AGREEMENT AND PLAN OF MERGER
AMONG
VENTRITEX, INC.
ST. JUDE MEDICAL, INC.
AND
PACESETTER, INC.
TABLE OF CONTENTS
ARTICLE 1
THE MERGER.................................................................. 1
SECTION 1.2. Effective Time........................................... 1
SECTION 1.3. Closing of the Merger.................................... 2
SECTION 1.4. Effects of the Merger.................................... 2
SECTION 1.5. Certificate of Incorporation and Bylaws.................. 2
SECTION 1.6. Directors................................................ 2
SECTION 1.7. Officers................................................. 2
SECTION 1.8. Conversion of Shares..................................... 2
SECTION 1.9. Exchange of Certificates................................. 3
SECTION 1.10. Stock Options............................................ 5
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 7
SECTION 2.1. Organization and Qualification; Subsidiaries............. 7
SECTION 2.2. Capitalization of the Company and its Subsidiaries....... 8
SECTION 2.3. Authority Relative to this Agreement..................... 9
SECTION 2.4. SEC Reports; Financial Statements........................ 9
SECTION 2.5. Information Supplied..................................... 10
SECTION 2.6. Consents and Approvals; No Violations.................... 11
SECTION 2.7. No Default............................................... 11
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes........... 12
SECTION 2.9. Litigation............................................... 12
SECTION 2.10. Compliance with Applicable Law........................... 12
SECTION 2.11. Employee Plans........................................... 13
SECTION 2.12. Environmental Laws and Regulations....................... 14
SECTION 2.13. Tax Matters.............................................. 15
SECTION 2.14. Intangible Property...................................... 17
SECTION 2.15. Opinion of Financial Advisor............................. 17
SECTION 2.16. Brokers.................................................. 17
SECTION 2.17. Accounting Matters....................................... 17
SECTION 2.18. Material Contracts....................................... 18
SECTION 2.19. Products................................................. 18
SECTION 2.20. Amendment to Rights Agreement............................ 19
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION................................................... 20
SECTION 3.1. Organization............................................. 20
SECTION 3.2. Capitalization of Parent and its Subsidiaries............ 21
SECTION 3.3. Authority Relative to this Agreement..................... 21
SECTION 3.4. SEC Reports; Financial Statements........................ 22
SECTION 3.5. Information Supplied..................................... 22
SECTION 3.6. Consents and Approvals; No Violations.................... 23
SECTION 3.7. No Default............................................... 24
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes........... 24
SECTION 3.9. Litigation............................................... 24
SECTION 3.10. Compliance with Applicable Law........................... 25
SECTION 3.11. Tax Matters.............................................. 25
SECTION 3.12. Products................................................. 25
SECTION 3.13. Intangible Property...................................... 26
SECTION 3.14. Brokers.................................................. 26
SECTION 3.15. Accounting Matters....................................... 26
SECTION 3.16. Telectronics Agreements.................................. 27
SECTION 3.17. Medtronic Agreement...................................... 27
ARTICLE 4
COVENANTS................................................................... 27
SECTION 4.1. Conduct of Business of the Company and Parent............ 27
SECTION 4.2. Preparation of S-4 and the Proxy Statement............... 31
SECTION 4.3. No Solicitation.......................................... 31
SECTION 4.4. Intentionally omitted.................................... 33
SECTION 4.5. Stockholder Meeting...................................... 33
SECTION 4.6. Access to Information.................................... 33
SECTION 4.7. Additional Agreements; Best Efforts...................... 34
SECTION 4.9. Public Announcements..................................... 35
SECTION 4.10. Indemnification; Directors' and Officers' Insurance...... 35
SECTION 4.11. Notification of Certain Matters.......................... 36
SECTION 4.12. Pooling.................................................. 37
SECTION 4.13. Tax-Free Reorganization Treatment........................ 37
SECTION 4.14. Employee Matters......................................... 38
SECTION 4.15. Company Affiliates....................................... 38
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SECTION 4.16. SEC Filings.............................................. 39
SECTION 4.17. Guarantee of Performance................................. 39
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER.................................... 39
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger................................................... 39
SECTION 5.2. Conditions to the Obligations of the Company............. 40
SECTION 5.3. Conditions to the Obligations of Parent and
Acquisition.............................................. 42
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER.............................................. 43
SECTION 6.1. Termination.............................................. 43
SECTION 6.2. Effect of Termination.................................... 44
SECTION 6.3. Fees and Expenses........................................ 44
SECTION 6.4. Amendment................................................ 45
SECTION 6.5. Extension; Waiver........................................ 45
ARTICLE 7
MISCELLANEOUS............................................................... 45
SECTION 7.1. Nonsurvival of Representations and Warranties............ 45
SECTION 7.2. Entire Agreement; Assignment............................. 45
SECTION 7.3. Validity................................................. 46
SECTION 7.4. Notices.................................................. 46
SECTION 7.5. Governing Law............................................ 47
SECTION 7.6. Descriptive Headings..................................... 47
SECTION 7.7. Parties in Interest...................................... 47
SECTION 7.8. Severability............................................. 47
SECTION 7.9. Specific Performance..................................... 47
SECTION 7.10. Subsidiaries............................................. 47
SECTION 7.11. Counterparts............................................. 47
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 23, 1996, is
among VENTRITEX, INC.,a Delaware corporation (the "Company"), ST. JUDE MEDICAL,
INC., a Minnesota corporation ("Parent"), and PACESETTER, INC., a Delaware
corporation and a direct wholly-owned subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and
Acquisition each have, in light of and subject to the terms and conditions set
forth herein, (i) determined that the Merger (as defined in Section 1.1) is fair
to their respective stockholders and in the best interests of such stockholders
and (ii) approved the Merger in accordance with this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a "pooling-of-interests".
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law (the "DGCL"), the Company shall be merged with and into
Acquisition (the "Merger"). Following the Merger, Acquisition shall continue as
the surviving corporation (the "Surviving Corporation") and the separate
corporate existence of the Company shall cease.
SECTION 1.2. Effective Time. Subject to the provisions of this
Agreement, Parent, Acquisition and the Company shall cause the Merger to be
consummated by filing an appropriate Certificate of Merger or other appropriate
documents (the"Certificate of Merger") with the Secretary of State of the State
of Delaware in such form as required by, and executed in accordance with, the
relevant provisions of the DGCL, as soon as practicable on or after the Closing
Date (as defined in Section 1.3). The Merger shall become effective upon such
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filing or at such time thereafter as is provided in the Certificate of Merger
(the "Effective Time").
SECTION 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article 5, other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions (the "Closing Date"), at the offices
of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
unless another time, date or place is agreed to in writing by the parties
hereto.
SECTION 1.4. Effects of the Merger. The Merger shall have the effects
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5. Certificate of Incorporation and Bylaws. The certificate
of incorporation of Acquisition in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law. The bylaws of Acquisition in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 1.6. Directors. The directors of Acquisition at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 1.7. Officers. The officers of Acquisition at the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified. The officers of the Company at the Effective Time shall
be the initial officers of the Ventritex division of the Surviving Corporation,
each to hold such position in accordance with the certificate of incorporation
and bylaws of the Surviving Corporation until such person's successor is duly
appointed and qualified.
SECTION 1.8. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value
$0.001 per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (individually a "Share" and
collectively, the "Shares") (other than Shares held by Parent, Acquisition or
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any other subsidiary of Parent) shall, by virtue of the Merger and without any
action on the part of Acquisition, the Company or the holder thereof, be
converted into and shall become exchangeable for 0.6 of a fully paid and
nonassessable share of common stock, par value $0.10 per share, of Parent
("Parent Common Stock") (the "Exchange Ratio"). 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 stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the amount of shares
of Parent Common Stock constituting the Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or other similar
transaction.
(b) At the Effective Time, each outstanding share of the common
stock, par value $1.00 per share, of Acquisition shall remain outstanding as
one share of common stock, par value $1.00 per share, of the Surviving
Corporation.
(c) At the Effective Time, each Share held by Parent, Acquisition or
any subsidiary of Parent or Acquisition immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be canceled, retired and cease
to exist and no payment shall be made with respect thereto.
(d) In accordance with Section 262 of the DGCL, no appraisal rights
shall be available to holders of Shares in connection with the Merger.
SECTION 1.9. Exchange of Certificates.
(a) As of the Effective Time, Parent shall make available to American
Stock Transfer & Trust Company (the "Exchange Agent"), for the benefit of the
holders of Shares, for exchange in accordance with this Article 1, through the
Exchange Agent: (i) certificates representing the appropriate number of shares
of Parent Common Stock issuable pursuant to Section 1.8 in exchange for
outstanding Shares and (ii) cash to be paid in lieu of fractional shares of
Parent Common Stock pursuant to Section 1.9(f) (such shares of Parent Common
Stock and such cash are hereinafter referred to as the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose Shares were converted into the
right to receive shares of Parent Common Stock pursuant to Section 1.8: (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
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for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent and Acquisition, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock and, if applicable, a check representing the cash
consideration to which such holder may be entitled pursuant to Section 1.9(f) on
account of a fractional share of Parent Common Stock, which such holder has the
right to receive pursuant to the provisions of this Article 1, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the transfer records
of the Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing such
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
1.9, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock and cash in lieu of any fractional
shares of Parent Common Stock as contemplated by this Section 1.9. Holders of
unsurrendered Certificates shall be entitled to vote after the Effective Time at
any meeting of Parent stockholders the number of whole shares of Parent Common
Stock represented by such Certificates, regardless of whether such holders have
exchanged their Certificates.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 1.9(f) until the holder of record of such Certificate shall surrender
such Certificate. Subject to the effect of applicable laws, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 1.9(f) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(d) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange therefor, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock and cash in lieu of fractional shares, if any, as may be
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required pursuant to this Agreement; provided, however, that Parent may, in its
discretion, require the delivery of a suitable bond or indemnity.
(e) All shares of Parent Common Stock issued upon the surrender for
exchange of Shares in accordance with the terms hereof (including any cash paid
pursuant to Section 1.9(c) or 1.9(f)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
(f) No fractions of a share of Parent Common Stock shall be issued in
the Merger, but in lieu thereof each holder of Shares otherwise entitled to a
fraction of a share of Parent Common Stock shall, upon surrender of his or her
Certificate or Certificates, be entitled to receive an amount of cash (without
interest) determined by multiplying the average closing price for Parent Common
Stock as reported on the Nasdaq Stock Market (or any subsequent national
securities exchange on which shares of Parent Common Stock are listed for
trading) for the five trading days immediately preceding the date of the meeting
of the Company's stockholders held in connection with the Merger by the
fractional share interest to which such holder would otherwise be entitled. The
parties acknowledge that payment of the cash consideration in lieu of issuing
fractional shares was not separately bargained for consideration but merely
represents a mechanical rounding off for purposes of simplifying the corporate
and accounting problems which would otherwise be caused by the issuance of
fractional shares.
