UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
RESTORE MEDICAL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing.
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Persons who are to respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control number.
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RESTORE MEDICAL, INC.
2800 Patton Road
St. Paul, Minnesota 55113
June 11, 2008
Dear Stockholder:
You are cordially invited to attend the special meeting of
stockholders of Restore Medical, Inc., to be held on July 16,
2008, at 10:30 a.m., local time, at the offices of
Dorsey & Whitney LLP, located at 50 South Sixth
Street, Suite 1500, Minneapolis, Minnesota 55402.
At the special meeting, you will be asked to consider and vote
upon (i) a proposal to adopt an Agreement and Plan of
Merger, dated as of April 22, 2008 and approve the merger,
pursuant to which MRM Merger Corporation, a newly formed
Delaware corporation and a wholly owned subsidiary of Medtronic,
Inc., a Minnesota corporation, will be merged with and into
Restore Medical and Restore Medical will become a wholly owned
subsidiary of Medtronic, and (ii) a proposal to approve the
adjournment of the special meeting, if necessary, to solicit
additional proxies if there are insufficient votes at the time
of the special meeting to adopt the merger agreement and approve
the merger. For your reference, a copy of the merger agreement
is attached to the enclosed proxy statement as
Appendix A
. If the merger agreement is adopted, the
merger is approved, and the merger is subsequently completed,
each outstanding share of Restore Medical common stock you own
will be canceled and converted automatically into the right to
receive $1.60 in cash, without interest, subject to decrease
only if it were determined that the outstanding capital stock,
options and warrants of Restore Medical reflected in our records
and audited financial statements is inaccurate and would, but
for the decrease, cause the aggregate merger consideration to
exceed $26,333,800. As a result, you will have no ongoing
ownership interest in our continuing business following
completion of the merger.
Our board of directors has reviewed and considered the terms and
conditions of the merger agreement, and has unanimously
determined that the merger is advisable, fair to and in the best
interests of Restore Medical and its stockholders. Piper
Jaffray & Co. rendered a written opinion to our board
of directors dated April 20, 2008, to the effect that, as
of that date and based upon and subject to the matters stated in
the opinion, the merger consideration of $1.60 in cash per share
is fair, from a financial point of view, to Restore Medical
stockholders. Piper Jaffrays written opinion is attached
as
Appendix B
to the enclosed proxy statement, and
you should read it carefully and in its entirety.
Our board of directors unanimously recommends that you vote
FOR adoption of the merger agreement and approval of
the merger and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies.
Approval of the merger and adoption of the merger agreement
requires the affirmative vote of the holders of a majority of
Restore Medicals issued and outstanding shares of common
stock entitled to vote thereon. Each share of Restore Medical
common stock is entitled to one vote on all matters to come
before the special meeting. Our common stock constitutes the
only outstanding class of our capital stock.
Attached to this letter you will find a formal notice of special
meeting and a proxy statement. This proxy statement is dated
June 11, 2008, and is first being mailed to stockholders on
or about June 11, 2008. The accompanying proxy statement
provides you with detailed information about the special meeting
and the proposed merger. If the merger agreement is adopted and
the merger is approved by the requisite number of holders of
Restore Medical common stock, the closing of the merger will
occur soon after the special meeting and after all of the other
conditions to closing the merger are satisfied. Please give this
material your careful attention and consideration. You may also
obtain more information about us from documents we have filed
with the Securities and Exchange Commission. Such documents are
also available on our website at
www.restoremedical.com
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Your vote is important regardless of the number of shares of
Restore Medical common stock you own.
A failure to vote will
count as a vote against the merger. If you are a stockholder of
record, you may submit your proxy and vote your Restore Medical
shares by returning the enclosed proxy card, properly marked,
signed and dated, in the postage-paid envelope provided, or you
may vote your Restore Medical shares by telephone or through the
Internet, all as described in the Summary Voting
Instructions included in this proxy statement and in the
instructions on the enclosed proxy card. If you hold your
Restore Medical shares through a broker, bank or other nominee
(that is, in street name), you should follow the
separate voting instructions, if any, provided to you by the
broker, bank or other nominee along with the proxy statement.
Your broker, bank or other nominee may provide for voting
through the Internet or by telephone. A decision to vote by
proxy will not prevent you from voting your shares in person if
you subsequently choose to attend the special meeting.
Thank you in advance for your continued support and your
consideration of this matter.
Very truly yours,
J. Robert Paulson, Jr.
President and Chief Executive Officer
RESTORE MEDICAL, INC.
2800 Patton Road
St. Paul, Minnesota 55113
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE
HELD ON JULY 16, 2008
TO THE STOCKHOLDERS OF RESTORE MEDICAL, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Restore Medical, Inc., a Delaware corporation, will be held on
July 16, 2008, at 10:30 a.m., local time, at the
offices of Dorsey & Whitney LLP, located at 50 South
Sixth Street, Suite 1500, Minneapolis, Minnesota 55402 for
the following purposes:
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1.
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To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of April 22, 2008, by and among
Medtronic, Inc., a Minnesota corporation, MRM Merger
Corporation, a newly formed Delaware corporation and wholly
owned subsidiary of Medtronic, and Restore Medical, and approve
the merger.
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To consider and vote upon a proposal to approve the adjournment
of the special meeting, if necessary, to solicit additional
proxies if there are insufficient votes at the time of the
special meeting to adopt the merger agreement and approve the
merger.
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3.
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To transact such other business as may properly come before the
special meeting or any adjournment or postponements of the
meeting.
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Only stockholders of record at the close of business on
June 6, 2008, are entitled to notice of and to vote at the
special meeting and at any adjournment or postponements of the
special meeting. The adoption of the merger agreement and
approval of the merger require the approval of the holders of a
majority of the outstanding shares of Restore Medical common
stock.
All stockholders are cordially invited to attend the special
meeting in person. However, to assure your representation at the
meeting in case you cannot attend, and if you are a stockholder
of record, you should vote your shares by telephone or through
the Internet, or by completing, signing, dating and mailing the
enclosed proxy card and returning it in the envelope provided,
all as described in the Summary Voting Instructions
included in this proxy statement and in the instructions on the
enclosed proxy card. If you hold your shares in street
name, to ensure that your shares are voted at the special
meeting, you should follow the directions provided by your
broker, bank or other nominee regarding how to instruct your
broker, bank or other nominee to vote your shares. Your broker,
bank or other nominee may provide for voting through the
Internet or by telephone. Without your specific voting
instructions, your shares will not be voted, which will have the
same effect as a vote against adoption of the merger agreement
and approval of the merger.
If you sign, date and mail your proxy card without indicating
how you wish to vote, your shares will be voted FOR
the adoption of the merger agreement and approval of the merger
and FOR the proposal to adjourn the special meeting
if the solicitation of additional proxies is deemed necessary,
except that no proxy that is specifically marked
AGAINST the proposal to adopt the merger agreement
and approve the merger will be voted in favor of the adjournment
proposal, unless it is specifically marked FOR the
adjournment proposal. If you do not vote in favor of the
proposal to adopt the merger agreement and approve the merger,
you will have appraisal rights under Delaware law, provided that
you strictly comply with the procedures as described further in
the accompanying proxy statement. A copy of the applicable
Delaware statutory provisions is included as
Appendix C
to the accompanying proxy statement, and a summary of these
provisions can be found under Dissenters Rights of
Appraisal in the accompanying proxy statement. Any
stockholder
attending the special meeting may vote in person even if he or
she has returned a proxy card. Your prompt attention is greatly
appreciated.
The Restore Medical board of directors has unanimously
determined that the merger is advisable, fair to and in the best
interests of Restore Medical and its stockholders. Accordingly,
the board of directors has unanimously approved the merger
agreement and recommends that Restore Medical stockholders vote
FOR the adoption of the merger agreement and
approval of the merger and FOR the adjournment of
the special meeting, if necessary, to solicit additional
proxies.
By Order of the Board of Directors
Christopher R. Geyen
Corporate Secretary
St. Paul, Minnesota
June 11, 2008
Please do not send your stock certificates at this time. If
the merger agreement is adopted and the merger is approved, you
will be sent instructions regarding the surrender of your stock
certificates.
SUMMARY
VOTING INSTRUCTIONS
YOUR VOTE IS IMPORTANT
Ensure that your Restore Medical common stock can be voted at
the special meeting by submitting your proxy or contacting your
broker, bank or other nominee. If you do not vote or do not
instruct your broker, bank or other nominee how to vote, it will
have the same effect as voting AGAINST the proposal
to adopt the merger agreement and approve the merger.
If your Restore Medical common stock is registered in the
name of a broker, bank or other nominee:
check the
voting instruction card forwarded by your broker, bank or other
nominee to see which voting options are available or contact
your broker, bank or other nominee in order to obtain directions
as to how to ensure that your shares of common stock are voted
in favor of the proposals at the special meeting. If you wish to
attend the special meeting to vote your shares in person, you
need to provide a proxy from your broker, bank or other nominee
authorizing you to vote your shares held in the brokers,
banks or other nominees name.
If your Restore Medical common stock is registered in your
name:
submit your proxy as soon as possible by
completing, signing, dating and returning the enclosed proxy
card in the enclosed postage-paid, self-addressed envelope, or
vote your shares as soon as possible by telephone or through the
Internet, so that your shares can be voted in favor of the
proposals at the special meeting.
Whether or not you plan to attend the special meeting, please
vote all proxies you receive. Voting now will not limit your
right to vote at the special meeting. If you later decide to
attend the special meeting in person, you may vote your shares
even if you have previously submitted a proxy.
YOU
SHOULD NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY
CARD.
The Restore Medical board of directors unanimously recommends
that stockholders vote FOR the adoption of the
merger agreement and approval of the merger at the special
meeting and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies.
There are
three ways to vote your Proxy:
Your telephone or Internet vote authorizes the proxies named
on the proxy card to vote your shares in the same manner as if
you marked, signed and returned your proxy card.
VOTE BY
PHONE TOLL FREE
1-800-560-1965
QUICK *** EASY *** IMMEDIATE
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Use any touch-tone telephone to vote your proxy 24 hours a
day, 7 days a week, until 12:00 p.m. noon (CT) on
July 15, 2008.
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Please have your proxy card and the last four digits of your
Social Security Number or taxpayer identification number
available. Follow the simple instructions the voice provides you.
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VOTE BY
INTERNET
http://www.eproxy.com/rest/
QUICK
***
EASY
***
IMMEDIATE
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Use the Internet to vote your proxy 24 hours a day,
7 days a week until 12:00 p.m. noon (CT) on
July 15, 2008.
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Please have your proxy card and the last four digits of your
Social Security Number or taxpayer identification number
available. Follow the simple instructions to obtain your records
and create an electronic ballot.
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VOTE BY
MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope weve provided or return it to
Restore Medical, Inc.,
c/o Shareowner
Services
sm
,
P.O. Box 64873, St. Paul, MN
55164-0873.
TABLE OF
CONTENTS
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1
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8
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10
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52
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52
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A-1
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B-1
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C-1
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QUESTIONS
AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address
briefly some commonly asked questions regarding the special
meeting and the proposed merger. These questions and answers may
not address all questions that may be important to you as a
Restore Medical stockholder. Please refer to the more detailed
information contained elsewhere in this proxy statement, the
Appendices to this proxy statement and the documents referred to
in this proxy statement, which you should read carefully. In
this proxy statement, the terms Restore Medical,
we, our, and us refer to
Restore Medical, Inc.
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Q:
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Why am I receiving this proxy statement?
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A:
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We have agreed to be acquired by Medtronic under the terms of a
merger agreement that is described in this proxy statement. A
copy of the merger agreement is included as
Appendix A
to this proxy statement. In order to complete the merger,
our stockholders must vote to adopt the merger agreement and
approve the merger. This proxy statement contains important
information about the merger and our special meeting of
stockholders.
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What is the proposed merger?
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A:
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Medtronic proposes to acquire us through a cash merger by
merging a subsidiary of Medtronic into us. If the merger is
completed, we will become a wholly owned subsidiary of Medtronic.
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Q:
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What will I receive for my Restore Medical common stock in
the merger?
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A:
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You will receive merger consideration of $1.60 in cash for each
share of Restore Medical common stock you own, without interest,
subject to decrease only if it were determined that the
outstanding capital stock, options and warrants of Restore
Medical reflected in our records and audited financial
statements is inaccurate, and would, but for the decrease, cause
the aggregate merger consideration to exceed $26,333,800. Upon
completion of the merger, stockholders of Restore Medical will
no longer have any equity or ownership interest in Restore
Medical, or in Medtronic, by virtue of their current ownership
of Restore Medical common stock.
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What will happen in the merger to warrants and stock options
to purchase Restore Medical common stock?
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A:
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At the effective time of the merger, each warrant and option to
acquire Restore Medical common stock outstanding immediately
prior to the consummation of the merger will be canceled and the
holder of such warrant or option will receive an amount equal to
the product of (i) the excess, if any, of the merger
consideration per share over the exercise price per share of
such warrant or option multiplied by (ii) the total number
of shares subject to such warrant or option, less any applicable
withholding taxes. As a condition to closing the merger, all
persons that are holders of Restore Medical stock options or
warrants are required to deliver statements confirming the
merger consideration to be paid pursuant to such stock options
and warrants and acknowledging the cancellation thereof, as
provided for in the merger agreement.
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Q:
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How does the merger consideration compare to the market price
of Restore Medical common stock?
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A:
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The signing of the merger agreement was announced after the
close of the regular trading session on April 22, 2008. The
merger consideration represents a premium of 191% over the
closing sale price of Restore Medical common stock on the Nasdaq
Global Market on April 22, 2008.
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When and where is the special meeting?
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A:
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The special meeting is scheduled to be held at 10:30 a.m.,
local time, on July 16, 2008 at the offices of
Dorsey & Whitney LLP, located at 50 South Sixth
Street, Suite 1500, Minneapolis, Minnesota 55402, unless it
is postponed or adjourned.
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What matters will be voted on at the special meeting?
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A:
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You are being asked to vote on whether to adopt the merger
agreement and approve the merger by which we propose to be
acquired by Medtronic and to approve the adjournment of the
special meeting, if
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necessary, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to adopt
the merger agreement and approve the merger.
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Q:
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How does the Restore Medical board of directors recommend
that I vote on the proposals?
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A:
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The Restore Medical board of directors unanimously recommends
that stockholders vote FOR the adoption of the
merger agreement and approval of the merger at the special
meeting and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies.
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Why is the Restore Medical board of directors recommending
the merger?
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Our board believes that the merger is advisable, fair to and in
the best interests of our stockholders. To review our
boards reasons for recommending the merger, see
pages 17 through 20.
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What vote is required for Restore Medical stockholders to
adopt the merger agreement and approve the merger?
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In order for the merger agreement to be adopted and for the
merger to be approved, holders of a majority of the outstanding
shares of our common stock must vote FOR the
adoption of the merger agreement and approval of the merger.
Each share of our common stock is entitled to one vote.
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Who is entitled to vote at the special meeting?
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Holders of record of our common stock as of the close of
business on June 6, 2008 are entitled to vote at the
special meeting.
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What do I need to do now?
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A:
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You should read this proxy statement carefully, including its
appendices and the documents to which it refers, and consider
how the merger would affect you. If you are a stockholder of
record, you should vote your shares by telephone or through the
Internet, or by completing, signing, dating and mailing the
enclosed proxy card and returning it in the envelope provided,
all as described in the Summary Voting Instructions
included in this proxy statement and in the instructions on the
enclosed proxy card. If you hold your shares in street
name, you can ensure that your shares are voted at the
special meeting by instructing your broker, bank or other
nominee how to vote, as discussed below.
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Q:
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If my shares are held in street name by my
broker, will my broker vote my shares for me?
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Yes, but only if you provide instructions to your broker, bank
or other nominee on how to vote. You should follow the
directions provided by your broker, bank or other nominee
regarding how to instruct your broker, bank or other nominee to
vote your shares. Without your specific voting instructions,
your shares will not be voted, which will have the same effect
as a vote against adoption of the merger agreement and approval
of the merger.
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Can I change my vote after I have mailed my proxy card?
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A:
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Yes. You can change your vote at any time before your proxy is
voted at the special meeting. If you are a stockholder of
record, you may revoke your proxy by notifying our Corporate
Secretary in writing or by submitting a new proxy by mail, in
each case, with a date after the date of the proxy being revoked
or by submitting a new proxy by telephone or through the
Internet. In addition, your proxy may be revoked by attending
the special meeting and voting in person (you must vote in
person, as simply attending the special meeting will not revoke
your proxy).
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Please note that if you hold your shares in street
name and you have instructed your broker, bank or other
nominee to vote your shares, the above-described options for
changing your vote do not apply, and instead you must follow the
directions received from your broker, bank or other nominee to
change your vote.
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What happens if I do not return a proxy card?
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If you fail to return your proxy card, your shares will not be
counted for purposes of determining whether a quorum is present
at the special meeting. In addition, the failure to return your
proxy card will have the same effect as a vote
AGAINST the merger agreement.
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Q:
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What should I do if I receive more than one set of voting
materials?
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A:
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You may receive more than one set of voting materials, including
multiple copies of this proxy statement and multiple proxy cards
or voting instruction cards. For example, if you hold your
shares in more than one brokerage account, you will receive a
separate voting instruction card for each brokerage account in
which you hold shares. If you are a holder of record and your
shares are registered in more than one name, you will receive
more than one proxy card. Please complete, sign, date, and
return each proxy card and voting instruction card that you
receive.
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Q:
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Do I need to attend the Restore Medical special meeting in
person?
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A:
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No. It is not necessary for you to personally attend the
special meeting to vote your shares if Restore Medical has
previously received your proxy, although you are welcome to
attend.
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Q:
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Will I have the right to have my shares appraised in
connection with the merger?
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A:
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Yes, but only if you strictly comply with the requirements of
Delaware law. If you wish to exercise your appraisal rights, you
must not vote in favor of adoption of the merger agreement or in
favor of the merger, you must continuously hold your shares from
the date of your demand for appraisal through the effective time
of the merger and you must strictly follow the other
requirements of Delaware law. A summary describing the
requirements you must meet in order to exercise your appraisal
rights is in the section entitled Dissenters Rights
of Appraisal on pages 49 through 52 of this proxy
statement.
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Q:
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When will holders of Restore Medical common stock receive the
merger consideration?
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A:
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The merger is expected to be completed promptly following the
special meeting of Restore Medical stockholders. However, it is
possible that delays could require that the merger be completed
at a later time. Following the effective time of the merger, you
will receive instructions on how to receive your cash payment in
exchange for each share of Restore Medical common stock. You
must return your Restore Medical stock certificates along with a
completed letter of transmittal as described in the
instructions, and you will receive your cash payment as soon as
practicable after the paying agent receives these documents. If
you hold shares through a brokerage account, your broker will
handle the surrender of stock certificates to the paying agent
on your behalf.
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Q:
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Should I send in my Restore Medical stock certificates
now?
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A:
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No. After the merger is completed the paying agent will
send you written instructions for exchanging your Restore
Medical stock certificates.
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Q:
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What happens if I sell my shares before the special
meeting?
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A:
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The record date of the special meeting is earlier than the date
of the special meeting and the date that the merger is expected
to be completed. If you sell your shares after the record date
but before the special meeting, you will retain your right to
vote at the special meeting, but will have transferred the right
to receive the merger consideration to be received by our
stockholders. In order to receive the merger consideration, you
must hold your shares until the effective time of the merger.
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Q:
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What happens if the merger is not completed?
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A:
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If the merger agreement is not adopted by our stockholders and
the merger is not approved, or if the merger is not completed
for any other reason, our stockholders will not receive any
payment for their shares in connection with the merger. Instead,
we will remain an independent public company and our common
stock will continue to be listed and traded on the Nasdaq
Capital Market under the REST
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iii
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symbol, subject to compliance with continued listing
requirements. You should read The Merger
Delisting and Deregistration of Our Common Stock on
page 29 for more information.
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Q:
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Will I owe taxes as a result of the merger?
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A:
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The cash you receive in the merger in exchange for your shares
of Restore Medical common stock and any cash you may receive as
a result of exercising your appraisal rights will be subject to
United States federal income tax and also may be taxed under
applicable state, local and foreign tax laws. In general, for
United States federal income tax purposes, you will recognize a
gain or loss equal to the difference between the amount of cash
you receive and your adjusted tax basis in your shares of
Restore Medical common stock. We recommend that you read the
section titled Material United States Federal Income Tax
Consequences in this proxy statement for a more detailed
explanation of the tax consequences of the merger. You should
consult your tax advisor regarding the specific tax consequences
of the merger applicable to you in light of your particular
circumstances.
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Q:
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Where can I find more information about Restore Medical and
Medtronic?
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A:
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We and Medtronic each file periodic reports and other
information with the SEC. This information is available at the
SECs public reference facilities, the Internet site
maintained by the SEC at
www.sec.gov
, and the investor
relations section of each of our company websites. For a more
detailed description of the information available, please see
the section entitled Where You Can Find More
Information on page 52.
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Q:
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Will a proxy solicitor be used?
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A:
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Yes. Restore Medical has engaged Morrow & Co., LLC to
assist in the solicitation of proxies for the
special meeting.
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Q:
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Who can help answer my questions?
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A:
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If you have additional questions about the merger or other
matters discussed in this proxy statement after reading this
proxy statement, you should contact:
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Corporate Secretary
Restore Medical, Inc.
2800 Patton Road
St. Paul, MN 55113
(651) 634-3111
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You may also contact Morrow & Co., LLC, located at 470 West
Avenue, third floor, Stamford, Connecticut 06902. Banks and
brokers should call
1-800-662-5200,
and stockholders should call
1-800-483-1314.
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iv
SUMMARY
TERM SHEET
This summary highlights selected information from this proxy
statement and may not contain all of the information that is
important to you as a Restore Medical stockholder. Accordingly,
we encourage you to carefully read this entire document and the
other documents to which we have referred you. See WHERE
YOU CAN FIND MORE INFORMATION on page 52. Page
references are to the longer descriptions of these items in the
proxy statement.
The
Companies
Restore Medical, Inc.
2800 Patton Road
St. Paul, Minnesota 55113
(651) 634-3111
Restore Medical was incorporated in Minnesota in November 1999
and reincorporated in Delaware in May 2004. We develop,
manufacture and market our proprietary and patented
Pillar
®
palatal implant system, which we refer to as the Pillar System.
The Pillar System is a simple, innovative, minimally invasive,
implantable medical device that is used to treat the soft palate
component of sleep disordered breathing, which includes mild to
moderate obstructive sleep apnea, or OSA, and habitual or
socially disruptive snoring. We currently market and sell our
Pillar System primarily to otolaryngologists (ear, nose and
throat physicians, or ENTs) and to a limited number of other
healthcare professionals that treat sleep disordered breathing,
as a minimally invasive, clinically effective treatment for mild
to moderate OSA and snoring. Our Pillar System has been both
cleared by the U.S. Food and Drug Administration, or FDA,
and received CE Mark certification from the European Commission
for treatment of mild to moderate OSA and snoring.
Medtronic, Inc.
710 Medtronic Parkway
Minneapolis, Minnesota 55432
(763) 514-4000
Medtronic, Inc. was founded in 1949, incorporated as a Minnesota
corporation in 1957, and today serves physicians, clinicians and
patients in more than 120 countries worldwide. Medtronic is the
global leader in medical technology, alleviating pain, restoring
health, and extending life for millions of people around the
world. Medtronic is committed to offering market-leading
therapies to restore patients to fuller, healthier lives. With
beginnings in the treatment of heart disease, Medtronic has
expanded well beyond its historical core business and today
provides a wide range of products and therapies that help solve
many challenging, life-limiting medical conditions.
MRM Merger Corporation
710 Medtronic Parkway
Minneapolis, Minnesota 55432
(763) 514-4000
MRM Merger Corporation, which we refer to as Merger Sub, is
incorporated under the laws of the State of Delaware and is a
wholly owned subsidiary of Medtronic formed solely for purposes
of the merger and is engaged in no other business.
The
Merger
Structure
of the Merger (Page 32)
This proxy statement relates to the proposed acquisition of us
by Medtronic pursuant to an Agreement and Plan of Merger, dated
as of April 22, 2008, among Medtronic, Merger Sub and us.
Upon the terms and subject to the conditions of the merger
agreement, Merger Sub will be merged with and into Restore
Medical. As a result of the merger, we will become a direct,
wholly owned subsidiary of Medtronic.
We have attached
1
a copy of the merger agreement to this proxy statement as
Appendix A
. We encourage you to read the merger
agreement in its entirety.
Consideration
to be Received in the Merger (Pages 32 to 33)
In the merger, you will receive merger consideration of $1.60
per share (subject to decrease in the limited circumstance
described below) in cash, without interest and subject to any
applicable withholding taxes, for each share of our common stock
you hold immediately prior to the merger. In addition,
outstanding options and warrants will be canceled at the
effective time in exchange for cash equal to the number of
shares of common stock underlying the outstanding stock option
or warrant multiplied by the excess, if any, of the merger
consideration per share over the exercise price of the stock
option or warrant. Based on the number of shares of our common
stock outstanding on June 6, 2008 and the number of stock
options and warrants outstanding with an exercise price less
than $1.60, the aggregate cash consideration to be paid by
Medtronic to our stockholders, option holders and warrant
holders will be approximately $26,333,800. Pursuant to the
merger agreement, the merger consideration of $1.60 per share is
subject to decrease only if it were determined that the
outstanding capital stock, options and warrants of Restore
Medical reflected in our records and audited financial
statements is inaccurate, and would, but for the decrease, cause
the aggregate consideration to exceed $26,333,800.
Completion
of the Merger (Page 32)
We are working to complete the merger as soon as practicable. We
currently anticipate completing the merger in the third quarter
of 2008, following the special meeting, subject to receipt of
stockholder approval and satisfaction of other requirements,
including the conditions described below. See The Merger
Agreement Effective Time of the Merger.
Restore
Medical Stock Price
Shares of Restore Medical are traded on the Nasdaq Capital
Market under the symbol REST. On April 22,
2008, we announced the signing of the merger agreement after the
close of regular trading. The closing price per share on
April 22
nd
was
$0.55.
Recommendation
of Our Board of Directors (Page 20)
Our board of directors has unanimously approved the merger
agreement, and determined that the merger is advisable, fair to
and in the best interests of our stockholders. Our board of
directors unanimously recommends that Restore Medical
stockholders vote FOR the adoption the merger
agreement and approval of the merger at the special meeting and
FOR the proposal to adjourn the special meeting to
solicit additional proxies, if necessary.
Restore
Medicals Reasons for the Merger (Pages 17 to
20)
Our board of directors consulted with senior management and our
financial and legal advisors and considered a number of factors,
including those set forth below, in reaching its decisions to
approve the merger agreement and the transactions contemplated
by the merger agreement, and to recommend that Restore
Medicals stockholders vote FOR adoption of the
merger agreement and approval of the merger:
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The form and amount of the merger consideration;
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Advice from Restore Medicals financial advisor;
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The prospects of remaining independent;
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Uncertain availability of alternative transactions; and
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Likelihood of closing.
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2
The information and factors set forth above includes the
material factors considered by our board of directors. In view
of the variety of factors considered in connection with its
evaluation of the merger, our board of directors did not find it
practicable to, and did not quantify or otherwise assign
relative or specific weight or values to any of these factors,
and individual directors may have given different weight to
different factors. See The Merger Restore
Medicals Reasons for the Merger.
Opinion
of Our Financial Advisor (Pages 20 to 26 and
Appendix B
)
Piper Jaffray & Co. has delivered to our board of
directors its opinion, as of April 20, 2008, to the effect
that as of that date and based upon and subject to the matters
stated in its opinion, the merger consideration of $1.60 in cash
per share is fair, from a financial point of view, to the
holders of Restore Medical common stock. See The
Merger Opinion of Restore Medicals Financial
Advisor. Piper Jaffray received a retainer fee of $50,000
and a fixed fee of $250,000 in payment for delivering this
fairness opinion to our board of directors, neither of which was
contingent upon consummation of the merger. Piper Jaffray also
provided financial advisory services to our board of directors
for which it will be paid a transaction fee, contingent upon
consummation of the merger, equal to $950,000.
Interests
of Directors and Executive Officers in the Merger that Differ
From Your Interests (Pages 27 to 29)
Some of our directors and executive officers have interests in
the merger that are different from, or are in addition to, their
interests as stockholders in Restore Medical. Our board of
directors knew about these additional interests and considered
them when they approved the merger agreement. These interests
include the following, which are described in more detail under
the heading The Merger Interests of Restore
Medicals Directors and Executive Officers in the
Merger:
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Stock Options.
The merger agreement provides
that each stock option issued by Restore Medical to acquire
common stock outstanding immediately prior to the effective time
of the merger, whether vested or unvested, will be canceled, and
the option holder will be entitled to receive an amount in cash
equal to the excess of the merger consideration per share over
the exercise price of each stock option, multiplied by the
number of shares of common stock underlying the stock option,
less applicable withholding taxes. The option cash-out amounts
payable to each executive officer and director of Restore
Medical (before deduction of withholding taxes) as a result of
the merger are as follows: J. Robert Paulson, Jr.
$217,578; Christopher R. Geyen, $8,959; Craig G. Palmer,
$10,250; David L. Bremseth, $6,150; Michael R. Kujak,
$9,225; Paul J. Buscemi, Ph.D., $24,900; John P. Sopp,
$25,225; Luke Evnin, Ph.D. $0; Mark B. Knudson, Ph.D.
$20,000; Stephen Kraus, $0; Howard Liszt, $0; Richard Nigon, $0;
John Schulte, $20,000; and all directors and executive officers
as a group, $342,285.
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Employment and
Change-in-Control
Agreements.
Each of our executive officers
previously entered into employment and
change-in-control
agreements that provide severance and certain other benefits in
the event of a
change-in-control
of Restore Medical. The following summarizes the total amount
(including the cash-out of stock options described above and
healthcare benefits) that would be received by each Restore
Medical executive officer under these agreements upon a
change-in-control,
assuming that such executive officer is terminated without
cause (as defined in the agreements) following the
closing date of the last transaction necessary to effect the
change-in-control
or if a constructive termination (as defined in the
agreements) occurs following the closing date of the last
transaction necessary to effect the
change-in-control
(or in the case of all of the executive officers except J.
Robert Paulson, Jr., Christopher R. Geyen and Craig G.
Palmer, within 12 months following such date):
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J. Robert Paulson, Jr., President and Chief Executive
Officer $529,400
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Christopher R. Geyen, Senior Vice President and Chief Financial
Officer $238,352
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Craig G. Palmer, Senior Vice President of
U.S. Sales $244,330
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David L. Bremseth, Vice President of Clinical and Regulatory
Affairs $108,822
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3
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Michael R. Kujak, Vice President of Marketing
$114,354
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Paul J. Buscemi, Ph.D., Vice President of Research and
Development $118,302
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John P. Sopp, Vice President of Operations $119,196
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Indemnification.
Our directors and executive
officers will continue to be entitled to indemnification
following consummation of the merger pursuant to provisions in
the merger agreement.
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Shares
Held by Directors and Executive Officers
(Page 13)
As of June 1, 2008, approximately 35.5% of the outstanding
shares of our common stock (excluding shares issuable upon
exercise of options or warrants) were held by our directors and
executive officers and their affiliates, and no shares of
Restore Medical common stock were held by Medtronic. We expect
all of these shares to be voted in favor of the proposal to
adopt the merger agreement and in favor of the merger, and to
approve the adjournment of the special meeting, if necessary, to
solicit additional proxies.
The
Special Meeting of Stockholders
Date,
Time and Place (Page 10)
The special meeting will be held at the offices of
Dorsey & Whitney LLP, located at 50 South Sixth
Street, Suite 1500, Minneapolis, Minnesota 55402 at
10:30 a.m., local time, on July 16, 2008.
Matters
to be Considered (Page 10)
At the special meeting, you will be asked to consider and vote
upon (i) a proposal to adopt the merger agreement and
approve the merger, and (ii) a proposal to adjourn the
special meeting, if necessary, to solicit additional proxies.
You may also be asked to consider and vote on other matters,
such as procedural matters in connection with the special
meeting, if they properly come before the meeting.
Record
Date and Voting (Pages 10 to 13)
At the special meeting you can vote all of the shares of Restore
Medical common stock you own of record as of June 6, 2008,
which is the record date for the special meeting. You have one
vote for each share of common stock owned on the record date. If
you own shares that are registered in someone elses name,
for example, a broker, you need to direct that person to vote
those shares or obtain an authorization from them and vote the
shares yourself at the meeting. As of the close of business on
June 6, 2008, there were 15,738,364 shares of Restore
Medical common stock outstanding held by approximately 49
holders of record.
Required
Vote and Quorum (Page 10)
The adoption of the merger agreement and approval of the merger
requires the approval of the holders of a majority of the
outstanding shares of Restore Medical common stock entitled to
vote thereon. Although it is not currently expected that we will
have to adjourn the special meeting, if a quorum is present, the
vote of the holders of a majority of the stock having voting
power present in person or represented by proxy may adjourn the
meeting. The presence at the special meeting, in person or by
proxy, of the holders of a majority of the outstanding shares of
our common stock will constitute a quorum for the purposes of
the special meeting. If a quorum is not present at the meeting,
then either the chairman of the meeting, or the holders of a
majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting.
Procedures
for Voting (Pages 10 to 13)
If you are a stockholder of record, you can vote your shares by:
(1) attending the special meeting and voting in person,
(2) mailing the enclosed proxy card, (3) voting by
telephone or (4) voting through the Internet, all as
described in the Summary Voting Instructions
included in this proxy statement and in the instructions on the
enclosed proxy card. If you hold your Restore Medical shares
through a broker, bank or
4
other nominee (that is, in street name), you should
follow the separate voting instructions, if any, provided to you
by the broker, bank or other nominee along with the proxy
statement. Your broker, bank or other nominee may provide for
voting through the Internet or by telephone.
If you are a stockholder of record, you can revoke or change
your proxy before it is voted by: (1) filing a notice of
revocation, that is dated a later date than your proxy, with the
Corporate Secretary, (2) submitting a duly executed proxy
card bearing a later date, (3) submitting a new proxy by
telephone or through the Internet at a later time, but not later
than 12:00 p.m. noon, Central Time, on July 15, 2008,
or the day before the meeting date, if the special meeting is
adjourned or postponed, or (4) voting in person at a
special meeting (simply attending the special meeting will not
constitute revocation of a proxy). If your shares are held in
street name, you should follow the instructions of
your broker, bank or other nominee in order to revoke or change
your proxy. If your broker, bank or other nominee allows you to
submit a proxy by telephone or through the Internet, you may be
able to change your vote by submitting a proxy again by
telephone or through the Internet.
The
Merger Agreement
Conditions
to Completion of the Merger (Pages 41 to 42 and
Appendix A)
The obligations of each of Medtronic and Merger Sub, on the one
hand, and us, on the other hand, to complete the merger depend
on the satisfaction or waiver, on or prior to the effective time
of the merger, of a number of conditions, including:
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receipt of the required vote to adopt the merger agreement and
approve the merger by our stockholders at the special meeting;
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the absence of any order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal
restraint or prohibition preventing completion of the merger and
that no governmental entity shall have enacted or enforced any
statute, rule, order or decree prohibiting the merger or making
it illegal;
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the aggregate amount of shares demanding appraisal shall not
equal or exceed 10% of the total number of shares outstanding as
of the record date for the special meeting; and
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for each party, specified levels of compliance by the other with
its representations, warranties and obligations under the merger
agreement.
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The obligation of Medtronic and Merger Sub to complete the
merger is subject to the additional condition that no material
adverse effect (as defined in the merger agreement) shall have
occurred on us since the date of the merger agreement.
