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AGREEMENT AND PLAN OF MERGER
AMONG
VENTRITEX, INC.
ST. JUDE MEDICAL, INC.
AND
PACESETTER, INC.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1
THE MERGER............................................................................. 1
SECTION 1.2. Effective Time................................................. 1
SECTION 1.3. Closing of the Merger.......................................... 1
SECTION 1.4. Effects of the Merger.......................................... 1
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....................................... 2
SECTION 1.10. Stock Options.................................................. 4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................... 5
SECTION 2.1. Organization and Qualification; Subsidiaries................... 5
SECTION 2.2. Capitalization of the Company and its Subsidiaries............. 6
SECTION 2.3. Authority Relative to this Agreement........................... 6
SECTION 2.4. SEC Reports; Financial Statements.............................. 7
SECTION 2.5. Information Supplied........................................... 7
SECTION 2.6. Consents and Approvals; No Violations.......................... 8
SECTION 2.7. No Default..................................................... 8
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes................. 8
SECTION 2.9. Litigation..................................................... 9
SECTION 2.10. Compliance with Applicable Law................................. 9
SECTION 2.11. Employee Plans................................................. 9
SECTION 2.12. Environmental Laws and Regulations............................. 10
SECTION 2.13. Tax Matters.................................................... 11
SECTION 2.14. Intangible Property............................................ 12
SECTION 2.15. Opinion of Financial Advisor................................... 12
SECTION 2.16. Brokers........................................................ 12
SECTION 2.17. Accounting Matters............................................. 13
SECTION 2.18. Material Contracts............................................. 13
SECTION 2.19. Products....................................................... 13
SECTION 2.20. Amendment to Rights Agreement.................................. 14
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION.............................................................. 14
SECTION 3.1. Organization................................................... 14
SECTION 3.2. Capitalization of Parent and its Subsidiaries.................. 15
SECTION 3.3. Authority Relative to this Agreement........................... 15
SECTION 3.4. SEC Reports; Financial Statements.............................. 15
SECTION 3.5. Information Supplied........................................... 16
SECTION 3.6. Consents and Approvals; No Violations.......................... 16
SECTION 3.7. No Default..................................................... 17
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes................. 17
SECTION 3.9. Litigation..................................................... 17
SECTION 3.10. Compliance with Applicable Law................................. 18
SECTION 3.11. Tax Matters.................................................... 18
SECTION 3.12. Products....................................................... 18
SECTION 3.13. Intangible Property............................................ 18
SECTION 3.14. Brokers........................................................ 19
SECTION 3.15. Accounting Matters............................................. 19
SECTION 3.16. Telectronics Agreements........................................ 19
SECTION 3.17. Medtronic Agreement............................................ 19
ARTICLE 4
COVENANTS.............................................................................. 19
SECTION 4.1. Conduct of Business of the Company and Parent.................. 19
SECTION 4.2. Preparation of S-4 and the Proxy Statement..................... 22
SECTION 4.3. No Solicitation................................................ 22
SECTION 4.4. Intentionally omitted.......................................... 23
SECTION 4.5. Stockholder Meeting............................................ 23
SECTION 4.6. Access to Information.......................................... 23
SECTION 4.7. Additional Agreements; Best Efforts............................ 24
SECTION 4.9. Public Announcements........................................... 25
SECTION 4.10. Indemnification; Directors' and Officers' Insurance............ 25
SECTION 4.11. Notification of Certain Matters................................ 26
SECTION 4.12. Pooling........................................................ 26
SECTION 4.13. Tax-Free Reorganization Treatment.............................. 27
SECTION 4.14. Employee Matters............................................... 27
SECTION 4.15. Company Affiliates............................................. 27
SECTION 4.16. SEC Filings.................................................... 27
SECTION 4.17. Guarantee of Performance....................................... 28
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER............................................... 28
SECTION 5.1. Conditions to Each Party's Obligations to Effect the Merger.... 28
SECTION 5.2. Conditions to the Obligations of the Company................... 28
SECTION 5.3. Conditions to the Obligations of Parent and Acquisition........ 30
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER......................................................... 30
SECTION 6.1. Termination.................................................... 30
SECTION 6.2. Effect of Termination.......................................... 31
SECTION 6.3. Fees and Expenses.............................................. 31
SECTION 6.4. Amendment...................................................... 32
SECTION 6.5. Extension; Waiver.............................................. 32
ARTICLE 7
MISCELLANEOUS.......................................................................... 32
SECTION 7.1. Nonsurvival of Representations and Warranties.................. 32
SECTION 7.2. Entire Agreement; Assignment................................... 32
SECTION 7.3. Validity....................................................... 33
SECTION 7.4. Notices........................................................ 33
SECTION 7.5. Governing Law.................................................. 33
SECTION 7.6. Descriptive Headings........................................... 33
SECTION 7.7. Parties in Interest............................................ 33
SECTION 7.8. Severability................................................... 34
SECTION 7.9. Specific Performance........................................... 34
SECTION 7.10. Subsidiaries................................................... 34
SECTION 7.11. Counterparts................................................... 34
</TABLE>
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
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 & Manges LLP, 767 Fifth Avenue, New York, New York 10153,
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 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
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 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 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
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.
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, 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
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, 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 Hart-Scott-Rodino 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.
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
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.
(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.
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 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.
(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. Goldman, Sachs &
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."
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
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.
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.
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. 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 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.
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.
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;
(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 it 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
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 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
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 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;
(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' 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,
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.
(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
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.,
Peter Dorflinger 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
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 for
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,
(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 def