(g) Any portion of the Exchange Fund which remains undistributed to
the stockholders of the Company for six months after the Effective Time shall be
delivered to Parent, upon demand, and any stockholders of the Company who have
not theretofore complied with this Article I shall thereafter look only to
Parent for payment of their claim for Parent Common Stock for any cash in lieu
of fractional shares of Parent Common Stock and any dividends or distributions
with respect to Parent Common Stock, as the case may be.
(h) Neither Parent nor the Company shall be liable to any holder of
Shares, or Parent Common Stock, as the case may be, for such shares (or
dividends or distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
SECTION 1.10. Stock Options.
(a) At the Effective Time, each outstanding option to purchase shares
of Company Common Stock (a "Company Stock Option" or, collectively, "Company
Stock Options") issued pursuant to the Company's stock option plans listed on
Schedule 1.10 hereto (the "Company Plans"), whether vested or unvested, shall be
5
cancelled and, in lieu thereof, Parent shall issue to each holder of a Company
Stock Option an option (each, a "Parent Option"), to acquire, on substantially
the same terms and subject to substantially the same conditions as were
applicable under such Company Stock Option, including, without limitation, term,
exercisability, vesting schedule, status as an "incentive stock option" under
Section 422 of the Code, acceleration and termination provisions, the same
number of shares of Parent Common Stock as the holder of such Company Stock
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such option in full immediately prior to the Effective Time, at
a price per share equal to (y) the aggregate exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such Company Stock Option
divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Company Stock Option; provided, however, that in
the case of any option to which Section 421 of the Code applies by reason of its
qualification under any of Sections 422 through 424 of the Code, the exercise
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option shall be adjusted, if necessary, in
order to comply with Section 424 of the Code and provided, further, however,
that the number of shares of Parent Common Stock that may be purchased upon
exercise of any such Parent Option shall not include any fractional share and,
upon exercise of the Parent Option, a cash payment shall be made for any
fractional share based upon the average closing price for Parent Common Stock as
reported on the Nasdaq Stock Market (or any subsequent national securities
exchange on which shares of Parent Common Stock are listed for trading) for the
five trading days immediately preceding the date of exercise. Employment with
the Company shall be credited to the optionees for purposes of determining the
number of vested shares of Parent Common Stock subject to exercise under
converted Company Options after the Effective Time. None of the Company Stock
Options that are unvested at the Effective Time shall become vested as a result
of the execution and delivery of this Agreement or the consummation of the
Merger.
(b) As soon as practicable after the Effective Time, but no later than
30 days thereafter, Parent shall deliver to the holders of Company Stock Options
appropriate notices setting forth such holders' rights pursuant to the
respective Company Plans and stating that the holders will receive Parent
Options exercisable for shares of Parent Common Stock on substantially the same
terms and conditions as their Company Stock Options (subject to the adjustments
required by this Section 1.10 after giving effect to the Merger). At or prior to
the Effective Time, Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of Parent Options issued by it in accordance with this Section
1.10. As soon as practicable after the Effective Time, to the extent the Parent
Common Stock issuable upon exercise of the Parent Options issued in accordance
with this Section 1.10 has not previously been registered under the Securities
Act of 1933, as amended (the "Securities Act"), then Parent shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form with respect
to the Parent Common Stock subject to such Parent Options, and shall use its
best efforts to maintain the effectiveness of such registration statements (and
6
maintain the current status of the prospectus or prospectuses contained therein)
for so long as the Parent Options remain outstanding.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition as follows:
SECTION 2.1. Organization and Qualification; Subsidiaries.
(a) The Company and each of its subsidiaries (as defined in Section
7.10), is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power and authority
would not have a Company Material Adverse Effect (as defined below). When used
in connection with the Company or its subsidiaries, the term "Company Material
Adverse Effect" means any change or effect (i) that is materially adverse to the
properties, business, results of operations or financial condition of the
Company and its subsidiaries, taken as whole, other than any change or effect
arising out of general economic conditions or conditions generally affecting the
cardiovascular medical device market or (ii) that would impair the ability of
the Company to consummate the transactions contemplated hereby.
(b) Except as set forth in Section 2.1(b) of the Disclosure Schedule
previously delivered by the Company to Parent (the "Company Disclosure
Schedule"), the Company has no subsidiaries and does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity.
(c) Each of the Company and its subsidiaries is duly qualified or
licensed 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 or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Company Material Adverse Effect.
(d) The Company has heretofore delivered to Parent accurate and
complete copies of the certificate of incorporation and by-laws, as currently in
effect, of each of the Company and each of its subsidiaries.
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SECTION 2.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of:
35,000,000 Shares, of which, as of October 15, 1996, 20,959,260 Shares were
issued and outstanding, and 5,000,000 shares of preferred stock, par value
$0.001 per share (the "Company Preferred Stock"), of which, as of the date
hereof, none are issued and outstanding. All of the issued and outstanding
Shares have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of October 15, 1996, 2,782,116 Shares were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding Company Stock Options issued pursuant to the Company
Plans, 78,813 Shares were reserved for issuance under the Company's 1991
Employee Stock Purchase Plan (the "ESPP") and 3,345,455 Shares were reserved for
issuance pursuant to the conversion of the Company's 5-3/4% Convertible
Subordinated Notes due August 15, 2001 (the "Convertible Notes"). The final
purchase by participants under the ESPP will occur no later than the business
day immediately preceding the Effective Time. The ESPP will terminate at the
Effective Time. A total of 35,000 shares of Preferred Stock have been designated
as Series A Participating Preferred Stock and reserved for issuance in
connection with the exercise of the Rights (as defined in Section 2.20). Except
as set forth in Section 2.2(a) of the Company Disclosure Schedule, since October
15, 1996, no shares of the Company's capital stock have been issued other than
pursuant to stock options already in existence on October 15, 1996, and no stock
options have been granted. Except as set forth above or as set forth in Section
2.2(a) of the Company Disclosure Schedule, as of the date hereof, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or its subsidiaries convertible into
or exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or its
subsidiaries, and no obligations of the Company or its subsidiaries to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (including stock appreciation rights)
(collectively, "Company Securities"). There are no outstanding obligations of
the Company or its subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities. Except as set forth in Section 2.2(a) of the Company
Disclosure Schedule, there are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or to which it is
bound relating to the voting of any shares of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's subsidiaries
is owned by the Company, directly or indirectly, free and clear of any Lien (as
defined below) or any other limitation or restriction (including any restriction
on the right to vote or sell the same, except as may be provided as a matter of
law). There are no securities of the Company or its subsidiaries convertible
into or exchangeable for, no options or other rights to acquire from the Company
or its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
8
directly or indirectly, of any capital stock or other ownership interests in, or
any other securities of, any subsidiary of the Company. There are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including, without limitation, any
security) any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
SECTION 2.3. Authority Relative to this Agreement.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company (the "Company Board") and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the holders of a majority of the then outstanding shares of Company
Common Stock). This Agreement has been duly and validly executed and delivered
by the Company and constitutes a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (the "Bankruptcy and Equity Exception").
(b) The Company Board has, by unanimous vote of those present, duly
and validly approved, and taken all corporate actions required to be taken by
the Company Board for the consummation of, the transactions, including the
Merger, contemplated hereby and resolved to recommend that the stockholders of
the Company approve and adopt this Agreement.
SECTION 2.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents
with the Securities and Exchange Commission (the "SEC") since January 1, 1995,
each of which has complied in all material respects with all applicable
requirements of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), each as in effect on the dates such forms, reports
and documents were filed. The Company has heretofore delivered to Parent, in the
form filed with the SEC (including any amendments thereto), (i) its Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, (ii) all definitive
proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since July 1, 1995 and (iii) all other reports or
registration statements filed by the Company with the SEC since January 1, 1995
(the "Company SEC Reports"). As of their respective dates, none of such Company
9
SEC Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in the Company SEC Reports complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto and fairly
present, in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended
(subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments). Since June 30, 1996, except as set forth in the Company
SEC Reports, there has not been any change, or any application or request for
any change, by the Company or any of its subsidiaries in accounting principles,
methods or policies for financial accounting or tax purposes (subject, in the
case of the unaudited interim financial statements, to normal year-end
adjustments).
(b) The Company has heretofore made available to Parent a complete and
correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Exchange
Act.
SECTION 2.5. Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"S-4") will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the proxy
statement relating to the meeting of the Company's stockholders to be held in
connection with the Merger (the "Proxy Statement"), will, at the date mailed to
stockholders and at the time of the meeting of stockholders of the Company to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or any of
its subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the S-4 or the Proxy Statement, the Company shall
promptly so advise Parent and such event shall be so described, and such
amendment or supplement (which Parent shall have a reasonable opportunity to
review) shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The Proxy Statement, insofar as
it relates to the meeting of the Company's stockholders to vote on the Merger,
10
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
SECTION 2.6. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the filing and recordation
of the Certificate of Merger as required by the DGCL and as otherwise set forth
in Section 2.6 to the Company Disclosure Schedule, no filing or registration
with or notice to, and no permit, authorization, consent or approval of, any
court or tribunal or administrative, governmental or regulatory body, agency,
commission or authority (a "Governmental Entity") is necessary for the execution
and delivery by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Company Material Adverse Effect. Except as set
forth in Section 2.6 to the Company Disclosure Schedule, neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective certificate or articles
of incorporation or bylaws (or similar governing documents) of the Company or
any of its subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration or Lien)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company 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, or (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults which would not have a Company Material Adverse Effect.
SECTION 2.7. No Default. None of the Company or its subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) its certificate or articles of incorporation or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company,
its subsidiaries or any of their respective properties or assets, except in the
case of (ii) or (iii) for violations, breaches or defaults that would not have a
Company Material Adverse Effect.
11
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes. Except as
and to the extent publicly disclosed by the Company in the Company SEC Reports,
as of June 30, 1996, none of the Company or its subsidiaries had any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
and whether due or to become due or asserted or unasserted, which would be
required by GAAP to be reflected in, reserved against or otherwise described in
the consolidated balance sheet of the Company (including the notes thereto) as
of such date. Except as publicly disclosed by the Company in the Company SEC
Reports, since the date of the end of the period covered by the latest Company
SEC Report, (i) the business of the Company and its subsidiaries has been
carried on only in the ordinary and usual course, and (ii) to the knowledge of
the Company, none of the Company or its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise, and
there have been no events, changes or effects with respect to the Company or its
subsidiaries, which would have a Company Material Adverse Effect. For purposes
of this Agreement, "knowledge of the Company" means the actual knowledge of any
executive officer or member of the Company Board as listed in Section 2.8 of the
Company Disclosure Schedule.