Terminating
the Merger Agreement (Pages 42 to 43 and
Appendix A)
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the effective time of the merger,
regardless of whether our stockholders have adopted the merger
agreement and approved the merger:
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by mutual written consent of Medtronic and us;
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by either Medtronic or us, under circumstances that involve any
of the following:
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a final, nonappealable action by any governmental entity
prohibiting the merger;
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if the merger shall not have occurred on or before
September 30, 2008; or
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if we do not obtain the required stockholder approval in favor
of adoption of the merger agreement and in favor of the merger;
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by Medtronic, under circumstances that involve any of the
following:
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our uncured or incurable breach of any of our representations,
warranties, covenants or agreements in the merger agreement,
which would result in the conditions to Medtronics
obligation to complete the merger not being satisfied;
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our knowing and material breach of our obligations under the
non-solicitation provisions of the merger agreement or our
obligations relating to obtaining the required stockholder
approval; or
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an adverse change in the recommendation of our board of
directors that our stockholders adopt the merger agreement and
approve the merger, or the taking of various other actions by us
or our board of directors relating to a competing acquisition
proposal including if we engaged in discussions relating to a
competing acquisition proposal for longer than certain periods
of time specified in the merger agreement;
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by us, under circumstances that involve any of the following:
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the uncured or incurable breach by Medtronic or Merger Sub of
any of their representations, warranties, covenants or
agreements in the merger agreement, which would result in the
conditions to our obligation to complete the merger not being
satisfied; or
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our acceptance of a superior proposal in compliance with our
non-solicitation obligations, and payment to Medtronic of the
$1.5 million termination fee.
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Termination
Fee; Expenses (Pages 43 to 44 and
Appendix A)
The merger agreement provides that we may be required to pay
Medtronic a termination fee of $1.5 million under the
following circumstances:
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the merger agreement is terminated for any of the following
reasons, and we enter into an agreement with respect to, or
consummate, any competing acquisition proposal (as
defined in the merger agreement, subject to the references to
15% in that definition being replaced by
50%), within 12 months after termination:
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the merger has not occurred prior to September 30, 2008
without a special meeting having been convened, and a competing
acquisition proposal has been made public and not irrevocably
withdrawn prior to such date;
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our stockholders have failed to adopt the merger agreement and
approve the merger at the special meeting and a competing
acquisition proposal has been made public and not irrevocably
withdrawn prior to the stockholder vote; or
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following certain knowing and material breaches of the merger
agreement by us, where a competing acquisition proposal has been
made public and not irrevocably withdrawn prior to such breach;
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Medtronic terminates the merger agreement as a result of an
adverse change in the recommendation of our board of directors
that our stockholders adopt the merger agreement and approve the
merger, or the taking of various other actions by us or our
board of directors relating to a competing acquisition
proposal; or
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we terminate the merger agreement in connection with accepting a
superior proposal.
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We may be obligated to reimburse Medtronic for its reasonably
documented out-of-pocket fees and expenses, up to a maximum of
$1 million, following termination in connection with our
failure to obtain the required stockholder approval. The
reimbursement amount will be offset against any termination fee
that subsequently becomes due. See The Merger
Agreement Termination Fee and
Expenses.
6
No
Solicitation of Alternative Transactions (Pages 38 to 40
and
Appendix A
)
The merger agreement contains restrictions on our ability to
solicit or engage in discussions or negotiations with a third
party with respect to a proposal to acquire a significant
interest in us. Notwithstanding these restrictions, the merger
agreement provides that under specified circumstances, if prior
to the adoption of the merger agreement and approval of the
merger by our stockholders, we receive an unsolicited
acquisition proposal from a third party that our board of
directors determines in good faith, after consultation with
outside legal counsel and financial advisors, is or is
reasonably likely to result in a superior proposal, we may, if
our board of directors also determines in good faith (after
receiving advice of outside legal counsel) that the failure to
take such action would constitute a breach of the board of
directors fiduciary duties to our stockholders and if we
provide Medtronic with at least one business day advance notice,
furnish nonpublic information to that third party and engage in
negotiations with that third party. See The Merger
Agreement No Solicitation of Alternative
Transaction.
Dissenters
Rights of Appraisal (Pages 49 to 52 and
Appendix C
)
Under Delaware law, if you do not vote in favor of adoption of
the merger agreement and approval of the merger, if you
continuously hold your shares from the date of your demand for
appraisal through the effective time of the merger, and if you
comply with all of the other statutory requirements of the
Delaware General Corporation Law, you may elect to receive, in
cash, the judicially determined fair value of your shares of
stock in lieu of the merger consideration. See
Dissenters Rights of Appraisal.
Material
United States Federal Income Tax Consequences (Pages 30 to
31)
The receipt by a U.S. stockholder of cash in exchange for
shares of Restore Medical common stock pursuant to the merger
will be a taxable transaction for U.S. federal income tax
purposes (and may also be a taxable transaction under applicable
state, local, and foreign tax laws). In general, a
U.S. holder who receives cash in exchange for shares
pursuant to the merger will recognize gain or loss for
U.S. federal income tax purposes in an amount equal to the
difference, if any, between the amount of cash received in
exchange for the shares and the holders adjusted tax basis
in the shares surrendered. Tax matters can be complicated and
you should also consult your tax advisor with respect to the
application of the U.S. federal income tax laws to your
particular tax situation. See Material United States
Federal Income Tax Consequences in this proxy statement
for a more detailed explanation of the tax consequences of the
merger.
Paying
Agent
U.S. Bank National Association or another comparable
institution will act as the paying agent in connection with the
merger.
7
CAUTIONARY
STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
Forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (PSLRA) are
included in this proxy statement. The words or phrases
believes, may, will,
expects, should, continue,
anticipates, intends, will likely
result, estimates, projects or
similar expressions identify forward-looking statements in this
proxy statement and in our future filings with the Securities
and Exchange Commission, in our press releases, in our
presentations to securities analysts or investors, and in oral
statements made by or approved by an executive officer of
Restore Medical. These forward-looking statements, including our
projected financial and operating results under the heading
The Merger Financial Projections and
statements relating to the expected timetable for completing the
merger, reflect our managements current expectations,
estimates, forecasts and projections, and are subject to a
number of risks and uncertainties that may cause our actual
results to differ materially from those expressed in, or implied
by, such statements. Actual results, including our future
financial condition and results of operations, are subject to
inherent risks and uncertainties.
You should consider carefully the following cautionary
statements as you consider whether to adopt the merger agreement
and approve the merger. We intend to take advantage of the
safe harbor provisions of the PSLRA by providing
this discussion. We are not undertaking to address or update
each factor in future filings or communications regarding our
business or results except to the extent required by law.
In addition to other factors and matters contained in this proxy
statement, we believe the following factors could cause actual
results to differ materially from those discussed in the
forward-looking statements:
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the risk that stockholder approval may not be obtained or may
not be obtained in a timely manner;
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inability to complete all closing conditions required for the
proposed transaction and the risk that the merger will not be
completed for that or other reasons;
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unexpected costs or liabilities resulting from the proposed
transaction;
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diversion of managements attention from the operations of
the business as a result of preparations for the proposed merger;
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the risk that announcement of the proposed merger may negatively
affect our relationship with our customers, suppliers, and
employees;
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legislative or regulatory developments that could have the
effect of delaying or preventing the merger;
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the risk that we are unable to achieve the financial projections
set forth under The Merger Financial
Projections below, for the reasons set forth in that
section;
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the risk that legal proceedings are instituted against us in
connection with the merger or otherwise and the impact or
outcome of those proceedings; and
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other factors and other risks referred to in our filings with
the Securities and Exchange Commission (SEC),
including as described in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 and our most
recent Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008, both of which can be
found at the SECs website located at
www.sec.gov
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and on our website located at
www.restoremedical.com
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8
THE
PARTIES TO THE MERGER
Restore
Medical, Inc.
Restore Medical, Inc. was incorporated in Minnesota in November
1999 and reincorporated in Delaware in May 2004. We develop,
manufacture and market our proprietary and patented
Pillar
®
palatal implant system. The Pillar System is a simple,
innovative, minimally invasive, implantable medical device that
is used to treat the soft palate component of sleep disordered
breathing, which includes mild to moderate obstructive sleep
apnea, or OSA, and habitual or socially disruptive snoring. We
currently market and sell our Pillar System primarily to
otolaryngologists (ear, nose and throat physicians, or ENTs) and
to a limited number of other healthcare professionals that treat
sleep disordered breathing, as a minimally invasive, clinically
effective treatment for mild to moderate OSA and snoring. Our
Pillar System has been both cleared by the U.S. Food and
Drug Administration, or FDA, and received CE Mark certification
from the European Commission for treatment of mild to moderate
OSA and snoring. To date, more than 30,000 Pillar Procedures
have been performed world-wide. We believe the Pillar Procedure
is a safe, clinically effective, long-lasting and low-risk
procedure with minimal pain or complications that provides
patients and physicians with significant benefits over other
available options to treat the soft palate component of snoring
and OSA. Our website address is
www.restoremedical.com
.
Medtronic,
Inc.
Medtronic, Inc. was founded in 1949, incorporated as a Minnesota
corporation in 1957, and today serves physicians, clinicians and
patients in more than 120 countries worldwide. Medtronic is the
global leader in medical technology, alleviating pain, restoring
health, and extending life for millions of people around the
world. Medtronic is committed to offering market-leading
therapies to restore patients to fuller, healthier lives. With
beginnings in the treatment of heart disease, Medtronic has
expanded well beyond its historical core business and today
provides a wide range of products and therapies that help solve
many challenging, life-limiting medical conditions.
Medtronics website address is
www.medtronic.com
.
MRM
Merger Corporation
MRM Merger Corporation is a Delaware corporation and a wholly
owned subsidiary of Medtronic formed solely for the purpose of
engaging in the merger and is engaged in no other business.
Pursuant to the terms of the merger agreement, at the effective
time of the merger, MRM Merger Corporation will be merged with
and into Restore Medical with Restore Medical being the
surviving corporation.
9
THE
SPECIAL MEETING OF RESTORE MEDICAL STOCKHOLDERS
Date,
Time, Place and Purpose of the Special Meeting
The special meeting will be held at the offices of
Dorsey & Whitney LLP, located at 50 South Sixth
Street, Suite 1500, Minneapolis, Minnesota 55402, on
July 16, 2008 at 10:30 a.m., local time. The purpose
of the special meeting is to consider and vote upon (i) the
proposal to adopt the merger agreement and approve the merger,
and (ii) the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies.
Our board of directors has unanimously determined that the
merger is advisable, fair to and in the best interests of
Restore Medical and its stockholders, and has approved the
merger agreement. Our board of directors unanimously recommends
that Restore Medical stockholders vote FOR the
adoption of the merger agreement and approval of the merger and
FOR the adjournment of the special meeting, if
necessary, to solicit additional proxies.
Who Can
Vote at the Special Meeting
The holders of record of Restore Medical common stock as of the
close of business on June 6, 2008, which is the record date
for the special meeting, are entitled to receive notice of and
to vote at the special meeting. If you own shares that are
registered in someone elses name, for example, a broker,
you need to direct that person to vote those shares or obtain an
authorization from them and vote the shares yourself at the
meeting. On the record date, there were 15,738,364 shares
of Restore Medical common stock outstanding.
Vote
Required
Each outstanding share of our common stock on the record date
entitles the holder to one vote at the special meeting. The
adoption of the merger agreement and approval of the merger
require the affirmative vote of the holders of a majority of the
outstanding shares of common stock entitled to vote. Each share
of common stock is entitled to one vote. Failure to vote your
proxy by telephone or through the Internet, to return a properly
executed proxy card or to vote in person will have the same
effect as a vote AGAINST adoption of the merger
agreement and approval of the merger.
Under the rules of the Nasdaq Stock Market, brokers who hold
shares in street name for customers have the authority to vote
on routine proposals when they have not received
instructions from beneficial owners. However, brokers are
precluded from exercising their voting discretion with respect
to the approval of non-routine matters such as adoption of the
merger agreement and approval of the merger, and, as a result,
absent specific instructions from the beneficial owner of such
shares, brokers are not empowered to vote those shares, referred
to generally as broker non-votes. Abstentions and
properly executed broker non-votes will be treated as shares
that are present and entitled to vote at the special meeting for
purposes of determining whether a quorum exists and will have
the same effect as votes AGAINST adoption of the
merger agreement and approval of the merger.
The holders of a majority of the outstanding shares of Restore
Medical common stock entitled to be cast as of the record date,
represented in person or by proxy, will constitute a quorum for
purposes of the special meeting. A quorum is necessary to hold
the special meeting. Once a share is represented at the special
meeting, it will be counted for the purpose of determining a
quorum and any adjournment of the special meeting, unless the
holder is present solely to object to the special meeting.
However, if a new record date is set for an adjourned meeting,
then a new quorum will have to be established.
Proxies
and Voting Instructions
Each copy of this document mailed to Restore Medical
stockholders is accompanied by a proxy card or voting
instruction card and a postage-paid, self-addressed envelope.
You may vote by completing, signing and dating and returning the
proxy card or voting instruction card accompanying this document
by mail in the
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enclosed postage-paid, self-addressed envelope, or by telephone
or through the Internet, as provided on the proxy card or voting
instruction card.
Stockholders
of Record
If your shares are registered directly in your name with our
transfer agent, Wells Fargo Shareowner Services, you are
considered, with respect to those shares, the stockholder
of record, and these proxy materials are being sent
directly to you by us. As the stockholder of record, you have
the right to vote in person at the meeting or direct the
proxyholder how to vote your shares on your behalf at the
meeting by fully completing, signing and dating the enclosed
proxy card and returning it to us in the enclosed postage-paid,
self-addressed return envelope, or you may vote your Restore
Medical shares by telephone or through the Internet, all as
described in the Summary Voting Instructions
included in this proxy statement and in the instructions on the
enclosed proxy card.
Beneficial
Owners
If your shares are held through a broker, bank or other nominee,
you are considered the beneficial owner of the
shares, and these proxy materials are being forwarded to you
together with a voting instruction card by, or at the direction
of, your broker, bank or other nominee. As the beneficial owner,
you have the right to direct your broker, bank or other nominee
to vote your shares as you instruct in the voting instruction
card. The broker, bank or other nominee may either vote in
person at the meeting or grant a proxy and direct the
proxyholder to vote your shares at the meeting, but only as you
instruct in the voting instruction card. You may also vote in
person at the meeting, but only after you obtain a legal
proxy from the broker, bank or other nominee that is the
record holder of your shares, giving you the right to vote your
shares at the meeting. Your broker, bank or other nominee has
enclosed or provided a voting instruction card for you to use in
directing the broker, bank or other nominee how to vote your
shares.
In addition, a large number of brokers, banks and certain other
nominees participate in Broadridge Financial Solutions,
Inc.s (formerly ADP Investor Communication Services)
online program. This program provides eligible stockholders who
receive a paper copy of this proxy statement the opportunity to
vote through the Internet or by telephone. If your broker, bank
or other nominee participates in Broadridges program, your
broker, bank or other nominee will provide instructions. Please
check the voting instruction card provided by your broker, bank
or other nominee to see which options are available and the
procedures to be followed.
Proxies
All shares represented by properly completed proxies received
prior to the special meeting will be voted at the special
meeting in the manner specified in the proxies. Properly
completed proxies that do not contain voting instructions will
be voted FOR the adoption of the merger agreement
and approval of the merger and FOR the proposal to
adjourn the special meeting to solicit additional proxies, if
necessary, provided that no proxy that is specifically marked
AGAINST the proposal to adopt the merger agreement
and approve the merger will be voted in favor of the adjournment
proposal, unless it is specifically marked FOR the
adjournment proposal.
Abstentions
Shares of our common stock represented at the special meeting
but not voting, including shares of our common stock for which
proxies have been received but with respect to which
stockholders have abstained, will be treated as present at the
special meeting for purposes of determining whether a quorum
exists, but will not be voted on the proposal to adopt the
merger agreement and approve the merger, and will effectively
count as votes against the adoption of the merger agreement and
the approval of the merger. Similarly, shares of our common
stock for which proxies have been received but with respect to
which stockholders have abstained will not be voted on the
proposal to adjourn the special meeting to solicit additional
proxies, and will effectively count as votes against that
proposal.
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Effect of
Broker Non-Votes
Brokers will not have discretionary authority to vote on the
proposal to adopt the merger agreement and approve the merger or
on any proposal that is the subject of a counter-solicitation.
If no instructions are given to the broker holding shares for a
customer, or if instructions are given to the broker indicating
that the broker does not have authority to vote on the proposal
to adopt the merger agreement and approve the merger, then, in
either case, a broker non-vote will generally occur
and the shares will be counted as present for purposes of
determining whether a quorum exists, but will not be voted on
the proposal to adopt the merger agreement and approve the
merger. However, given that this proposal requires the
affirmative vote of the holders of a majority of the outstanding
shares of our common stock, broker non-votes will have the same
effect as voting against the adoption of the merger agreement
and approval of the merger.
Any broker non-votes with respect to the proposal to adjourn the
special meeting will also be counted as present for purposes of
determining whether a quorum exists. However, given that the
required vote with respect to the adjournment proposal is the
affirmative vote of the holders of a majority of the shares
having voting power present in person or represented by proxy at
the meeting and these broker non-votes are not considered to
have voting power, they will not have any effect on the
adjournment proposal.
Adjournments
and Postponements
Although it is not currently expected that we will have to
adjourn the special meeting, if a quorum is present, the vote of
the holders of a majority of the stock having voting power
present in person or represented by proxy may adjourn the
meeting. The presence at the special meeting, in person or by
proxy, of the holders of a majority of the outstanding shares of
our common stock will constitute a quorum for the purposes of
the special meeting. If a quorum is not present at the meeting,
then either the chairman of the meeting, or the holders of a
majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting. For
information relevant to an adjournment for purposes of
soliciting additional proxies to approve the proposal to adopt
the merger agreement and approve the merger, please see
Proposal to Adjourn the Special Meeting, below.
Any adjournment may be made without notice, other than by an
announcement made at the special meeting, unless the adjournment
is for more than thirty days or a new record date is fixed for
the adjourned meeting. Any adjournment of the special meeting
for the purpose of soliciting additional proxies will allow our
stockholders who have already sent in their proxies to revoke
them at any time prior to their use at the special meeting as
adjourned.
At any time prior to convening the special meeting, our board of
directors may postpone the special meeting for any reason
without the approval of our stockholders. If postponed, we will
provide notice of the new meeting date at least ten days prior
to the new meeting date. Although it is not currently expected,
our board of directors may postpone the special meeting for the
purposes of soliciting additional proxies if it concludes that
by the meeting date it is reasonably likely that we will not
have received sufficient proxies to constitute a quorum or
sufficient votes to approve the proposal to adopt the merger
agreement and approve the merger. Any postponement of the
special meeting for the purpose of soliciting additional proxies
will allow stockholders who have already sent in their proxies
to revoke them at any time prior to their use. If the special
meeting is adjourned or postponed and the record date remains
unchanged, unrevoked proxies will continue to be effective for
purposes of voting on the new meeting date.
Revocability
of Proxies
If you are a stockholder of record, you can revoke or change
your proxy before it is voted by:
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filing a notice of revocation, that is dated a later date than
your proxy, with the Corporate Secretary of Restore Medical;
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submitting a duly executed proxy card bearing a later date;
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submitting a new proxy by telephone or through the Internet at a
later time, but not later than 12:00 p.m. noon, Central
Time, on July 15, 2008, or the day before the meeting date,
if the special meeting is adjourned or postponed; or
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voting in person at a special meeting (simply attending the
special meeting will not constitute revocation of a proxy).
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Written notices of revocation and other communications about
revoking your proxy should be addressed to:
Corporate
Secretary
Restore Medical, Inc.
2800 Patton Road
St. Paul, MN 55113
If your shares are held in street name, you should
follow the instructions of your broker, bank or other nominee in
order to revoke or change your proxy. If your broker, bank or
other nominee allows you to submit a proxy by telephone or
through the Internet, you may be able to change your vote by
submitting a proxy again by telephone or through the Internet.
Solicitation
of Proxies
We will pay the cost of this proxy solicitation. In addition to
soliciting proxies by mail, directors, officers and employees of
Restore Medical may solicit proxies personally and by telephone.
None of these persons will receive additional or special
compensation for soliciting proxies. We will, upon request,
reimburse brokers, banks and other nominees for their expenses
in sending proxy materials to their customers who are beneficial
owners and obtaining their voting instructions. Restore Medical
has engaged Morrow & Co., LLC to assist in the
solicitation of proxies for the special meeting and will pay
Morrow & Co. a fee of approximately $5,500 plus
disbursements.
Shares
Owned by Our Directors and Executive Officers
As of June 1, 2008, our directors and executive officers
and their affiliates owned, in the aggregate,
5,587,174 shares of our common stock (excluding shares
issuable upon exercise of options or warrants), or approximately
35.5% of the outstanding shares of our common stock. Our
directors and executive officers have informed us that they
intend to vote all of their shares of common stock
FOR the adoption of the merger agreement and the
approval of the merger and FOR the adjournment of
the special meeting, if necessary, to solicit additional proxies.
13
THE
MERGER
The discussion of the merger in this proxy statement is
qualified by reference to the merger agreement, which is
attached to this proxy statement as Appendix A. You should
read the entire merger agreement carefully.
Background
of the Merger
On an ongoing basis, Restore Medicals board of directors
and management have reviewed and assessed our business
strategies and objectives and the various trends and conditions
affecting our business and the markets in which we operate,
including consideration of various strategic alternatives that
might be available to Restore Medical, all with the goal of
enhancing stockholder value. In 2007, we determined, and
disclosed in our periodic reports filed with the SEC, that our
current cash, cash equivalents, short-term investments and cash
generated from operations would be sufficient to fund our
working capital and capital resource needs into mid-2008, and
that we would require additional capital to continue our
operations. In addition, our short-term investments include
approximately $5.0 million, par value, of investments in
auction rate securities, which became illiquid in February 2008.
Even with the successful sale of our auction rate securities,
the funding of our operations beyond mid-2008 would require
additional investments in our company in the form of equity or
debt financing or through licensing our intellectual property to
generate capital. In light of the foregoing, we have been
actively exploring various equity and debt financing
alternatives to raise sufficient capital to fund our operations,
as well as various strategic alternatives, since August 2007.
In late Summer 2007, we engaged Piper Jaffray & Co. to
assist with the exploration of various potential transactions
and to serve as our financial advisor in the evaluation of such
potential transactions. Throughout August and September of 2007,
Piper Jaffray, at the request of our board of directors,
undertook to explore the possible interest of third parties
identified as most likely to have an interest in entering into a
transaction with us. In considering companies most likely to
have an interest in acquiring us, J. Robert Paulson, Jr.,
our President and Chief Executive Officer, Christopher R. Geyen,
our Senior Vice President and Chief Financial Officer, and our
board of directors, evaluated and discussed with Piper Jaffray
the product portfolios, business strategies, and past and
current business performance of those medical device companies
currently selling products, or developing products to be sold,
in the sleep disordered breathing market. This evaluation
included assessments of the anticipated strategic importance
that the addition of our Pillar System might represent to the
respective product portfolios of each of these businesses, as
well as the financial ability of each company to complete an
acquisition at a price that would afford our stockholders a
premium to the market price of our stock. At the request of our
board of directors, Piper Jaffray initiated contact with several
candidates, including four companies that expressed interest in
evaluating a potential transaction, which companies are referred
to in this proxy statement as Company A,
Company B, Company C and Medtronic.
In August 2007, Piper Jaffray contacted Company A regarding a
potential transaction with us and sent a non-disclosure
agreement to Company A, along with an information packet
containing publicly available financial and other information
about Restore Medical. Upon receipt of the executed
non-disclosure agreement from Company A, Piper Jaffray arranged
for a meeting to discuss a possible transaction between the two
companies. In September 2007, our senior management team made an
initial presentation to Company A to allow the management of
Company A and Restore Medical to evaluate their respective
strategic interest in a potential transaction. Following a
request for additional due diligence materials, we received a
non-binding indication of interest from Company A in late
September, but which was withdrawn approximately one week later.
In early September 2007, Piper Jaffray contacted Medtronic and
Company B regarding their interest in a transaction opportunity
with us. Our CEO had an initial meeting with executives of
Medtronics ENT business unit at the Annual Meeting of the
American Academy of Otolaryngology in mid-September. Following
these initial discussions, on October 15, 2007, Medtronic
entered into a non-disclosure agreement with us. Company B also
indicated interest, but took no further steps at that time. On
October 17, 2007, members of our senior management team
made a presentation regarding our company to a team of senior
executives from the
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Medtronic ENT business unit as well as representatives of
Medtronics corporate development group, and Medtronic
commenced a preliminary due diligence review of Restore Medical.
In November 2007, we met again with Company A and on
December 3, 2007, Company A submitted a draft term sheet
regarding a potential non-exclusive worldwide license to use
certain patents in our portfolio. From December 2007 through
March 2008, we negotiated the terms of this potential
transaction with Company A, which would include an upfront
license fee, plus an additional cash amount to be held in escrow
subject to approval of pending patents, and future royalty
payments.
In January 2008, Piper Jaffray contacted Company C and our
senior management team made a presentation to Company C to
provide information and assess Company Cs interest in a
potential acquisition opportunity. Company C did not express any
interest in an acquisition or investment in Restore Medical
following this presentation.
Our senior management team and representatives of Piper Jaffray
responded to preliminary due diligence questions from Medtronic
about our business and patent portfolio during December and
January, and during this time, Medtronic reviewed information
contained in our SEC filings. On January 29, 2008,
Medtronic submitted to our CEO an initial non-binding expression
of interest regarding an acquisition of Restore Medical at a
price to be determined ranging between $1.20 and $2.00 per
share, subject to Medtronics completion of its due
diligence review of Restore Medical. Medtronic indicated it
would finance the acquisition from existing cash resources and
would not require outside financing. From January 29 through
March 4, various
follow-up
conversations took place between our management and financial
and legal advisors and Medtronic representatives regarding this
non-binding expression of interest. The discussions between the
companies focused on clarifying certain terms of
Medtronics non-binding expression of interest, including
price, and providing Mr. Paulson all of the information
necessary for him to present Medtronics best proposal to
our board of directors. As part of this discussion, Piper
Jaffray informed Medtronic that Restore Medicals board of
directors was reluctant to authorize the execution of a letter
with Medtronic that provided for a period of exclusive due
diligence and negotiations, in light of the uncertainty
represented by the range of $1.20 to $2.00 per share. Piper
Jaffray further informed Medtronic that it was the opinion of
our senior management and board of directors that, in order for
Restore Medical to agree to execute the non-binding expression
of interest and enter into a period of exclusive negotiations,
Medtronic would need to (1) specify a firm price per share,
subject to Medtronic satisfactorily completing the necessary due
diligence review of Restore Medical, and (2) endeavor to
promptly complete due diligence and execute a definitive
agreement prior to March 31.
Meanwhile, during late January to mid-February 2008, Piper
Jaffray made Company B aware of the increased strategic interest
in Restore Medical (without revealing the preliminary
discussions with Medtronic), and encouraged Company B to
communicate to Piper Jaffray their potential interest, if any.
On February 13, 2008, Company B entered into a
non-disclosure agreement with us and our senior management team
made a presentation to Company B regarding the acquisition
opportunity. From February 18 to March 13, various
conversations took place between Piper Jaffray and Company B
regarding the status of its internal review process and its
position on submitting an indication of interest with respect to
a transaction.
With its non-binding expression of interest on January 29,
Medtronic also submitted a request for due diligence
information. On February 8, 2008, we delivered an initial
package of due diligence materials to Medtronic, and on
February 14, representatives from Restore Medical and
Medtronic gathered for a meeting with relevant key personnel to
launch the formal due diligence process. Our CEO and CFO
represented Restore Medical at the meeting. Representatives from
Medtronic included senior executives from Medtronics ENT
business unit as well as representatives from various other
Medtronic corporate functions. From February 14, 2008 until
shortly before the conclusion of negotiations with respect to
the merger agreement, Medtronic and its legal and financial
representatives conducted a detailed due diligence investigation
of Restore Medical by reviewing data and documents provided by
Restore Medical or made available at the offices of
Dorsey & Whitney LLP, Restore Medicals outside
legal counsel, and by asking questions of Restore Medical
management and its legal and financial representatives.
On March 2, 2008, our board of directors held a special
telephonic board meeting and invited members of management and
representatives from Piper Jaffray and Dorsey &
Whitney LLP to discuss the terms of the
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Medtronic non-binding indication of interest and the status of
on-going discussions with Medtronic regarding the price and
timing of the proposed acquisition. These parties also discussed
the terms of Company As proposal for a non-exclusive
worldwide license to use certain of our patents. In addition, a
representative from Dorsey & Whitney LLP advised our
board of directors regarding their fiduciary duties with respect
to the proposed transaction with Medtronic, the consideration of
Company As proposal and any other third party proposals.
Following these presentations, our legal and financial advisors
were excused from the meeting and the board discussed the two
proposals. Based on its discussion and analysis of the
alternatives, the board of directors expressed a preference for
pursuing a transaction that would lead to the sale of the
company rather than a technology license and authorized
management to continue negotiations with Medtronic.
Medtronic sent us a revised non-binding indication of interest
on March 4, 2008, reflecting a proposed acquisition price
of $1.75 per share, subject to completion of due diligence, and
requiring exclusivity through April 21, 2008. On
March 5, 2008, we finalized the terms of the license
agreement with Company A and Mr. Paulson informed Company A
that Restore Medical had received a non-binding indication of
interest and that our board of directors had indicated its
preference to proceed with a transaction to sell the company.
Company A indicated that it was not interested in reconsidering
its original proposal to acquire Restore Medical and was
interested only in completing the negotiated license agreement.
Mr. Paulson spoke with the various members of our board of
directors to confirm the board of directors decision to
reject Company As proposal, and communicated the
boards decision to Company A. On March 7, 2008,
Company A formally withdrew its offer to complete the negotiated
license agreement.
From March 4 through March 14, Restore Medical,
Medtronic and the parties respective legal and financial
advisors discussed the terms of the non-binding indication of
interest. On March 13, 2008, Piper Jaffray contacted
Company B to inform them that Restore Medical may soon be under
exclusivity with a party who had formally expressed interest in
an acquisition of Restore Medical and requested that Company B
make its interest in Restore Medical known. Company B
communicated to Piper Jaffray that it was withdrawing from the
process at that time.
On March 14, 2008, Medtronic delivered and we executed a
revised indication of interest with Medtronic, reflecting a
proposed acquisition price of $1.75 per share, or total
consideration not to exceed $29.1 million, subject to
completion of due diligence, and providing that a decline in
Restore Medicals stock price between the date of the
letter and the execution of a definitive agreement would not, in
and of itself, cause a reduction in the price per share
reflected in the non-binding indication of interest. Upon
executing the non-binding indication of interest, we agreed to
refrain from entering into discussions with any other party
through April 21, 2008, unless our board of directors
received an unsolicited bona fide acquisition proposal that the
board determined was superior.
On March 20, 2008, we provided additional due diligence
information requested by Medtronic, and representatives of
Fredrikson & Byron, P.A., Medtronics legal
counsel, delivered an initial draft merger agreement to
representatives of Dorsey & Whitney LLP on
March 24, 2008. On March 27, 2008, we filed our 2007
Annual Report on
Form 10-K
with the SEC. Our 2007
Form 10-K
included a going concern opinion from our auditors
as a result of our need to obtain additional financing in order
to fund our operations beyond mid-2008.
On April 1, 2008, we received notice from The Nasdaq Stock
Market that currently we did not comply with the minimum
$10,000,000 stockholders equity requirement for continued
listing on the Nasdaq Global Market set forth in Marketplace
Rule 4450(a)(3). As a result, we determined to apply to
transfer the listing of our common stock to the Nasdaq Capital
Market. On April 3, 2008, we issued a press release
announcing these developments and filed a related Current Report
on
Form 8-K
on April 4, 2008. Following the filing of our 2007
Form 10-K
with the SEC and the issuance of our press release, our stock
price dropped significantly, trading between $0.25 and $0.80 per
share during the first two weeks of April.
On March 31, 2008, representatives of Dorsey &
Whitney delivered comments on the draft merger agreement to
Fredrikson & Byron, and representatives of both firms
discussed the significant issues in the merger agreement on
April 3, 2008. Also on April 3, 2008, Medtronic and
Fredrikson & Byron requested
16
additional due diligence information, which we delivered on
April 7 and 8, 2008. On April 9, 2008, Dorsey &
Whitney provided Fredrikson & Byron an initial draft
of our disclosure letter relating to the merger agreement.
As Medtronic conducted its review of the due diligence materials
we provided, representatives of Medtronic discussed a variety of
questions and due diligence issues with representatives of Piper
Jaffray and our executives. On April 11, 2008, Medtronic
contacted us to communicate that it was unwilling to continue
the transaction as described in the March 14 non-binding
indication of interest and released us from our exclusivity
obligations. From April 11 through April 15, Piper Jaffray
and our CEO had separate discussions with various Medtronic
representatives to discuss potential terms on which Medtronic
would continue to pursue an acquisition. Our CEO also contacted
Company A to inquire about their interest in either an
acquisition of Restore Medical or the previously negotiated
license agreement, and Company A reaffirmed they were not
interested in pursuing a transaction with us at such time. Piper
Jaffray also attempted to contact Company B to solicit their
interest in an acquisition transaction, but Company B did not
respond.
On April 15, 2008, Medtronic indicated to representatives
of Piper Jaffray that Medtronic would be willing to pursue an
acquisition at a price of $1.60 per share, or total
consideration not to exceed $26.3 million, subject to
completion of remaining due diligence. Our CEO contacted each of
the other Restore Medical board members individually to discuss
this proposal and received a verbal consensus to pursue a
transaction at the $1.60 price. From April 15 to April 21,
members of the executive teams of Restore Medical and Medtronic
and their respective legal counsel discussed and resolved the
remaining open issues in the merger agreement and concluded the
due diligence process. In conjunction with the merger agreement,
Medtronic agreed to purchase from us between $750,000 and
$1,100,000 par value of auction rate securities owned by us
at purchase prices between approximately 86.7% and 88.2% of the
par value (plus accrued and unpaid interest) on each of
May 15, 2008, June 10, 2008, July 25, 2008,
August 23, 2008 and September 18, 2008, unless the
merger agreement has been terminated or the effective time has
occurred prior to such date.
The board of directors of Restore Medical held a special
telephonic meeting on April 20, 2008 to discuss final
resolutions approving the merger agreement and authorizing the
merger, and to review an updated valuation analysis of Restore
Medical delivered by Piper Jaffray. In addition, Piper Jaffray
delivered to the board at this meeting its opinion as to the
fairness, from a financial point of view, of the $1.60 per share
merger consideration to the stockholders of Restore Medical. On
April 20, 2008, our board of directors unanimously approved
the merger agreement and authorized the management team to
complete the merger process.
During the afternoon of April 22, 2008, Medtronic finalized
its internal approval process. The parties entered into the
merger agreement and issued a press release announcing the
execution of the merger agreement.
Restore
Medicals Reasons for the Merger
After careful consideration, the Restore Medical board of
directors determined that the merger is advisable, fair to and
in the best interests of Restore Medical and its stockholders,
and, by unanimous vote, adopted and approved the merger
agreement, the merger and the other transactions contemplated by
the merger agreement.
In reaching its decision to adopt and approve, and declare
advisable, the merger agreement and the other transactions
contemplated by the merger agreement, our board of directors
consulted with Restore Medicals senior management, as well
as its financial and legal advisors, and considered a number of
factors that the board members believed supported their
decision, including the following:
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Strategic, Financial and Operating Risks of Remaining
Independent
. Our board of directors considered
our current and anticipated financial condition, results of
operations, and business and earnings prospects, if we were to
remain independent in light of a multiplicity of relevant
factors. The following were key strategic, financial and
operating risks evaluated by our board of directors as part of
assessing the proposed merger with Medtronic:
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○
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the availability of capital to fund our future operations;
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17
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○
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fluctuation in the fair value of our auction rate securities
based on future market conditions and continued uncertainties in
the credit markets;
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○
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the demand for and acceptance of our Pillar System to treat mild
to moderate OSA and snoring by both physicians and patients;
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○
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the success of alternative therapies and surgical procedures to
treat individuals suffering from sleep disordered breathing, and
the possible future introduction of new products and treatments
for sleep disordered breathing;
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○
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our ability to maintain current pricing for our Pillar System,
our ability to obtain reimbursement for the Pillar Procedure to
treat mild to moderate OSA in the future from third-party
healthcare insurers, and the willingness of patients to pay
out-of-pocket for the Pillar Procedure to treat snoring and, in
the absence of reimbursement from third-party healthcare
insurers, mild to moderate OSA; and
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○
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the successful completion of current and future clinical
studies, the presentation and publication of positive outcomes
data from these clinical studies and the increased adoption of
the Pillar Procedure by physicians as a result of the data from
these clinical studies.