SECTION 2.9. Litigation. Except as publicly disclosed by the Company
in the Company SEC Reports or disclosed in Section 2.9 of the Company Disclosure
Schedule, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries or any of their respective properties or assets which (i) would
have, individually or in the aggregate, a Company Material Adverse Effect or
(ii) as of the date hereof, questions the validity of this Agreement or any
action to be taken by the Company in connection with the consummation of the
transactions contemplated hereby or could otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
publicly disclosed by the Company, none of the Company or its subsidiaries is
subject to any outstanding order, writ, injunction or decree which would have a
Company Material Adverse Effect or would prevent or delay the consummation of
the transactions contemplated hereby.
SECTION 2.10. Compliance with Applicable Law. Except as publicly
disclosed by the Company in the Company SEC Reports, the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the conduct of their
respective businesses as presently conducted (the "Company Permits"), except for
failures to hold such permits, licenses, variances, exemptions, orders and
approvals which would not have a Company Material Adverse Effect. Except as
publicly disclosed by the Company in the Company SEC Reports, the Company and
its subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would have a Company Material Adverse Effect.
Except as publicly disclosed by the Company in the Company SEC Reports, the
businesses of the Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity except
that no representation or warranty is made in this Section 2.10 with respect to
Environmental Laws (as defined in Section 2.12(a)) and except for violations or
12
possible violations which would not have a Company Material Adverse Effect.
Except as publicly disclosed by the Company in the Company SEC Reports or as
disclosed in Section 2.10 of the Company Disclosure Schedule, to the knowledge
of the Company, no investigation or review by any Governmental Entity with
respect to the Company or its subsidiaries is pending or threatened, nor, to the
knowledge of the Company, has any Governmental Entity indicated an intention to
conduct the same, other than, in each case, those which would not have a Company
Material Adverse Effect.
SECTION 2.11. Employee Plans.
(a) Section 2.11(a) of the Company Disclosure Schedule lists all
"employee benefit plans," as defined in Section 3(3) of ERISA, and all other
employee benefit plans or other benefit arrangements, including executive
compensation, directors' benefit, bonus or other incentive compensation,
severance and deferred compensation plans and practices which the Company or any
of its subsidiaries maintains, contributes to or has any obligation to or
liability for (each an "Employee Benefit Plan" and collectively, the "Employee
Benefit Plans").
(b) True, correct and complete copies or descriptions of each Employee
Benefit Plan (and, where applicable, the most recent summary plan description,
actuarial report, determination letter, most recent Form 5500 and trust
agreement) have been delivered or made available to Parent for review prior to
the date hereof.
(c) As of the date hereof, except as disclosed on Section 2.11(c) of
the Company Disclosure Schedule, (i) all material payments required to be made
by or under any Employee Benefit Plan or any related trusts have been made; (ii)
the Company and its subsidiaries have performed all material obligations
required to be performed by them under any Employee Benefit Plan; (iii) the
Employee Benefit Plans, have been administered in material compliance with their
terms and the requirements of ERISA, the Code and other applicable laws; (iv)
there are no material actions, suits, arbitrations or claims (other than routine
claims for benefit) pending or threatened with respect to any Employee Benefit
Plan; and (v) the Company and its subsidiaries have no material liability as a
result of any "prohibited transaction" (as defined in Section 406 of ERISA and
Section 4975 of the Code) for any excise tax or civil penalty.
(d) Except as disclosed on Section 2.11(d) of the Company Disclosure,
none of the Employee Benefit Plans is subject to Title IV of ERISA.
(e) Except as set forth on Section 2.11(e) of the Company Disclosure
Schedule, the Company and its subsidiaries have not incurred any unsatisfied
withdrawal liability with respect to any Multiemployer Plan.
13
(f) Except as set forth on Section 2.11(f) of the Company Disclosure
Schedule, each of the Employee Benefit Plans which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so "qualified" and the Company knows of no fact
which would adversely affect the qualified status of any such Employee Benefit
Plan.
(g) Except as set forth on Section 2.11(g) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment becoming due, or materially increase the amount of compensation
due, to any current or former employee of the Company or any of its
subsidiaries; (ii) materially increase any benefits otherwise payable under any
Employee Benefit Plan; or (iii) result in the acceleration of the time of
payment or vesting of any such material benefits.
SECTION 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by the Company in the Company SEC
Reports, (i) each of the Company and its subsidiaries is in compliance with all
applicable federal, state and local laws and regulations relating to pollution,
the protection of human health from the effects of pollution or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) (collectively, "Environmental Laws"), except for
non-compliance that would not have a Company Material Adverse Effect, which
compliance includes, but is not limited to, the possession by the Company and
its subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws necessary for the operation of its
business as presently conducted, and compliance with the terms and conditions
thereof; (ii) none of the Company or its subsidiaries has received written
notice of, or, to the knowledge of the Company, is the subject of, any action,
cause of action, claim, investigation, demand or notice by any person or entity
alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim") that would have a Company Material Adverse Effect; and
(iii) to the knowledge of the Company, there are no circumstances that are
reasonably likely to prevent or interfere with such material compliance in the
future.
(b) Except as publicly disclosed by the Company in the Company SEC
Reports, there are no Environmental Claims which would have a Company Material
Adverse Effect that are pending or, to the knowledge of the Company, threatened
against the Company or its subsidiaries or, to the knowledge of the Company,
against any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries has or may have retained or assumed either
contractually or by operation of law.
14
SECTION 2.13. Tax Matters.
(a) The Company and each of its subsidiaries has timely filed all
Federal income tax returns and all other material tax returns and reports
required to be filed by it. All such tax returns are complete and correct in all
material respects. The Company and each of its subsidiaries has paid (or the
Company has paid on its subsidiaries' behalf) all taxes shown due on such tax
returns. The most recent consolidated financial statements contained in the
Company SEC Reports reflect an adequate reserve for all taxes payable by the
Company and its subsidiaries for all taxable periods and portions thereof
through the date of such financial statements. The Company has previously
delivered to Parent copies of the Federal and California income tax returns
filed by the Company for its taxable years ended in 1993, 1994 and 1995. For
purposes of this Agreement, "tax" or "taxes" shall mean all taxes, charges,
fees, imposts, levies, gaming or other assessments, including, without
limitation, all net income, gross receipts, capital, sales, use, ad valorem,
value added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever, together with any interest
and any penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign). "Tax returns" shall mean any report,
return, document, declaration or any other information or filing required to be
supplied to any taxing authority or jurisdiction (foreign or domestic) with
respect to taxes, including without limitation, information returns, any
document with respect to or accompanying payments or estimated taxes, or with
respect to or accompanying requests for the extension of time in which to file
any such report, return document, declaration or other information.
(b) Except as disclosed on Section 2.13 of the Company Disclosure
Schedule, no material deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that have not been fully
paid or adequately provided for in the appropriate financial statements of the
Company and its subsidiaries, no requests for waivers of the time to assess any
taxes are pending, and no power of attorney with respect to any taxes has been
executed or filed with any taxing authority. No material issues relating to
taxes have been raised in writing by the relevant taxing authority during any
presently pending audit or examination. None of the Federal income tax returns
of the Company or any of its subsidiaries consolidated in such tax returns has
been examined by the Internal Revenue Service.
(c) No material liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for statutory liens
for taxes not yet due.
(d) Except as disclosed on Section 2.13 of the Company Disclosure
Schedule and other than with respect to contractual tax indemnity obligations of
the Company and its subsidiaries involving claims for state and local taxes
which are not material in amount, none of the Company or any of its subsidiaries
is a party to or is bound by any tax sharing agreement, tax indemnity obligation
15
or similar agreement, arrangement or practice with respect to taxes (including
any advance pricing agreement, closing agreement or other agreement relating to
taxes with any taxing authority).
(e) None of the Company or any of its subsidiaries has taken or agreed
to take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
(f) Except as disclosed in Section 2.13 of the Company Disclosure
Schedule, there are no employment, severance or termination agreements, other
compensation arrangements or Employee Benefit Plans currently in effect which
provide for the payment of any amount (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement to any employee, officer or director of the Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
Section 280G(c) of the Code), that would be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
(g) Except as disclosed in Section 2.13 of the Company Disclosure
Schedule, no Federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Federal income or material state, local or foreign taxes or tax returns of the
Company or any of its subsidiaries and neither the Company nor any of its
subsidiaries has received a written notice of any pending audit or proceeding
with regard to any federal income or material state, local or foreign taxes or
tax returns of the Company or any of its subsidiaries.
(h) Neither the Company nor any of its subsidiaries has agreed to or
is required to make any adjustment under Section 481(a) of the Code.
(i) Neither the Company nor any of its subsidiaries has (i) with
regard to any assets or property held or acquired by any of them, filed a
consent to the application of Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company
or any of its subsidiaries or (ii) received, or filed any requests for, rulings
or determinations in respect of any taxes within the last five years.
(j) No property owned by the Company or any of its subsidiaries (i) is
property required to be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986;
(ii) constitutes "tax exempt use property" within the meaning of Section
168(h)(1) of the Code; or (iii) is "tax exempt bond financed property" within
the meaning of Section 168(g) of the Code.
16
(k) The Company and each of its subsidiaries are not currently, have
not been within the last five years, and do not anticipate becoming a "United
States real property holding company" within the meaning of Section 897(c) of
the Code.
(l) No subsidiary of the Company owns any Shares.
SECTION 2.14. Intangible Property. To the Company's knowledge, the
Company and its subsidiaries own or possess adequate licenses or other valid
rights to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets, applications
for trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of the Company
and its subsidiaries as currently conducted, except for failures to own or
possess adequate licenses or other valid rights to use any of the foregoing
which would not have a Company Material Adverse Effect, and, except as set forth
in the Company SEC Reports or Section 2.14 of the Company Disclosure Schedule,
to the knowledge of the Company there are no pending assertions or claims
challenging the validity of any of the foregoing which would have a Company
Material Adverse Effect. Except as disclosed in Section 2.14 of the Company
Disclosure Schedule, to the Company's knowledge, there are no current claims or
notices that the manufacture and sale of the Company's products infringes the
patents of any third party.
SECTION 2.15. Opinion of Financial Advisor. Xxxxxxx, Xxxxx & Co. (the
"Financial Advisor") has delivered to the Company Board its opinion to the
effect that, as of the date of such opinion, the Exchange Ratio is fair to the
holders of Shares, and such opinion has not been withdrawn.
SECTION 2.16. Brokers. No broker, finder or investment banker (other
than the Financial Advisor, a true and correct copy of whose engagement
agreement has been provided to Parent) is entitled to any brokerage, finder's or
other fee or commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company or any of its affiliates.
SECTION 2.17. Accounting Matters. Neither the Company nor, to the best
of its knowledge, any of its affiliates or stockholders (including the Company
Affiliates), has taken or agreed to take any action that would prevent Parent
from accounting for the business combination to be effected by the Merger as a
"pooling-of-interests." The Company has not failed to bring to the attention of
Parent any actions, or agreements or understandings, whether written or oral, to
act that would be reasonably likely to prevent Parent from accounting for the
Merger as a "pooling-of-interests."
17
SECTION 2.18. Material Contracts.
(a) The Company has filed as an exhibit to an Annual Report on Form
10-K or another document filed pursuant to the Securities Act or the Exchange
Act, or has delivered or otherwise made available to Parent true, correct and
complete copies of all contracts and agreements to which the Company or any of
its subsidiaries is a party that are required to be filed in an exhibit to an
Annual Report on Form 10-K filed by the Company with the SEC as of the date of
this Agreement (the "Contracts"). The Contracts include any severance or other
agreement with any employee or consultant pursuant to which such person would be
entitled to receive any additional compensation or an accelerated payment of
compensation as a result of the consummation of the transactions contemplated
hereby.
(b) Each of the Contracts is valid and enforceable in accordance with
its terms, and there is no default under any Contract so listed either by the
Company or, to the knowledge of the Company, by any other party thereto, and no
event has occurred that with the lapse of time or the giving of notice or both
would constitute a default thereunder by the Company or, to the knowledge of the
Company, any other party, in any such case in which such default or event would
have a Company Material Adverse Effect.
(c) No party to any such Contract has given notice to the Company of
or made a claim against the Company with respect to any breach or default
thereunder, in any such case in which such breach or default would have a
Company Material Adverse Effect.
SECTION 2.19. Products. Except as disclosed in the Company SEC
Reports:
(a) Each of the products currently being produced or sold by the
Company and its subsidiaries (i) is in compliance in all material respects with
all applicable U.S. federal, state and local laws and regulations and (ii)
conforms in all material respects to any promises or affirmations of fact made
on the container or label for such product or in connection with its sale;
(b) To the knowledge of the Company, no facts exist which would
reasonably be expected to furnish a substantial basis for the recall, withdrawal
or suspension by the Company or any of its subsidiaries of any such product as a
result of, or in order to comply with, any U.S. federal, state or local law,
regulation or rule or order of any Governmental Entity, except for such recalls,
withdrawals or suspensions as would not have a Company Material Adverse Effect;
(c) Section 2.19 of the Company Disclosure Schedule sets forth a list
of all licenses and approvals granted by or pending with any Governmental Entity
in any country to market any product of the Company and its subsidiaries (the
"Company Product Registrations"). All products sold under the Company Product
Registrations are manufactured and marketed in all material respects in
accordance with the specifications and standards contained in the Company
18
Product Registrations. The Company and its subsidiaries have the sole rights
under the Company Product Registrations and such registrations are in full force
and effect; and
(d) Except as disclosed in Section 2.19 of the Company Disclosure
Schedule, since January 1, 1993, there have been no statements, citations,
warning letters, FDA Forms 483, or decisions by any Governmental Entity that any
product produced, manufactured, marketed or distributed at any time by the
Company or any of its subsidiaries is defective or fails to meet any applicable
standards promulgated by any such Governmental Entity. Except as disclosed in
Section 2.19 of the Company Disclosure Schedule, there is no proceeding by the
FDA or any other Governmental Entity, including, but not limited to, a grand
jury investigation, a 405 hearing or a civil penalty proceeding, pending, or to
the Company's knowledge threatened, against the Company or any of its
subsidiaries, and no such proceedings have been brought at any time in the past
relating to the safety or efficacy of the products of the Company and its
subsidiaries and, to the Company's knowledge, there is no basis for such a
proceeding.
SECTION 2.20. Amendment to Rights Agreement. The Company Board has
taken all necessary action to amend the Rights Agreement, dated as of August 16,
1994, as amended, between the Company and Chemical Trust Company of California,
as Rights Agent (the "Rights Agreement") so that none of the execution or
delivery of this Agreement, the exchange of Parent Common Stock for the Shares
in accordance with Article I, or any other transaction contemplated hereby will
cause (i) the rights (the "Rights") issued pursuant to the Rights Agreement to
become exercisable under the Rights Agreement, (ii) Parent or Acquisition to be
deemed an "Acquiring Person" (as defined in the Rights Agreement), or (iii) the
"Shares Acquisition Date" (as defined in the Rights Agreement) to occur upon any
such event. The "Expiration Date" (as defined in the Rights Agreement) of the
Rights shall occur immediately prior to the Effective Time.
19
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
SECTION 3.1. Organization.
(a) Each of Parent and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
businesses as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not have
a Parent Material Adverse Effect (as defined below). When used in connection
with Parent or Acquisition, the term "Parent Material Adverse Effect" means any
change or effect that is (i) materially adverse to the properties, business,
results of operations or financial condition of Parent and its subsidiaries,
taken as a whole, other than any change or effect arising out of general
economic conditions unrelated to any businesses in which Parent and its
subsidiaries are engaged or (ii) that would impair the ability of Parent and/or
Acquisition to consummate the transactions contemplated hereby. The parties
acknowledge and agree that a decrease in the market value of the Parent Common
Stock will not, in and of itself, constitute a Parent Material Adverse Effect.
(b) Except as set forth in Section 3.1(b) of the Disclosure Schedule
previously delivered by Parent to the Company (the "Parent Disclosure
Schedule"), Parent has no subsidiaries and does not own, directly or indirectly,
beneficially or of record, any shares of capital stock or other security of any
other entity or any other investment in any other entity.
(c) Each of Parent and its subsidiaries is duly qualified or licensed
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 or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Parent Material Adverse Effect.
(d) Parent has heretofore delivered to the Company accurate and
complete copies of the articles of incorporation and by-laws, as currently in
effect, of Parent.
20
SECTION 3.2. Capitalization of Parent and its Subsidiaries.
(a) The authorized capital stock of Parent consists of (i) 250,000,000
shares of Parent Common Stock, of which, as of September 30, 1996, 80,976,337
shares of Parent Common Stock were issued and outstanding, and (ii) 25,000,000
shares of preferred stock, $.01 par value per share, of which, as of the date
hereof, none are issued and outstanding. All of the shares of Parent Common
Stock have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of September 30, 1996, 5,155,986 shares of Parent Common
Stock were reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding options and 494,442 shares of Parent
Common Stock were reserved for issuance in connection with Parent's employee
stock purchase savings plan. Except as set forth in Section 3.2 of the Parent
Disclosure Schedule since September 30, 1996, no shares of Parent's capital
stock have been issued other than pursuant to stock options already in existence
on September 30, 1996, and no stock options have been granted. Except as set
forth above or as described in Section 3.2 of the Parent Disclosure Schedule, as
of the date hereof, there are outstanding (i) no shares of capital stock or
other voting securities of Parent, (ii) no securities of Parent or its
subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of Parent, (iii) no options or other rights to acquire from
Parent or its subsidiaries, and no obligations of Parent or its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent, and (iv) no
equity equivalents, interests in the ownership or earnings of Parent or its
subsidiaries or other similar rights (including stock appreciation rights)
(collectively, "Parent Securities"). There are no outstanding obligations of
Parent or any of its subsidiaries to repurchase, redeem or otherwise acquire any
Parent Securities. Except as set forth in Section 3.2 of the Parent Disclosure
Schedule, there are no stockholder agreements, voting trusts or other agreements
or understandings to which Parent is a party or to which it is bound relating to
the voting of any shares of capital stock of Parent.
(b) All of the outstanding capital stock of Parent's subsidiaries
(including Acquisition) is owned by Parent, directly or indirectly, free and
clear of any Lien or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no securities of Parent or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
Parent or its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of any capital stock or other ownership interests in, or
any other securities of, any subsidiary of Parent. There are no outstanding
contractual obligations of Parent or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of Parent.
SECTION 3.3. Authority Relative to this Agreement. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
21
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Acquisition and by Parent as the sole
stockholder of Acquisition, and no other corporate proceedings on the part of
Parent or Acquisition are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Acquisition and constitutes a
valid, legal and binding agreement of each of Parent and Acquisition,
enforceable against each of Parent and Acquisition in accordance with its terms,
subject to the Bankruptcy and Equity Exception.
SECTION 3.4. SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents with
the SEC since January 1, 1995, each of which has complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, each as in effect on the dates such forms, reports and documents were
filed. Parent has heretofore delivered to the Company, in the form filed with
the SEC (including any amendments thereto), (i) its Annual Reports on Form 10-K
for the fiscal year ended December 31, 1995, (ii) all definitive proxy
statements relating to Parent's meetings of stockholders (whether annual or
special) held since January 1, 1996 and (iii) all other reports or registration
statements filed by Parent with the SEC since January 1, 1995 (the "Parent SEC
Reports"). As of their respective dates, none of such Parent SEC Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of Parent
included in the Parent SEC Reports complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto and fairly present, in conformity with GAAP
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations and changes
in financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments). Since
December 31, 1995, except as set forth in the Parent SEC Reports, there has not
been any change, or any application or request for any change, by Parent or any
of its subsidiaries in accounting principles, methods or policies for financial
accounting or tax purposes.
(b) Parent has heretofore made available to the Company a complete and
correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by Parent with the SEC pursuant to the Exchange Act.
SECTION 3.5. Information Supplied. None of the information supplied or
to be supplied by Parent or Acquisition for inclusion or incorporation by
22
reference in (i) the S-4 will, at the time the S-4 is filed with the SEC and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(ii) the Proxy Statement will, at the date mailed to stockholders and at the
time of the meeting of stockholders of the Company to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect to
Parent, its officers and directors or any of its subsidiaries should occur which
is required to be described in an amendment of, or a supplement to, the S-4 or
the Proxy Statement, Parent shall promptly so advise the Company and such event
shall be so described, and such amendment or supplement (which the Company shall
have a reasonable opportunity to review) shall be promptly filed with the SEC.
The S-4 will comply as to form in all material respects with the provisions of
the Securities Act and the rules and regulations thereunder.