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Potential Benefits of Continuing as a Stand-Alone
Company
. As part of its deliberation of whether
to recommend approval of the merger agreement, our board of
directors considered factors that, were we to continue to
operate as an independent company, could potentially increase
the future value of Restore Medicals capital stock. In
evaluating the potential benefits and risks of remaining
independent, the board considered, among other matters, the
following factors:
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○
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our ability to generate increased revenue as a result of the
recently implemented new consultative sales and marketing
strategies and programs;
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○
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the sustainability of the increased revenue being generated by
our newly hired U.S. sales representatives, our ability to
retain and motivate these sales employees, and our ability to
recruit, hire and train additional U.S. sales employees in
order to drive future revenue growth;
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○
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our ability to improve our operating cash flow and achieve
future profitability by successfully leveraging our
infrastructure and operating costs while increasing revenue from
our new sales and marketing initiatives; and
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○
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our ability to raise sufficient additional capital to fund these
programs and initiatives and hire the additional people required
to drive future revenue growth, and the corresponding dilution
associated with raising that level of capital given our current
and anticipated future stock price.
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Our board evaluated these various factors in the context of the
risks and benefits of remaining an independent company and
against the various strategic, financial and operating factors
summarized in the section entitled Strategic, Financial
and Operating Risks of Remaining Independent above as part
of its decision to recommend approval of the merger.
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Uncertain Availability of Alternative
Transactions.
In addition to the factors
discussed above, our board of directors considered the fact that
while we had in the past been contacted from time-to-time by
various third parties expressing an interest in a possible
transaction with us, there was uncertainty as to whether an
alternative transaction would be available in the future on
terms more favorable to our stockholders than the Medtronic
proposal. The board of directors considered our discussions with
the other potential strategic partners during the process
described in Background of the Merger and considered
the fact that none of these discussions had proceeded beyond the
exploratory stage or resulted in a transaction that was as
favorable to our stockholders as the transaction proposed by
Medtronic. Our board of directors determined, at this time, that
it was in the best interests of our stockholders to recommend
approval of the merger.
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Merger Consideration.
Our board of directors
considered the proposed merger and the merger consideration in
the context of a variety of enterprise valuation factors. The
board of directors reviewed Restore Medicals 2007 and 2006
financial results and current internal operations assumptions
and
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18
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financial projections which are described in this proxy
statement under the heading The Merger
Financial Projections. Our board of directors also
reviewed the financial analysis presented by Piper Jaffray, our
financial advisor, in connection with the delivery of its
fairness opinion which addressed the value offered by Medtronic
when compared to other medical technology transactions, the
value of other publicly traded medical technology companies and
the intrinsic value, based upon a discounted cash flow analysis,
of Restore Medical on a stand-alone basis.
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Our board of directors also considered the percentage premium on
our stock price represented by the $1.60 per share merger
consideration (subject to decrease in the limited circumstance
that our outstanding capital stock, options and warrants
reflected in our records and audited financial statements is
inaccurate, which our board believes is unlikely to occur) and
the boards belief that the merger consideration
represented the highest consideration that Medtronic was willing
to pay, and the highest per share value obtainable as of the
date of signing the merger agreement. Our board also evaluated
the consideration that option holders and warrant holders would
receive under the terms of the merger agreement versus possible
alternatives.
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Advice from Restore Medicals Financial
Advisor.
Our board of directors considered the
detailed presentations made by Piper Jaffray, our financial
advisor, with respect to the proposed merger consideration
offered to the Restore Medical stockholders, which presentation
is discussed further below under Opinion of Restore
Medicals Financial Advisor. Piper Jaffrays
opinion was that, as of the date of its opinion, and subject to
the assumptions, qualifications and limitations set forth in the
opinion, the merger consideration to be received by the holders
of Restore Medical common stock was fair, from a financial point
of view, to our stockholders. The full text of Piper
Jaffrays fairness opinion is attached to this proxy
statement as
Appendix B
.
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Certain Terms of the Merger Agreement Relating to Alternative
Transactions
. Our board of directors considered
the terms of the merger agreement, including the provisions
relating to termination of the merger agreement in the event
that our board of directors received a bona-fide superior third
party proposal.
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Likelihood of Closing.
Our board of directors
considered the limited nature of the closing conditions included
in the merger agreement, including the likelihood that the
merger would be approved by regulatory authorities, if required,
and the likelihood that the merger agreement would be approved
by a majority of our stockholders. Our board also considered
Medtronics ability to finance the acquisition from
existing cash resources without the need for outside financing.
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Taxability; No Participation in Future
Growth.
Our board of directors considered the
fact that the merger will be a taxable transaction to our
stockholders. Our board also considered the fact that because
Restore Medical stockholders are receiving cash for their
Restore Medical common stock, they will not participate as
stockholders in the future growth of either Restore Medical or
Medtronic unless they currently have, or acquire in the future,
shares of Medtronic stock independent of this merger
transaction. However, it also considered the certainty of the
value of the merger to our stockholders this structure afforded,
compared to a transaction involving all stock consideration or a
mixture of stock and cash.
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While our board of directors considered potentially negative and
potentially positive factors, the board of directors concluded
that overall, the potentially positive factors outweighed the
potentially negative factors.
The foregoing discussion of the factors considered by our board
of directors is not intended to be exhaustive, but rather
includes the material information and factors considered by our
board of directors in its consideration of the merger. Our board
of directors collectively reached the unanimous decision to
approve the merger agreement in light of the factors described
above and other factors that each member of the board of
directors felt were appropriate. In view of the variety of
factors, many of which are qualitative or difficult to quantify,
and the quality and amount of information considered, our board
of directors did not find it practicable to and did not make
specific assessments of, quantify or otherwise assign relative
weights to the
19
specific factors considered in reaching its determination.
Individual members of our board of directors may have considered
certain factors to be more important than others.
Recommendation
of Restore Medicals Board of Directors
After careful consideration, our board of directors has
unanimously determined that the merger is advisable, fair to and
in the best interests of Restore Medical and its stockholders,
has approved the merger agreement, and unanimously recommends
that Restore Medical stockholders vote FOR the
adoption of the merger agreement and the approval of the merger
and FOR the adjournment of the special meeting, if
necessary, to solicit additional proxies.
Opinion
of Restore Medicals Financial Advisor
We retained Piper Jaffray to act as financial advisor to our
board of directors, and, if requested, to render to the board an
opinion as to the fairness, from a financial point of view, to
the holders of our common stock of the consideration to be paid
pursuant to the merger agreement.
The full text of the Piper Jaffray written opinion dated
April 20, 2008, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Piper
Jaffray in rendering its opinion, is attached as
Appendix B
and is incorporated in its
entirety herein by reference. You are urged to, and should,
carefully read the Piper Jaffray opinion in its entirety and
this summary is qualified by reference to the written opinion.
The Piper Jaffray opinion addresses only the fairness, from a
financial point of view and as of the date of the opinion, to
holders of common stock of Restore Medical of the $1.60 per
share merger consideration to be paid in cash pursuant to the
merger agreement. The Piper Jaffray opinion was directed to the
Board of Directors of Restore Medical and was not intended to
be, and does not constitute, a recommendation as to how any of
our shareholders should vote with respect to the merger or any
other matter. The opinion was approved for issuance by a
committee of Piper Jaffray employees in accordance with its
customary practice.
In connection with rendering the opinion described above and
performing its related financial analyses, Piper Jaffray:
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reviewed and analyzed the financial terms set forth in a draft
of the merger agreement, dated April 18, 2008;
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reviewed and analyzed certain financial and other data with
respect to Restore Medical that was publicly available or made
available to it from internal records of Restore Medical;
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reviewed and analyzed certain internal financial projections for
Restore Medical on a stand-alone basis prepared for financial
planning purposes and furnished to it by our management;
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conducted discussions with members of our senior management and
members of the board with respect to our business and prospects
on a stand-alone basis;
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reviewed the reported prices and trading activity of our common
stock;
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compared our financial performance with that of certain other
publicly-traded companies deemed by Piper Jaffray to be
comparable to us;
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reviewed and compared the premium payable in the merger to
recent Restore Medical stock trading prices to premiums or
discounts implied by the consideration paid in selected merger
transactions;
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reviewed the financial terms, to the extent publicly available,
of certain comparable merger transactions; and
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performed discounted cash flow analysis for Restore Medical on a
stand-alone basis.
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In addition, Piper Jaffray conducted such other analyses,
examinations and inquiries and considered such other financial,
economic and market criteria as it deemed necessary in arriving
at its opinion.
20
The following is a summary of the material financial analyses
performed by Piper Jaffray in connection with the preparation of
its fairness opinion, which was reviewed with, and was formally
delivered to, our board of directors at a meeting held on
April 20, 2008. The preparation of analyses and a fairness
opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to
the particular circumstances and, therefore, this summary does
not purport to be a complete description of the analyses
performed by Piper Jaffray or of its presentations to our board
on April 20, 2008.
This summary includes information presented in tabular format,
which must be read together with the text of each analysis
summary and considered as a whole in order to fully understand
the financial analyses presented by Piper Jaffray. The tables
alone do not constitute a complete summary of the financial
analyses. The order in which these analyses are presented below,
and the results of those analyses, should not be taken as any
indication of the relative importance or weight given to these
analyses by Piper Jaffray or our board of directors. Except as
otherwise noted, the following quantitative information, to the
extent that it is based on market data, is based on market data
as it existed on or before April 20, 2008, and is not
necessarily indicative of current market conditions.
For purposes of its analyses, Piper Jaffray calculated our
equity value implied by the merger to be $26.3 million,
based on our diluted shares deemed outstanding and the per share
merger consideration, and our implied enterprise value (implied
equity value plus debt less cash and cash equivalents) to be
$21.6 million. With our consent, Piper Jaffray assumed our
portfolio of auction rate securities to be cash equivalents.
Selected
Publicly Traded Companies Analysis
Piper Jaffray reviewed selected historical Restore Medical
financial data for calendar year 2007 and estimated Restore
Medical financial data that were prepared by our management as
its internal forecasts for calendar years 2008 and 2009 and
compared them to corresponding historical financial data and
consensus Wall Street forecasts, where applicable, for publicly
traded companies that are engaged primarily in the medical
technology industry and which Piper Jaffray believed were
similar to our financial profile. Piper Jaffray selected
companies based on information obtained by searching SEC
filings, public company disclosures, press releases, industry
and popular press reports, databases and other sources and by
applying the following criteria:
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publicly-traded companies with medical technology Standard
Industrial Classification codes;
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companies with enterprise values of less than
$100 million; and
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companies with estimated calendar year 2007 to 2009 compound
annual revenue growth between 5% and 15% which equals plus and
minus 5% of our corresponding estimated compound annual revenue
growth for that period.
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Based on these criteria, Piper Jaffray identified and analyzed
the following seven selected companies:
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Biosphere Medical, Inc.
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Candela Corporation
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Cutera, Inc.
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Digirad Corporation
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Osteotech, Inc.
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Thermage, Inc.
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Vital Images, Inc.
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21
Piper Jaffray compared valuation multiples for Restore Medical
derived from its enterprise value based on our recent market
price and the merger price and historical and projected revenue
data for Restore Medical, on the one hand, to valuation
multiples for the selected companies derived from their market
valuation and historical and projected revenue data, on the
other hand:
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Restore Medical
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Selected Public Companies
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Current(1)
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Merger(2)
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Min.
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Median
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Mean
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Max.
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Enterprise value to calendar year 2007 revenue
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0.4
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x
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5.3
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x
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0.1
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x
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0.5
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x
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0.8
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x
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2.7
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x
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Enterprise value to estimated calendar year 2008 revenue(3)
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0.4
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x
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6.0
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x
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0.1
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x
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0.4
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x
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0.7
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x
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2.5
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x
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Enterprise value to estimated calendar year 2009 revenue(3)
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0.3
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x
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4.3
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x
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0.1
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x
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0.4
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x
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0.7
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x
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2.1
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x
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(1)
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Based on closing market price of our common stock of $0.39 on
April 16, 2008.
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(2)
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Based on the merger consideration of $1.60 per share.
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(3)
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Projected calendar year 2008 and 2009 revenue for Restore
Medical were based on the estimates of our management. Projected
calendar year 2008 and 2009 revenue for the selected public
companies were based on Reuters consensus estimates.
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Piper Jaffray observed that the implied enterprise value
multiples based on the merger consideration were in excess of
the enterprise value multiples derived for the comparable
companies. Based on this analysis, Piper Jaffray also
derived a range of implied equity values per diluted share of
Restore Medical common stock of $0.32 to $0.99. Piper Jaffray
noted that the merger consideration was $1.60 per share.
Selected
M&A Transaction Analysis
Piper Jaffray reviewed transactions involving target companies
that it deemed comparable to us. Piper Jaffray selected
these transactions by searching SEC filings, public company
disclosures, press releases, industry and press reports,
databases and other sources and by applying the following
criteria:
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public or private medical technology companies;
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companies with enterprise values of less than $100 million
since 1998; and
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companies with estimated forward twelve months revenue growth of
5% and 15% which equals plus and minus 5% of our estimated two
year compound annual revenue growth rate.
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Based on these criteria, the following nine transactions were
deemed similar to the merger:
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Target
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Acquiror
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Biomateriali S.r.l.
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LeMaitre Vascular
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Specialty Surgical Instruments
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Symmetry Medical
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Medisystems
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NxStage Medical
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Bio-Logic
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Natus Medical
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Crosstex Intertion
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Cantel Medical
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Newdeal Technologies
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Integra Lifesciences
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C.R. Bards Endoscopic Technologies
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Conmed
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Orthologic (BGS Business)
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DJ Orthopedics
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Smith & Nephew ENT
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Gyrus Group PLC
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22
Piper Jaffray calculated the multiple of enterprise value to
revenue for the last twelve months preceding each transaction
and the multiple of the enterprise value to projected revenue
for the twelve consecutive months following each transaction.
Piper Jaffray then compared the results of these calculations
with similar calculations based on the merger consideration. The
analysis indicated the following multiples:
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Restore
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Selected Transactions
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Medical(1)
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Min.
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Median
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Mean
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Max.
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Enterprise value to last 12 months revenue(2)
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5.3
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x
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0.7
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x
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1.6
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x
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1.7
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x
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2.8
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x
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Enterprise value to forward 12 months revenue(3)
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6.0
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x
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0.7
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x
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1.4
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x
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1.5
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x
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2.5
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x
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(1)
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Based on $1.60 per share.
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(2)
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Revenue for the last twelve months for Restore Medical is for
the calendar year ended December 31, 2007. Revenue for the
last twelve months preceding a selected transaction is based on
reported SEC sources.
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(3)
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Estimated revenue for Restore Medical with respect to the
forward period is for the calendar year ending December 31,
2008 and is based on estimates of our management. Revenues for
the selected transactions for the forward period are based on
Reuters consensus estimates.
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The analysis indicated that, based on the estimates and
assumptions used in the analysis, the enterprise value implied
by the proposed $1.60 per share merger consideration as a
multiple of projected revenue for the forward twelve month
period and as a multiple of revenue for the last twelve months
was above the range of similar multiples for the selected
transactions. Based on this analysis, Piper Jaffray also derived
a range of implied equity values per diluted share of Restore
Medical common stock of $0.44 to $1.00. Piper Jaffray noted that
the merger consideration was $1.60.
Premiums
Paid Analysis
Piper Jaffray reviewed publicly available information for
selected merger or buyout transactions to determine the premiums
(or discounts) paid in the transactions over recent trading
prices of the target companies prior to announcement of the
transaction. Piper Jaffray selected these transactions by
searching SEC filings, public company disclosures, press
releases, industry and popular press reports, databases and
other sources for publicly traded medical technology targets
that were acquired between January 1, 2004 and
March 31, 2008.
Piper Jaffray performed its analysis on 57 transactions that
satisfied the criteria, and the table below shows a comparison
of premiums paid in these transactions to the premium that would
be paid to our stockholders based on merger consideration of
$1.60 per share.
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Restore
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Selected Transactions
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Medical
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Low
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Median
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Mean
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High
|
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One week before announcement
|
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321.1%(1)
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3.1
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%
|
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27.8
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%
|
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|
31.3
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%
|
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97.2
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%
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Four weeks before announcement
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36.8%(2)
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2.8
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%
|
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|
31.0
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%
|
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|
36.1
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%
|
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123.9
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%
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(1)
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Premium based on closing price of $0.38 on April 9, 2008.
|
|
(2)
|
|
Premium based on closing price of $1.17 on March 19, 2008.
|
This analysis indicated that, based on the estimates and
assumptions used in the analysis, the premium over the market
price on March 19, 2008 for the shares of our common stock
implied by the $1.60 per share merger consideration was within
the range of premiums paid in the selected transactions as
calculated four weeks before announcement, and the premium over
the market price on April 9, 2008 for the shares of our
common stock implied by the $1.60 per share merger consideration
was above the range of premiums paid in the selected
transactions as calculated one week before announcement. Based
on this analysis, Piper Jaffray also derived a range of implied
equity values per diluted share of Restore Medical common stock
of $0.39 to $2.62. Piper Jaffray noted that the merger
consideration was $1.60.
23
Discounted
Cash Flow Analysis
Using a discounted cash flow analysis, Piper Jaffray calculated
an estimated range of theoretical equity values for Restore
Medical based on the net present value of (1) the projected
calendar year free cash flows from 2008 to 2012, discounted back
to June 30, 2008 based on management projections and
(2) a terminal value at calendar year end 2012 based upon
revenue exit multiples discounted back to June 30, 2008.
Piper Jaffray utilized forecasts of future results
furnished to it by our management for the period from calendar
year 2008 through calendar year 2012. Piper Jaffray calculated
the range of net present values based on an assumed tax rate of
40.0%, an estimate of available net operating loss carry
forwards by our management, discount rates of 10.0%, 15.0% and
20.0% on net operating loss carry forwards, discount rates of
18.0%, 20.0% and 22.0% on free cash flow and terminal value, and
revenue exit multiples of 1.25x, 1.50x and 1.75x applied to our
projected calendar year 2012 revenue. Piper Jaffray based the
discount rates on an analysis of our weighted average cost of
capital and the Morningstar Micro-Cap Size Premium. This
analysis resulted in implied per share values of our equity
ranging from a low of $0.66 to a high of $1.20. Piper Jaffray
observed that the $1.60 per share merger consideration was above
the range of values derived from this analysis.
Miscellaneous
The summary set forth above does not contain a complete
description of the analyses performed by Piper Jaffray, but
does summarize the material analyses performed by Piper Jaffray
in rendering its opinion. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to
partial analysis or summary description. Piper Jaffray believes
that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its
analyses or of the summary, without considering the analyses as
a whole or all of the factors included in its analyses, would
create an incomplete view of the processes underlying the
analyses set forth in the Piper Jaffray opinion. In arriving at
its opinion, Piper Jaffray considered the results of all of its
analyses and did not attribute any particular weight to any
factor or analysis. Instead, Piper Jaffray made its
determination as to fairness on the basis of its experience and
financial judgment after considering the results of all of its
analyses. The fact that any specific analysis has been referred
to in the summary above is not meant to indicate that this
analysis was given greater weight than any other analysis. In
addition, the ranges of valuations resulting from any particular
analysis described above should not be taken to be Piper
Jaffrays view of the actual value of Restore Medical.
No company or transaction used in the above analyses as a
comparison is directly comparable to Restore Medical or the
transaction contemplated by the merger agreement. Accordingly,
an analysis of the results of the comparisons is not
mathematical; rather, it involves complex considerations and
judgments about differences in the companies and transactions to
which Restore Medical and the merger were compared and other
factors that could affect the public trading value or
transaction value of the companies.
Piper Jaffray performed its analyses solely for purposes of
providing its opinion to our board of directors. In performing
its analyses, Piper Jaffray made numerous assumptions with
respect to industry performance, general business and economic
conditions and other matters. Certain of the analyses performed
by Piper Jaffray are based upon forecasts of future results
furnished to Piper Jaffray by our management, which are not
necessarily indicative of actual future results and may be
significantly more or less favorable than actual future results.
These forecasts are inherently subject to uncertainty because,
among other things, they are based upon numerous factors or
events beyond the control of the parties or their respective
advisors. Piper Jaffray does not assume responsibility if future
results are materially different from forecasted results.
Piper Jaffrays opinion was one of many factors taken into
consideration by our board of directors in making the
determination to approve the merger agreement. While Piper
Jaffray provided advice to our board during their negotiations
with Medtronic, Piper Jaffray did not recommend any specific
merger consideration.
Piper Jaffray relied upon and assumed the accuracy and
completeness of the financial, accounting and other information
discussed with or reviewed by it and did not independently
verify such information. Piper Jaffray further relied upon
the assurances of our management that the information provided
was prepared on a reasonable basis in accordance with industry
practice, and that they were not aware of any information or
facts that would make the information provided to Piper Jaffray
incomplete or misleading. Without limiting
24
the generality of the foregoing, for the purpose of the opinion,
Piper Jaffray assumed that we were not party to any material
pending transaction, including any external financing,
recapitalization, acquisition or merger, other than the merger,
and with respect to financial forecasts, pro forma adjustments,
estimates of net operating loss tax benefits and other estimates
and forward-looking information relating to us reviewed by it,
Piper Jaffray assumed that such information reflected the best
then-available estimates and judgments of our management. Piper
Jaffray expressed no opinion as to any financial forecasts, pro
forma adjustments, net operating loss or other estimates or
forward-looking information of Restore Medical or the
assumptions on which they were based. Piper Jaffray relied, with
the consent of our board, on advice of the outside counsel and
our independent accountants, and on the assumptions of our
management, as to all accounting, legal, tax and financial
reporting matters with respect to us, Medtronic and the merger
agreement.
Piper Jaffray assumed that the executed merger agreement was in
all material respects identical to the last draft reviewed by
it. Piper Jaffray relied upon and assumed, without independent
verification, that (i) the representations and warranties
of all parties to the merger agreement and all other related
documents and instruments that are referred to therein are true
and correct, (ii) each party to such agreements will fully
and timely perform all of the covenants and agreements required
to be performed by such party, (iii) the merger will be
consummated pursuant to the terms of the merger agreement
without amendments thereto and (iv) all conditions to the
consummation of the merger will be satisfied without waiver by
any party of any conditions or obligations thereunder. In
arriving at its opinion, Piper Jaffray assumed that all the
necessary regulatory approvals and consents required for the
merger will be obtained in a manner that will not adversely
affect Restore Medical or alter the terms of the merger.
In arriving at its opinion, Piper Jaffray did not perform any
appraisals or valuations of any specific assets or liabilities
(fixed, contingent or other) of Restore Medical, and was not
furnished with any such appraisals or valuations, nor did Piper
Jaffray evaluate the solvency of Restore Medical under any state
or federal law relating to bankruptcy, insolvency or similar
matters. The analyses performed by Piper Jaffray in connection
with the opinion were going concern analyses.
Piper Jaffrays opinion was necessarily based upon the
information available to Piper Jaffray and facts and
circumstances as they existed and were subject to evaluation on
the date of the opinion; events occurring after the date of the
opinion could materially affect the assumptions used in
preparing the opinion. Piper Jaffray did not express any
opinion as to the price at which shares of common stock of
Restore Medical have traded or such stock may trade at any
future time. Piper Jaffray has not undertaken to reaffirm or
revise the opinion or otherwise comment upon any events
occurring after the date of the opinion and do not have any
obligation to update, revise or reaffirm the opinion.
The opinion addressed solely the fairness, from a financial
point of view, to holders of common stock of Restore Medical of
the proposed per share price set forth in the merger agreement
and did not address any other terms or agreement relating to the
merger. Piper Jaffray was not requested to opine as to, and the
opinion did not address, the basic business decision to proceed
with or effect the merger, Medtronics ability to fund the
per share price, or the fairness of the amount or nature of
compensation to our officers, directors or employees, or any
class of such persons, relative to the per share price proposed
to be paid to holders of common stock of Restore Medical. Piper
Jaffray expressed no opinion as to whether any alternative
transaction might produce consideration for Restore
Medicals stockholders in excess of the amount contemplated
in the merger.
Piper Jaffray is a nationally recognized investment banking firm
and is regularly engaged as a financial advisor in connection
with mergers and acquisitions, underwritings and secondary
distributions of securities and private placements. Our board of
directors selected Piper Jaffray to render its fairness opinion
in connection with the transactions contemplated by the merger
agreement on the basis of its experience and reputation in
acting as a financial advisor in connection with mergers and
acquisitions.
Piper Jaffray acted as our financial advisor in connection with
the merger and will receive an estimated fee of approximately
$1.25 million from us, $950,000 of which is contingent upon
the consummation of the merger. Piper Jaffray received a
non-refundable retainer in the amount of $50,000 and a fee of
$250,000 from us for providing its opinion, both of which will
be credited against the fee for financial advisory services. The
25
opinion fee was not contingent upon the consummation of the
merger. We also agreed to indemnify Piper Jaffray against
certain liabilities in connection with its services. Piper
Jaffray has advised us that in the past it performed investment
banking services for Medtronic, including acting as financial
advisor in various transactions, for which it received customary
fees. Specifically, within the last two years Piper Jaffray
received customary fees from Medtronic related to advisory
services performed in connection with a single transaction.
Although Piper Jaffray is not currently engaged by Medtronic, it
has an ongoing relationship with Medtronic and plans to seek to
provide investment banking services to Medtronic in the future.
In the ordinary course of its business, Piper Jaffray and its
affiliates may actively trade securities of Restore Medical and
Medtronic for their own account or the account of their
customers and, accordingly, Piper Jaffray or its affiliates may
at any time hold a long or short position in such securities.
Piper Jaffray also provides research coverage relating to common
stock of Medtronic.
Financial
Projections
Our management does not as a matter of course make public
projections as to future performance or earnings beyond the
current fiscal year and is especially wary of making projections
for extended periods due to the unpredictability of the
underlying assumptions and estimates. However, current financial
projections prepared by management were made available to our
board of directors and Piper Jaffray in connection with this
transaction and the analysis conducted by Piper Jaffray for
purposes of their fairness opinion. We have included below the
material financial projections to provide our stockholders
access to certain nonpublic information that was provided to our
board of directors and Piper Jaffray. The inclusion of this
information should not be regarded as an indication that our
board of directors or Piper Jaffray considered, or now
considers, it to be a reliable prediction of future results. Our
board of directors considered the execution risks associated
with the financial projections below in considering and
evaluating the merger.
Although the financial projections are presented with numerical
specificity, they reflect numerous assumptions and estimates as
to future events made by our management that, while our
management believed such assumptions and estimates were
reasonable at the time the financial projections were prepared,
are inherently uncertain and are subject to significant
business, economic and competitive risks and uncertainties that
are difficult to predict and beyond our control and that may
cause actual results to vary materially from the projections or
the assumptions underlying the financial projections. These
include, among others, risks and uncertainties identified in the
section entitled Cautionary Statement Concerning
Forward-Looking Information in this proxy statement,
including the risk factors described in our filings with the
SEC, as described in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 and our most
recent Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008, both of which can be
found at the SECs website at
www.sec.gov
, and on
our website at
www.restoremedical.com
. In addition, the
financial projections cover multiple years and such information
by its nature becomes less reliable with each successive year.
Accordingly, there can be no assurance that the financial
projections will be realized, and actual results may be
materially greater or less than those contained in the financial
projections.
The financial projections were prepared solely for internal use
and for the use of our board of directors and Piper Jaffray in
connection with this transaction and not with a view toward
public disclosure or toward complying with GAAP, the published
guidelines of the SEC regarding projections or the guidelines
established by the American Institute of Certified Public
Accountants for preparation and presentation of prospective
financial information, and investors should not unduly rely on
them. The financial projections are not being included in this
proxy statement to influence your decision on how you should
vote with respect to the adoption of the merger agreement and
approval of the merger but merely to provide our stockholders
access to certain nonpublic information that was provided our
board of directors and Piper Jaffray in connection with this
transaction. The financial projections included below were
prepared by, and are the responsibility of, our management.
Neither our independent registered public accounting firm, nor
any other independent accountants, have compiled, examined or
performed any procedures with respect to the prospective
financial information contained in them, nor have they expressed
any opinion or any other form of assurance on the information or
its achievability.
26
The financial projections do not take into account any
circumstances or events occurring after the date they were
prepared. Except as required by applicable securities laws we do
not intend to update or otherwise revise the financial
projections to reflect circumstances existing after the date
when made or to reflect the occurrence of future events.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending(1)
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
|
(In thousands)
|
|
|
Net Sales
|
|
$
|
3,600
|
|
|
$
|
4,977
|
|
|
$
|
7,466
|
|
|
$
|
11,945
|
|
|
$
|
18,514
|
|
Cost of Sales
|
|
|
1,236
|
|
|
|
1,246
|
|
|
|
1,792
|
|
|
|
2,628
|
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
2,364
|
|
|
|
3,731
|
|
|
|
5,674
|
|
|
|
9,317
|
|
|
|
14,812
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales & Marketing
|
|
|
5,078
|
|
|
|
5,035
|
|
|
|
5,301
|
|
|
|
5,495
|
|
|
|
5,739
|
|
General & Administrative
|
|
|
3,908
|
|
|
|
3,650
|
|
|
|
3,733
|
|
|
|
3,942
|
|
|
|
4,166
|
|
Research & Development
|
|
|
2,002
|
|
|
|
1,050
|
|
|
|
1,232
|
|
|
|
1,493
|
|
|
|
1,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
$
|
(8,624
|
)
|
|
$
|
(6,004
|
)
|
|
$
|
(4,591
|
)
|
|
$
|
(1,613
|
)
|
|
$
|
3,240
|
|
|
|
|
(1)
|
|
As previously disclosed, if the proposed transaction with
Medtronic did not take place, the funding of our operations
beyond mid-2008 would require additional investments in our
company in the form of equity or debt financing, or through
licensing a portion of our intellectual property portfolio in
order to generate capital. We actively explored a variety of
equity and debt financing alternatives to raise sufficient
capital to fund our operations, as well as various strategic
alternatives. Had this proposed transaction not occurred, we
would have been required to significantly reduce the scope of
our operations including reducing the size of our sales and
marketing, research and development, administrative and
operations staff, combined with the elimination of the
significant programs and initiatives planned by each of those
functional groups. The principal assumptions of our management
in preparing these projections are as follows:
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|
Receipt of up to $5 million of incremental
financing in the first half of 2008, plus additional financing
beginning in 2009 of approximately $10 million to fund
future operations, depending upon revenue;
|
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|
Reduction of 24.5 full-time employees to
conserve cash, including sales force reduction from 21 to 13 and
a reduction of employees and programs in general and
administrative, marketing, research and development and
operations from 34.5 to 18; and
|
|
|
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Outsourcing our manufacturing operation with a
corresponding reduction in facilities-related expenses.
|
Interests
of Restore Medicals Directors and Executive Officers in
the Merger
In considering the recommendation of our board of directors with
respect to the merger agreement, you should be aware that some
of our executive officers and directors have interests in the
merger and have arrangements that are different from, or in
addition to, those of our stockholders generally. Our board of
directors was aware of these interests and considered them,
among other matters, in reaching its decisions to approve the
merger agreement and to recommend that our stockholders vote in
favor of adopting the merger agreement and approving the merger.
These interests include the following:
Stock
Options
The merger agreement provides that each stock option issued by
Restore Medical to acquire common stock outstanding immediately
prior to the effective time of the merger, whether vested or
unvested, will be canceled, and the option holder will be
entitled to receive an amount equal to the excess, if any, of
the merger consideration per share over the exercise price,
multiplied by the number of shares of common stock underlying
the option, less applicable withholding taxes. This cancellation
will occur upon consummation of the merger. The amounts that
would be payable to our executive officers and directors due to
the cash-out of the stock options described above (before
deductions for withholding taxes) are as follows:
Mr. Paulson, $217,576; Mr. Geyen, $8,959;
Mr. Palmer, $10,250; Mr. Bremseth, $6,150;
Mr. Kujak, $9,225; Mr. Buscemi,
27
$24,900; Mr. Sopp, $25,225; Dr. Evnin, $0;
Dr. Knudson, $20,000; Mr. Kraus, $0; Mr. Liszt,
$0; Mr. Nigon, $0; Mr. Schulte, $20,000; and all
directors and executive officers as a group, $342,285.
Employment
and
Change-in-Control
Agreements
Each of our executive officers is party to an employment and
change-in-control
agreement. Pursuant to the terms of the merger agreement,
Medtronic has agreed not to amend, modify or terminate these
agreements and to assume our obligations under the agreements
following the effective time of the merger.
Under the terms of these agreements, upon the closing of the
last transaction necessary to effect a
change-in-control,
50% of the unvested shares underlying any stock options then
held by the executive will automatically vest. For purposes of
these agreements, a
change-in-control
includes, among other things, a change in beneficial ownership
of our securities from the date of the agreement resulting in a
new beneficial owner holding 50% or more of the combined voting
power of our securities.
In addition, if Mr. Paulson, Mr. Geyen or
Mr. Palmer is terminated without cause (as
defined in the agreements) or if a constructive termination
occurs (i.e. a material reduction in job responsibilities or
base salary or a relocation of more than 40 miles)
following the closing date of the last transaction necessary to
effect a
change-in-control,
such executive will be entitled to receive: (i) any amounts
vested and earned, but unpaid as of the termination date, plus
12 months base salary paid according to our normal payroll
schedule; (ii) up to 12 months of COBRA payments for
medical and dental coverage, provided that such COBRA payments
will cease in the event there is coverage under another
companys benefit plan, coverage under Medicare or death,
and (iii) the remaining portion of any unvested stock
options then held by such executive will immediately vest. If
any of the other executive officers is terminated without
cause (as defined in the agreements) following the
closing date of the last transaction necessary to effect a
change-in-control
or if a constructive termination occurs (i.e. a material
reduction in job responsibilities or base salary or a relocation
of more than 40 miles) within 12 months of the closing
date of the last transaction necessary to effect a
change-in-control,
such executive will be entitled to receive: (i) any amounts
vested and earned, but unpaid as of the termination date, plus
six months base salary and (ii) up to six months of COBRA
payments under the same terms and conditions as described above
for Mr. Paulson, Mr. Geyen and Mr. Palmer. In the
event such payments are subject to Section 409A of the
Internal Revenue Code, the reimbursements to be paid in the
first six months following the termination will be delayed and
paid in a single lump sum on the first day of the month
following the date that is six months after the termination date.
The
change-in-control
agreements provide that our executive officers will be entitled
to receive the additional base salary and COBRA payments
described above upon certain termination events only if they
sign a comprehensive release of claims in a form acceptable to
us that is not subsequently rescinded.
The following table sets forth an estimate of the potential cash
severance payments and other benefits that could be payable as
described above in the event our executive officers become
entitled to the severance amounts pursuant to their employment
and
change-in-control
agreements following the merger (assuming for illustrative
purposes that each executive officers employment is
terminated without cause or a constructive termination occurs on
July 16, 2008 and utilizing current base salaries).