SECTION 3.6. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the HSR Act, the filing and recordation
of the Certificate of Merger as required by the DGCL and as otherwise set forth
in Section 3.6 to the Parent Disclosure Schedule, no filing or registration with
or notice to, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution and delivery by Parent or
Acquisition of this Agreement or the consummation by Parent or Acquisition of
the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Parent Material Adverse Effect. Except as set forth
in Section 3.6 of the Parent Disclosure Schedule, neither the execution,
delivery and performance of this Agreement by Parent or Acquisition nor the
consummation by Parent or Acquisition of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
respective articles of incorporation or bylaws (or similar governing documents)
of Parent or Acquisition or any of Parent's subsidiaries, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent or Acquisition or
any of Parent's subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent or
Acquisition or any of Parent's subsidiaries or any of their respective
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults which would not have a Parent Material Adverse Effect.
23
SECTION 3.7. No Default. None of the Parent or its subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) its certificate or articles of incorporation or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or any of its subsidiaries is now a party or by which any of them or any of
their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent, its
subsidiaries or any of their respective properties or assets, except in the case
of (ii) or (iii) for violations, breaches or defaults that would not have a
Parent Material Adverse Effect.
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes. Except as
and to the extent publicly disclosed by Parent in the Parent SEC Reports, as of
June 30, 1996, none of Parent or its subsidiaries had any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be required
by GAAP to be reflected in, reserved against or otherwise described in the
consolidated balance sheet of Parent (including the notes thereto) as of such
date. Except as publicly disclosed by Parent in the Parent SEC Reports and
except for the execution by Parent, Acquisition and certain affiliates of Parent
of that certain Asset Purchase Agreement (United States), dated as of September
24, 1996, among Acquisition, Telectronics Pacing Systems, Inc. and TPLC, Inc.,
the International Purchase Agreements referred to in such Asset Purchase
Agreement (United States) and the other agreements to be executed pursuant to
such Asset Purchase Agreement (United States) and International Purchase
Agreements (collectively, the "Telectronics Agreements"), since the date of the
end of the period covered by the latest Parent SEC Report, (i) the business of
Parent and its subsidiaries has been carried on only in the ordinary and usual
course, and (ii) to the knowledge of Parent, none of Parent or its subsidiaries
has incurred any liabilities of any nature, whether or not accrued, contingent
or otherwise, which would have, and there have been no events, changes or
effects with respect to Parent or its subsidiaries which would have, a Parent
Material Adverse Effect. For purposes of this Agreement, "knowledge of the
Parent" means the actual knowledge of any executive officer or member of the
Board of Directors of the Parent as listed in Section 3.8 of the Parent
Disclosure Schedule.
SECTION 3.9. Litigation. Except as publicly disclosed by Parent in the
Company SEC Reports or disclosed in Section 3.9 of the Parent Disclosure
Schedule, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries or any of their respective properties or assets which (i) would
have, individually or in the aggregate, a Parent Material Adverse Effect or (ii)
as of the date hereof, questions the validity of this Agreement or any action to
be taken by Parent in connection with the consummation of the transactions
contemplated hereby or could otherwise prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed by
Parent, none of Parent or its subsidiaries is subject to any outstanding order,
writ, injunction or decree which would have a Parent Material Adverse Effect or
would prevent or delay the consummation of the transactions contemplated hereby.
24
SECTION 3.10. Compliance with Applicable Law. Except as publicly
disclosed by Parent in the Parent SEC Reports, Parent and its subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the conduct of their respective businesses
as presently conducted (the "Parent Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which would have
a Parent Material Adverse Effect. Except as publicly disclosed by Parent in the
Parent SEC Reports, Parent and its subsidiaries are in compliance with the terms
of the Parent Permits, except where the failure so to comply would not have a
Parent Material Adverse Effect. Except as publicly disclosed by Parent in the
Parent SEC Reports, the businesses of Parent and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for violations or possible violations which would not have a
Parent Material Adverse Effect. Except as publicly disclosed by Parent in the
Parent SEC Reports, to the knowledge of Parent, no investigation or review by
any Governmental Entity with respect to Parent or its subsidiaries is pending or
threatened, nor, to the knowledge of Parent, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those
which would not have a Parent Material Adverse Effect.
SECTION 3.11. Tax Matters. Neither Parent nor any of its affiliates
has taken or agreed to take any action that would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
SECTION 3.12. Products. Except as disclosed in the Parent SEC Reports
and except for the products to be acquired pursuant to the Telectronics
Agreements, as to which no representation or warranty is being made hereunder:
(a) Each of the products currently being produced or sold by Parent
and its subsidiaries (i) is in compliance in all material respects with all
applicable U.S. federal, state and local laws and regulations and (ii) conforms
in all material respects to any promises or affirmations of fact made on the
container or label for such product or in connection with its sale;
(b) To the knowledge of Parent, no facts exist which would reasonably
be expected to furnish a substantial basis for the recall, withdrawal or
suspension by Parent or any of its subsidiaries of any such product as a result
of, or in order to comply with, any U.S. federal, state or local law, regulation
or rule or order of any Governmental Entity, except for such recalls,
withdrawals or suspensions as would not have a Parent Material Adverse Effect;
25
(c) All products sold under all licenses and approvals granted by or
pending with any Governmental Entity in any country to market any product of
Parent and its subsidiaries (the "Parent Product Registrations") are
manufactured and marketed in all material respects in accordance with the
specifications and standards contained in the Parent Product Registrations.
Parent and its subsidiaries have the sole rights under the Parent Product
Registrations in the United States and such registrations are in full force
and effect; and
(d) As of the date hereof, there are no pending and unsatisfied
statements, citations, warning letters, FDA Forms 483, or decisions by any
United States Governmental Entity that any product produced, manufactured,
marketed or distributed by Parent or any of its subsidiaries is defective or
fails to meet any applicable standards promulgated by any such United States
Governmental Entity. There is no proceeding by the FDA or any other United
States Governmental Agency, including, but not limited to, a grand jury
investigation, a 405 hearing or a civil penalty proceeding, pending, or to
Parent's knowledge threatened, against Parent or any of its subsidiaries,
relating to the safety or efficacy of the products of Parent and its
subsidiaries and, to Parent's knowledge, there is no basis for such a
proceeding.
SECTION 3.13. Intangible Property. To Parent's knowledge, Parent and
its subsidiaries own or possess adequate licenses or other valid rights to use
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of Parent and
its subsidiaries as currently conducted, except for failures to own or possess
adequate licenses or other valid rights to use any of the foregoing which would
not have a Parent Material Adverse Effect, and, except as set forth in the
Parent SEC Reports or Section 3.13 of the Parent Disclosure Schedule, to the
knowledge of Parent there are no pending assertions or claims challenging the
validity of any of the foregoing which would have a Parent Material Adverse
Effect. Except as disclosed in Section 3.13 of the Parent Disclosure Schedule,
to Parent's knowledge, there are no pending claims or notices that the
manufacture and sale of Parent's products infringes the patents of any third
party.
SECTION 3.14. Brokers. No broker, finder or investment banker (other
than CS First Boston) is entitled to any brokerage, finder's or other fee or
commission or expense reimbursement in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Acquisition or any of their affiliates.
SECTION 3.15. Accounting Matters. Neither Parent nor, to the best of
its knowledge, any of its affiliates, has taken or agreed to take any action
that would prevent Parent from accounting for the business combination to be
effected by the Merger as a "pooling-of-interests." Parent has not failed to
bring to the attention of the Company any actions, or agreements or
26
understandings, whether written or oral, to act that would be reasonably likely
to prevent Parent from accounting for the Merger as a "pooling-of-interests."
SECTION 3.16. Telectronics Agreements. Parent has furnished to counsel
to the Company true, complete and correct copies of all Telectronics Agreements
in effect as of the date of this Agreement and any written documents,
instruments or other arrangements executed by the parties thereto in connection
therewith.
SECTION 3.17. Medtronic Agreement. The License Agreement, dated August
26, 1992, between Medtronic Inc. and Siemens AG as assigned to Parent on August
23, 1994 is in full force and effect and will not by its terms terminate by
reason of the Merger.
ARTICLE 4
COVENANTS
SECTION 4.1. Conduct of Business of the Company and Parent.
(a) Except as contemplated by this Agreement or Section 4.1 of the
Company Disclosure Schedule, during the period from the date hereof to the
Effective Time, the Company will, and will cause each of its subsidiaries to,
conduct its operations in the ordinary course of business consistent with past
practice and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, seek to preserve
intact its current business organizations, seek to keep available the service of
its current officers and employees and seek to preserve its relationships with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Effective Time, neither the Company nor
any of its subsidiaries will, without the prior written consent of Parent, which
consent shall not be unreasonably withheld:
(i) amend its certificate of incorporation or bylaws (or other
similar governing instrument);
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting
of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except for the sale of up to 78,813 shares of Company
Common Stock to employees under the ESPP, the issuance of shares of Company
Common Stock pursuant to the conversion of the Convertible Notes in
27
accordance with the terms thereof and the issuance or sale of shares of
Company Common Stock pursuant to outstanding options granted prior to the
date hereof under the Company Plans (in each case, in the ordinary course
of business and consistent with past practice);
(iii) 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, make any other actual, constructive or deemed
distribution in respect of any shares of its capital stock or otherwise
make any payments to stockholders in their capacity as such, or, except as
set forth in Section 4.1(c) below, redeem or otherwise acquire any of its
securities or any securities of any of its subsidiaries;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries (other than
the Merger);
(v) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership
of any subsidiary in a manner that would have a Company Material Adverse
Effect;
(vi) (A) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under existing lines of
credit in the ordinary course of business and in amounts not material to
the Company and its subsidiaries taken as a whole; (B) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except
in the ordinary course of business consistent with past practice and in
amounts not material to the Company and its subsidiaries, taken as a whole,
and except for obligations of the wholly owned subsidiaries of the Company;
(C) make any loans, advances or capital contributions to, or investments
in, any other person (other than to the wholly owned subsidiaries of the
Company or customary loans or advances to employees in the ordinary course
of business consistent with past practice and in amounts not material to
the maker of such loan or advance); (D) pledge or otherwise encumber shares
of capital stock of the Company or its subsidiaries; or (E) mortgage or
pledge any of its material assets, tangible or intangible, or create, grant
or incur any material Lien thereupon;
(vii) except as may be required by law or as contemplated by this
Agreement, enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option (except for
normal grants to newly hired or current employees, consistent with past
practice), stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund, award or other arrangement for the benefit or welfare of
any director, officer or
28
employee in any manner, or (except for normal increases in the ordinary
course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company, and as required under existing
agreements or in the ordinary course of business generally consistent
with past practice) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation
rights or performance units);
(viii) acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets which in the aggregate are
material to the Company and its subsidiaries taken as a whole, enter into
any commitment or transaction outside the ordinary course of business or
grant any exclusive distribution rights;
(ix) except as may be required as a result of a change in law or
in generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(x) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than in the ordinary course of business
or as required by generally accepted accounting principles;
(xi) (A) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (B) enter
into any contract or agreement, other than in the ordinary course of
business or amend in any material respect any of the Contracts or the
agreements referred to in Section 2.18; (C) authorize any new capital
expenditure or expenditures which, individually, is in excess of $500,000
or, in the aggregate, are in excess of $5 million; provided, that none of
the foregoing shall limit any capital expenditure already included in the
Company's fiscal 1996 or fiscal 1997 capital expenditure budget provided to
Parent prior to the date hereof; or (D) enter into or amend any contract,
agreement, commitment or arrangement providing for the taking of any action
that would be prohibited hereunder;
(xii) make or revoke any tax election or settle or compromise any
tax liability in a manner that involves the payment of a sum of money in
excess of $100,000 or change (or make a request to any taxing authority to
change) any material aspect of its method of accounting for tax purposes;
(xiii) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
29
ordinary course of business of liabilities reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its subsidiaries or incurred in the ordinary
course of business consistent with past practice;
(xiv) settle or compromise any pending or threatened suit, action
or claim relating to the transactions contemplated hereby in a manner that
involves the payment of a sum of money in excess of $100,000 or that
imposes material non-monetary obligations on the Company; or
(xv) take, propose to take, or agree in writing or otherwise to
take, any of the actions described above or any action which would make any
of the representations or warranties of the Company contained in this
Agreement untrue or incorrect in any material respect.