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Stock
|
|
|
Health Care
|
|
|
|
|
Executive Officer
|
|
Base Pay
|
|
|
Options(1)
|
|
|
Benefits
|
|
|
Total
|
|
|
J. Robert Paulson, Jr.
|
|
$
|
294,580
|
|
|
$
|
217,576
|
|
|
$
|
17,244
|
|
|
$
|
529,400
|
|
Christopher R. Geyen
|
|
|
212,149
|
|
|
|
8,959
|
|
|
|
17,244
|
|
|
|
238,352
|
|
Craig G. Palmer
|
|
|
221,450
|
|
|
|
10,250
|
|
|
|
12,630
|
|
|
|
244,330
|
|
David L. Bremseth
|
|
|
92,700
|
|
|
|
6,150
|
|
|
|
9,972
|
|
|
|
108,822
|
|
Michael R. Kujak
|
|
|
95,157
|
|
|
|
9,225
|
|
|
|
9,972
|
|
|
|
114,354
|
|
Paul J. Buscemi, Ph.D.
|
|
|
83,430
|
|
|
|
24,900
|
|
|
|
9,972
|
|
|
|
118,302
|
|
John P. Sopp
|
|
|
83,999
|
|
|
|
25,225
|
|
|
|
9,972
|
|
|
|
119,196
|
|
|
|
|
(1)
|
|
Under the terms of the merger agreement, all stock options
outstanding immediately prior to the effective time, vested or
unvested, will be canceled in exchange for the right to receive
an amount in cash equal to the total number of shares subject to
the outstanding stock option multiplied by the excess, if any,
of the
|
28
|
|
|
|
|
merger consideration per share over the exercise price of the
stock option. Therefore, there is no added benefit to the
executive officers of the vesting acceleration provisions in
their employment and
change-in-control
agreements. The values provided in the table are the amounts
each executive officer will receive for their stock options
pursuant to the terms of the merger agreement upon the
consummation of the merger.
|
Indemnification
Our certificate of incorporation and the merger agreement
contain provisions regarding indemnification of the directors
and officers of Restore Medical, and the merger agreement
provides for the maintenance of directors and
officers insurance for a period of six years after the
effective time of the merger.
Delisting
and Deregistration of Our Common Stock
If the merger is completed, our common stock will be delisted
from the Nasdaq Capital Market and deregistered under the
Securities Exchange Act of 1934, as amended, and we will no
longer file periodic reports with the SEC on account of our
common stock.
If the merger agreement is not adopted and the merger is not
approved by our stockholders or if the merger is not completed
for any other reason, our stockholders will not receive any
payment for their shares in connection with the merger. Instead,
we will remain an independent public company and our common
stock will continue to be listed and traded on the Nasdaq
Capital Market, subject to compliance with continued listing
requirements.
REQUIRED
REGULATORY APPROVALS
Medtronic and Restore Medical believe that no regulatory filings
or approvals will be required to complete the merger; however,
in the event that any such filings or approvals are required,
Medtronic and Restore Medical have no reason to believe that any
such filings and approvals would not be completed and obtained
within the time period contemplated by the merger agreement.
29
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the merger to holders of Restore Medical common
stock. The discussion is based on the Internal Revenue Code of
1986, as amended (the Code), existing, proposed and
temporary Treasury regulations promulgated thereunder, Internal
Revenue Service (IRS) rulings, administrative
pronouncements and judicial decisions in effect as of the date
of this proxy statement, all of which are subject to change
(possibly with retroactive effect) or to different
interpretations. The following discussion is limited to the
material federal income tax consequences of the merger to a
stockholder of Restore Medical who is a citizen or resident of
the United States and who, on the date on which the merger is
completed, holds shares of Restore Medical common stock as a
capital asset within the meaning of Section 1221 of the
Code. The following discussion may not apply to beneficial
owners of Restore Medical common stock subject to special
treatment under federal income tax laws, such as insurance
companies, financial institutions, dealers in securities or
foreign currency, regulated investment companies, tax-exempt
organizations, S corporations, partnerships, and taxpayers
subject to the alternative minimum tax. In addition, the
following discussion does not apply to stockholders who acquired
their shares of Restore Medical common stock upon the exercise
of warrants or employee stock options or, as compensation for
services (and such stockholders should consult their own income
tax advisors to determine whether the discussion applies to
them), and further, the following discussion does not apply to
stockholders who hold their shares as part of a hedge, straddle
or conversion transaction. The discussion does not address the
tax consequences of amounts paid with respect to options and
warrants.
The following discussion is not intended to constitute a
complete description of all U.S. federal income tax
consequences relating to the merger, and does not address
potential foreign, state, local and other tax consequences of
the merger. Because individual circumstances may differ, you
should consult your own tax advisor to determine the
applicability of the rules discussed below to your situation.
This discussion is for general information only and is not tax
advice.
For federal income tax purposes, the merger will be treated as a
taxable sale or exchange of Restore Medical common stock for
cash by each Restore Medical stockholder (including any
stockholder who properly exercises dissenters rights).
Accordingly, the federal income tax consequences to the Restore
Medical stockholders receiving cash will generally be as follows:
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Each stockholder will recognize a capital gain or loss upon the
disposition of the stockholders shares of Restore Medical
common stock pursuant to the merger. If a stockholder exercises
its dissenters rights, a portion of the gain may be
treated as interest for federal income tax purposes, which will
be taxed as ordinary income.
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The capital gain or loss, if any, will be long-term with respect
to shares of Restore Medical common stock held for more than
12 months as of the effective time of the merger. In
general, long-term capital gains recognized by a corporation
will be subject to U.S. federal income tax at a maximum
rate of 35%, while long-term capital gains recognized by
non-corporate taxpayers will be subject to a maximum federal
income tax rate of 15%. If the shares have been held for
12 months or less, gains will be subject to tax at ordinary
income tax rates. The deductibility of capital losses is subject
to limitations under the Code.
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The amount of capital gain or loss recognized by each
stockholder will be measured by the difference between the
amount of cash received by the stockholder in connection with
the merger, or cash received in connection with the exercise of
dissenters rights, and the stockholders adjusted tax
basis in the shares of Restore Medical common stock at the
effective time of the merger.
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Gain or loss must be determined separately for each block of
shares of Restore Medical common stock (
i.e.
, shares
acquired at the same cost in a single transaction) converted to
cash in the merger.
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Cash payments made pursuant to the merger, including any cash
paid to a stockholder who properly exercises dissenters
rights, will be reported to Restore Medical stockholders and the
IRS to the extent required by the Code and applicable
regulations. These amounts will ordinarily not be subject to
withholding of U.S. federal income tax. However, backup
withholding at a rate of 28% may apply if the stockholder
(a) fails
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to furnish its social security number or other taxpayer
identification number (TIN) to Restore Medical or
its paying agent, (b) is notified by the IRS that the
stockholder furnished an incorrect TIN or underreported interest
or dividends on the stockholders federal income tax
return, or (c) under certain circumstances, fails to
provide a certified statement, signed under penalties of
perjury, that the TIN provided is its correct number and that it
is not subject to backup withholding. Backup withholding is not
an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax.
Certain taxpayers, such as corporations and financial
institutions, are exempt from backup withholding. Each Restore
Medical stockholder will be asked to provide a correct taxpayer
identification number on a Substitute
Form W-9
which is to be included in the appropriate letter of transmittal
for the shares of Restore Medical common stock.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE
ANALYSIS OF ALL TAX CONSEQUENCES TO HOLDERS OF SHARES OF RESTORE
MEDICAL COMMON STOCK WITH RESPECT TO THE DISPOSITION OF THOSE
SHARES PURSUANT TO THE MERGER. HOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE TAX CONSEQUENCES APPLICABLE TO THEM
IN THEIR PARTICULAR CIRCUMSTANCES. NOTHING IN THIS DISCUSSION IS
INTENDED TO BE, OR SHOULD BE CONSTRUED AS, TAX ADVICE.
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THE
MERGER AGREEMENT
The following summary describes selected material terms of
the merger agreement. This summary is qualified in its entirety
by reference to the merger agreement, a copy of which is
attached as Appendix A to, and incorporated by reference
into, this proxy statement. You should read the merger agreement
in its entirety as it is the primary legal document that governs
the merger. This summary does not purport to be complete and may
not contain all of the information about the merger agreement
that is important to you.
Structure
of the Merger
The merger agreement provides that, upon the terms and subject
to the conditions of the merger agreement, Merger Sub will be
merged with and into us and the separate corporate existence of
Merger Sub will thereupon cease, and we will be the surviving
corporation of the merger and will be a wholly owned subsidiary
of Medtronic. At the effective time of the merger, all of our
property, rights, privileges, powers and franchises and those of
the Merger Sub will vest in the surviving corporation, and all
of our debts, obligations, claims, liabilities and duties and
those of the Merger Sub will become the debts, obligations,
claims, liabilities and duties of the surviving corporation. We
will continue as the surviving corporation and will be
unaffected by the merger, except that all of our then
outstanding common stock will be owned by Medtronic. Upon the
election of Medtronic, the merger may be restructured so that we
merge into Merger Sub instead.
Effective
Time of the Merger
The merger will become effective when a certificate of merger is
duly filed with the Secretary of State of the State of Delaware
or, if it is mutually agreed by the parties, the date and time
specified in the certificate of merger at which the merger will
become effective.
The merger agreement also provides that at the effective time of
the merger:
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the certificate of incorporation of Merger Sub immediately prior
to the effective time shall be the certificate of incorporation
of the surviving corporation, except as amended to change the
name of the surviving corporation to Medtronic Restore Medical,
Inc.;
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the bylaws of Merger Sub immediately prior to the effective time
shall be the bylaws of the surviving corporation;
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the directors of Merger Sub immediately prior to the effective
time will be the directors of the surviving corporation; and
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our officers immediately prior to the effective time will be the
officers of the surviving corporation.
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Merger
Consideration
Each share of our common stock issued and outstanding
immediately prior to the effective time of the merger, other
than:
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treasury shares or shares held by Medtronic or any direct or
indirect subsidiary of Medtronic or us, all of which will be
canceled in the merger, and
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shares held by stockholders who properly exercise appraisal
rights, whom we refer to as dissenting stockholders,
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will be automatically converted into and represent the right to
receive merger consideration of $1.60 in cash (subject to
decrease in the limited circumstance described below) without
interest and less required withholding taxes, if any. After the
merger is effective, stockholders will no longer have any rights
with respect to their shares, except for the right to receive
the merger consideration. No interest will accrue or be paid
with respect to the merger consideration. At the effective time
of the merger, shares of our common stock will no longer be
outstanding, will automatically be canceled and will cease to
exist. Pursuant to the merger agreement, the merger
consideration is subject to decrease only if it were determined
that the outstanding capital stock,
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options and warrants of Restore Medical reflected in our records
and audited financial statements is inaccurate, and would, but
for the decrease, cause the aggregate consideration to exceed
$26,333,800.
Stockholders of record will not receive the merger consideration
until they surrender their stock certificates for certificated
shares to the paying agent for exchange or comply with the
procedures for lost certificates (each as described below), and
otherwise comply with the procedures described under
Payment Procedures below.
Medtronic has represented to us under the merger agreement that
it has, and will have upon completion of the merger, sufficient
funds to complete the merger and pay all amounts it is required
to pay under the merger agreement.
Payment
Procedures
Medtronic will appoint U.S. Bank National Association, or
another paying agent reasonably acceptable to us, prior to the
effective time of the merger which will make payment of the
merger consideration in exchange for the surrender of
certificates representing shares of our common stock or
non-certificated shares represented by book entry. Medtronic
will deposit with the paying agent at or prior to the effective
time of the merger a sufficient amount of cash in order to
permit the payment of the merger consideration. As soon as
reasonably practicable and in any event within five business
days after the later of the effective time of the merger, or the
date on which the paying agent receives appropriate stockholder
information, the paying agent will mail to each person who, as
of the effective time, was the record holder of shares of our
common stock whose shares were converted into the right to
receive the merger consideration, a letter of transmittal and
instructions explaining how to surrender stock certificates and
book-entry shares to the paying agent. The paying agent will pay
the merger consideration, without interest and less any
applicable withholding taxes, to our stockholders promptly
following the paying agents receipt of the stock
certificates or book-entry shares, as applicable, and properly
completed and executed transmittal documents. The merger
consideration may be paid to a person other than the person in
whose name the corresponding certificate is registered if the
certificate (or affidavit of loss) representing the canceled
shares is presented to the paying agent accompanied by all
documents required to evidence and effect such transfer and by
evidence satisfactory to the paying agent that any applicable
stock transfer or other taxes have been paid.
If you have lost your stock certificate, or if it has been
stolen or destroyed, you will be required to make an affidavit
of that fact before you will be entitled to receive the merger
consideration. In addition, if required by the paying agent or
the surviving corporation in the merger, you will have to post a
bond in customary amount and upon such terms as may be required
by the paying agent or the surviving corporation as indemnity
against any claims made against it with respect to the lost,
stolen or destroyed certificate. Thereafter, the paying agent
will pay the merger consideration to you in exchange for your
lost, stolen or destroyed certificate.
Any portion of the funds deposited with the paying agent
(including any investment proceeds) that remains undistributed
to the holders of shares of our common stock one year after the
effective time of the merger will be delivered to the surviving
corporation. Any of our former stockholders who have not
surrendered their certificates or book-entry shares prior to the
delivery of these funds to the surviving corporation may look
only to the surviving corporation (subject to abandoned
property, escheat and other similar laws) only as general
creditors thereof with respect to any merger consideration that
may be payable upon due surrender of the certificates, or
book-entry shares, held by them. Notwithstanding the foregoing,
neither Medtronic nor the surviving corporation will be liable
to any of our stockholders for any merger consideration
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates
or book-entry shares have not been surrendered immediately prior
to the date the unclaimed funds would otherwise become subject
to any abandoned property, escheat or similar law, any unclaimed
funds payable with respect to these shares will, to the extent
permitted by law, become the property of the surviving
corporation, free and clear of all claims or interest of any
person previously entitled to such funds.
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You should not return your stock certificates with the
enclosed proxy card, and you should not forward your stock
certificates to the paying agent without a letter of
transmittal.
Treatment
of Our Stock Options and Warrants
If we complete the merger, at the effective time of the merger
each outstanding option to purchase shares of our common stock,
whether vested or unvested, that is held by an employee,
director, consultant or advisor will be canceled in exchange for
the right to receive an amount, payable in cash, as soon as
practicable following the effective time, equal to the total
number of shares subject to the stock option as of the effective
time multiplied by the excess, if any, of the merger
consideration per share over the exercise price, less applicable
withholdings. Each warrant to purchase shares of our common
stock outstanding immediately prior to the effective time of the
merger will be canceled in exchange for the right to receive an
amount, payable in cash as soon as practicable following the
effective time, equal to the total number of shares exercisable
with respect to the warrant as of the effective time multiplied
by the excess, if any, of the merger consideration per share
over the exercise price, less applicable withholdings.
Representations
and Warranties
The merger agreement contains representations and warranties
made by us to Medtronic and Merger Sub and by Medtronic and
Merger Sub to us, and may be subject to important limitations
and qualifications agreed to by the parties in connection with
negotiating the terms of the merger agreement. The statements
embodied in those representations and warranties are in some
cases subject to important exceptions, limitations and
supplemental information contained in confidential disclosure
schedules that Restore Medical and Medtronic have exchanged in
connection with signing the merger agreement or as otherwise
provided in the merger agreement, and are additionally subject
to contractual standards of materiality that may be different
from that generally applicable under federal securities laws. In
addition, the representations and warranties may have been
included in the merger agreement for the purpose of allocating
risk between Medtronic and Restore Medical, rather than to
establish matters as facts. For the foregoing reasons, you
should not rely on the representations and warranties contained
in the merger agreement as statements of factual information.
Restore Medical has made representations and warranties to
Medtronic and Merger Sub regarding, among other things:
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corporate matters, including due organization, qualification and
its certificate of incorporation and bylaws;
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our subsidiaries and our ownership interests in them;
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our capitalization, including the number of outstanding shares
of our common stock and preferred stock and our outstanding
stock options and warrants and the terms of our outstanding
stock options and warrants;
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requisite corporate power and the authorization, execution,
delivery and enforceability of the merger agreement;
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absence of conflicts with, or violations of, our and our
subsidiaries organizational documents or other
obligations, including under applicable law, in connection with
entering into the merger agreement or completing the merger;
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the accuracy of information contained in the reports and
financial statements that we have filed with the SEC, since
May 16, 2006, and the compliance of these SEC filings with
applicable federal securities law requirements and, with respect
to financial statements therein, generally accepted accounting
principles, which we sometimes refer to as GAAP;
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the adequacy of our internal controls and procedures and
disclosure controls and procedures;
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the absence of undisclosed liabilities;
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the absence since December 31, 2007 of changes or events
that would have a material adverse effect on us and the absence
of certain actions by us since that date;
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the accuracy and compliance as to form with applicable
securities law requirements of this proxy statement;
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the absence of undisclosed brokers or financial
advisors fees in connection with the merger;
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employee benefits and labor matters;
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litigation and investigations;
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tax matters;
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compliance since January 1, 2005 with law, contracts and
other obligations and the possession of and compliance with all
government permits necessary for the lawful conduct of our
business;
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environmental matters;
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intellectual property matters, including our rights to use owned
and licensed intellectual property and any infringement matters;
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real property matters, including leased properties;
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material contracts and the performance of obligations thereunder;
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regulatory compliance;
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insurance policies;
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customers and suppliers;
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absence of illegal payments or undisclosed related party
transactions;
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receipt of an opinion from our financial advisor;
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required vote of our stockholders; and
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inapplicability of state takeover statutes.
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Medtronic and Merger Sub made representations and warranties to
us regarding, among other things:
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corporate matters, including due organization and the ownership
of Merger Subs outstanding capital stock;
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requisite corporate power and the authorization, execution,
delivery and enforceability of the merger agreement;
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accuracy of information supplied for inclusion in this proxy
statement, except for information supplied by any person other
than Medtronic or Merger Sub;
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the absence of conflicts with, or violations of, their
respective organizational documents or other obligations,
including under applicable law, in connection with entering into
the merger agreement or completing the merger;
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the absence of litigation that would be reasonably expected to
prevent or materially delay the completion of the merger;
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ownership of Restore Medicals stock;
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the sufficiency of available funds for the merger; and
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the absence of our responsibility for any broker or investment
advisor fees based upon arrangements made by and on behalf of
Medtronic and Merger Sub.
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In general, any of our representations and warranties shall be
deemed to be untrue or incorrect only if the fact, circumstance,
change or event that resulted in such untruth or incorrectness,
individually or when taken together with all other facts,
circumstances, changes or events that result in such
representation and warranty or any of our other representations
or warranties being untrue or incorrect, has had or would be
reasonably likely to have a material adverse effect on us. For
purposes of this determination, materiality qualifications in
representations and warranties are disregarded. Certain
representations and warranties shall be deemed to be untrue and
incorrect only if they are untrue or incorrect in any material
respect. These include representations and warranties relating
to our organization and good standing, our capitalization, our
authority to undertake the merger agreement, the fairness
opinion we received from Piper Jaffray and the inapplicability
of state takeover statutes. Certain of our capitalization
representations and warranties shall be deemed to be untrue and
incorrect only if the aggregate number of shares set forth in
them is more than one percent less than the correct number. Our
representation and warranty relating to the absence of any
material adverse effect shall be deemed untrue and incorrect if
it is untrue or incorrect in any respect.
Material
Adverse Effect
A material adverse effect is defined in the agreement as any
occurrence, change, event, effect or circumstance that,
individually or in the aggregate is or would be reasonably
likely to be, materially adverse to the business, results of
operations or financial condition of us and our subsidiaries,
taken as a whole. For this purpose, a material adverse effect
excludes any occurrence, change, event, effect or circumstance
to the extent relating to or resulting from (i) changes,
after the date of the merger agreement, in general economic
conditions or securities or financial markets in general,
(ii) changes, after the date of the merger agreement, in
law or GAAP, (iii) general changes, after the date of the
merger agreement, in the medical device industry, (iv) any
outbreak or escalation of hostilities or war (whether declared
or not declared) or act of terrorism, (v) the announcement
or the existence of, or compliance with, the merger agreement
and the transactions contemplated by the merger agreement (but
only if directly resulting solely from the existence of the
merger agreement and the related transactions and not resulting
from our operations, financial position or performance),
(vi) any change in our stock price or trading volume, in
and of itself (but taking into account the facts or occurrences
giving rise to such change), (vii) our failure to meet
projections of earnings, revenues or other financial measures
(whether made by us or independent third parties), in and of
itself (but taking into account the facts or occurrences giving
rise to such failure), (viii) any action taken with the
express consent of Medtronic which consent states explicitly
that such consent excludes such action from the definition of
material adverse effect; except in the case of clauses (i),
(ii), (iii) or (iv) to the extent such occurrence,
change, event, effect or circumstance has a disproportionate
effect on us and our subsidiaries, taken as a whole, as compared
with other companies in the medical device industry. In
addition, a material adverse effect also includes any
occurrence, change, event, effect or circumstance that,
individually or in the aggregate, would, or would be reasonably
likely to, prevent or materially delay or impair the ability of
us or any of our subsidiaries to consummate the merger and the
other transactions contemplated by the merger agreement.
Covenants
Relating to the Conduct of Our Business
From the date of the merger agreement through the effective time
of the merger, we have agreed (and have agreed to cause each of
our subsidiaries) to conduct our operations in the ordinary and
usual course of business consistent with past practice, to use
our commercially reasonable efforts to preserve intact our
business organization, to preserve the goodwill of and maintain
satisfactory business relationships with third parties, and to
keep available the services of our present officers and
employees.
During the same period, we have also agreed that we will not,
and will not allow our subsidiaries to, among other things, do
any of the following without the prior written consent of
Medtronic, subject to certain exceptions:
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issue, sell, or grant options or rights to acquire any shares of
our capital stock or the capital stock of our subsidiaries other
than shares issuable upon exercise of existing stock options or
warrants;
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acquire, redeem or amend any shares of our capital stock or the
capital stock of our subsidiaries;
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split, combine or reclassify any shares of our capital stock or
the capital stock of our subsidiaries;
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declare, make or pay any dividend or distribution on any shares
of our capital stock;
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make any acquisition or disposition or cause any acquisition or
disposition to be made of any business, assets or securities of
ours or any third party, except for purchases or sales of raw
material or inventory made in the ordinary course of business
and consistent with past practice;
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adopt a plan of complete or partial liquidation, dissolution,
recapitalization or restructuring;
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enter into a material contract or amend or terminate any
material contract or grant any release or relinquishment of any
rights under any material contract;
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enter into a new agreement related to a clinical trial with
regard to our products or amend or terminate any of the
agreements or protocols related to certain clinical trials;
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incur, create, assume or otherwise become liable or responsible
for any debt except for short-term debt incurred under
instruments outstanding as of the date of the merger agreement
in the ordinary course of business consistent with past practice;
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assume, guarantee, or otherwise become liable or responsible in
any way for the obligations of third parties;
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make any loans, advances or capital contributions to, or
investments in, any third party (other than our subsidiaries);
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change in any material respect, any financial accounting
methods, principles or practices, except as required by GAAP;
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make or change any material tax election, extend the statute of
limitations with any tax authority, amend any tax return, or
settle or compromise any material income tax liability;
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adopt any amendments to our (or our subsidiaries)
certificate of incorporation or bylaws or other similar
governing documents or adopt a shareholder rights plan;
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grant any stock-related, performance or similar awards or
bonuses;
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forgive any loans to employees, officers or directors or any of
their affiliates or associates;
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enter into any new, or amend, terminate or renew any existing,
employment, severance, consulting or salary continuation
agreements with or for the benefit of any existing or future
officers, director or employees;
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grant any increases in the compensation or benefits to officers,
directors or employees (other than normal increases to
non-officer and
non-director
employees in the ordinary course of business consistent with
past practice and that, in the aggregate, do not result in a
material increase in our benefits or compensation expense);
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make any deposits or contributions of cash or other property to
or take any other action to fund or in any other way secure the
payment of compensation or benefits under an employee benefit
plan or similar arrangement;
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terminate any employee having an annual base salary of more than
$150,000, except as a result of voluntary resignation or a
termination for cause;
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enter into any collective bargaining or similar labor agreement;
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adopt, amend or terminate any employee benefits plan or any
other bonus, severance, insurance, pension or similar
arrangement;
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incur any material capital expenditure or any obligations,
liabilities or indebtedness in respect thereof, except for those
contemplated by the capital expenditure budget for the relevant
fiscal year, which capital expenditure budget has been provided
to Medtronic before the date of the merger agreement;
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settle any suit, action, claim, proceeding or investigation;
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convene any regular or special meeting of our stockholders
except the special meeting to approve the merger;
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take or omit to take any action that would cause any issued
patents or registered trademarks owned by us or our subsidiaries
to lapse, be abandoned or canceled, or fall into the public
domain;
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convene any regular or special meeting of stockholders other
than the special meeting for the purposes of voting on the
adoption of the merger agreement and the approval of the merger;
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pay any expenses (such as professional fees) relating to the
merger agreement or the merger (or other similar amounts
relating to the sale or strategic alternative process); or
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offer, agree or commit, in writing or otherwise, to take any of
the foregoing actions.
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No
Solicitation of Alternative Transactions
The merger agreement provides that we will not and will cause
our subsidiaries not to, and will direct and use our reasonable
best efforts to cause our and their respective officers,
directors, employees, representatives, agents or affiliates not
to, directly or indirectly:
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solicit, initiate, or knowingly encourage or participate in any
way in any discussions or negotiations with respect to any
competing acquisition proposal; or
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provide any information to, or afford any access to our or our
subsidiaries properties, books or records, or otherwise
take any action to assist or facilitate, any person or group,
with respect to any competing acquisition proposal.
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Until such time as our stockholders adopt the merger agreement
and approve the merger, however, we may provide information to
(so long as it has previously been, or is concurrently, made
available to Medtronic or Merger Sub) and negotiate with a third
party that makes an unsolicited bona fide written acquisition
proposal that did not result from our breach of our
non-solicitation obligations, so long as the third party has
executed a confidentiality agreement at least as restrictive in
all material respects as the confidentiality agreement entered
into by Medtronic, if:
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our board determines in good faith, after consultation with our
outside legal and financial advisors, that such unsolicited bona
fide acquisition proposal constitutes, or is reasonably likely
to result in, a superior proposal, taking into account the
legal, financial, financing, and other aspects of the proposal;
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our board determines in good faith, after receiving advice of
outside counsel, that the failure to take such action would
constitute a breach of its fiduciary duties to our stockholders
under applicable law; and
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we provide Medtronic with prior written notice of our intent to
take any such action at least one business day prior to taking
such action.
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We also have agreed to promptly (within one business day) notify
and provide specified information to Medtronic if any
information is requested or negotiations or discussions are
sought to be initiated by a potential acquirer, communicate to
Medtronic and Merger Sub the identity of the potential acquirer
and the material terms of the request, inquiry or acquisition
proposal, provide copies of any written communications received
from or sent to or on behalf of the potential acquirer
describing the financial or other material terms of such
acquisition proposal, and keep Medtronic and Merger Sub
reasonably informed of the status of any such discussions or
negotiations and, within 24 hours, notify Medtronic and
Merger Sub of any modifications to the financial or other
material terms of any such request or acquisition proposal.
We have also agreed that we will and will cause our officers,
directors, employees, representatives, agents and affiliates to
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any third party
other than Medtronic or Merger Sub and notify any third party
with whom we have had discussions during the prior 180 days
that we are no longer seeking the making of any acquisition
38
proposal and thereby withdraw any request or consent given to
making an acquisition proposal and shall request the return or
destruction of any non-public information provided to the third
party in connection with such activities, discussions or
negotiations.
The merger agreement provides that neither we nor our board of
directors may do any of the following:
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withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify, in a manner adverse to Medtronic or Merger
Sub, our approval of the merger agreement and the merger, or our
recommendation that our stockholders adopt the merger agreement
and approve the merger;
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approve or recommend, or propose publicly to approve or
recommend, any competing acquisition proposal; or
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unless our board determines in good faith, after receiving
advice of outside counsel, that the failure to take such action
would constitute a breach of its fiduciary duties to our
stockholders under applicable law, (i) release any third
party from any confidentiality or standstill agreement to which
we are a party or (ii) fail to enforce to the fullest
extent possible or grant any waiver, request or consent to any
acquisition proposal under, any such agreement; or enter into
any letter of intent, agreement in principle, acquisition
agreement or other agreement related to a competing acquisition
proposal.
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However, our board of directors may withdraw, modify or qualify
or publicly propose to withdraw, modify or qualify in a manner
adverse to Medtronic or Merger Sub its recommendation that our
stockholders adopt the merger agreement and approve the merger
if our board determines in good faith, after receipt of advice
of outside counsel, that failure to do so would constitute a
breach of its fiduciary duties to our stockholders. If the
change of recommendation relates to a competing acquisition
proposal, our board of directors may only withdraw or modify in
a manner adverse to Medtronic its recommendation if:
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the acquisition is a bona fide unsolicited written acquisition
proposal that did not result from a violation of our
non-solicitation obligations;
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our board of directors determines in good faith, after
consultation with outside legal and financial advisors that the
competing acquisition proposal constitutes a superior proposal
and that it intends to accept or recommend the competing
acquisition proposal as a superior proposal;
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our board of directors determines in good faith, after receiving
advice of outside counsel, that the failure to take such action
would constitute a breach of its fiduciary duties to our
stockholders;
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we provide Medtronic with prior written notice of our intention
to take any such action at least four business days prior to
taking such action, including all of the terms and conditions of
the acquisition proposal;
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during the four business day period, we negotiate in good faith
with Medtronic and Merger Sub (to the extent Medtronic and
Merger Sub wish to negotiate) to enable Medtronic and Merger Sub
to make an offer that is at least as favorable to our
stockholders as the competing acquisition proposal;
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Medtronic and Merger Sub do not, within the four business day
period, make an offer that our board of directors determines in
good faith, after consultation with its outside financial
advisors and legal counsel and after taking into account the
legal, financial, financing and other aspects of the proposal,
to be at least as favorable to our stockholders as the competing
acquisition proposal (except that in the event of an amendment
to the financial or other material terms of the competing
acquisition proposal, a new notice and matching period must be
given, which expires after the later of three business days and
the end of the original four business day period); and
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our board of directors, after taking into account any
modifications to the terms of the merger agreement and the
merger agreed to by Medtronic and Merger Sub after receipt of
the notice, continues to believe that the competing acquisition
proposal constitutes a superior proposal.
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A competing acquisition proposal is defined under
the merger agreement as any offer or proposal, or any indication
of interest in making an offer or proposal, made by a person or
group at any time which is
39
structured to permit the person or group to acquire beneficial
ownership of any material portion of the assets (other than
inventory purchased in the ordinary course of business) of, or
at least 15% of the capital stock, equity interest in, or
businesses of, us and our subsidiaries, taken as a whole,
pursuant to a merger, recapitalization, consolidation or other
business combination, sale of share of capital stock or equity
interests, sale of assets, tender offer or exchange offer or
similar transaction, including any single or multi-step
transaction or series of related transactions, in each case
other than the proposed merger with Merger Sub.
A superior proposal is defined under the merger
agreement as any unsolicited, bona fide acquisition proposal
(except that references in the definition of acquisition
proposal to 15% shall be replaced by 50%) made in writing, in
respect of which our board has determined in good faith after
consultation with its outside financial advisor and outside
legal counsel and after taking into account the legal,
financial, financing and other aspects of such unsolicited bona
fide written acquisition proposal, would result in a transaction
that is (i) more favorable, from a financial point of view,
to our stockholders than the merger with Merger Sub (after
taking into account any modifications to the terms of the merger
agreement and the merger agreed to by Medtronic and Merger Sub)
and (ii) reasonably likely to be consummated without
unreasonable delay.
Stockholder
Approval
The merger agreement requires us, as promptly as reasonably
practicable following the date of the merger agreement, to
establish a record date for, duly call, give notice of, convene
and hold a meeting of our stockholders for the purpose of
obtaining the required stockholder approval of the proposal to
adopt the merger agreement and approve the merger and to use our
reasonable best efforts to cause the meeting to occur as soon as
reasonably practicable. Unless the merger agreement is earlier
terminated in accordance with its terms (including by us in
connection with our receipt and acceptance of a superior
proposal), we are required to submit the merger agreement to our
stockholders for adoption and the merger for approval even if
our board of directors withdraws, modifies or qualifies its
recommendation that our stockholders adopt the merger agreement
and approve the merger.
Except in the limited circumstances described above in The
Merger Agreement No Solicitation of Alternative
Transactions, our board of directors is required to
recommend that our stockholders vote in favor of the adoption of
the agreement of merger and approval of the merger and we must
use our reasonable best efforts to obtain from our stockholders
the vote in favor of the adoption of the merger agreement and
approval of the merger.
Indemnification
and Insurance
Medtronic and Merger Sub have agreed that all rights to
indemnification, exculpation and advancement of expenses
existing in favor of our or our subsidiaries current or
former directors, officers, and employees as provided in our and
our subsidiaries certificate of incorporation and bylaws
and in various agreements disclosed to Medtronic before the date
of the merger agreement, as in effect on the date of the merger
agreement with respect to matters occurring at or prior to the
effective time of the merger, will survive and continue in full
force and effect for a period of not less than the applicable
statute of limitations.
The merger agreement requires us to obtain policies of
directors and officers insurance covering us and our
directors and officers for a period of six years following the
effective time. The merger agreement provides that the surviving
corporation will cause such policies to be maintained for such
period. However, neither Medtronic nor the surviving corporation
will be required to pay aggregate premiums in excess of $430,000
(less any premium paid by us prior to the effective time of the
merger) with respect to such insurance.
Employee
Matters
The merger agreement provides that:
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Medtronic will, for the twelve-month period following the
effective time of the merger, provide compensation and employee
benefits to our and our subsidiaries employees as of the
date of the
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40
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merger agreement that are substantially comparable, in the
aggregate, to those offered by Medtronic generally under its
employee benefit plans to similarly situated employees of
Medtronic;
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From and after the effective time of the merger, Medtronic will,
or will cause the surviving corporation to, cause service
rendered by our and our subsidiaries employees prior to
the effective time to be credited for purposes of determining
vesting and entitlement to benefits (other than as would result
in a duplication of benefits) under each benefit plan of
Medtronic, the surviving corporation, or any of their
subsidiaries to the same extent such service was taken into
account under the corresponding plans of ours. Employees and
their dependents will be eligible to participate in employee
benefit plans of Medtronic and any of its subsidiaries. Credit
for co-payments made and deductibles paid under our plans will
be provided under the plans of Medtronic and its subsidiaries;
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Prior to the effective time, we will provide Medtronic with a
true, complete and accurate list of all employees that have been
terminated by us from the date of the merger agreement through
the effective time. Medtronic and the surviving corporation
retain the right to terminate employment or change the place of
work, responsibilities, status or description of any employee or
group of employees, and to terminate any employee benefit plan
without establishing a replacement plan to the extent that we
would have had such a right prior to the effective time;
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No provision in the merger agreement will modify or amend any of
our employee benefit plans unless the merger agreement
explicitly states that such plan is amended. Notwithstanding the
foregoing, Medtronic will not amend, modify or terminate our
outstanding employment, retention and severance agreements and
will take all action necessary to assume our obligations under
these agreements.
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Purchase
of Auction Rate Securities
Medtronic has also agreed to purchase from us between $750,000
and $1,100,000 par value of auction rate securities owned
by us at purchase prices between approximately 86.7% and 88.2%
of the par value (plus accrued and unpaid interest) on each of
May 15, 2008, June 10, 2008, July 25, 2008,
August 23, 2008 and September 18, 2008, unless the
merger agreement has been terminated or the effective time has
occurred prior to such date. Medtronic will pay the purchase
price to us promptly following delivery of the securities to an
account designated by Medtronic and the delivery of any third
party consents or waivers required to effect the transfer and
sale. As of the date of this proxy statement, Medtronic has
completed the purchase of $1,000,000 par value of auction rate
securities at a purchase price equal to 88.2% of par value on
May 15 and the purchase of $750,000 par value of auction
rate securities at a purchase price equal to 87.7% of par value
on June 10.
Conditions
to Completion of the Merger
The obligations of each of Medtronic and Merger Sub, on the one
hand, and us, on the other hand, to complete the merger depend
on the satisfaction or waiver, on or prior to the effective time
of the merger, of a number of conditions, including:
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receipt of the required vote to adopt the merger agreement and
approve the merger by our stockholders at the special meeting;
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the absence of any order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal
restraint or prohibition preventing completion of the merger and
that no governmental entity shall have enacted or enforced any
statute, rule, regulation, order, injunction or decree
prohibiting the merger or making it illegal;
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for each party, specified levels of compliance by the other with
its representations, warranties and obligations under the merger
agreement and delivery of an executed certificate of the chief
executive officer or chief financial officer of the party
certifying the same; and
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41
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for each party, the performance or compliance, in all material
respects, of all obligations required under the merger agreement
and delivery of an executed certificate of a specified executive
officer of the party certifying the same.
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The obligation of Medtronic and Merger Sub to complete the
merger is subject to the following additional conditions:
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no material adverse effect (as defined in the merger agreement)
shall have occurred on us since the date of the merger agreement;
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the aggregate dissenting shares shall not equal or exceed 10% of
the total number of shares outstanding as of the record date for
the special meeting;
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our obligations regarding insurance and statements from option
and warrant holders shall have been satisfied;
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Medtronic shall have received final statements reflecting all
third party expenses, including unpaid amounts, from the third
parties who provided legal, accounting, investment banking,
broker, financial advisory, consulting or other services to us
in connection with the merger agreement; and
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Medtronic shall have received a pay-off letter from Lighthouse
Capital (and any other lender pursuant to debt arrangements
entered into after the date of the merger agreement) showing all
payments required to retire our indebtedness and release of all
related liens and to cancel warrants held by Lighthouse Capital
Partners (or any such other lender) as of the effective time and
providing for termination of all agreements with us.
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Termination
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the effective time of the merger,
regardless of whether our stockholders have adopted the merger
agreement and approved the merger:
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by mutual written consent of Medtronic and us;
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by either Medtronic or us, if any of the following occur:
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○
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if any court or other governmental entity takes any action
prohibiting the merger, the action has become final and
nonappealable, and the terminating party has used its reasonable
best efforts to contest the action and fulfill its obligations
to cause the merger to be completed, and is not otherwise in
material breach of the merger agreement;
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○
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if the merger shall not have occurred on or before
September 30, 2008, provided that the failure of the merger
to occur is not due to the terminating partys material
breach of any covenant or agreement in the merger agreement;
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○
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if we do not obtain the required stockholder approval in favor
of adoption of the merger agreement and approval of the merger,
although we may not terminate if we have materially breached our
non-solicitation obligations under the merger agreement;
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by Medtronic, if any of the following occur:
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if we have breached any of our representations, warranties,
covenants or agreements in the merger agreement, which breach,
either individually or in the aggregate with other breaches,
would result in the conditions to Medtronics obligation to
complete the merger not being satisfied and which is not cured
within 30 days after written notice to us or by its nature
or timing cannot be cured;
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○
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if we knowingly and materially breach our obligations under the
non-solicitation provisions of the merger agreement or our
obligation to promptly call a special meeting and use reasonable
best efforts to obtain the required stockholder approval;
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42
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○
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if our board of directors withdraws, modifies or qualifies, in a
manner adverse to Medtronic or Merger Sub, its recommendation
that our stockholders adopt the merger agreement and approve of
the merger (or publicly proposes to do so) or approves or
recommends another acquisition proposal (or publicly proposes to
do so), if we enter into an agreement relating to another
acquisition proposal or if we release a third party from or fail
to enforce to the fullest extent possible any standstill or
confidentiality provision, in each case, whether or not
permitted to do so under the merger agreement;
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if we or our subsidiaries or representatives engage in
discussions with any other person in connection with an
alternative acquisition proposal submitted in compliance with
the non-solicitation provisions of the merger agreement without
our board of directors having determined that such alternative
acquisition proposal constitutes a superior proposal under the
terms of the merger agreement, and we, our subsidiaries and our
representatives do not cease discussions within 30 business
days, subject to extension of up to 10 business days in certain
circumstances in the event of multiple acquisition proposals;
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by us, if any of the following occur:
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if Medtronic or Merger Sub has breached any of its
representations, warranties, covenants or agreements in the
merger agreement, which breach, either individually or in the
aggregate with other breaches, would result in the conditions to
our obligation to complete the merger not being satisfied and
which is not cured within 30 days after written notice to
us or by its nature or timing cannot be cured; or
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if, at any time prior to the adoption of the merger agreement
and approval of the merger by our stockholders, we determine
that a bona fide, unsolicited, written acquisition constitutes a
superior proposal, our board of directors, after taking into
account any modifications to the merger agreement agreed to by
Medtronic and Merger Sub following receipt of a notice of
superior proposal, continues to believe the acquisition proposal
constitutes a superior proposal, we enter into a definitive
agreement for the transaction contemplated by the superior
proposal on the date of the termination, and we have paid
Medtronic the $1.5 million termination fee.
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Termination
Fee
If the merger agreement is terminated, we are required to pay
Medtronic a termination fee in the following circumstances:
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if either party terminates the merger agreement because the
merger has not occurred on or before September 30, 2008
without the special meeting having been convened, an alternative
acquisition proposal has been made public and not irrevocably
withdrawn prior to such date and within 12 months after
termination of the merger agreement, we enter into an agreement
with respect to, or consummate, any alternative transaction,
then we are required to pay Medtronic a termination fee of
$1.5 million;
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if either party terminates the merger agreement because our
stockholders failed to adopt the merger agreement and approve
the merger at a meeting of our stockholders held for that
purpose (or because such approval has not been obtained by
September 30, 2008 even though such meeting has been
convened) and a competing acquisition proposal has been made
public and not irrevocably withdrawn prior to the vote at the
meeting of stockholders, then we must reimburse Medtronic for
its reasonable out-of-pocket expenses (including reasonable
legal fees and expenses) incurred in connection with the merger
on or prior to the termination date, up to $1 million; if
within 12 months after termination of the merger agreement,
we enter into an agreement with respect to, or consummate, any
alternative transaction, then we are required to pay Medtronic a
termination fee of $1.5 million, less any expenses
previously reimbursed;
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if Medtronic terminates the merger agreement because we have
(i) knowingly and materially breached our non-solicitation
obligations or our obligation to promptly convene a meeting of
our stockholders to adopt the merger agreement and approve the
merger and to use reasonable best efforts to solicit the
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requisite stockholder approval or (ii) knowingly and
materially breached our representations, warranties, covenants
or agreements under the merger agreement in a manner that would,
individually or in the aggregate, result in the failure to
satisfy the conditions to Medtronics and Merger Subs
obligations to consummate the merger and, in either case, a
competing acquisition proposal has been made known to us or our
stockholders and not irrevocably withdrawn prior to such breach
and within 12 months after termination of the merger
agreement, we enter into an agreement with respect to, or
consummate, any alternative transaction, then we are required to
pay Medtronic a termination fee of $1.5 million;
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if Medtronic terminates the merger agreement because our board
of directors withdraws, modifies or qualifies, in a manner
adverse to Medtronic or Merger Sub, its recommendation that our
stockholders adopt the merger agreement and approve the merger
(or publicly proposes to do so) or approves or recommends
another acquisition proposal (or publicly proposes to do so), or
if we enter into an agreement relating to another acquisition
proposal or release a third party from or fail to enforce to the
fullest extent possible any standstill or confidentiality
provision, in all cases, whether or not permitted to do so under
the merger agreement, then we are required to pay Medtronic a
termination fee of $1.5 million;
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if we terminate the merger agreement in connection with our
receipt and acceptance of a superior proposal, under the
circumstances described under The Merger
Agreement Termination, above, then we are
required to pay Medtronic a termination fee of $1.5 million;
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if Medtronic terminates the merger agreement because we, our
subsidiaries and our representatives have not terminated
discussions in connection with a competing acquisition proposal
within 30 business days (subject to up to a 10 business day
extension in the event of multiple acquisition proposals), under
the circumstances described under The Merger
Agreement Termination, above and any
alternative transaction is consummated or we enter into any
acquisition agreement within 12 months of the termination
date, then we are required to pay Medtronic a termination fee of
$1.5 million.
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For the purposes of the above termination fee discussion,
alternative transaction means any transaction of the
type referred to in the definition of a competing
acquisition proposal, except that references to
15% in that definition shall be replaced by
50%.
Expenses
Whether or not the merger is completed, the parties must pay
their own costs and expenses incurred in connection with the
merger, except that we must reimburse Medtronic for up to
$1 million of fees and expenses if we fail to obtain the
requisite stockholder approval, as described under The
Merger Agreement Termination Fee above.
Amendment,
Extension and Waiver
At any time prior to the completion of the merger, the merger
agreement may be amended by mutual consent of the parties in
writing. However, after the merger agreement has been adopted
and the merger has been approved by our stockholders, there may
not be any amendment which decreases the merger consideration or
adversely affects the rights of our stockholders without our
stockholders further approval. At any time prior to the
completion of the merger, each party may (i) extend the
time for the performance of any of the obligations or acts of
the other parties to the merger agreement, (ii) waive any
inaccuracies in the representations and warranties by any other
applicable party, or (iii) waive compliance by any party
with any of the agreement or conditions contained in the merger
agreement. Any such extension or waiver by a party must be in
writing signed on behalf of such party.
44
PROPOSAL TO
ADJOURN THE SPECIAL MEETING
The
Adjournment Proposal
If at the special meeting of stockholders the number of shares
of our common stock represented and voting in favor of adoption
of the merger agreement and approval of the merger is
insufficient to adopt that proposal under the Delaware General
Corporation Law, we intend to move to adjourn the special
meeting in order to enable our board of directors to solicit
additional proxies in respect of the proposal. In that event, we
will ask our stockholders to vote only upon the adjournment
proposal, and not the proposal regarding adoption of the merger
agreement and approval of the merger.
In this proposal, we are asking you to authorize the holder of
any proxy solicited by our board of directors to vote in favor
of granting discretionary authority to the proxy or
attorney-in-fact to adjourn the special meeting to another time
and place for the purpose of soliciting additional proxies. If
the stockholders approve the adjournment proposal, we could
adjourn any adjourned session of the special meeting and use the
additional time to solicit additional proxies, including the
solicitation of proxies from stockholders that have previously
voted. Among other things, approval of the adjournment proposal
could mean that, even if we had received proxies representing a
sufficient number of votes against adoption of the merger
agreement and approval of the merger to defeat that proposal, we
could adjourn the special meeting without a vote on the merger
agreement and seek to convince the holders of those shares to
change their votes to vote in favor of adoption of the merger
agreement and approval of the merger.
Vote
Required and Board Recommendation
If a quorum is present, the vote of the holders of a majority of
the stock having voting power present in person or represented
by proxy may adjourn the meeting. The presence at the special
meeting, in person or by proxy, of the holders of a majority of
the outstanding shares of our common stock will constitute a
quorum for the purposes of the special meeting. If a quorum is
not present at the meeting, then either the chairman of the
meeting, or the holders of a majority of the shares of stock
entitled to vote who are present, in person or by proxy, may
adjourn the meeting. No proxy that is specifically marked
AGAINST adoption of the merger agreement and
approval of the merger will be voted in favor of the adjournment
proposal, unless it is specifically marked FOR the
adjournment proposal.
Our board
of directors recommends that you vote FOR the
adjournment proposal.
45
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of Restore Medicals common stock as
of June 1, 2008, by (i) each person who is known by
Restore Medical to own beneficially more than 5% of the
outstanding common stock of Restore Medical, (ii) each
director and executive officer of Restore Medical, and
(iii) all directors and executive officers of Restore
Medical as a group. Unless otherwise noted, the stockholders
listed in the table have sole voting and investment power with
respect to the shares of common stock owned by them and their
address is
c/o Restore
Medical, Inc., 2800 Patton Road, St. Paul, Minnesota 55113. The
number of shares of Restore Medical common stock outstanding on
June 1, 2008 was 15,737,864.
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Amount and
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Nature of Beneficial
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Percent of
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Name of Beneficial Owner
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Ownership(1)
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Class
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MPM Capital Funds
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4,435,084
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(3)(4)
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27.4
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Venturi I, LLC
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1,602,306
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(5)
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10.2
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Bessemer Venture Partners
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1,379,308
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(6)
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8.8
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Magnetar Financial LLC
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1,239,125
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(7)
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7.9
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General Electric Pension Trust
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872,069
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(8)
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5.5
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Putnam Investments
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862,069
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(9)
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5.5
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J. Robert Paulson, Jr.
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367,639
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(2)
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2.3
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Christopher R. Geyen
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*
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Craig G. Palmer
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*
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David L. Bremseth
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*
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Michael R. Kujak
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*
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Luke Evnin, Ph.D.
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4,472,584
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(2)(10)
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27.6
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Mark B. Knudson, Ph.D.
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1,692,401
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(2)(11)
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10.7
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Stephen Kraus
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37,500
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(2)
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*
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Howard Liszt
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42,500
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(2)
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*
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Richard Nigon
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45,000
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(2)
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*
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John Schulte
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77,500
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(2)
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*
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All directors and executive officers as a group (13 persons)
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6,796,602
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(12)
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40.1
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*
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The percentage of shares of common stock beneficially owned does
not exceed one percent of the outstanding shares of common stock.
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(1)
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For purposes of this table, a person or group of persons is
deemed to have beneficial ownership of any shares of
common stock which that person has the right to acquire within
60 days following June 1, 2008. For purposes of
computing the percentage of outstanding shares of common stock
held by each person or group of persons named above, any shares
which that person or persons has or have the right to acquire
within 60 days following June 1, 2008, is deemed to be
outstanding, but is not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person.
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(2)
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All options and warrants to purchase shares of Restore Medical
common stock that are outstanding immediately prior to the
merger will be canceled in exchange for a cash payment equal to
the number of outstanding options or warrants multiplied by the
excess of the merger consideration per share over the exercise
price of the option or warrant. Shares of common stock
underlying options or warrants exercisable currently or within
60 days of June 1, 2008 are deemed outstanding for
computing the percentage beneficially owned by the person
holding such options, but are not deemed outstanding for
computing the percentage beneficially owned by any other person.
Includes the following shares subject to options:
Mr. Paulson, 331,869 shares; Dr. Evnin,
37,500 shares; Dr. Knudson, 82,500 shares;
Mr. Kraus, 37,500 shares; Mr. Liszt,
37,500 shares; Mr. Nigon, 45,000 shares and
Mr. Schulte, 77,500 shares.
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46
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(3)
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This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 9, 2007 by
MPM BioVentures II-QP, L.P. and a group of affiliated entities,
which reported sole voting and dispositive power and shared
voting and dispositive power as of December 31, 2006, as
follows: (i) MPM BioVentures II-QP, L.P. (BV
QP), sole voting and dispositive power as to
2,985,706 shares; (ii) MPM BioVentures II, L.P.
(BV II), sole voting and dispositive power as to
329,524 shares; (iii) MPM BioVentures GmbH &
Co. Parallel-Beteiligungs KG (BV KG), sole voting
and dispositive power as to 1,051,115 shares; MPM Asset
Management Investors 2000B LLC (AM 2000), sole
voting and dispositive power as to 68,739 shares;
(iv) Ansbert Gadicke, shared voting and dispositive power
as to 4,435,084 shares and (v) Luke Evnin, shared
voting and dispositive power as to 4,435,084 shares. MPM
Asset Management II, L.P. (AM II LP) and MPM Asset
Management II LLC (AM II LLC) are the direct
and indirect general partners of BV QP, BV II and BV KG.
Messrs. Gadicke and Evnin are members and investment
managers of Asset 2000 and AM II LLC and each disclaims
beneficial ownership of the shares owned by AM II LLC and its
affiliates except to the extent of their proportionate pecuniary
interest therein. The address for each of these affiliated
entities is
c/o MPM
Capital L.P., The John Hancock Tower, 200 Clarendon Street,
54
th
Floor, Boston, MA 02116.
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(4)
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Includes warrants exercisable within 60 days of
June 1, 2008 as follows: (i) 306,986 by BV QP.;
(ii) 33,880 by BV II; (iii) 108,073 by BV KG and
(iv) 7,067 by Asset 2000.
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(5)
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Consists of 1,560,141 shares and warrants to purchase
42,165 shares. Mark B. Knudson, the chairman of our board
of directors, holds voting and/or dispositive power over the
shares held by Venturi I, LLC. Dr. Knudson disclaims
beneficial ownership of the shares held by Venturi I, LLC
except to the extent of his pecuniary interest therein.
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(6)
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This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 9, 2007 by
Deer VI & Co, LLC (Deer VI), Bessemer
Venture Partners VI L.P. (BVP), Bessemer Venture
Partners Co-Investment L.P. (BVPCI) and Bessemer
Venture Partners VI Institutional L.P. (BVPI), which
reported shared voting and dispositive power as of
December 31, 2006 as to 1,379,308 shares. As of
December 31, 2006, BVP was the record holder of
1,018,966 shares of common stock, BVPCI was the record
holder of 343,102 shares of common stock and BVPI was the
record holder of 17,240 shares of common stock. By virtue
of their relationship as affiliated entities, whose general
partner has overlapping individual executive managers, as the
case may be, each of BVP, BVPCI and BVPI may be deemed to
beneficially own and share the power to direct the disposition
and vote of the aggregate 1,379,308 shares held by BVP,
BVPCI and BVPI. Deer VI, as sole general partner of BVP, BVPCI
and BVPI, may also be deemed to beneficially own these shares.
Each reporting person disclaims beneficial ownership of such
shares except to the extent of their pecuniary interest, if any.
The address of each of these affiliated entities is
c/o Bessemer
Venture Partners, 1865 Palmer Avenue, Larchmont, NY 10583.
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(7)
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This information is based on Amendment No. 1 to a
Schedule 13G field with the Securities and Exchange
Commission on February 13, 2008 by Magnetar Financial LLC,
a registered investment advisor, and a group of affiliated
entities, which reported voting and dispositive power as of
December 31, 2007, as follows: (i) Magnetar Financial
LLC, shared voting and dispositive power as to
747,398 shares held for the account of Magnetar Capital
Master Fund (MCMF) and (ii) Magnetar Capital
Partners L.P., Supernova Management LLC and Alec N. Litowitz,
shared voting and dispositive power as to 1,239,125 shares,
consisting of 747,398 shares held for the account of MCMF,
2,320 shares held for the account of Magnetar SGR Fund,
Ltd, 47,634 shares held for the account of Magnetar SGR
Fund, LP and 441,773 shares held for the account of certain
managed accounts (the Managed Accounts). Magnetar
Financial LLC serves as investment advisor to MCMF and in such
capacity exercises voting and investment power over the shares
held for the account of MCMF. Magnetar Investment Management, a
registered investment advisor, serves as investment advisor to
the Managed Accounts, Magnetar SGR Fund, Ltd and Magetar SGR
Fund, LP and in such capacity exercises voting and investment
power over the shares held by such accounts. Supernova
Management is the general partner of Magnetar Capital Partners
and Mr. Litowitz is the manager of Supernova Management.
The address for each of these affiliated entities is 1603
Orrington Avenue,
13
th
Floor, Evanston, IL 60201.
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47
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(8)
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This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 13, 2008 by
GE Asset Management Incorporated, a registered investment
advisor and wholly owned subsidiary of General Electric Company,
which reported sole voting and dispositive power as of
December 31, 2007 to 872,069 shares. General Electric
Company disclaims beneficial ownership of the shares held by GE
Asset Management Incorporated. The address for GE Asset
Management Incorporated is 3001 Summer Street, Stamford, CT
06905 and the address for General Electric Company is
3135 Easton Turnpike, Fairfield, CT 06431.
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(9)
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This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 1, 2008 by
Putnam, LLC d/b/a Putnam Investments (PI), a parent
holding company to Putnam Investment Management, LLC
(PIM) and The Putnam Advisory Company, LLC
(PAC), each wholly owned registered investment
advisors, which reported shared dispositive power as of
December 31, 2007 to 862,069 shares. PIM is the
investment advisor to the Putnam family of mutual funds and PAC
is the investment advisor to Putnams institutional
clients. PIM and PAC have dispositive power over the shares as
investment managers, but each of the mutual funds trustees
have voting power over the shares held by each fund and PAC has
shared voting power over the shares held by the institutional
clients. PI disclaims beneficial ownership of the shares
held by PIM and PAC and states that it does not have voting or
dispositive power over these shares. The address for PI, PIM and
PAC is One Post Office Square, Boston, MA 02109.
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(10)
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Consists of 3,979,078 shares and warrants to purchase
456,006 shares owned by MPM Capital Funds described in
Footnotes (3) and (4) and options owned by
Dr. Evnin described in Footnote (2). As described in
Footnote (3), Dr. Evnin, one of the members of our Board of
Directors, holds shared voting and/or dispositive power over the
shares held by BV QP, BV II, BV KG and Asset 2000.
Dr. Evnin disclaims beneficial ownership of the shares
owned by the MPM Capital Funds except to the extent of his
proportionate pecuniary interest therein.
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(11)
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Consists of 7,185 shares, warrants to purchase
410 shares and options owned by Dr. Knudson described
in Footnote (2). Also consists of the 1,560,141 shares and
warrants to purchase 42,165 shares owned by Venturi I,
LLC described in Footnote (5). Dr. Knudson, the Chairman of
our Board of Directors, holds voting and/or dispositive power
over the shares held by Venturi I, LLC. Dr. Knudson
disclaims beneficial ownership of the shares owned by Venturi I
LLC except to the extent of his proportionate pecuniary interest
therein.
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(12)
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Includes 1,209,428 shares of common stock issuable upon
exercise of options and warrants currently exercisable or
exercisable within 60 days of June 1, 2008, inclusive
of the options exercisable as described in Footnote (2).
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48
DISSENTERS
RIGHTS OF APPRAISAL
Under Delaware law, if you do not wish to accept the cash
payment provided for in the merger agreement, you have the right
to dissent from the merger and to receive payment in cash for
the fair value of your Restore Medical common stock. Restore
Medical stockholders electing to exercise appraisal rights must
comply with the provisions of Section 262 of the Delaware
General Corporation Law in order to perfect their rights.
Restore Medical will require strict compliance with the
statutory procedures. A copy of Section 262 is attached to
this proxy statement as
Appendix C
.
The following discussion is not a complete statement of the
law pertaining to appraisal rights under Section 262 and is
qualified in its entirety by the full text of Section 262
which is attached to this proxy statement as
Appendix C.
All references in Section 262 and in this summary to a
stockholder are to the record holder of the shares
of our common stock as to which appraisal rights are asserted. A
person having a beneficial interest in shares of our common
stock held of record in the name of another person, such as a
broker, fiduciary, depositary or other nominee, must act
promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect
appraisal rights.
Section 262 requires that stockholders be notified not less
than 20 days before the special meeting to vote on the
merger that appraisal rights will be available. A copy of
Section 262 must be included with such notice. This proxy
statement constitutes Restore Medicals notice to its
stockholders of the availability of appraisal rights in
connection with the merger in compliance with the requirements
of Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of
Section 262 contained in
Appendix C
since
failure to timely and properly comply with the requirements of
Section 262 will result in the loss of your appraisal
rights under Delaware law. Merely voting against adoption of the
merger agreement and against approval of the merger will not
satisfy the notice requirements under Delaware law with respect
to appraisal rights.
If you elect to demand appraisal of your shares, you must
satisfy each of the following conditions:
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You must deliver to Restore Medical a written demand for
appraisal of your shares before the vote with respect to the
merger is taken. This written demand for appraisal must be in
addition to and separate from any proxy or vote abstaining from
or voting against adoption of the merger agreement and approval
of the merger. Voting against or failing to vote for adoption of
the merger agreement and approval of the merger by itself does
not constitute a demand for appraisal within the meaning of
Section 262. Failure to vote against adoption of the merger
agreement and approval of the merger will not constitute waiver
of your appraisal rights.
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You must not vote in favor of adoption of the merger agreement
and approval of the merger. A vote in favor of the adoption of
the merger agreement or in favor of the merger, by proxy or in
person, will constitute a waiver of your appraisal rights in
respect of the shares so voted and will nullify any previously
filed written demands for appraisal.
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If you fail to comply with either of these conditions and the
merger is completed, you will be entitled to receive the cash
payment for your shares of Restore Medical common stock as
provided for in the merger agreement, but you will have no
appraisal rights with respect to your shares of Restore Medical
common stock.
All demands for appraisal should be addressed to the Corporate
Secretary at Restore Medical, Inc., 2800 Patton Road, St.
Paul, Minnesota 55113, and must be delivered to Restore Medical
before the vote on the merger is taken at the special meeting,
and should be executed by, or on behalf of, the record holder of
the shares of Restore Medical common stock. The demand must
reasonably inform Restore Medical of the identity of the
stockholder and the intention of the stockholder to demand
appraisal of his, her or its shares.
To be effective, a demand for appraisal by a holder of Restore
Medical common stock must be made by, or in the name of, such
stockholder, fully and correctly, as the stockholders name
appears on his or her stock certificate(s) and cannot be made by
the beneficial owner if he or she does not also hold the shares
of record.
49
The beneficial holder must, in such cases, have the record
holder submit the required demand in respect of those shares.
If shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, execution of a demand for
appraisal should be made in that capacity; and if the shares are
owned of record by more than one person, as in a joint tenancy
or tenancy in common, the demand should be executed by or for
all joint owners. An authorized agent, including an authorized
agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must
identify the record owner or owners and expressly disclose the
fact that, in executing the demand, he or she is acting as agent
for the record owner. A record owner, such as a broker, who
holds shares as a nominee for others, may exercise his or her
right of appraisal with respect to the shares held for one or
more beneficial owners, while not exercising this right for
other beneficial owners. In that case, the written demand should
state the number of shares as to which appraisal is sought.
Where no number of shares is expressly mentioned, the demand
will be presumed to cover all shares held in the name of the
record owner.
If you hold your shares of Restore Medical common stock in a
brokerage account or in other nominee form and you wish to
exercise appraisal rights, you should consult with your broker
or the other nominee to determine the appropriate procedures for
the making of a demand for appraisal by the nominee.
Within 10 days after the effective time of the merger, the
surviving corporation must give written notice that the merger
has become effective to each Restore Medical stockholder who has
properly filed a written demand for appraisal and who did not
vote in favor of the merger. At any time within 60 days
after the effective time of the merger, any stockholder who has
demanded an appraisal but who has not commenced an appraisal
proceeding or joined that proceeding as a named party, has the
right to withdraw the demand and to accept the cash payment
specified by the merger agreement for his or her shares of
Restore Medical common stock.
Within 120 days after the effective time of the merger,
either the surviving corporation or any stockholder who has
complied with the requirements of Section 262 may file a
petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares held by all
stockholders entitled to appraisal. In addition, a beneficial
owner of shares as to which demand has been properly made and
not effectively withdrawn, where such shares are held in a
voting trust or by a nominee on behalf of such beneficial owner,
may, in his or her own name, file such a petition. The surviving
corporation has no obligation to file such a petition in the
event there are dissenting stockholders. Accordingly, the
failure of a stockholder to file such a petition within the
period specified could nullify the stockholders previously
written demand for appraisal. You will not receive notice
specifying the deadline by which you must file such petition,
and you must calculate the deadline by counting 120 days
from the time of effectiveness of the merger. As described
above, the surviving corporation will notify you of the
effective time of the merger.
Within 120 days after the effective time of the merger, any
stockholder who has complied with the provisions of Section 262
to that point in time may receive from us, upon written request,
a statement setting forth the aggregate number of shares not
voted in favor of adoption of the merger agreement and with
respect to which we have received demands for appraisal, and the
aggregate number of holders of those shares. We must mail this
statement to the stockholder within 10 days after receipt of the
written request or within 10 days after expiration of the period
for delivery of demands for appraisals under Section 262,
whichever is later. In addition, a beneficial owner of shares as
to which demand has been properly made and not effectively
withdrawn, where such shares are held in a voting trust or by a
nominee on behalf of such beneficial owner, may, in his or her
own name, request such written statement from the company.
If a stockholder or beneficial owner files a petition for
appraisal in a timely manner, service of a copy thereof shall be
made upon the surviving corporation, and the surviving
corporation will then be obligated, within 20 days after
receiving a copy of the petition, to file with the Register in
Chancery a duly verified list containing the names and addresses
of all stockholders who have demanded an appraisal of their
shares and with whom an agreement as to the value of their
shares has not been reached.
50
After notice to dissenting stockholders, the Court of Chancery
is empowered to conduct a hearing upon the petition, and to
determine those stockholders who have complied with
Section 262 and who have become entitled to the appraisal
rights provided thereby. The Court of Chancery may require the
stockholders who have demanded payment for their shares to
submit their stock certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with that direction, the
Chancery Court may dismiss the proceedings as to that
stockholder.
After determination of the stockholders entitled to appraisal of
their shares of Restore Medical common stock, the Court of
Chancery will conduct the appraisal hearing in accordance with
the courts rules. The appraisal proceeding is a litigation
proceeding. The court will appraise the shares at their
fair value, exclusive of any element of value
arising from the accomplishment or expectation of the merger,
together with interest, if any, to be paid on the amount
determined to be fair value. In determining fair value, the
Court of Chancery is required to take into account all relevant
factors. Unless the court in its discretion determines otherwise
for good cause shown, interest from the effective date of the
merger through the date of payment shall be compounded quarterly
and shall accrue at 5% over the Federal Reserve discount rate
(including any surcharge) as established from time to time
during the period between the effective date of the merger and
the date of payment. You should be aware that the fair value of
your shares as determined under Section 262 could be more, the
same, or less than the value that you are entitled to receive
under the terms of the merger agreement.
Upon application by the surviving corporation or by any
stockholder entitled to participate in the appraisal proceeding,
the Court of Chancery may, in its discretion, proceed to trial
upon the appraisal prior to the final determination of the
stockholders entitled to an appraisal. Any stockholder whose
name appears on the verified list and who has submitted his or
her certificates of stock to the Register in Chancery, if such
is required, may participate fully in all proceedings until it
is finally determined that he or she is not entitled to
appraisal rights. When the fair value is determined, the Court
of Chancery will direct the payment of such value, with interest
thereon accrued during the pendency of the proceeding, if the
Court of Chancery so determines, to the stockholders entitled to
receive the same, upon surrender by such holders of the
certificates representing those shares.
Costs of the appraisal proceeding may be imposed upon the
surviving corporation and the stockholders participating in the
appraisal proceeding by the Court of Chancery as the Court of
Chancery deems equitable in the circumstances. Upon the
application of a stockholder, the Court of Chancery may order
all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, without
limitation, reasonable attorneys fees and the fees and
expenses of experts, to be charged pro rata against the value of
all shares entitled to appraisal.
Any stockholder who had demanded appraisal rights will not,
after the effective time of the merger, be entitled to vote
shares subject to that demand for any purpose or to receive
payments of dividends or any other distribution with respect to
those shares, other than with respect to payment as of a record
date prior to the effective time of the merger; however, if no
petition for appraisal is filed within 120 days after the
effective time of the merger, or if the stockholder delivers a
written withdrawal of his or her demand for appraisal and an
acceptance of the merger within 60 days after the effective
time of the merger, then the right of that stockholder to
appraisal will cease and that stockholder will be entitled to
receive the cash payment for shares of his, her or its Restore
Medical common stock pursuant to the merger agreement. Any
withdrawal of a demand for appraisal made more than 60 days
after the effective time of the merger may only be made with the
written approval of the surviving corporation and must, to be
effective, be made within 120 days after the effective time
of the merger. No appraisal proceeding in the Court of Chancery
will be dismissed as to any stockholder without the approval of
the Court of Chancery, and such approval may be subject to such
conditions as the Court of Chancery deems just. This shall not,
however, affect the right of a stockholder who has not commenced
an appraisal proceeding as to such stockholders shares, or
joined such an appraisal proceeding as a named party, to
withdraw his or her demand for appraisal within 60 days after
the effective date of the merger and to accept the merger
consideration. If the stockholder fails to perfect, effectively
withdraws or otherwise loses the appraisal right, the
stockholders shares will be converted into the right to
receive the merger consideration.
51
In view of the complexity of Section 262, Restore Medical
stockholders and beneficial owners who may wish to dissent from
the merger and pursue appraisal rights should consult their
legal advisors.
OTHER
MATTERS
You should rely only on the information contained in this proxy
statement or incorporated herein by reference to vote your
shares at the special meeting. Restore Medical has not
authorized anyone to provide you with information that is
different from what is contained in this proxy statement. This
proxy statement is dated June 11, 2008. You should not
assume that the information contained in this proxy statement is
accurate as of any date other than that date, and the mailing of
this document to stockholders is not intended to create any
implication to the contrary.
We intend to hold the 2008 annual stockholder meeting only if
the merger is not completed. If it is held, the date of the 2008
annual meeting will be more than 30 days after the
anniversary date of last years annual meeting, which was
held on May 15, 2007. Therefore, the deadline for inclusion
of stockholder proposals in our proxy statement will be a
reasonable time before we begin to print and mail our proxy
materials. Stockholder proposals must be in writing and comply
with the requirements of
Rule 14a-8
of the Securities Exchange Act of 1934, as amended. Stockholders
are also advised to review our bylaws, which contain additional
requirements with respect to advance notice of stockholder
proposals. All stockholder proposals should be addressed to
Corporate Secretary, Restore Medical, 2800 Patton Road, St.
Paul, Minnesota 55113.
The board of directors of Restore Medical does not intend to
bring before the meeting any matters other than those set forth
herein, and has no present knowledge that any other matters will
or may be brought before the meeting by others. If, however, any
other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of proxy to
vote the proxies in accordance with their judgment.
WHERE YOU
CAN FIND MORE INFORMATION
Restore Medical files annual, quarterly and current reports,
proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information
Restore Medical files at the SECs public reference room in
Washington D.C. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Restore
Medicals public filings are also available to the public
from document retrieval services, at the Internet website
maintained by the SEC at
www.sec.gov
and under the
Investor Relations tab on Restore Medicals
website at
www.restoremedical.com.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF
A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR
FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN SUCH
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT. THIS PROXY STATEMENT IS DATED JUNE 11,
2008. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT
DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS
DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
52
Appendix A
AGREEMENT
AND PLAN OF MERGER
AMONG
MEDTRONIC, INC.,
MRM MERGER CORPORATION
and
RESTORE MEDICAL, INC.
Dated as of April 22, 2008
Table of
Contents
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Page
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Article I THE MERGER
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A-1
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Section 1.01.
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The Merger
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A-1
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Section 1.02.
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Consummation of the Merger
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A-1
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Section 1.03.
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Effects of the Merger
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A-2
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Section 1.04.
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Certificate of Incorporation and Bylaws
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A-2
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Section 1.05.
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Directors and Officers
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A-2
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Section 1.06.
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Conversion of Shares
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A-2
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Section 1.07.
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Conversion of Common Stock of Merger Sub
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A-2
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Section 1.08.
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Withholding Taxes
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A-2
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Section 1.09.
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Subsequent Actions
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A-2
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Article II DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
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A-3
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Section 2.01.
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Dissenting Shares
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A-3
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Section 2.02.
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Payment for Shares
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A-3
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Section 2.03.
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Closing of the Companys Transfer Books
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A-4
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Section 2.04.
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Existing Stock Options
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A-4
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Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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A-5
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Section 3.01.
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Organization and Qualification
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A-5
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Section 3.02.
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Capitalization
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A-5
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Section 3.03.
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Authority for this Agreement; Board Action
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A-6
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Section 3.04.
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Consents and Approvals; No Violation
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A-7
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Section 3.05.
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Reports; Financial Statements
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A-7
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Section 3.06.