(b) Except as otherwise expressly provided in this Agreement, prior
to the Effective Time, neither Parent nor any of its subsidiaries will, without
the prior written consent of the Company, which consent shall not be
unreasonably withheld:
(i) amend its certificate of incorporation or bylaws (or other
similar governing instrument);
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting
of warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities or equity equivalents,
except for the sale of shares of Parent Common Stock to employees under the
Parent's employee stock purchase savings plan, the issuance of shares of
Parent Common Stock pursuant to outstanding options granted prior to the
date hereof under the Parent's employee stock option plans and the grant of
options after the date hereof (and the issuance of shares pursuant thereto)
pursuant to such plans (in each case, in the ordinary course of business
and consistent with past practice);
(iii) 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 (other than in respect of periodic regular cash
dividends), make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments
to stockholders in their capacity as such, or redeem or otherwise acquire
any of its securities or any securities of any of its subsidiaries;
30
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of Parent or any of its subsidiaries (other than the
Merger);
(v) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership
of any subsidiary in a manner that would have a Parent Material Adverse
Effect;
(vi) except as may be required as a result of a change in law or
in generally accepted accounting principles, change any of the accounting
principles or practices used by it; or
(vii) take, propose to take, or agree in writing or otherwise to
take, any of the actions described above or any actions which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect in any material respect.
(c) Notwithstanding the provisions of Section 4.1(a) hereof, following
the public announcement of the execution of this Agreement and prior to the
Effective Time, the Company shall repurchase in open market transactions 200,000
shares of Company Common Stock outstanding on the date hereof.
SECTION 4.2. Preparation of S-4 and the Proxy Statement. The Company
will, as promptly as practicable, prepare and file with the SEC the Proxy
Statement in connection with the vote of the stockholders of the Company with
respect to the Merger. Parent will, as promptly as practicable, prepare,
following receipt of notification from the SEC that it has no further comments
on the Proxy Statement, and file with the SEC the S-4, containing a proxy
statement/prospectus and form of proxy, in connection with the registration
under the Securities Act of the shares of Parent Common Stock issuable upon
conversion of the Shares and the other transactions contemplated hereby. Parent
and the Company will, and will cause their accountants and lawyers to, use all
reasonable best efforts to have or cause the S-4 declared effective as promptly
as practicable, including, without limitation, causing their accountants to
deliver necessary or required instruments such as opinions, consents and
certificates, and will take any other action required or necessary to be taken
under federal or state securities laws or otherwise in connection with the
registration process. The Company will use its reasonable best efforts to cause
the Proxy Statement to be mailed to its stockholders at the earliest practicable
date.
SECTION 4.3. No Solicitation.
(a) Until the earlier of the Effective Time or the termination of this
Agreement, the Company agrees that neither it nor any of its subsidiaries, nor
any of the officers, directors or employees of it or its subsidiaries shall, and
it shall direct and use its best efforts to cause its and its subsidiaries'
31
representatives and agents (including, without limitation, any investment
banker, attorney or accountant retained by the Company or any of its
subsidiaries), not to, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or take any other action knowingly to facilitate, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal; provided, however, that nothing in this Agreement shall
prohibit the Company Board from (i) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal or (ii) furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal after the date of this
Agreement, if, in the case referred to in clause (ii) above, the Company Board,
after consultation with and based upon the advice of independent legal counsel,
determines in good faith that such action is likely to be required for the
Company Board to comply with its fiduciary duties to stockholders under
applicable law and, prior to taking such action, the Company receives from such
person or entity an executed confidentiality agreement in reasonably customary
form. For purposes of this Agreement, "Acquisition Proposal" means an inquiry,
offer or proposal regarding any of the following (other than the transactions
contemplated by this Agreement) involving the Company or any of its
subsidiaries: (w) any merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (x) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of the Company and its subsidiaries, taken as a
whole, in a single transaction or series of related transactions; (y) any tender
offer or exchange offer for 20 percent or more of the outstanding shares of
Company Common Stock or the filing of a registration statement under the
Securities Act in connection therewith; or (z) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(b) Except as set forth in this Section 4.3(b), the Company Board
shall not (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by the Company Board, (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal or (iii) cause the Company to enter into any agreement with respect to
any Acquisition Proposal. Notwithstanding the foregoing, if the Board of
Directors of the Company, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that it is necessary to do
so in order to comply with its fiduciary duties to stockholders under applicable
law, the Company Board may approve or recommend a Superior Proposal (as defined
below) or cause the Company to enter into an agreement with respect to a
Superior Proposal, but in each case only (i) after providing reasonable written
notice to Parent (a "Notice of Superior Proposal") advising Parent that the
Company Board has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person making such
Superior Proposal and (ii) if Parent does not make within 48 hours of Parent's
receipt of the Notice of Superior Proposal, an offer which the Company Board,
32
after consultation with its financial advisors, determines is superior to such
Superior Proposal. For purposes of this Agreement, a "Superior Proposal" means
any bona fide Acquisition Proposal that the Company Board determines in its good
faith judgment (based on the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Merger.
SECTION 4.4. Intentionally omitted.
SECTION 4.5. Stockholder Meeting. The Company shall call a meeting of
its stockholders to be held as promptly as practicable for the purpose of voting
upon this Agreement and related matters. The Company will, through the Company
Board recommend to its stockholders approval of such matters; provided, however,
that the Company Board may withdraw its recommendation if the Company Board by a
majority vote determines in its good faith judgment, after consultation with and
based upon the advice of independent legal counsel, that it is necessary to do
so to comply with its fiduciary duties to stockholders under applicable law.
SECTION 4.6. Access to Information.
(a) Between the date hereof and the Effective Time, upon reasonable
notice and except as may be otherwise required by applicable law, each party
(for these purposes, Parent and Acquisition shall be deemed to be one party)
will give to the other party and the other party's authorized representatives
reasonable access during normal business hours to its employees, plants,
offices, warehouses and other facilities and to all of its books and records,
will permit the other party to make such inspections as the other party may
reasonably require and will cause its officers and those of its subsidiaries to
furnish the other party with such financial and operating data and other
information with respect to its business, properties and personnel as the other
party may from time to time reasonably request, provided that no investigation
pursuant to this Section 4.6(a) shall affect or be deemed to modify any of the
representations or warranties made herein and provided, further, that the
foregoing shall not require either party to permit any inspection, or to
disclose any information, that in its reasonable judgment would result in the
violation of any of its obligations to a third party with respect to
confidentiality if it shall have used best efforts to obtain the consent of such
third party to such inspection or disclosure.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent and Acquisition within five business days after the delivery
thereof to management, such monthly financial statements and data as are
regularly prepared for distribution to Company management. At the earliest time
they are available, each party shall furnish to the other party such quarterly
and annual financial statements as are prepared for its SEC filings, which shall
be in accordance with its books and records.
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(c) Parent will furnish to counsel to the Company true, complete and
correct copies of all Telectronics Agreements (and any written documents,
instruments or other arrangements executed by the parties thereto in connection
therewith) executed following the date hereof and on or prior to the Effective
Time.
(d) Each party will hold and will cause its consultants and advisors
to hold in confidence all documents and information concerning the other party
furnished to it in connection with the transactions contemplated by this
Agreement pursuant to the terms of the Confidentiality Agreements entered into
between the Company and Parent dated August 30, 1996.
SECTION 4.7. Additional Agreements; Best Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Telectronics Agreements as soon as practicable,
including, without limitation, (i) cooperation in the preparation and filing of
the Proxy Statement and the S-4 and any amendments to any thereof; (ii) the
taking of all action necessary, proper or advisable to secure any necessary
consents of all third parties and Governmental Entities; (iii) contesting and
resisting any legal proceeding relating to the Merger or the Telectronics
Agreements and having vacated, lifted, reversed or overturned any decree,
judgment or other order that restricts, prevents or prohibits the Merger or any
other transaction contemplated hereby or by the Telectronics Agreements; and
(iv) the execution of any additional instruments, including the Certificate of
Merger, necessary to consummate the transactions contemplated hereby. In case at
any time after the Effective Time any further action is necessary to carry out
the purposes of this Agreement, the proper officers and directors of each party
hereto shall take all such necessary action. Notwithstanding the provisions of
this Section 4.7, except for contractual arrangements in effect on the date
hereof, neither party shall be required to pay any amounts of money to third
parties to secure any consent or approval or to agree to any request or
requirement of any Governmental Entity that would materially impair or diminish
the benefits or ownership rights expected to be derived by Parent or the Company
from the transactions contemplated by this Agreement and the Telectronics
Agreements.
SECTION 4.8. Antitrust Reviews. Each party hereto will use its best
efforts (a) to file with the US Department of Justice and US Federal Trade
Commission, as soon as practicable after the date hereof, the Notification and
Report Form under the HSR Act and any supplemental information or material
requested pursuant to the HSR Act, and (b) to comply as soon as practicable
after the date hereof with any other laws of any country and the European Union
under which any consent, authorization, registration, declaration or other
action with respect to the transactions contemplated herein may be required.
Each party hereto shall furnish to the other such information and assistance as
the other may reasonably request in connection with any filing or other act
undertaken in compliance with the HSR Act or other such laws, and shall keep
34
each other timely apprised of the status of any communications with, and any
inquiries or requests for additional information from, any Governmental Entity
under the HSR Act or other such laws.