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Absence of Certain Changes
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|
A-9
|
|
Section 3.07.
|
|
Proxy Statement
|
|
|
A-9
|
|
Section 3.08.
|
|
Brokers; Certain Expenses
|
|
|
A-9
|
|
Section 3.09.
|
|
Employee Benefit Matters/Employees
|
|
|
A-9
|
|
Section 3.10.
|
|
Litigation
|
|
|
A-12
|
|
Section 3.11.
|
|
Tax Matters
|
|
|
A-12
|
|
Section 3.12.
|
|
Compliance with Law; No Default; Permits
|
|
|
A-13
|
|
Section 3.13.
|
|
Environmental Matters
|
|
|
A-14
|
|
Section 3.14.
|
|
Intellectual Property
|
|
|
A-15
|
|
Section 3.15.
|
|
Real Property
|
|
|
A-16
|
|
Section 3.16.
|
|
Material Contracts
|
|
|
A-16
|
|
Section 3.17.
|
|
Regulatory Compliance
|
|
|
A-18
|
|
Section 3.18.
|
|
Insurance
|
|
|
A-20
|
|
Section 3.19.
|
|
Customers and Suppliers
|
|
|
A-20
|
|
Section 3.20.
|
|
Questionable Payments
|
|
|
A-20
|
|
Section 3.21.
|
|
Related Party Transactions
|
|
|
A-20
|
|
Section 3.22.
|
|
Opinion
|
|
|
A-20
|
|
Section 3.23.
|
|
Required Vote of Company Stockholders
|
|
|
A-21
|
|
Section 3.24.
|
|
State Takeover Statutes Inapplicable; Rights Agreement
|
|
|
A-21
|
|
|
|
|
|
|
|
|
ii
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
|
|
|
A-21
|
|
Section 4.01.
|
|
Organization and Qualification
|
|
|
A-21
|
|
Section 4.02.
|
|
Authority for this Agreement
|
|
|
A-21
|
|
Section 4.03.
|
|
Proxy Statement
|
|
|
A-21
|
|
Section 4.04.
|
|
Consents and Approvals; No Violation
|
|
|
A-21
|
|
Section 4.05.
|
|
Litigation
|
|
|
A-22
|
|
Section 4.06.
|
|
Interested Stockholder
|
|
|
A-22
|
|
Section 4.07.
|
|
Sufficient Funds
|
|
|
A-22
|
|
Section 4.08.
|
|
Brokers
|
|
|
A-22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Article V COVENANTS
|
|
|
A-22
|
|
Section 5.01.
|
|
Conduct of Business of the Company
|
|
|
A-22
|
|
Section 5.02.
|
|
No Solicitation
|
|
|
A-24
|
|
Section 5.03.
|
|
Access to Information
|
|
|
A-26
|
|
Section 5.04.
|
|
Stockholder Approval
|
|
|
A-27
|
|
Section 5.05.
|
|
Reasonable Best Efforts
|
|
|
A-27
|
|
Section 5.06.
|
|
Indemnification and Insurance
|
|
|
A-28
|
|
Section 5.07.
|
|
Employee Matters
|
|
|
A-29
|
|
Section 5.08.
|
|
Takeover Laws
|
|
|
A-30
|
|
Section 5.09.
|
|
Proxy Statement
|
|
|
A-30
|
|
Section 5.10.
|
|
Notification of Certain Matters
|
|
|
A-31
|
|
Section 5.11.
|
|
Securityholder Litigation
|
|
|
A-31
|
|
Section 5.12.
|
|
Subsequent Filings
|
|
|
A-31
|
|
Section 5.13.
|
|
Pending Litigation
|
|
|
A-31
|
|
Section 5.14.
|
|
Press Releases
|
|
|
A-31
|
|
Section 5.15.
|
|
Rule 16b-3
|
|
|
A-31
|
|
Section 5.16.
|
|
Stock Options and Warrants
|
|
|
A-31
|
|
Section 5.17.
|
|
Purchase of Auction Rate Securities
|
|
|
A-32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Article VI CONDITIONS TO CONSUMMATION OF THE MERGER
|
|
|
A-32
|
|
Section 6.01.
|
|
Conditions to Each Partys Obligation To Effect the Merger
|
|
|
A-32
|
|
Section 6.02.
|
|
Conditions to Obligations of Parent and Merger Sub
|
|
|
A-32
|
|
Section 6.03.
|
|
Conditions to Obligations of the Company
|
|
|
A-33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Article VII TERMINATION; AMENDMENT; WAIVER
|
|
|
A-33
|
|
Section 7.01.
|
|
Termination
|
|
|
A-33
|
|
Section 7.02.
|
|
Effect of Termination
|
|
|
A-34
|
|
Section 7.03.
|
|
Fees and Expenses
|
|
|
A-35
|
|
Section 7.04.
|
|
Amendment
|
|
|
A-36
|
|
Section 7.05.
|
|
Extension; Waiver; Remedies
|
|
|
A-36
|
|
|
|
|
|
|
|
|
iii
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Article VIII MISCELLANEOUS
|
|
|
A-36
|
|
Section 8.01.
|
|
Representations and Warranties
|
|
|
A-36
|
|
Section 8.02.
|
|
Entire Agreement; Assignment
|
|
|
A-37
|
|
Section 8.03.
|
|
Enforcement of the Agreement; Jurisdiction
|
|
|
A-37
|
|
Section 8.04.
|
|
Notices
|
|
|
A-38
|
|
Section 8.05.
|
|
Governing Law
|
|
|
A-39
|
|
Section 8.06.
|
|
Descriptive Headings
|
|
|
A-39
|
|
Section
8.07.
|
|
Parties in Interest
|
|
|
A-39
|
|
Section 8.08.
|
|
Counterparts
|
|
|
A-39
|
|
Section 8.09.
|
|
Certain Definitions
|
|
|
A-39
|
|
Section 8.10.
|
|
Interpretation
|
|
|
A-41
|
|
iv
Glossary
of Defined Terms
|
|
|
Defined Terms
|
|
Defined in Section
|
|
409A Authorities
|
|
Section 3.09(p)
|
Acquisition Proposal
|
|
Section 5.02(g)
|
Affiliate
|
|
Section 8.09(a)
|
Aggregate Consideration
|
|
Section 8.09(k)
|
Agreement
|
|
Preamble
|
AJCA
|
|
Section 3.09(p)
|
Alternative Per Share Consideration
|
|
Section 8.09(k)
|
Alternative Transaction
|
|
Section 7.03(b)
|
Associate
|
|
Section 8.09(a)
|
beneficial ownership
|
|
Section 8.09(b)
|
Book-Entry Shares
|
|
Section 2.02(b)
|
Business Day
|
|
Section 8.09(c)
|
Certificates
|
|
Section 2.02(b)
|
Closing
|
|
Section 1.02
|
Code
|
|
Section 1.08
|
Company
|
|
Preamble
|
Company Acquisition Agreement
|
|
Section 7.03(b)(i)
|
Company Employees
|
|
Section 5.07(a)
|
Company Financial Advisor
|
|
Section 3.08
|
Company Partner
|
|
Section 3.17(b)
|
Company SEC Reports
|
|
Section 3.05(a)
|
Company Securities
|
|
Section 3.02(a)
|
Confidentiality Agreement
|
|
Section 3.03(b)
|
Corporation Law
|
|
Recitals
|
Disclosure Letter
|
|
Article III
|
Dissenting Shares
|
|
Section 2.01
|
Effective Time
|
|
Section 1.02
|
End Date
|
|
Section 8.09(d)
|
Environmental Laws
|
|
Section 3.13(d)(i)
|
Environmental Liabilities
|
|
Section 3.13(d)(ii)
|
Environmental Permits
|
|
Section 3.13(b)
|
ERISA
|
|
Section 3.09(a)
|
ERISA Affiliate
|
|
Section 3.09(c)
|
Exchange Act
|
|
Section 3.04
|
Existing Stock Options
|
|
Section 2.04(a)
|
Existing Warrants
|
|
Section 2.04(b)
|
FDA
|
|
Section 3.17(a)
|
FDCA
|
|
Section 3.17(f)
|
Fee
|
|
Section 8.09(e)
|
Foreign Antitrust Laws
|
|
Section 5.05(a)
|
GAAP
|
|
Section 3.05(b)
|
Governmental Entity
|
|
Section 3.04
|
Hazardous Materials
|
|
Section 3.13(d)(iii)
|
HSR Act
|
|
Section 5.05(a)
|
Indemnified Person
|
|
Section 5.06(a)
|
Intellectual Property
|
|
Section 3.14(a)
|
Investigation
|
|
Section 3.10(b)
|
v
|
|
|
Defined Terms
|
|
Defined in Section
|
|
knowledge
|
|
Section 8.09(f)
|
Laws
|
|
Section 3.12
|
Material Adverse Effect
|
|
Section 8.09(g)
|
Material Contract
|
|
Section 3.16(a)
|
Medical Device
|
|
Section 3.17(f)
|
Merger
|
|
Section 1.01
|
Merger Consideration
|
|
Section 8.09(j)
|
Merger Sub
|
|
Preamble
|
Nonqualified Deferred Compensation Plan
|
|
Section 3.09(p)
|
Notice of Superior Proposal
|
|
Section 5.02(e)
|
Parent
|
|
Preamble
|
Parent Benefit Plan
|
|
Section 5.07(b)
|
Parent Expenses
|
|
Section 7.03(b)(ii)
|
Paying Agent
|
|
Section 2.02(a)
|
Payment Fund
|
|
Section 2.02(a)
|
PBGC
|
|
Section 3.09(c)
|
Permits
|
|
Section 3.12
|
Person
|
|
Section 8.09(h)
|
Plans
|
|
Section 3.09(a)
|
Potential Acquirer
|
|
Section 5.02(b)
|
Preferred Stock
|
|
Section 3.02(a)
|
Preliminary Proxy Statement
|
|
Section 5.09
|
Proceeding
|
|
Section 3.17(i)
|
Program
|
|
Section 3.17(i)
|
Proxy Statement
|
|
Section 3.07
|
Real Property Leases
|
|
Section 3.15(b)
|
Release
|
|
Section 3.13(d)(iv)
|
Required Antitrust Clearances
|
|
Section 6.01(c)
|
Sarbanes-Oxley Act
|
|
Section 3.05(a)
|
SEC
|
|
Section 3.05(a)
|
Securities Act
|
|
Section 3.02(a)
|
Share
|
|
Section 1.06
|
Special Meeting
|
|
Section 5.04
|
Stock Plan
|
|
Section 2.04(a)
|
Subsidiary
|
|
Section 8.09(i)
|
Subsidiary Securities
|
|
Section 3.02(b)
|
Superior Proposal
|
|
Section 5.02(g)
|
Surviving Corporation
|
|
Section 1.01
|
Takeover Laws
|
|
Section 3.03(b)
|
Tax
|
|
Section 3.11(l)
|
Third Party Expenses
|
|
Section 8.09(l)
|
WARN Act
|
|
Section 3.09(o)
|
vi
Appendix A
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this Agreement)
is dated as of April 22, 2008, among Medtronic, Inc., a
Minnesota corporation (Parent), MRM Merger
Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent (Merger Sub), and Restore
Medical, Inc., a Delaware corporation (the Company).
RECITALS
WHEREAS, the Board of Directors of the Company has unanimously
determined that this Agreement and the transactions contemplated
hereby, including the Merger (as defined below), are advisable
and fair to, and in the best interests of, the Company and its
stockholders;
WHEREAS, the Board of Directors of the Company has unanimously
adopted resolutions approving the acquisition of the Company by
Parent, the execution of this Agreement and the consummation of
the transactions contemplated hereby and recommending that the
Companys stockholders adopt the agreement of merger (as
such term is used in Section 251 of the Delaware General
Corporation law (the Corporation Law)) contained in
this Agreement;
WHEREAS, the Board of Directors of Merger Sub has approved the
execution of this Agreement and determined that this Agreement
and the transactions contemplated hereby, including the Merger,
are advisable and fair to and in the best interests of Merger
Sub and its stockholder;
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Article I
THE MERGER
Section
1.01.
The
Merger
.
Upon the terms and subject to the
conditions set forth herein, and in accordance with the relevant
provisions of the Corporation Law, Merger Sub shall be merged
with and into the Company (the Merger) on the second
Business Day (as defined below), following the satisfaction or
waiver, if permissible, of the conditions set forth in
Article VI (other than those conditions that by their
nature are to be satisfied at the Closing (as defined below) but
subject to their satisfaction or, if permissible, waiver, at the
Closing) or on such other day as the parties may mutually agree.
The Company shall be the surviving corporation in the Merger
(the Surviving Corporation) under the name
Medtronic Restore Medical, Inc. and shall continue
its existence under the Laws (as defined below) of the State of
Delaware. In connection with the Merger, the separate corporate
existence of Merger Sub shall cease. Upon the election of
Parent, the Merger may be structured so that the Company shall
be merged with and into Merger Sub, with Merger Sub continuing
as the Surviving Corporation; provided, that the Company shall
not be deemed to have breached any of its representations,
warranties, covenants or agreements set forth in this Agreement,
to the extent such breach results from such election by Parent.
Section
1.02.
Consummation
of the Merger
.
On the terms and subject to
the conditions set forth herein, Merger Sub and the Company
shall cause the Merger to be consummated by filing with the
Secretary of State of the State of Delaware a duly executed
certificate of merger, as required by the Corporation Law, which
may specify the date and time mutually agreed by the parties at
which the Merger will become effective, and the parties shall
take all such further actions as may be required by Law to make
the Merger effective. Prior to the filing referred to in this
Section, a closing (the Closing) will be held at the
offices of
A-1
Fredrikson & Byron, P.A., 200 South Sixth Street,
Suite 4000, Minneapolis, Minnesota (or such other place as
the parties may mutually agree) for the purpose of confirming
all the matters contained herein. The time the Merger becomes
effective in accordance with applicable Law is referred to as
the Effective Time.
Section
1.03.
Effects
of the Merger
.
The Merger shall have the
effects set forth herein and in the applicable provisions of the
Corporation Law.
Section
1.04.
Certificate
of Incorporation and Bylaws
.
The Certificate
of Incorporation of the Company shall, by virtue of the Merger,
be amended and restated in its entirety to read as the
Certificate of Incorporation of Merger Sub in effect immediately
prior to the Effective Time (which shall comply with
Section 5.06(a) hereof), except that Article I thereof
shall read as follows: The name of the Corporation is
Medtronic Restore Medical, Inc. and, as so amended, shall
be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as permitted by Law and this Agreement.
The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time (which shall comply with Section 5.06(a)
hereof), shall be the Bylaws of the Surviving Corporation.
Section
1.05.
Directors
and Officers
.
The directors of Merger Sub
immediately prior to the Effective Time and the officers of the
Company immediately prior to the Effective Time shall be the
directors and officers, respectively, of the Surviving
Corporation until their respective death, permanent disability,
resignation or removal or until their respective successors are
duly elected and qualified.
Section
1.06.
Conversion
of Shares
.
Each share of common stock of the
Company, par value $0.01 per share (each, a
Share), issued and outstanding immediately prior to
the Effective Time (other than Shares owned by Parent, Merger
Sub or any Subsidiary (as defined below) of Parent or the
Company or held in the treasury of the Company, all of which
shall be canceled without any consideration being exchanged
therefor, and other than Dissenting Shares (as defined below),
which shall have only those rights set forth in
Section 2.01) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted at
the Effective Time into the right to receive in cash an amount
per Share (subject to any applicable withholding Tax) equal to
the Merger Consideration without interest, upon the surrender of
the certificate, if any, representing such Shares in accordance
with Article II. At the Effective Time all such Shares
shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of such
Shares shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration as provided
herein.
Section
1.07.
Conversion
of Common Stock of Merger Sub
.
Each share of
common stock, $0.01 par value, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one share of common
stock of the Surviving Corporation.
Section
1.08.
Withholding
Taxes
.
Parent and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration
otherwise payable to a holder of Shares pursuant to the Merger,
or otherwise, such amounts as are required to be withheld under
the Internal Revenue Code of 1986, as amended (the
Code), or any applicable provision of state, local
or foreign Tax Law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made.
Section
1.09.
Subsequent
Actions
.
If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised
that any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary or desirable to continue,
vest, perfect or confirm of record or otherwise the Surviving
Corporations right, title or interest in, to or under any
of the rights, properties, privileges, franchises or assets of
the Company as a result of, or in connection with, the Merger,
or otherwise to carry out the intent of this Agreement, the
officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of
the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of the
Company or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such
A-2
rights, properties, privileges, franchises or assets in the
Surviving Corporation or otherwise to carry out the intent of
this Agreement.
Article II
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
Section
2.01.
Dissenting
Shares
.
Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and
outstanding immediately prior to the Effective Time and that are
held by stockholders properly exercising appraisal rights
available under Section 262 of the Corporation Law (the
Dissenting Shares) shall not be converted into or be
exchangeable for the right to receive the Merger Consideration,
unless and until such holders shall have failed to perfect or
shall have effectively withdrawn or lost their rights to
appraisal under the Corporation Law. Dissenting Shares shall be
treated in accordance with Section 262 of the Corporation
Law. If any such holder shall have failed to perfect or shall
have effectively withdrawn or lost such right to appraisal, such
holders Shares shall thereupon be converted into and
become exchangeable only for the right to receive, as of the
later of the Effective Time and the time that such right to
appraisal shall have been irrevocably lost, withdrawn or
expired, the Merger Consideration, without any interest thereon.
The Company shall give Parent and Merger Sub (a) prompt
notice of any written demands for appraisal of any Shares,
attempted withdrawals of such demands and any other instruments
served pursuant to the Corporation Law and received by the
Company relating to rights to be paid the fair value
of Dissenting Shares, as provided in Section 262 of the
Corporation Law and (b) the opportunity to participate in
and direct all negotiations and proceedings with respect to
demands for appraisal under the Corporation Law. The Company
shall not, except with the prior written consent of Parent,
voluntarily make or agree to make any payment with respect to
any demands for appraisals of capital stock of the Company,
offer to settle or settle any such demands or approve any
withdrawal of any such demands.
Section
2.02.
Payment
for Shares
.
(a) At or prior to the
Effective Time, Parent will, or will cause the Surviving
Corporation to deposit, or cause to be deposited, with a bank or
trust company designated by Parent and reasonably acceptable to
the Company (the Paying Agent) sufficient funds to
make the payments due pursuant to Section 1.06 on a timely
basis to holders of Shares that are issued and outstanding
immediately prior to the Effective Time (such amounts being
hereinafter referred to as the Payment Fund). The
Paying Agent shall, pursuant to irrevocable instructions, make
the payments provided for in the preceding sentence out of the
Payment Fund. Such funds may be invested by the Paying Agent as
directed by Parent or the Surviving Corporation; provided, that
(i) no such investment or losses thereon shall affect the
Merger Consideration payable to the holders of Shares and
following any losses that result in the amount of funds in the
Payment Fund being insufficient to pay the portion of the
aggregate Merger Consideration that remains unpaid, Parent shall
promptly provide additional funds to the Paying Agent for the
benefit of the stockholders of the Company to the extent of such
insufficiency and (ii) such investments shall be in
obligations of or guaranteed by the United States of America or
in commercial paper obligations rated
A-1
or
P-1
or
better by Moodys Investor Services, Inc. or
Standard & Poors Corporation, respectively. The
Payment Fund shall not be used for any other purpose, except as
provided in this Agreement.
(b) As of or promptly following the Effective Time, and in
any event within five (5) Business Days after the later of
the Effective Time or the date on which the Company has provided
the Paying Agent with appropriate records and information
reasonably requested, the Surviving Corporation shall cause the
Paying Agent to mail to each Person who, as of the Effective
Time, was the record holder of Shares whose Shares were
converted into the Merger Consideration pursuant to
Section 1.06: (A) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and
title to the certificates that immediately prior to the
Effective Time represented Shares (the Certificates)
shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and (B) instructions for use in effecting the
surrender of the Certificates (or affidavits of loss in lieu
thereof) or non-certificated Shares represented by book-entry
(Book-Entry Shares) in exchange for the Merger
Consideration. Following surrender to the Paying Agent of a
Certificate (or affidavit of loss in lieu thereof) or Book-Entry
Shares, together with such letter of transmittal duly executed,
the holder of such Certificate or Book-Entry Shares shall be
paid in exchange therefor cash in an amount (subject to any
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applicable withholding Tax) equal to the product of the number
of Shares represented by such Certificate (or affidavit of loss
in lieu thereof) or Book-Entry Shares multiplied by the Merger
Consideration, and such Certificate shall forthwith be canceled.
No interest will be paid or accrued on the cash payable upon the
surrender of the Certificates or Book-Entry Shares. If payment
is to be made to a Person (as defined below) other than the
Person in whose name the Certificate surrendered is registered,
it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such payment
pay any transfer or other Taxes required by reason of the
payment to a Person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the
Surviving Corporation that such Tax has been paid or is not
applicable. From and after the Effective Time and until
surrendered in accordance with the provisions of this
Section 2.02, each Certificate shall represent for all
purposes solely the right to receive, in accordance with the
terms hereof, the Merger Consideration in cash multiplied by the
number of Shares evidenced by such Certificate, without any
interest thereon. The Paying Agent shall accept Certificates or
Book-Entry Shares upon compliance with such reasonable terms and
conditions as the Paying Agent may impose to effect an orderly
exchange thereof in accordance with normal practices.
(c) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by
such Person of a bond in such customary and reasonable amount as
the Surviving Corporation may direct as indemnity against any
claim that may be made against it with respect to such
Certificate, the Paying Agent will deliver in exchange for such
lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect to the Shares formerly represented
thereby.
(d) Any portion of the Payment Fund (including the proceeds
of any investments thereof) that remains unclaimed by the former
stockholders of the Company for one year after the Effective
Time shall be delivered to the Surviving Corporation. Any former
stockholders of the Company who have not complied with this
Section 2.02 prior to the end of such one-year period shall
thereafter look only to the Surviving Corporation (subject to
abandoned property, escheat or other similar Laws) but only as
general creditors thereof for payment of their claim for the
Merger Consideration, without any interest thereon. Neither
Parent nor the Surviving Corporation shall be liable to any
holder of Shares for any amounts (whether in respect of such
Shares or otherwise) delivered from the Payment Fund or
otherwise to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificates
shall not have been surrendered immediately prior to the date
that such unclaimed funds would otherwise become subject to any
abandoned property, escheat or similar Law, any unclaimed funds
payable with respect to such Certificates shall, to the extent
permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interest
of any Person previously entitled thereto.
Section
2.03.
Closing
of the Companys Transfer Books
.
At the
Effective Time, the stock transfer books of the Company shall be
closed and no transfer of Shares shall thereafter be made. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation for transfer, they shall be canceled and
exchanged for the Merger Consolidation as provided in this
Article II.
Section
2.04.
Existing
Stock Options
.
(a) Each option to
purchase Shares (Existing Stock Options) granted to
employees or directors of, or consultants or advisors to, the
Company or any of its Subsidiaries pursuant to the terms of the
Company 1999 Omnibus Stock Plan (the Stock Plan) or
otherwise outstanding immediately prior to the Effective Time
shall, at the Effective Time, be cancelled in exchange for the
right to receive an amount, payable in cash as soon as
practicable following the Effective Time, equal to the product
of (x) the total number of Shares subject to such Existing
Stock Option as of the Effective Time, multiplied by
(y) the excess, if any, of the amount of the Merger
Consideration over the exercise price per share of the Shares
subject to such Existing Stock Option, less applicable
withholding taxes, if any, required to be withheld with respect
to such payment.
(b) Each warrant to purchase Shares (Existing
Warrants) outstanding immediately prior to the Effective
Time shall, at the Effective Time, be cancelled in exchange for
the right to receive an amount, payable in cash as soon as
practicable following the Effective Time, equal to the product
of (x) the total number of Shares
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with respect to which such Existing Warrant is exercisable as of
the Effective Time, multiplied by (y) the excess, if any,
of the amount of the Merger Consideration over the exercise
price per share of the Shares subject to such Existing Warrant,
less applicable withholding taxes, if any, required to be
withheld with respect to such payment.
Article III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject, in the case of each representation and warranty in this
Article III, to Section 8.01(b), and except, with
respect to any Section of this Article III, (i) as set
forth in the section of the disclosure letter dated the date
hereof and delivered by the Company to Parent with respect to
this Agreement prior to the date hereof (the Disclosure
Letter) that specifically corresponds to such
Section (or in any other section of the Disclosure Letter
if the applicability of such disclosure to such Section is
reasonably apparent on its face) and (ii) as disclosed in
the reports, schedules, forms, statements and other documents
filed by the Company with the SEC or furnished by the Company to
the SEC, in each case, on or after December 31, 2007, and
at least two Business Days prior to the date hereof (to the
extent such disclosure does not constitute a risk
factor or forward-looking statement and such disclosure is
reasonably apparent on its face to relate to such Section of
Article III below), the Company represents and warrants to
Parent and Merger Sub that the following are true and correct:
Section
3.01.
Organization
and Qualification
.
The Company and each of
its Subsidiaries is a duly organized and validly existing entity
in good standing (to the extent such concepts are recognized in
the applicable jurisdiction) under the Laws of its jurisdiction
of incorporation, with all corporate power and authority to own
its properties and conduct its business as currently conducted.
The Company and each of its Subsidiaries is duly qualified and
in good standing as a foreign corporation authorized to do
business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of
the business transacted by it makes such qualification
necessary. The Company has heretofore made available to Parent
true, correct and complete copies of the Certificate of
Incorporation and Bylaws (or similar governing documents) as
currently in effect for the Company and each of its
Subsidiaries. Neither the Company nor any of its Subsidiaries,
directly or indirectly, owns any interest in any Person other
than the Companys Subsidiaries.
Section
3.02.
Capitalization
.
(a) The
authorized capital stock of the Company consists of
50,000,000 Shares and 5,000,000 shares of preferred
stock, par value $0.01 per share (the Preferred
Stock). As of the close of business on the date hereof,
15,731,094 Shares were issued and outstanding, no shares of
Preferred Stock were issued and outstanding and no Shares were
held in the Companys treasury. In addition, as of such
date, there were outstanding Existing Stock Options to purchase
an aggregate of 2,706,718 Shares, outstanding Existing
Warrants to purchase an aggregate of 705,696 Shares, no
Shares underlying any other outstanding awards under the Stock
Plan, and there were no shares of restricted stock granted under
the Stock Plan or stock appreciation rights outstanding. Since
such date, the Company has not issued any Shares, has not
granted any options, restricted stock, stock appreciation
rights, warrants or rights or entered into any other agreements
or commitments to issue any Shares, or granted any other awards
in respect of any Shares and has not split, combined or
reclassified any of its shares of capital stock. All of the
outstanding Shares have been duly authorized and validly issued
and are fully paid and nonassessable and are free of preemptive
rights. Section 3.02(a) of the Disclosure Letter contains a
true, correct and complete list, as of the date hereof, of each
Existing Stock Option and Existing Warrant, the name of each
holder thereof, the number of outstanding Existing Stock Options
and Existing Warrants held by such holder, the grant date of
each such Existing Stock Option and Existing Warrant, the number
of Shares such holder is entitled to receive upon the exercise
of each Existing Stock Option and Existing Warrant and the
corresponding exercise price, the vesting schedule of each such
Existing Stock Option and the plan pursuant to which each such
Existing Stock Option was granted. Except for the Existing Stock
Options and the Existing Warrants, there are on the date hereof
no outstanding (A) securities of the Company convertible
into or exchangeable for shares of capital stock or voting
securities or ownership interests in the Company,
(B) options, warrants, rights or other agreements or
commitments
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requiring the Company to issue, or other obligations of the
Company to issue, any capital stock, voting securities or other
ownership interests in (or securities convertible into or
exchangeable for capital stock or voting securities or other
ownership interests in) the Company (or, in each case, the
economic equivalent thereof), (C) obligations of the
Company to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other
similar agreement or commitment relating to any capital stock,
voting securities or other ownership interests in the Company
(the items in clauses (A), (B) and (C), together with
the capital stock of the Company, being referred to collectively
as Company Securities) or (iv) obligations by
the Company or any of its Subsidiaries to make any payments
based on the price or value of the Shares. There are on the date
hereof no outstanding obligations of the Company or any of its
Subsidiaries to purchase, redeem or otherwise acquire any
Company Securities. There are no voting trusts or other
agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of capital
stock of the Company. All outstanding securities of the Company
have been offered and issued in compliance with all applicable
securities laws, including the Securities Act of 1933, as
amended (the Securities Act) and blue
sky laws. Any cancellation, re-grant or other re-pricing
or amendment transaction, with respect to options or other
rights to purchase Shares, was properly authorized and conducted
in accordance with all applicable laws and regulations,
including rules of the National Association of Securities
Dealers and Financial Industry Regulatory Authority and
applicable securities laws.
(b) The Company or another of its Subsidiaries is the
record and beneficial owner of all the outstanding shares of
capital stock of each Subsidiary of the Company, free and clear
of any lien, mortgage, pledge, charge, security interest or
encumbrance of any kind, and there are no irrevocable proxies
with respect to any such shares. There are no outstanding
(i) securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary
of the Company, (ii) options, restricted stock, warrants,
rights or other agreements or commitments to acquire from the
Company or any of its Subsidiaries, or obligations of the
Company or any of its Subsidiaries to issue, any capital stock,
voting securities or other ownership interests in (or securities
convertible into or exchangeable for capital stock or voting
securities or other ownership interests in) any Subsidiary of
the Company, (iii) obligations of the Company or any of its
Subsidiaries to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other
similar agreement or commitment relating to any capital stock,
voting securities or other ownership interests in any Subsidiary
of the Company (the items in clauses (i), (ii) and
(iii), together with the capital stock of such Subsidiaries,
being referred to collectively as Subsidiary
Securities) or (iv) obligations of the Company or any
of its Subsidiaries to make any payment based on the value of
any shares of any Subsidiary of the Company. There are no
outstanding obligations of the Company or any of its
Subsidiaries to purchase, redeem or otherwise acquire any
outstanding Subsidiary Securities. There are no voting trusts or
other agreements or understandings to which the Company or any
of its Subsidiaries is a party with respect to the voting of
capital stock of any Subsidiary of the Company.
(c) The Companys past and current stock option grant
practices (i) complied with the terms of the Stock Plan,
stock exchange rules and applicable Laws, (ii) have been
fairly presented in accordance with GAAP in the Companys
financial statements set forth in the Company SEC Reports, and
(iii) have resulted only in exercise prices that correspond
to the fair market value on the date that the grants were
actually authorized under applicable Law. The Company has no
ongoing internal review of its past and current stock option
practice and has disclosed to Parent the results of any such
review completed since January 1, 2005.
Section
3.03.
Authority
for this Agreement; Board
Action
.
(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, including
the agreement of merger (as such term is used in
Section 251 of the Corporation Law) contained in this
Agreement, by the Company and the consummation by the Company of
the transactions contemplated hereby, including the Merger, have
been duly and validly authorized by the Board of Directors of
the Company 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 completion of the Merger, the adoption of the
agreement of merger contained in this Agreement by the holders
of a majority of the outstanding Shares prior to the
consummation of the Merger. This Agreement has been duly and
validly executed and delivered by the
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Company and (assuming the valid authorization, execution and
delivery of this Agreement by Parent and Merger Sub) constitutes
a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
(b) The Companys Board of Directors (at a meeting or
meetings duly called and held) has unanimously
(i) determined that the Merger is advisable and fair to and
in the best interests of, the stockholders of the Company,
(ii) approved this Agreement, including the agreement of
merger (as such term is used in Section 251 of the
Corporation Law) contained in this Agreement,
(iii) resolved to recommend the adoption of the agreement
of merger contained in this Agreement by the stockholders of the
Company, (iv) consented to this Agreement, including the
agreement of merger contained in this Agreement, and the
transactions contemplated hereby in accordance with the terms
and provisions of Section 7 of the Confidentiality
Agreement, dated October 15, 2007, between Medtronic Xomed,
Inc. and the Company (the Confidentiality
Agreement), (v) assuming the accuracy of
Parents representations in Section 4.06, taken all
necessary steps to render Section 203 of the Corporation
Law inapplicable to Parent and Merger Sub and to the Merger and
(vi) adopted a resolution resolving to elect, that any
other moratorium, control share
acquisition, business combination, fair
price or other form of anti-takeover Laws or regulations
(collectively, Takeover Laws) of any jurisdiction
that purports to be applicable to the Company, Parent, Merger
Sub, the Merger or this Agreement, shall not be applicable to
the Company, Parent, Merger Sub, the Merger or this Agreement.
Section
3.04.
Consents
and Approvals; No Violation
.
Neither the
execution and delivery of this Agreement by the Company nor the
consummation of the transactions contemplated hereby will
(a) violate or conflict with or result in any breach of any
provision of the respective Certificate of Incorporation or
Bylaws (or other similar governing documents) of the Company or
any of its Subsidiaries, (b) require any consent, approval,
authorization or permit of, or filing with or notification to,
any supranational, national, foreign, federal, state or local
government or subdivision thereof, or governmental, judicial,
legislative, executive, administrative or regulatory authority
(including the FDA), agency, commission, tribunal or body (a
Governmental Entity) except (i) the applicable
requirements of the Securities Exchange Act of 1934, as amended
(the Exchange Act) and the rules and regulations
promulgated thereunder, (ii) the filing and recordation of
appropriate merger documents as required by the Corporation Law
or (iii) the applicable requirements of the NASDAQ Global
Market and NASDAQ Capital Market, (c) violate, conflict
with, or result in a breach of any provisions of, or require any
consent, waiver or approval or result in a default (or give rise
to any right of termination, cancellation, modification or
acceleration or any event that, with the giving of notice, the
passage of time or otherwise, would constitute a default or give
rise to any such right) under any of the terms, conditions or
provisions of any note, license, agreement, contract, indenture
or other instrument or obligation to which the Company or any of
its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective assets may be bound,
(d) result (or, with the giving of notice, the passage of
time or otherwise, would result) in the creation or imposition
of any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind on any asset of the Company or any of
its Subsidiaries (other than one created by Parent or Merger
Sub) or (e) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of
its Subsidiaries or by which any of their respective assets are
bound.
Section
3.05.
Reports;
Financial Statements
.
(a) Since
May 16, 2006, the Company has timely filed or furnished all
reports, schedules, forms, statements and other documents
required to be filed or furnished by it with the Securities and
Exchange Commission (the SEC), all of which have
complied as of their respective filing dates or, if amended or
superseded by a subsequent filing, as of the date of the last
such amendment or superseding filing made at least two Business
Days prior to the date hereof, in all material respects with all
applicable requirements of the Securities Act, the Exchange Act
and the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley
Act) and, in each case, the rules and regulations of the
SEC promulgated thereunder. No executive officer of the Company
has failed in any respect to make the certifications required of
him or her under Section 302 or 906 of the Sarbanes-Oxley
Act with respect to any Company SEC Report. None of the reports,
schedules, forms, statements and other documents filed or
furnished by the Company with the SEC since May 16, 2006
(the Company SEC Reports), including any financial
statements or schedules included or incorporated by reference
therein, at the time filed or, if amended or superseded by a
subsequent filing, as of the date of the last such amendment or
superseding filing made at least two Business Days prior to the
date
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hereof, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
As of the date of this Agreement, there are no outstanding or
unresolved comments in comment letters received from the SEC
staff with respect to the Company SEC Reports. None of the
Companys Subsidiaries is required to file periodic reports
with the SEC pursuant to the Exchange Act.
(b) The audited and unaudited consolidated financial
statements (including the related notes thereto) of the Company
included (or incorporated by reference) in the Company SEC
Reports have been prepared in accordance with United States
generally accepted accounting principles (GAAP)
applied on a consistent basis throughout the periods involved
and fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of
their respective dates, and the consolidated income,
stockholders equity, results of operations and changes in
consolidated financial position or cash flows for the periods
presented therein (subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments). All
of the Companys Subsidiaries are consolidated for
accounting purposes. The unaudited consolidated financial
statements (including the related notes thereto) of the Company
for the quarterly period ended March 31, 2008, when
finalized and filed in the Companys
Form 10-Q
for the quarterly period ended March 31, 2008, will not
differ in any material respect (except for the inclusion of
additional, consistent information) from that set forth in
Section 3.05(b) of the Disclosure Letter, and the contents
of such
Form 10-Q
will not be inconsistent in any material respect with the
Companys press releases containing preliminary results for
such quarterly period; provided, however, that such
Form 10-Q
may contain disclosures and modifications necessary to reflect
transactions completed by the Company in accordance with
Section 5.17 hereof, which disclosures and modifications
will not be deemed to be a Material Adverse Effect.
(c) The Company and its Subsidiaries have implemented and
maintain a system of internal accounting controls sufficient to
provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements
in accordance with GAAP. The Companys management has
completed an assessment of the effectiveness of the
Companys internal controls over financial reporting in
compliance with the requirements of Section 404 of the
Sarbanes-Oxley Act for the year ended December 31, 2007 and
the description of such assessment set forth in Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 is accurate in
all material respects. The Company (i) has implemented and
maintains disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) designed to ensure that material
information relating to the Company, including its consolidated
Subsidiaries, is made known to the Chief Executive Officer and
the Chief Financial Officer of the Company by others within
those entities, and (ii) has disclosed, based on its most
recent evaluation prior to the date hereof, to the
Companys outside auditors and the audit committee of the
Companys Board of Directors (A) any significant
deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) which are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information and (B) any fraud, whether
or not material, that involves management or other employees who
have a significant role in the Companys internal controls
over financial reporting. A true, correct and complete summary
of any such disclosures made by management to the Companys
auditors and audit committee is set forth as
Section 3.05(c) of the Disclosure Letter. As of the date
hereof, there is no reason to believe that its outside auditors
and its chief executive officer and chief financial officer will
not be able to give the certifications and attestations required
pursuant to the rules and regulations adopted pursuant to
Section 404 of the Sarbanes-Oxley Act, without
qualification, when due.
(d) Since May 16, 2006, (i) neither the Company
nor any of its Subsidiaries nor, to the knowledge of the
Company, any director, officer, employee, auditor, accountant or
representative of the Company or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any of
its Subsidiaries or their respective internal accounting
controls, including any material complaint, allegation,
assertion or claim that the Company or any of its Subsidiaries
has engaged in questionable accounting or auditing practices,
and (ii) no attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of
its Subsidiaries, has reported evidence of a material violation
of United States federal or state securities laws, material
breach of
A-8
fiduciary duty arising under United States federal or state law,
or similar material violation of any United States federal
or state law by the Company or any of its officers, directors,
employees or agents to the Board of Directors of the Company or
any committee thereof or to any director of officer of the
Company.
(e) Neither the Company nor any of its Subsidiaries has any
liabilities of any nature, whether accrued, absolute, fixed,
contingent or otherwise, whether due or to become due and
whether or not required to be recorded or reflected on a balance
sheet under GAAP, other than such liabilities (i) reflected
or reserved against in the financial statements of the Company
included in the Company SEC Reports filed and available prior to
the date hereof, (ii) incurred in connection with the
transactions contemplated hereby or (iii) incurred in the
ordinary course of business consistent with past practice since
December 31, 2007.
Section
3.06.
Absence
of Certain Changes
.
Since December 31,
2007, (a) the Company and its Subsidiaries have not
suffered any Material Adverse Effect and there has not been any
change, condition, event or development that is reasonably
likely to have a Material Adverse Effect with respect to the
Company, (b) the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary
course of business consistent with past practice, except for the
negotiation, execution, delivery and performance of this
Agreement and (c) neither the Company nor any of its
Subsidiaries has taken any action that, if taken after the date
hereof, would constitute a breach of (i) clauses (i)
and (ii) of paragraph (d) of Section 5.01,
(ii) paragraphs (e), (f), (g), (h), (j), (r),
(s) and (t) of Section 5.01 or
(iii) paragraph (v) of Section 5.01, but
only insofar as such paragraph (v) relates to clauses
or paragraphs set forth in the preceding clauses (i) or
(ii).
Section
3.07.
Proxy
Statement
.
The letter to stockholders, notice
of meeting, proxy statement and form of proxy that will be
provided to stockholders of the Company in connection with the
Merger (including any amendments or supplements thereto) and any
annexes, schedules or exhibits required to be filed with the SEC
in connection therewith (collectively, the Proxy
Statement) will not, on the date of filing the definitive
Proxy Statement with the SEC, at the time the Proxy Statement is
first mailed and at the time of the Special Meeting (as defined
below), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, except
that no representation or warranty is made by the Company with
respect to statements or omissions included in the Proxy
Statement based upon information supplied in writing by Parent,
Merger Sub or any Affiliate of Parent or Merger Sub expressly
for inclusion therein. The Proxy Statement will comply as to
form in all material respects with the provisions of the
Exchange Act and the rules and regulations of the SEC
promulgated thereunder.
Section
3.08.
Brokers;
Certain Expenses
.
No broker, finder,
investment banker or financial advisor (other than Piper
Jaffray & Co. (the Company Financial
Advisor), a true, correct and complete copy of whose
engagement letter has been furnished to Parent, and whose fees
and expenses shall be paid by the Company) is or shall be
entitled to receive any brokerage, finders, financial
advisors, transaction or other fee or commission in
connection with this Agreement or the transactions contemplated
hereby based upon agreements made by or on behalf of the
Company, any of its Subsidiaries or any of their respective
officers, directors or employees; provided, however,
notwithstanding anything in this Agreement to the contrary,
Parent understands and agrees that the Company shall be
permitted to engage a second financial advisor if the
Companys Board of Directors determines in good faith in
connection with an Acquisition Proposal that the Company
Financial Advisor has a conflict of interest and, taking into
account the advice of outside counsel to the Company, such
engagement is necessary in connection with satisfaction of the
Board of Directors fiduciary duties to the stockholders of
the Company.
Section
3.09.
Employee
Benefit
Matters/Employees
.
(a) Section 3.09(a)
of the Disclosure Letter contains a true, correct and complete
list of each material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock or other equity-based,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other employee benefit plan,
program, arrangement, agreement, fund or commitment, including
any employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (ERISA), whether or not subject
to ERISA, and each employment, retention, consulting, change in
control, termination or severance plan, program, arrangement or
agreement entered into, maintained, sponsored or contributed to
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by the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries has any obligation to
contribute or any other liability (the Plans). Prior
to the date hereof, the Company has provided or made available
to Parent true, correct and complete copies of each of the
following, as applicable, with respect to each Plan:
(i) the plan document or agreement (or if the Plan is not a
written Plan, a description thereof); (ii) the trust
agreement, insurance contract or other documentation of any
related funding arrangement; (iii) the summary plan
description; (iv) the two most recent annual reports,
actuarial reports
and/or
financial reports; (v) the most recent required Internal
Revenue Service Form 5500, including all schedules thereto;
(vi) any material written communication to or from any
Governmental Entity made within the past three years;
(vii) all amendments or modifications to any such
documents; and (viii) the most recent determination letter
received from the Internal Revenue Service with respect to each
Plan that is intended to be a qualified plan under
Section 401 of the Code.
(b) With respect to each Plan, (i) all payments due
from the Company or any of its Subsidiaries to date have been
timely made and all amounts properly accrued to date as
liabilities of the Company or any of its Subsidiaries which have
not been paid are properly recorded on the books of the Company
and, to the extent required by GAAP, adequate reserves are
reflected on the financial statements of the Company or
liability thereof was incurred in the ordinary course of
business consistent with past practice since December 31,
2007, (ii) each such Plan which is an employee
pension benefit plan (as defined in Section 3(2) of
ERISA) and intended to qualify under Section 401 of the
Code has received a favorable determination letter from the
Internal Revenue Service with respect to such qualification, its
related trust has been determined to be exempt from taxation
under Section 501(a) of the Code, and nothing has occurred
since the date of such letter that has or is likely to adversely
affect such qualification or exemption, (iii) there are no
actions, suits or claims pending (other than routine claims for
benefits) or, to the knowledge of the Company, threatened with
respect to such Plan or against the assets of such Plan and
(iv) it has been operated and administered in compliance
with its terms and all applicable Laws and regulations,
including ERISA and the Code, in all material respects.
(c) Neither the Company nor any trade or business, whether
or not incorporated (an ERISA Affiliate), which
together with the Company would be deemed to be a single
employer within the meaning of Section 4001(b) of
ERISA, has incurred any material unpaid liability pursuant to
Title IV or Section 302 of ERISA or Section 412
of the Code and to the knowledge of Company no condition exists
that could cause the Company or any ERISA Affiliate of the
Company to incur any such liability (other than liability for
benefits or premiums payable to the Pension Benefit Guaranty
Corporation (PBGC) arising in the ordinary course
that are not yet due), or after the Effective Time, Parent or
any of its Affiliates.
(d) With respect to each employee pension benefit
plan (as defined in Section 3(2) of ERISA) as to
which the Company or any of its Subsidiaries may incur any
liability under Section 302 or Title IV of ERISA or
Section 412 of the Code: (i) no such plan is a
multiemployer plan (as defined in Section 3(37)
of ERISA) or a multiple employer plan (as defined in
Section 413 of the Code); (ii) to the knowledge of the
Company, no condition or event currently exists that would
reasonably be expected to result, directly or indirectly, in any
material liability of the Company or any of its Subsidiaries
under Title IV of ERISA, whether to the PBGC or otherwise,
on account of the termination of any such plan; and
(iii) no such plan has incurred any accumulated
funding deficiency (as defined in Section 412 of the
Code or Part 3 of Title I of ERISA), whether or not
waived
(e) To the knowledge of the Company, no Plan is under audit
or is subject of an investigation by the Internal Revenue
Service, the U.S. Department of Labor, the SEC, the PBGC or
any other Governmental Entity.
(f) Except as set forth on Section 3.09(a) of the
Disclosure Letter, neither the execution or delivery of this
Agreement nor the consummation of the transactions contemplated
by this Agreement will, either alone or in conjunction with any
other event (whether contingent or otherwise), (i) result
in any payment or benefit becoming due or payable, or required
to be provided, to any director, employee or independent
contractor of the Company or any of its Subsidiaries,
(ii) increase the amount or value of any benefit or
compensation otherwise payable or required to be provided to any
such director, employee or independent contractor,
A-10
(iii) result in the acceleration of the time of payment,
vesting or funding of any such benefit or compensation or
(iv) result in any amount to fail to be deductible by
reason of Section 280G or Section 162(m) of the Code.
(g) Except as disclosed in the financial statements
contained in Company SEC Filings filed prior to the date hereof,
with respect to each Plan that is a welfare plan (as
defined in Section 3(1) of ERISA), neither the Company nor
any of its Subsidiaries has any liability with respect to an
obligation to provide welfare benefits, including death or
medical benefits (whether or not insured) with respect to any
Person beyond their retirement or other termination of service
other than coverage mandated by Section 4980B of the Code
or state Law (or other Law) or disability benefits under any
employee welfare plan that have been fully provided for by
insurance or otherwise.
(h) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to
have been paid to date under the insurance policy have been paid.
(i) Neither the Company nor any of its Subsidiaries has
disseminated to any current or former employee or any individual
who is likely to become an employee in writing any intent or
commitment (whether or not legally binding) to create or
implement any additional employee benefit plan or to amend,
modify or terminate any Plan of the Company, except for
immaterial amendments to any Plan of the Company that will not
result in an increase in the annual costs in respect of such
plan incurred or to be incurred by the Company or any of its
Subsidiaries.
(j) Neither the Company nor any of its Subsidiaries is the
subject of any pending or, to the knowledge of the Company,
threatened proceeding alleging that the Company or any of its
Subsidiaries has engaged in any unfair labor practice under any
Law. Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement, and there are no labor
unions or other organizations representing, purporting to
represent or attempting to represent, any employee of the
Company or any of its Subsidiaries. There is no pending or, to
the knowledge of the Company, threatened labor strike, dispute,
walkout, work stoppage, slowdown or lockout with respect to
employees of the Company or any of its Subsidiaries, and no such
strike, dispute, walkout, slowdown or lockout has occurred
within the past five years.
(k) As of the close of business on the third Business Day
immediately preceding the date hereof, no current employee has
given written notice to the Company or any of its Subsidiaries
of his or her intent to terminate employment with the Company or
such Subsidiary.
(l) With respect to each open workers compensation claim
involving an employee of the Company or any of its Subsidiaries,
the Company has provided to Parent, prior to the date hereof,
the name, date of injury, payments made to date, current reserve
by payment type (e.g., indemnity and medical expense),
description of injury and location of employee. To the knowledge
of the Company, no circumstances exist that are reasonably
likely to result in any other workers compensation claims
against the Company or any of its Subsidiaries.
(m) The Company and each of its Subsidiaries is in material
compliance with all applicable local, state, federal and foreign
Laws relating to employment, including, without limitation, Laws
relating to discrimination, hours of work and the payment of
wages or overtime wages. There are no complaints, lawsuits or
other proceedings pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries
brought by or on behalf of any applicant for employment, any
current or former employee or any class of the foregoing,
relating to any such Law or regulation, or alleging breach of
any express or implied contract of employment, wrongful
termination of employment, or alleging any other discriminatory,
wrongful or tortuous conduct in connection with the employment
relationship.
(n) There are no pending or, to the knowledge of the
Company, threatened material investigations, audits, complaints
or proceedings against the Company or any of its Subsidiaries by
or before any Governmental Entity involving any applicant for
employment, any current or former employee or any class of the
foregoing, including, without limitation:
(i) the Equal Employment Opportunity Commission or any
other state or local agency with authority to investigate claims
or charges of employment discrimination in the workplace;
A-11
(ii) the United States Department of Labor or any other
state or local agency with authority to investigate claims or
charges in any way relating to hours of employment or wages;
(iii) the Occupational Safety and Health Administration or
any other state of local agency with authority to investigate
claims or charges in any way relating to the safety and health
of employees; and
(iv) the Office of Federal Contract Compliance or any
corresponding state agency.
(o) In the three (3) years prior to the date hereof,
neither the Company nor any of its Subsidiaries has effectuated
(i) a plant closing (as defined in the Worker
Adjustment and Retraining Notification Act (the WARN
Act) or any similar Law) affecting any site of employment
or one or more facilities or operating units within any site of
employment or facility of the Company or any of its Subsidiaries
or (ii) a mass layoff (as defined in the WARN
Act, or any similar Law) affecting any site of employment or
facility of the Company or any of its Subsidiaries.
(p) Each Plan that is a nonqualified deferred
compensation plan within the meaning of
Section 409A(d)(1) of the Code (a Nonqualified
Deferred Compensation Plan) subject to Section 409A
of the Code has been operated in compliance with
Section 409A of the Code since January 1, 2005, based
upon a good faith, reasonable interpretation of
Section 409A of the Code and the notices, regulations, and
other guidance of general applicability issued thereunder
(together, the 409A Authorities). No Plan that would
be a Nonqualified Deferred Compensation Plan subject to
Section 409A of the Code but for the effective date
provisions that are applicable to Section 409A of the Code,
as set forth in Section 885(d) of the American Jobs
Creation Act of 2004, as amended (the AJCA), has
been materially modified within the meaning of
Section 885(d)(2)(B) of the AJCA after October 3,
2004, based upon a good faith reasonable interpretation of the
AJCA and the 409A Authorities.
Section
3.10.
Litigation
.
Except
as set forth in Section 3.10(a) of the Disclosure Letter,
there is no claim, action, suit, litigation, proceeding or
governmental or administrative investigation, audit, inquiry or
action pending, or, to the knowledge of the Company, threatened,
against or relating to the Company, any of its Subsidiaries or,
to the knowledge of the Company, any product of the Company or
its Subsidiaries. None of the threatened or pending claims,
actions, suits, litigations, proceedings, or governmental or
administrative investigations, audits, inquiries or actions set
forth in Section 3.10(a) of the Disclosure Letter would
reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. Neither the Company nor any of
its Subsidiaries is subject to any outstanding order, writ,
injunction or decree.
Section
3.11.
Tax
Matters
.
(a) The Company and each of its
Subsidiaries have timely filed all returns and reports relating
to Taxes (including income Taxes, withholding Taxes and
estimated Taxes) required to be filed by applicable Law with
respect to the Company and each of its Subsidiaries or any of
their income, properties or operations as of the date hereof.
All such returns are true, correct and complete and accurately
set forth all items required to be reflected or included in such
returns by applicable federal, state, local or foreign Tax Laws.
The Company and each of its Subsidiaries have timely paid
(taking account of extensions to file that have been properly
obtained) all Taxes attributable to the Company or any of its
Subsidiaries that were required to be paid regardless of whether
shown on such returns.
(b) The Company and each of its Subsidiaries have made
adequate provisions in accordance with United States GAAP,
appropriately and consistently applied, in the consolidated
financial statements included in the Company SEC Reports for the
payment of all Taxes for which the Company or any of its
Subsidiaries may be liable for the periods covered thereby that
were not yet due and payable as of the dates thereof, regardless
of whether the liability for such Taxes is disputed.
(c) As of the date hereof, none of the consolidated federal
income Tax returns of the Company has been audited or settled,
or is the subject of a closing agreement as
described in Code Section 7121 (or any corresponding or
similar provision of state, local or foreign income Tax law).
There is no written claim or assessment pending or, to the
knowledge of the Company, threatened in writing against the
Company or any of its Subsidiaries for any alleged deficiency in
Taxes, and, to the knowledge of the Company, no audit or
investigation with respect to any liability of the Company or
any of its Subsidiaries for Taxes is pending or expected to be
initiated by any taxing authority. There are no agreements in
effect to extend the period of
A-12
limitations for the assessment or collection of any Tax for
which the Company or any of its Subsidiaries may be liable.
(d) The Company and each of its Subsidiaries have withheld
from their employees (and timely paid to the appropriate
Governmental Entity) proper and accurate amounts for all periods
through the date hereof in compliance with all Tax withholding
provisions of applicable federal, state, local and foreign Laws
(including, without limitation, income, social security, and
employment Tax withholding for all types of compensation).
(e) The Company and each of its Subsidiaries have withheld
(and timely paid to the appropriate Governmental Entity) proper
and accurate amounts for all periods through the date hereof in
compliance with all Tax withholding provisions of applicable
federal, state, local and foreign Laws other than provisions of
employee withholding (including, without limitation, withholding
of Tax on dividends, interest, and royalties and similar income
earned by nonresident aliens and foreign corporations and
withholding of Tax on United States real property
interests).
(f) There is no contract or agreement in existence under
which the Company or any of its Subsidiaries has, or may at any
time in the future have, an obligation to contribute to the
payment of any portion of a Tax (or pay any amount calculated
with reference to any portion of a Tax) of any Person that is
not currently a member of the affiliated group of corporations
(within the meaning of section 1504 of the Code) of which
the Company is the common parent.
(g) No claim has been made in writing during the three-year
period ending on the date hereof by any authority in a
jurisdiction where neither the Company nor any of its
Subsidiaries filed Tax returns that it is or may be subject to
taxation by that jurisdiction.
(h) Neither the Company nor any of its Subsidiaries has
executed any closing agreement during the three-year period
ending on the date hereof pursuant to Section 7121 of the
Code or any predecessor provision thereof.
(i) To the knowledge of the Company, the Company and each
of its Subsidiaries has disclosed on its federal income Tax
returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the
meaning of Code Section 6662.
(j) None of the Company or its Subsidiaries has
participated in a listed transaction
within the meaning of Treasury
regulation Section 1.6011-4(b)(2).
(k) The Company has not constituted either a
distributing corporation or a controlled
corporation (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for Tax-free treatment under Section 355
of the Code within the past two years.
(l) For purposes of this Agreement, Tax shall
mean all taxes, levies, imposts, duties, and other assessments,
including any income, alternative minimum or add-on Tax,
estimated, gross income, gross receipts, sales, use, transfer,
transactions, intangibles, ad valorem, value-added, franchise,
registration, title, license, capital,
paid-up
capital, profits, withholding, employee withholding, payroll,
workers compensation, unemployment insurance, social
security, employment, excise (including the federal
communications excise tax under Section 4251 of the Code),
severance, stamp, transfer, occupation, premium, recording, real
property, personal property, federal highway use, commercial
rent, environmental (including taxes under Section 59A of
the Code) or windfall profit tax, custom, duty or other tax, or
other like assessment of any kind whatsoever, including
information reporting penalties, together with any interest,
penalties, or additions to Tax that may become payable in
respect thereof imposed by any country, any state county,
provincial or local government or subdivision or agency thereof.
Section
3.12.
Compliance
with Law; No Default;
Permits
.
(a) Neither the Company nor any
of its Subsidiaries is, or has been since January 1, 2005,
in conflict with, in default with respect to or in violation of,
(i) any statute, law, ordinance, rule, regulation, order,
judgment, decree or requirement of a Governmental Entity
(Laws) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to
which the Company or any of
A-13
its Subsidiaries is a party or by which the Company or any of
its Subsidiaries, or any property or asset of the Company or any
of its Subsidiaries, is bound or affected; (b) the Company
and each of its Subsidiaries have all permits, licenses,
authorizations, consents, approvals and franchises from
Governmental Entities required to conduct their businesses as
currently conducted (Permits) and such Permits are
valid and in full force and effect; (c) neither the Company
nor any of its Subsidiaries has received written notice from any
Governmental Entity threatening to revoke any such Permit; and
(d) the Company and each of its Subsidiaries are in
material compliance with the terms of such Permits.
Section
3.13.
Environmental
Matters
.
(a) Each of the Company and its
Subsidiaries is, and has been at all times since January 1,
2005, in compliance in all material respects with all applicable
Environmental Laws. There is no investigation, suit, claim,
action or proceeding relating to or arising under Environmental
Laws that is pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries or any real property currently or, to the knowledge
of the Company, formerly owned, operated or leased by the
Company or any of its Subsidiaries. Neither the Company nor its
Subsidiaries has received any notice of or entered into or
assumed (by contract or operation of Law or otherwise), any
material obligation, liability, order, settlement, judgment,
injunction or decree relating to or arising under Environmental
Laws. No facts, circumstances or conditions exist that would
reasonably be expected to result in the Company and its
Subsidiaries incurring Environmental Liabilities. Neither the
execution and delivery of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the provisions
hereof, will result in the termination or revocation of, or a
right of termination or cancellation under any Environmental
Permit. There have been no material Releases of Hazardous
Materials on properties currently (or, to the knowledge of the
Company, formerly) owned, operated or leased by the Company or
any of its Subsidiaries.
(b) The Company and each of its Subsidiaries has obtained
and currently maintains all Permits necessary under
Environmental Laws for their operations (Environmental
Permits), there is no investigation known to the Company,
nor any action pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries or any real property owned, operated or leased by
the Company or any of its Subsidiaries to revoke such
Environmental Permits, and neither the Company nor any of its
Subsidiaries has received any written notice from any Person to
the effect that there is lacking any Environmental Permit
required under Environmental Law for the current use or
operation of any property owned, operated or leased by the
Company or any of its Subsidiaries.
(c) None of the properties or products of the Company, any
of its current or prior Subsidiaries or any of their respective
predecessors have contained or currently contain any asbestos or
asbestos-containing materials, polychlorinated biphenyls, silica
or any other substance listed in the Stockholm Convention on
Persistent Organic Pollutants.
(d) For purposes of the Agreement:
(i)
Environmental Laws
means all Laws
relating in any way to the environment, preservation or
reclamation of natural resources, the presence, management or
Release of, or exposure to, Hazardous Materials, or to human
health and safety, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C.
§ 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. § 5101 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C.
§ 6901 et seq.), the Clean Water Act (33 U.S.C.
§ 1251 et seq.), the Clean Air Act (42 U.S.C.
§ 7401 et seq.), the Safe Drinking Water Act
(42 U.S.C. § 300f et seq.), the Toxic Substances
Control Act (15 U.S.C. § 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. § 136 et seq.) and the Occupational
Safety and Health Act (29 U.S.C. § 651 et seq.),
each of their state and local counterparts or equivalents, each
of their foreign and international equivalents, and any transfer
of ownership notification or approval statute, as each has been
amended and the regulations promulgated pursuant thereto.
(ii)
Environmental Liabilities
means,
with respect to any Person, all liabilities, obligations,
responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and
expenses (including any amounts paid in settlement, all
reasonable fees, disbursements
A-14
and expenses of counsel, experts and consultants and costs of
investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or
demand by any other Person or in response to any violation of
Environmental Law, whether known or unknown, accrued or
contingent, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, to the
extent based upon, related to, or arising under or pursuant to
any Environmental Law, Environmental Permit, order or agreement
with any Governmental Entity or other Person, which relates to
any environmental, health or safety condition, violation of
Environmental Law or a Release or threatened Release of
Hazardous Materials.
(iii)
Hazardous Materials
means any
material, substance or waste that is regulated, classified, or
otherwise characterized under or pursuant to any Environmental
Law as hazardous, toxic, a
pollutant, a contaminant,
radioactive or words of similar meaning or effect,
including petroleum and its by-products, asbestos,
polychlorinated biphenyls, radon, mold, urea formaldehyde
insulation, silica, chlorofluorocarbons, and all other
ozone-depleting substances.
(iv)
Release
means any spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, disposing of or
migrating into or through the environment.
Section
3.14.
Intellectual
Property
.
(a)
Intellectual Property
shall mean any
or all intellectual property and similar proprietary rights in
any jurisdiction throughout the world, including without
limitation: (i) all United States, international and
foreign patents and applications therefor, including any and all
reissues, divisions, renewals, extensions, provisionals,
continuations and
continuations-in-part
thereof, whether or not related to such divisions, renewals,
extensions, provisionals, contributions or
continuations-in-part
through one or more intervening applications; (ii) all
inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know-how,
technology, technical data and customer lists, and all
documentation in any form or media relating to any of the
foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding
thereto throughout the world; (iv) all computer software,
including all source code, object code, development tools,
files, records and data, and all media on which any of the
foregoing is recorded; (v) all databases and data
collections and all rights therein throughout the world;
(vi) all trade names, logos, common law trademarks and
service marks, trademark and service mark registrations and
applications therefor throughout the world; and (vii) all
domain names, uniform resource locators, and other names and
locators associated with the internet.
(b) Section 3.14(b) of the Disclosure Letter sets
forth a true and complete list of all Intellectual Property
owned or exclusively licensed by Company that is registered or
subject to an application for patent or registration in any
jurisdiction throughout the world, together with: the name of
the current owners; the applicable jurisdiction; the application
or registration number. With respect to such Company
Intellectual Property that is issued or registered or subject to
an application for patent or registration, the Company has a
clear, recorded chain of title in the patent or trademark office
of each country in which such Intellectual Property is located.
Except as otherwise indicated, the Company is the sole and
exclusive owner of all such Intellectual Property, free and
clear of any liens. To the knowledge of the Company, all such
Intellectual Property is valid and enforceable. The Company has
received no notice from any third party challenging the
validity, enforceability or ownership of any such Intellectual
Property, nor is the Company or its Subsidiaries a party of any
proceeding relating to any such challenge.
(c) The Company and its Subsidiaries own or possess
sufficient rights to all Intellectual Property used in or
necessary for the operation of their businesses as currently
conducted or as currently contemplated to be conducted by the
Company.
(d) To the knowledge of the Company, the operation of the
business of Company and each of its Subsidiaries, including
their products and services, does not in any material respect
infringe or misappropriate the Intellectual Property of any
third party or constitute unfair competition or unfair trade
practices under the laws of any jurisdiction. Neither the
Company nor any of its Subsidiaries have received any notice
from any third party as of the date hereof, and, to the
knowledge of Company, there is no other assertion or threat from
A-15
any third party, nor any reasonable basis therefor, that the
operation of the business of Company or any of its Subsidiaries,
or any of their products or services, in any material respect
infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or unfair trade
practices under the laws of any jurisdiction. Neither the
Company nor any its Subsidiaries have brought or have been a
party to any claims, suits, arbitrations or other adversarial
proceedings with respect to a third partys Intellectual
Property.
(e) To the knowledge of the Company, as of the date hereof,
no person is infringing or misappropriating any material
Intellectual Property owned or exclusively licensed by Company
or any of its Subsidiaries. Neither the Company nor any its
Subsidiaries have brought or have been a party to any claims,
suits, arbitrations or other adversarial proceedings with
respect to their Intellectual Property against any third party
that remain unresolved.
(f) The Company and its Subsidiaries are not subject to any
judgment, order, writ, injunction or decree of any court or any
Federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality, domestic
or foreign, or any arbitrator, which restricts or impairs the
use of any of their Intellectual Property. The Intellectual
Property owned by the Company and its Subsidiaries was not
developed using any federal or university funding, resources or
staff, and no government entity or university has any rights to
any of such Intellectual Property.
(g) The Company and each of its Subsidiaries has taken
commercially reasonable and appropriate steps to protect and
maintain its Intellectual Property, including as it relates to
trade secrets. The Company and each of its Subsidiaries has
secured and has a policy to secure valid written confidentiality
agreements and assignments of Intellectual Property from all
consultants, contractors, employees, and customers who
contribute or have contributed to the creation, conception,
reduction to practice or other development of any Intellectual
Property developed on behalf of Company and its Subsidiaries.
(h) To the knowledge of the Company, the consummation of
this transaction will not entitle any third party to impose any
restriction upon, obtain any rights to, or receive any
compensation based on, the Intellectual Property of the Parent.
Section
3.15.
Real
Property
.
(a) Neither the Company nor
any of its Subsidiaries owns any real property.
(b) Section 3.15(b) of the Disclosure Letter sets
forth a true, correct and complete list of all leases, subleases
and other agreements under which the Company or any of its
Subsidiaries uses or occupies or has the right to use or occupy,
now or in the future, any real property (the Real Property
Leases). The Company has heretofore delivered to Parent
true, correct and complete copies of all Real Property Leases
(including all modifications, amendments, supplements, waivers
and side letters thereto). Each Real Property Lease is valid,
binding and in full force and effect, all rent and other sums
and charges payable by the Company or any of its Subsidiaries as
tenants thereunder are current in all material respects. No
termination event or condition or uncured default of a material
nature on the part of the Company or, if applicable, its
Subsidiary or, to the knowledge of the Company, the landlord
thereunder exists under any Real Property Lease. The Company and
each of its Subsidiaries has a good and valid leasehold interest
in each parcel of real property leased by it free and clear of
all mortgages, pledges, liens, encumbrances and security
interests, except (i) those reflected or reserved against
in the balance sheet of the Company as of December 31, 2007
and included in the Company SEC Reports, (ii) Taxes and
general and special assessments not in default and payable
without penalty and interest and (iii) other liens,
mortgages, pledges, encumbrances and security interests which do
not materially interfere with the Companys use and
enjoyment of such real property or materially detract from or
diminish the value thereof. Neither the Company nor any of its
Subsidiaries has received notice of any pending, and to the
knowledge of the Company there is no threatened, condemnation
with respect to any property leased pursuant to any of the Real
Property Leases. The Company and each of its Subsidiaries has
sufficient title to or other interest in all other assets to
conduct its business as currently conducted.
Section
3.16.
Material
Contracts
.
(a) Section 3.16(a) of
the Disclosure Letter lists as of the date hereof, and the
Company has made available to Parent and Merger Sub (or outside
counsel) true, correct and
A-16
complete (subject to any necessary redactions) copies of, all
contracts, agreements, commitments, arrangements, licenses
(including with respect to Intellectual Property), leases
(including with respect to personal property) and other
instruments to which the Company or any of its Subsidiaries is a
party or by which the Company, any of its Subsidiaries or any of
their respective properties or assets is bound that:
(i) would be required to be filed by the Company as a
material contract pursuant to Item 601(b)(10)
of
Regulation S-K
under the Securities Act or disclosed by the Company on a
Current Report on Form
8-K
or that
if terminated or subject to a default by any party thereto would
reasonably be expected to have a Material Adverse Effect;
(ii) contains covenants that limit the ability of the
Company or any of its Subsidiaries (or which, following the
consummation of the Merger, could restrict or purports to
restrict the ability of the Surviving Corporation or Parent):
(A) to compete in any business or with any Person or in any
geographic area or to sell, supply or distribute any service or
product (including any non-compete, exclusivity or
most-favored nation provisions), (B) to
purchase or acquire an interest in any other entity, except, in
each case, for any such contract that may be cancelled without
notice or penalty or other liability of the Company or any of
its Subsidiaries upon notice of 60 days or less or
(C) to enforce its rights under any contract, agreement or
applicable Law, including any covenant not to sue;
(iii) provides for or governs the formation, creation,
operation, management or control of any partnership or joint
venture;
(iv) involves (A) the use or license by the Company or
any of its Subsidiaries of any Intellectual Property owned by a
third party (other than
off-the-shelf
or commercially available software), including any Intellectual
Property used in any Company product or (B) the joint
development of products or technology with a third party;
(v) involves the license by the Company or any of its
Subsidiaries of any of its Intellectual Property to any third
party (other than as ancillary to a sale of products to
customers, but including any Intellectual Property used in any
Company product);
(vi) constitutes a material manufacturing, supply,
distribution or marketing agreement or contains a covenant not
to sue with a third party;
(vii) contains a cross-license with a third party;
(viii) involves any exchange traded or over the counter
swap, forward, future, option, cap, floor or collar financial
contract, or any other interest rate or foreign currency
protection contract;
(ix) other than solely among wholly owned Subsidiaries of
the Company, relates to (A) indebtedness or
(B) conditional sale arrangements, the sale, securitization
or servicing of loans or loan portfolios;
(x) involves the acquisition or disposition, directly or
indirectly (by merger or otherwise), of a business or capital
stock or other equity interests of another Person;
(xi) by its terms calls for aggregate payments by the
Company and its Subsidiaries or for the Company or any of its
Subsidiaries under such contract of more than $25,000 in any one
year (including by means of royalty payments) other than
contracts made in the ordinary course of business consistent
with past practice;
(xii) is with respect to any acquisition pursuant to which
the Company or any of its Subsidiaries has (x) any
continuing indemnification obligations or (y) any
earn-out or other contingent payment obligations;
(xiii) involves the supply of any materials used in
connection with the manufacture, or relates to the distribution
of any of the Companys products;
(xiv) is with a Governmental Entity; or
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(xv) is entered into between any director or executive
officer of the Company (or any of their Affiliates or
Associates), on the one hand, and the Company or a Subsidiary of
the Company, on the other hand.
Each contract of the type described in clauses (i) through
(xv) (including each of the amendments to noncompetition
agreements entered into by certain employees of the Company in
connection herewith) above is referred to herein as a
Material Contract.
(b) Each Material Contract is valid and binding on the
Company or the Subsidiary of the Company that is a party thereto
and, to the knowledge of the Company, each other party thereto
and is in full force and effect. The Company and its
Subsidiaries have performed and complied in all material
respects with all obligations required to be performed or
complied with by them under each Material Contract. There is no
default under any Material Contract by the Company or any of its
Subsidiaries, or, to the knowledge of the Company, by any other
party, 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 any of its Subsidiaries or to the
knowledge of the Company, by any other party thereto.
Section
3.17.
Regulatory
Compliance
(a) Neither the Company nor any of its Subsidiaries has
knowledge of any actual or threatened enforcement action by the
Food and Drug Administration (the FDA) or any other
Governmental Entity that has jurisdiction over the operations of
the Company and its Subsidiaries. Neither the Company nor any of
its Subsidiaries has any knowledge or reason to believe that the
FDA or any other Governmental Entity is considering such action.
(b) All material reports, documents, claims, Permits and
notices required to be filed with, maintained for or furnished
to the FDA or any other Governmental Entity by the Company, its
Subsidiaries, or, to the knowledge of the Company, any Person
that manufactures, develops, packages, processes, labels, tests
or distributes Medical Devices (as defined below) pursuant to a
development, distribution, commercialization, manufacturing,
supply, testing or other arrangement with the Company or any of
its Subsidiaries (each, a Company Partner) have been
so filed, maintained or furnished by the Company, its
Subsidiaries and, to the knowledge of the Company, the Company
Partners, as applicable. All such reports, documents, claims and
notices were complete and accurate in all material respects on
the date filed or furnished (or were corrected in or
supplemented by a subsequent filing), such that no liability
exists with respect to such filing.