SECTION 4.9. Public Announcements. Each of Parent, Acquisition and the
Company will consult with one another before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Merger, and
shall not issue any such press release or make any such public statement or any
filing with any third party or Governmental Entity prior to such consultation.
SECTION 4.10. Indemnification; Directors' and Officers' Insurance.
(a) Indemnification. From and after the Effective Time, Parent shall,
to the fullest extent permitted by applicable law, 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, a director, officer or
employee of the Company or any subsidiary thereof (each an "Indemnified Party"
and, collectively, the "Indemnified Parties") against all losses, expenses and
costs (including reasonable attorneys' fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or prior to
the Effective Time and whether asserted or claimed prior to, at or after the
Effective Time that are in whole or in part (i) based on, or arising out of the
fact that such person is or was a director, officer or employee of the Company
or one or more of its subsidiaries or (ii) based on, arising out of or
pertaining to the transactions contemplated by this Agreement. Parent hereby
agrees that any loss, expense, cost (including reasonable attorneys' fees and
expenses), claims, damages or liability suffered by any director, officer or
employee of the Company arising out of any claim initiated by Intermedics, Inc.,
Xxxxx Xxxxxxxxxx or any other officer or employee of Intermedics, Inc. shall be
deemed to be a loss, expense, cost, claim, damage or liability arising out of
the fact that such person is or was a director, officer or employee of the
Company or one or more of its subsidiaries. In the event of any loss, expense,
claim, damage or liability (whether or not arising before the Effective Time)
described in the first sentence of this Section 4.10(a), (i) Parent shall pay
the reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to Parent, promptly after
statements therefor are received and otherwise advance to such Indemnified Party
upon request reimbursement of documented expenses reasonably incurred, in either
case to the extent not prohibited by the DGCL and upon receipt of any
affirmation and undertaking required by the DGCL, (ii) Parent will cooperate in
the defense of any such matter and (iii) any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the DGCL and Parent's articles of incorporation or
bylaws shall be made by independent counsel mutually acceptable to Parent and
the Indemnified Party; provided, however, that Parent shall not be liable for
any settlement effected without its written consent (which consent shall not be
35
reasonably withheld). The Indemnified Parties as a group may retain only one law
firm with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
any two or more Indemnified Parties.
(b) Insurance. For a period of three years after the Effective Time,
Parent shall cause to be maintained in effect the policies of directors' and
officers' liability insurance maintained by the Company for the benefit of those
persons who are covered by such policies at the Effective Time (or Parent may
substitute therefor policies of at least the same coverage with respect to
matters occurring prior to the Effective Time), to the extent that such
liability insurance can be maintained annually at a cost to Parent not greater
than 150 percent of the premium for the current Company directors' and officers'
liability insurance; provided that if such insurance cannot be so maintained or
obtained at such costs, Parent shall maintain or obtain as much of such
insurance as can be so maintained or obtained at a cost equal to 150 percent of
the current annual premiums of the Company for such insurance.
(c) Successors. In the event Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity or such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in either such case, proper provision shall be made so
that the successors and assigns of Parent shall assume the obligations set
forth in this Section 4.10.
(d) Survival of Indemnification. To the fullest extent permitted by
law, from and after the Effective Time, all rights to indemnification now
existing in favor of the employees, agents, directors or officers of the Company
and its subsidiaries with respect to their activities as such prior to the
Effective Time, as provided in the Company's certificate of incorporation or
bylaws, in effect on the date thereof or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 4.10 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his or
her heirs and his or her representatives.
SECTION 4.11. Notification of Certain Matters. The Company shall give
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, of the status of matters relating to completion of
the transactions contemplated hereby, including (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the Effective Time,
36
(ii) any material failure of the Company, Parent or Acquisition, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, (iii) any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by it or any of its subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract or agreement material to the financial condition, properties,
businesses or results of operations of it and its subsidiaries taken as a whole
to which it or any of its subsidiaries is a party or is subject, (iv) any notice
or other communication from any third party or Governmental Entity with respect
to the Merger or the other transactions contemplated hereby or alleging that the
consent of such third party or Governmental Entity is or may be required in
connection with the Merger or the other transactions contemplated by this
Agreement, or (v) any material adverse change in their respective financial
condition, properties, businesses or results of operations, taken as a whole,
other than changes resulting from general economic conditions; provided,
however, that the delivery of any notice pursuant to this Section 4.11 shall not
cure such breach or non-compliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 4.12. Pooling. The Company and Parent each agrees that it will
not take any action which could prevent the Merger from being accounted for as a
"pooling-of-interests" for accounting purposes, and the Company will bring to
the attention of Parent, and Parent will bring to the attention of the Company,
any actions, or agreements or understandings, whether written or oral, that
could be reasonably likely to prevent Parent from accounting for the Merger as a
"pooling-of-interests." The Company and Parent shall use their best efforts to
cause Ernst & Young LLP ("E&Y") to deliver to Parent and the Company a letter,
addressed to the Company and Parent, stating that after appropriate review of
this Agreement and based upon its familiarity with the Company and Parent,
following the Merger the Company and Parent are entities that qualify as parties
to a pooling of interests transaction under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations. Each party will
inform all Company Affiliates (as hereinafter defined in Section 4.15) and other
relevant affiliates and employees of the parties as to those actions that should
or should not be taken by such persons so that the Merger will be accounted for
as a "pooling-of-interests" and will use its best efforts to cause such
affiliates and persons employed by it to take or not take such actions as either
party may be informed by any Governmental Entity are necessary to be taken or
not to be taken so that the Merger will be accounted for as a
"pooling-of-interests."
SECTION 4.13. Tax-Free Reorganization Treatment. The Company, Parent
and Acquisition shall execute and deliver to Xxxxxxxx & Xxxxxxxx, counsel to the
Company, and Weil, Gotshal & Xxxxxx LLP, counsel to Parent, certificates
containing customary representations, at such time or times as reasonably
requested by such law firms in connection with their respective deliveries of
opinions with respect to the transactions contemplated hereby.
37
SECTION 4.14. Employee Matters.
(a) For the period commencing with the Effective Time and ending on
June 30, 1998, Parent shall and shall cause its subsidiaries to maintain with
respect to their employees who had been employed by the Company or any of its
subsidiaries (i) base salary or regular hourly wage rates for each such employee
at not less than the rate applicable immediately prior to the Merger to such
employee, and (ii) benefits under employee benefit plans (as defined for
purposes of Section 3(3) of ERISA), other than employee benefits as to which the
employees' interests are based upon the Shares, which are substantially
comparable in the aggregate to such benefits provided by the Company and its
subsidiaries immediately prior to the Merger. Thereafter, in Parent's
discretion, either (i) the provisions of the preceding sentence shall be
complied with by Parent or (ii) employees of the Company and its subsidiaries
shall be treated no less favorably under the compensation and benefits programs
of Parent than other similarly situated employees of Parent and its
subsidiaries.
(b) Parent and its subsidiaries shall credit employees of the Company
and its subsidiaries with their service prior to the Merger with the Company and
its subsidiaries to the same extent such service was counted under the Company
ERISA Plans for all purposes other than benefit accruals under the defined
benefit pension plans of Parent and its subsidiaries.
(c) Parent will, and will cause the Surviving Corporation to, honor
the employment and severance agreements and all other obligations of the
Surviving Corporation listed on Section 4.14(c) of the Company Disclosure
Schedule. Nothing contained herein shall be construed as requiring Parent or the
Surviving Corporation to continue any specific plans or to continue the
employment of any specific person.
SECTION 4.15. Company Affiliates. Prior to the Effective Time, each of
the Company and Parent will deliver to the other a letter identifying all
persons who, at the time of the meeting of the Company's stockholders referred
to in Section 4.5, it believes are its "affiliates" for purposes of Rule 145
under the Securities Act and for the purposes of applicable interpretations
regarding the pooling-of-interests method of accounting (the persons identified
in the Company's letter are each hereinafter referred to as a "Company
Affiliate" and the persons identified in Parent's letter are each hereinafter
referred to as a "Parent Affiliate"). The Company shall use its best efforts to
obtain a written agreement on or prior to the Effective Time from each person
who is identified as a Company Affiliate providing that (i) such Company
Affiliate will not sell, pledge, transfer or otherwise dispose of any shares of
Parent Common Stock issued to such Company Affiliate pursuant to the Merger,
except in compliance with Rule 145 promulgated under the Securities Act or an
exemption from the registration requirements of the Securities Act. Each of the
Company and Parent shall use its best efforts to obtain a written agreement on
or prior to the Effective Time from each Company Affiliate and Parent Affiliate,
respectively, providing that (ii) on or prior to the earlier of (x) the mailing
of the Proxy Statement or (y) the thirtieth day prior to the Effective Time such
38
person will not thereafter sell or in any other way reduce such person's risk
relative to any shares of Parent Common Stock (within the meaning of the SEC's
Financial Reporting Release No. 1, "Codification of Financing Reporting
Policies," ss. 201.01 47 F.R. 21028 (April 15, 1982)), until such time as
financial results (including combined sales and net income) covering at least 30
days of post-merger operations have been published, except as permitted by Staff
Accounting Bulletin No. 76 issued by the SEC.
SECTION 4.16. SEC Filings. Each of Parent and the Company shall
promptly provide the other party (or its counsel) with copies of all filings
made by the other party or any of its subsidiaries with the SEC or any other
state or federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 4.17. Guarantee of Performance. Parent hereby guarantees the
performance by Acquisition of its obligations under this Agreement.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other Governmental Entity and continued in effect which prohibits,
restrains, enjoins or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received;
39
(d) the S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop order,
and Parent shall have received all state securities laws or "blue sky" permits
and authorizations necessary to issue shares of Parent Common Stock in exchange
for the Shares in the Merger;
(e) the Company and Parent each shall have received from E&Y a letter
stating that after appropriate review of this Agreement and based upon its
familiarity with the Company and Parent, following the Merger the Company and
Parent are entities that qualify as parties to a pooling of interests
transaction under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations and such letter shall not have been withdrawn or
modified in any material respect;
(f) [intentionally omitted]; and
(g) the closing contemplated by the Asset Purchase Agreement (United
States), dated as of September 24, 1996, by and among Acquisition, Telectronics
Pacing Systems, Inc. and TPLC, Inc. shall have occurred.
SECTION 5.2. Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition
contained in this Agreement or in any other document delivered pursuant hereto
shall be true and correct in all material respects at and as of the Effective
Time with the same effect as if made at and as of the Effective Time (except for
the representation and warranty made in the first sentence of Section 3.12(d),
which is being made only as of the date of this Agreement), and at the Closing
Parent and Acquisition shall have delivered to the Company a certificate to that
effect;
(b) each of the obligations of Parent and Acquisition to be performed
at or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time, and at the Closing Parent and Acquisition shall have delivered to the
Company a certificate to that effect;
(c) each Parent Affiliate shall have delivered and performed his or
her obligations under the letter referenced in Section 4.15;
(d) the shares of Parent Common Stock issuable to the Company
stockholders pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been authorized
for listing on the Nasdaq
40
Stock Market (or any subsequent national securities exchange on which shares of
Parent Common Stock are then listed for trading) upon official notice of
issuance;
(e) the opinion of Xxxxxxxx & Xxxxxxxx, counsel to the Company,
addressed to the Company substantially to the effect that (i) the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code; (ii) each of Parent, Acquisition and the Company
will be a party to the reorganization within the meaning of Section 368(b) of
the Code; and (iii) no gain or loss will be recognized by a stockholder of the
Company as a result of the Merger with respect to Shares converted into shares
of Parent Common Stock (other than with respect to cash received in lieu of
fractional shares of Parent Common Stock), dated the Closing Date, shall have
been delivered and such opinion shall not have been withdrawn or modified in any
material respect;
(f) there shall have been no events, changes or effects with respect
to Parent or its subsidiaries (other than such events, changes or effects that
arise out of or result from the execution of this Agreement or the proposed
consummation of the Merger and the other transactions contemplated hereby)
having or which would have a Parent Material Adverse Effect;
(g) Parent and Acquisition shall have executed with State Street Bank
and Trust Company a supplemental indenture with respect to the Convertible
Notes, which supplemental indenture shall provide that upon consummation of the
Merger, (i) Acquisition shall assume the due and punctual payment of the
principal of and interest on all the Convertible Notes and the performance and
observance of every covenant to be performed or observed by the Company under
the Indenture under which such Convertible Notes were issued, (ii) the holder of
each Convertible Note outstanding immediately following the Merger thereafter
shall have the right to convert such Convertible Note into Parent Common Stock
at the rate of 34.90908 shares of Parent Common Stock for each $1,000 principal
amount of the Convertible Notes and (iii) Parent shall assume as a joint obligor
Acquisition's obligations to pay the principal of and premium, if any, and
interest on the Convertible Notes;
(h) the Agreement, dated the date hereof, between Intermedics, Inc.
and Acquisition (the "Intermedics Consent") shall be in full force and effect
without any modification or amendment that would materially and adversely affect
the ability of the Surviving Corporation following the Effective Time to conduct
the operations of the Company as such operations are conducted by the Company on
the date of this Agreement;
(i) Acquisition shall have offered to enter into an employment
agreement in the form annexed hereto as Exhibit A with each of the persons
listed in Section 5.2(i) of the Company Disclosure Schedule; and
41
(j) Intermedics, Inc. and Acquisition shall have entered into the 1996
License Agreement referred to in the Intermedics Consent, such 1996 License
Agreement to be in substance as described in the Intermedics Consent as
determined in the reasonable judgment of the Company.
SECTION 5.3. Conditions to the Obligations of Parent and Acquisition.
The respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company contained in
this Agreement or in any other document delivered pursuant hereto shall be true
and correct in all material respects at and as of the Effective Time with the
same effect as if made at and as of the Effective Time, and at the Closing the
Company shall have delivered to Parent and Acquisition a certificate to that
effect;
(b) each of the obligations of the Company to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time,
and at the Closing the Company shall have delivered to Parent and Acquisition a
certificate to that effect;
(c) each Company Affiliate shall have delivered and performed his or
her obligations under the letter referenced in Section 4.15;
(d) there shall have been no events, changes or effects with respect
to the Company or its subsidiaries (other than such events, changes or effects
that arise out of or result from the execution of this Agreement or the proposed
consummation of the Merger and the other transactions contemplated hereby)
having or which would have a Company Material Adverse Effect;
(e) the opinion of Weil, Gotshal & Xxxxxx LLP, addressed to Parent,
substantially to the effect that (i) the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code; (ii) each of Parent, Acquisition and the Company will be a party to
the reorganization within the meaning of Section 368(b) of the Code; and (iii)
no gain or loss will be recognized by Parent, Acquisition or the Company as a
result of the Merger, dated the Closing Date, shall have been delivered and such
opinion shall not have been withdrawn or modified in any material respect; and
(f) the Surviving Corporation shall have entered into an employment
agreement with each of the persons listed in Section 5.3(f) of the Parent
Disclosure Schedule.
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ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time, but prior to the Effective Time:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if (i) the Merger has not
been consummated by May 1, 1997, provided that no party may terminate this
Agreement pursuant to this clause (i) if such party's failure to fulfill any of
its obligations under this Agreement shall have been the reason that the
Effective Time shall not have occurred on or before said date, or (ii) the
Company or Parent shall have convened a meeting of its respective stockholders
and failed to obtain the requisite vote of its respective stockholders; or
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement, or if any representation or warranty of Parent or Acquisition
shall have become untrue, in either case such that the conditions set forth in
Section 5.2(a) would be incapable of being satisfied by May 1, 1997 (or as
otherwise extended), (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements hereunder having
a Parent Material Adverse Effect or materially adversely affecting the
consummation of the Merger, and Parent or Acquisition, as the case may be, has
not cured such breach within 20 business days after notice by the Company
thereof, or (iii) the Company enters into a definitive agreement relating to a
Superior Proposal in accordance with Section 4.3(b) (provided that such
termination shall not be effective until payment of the amount required under
Section 6.3(a)).
(d) by Parent and Acquisition if (i) there shall have been a breach of
any representation or warranty on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 5.3(a)
would be incapable of being satisfied by May 1, 1997 (or as otherwise extended),
(ii) there shall have been a breach by the Company of its covenants or
agreements hereunder having a Company Material Adverse Effect or materially
adversely affecting the consummation of the Merger, and the Company has not
cured such breach within 20 business days after notice by Parent or Acquisition
thereof, or (iii) the Company Board shall have withdrawn, modified or changed
its approval or recommendation of this Agreement or the Merger, shall have
recommended to the Company's stockholders any Acquisition Proposal (other than
the Merger), shall have failed to call, give notice of, convene or hold a
stockholders' meeting to vote upon the Merger, or shall have adopted any
43
resolution to effect any of the foregoing, or the Company shall have entered
into a definitive agreement relating to a Superior Proposal.
SECTION 6.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 6.2 and Sections 4.6(c) and 6.3. Nothing
contained in this Section 6.2 shall relieve any party from liability for any
wilful breach of this Agreement.
SECTION 6.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Sections 6.1(d)(i) or 6.1(d)(ii) as a result of a wilful breach by
the Company and, within twelve months thereafter, the Company enters into an
agreement with respect to any Acquisition Proposal (other than the Merger)), or
(ii) Sections 6.1(c)(iii) or 6.1(d)(iii),
then Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent and
Acquisition for such damages, and in full satisfaction and settlement of any
claims that Parent otherwise might have against the Company in respect of any
such termination of this Agreement, the Company shall pay to Parent the amount
of Fourteen Million Five Hundred Thousand Dollars ($14,500,000) (and not as a
penalty) as follows: (i) in the case of a termination under Section 6.1(d)(i) or
6.1(d)(ii), such amount shall be paid on the date the Company consummates an
Acquisition Proposal and (ii) in the case of a termination under Section
6.1(c)(iii) or 6.1(d)(iii), such amount shall be paid on the date of such
termination. Notwithstanding the immediately preceding sentence, any payment as
a result of a termination of this Agreement pursuant to Section 6.1(d)(i) or
6.1(d)(ii) shall be reduced by the amount of any damages actually recovered by
Parent or Acquisition in respect thereof.
(b) If the Company Board withdraws its recommendation to Company
stockholders that they vote to approve this Agreement and related matters by
reason of changes to the market prices of Parent Common Stock (in the absence of
44
any occurrences that had or would have a Parent Material Adverse Effect)
following the date hereof and the Merger is not consummated by reason of such
withdrawal, then the Company shall pay to Parent the amount of Fourteen Million
Five Hundred Thousand Dollars ($14,500,000). Such payment shall not be deemed to
be the exclusive remedy or remedies for any breach of this Agreement by the
Company, but shall be in addition to all other remedies available to Parent at
law or equity. Nothing contained in this Section 6.3(b) shall be an admission by
Parent that a change in the market prices of Parent Common Stock (in the absence
of any occurrences that had or would have a Parent Material Adverse Effect)
following the date hereof is an appropriate basis for the Company Board to
withdraw its recommendation to Company stockholders pursuant to Section 4.5
hereof.
(c) Each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby. The cost of printing the S-4
and the Proxy Statement shall be borne equally by the Company and Parent.
SECTION 6.4. Amendment. This Agreement may be amended by action taken
by the Company, Parent and Acquisition at any time before or after approval of
this Agreement by the stockholders of the Company but, after any such approval,
no amendment shall be made which requires the approval of such stockholders
under applicable law without such approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto.
SECTION 6.5. Extension; Waiver. At any time prior to the Effective
Time, each party hereto (for these purposes, Parent and Acquisition shall
together be deemed one party and the Company shall be deemed the other party)
may (i) extend the time for the performance of any of the obligations or other
acts of the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document, certificate
or writing delivered pursuant hereto or (iii) waive compliance by the other
party with any of the agreements or conditions contained herein. Any agreement
on the part of either party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of either party hereto to assert any of its rights hereunder
shall not constitute a waiver of such rights.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
SECTION 7.2. Entire Agreement; Assignment. This Agreement
(a) constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof; and
(b) shall not be assigned by operation of law or otherwise; provided,
however, that Acquisition may assign any or all of its rights and obligations
under this Agreement to any direct wholly-owned subsidiary of Parent, but no
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such assignment shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
SECTION 7.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to Parent or
to Acquisition to: St. Jude Medical, Inc.
Xxx Xxxxxxxx Xxxxx
Xx. Xxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
Facsimile: (000) 000-0000
if to the Company to: Ventritex, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
46
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
SECTION 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 7.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 4.10 and 7.2 nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 7.8. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 7.9. Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and, shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
SECTION 7.10. Subsidiaries. The term "subsidiary" shall mean, when
used with reference to any entity, any entity more than fifty percent (50%) of
the outstanding voting securities or interests (including membership interests)
of which are owned directly or indirectly by such former entity.
SECTION 7.11. 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 shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
ST. JUDE MEDICAL, INC.
By: /s/Xxxxxx X. Matricaria
-----------------------
Name: Xxxxxx X. Matricaria
Title: President and Chief Executive
Officer
PACESETTER, INC.
By: /s/Xxxxxxx Xxxxxxx
------------------
Name: Xxxxxxx Xxxxxxx
Title: President
VENTRITEX, INC.
By: /s/Xxxxx X. Xxxxxxx
-------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive
Officer
48