(c) None of the Company, its Subsidiaries or, to the
knowledge of the Company, any Company Partner, has, since
January 1, 2005, received any FDA Form 483, notice of
adverse finding, Warning Letters, untitled letters or other
correspondence or notice from the FDA, or other Governmental
Entity (i) alleging or asserting noncompliance with any
applicable Laws or Permits and the Company and its Subsidiaries
have no knowledge or reason to believe that the FDA or any other
Governmental Entity is considering such action or
(ii) contesting the investigational device exemption,
premarket clearance or approval of, the uses of or the labeling
or promotion of any Medical Devices.
(d) No Permit issued to the Company, its Subsidiaries, or,
to the knowledge of the Company, any Company Partner, by the FDA
or any other Governmental Entity has, since January 1,
2005, been limited, suspended, modified or revoked and the
Company and its Subsidiaries have no knowledge or reason to
believe that the FDA or any other Governmental Entity is
considering such action.
(e) All preclinical animal testing and clinical trials and
studies being funded or conducted by, at the request of or on
behalf of the Company, a Company Partner or any of their
Subsidiaries are listed on Section 3.17(e) of the
Disclosure Letter and, to the knowledge of the Company, are
being conducted in material compliance with experimental
protocols, procedures and controls, accepted professional
scientific standards and applicable Law. The descriptions of the
studies, tests and preclinical and clinical trials listed on
Section 3.17(e) of the Disclosure Letter, including the
related results and regulatory status are accurate and complete
in all material respects. Each such study conducted by or on
behalf of the Company with respect to the Companys
products has been conducted or is being conducted such that the
resulting data was or, to the Companys knowledge, will be
acceptable for use in the Companys past or anticipated
regulatory filings, and
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to the Companys knowledge there is nothing included in
such data currently in existence that would cause any such
regulatory submission to be disallowed or delayed or that would
indicate that the relevant product will not perform as intended.
The Company and its Subsidiaries have not received any written
notices, correspondence or other communication from the FDA or
any other Governmental Entity since January 1, 2005
requiring the termination, suspension or material modification
of any clinical trials conducted by, or on behalf of, the
Company or its Subsidiaries, or in which the Company or its
Subsidiaries have participated, and the Company and its
Subsidiaries have no knowledge or reason to believe that the FDA
or any other Governmental Entity is considering such action.
(f) Each product or product candidate subject to the
Federal Food, Drug and Cosmetic Act (including the rules and
regulations of the FDA promulgated thereunder, the
FDCA) or comparable Laws in any
non-U.S. jurisdiction
that has been developed, manufactured, test distributed or
marked by or on behalf of the Company or any of its Subsidiaries
(each such product or product candidate, a Medical
Device), is being or has been developed, manufactured,
tested, distributed and marketed in compliance with all
applicable requirements under the FDCA and comparable Laws in
any
non-U.S. jurisdiction,
including those relating to investigational use, premarket
clearance or approval, registration and listing, good
manufacturing practices, good clinical practices, good
laboratory practices, labeling, advertising, record keeping and
filing of required reports. In addition, the Company and its
Subsidiaries and, to the knowledge of the Company, the Company
Partners, are in material compliance with all other applicable
FDA requirements and all other applicable Laws. The Company
maintains complete documentation showing that components
supplied to the Company are manufactured in accordance with the
Companys specifications therefor. The processes used by
the Company to produce the Companys products are
completely and accurately described in documents maintained by
the Company, and such documents have been made available to the
Parent. Such processes are adequate to ensure that commercial
quantities of the Companys products will conform to the
specifications established therefor and will be (i) of
merchantable quality, (ii) salable in the ordinary course
of business at prevailing market prices, (iii) free from
defects in design, material and workmanship, and
(iv) suitable for their intended purposes and efficacy
levels.
(g) The Company and its Subsidiaries have not either
voluntarily or involuntarily initiated, conducted or issued, or
caused to be initiated, conducted or issued, any recall, field
notifications, field corrections, market withdrawal or
replacement, safety alert, warning, dear doctor
letter, investigator notice, safety alert or other notice or
action relating to an alleged lack of safety, efficacy or
regulatory compliance of any product. The Company and its
Subsidiaries are not aware of any facts which are reasonably
likely to cause (1) the recall, market withdrawal or
replacement of any product sold or intended to be sold by the
Company or its Subsidiaries; (2) a change in the marketing
classification or a material change in the labeling of any such
products, or (3) a termination or suspension of the
marketing of such products.
(h) Neither the Company nor any of its Subsidiaries has
received any written notice that the FDA or any other
Governmental Entity has (i) commenced, or threatened to
initiate, any action to withdraw its investigational device
exemption, premarket clearance or premarket approval or request
the recall of any Medical Device, (ii) commenced, or
threatened to initiate, any action to enjoin manufacture or
distribution of any Medical Device or (iii) commenced, or
threatened to initiate, any action to enjoin the manufacture or
distribution of any Medical Device produced at any facility
where any Medical Device is manufactured, tested, processed,
packaged or held for sale.
(i) The Company and its Subsidiaries are and at all times
have been in material compliance with federal or state criminal
or civil Laws (including the federal Anti-Kickback Statute
(42 U.S.C.
§ 1320a-7(b)),
Stark Law (42 U.S.C. § 1395nn), False Claims Act
(42 U.S.C.
§ 1320a-7b(a)),
Health Insurance Portability and Accountability Act of 1996
(42 U.S.C. § 1320d et seq, and any comparable
state or local laws), and the regulations promulgated pursuant
to such Laws, or which are cause for civil or criminal penalties
or mandatory or permissive exclusion from Medicare
(Title XVIII of the Social Security Act), Medicaid
(Title XIX of the Social Security Act) or any other state
or federal health care program (each, a Program).
There is no civil, criminal, administrative or other action,
suit, demand, claim, hearing, investigation, proceeding, notice
or demand (a Proceeding) (i) excluding any
sealed Proceeding, pending or received, (ii) in the case of
a sealed Proceeding, to the knowledge of the Company, pending or
received, or (iii) in the case of any Proceeding, to
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the knowledge of the Company, threatened, in each case against
the Company or any of its Subsidiaries, that could reasonably be
expected to result in its exclusion from participation in any
Program or other third party payment programs in which the
Company or any of its Subsidiaries participates.
Section
3.18.
Insurance
.
Section
3.18 of the Disclosure Letter sets forth a true, correct and
complete list of all currently effective insurance policies
issued in favor of the Company or any of the Subsidiaries, or
pursuant to which the Company or any of the Subsidiaries is a
named insured or otherwise a beneficiary. With respect to each
such insurance policy, (i) the policy is in full force and
effect and all premiums due thereon have been paid,
(ii) neither the Company nor any of its Subsidiaries is in
breach or default, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action
which, with notice or the lapse of time or both, would
constitute such a breach or default, or permit termination or
modification of, any such policy, and (iii) to the
knowledge of the Company, no insurer on any such policy has been
declared insolvent or placed in receivership, conservatorship or
liquidation, and no notice of cancellation or termination has
been received with respect to any such policy. The reported
matters listed on Section 3.10 of the Disclosure Letter
have been accepted by the Companys insurer for coverage
and will be covered after the Effective Time, subject only to
payment of the deductible and the limits of the corresponding
policy as set forth on Section 3.18 of the Disclosure
Letter.
Section
3.19.
Customers
and Suppliers
.
Section 3.19 of the
Disclosure Letter contains a true and complete list of the ten
largest suppliers of the Company for the twelve month period
ended December 31, 2007. Since January 1, 2007, there
has not been any material adverse change in the business
relationship of the Company or its applicable Subsidiary with
(i) any of the Companys ten largest customers,
value-added resellers and distributors, for the twelve-month
period ended December 31, 2007, or (ii) any of the
Companys ten largest suppliers, in order of dollar volume,
for the twelve-month period ended December 31, 2007, or
(iii) any of the Companys suppliers of goods or
services that are not immediately available in commercial
quantities and on similar terms from an alternative reliable and
qualified source. To the Companys knowledge, neither the
Company nor any Subsidiary of the Company has received any
notice that (x) any such customer, value-added reseller,
distributor or supplier has any intention to terminate or modify
existing contracts with the Company or its applicable Subsidiary
or (y) any such supplier (A) expects in the
foreseeable future any material difficulty in obtaining, in the
quantity and quality and at a price consistent with past
practices, the raw materials, supplies or component parts
required for the manufacture, assembly or production of any
Company product, or (B) will not sell raw materials,
supplies, merchandise and other goods to the Company or any
Subsidiary of the Company at any time after the Effective Time
on terms and conditions substantially similar to those used in
its current sales to the Company and such Subsidiaries, subject
only to general and customary price increases.
Section
3.20.
Questionable
Payments
.
To the Companys knowledge,
none of the Company nor any of its Subsidiaries (nor any of
their respective directors, executives, representatives, agents
or employees) (a) has used or is using any corporate funds
for any illegal contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) has
used or is using any corporate funds for any direct or indirect
unlawful payments to any foreign or domestic government
officials or employees, (c) has violated or is violating
any provision of the Foreign Corrupt Practices Act of 1977,
(d) has established or maintained, or is maintaining, any
unlawful fund of corporate monies or other properties or
(e) has made any bribe, unlawful rebate, unlawful payoff,
influence payment, kickback or other unlawful payment of any
nature.
Section
3.21.
Related
Party Transactions
.
No current director,
officer, Affiliate or Associate of the Company or any of its
Subsidiaries (a) has outstanding any indebtedness to the
Company or any of its Subsidiaries, or (b) is otherwise a
party to, or directly or indirectly benefits from, any contract,
arrangement or understanding with the Company or any of its
Subsidiaries of a type that would be required to be disclosed
under Item 404 of
Regulation S-K
under United States federal securities laws.
Section
3.22.
Opinion
.
Prior
to the execution of this Agreement, the Company has received an
opinion from the Company Financial Advisor to the effect that,
as of the date thereof and based upon and subject to the matters
set forth therein, the Merger Consideration is fair to the
stockholders of the Company from a financial point of view, and
such opinion has not been withdrawn or modified. As soon as
practicable
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following the date hereof, an executed copy of the
aforementioned opinion will be made available to Parent for
informational purposes only.
Section
3.23.
Required
Vote of Company Stockholders
.
The only vote
of the stockholders of the Company required to adopt the
agreement of merger (as such term is used in Section 251 of
the Corporation Law) contained in this Agreement and approve the
Merger is the affirmative vote of the holders of not less than a
majority of the outstanding Shares in favor of the adoption of
the agreement of merger contained in this Agreement. No other
vote of the stockholders of the Company is required by Law, the
Certificate of Incorporation or Bylaws of the Company or
otherwise to adopt the agreement of merger contained in this
Agreement and approve the Merger.
Section
3.24.
State
Takeover Statutes Inapplicable; Rights
Agreement
.
The Board of Directors of the
Company has taken all action necessary so that (assuming
Section 4.06 is correct) Section 203 of the
Corporation Law is inapplicable to, and to the knowledge of the
Company no other Takeover Law is applicable to, the Merger and
the other transactions contemplated hereby. The Company does not
have in effect any poison pill or shareholder rights
plan.
Article IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Subject to Section 8.01(c), Parent and Merger Sub represent
and warrant to the Company as follows:
Section
4.01.
Organization
and Qualification
.
Each of Parent and Merger
Sub is a duly organized and validly existing corporation in good
standing under the Laws of the jurisdiction of its organization.
All of the issued and outstanding capital stock of Merger Sub is
owned directly or indirectly by Parent.
Section
4.02.
Authority for this Agreement
.
Each of
Parent and Merger Sub has all requisite corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and Merger Sub and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate
proceedings on the part of Parent and Merger Sub. This Agreement
has been duly and validly executed and delivered by Parent and
Merger Sub and (assuming the valid authorization, execution and
delivery of this Agreement by the Company) constitutes a legal,
valid and binding agreement of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance
with its terms.
Section
4.03.
Proxy
Statement
.
None of the information supplied
by Parent, Merger Sub or any Affiliate of Parent or Merger Sub
in writing, expressly for inclusion in the Proxy Statement will,
at the date of filing with the SEC, at the time the Proxy
Statement is mailed and at the time of the Special Meeting,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Neither Parent nor Merger Sub makes any representation or
warranty with respect to any information supplied by any other
Person that is included in the Proxy Statement.
Section
4.04.
Consents
and Approvals; No Violation
.
Neither the
execution and delivery of this Agreement by Parent or Merger Sub
nor the consummation of the transactions contemplated hereby
will (a) violate or conflict with or result in any breach
of any provision of the respective Certificates of Incorporation
or Bylaws (or other similar governing documents) of Parent or
Merger Sub, (b) require any consent, approval,
authorization or permit of, or filing with or notification to,
any Governmental Entity, except (i) the applicable
requirements of the Exchange Act and the rules and regulations
promulgated thereunder, or (ii) the filing and recordation
of appropriate merger documents as required by the Corporation
Law, (c) violate, conflict with or result in a breach of
any provision of, or require any consent, waiver or approval or
result in a default (or give rise to any right of termination,
cancellation, modification or acceleration or any event that,
with the giving of notice, the passage of time or otherwise,
would constitute a default or give rise to any such right) under
any of the terms, conditions or provisions of any note, license,
agreement, contract, indenture or other instrument or obligation
to which Parent or Merger Sub or any of their respective
Subsidiaries is a party
A-21
or by which Parent or any of its Subsidiaries or any of their
respective assets may be bound, or (d) violate any order,
writ, injunction, decree, statute, rule or regulation applicable
to Parent or any of its Subsidiaries (including Merger Sub) or
by which any of their respective assets are bound.
Section
4.05.
Litigation
.
As
of the date hereof, there is no claim, action, suit, litigation,
proceeding or governmental or administrative investigation or
action pending or, to the knowledge of Parent, threatened
against or relating to Parent or any of its Subsidiaries, except
such as would not reasonably be expected, individually or in the
aggregate, to prevent, materially impede or materially delay the
consummation of the transactions contemplated hereby. As of the
date hereof, neither Parent nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree,
except such as would not reasonably be expected, individually or
in the aggregate, to prevent, materially impede or materially
delay the consummation of the transactions contemplated hereby.
Section
4.06.
Interested
Stockholder
.
Neither Parent nor any of its
Subsidiaries is, or has been at any time during the period
commencing three years prior to the date hereof through the date
hereof, an interested stockholder of the Company, as
such term is defined in Section 203 of the Corporation Law.
Section
4.07.
Sufficient
Funds
.
Parent has, and will have at the
Effective Time, sufficient funds to consummate the transactions
contemplated hereby, including payment in full of all cash
amounts contemplated pursuant to Sections 1.06 and 2.04.
Section
4.08.
Brokers
.
The
Company will not be responsible for any brokerage,
finders, financial advisors or other fee or
commission payable to any broker, finder or investment banker in
connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent and
Merger Sub.
Article V
COVENANTS
Section
5.01.
Conduct
of Business of the Company
.
Except as
expressly provided for by this Agreement, during the period from
the date of this Agreement to the Effective Time, the Company
will conduct and will cause each of its Subsidiaries to conduct
its operations according to its ordinary and usual course of
business consistent with past practice, and the Company will use
and will cause each of its Subsidiaries to use its commercially
reasonable efforts to preserve intact its business organization,
to keep available the services of its current officers and
employees and to preserve the goodwill of and maintain
satisfactory relationships with those Persons having business
relationships with the Company or any of its Subsidiaries.
Without limiting the generality of the foregoing and except as
otherwise expressly provided for by this Agreement, during the
period specified in the preceding sentence, without the prior
written consent of Parent (which consent, in the case of
paragraph (d), (e), (o), (v) or (w) (solely to the extent
such paragraph (w) relates to paragraphs (d), (e),
(o) or (v)) shall not be unreasonably conditioned, withheld
or delayed), the Company will not and will not permit any of its
Subsidiaries to:
(a) except as set forth on Section 5.01(a) of the
Disclosure Letter, issue, sell, grant options or rights to
purchase, pledge, or authorize or propose the issuance, sale,
grant of options or rights to purchase or pledge, any Company
Securities or Subsidiary Securities, other than Shares issuable
upon exercise of the Existing Stock Options or Existing
Warrants, or pursuant to any other awards under the Stock Plans
disclosed in Section 3.02(a) hereof and outstanding on the
date hereof;
(b) acquire or redeem, directly or indirectly, or amend any
Company Securities or Subsidiary Securities;
(c) split, combine or reclassify its capital stock or
declare, set aside, make or pay any dividend or distribution
(whether in cash, stock or property) on any shares of its
capital stock (other than cash dividends paid to the Company or
one of its wholly owned Subsidiaries by a wholly owned
Subsidiary of the Company with regard to its capital stock or
other equity interests);
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(d) except as set forth in Section 5.01(d) of the
Disclosure Letter, (i) make any acquisition or disposition
or cause any acquisition or disposition to be made, by means of
a merger, consolidation, recapitalization or otherwise, of any
business, assets or securities or any sale, lease, encumbrance
or other disposition of assets or securities of the Company any
of its Subsidiaries or any third party, except for purchases or
sales of raw materials or inventory made in the ordinary course
of business and consistent with past practice, (ii) adopt a
plan of complete or partial liquidation, dissolution,
recapitalization or restructuring, (iii) enter into a
Material Contract or amend or terminate any Material Contract or
grant any release or relinquishment of any rights under any
Material Contract or noncompetition agreement with any of the
Companys employees, or (iv) enter into a new
agreement related to a clinical trial with regard to the
Companys products or amend or terminate any of the
agreements or protocols related to the clinical trials listed on
Section 3.17(e) of the Company Disclosure Letter;
(e) except as set forth in Section 5.01(e) of the
Disclosure Letter, incur, create, assume or otherwise become
liable or responsible for any long-term debt or short-term debt,
except for short-term debt incurred under debt instruments
outstanding as of the date of this Agreement in the ordinary
course of business consistent with past practice;
(f) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person except wholly owned
Subsidiaries of the Company;
(g) make any loans, advances or capital contributions to,
or investments in, any other Person (other than wholly owned
Subsidiaries of the Company);
(h) change in any material respect, any financial
accounting methods, principles or practices used by it, except
as required by GAAP;
(i) make or change any material Tax election, extend the
statute of limitations (or file any extension request) with any
Tax authority, amend any material federal, foreign, state or
local Tax return, or settle or compromise any material federal,
foreign, state or local income Tax liability;
(j) adopt any amendments to its Certificate of
Incorporation or Bylaws (or other similar governing documents)
or adopt a shareholder rights plan;
(k) except as set forth in Section 5.01(k) of the
Disclosure Letter, grant any stock-related, performance or
similar awards or bonuses;
(l) forgive any loans to employees, officers or directors
or any of their respective Affiliates or Associates;
(m) except as set forth in Section 5.01(m) of the
Disclosure Letter, enter into any new, or amend, terminate or
renew any existing, employment, severance, consulting or salary
continuation agreements with or for the benefit of any existing
or future officers, directors or employees (other than as
required by applicable Law), or grant any increases in the
compensation or benefits to officers, directors or employees
(other than normal increases to employees who are not directors
or officers in the ordinary course of business consistent with
past practices and that, in the aggregate, do not result in a
material increase in benefits or compensation expense of the
Company);
(n) make any deposits or contributions of cash or other
property to or take any other action to fund or in any other way
secure the payment of compensation or benefits under the Plans
or agreements subject to the Plans or any other plan, agreement,
contract or arrangement of the Company;
(o) terminate any employee having an annual base salary of
more than $150,000, except as a result of such employees
(i) voluntary resignation, (ii) failure to perform the
duties or responsibilities of his employment,
(iii) engaging in serious misconduct, (iv) being
convicted of or entering a plea of guilty to any crime or
(v) engaging in any other conduct constituting
cause (as defined in any applicable employment
agreement or services agreement) for such employees
termination as determined in the companys reasonable
discretion;
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(p) enter into any collective bargaining or similar labor
agreement;
(q) except as set forth in Section 5.01(q) of the
Disclosure Letter, adopt, amend or terminate any Plan or any
other bonus, severance, insurance pension or other employee
benefit plan or arrangement;
(r) incur any material capital expenditure or any
obligations, liabilities or indebtedness in respect thereof,
except for those contemplated by the capital expenditure budget
for the relevant fiscal year, which capital expenditure budget
has been provided or made available to Parent prior to the date
of this Agreement;
(s) settle any suit, action, claim, proceeding or
investigation;
(t) convene any regular or special meeting (or any
adjournment thereof) of the stockholders of the Company other
than the Special Meeting;
(u) take or omit to take any action that would cause any
issued patents or registered trademarks owned by the Company or
its Subsidiaries to lapse, be abandoned or canceled, or fall
into the public domain;
(v) pay any Third Party Expenses (or other amounts relating
to the sale or strategic alternative process to third parties to
which Third Party Expenses are owed); or
(w) offer, agree or commit, in writing or otherwise, to
take any of the foregoing actions.
Section
5.02.
No
Solicitation
.
(a) During the period from
the date of this Agreement to the Effective Time, the Company
shall not, and shall cause its Subsidiaries not to, and shall
direct and use its reasonable best efforts to cause its and
their respective officers, directors, employees, representatives
(including investment bankers, attorneys and accountants),
agents and Affiliates not to, directly or indirectly, solicit,
initiate, or knowingly encourage or participate in any way in
any discussions or negotiations with respect to any Acquisition
Proposal (as defined below), or provide any information to, or
afford any access to the properties, books or records of the
Company or any of its Subsidiaries to, or otherwise take any
action to assist or facilitate, any Person or group in respect
of, any Acquisition Proposal. Notwithstanding the foregoing and
subject to the prior execution by such Person or group of a
confidentiality agreement substantially in the form of, and with
terms at least as restrictive in all material respects on such
Person or group as, the Confidentiality Agreement is on Parent
(including the standstill provisions thereof), the
Company may, at any time prior to the adoption of the agreement
of merger contained in this Agreement by the requisite vote of
the holders of Shares, furnish information (so long as all such
information has previously been made available to Parent or
Merger Sub or is made available to Parent or Merger Sub prior to
or concurrently with the time such information is made available
to such Person or group) to or enter into discussions or
negotiations with any Person or group that has made an
unsolicited bona fide written Acquisition Proposal received
after the date hereof and not resulting from a breach of this
Section 5.02 only to the extent that (i) the Board of
Directors of the Company determines in good faith, after
consultation with its outside financial advisor and outside
legal counsel and after taking into account the legal,
financial, financing and other aspects of such unsolicited bona
fide written Acquisition Proposal, that such unsolicited bona
fide Acquisition Proposal constitutes, or is reasonably likely
to result in, a Superior Proposal, (ii) the Board of
Directors of the Company determines in good faith, after
receiving advice of outside counsel, that the failure to take
such action would constitute a breach of its fiduciary duties to
the stockholders of the Company under applicable Law and
(iii) the Company has provided Parent prior written notice
of its intent to take any such action at least one Business Day
prior to taking such action.
(b) The Company will promptly (and in any event within one
Business Day) (i) notify Parent if any such information is
requested or any such negotiations or discussions are sought to
be initiated, and (ii) communicate to Parent and Merger Sub
the identity of the Person or group making such request or
inquiry (the Potential Acquiror) and the material
terms of such request, inquiry or Acquisition Proposal and
(iii) shall provide copies of any written communications or
other documents received from or sent to or on behalf of the
Potential Acquiror that describe the financial or other material
terms of such Acquisition Proposal. The Company will keep Parent
and Merger Sub reasonably informed of the status of any such
discussions or
A-24
negotiations and shall promptly (and in any event within one
Business Day) notify Parent and Merger Sub of any modifications
to the financial or other material terms of any such request,
inquiry or Acquisition Proposal.
(c) The Company will, and will cause its Subsidiaries and
its and their respective officers, directors, employees,
representatives, agents and Affiliates to, immediately cease and
cause to be terminated any existing activities, discussions, or
negotiations with any Persons other than Parent and Merger Sub
conducted prior to the date hereof with respect to any
Acquisition Proposal and shall notify any such Person with whom
it has had any such discussions during the prior 180 days
that the Company is no longer seeking the making of any
Acquisition Proposal and thereby withdraws any request or
consent theretofore given to the making of an Acquisition
Proposal and shall request the return or destruction of any
nonpublic information provided to any such Person in connection
with any such activities, discussions or negotiations.
(d) Neither the Company nor the Board of Directors of the
Company shall (i) withdraw, modify or qualify, or propose
publicly to withdraw, modify or qualify, in a manner adverse to
Parent or Merger Sub, the approval of this Agreement, the
agreement of merger contained herein or the Merger or its
recommendation that the Companys stockholders adopt the
agreement of merger contained in this Agreement, in each case,
as set forth in Section 3.03(b), (ii) approve or
recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, (iii) unless the Board of Directors
of the Company determines in good faith, after receiving advice
of outside counsel, that the failure to take such action would
constitute a breach of its fiduciary duties to the stockholders
of the Company under applicable Law (x) release any third
party from any confidentiality or standstill agreement to which
the Company is a party or (y) fail to enforce to the
fullest extent possible or grant any waiver, request or consent
to any Acquisition Proposal under, any such agreement or
(iv) enter into any letter of intent, agreement in
principle, acquisition agreement or other agreement (other than
a confidentiality agreement entered into in accordance with
Section 5.02(a)) related to any Acquisition Proposal.
(e) Notwithstanding the foregoing, the Board of Directors
of the Company may withdraw, modify or qualify, or publicly
propose to withdraw, modify or qualify, in a manner adverse to
the Parent or Merger Sub, its recommendation that the
Companys stockholders adopt the agreement of merger
contained in this Agreement: (i) except if the Company has
received an Acquisition Proposal, in which case clause (ii)
shall govern, if the Board of Directors of the Company
determines in good faith, after receiving advice of outside
counsel, that the failure to take such action would constitute a
breach of its fiduciary duties to the stockholders of the
Company under applicable Law, or (ii) if (A) the
Company has received a bona fide unsolicited written Acquisition
Proposal that did not result from a violation of this
Section 5.02, (B) the Board of Directors of the
Company determines in good faith, after consultation with its
outside financial advisor and outside legal counsel and after
taking into account the legal, financial, financing and other
aspects of such unsolicited bona fide written Acquisition
Proposal, that such unsolicited bona fide written Acquisition
Proposal constitutes a Superior Proposal and that it intends to
accept or recommend such Acquisition Proposal as a Superior
Proposal, (C) the Board of Directors of the Company
determines in good faith, after receiving advice of outside
counsel, that the failure to take such action would constitute a
breach of its fiduciary duties to the stockholders of the
Company under applicable Law, (D) the Company provides
Parent prior written notice of its intent to take any such
action at least four Business Days prior to taking such action,
including all of the terms and conditions of such Acquisition
Proposal, (a Notice of Superior Proposal),
(E) during such four Business Day period, the Company
negotiates in good faith with Parent and Merger Sub (to the
extent that Parent and Merger Sub wish to negotiate) to enable
Parent and Merger Sub to make an offer that is at least as
favorable to the stockholders of the Company as such Acquisition
Proposal, (F) Parent and Merger Sub do not, within such
four Business Day period, make an offer that the Board of
Directors of the Company determines in good faith, after
consultation with its outside financial advisor and outside
legal counsel and after taking into account the legal,
financial, financing and other aspects of the proposal, to be at
least as favorable to the stockholders of the Company as such
Acquisition Proposal; provided, that, in the event of any
amendment to the financial or other material terms of such
Acquisition Proposal, the Company shall be required to deliver
to Parent and Merger Sub an additional written Notice of
Superior Proposal, and the four Business Day period referenced
above shall expire on the later of (x) three Business Days
after Parents and Merger Subs receipt of each such
additional Notice of Superior Proposal or (y) the original
expiration date of the four Business
A-25
Day period, and (G) the Companys Board of Directors,
after taking into account any modifications to the terms of this
Agreement and the Merger agreed to by Parent and Merger Sub
after receipt of such notice, continues to believe that such
Acquisition Proposal constitutes a Superior Proposal. Without
limiting any other rights of Parent and Merger Sub under this
Agreement in respect of any such action, any withdrawal,
modification or qualification by the Board of Directors of the
Company of the approval or recommendation of this Agreement, the
agreement of merger contained herein or the Merger or any
termination of this Agreement under Section 7.01(g) shall
not have any effect on the approvals of, and other actions
referred to herein for the purpose of causing Takeover Laws and
Section 7 of the Confidentiality Agreement to be
inapplicable to Parent, Merger Sub, this Agreement, the Merger
and the other transactions contemplated hereby, which approvals
and actions are irrevocable, in each case to the extent
permissible under applicable Law.
(f) Nothing contained in this Section 5.02 shall
prohibit the Company or its Board of Directors from taking and
disclosing to the Companys stockholders a position with
respect to a tender offer by a third party pursuant to
Rules 14d-9
and
14e-2(a)
promulgated under the Exchange Act if, in the good faith
judgment of the Board of Directors of the Company (after
consultation with outside legal counsel) failure to do so would
constitute a breach of its fiduciary duties to stockholders
under applicable Law, or otherwise violate its obligations under
applicable Law; provided, however, that no such action or
disclosure may have any of the effects set forth in
Section 5.02(d) or Section 5.02(e) unless the Company
shall have first complied with its obligations in
Section 5.02(e).
(g) For purposes of this Agreement,
(i) Acquisition Proposal means any offer or
proposal, or any indication of interest in making an offer or
proposal, made by a Person or group at any time which is
structured to permit such Person or group to acquire beneficial
ownership of any material portion of the assets (other than
inventory purchased in the ordinary course of business) of, or
at least 15% of the capital stock, equity interest in, or
businesses of, the Company and its Subsidiaries, taken as a
whole, pursuant to a merger, recapitalization, consolidation or
other business combination, sale of shares of capital stock or
equity interests, sale of assets, tender offer or exchange offer
or similar transaction, including any single or multi-step
transaction or series of related transactions, in each case
other than the Merger and (ii) Superior
Proposal means any unsolicited, bona fide Acquisition
Proposal (except the references therein to 15% shall
be replaced by 50%) made in writing, in respect of
which the Board of Directors of the Company has determined in
good faith, after consultation with its outside financial
advisor and outside legal counsel and after taking into account
the legal, financial, financing and other aspects of such
unsolicited bona fide written Acquisition Proposal, would result
in a transaction that is (x) more favorable, from a
financial point of view, to the stockholders of the Company than
the Merger (after taking into account any modifications to the
terms of this Agreement and the Merger agreed to by Parent and
Merger Sub) and (y) reasonably likely to be consummated
without unreasonable delay.
Section
5.03.
Access
to Information
.
(a) From and after the
date of this Agreement, subject to the requirements of
applicable Law, the Company will (i) give Parent and Merger
Sub and their authorized accountants, investment bankers,
counsel and other representatives reasonable access (during
regular business hours upon reasonable notice) to such
employees, plants, offices, warehouses and other facilities at
reasonable times and to such books, contracts, commitments and
records (including Tax returns) of the Company and its
Subsidiaries as Parent may reasonably request and instruct the
Companys and its Subsidiaries independent public
accountants to provide access to their work papers and such
other information as Parent or Merger Sub may reasonably
request, (ii) permit Parent and Merger Sub to make such
inspections as they may reasonably require, (iii) cause its
officers and those of its Subsidiaries to furnish Parent and
Merger Sub with such financial and operating data and other
information with respect to the business, properties and
personnel of the Company and its Subsidiaries as Parent or
Merger Sub may from time to time reasonably request,
(iv) use its commercially reasonable efforts to obtain when
available consistent with past practice all unblinded clinical
trial data with respect to the clinical trials listed on
Section 3.17(e) of the Disclosure Letter, and the Company
shall furnish all such data to Parent promptly upon receipt, and
(v) furnish promptly to Parent and Merger Sub a copy of
each report, schedule and other document filed or received by
the Company or any of its Subsidiaries during such period
pursuant to the requirements of the federal or state securities
Laws. Notwithstanding the foregoing, the Company shall not be
obligated to provide such access, inspections, data or
A-26
other information to the extent that to do so (x) may cause
a waiver of an attorney-client privilege or loss of attorney
work product protection, or (y) would violate a
confidentiality obligation to any Person; provided, however,
that that Company shall use its reasonable best efforts to
obtain any required consents to provide such access,
inspections, data or other information and take such other
action (such as the redaction of identifying or confidential
information, or by providing such access, inspections, data or
other information solely to outside counsel, or executing other
documents or taking other action reasonably requested by Parent
to avoid the loss of attorney-client privilege) as is necessary
to provide such access, inspections, data or other information
to Parent and Merger Sub in compliance with applicable law.
(b) Information obtained by Parent or Merger Sub pursuant
to Section 5.03(a) shall be subject to the provisions of
the Confidentiality Agreement.
Section
5.04.
Stockholder
Approval
.
The Company shall, as promptly as
reasonably practicable following the date of this Agreement,
establish a record date for, duly call, give notice of, convene
and hold a meeting of its stockholders (the Special
Meeting) for the purpose of obtaining the requisite
stockholder approval required in connection with this Agreement
and the Merger, and shall use its reasonable best efforts to
cause such meeting to occur as soon as reasonably practicable.
Except as specifically permitted by paragraphs (d) and
(e) of Section 5.02, the Board of Directors of the
Company shall continue to recommend that the Companys
stockholders vote in favor of the adoption of the agreement of
merger (as such term is used in Section 251 of the
Corporation Law) contained in this Agreement and the Company
shall use its reasonable best efforts to obtain from its
stockholders the stockholder vote in favor of the adoption of
the agreement of merger contained in this Agreement required to
consummate the Merger. Unless this Agreement shall have been
terminated in accordance with Section 7.01 (including, for
the avoidance of doubt, Section 7.01(g)), the Company shall
submit the agreement of merger contained in this Agreement to
its stockholders for adoption without regard to whether the
Board of Directors of the Company has withdrawn, modified or
qualified, or has publicly proposed to withdraw, modify or
qualify, in a manner adverse to Parent or Merger Sub, its
recommendation that the Companys stockholders adopt the
agreement of merger contained in this Agreement.
Section
5.05.
Reasonable
Best Efforts
.
(a) Subject to the terms
and conditions of this Agreement, each of the Company, Parent
and Merger Sub shall use its reasonable best efforts to cause
the Merger and the other transactions contemplated by this
Agreement to be consummated as promptly as reasonably
practicable on the terms and subject to the conditions hereof.
Without limiting the foregoing, (i) each of the Company,
Parent and Merger Sub shall use its reasonable best efforts:
(A) to make promptly any required submissions under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act) and any applicable foreign antitrust or competition
Laws (Foreign Antitrust Laws) which the Company or
Parent determines should be made, in each case, with respect to
this Agreement, the Merger and the other transactions
contemplated hereby, (B) to furnish information required in
connection with such submissions under the HSR Act or any
Foreign Antitrust Law, (C) to keep the other parties
reasonably informed with respect to the status of any such
submissions under the HSR Act or any Foreign Antitrust Law,
including with respect to: (1) the receipt of any
non-action, action, clearance, consent, approval or waiver,
(2) the expiration of any waiting period, (3) the
commencement or proposed or threatened commencement of any
investigation, litigation or administrative or judicial action
or proceeding under the HSR Act, FTC Act, Clayton Act, Sherman
Act or any Foreign Antitrust Law and (4) the nature and
status of any objections raised or proposed or threatened to be
raised under the HSR Act, FTC Act, Clayton Act, Sherman Act or
any Foreign Antitrust Law with respect to this Agreement, the
Merger or the other transactions contemplated hereby and
(D) to obtain all necessary actions or non-actions,
waivers, consents, clearances and approvals from any
Governmental Entity and (ii) Parent, Merger Sub and the
Company shall cooperate with one another: (A) in promptly
determining whether any filings are required to be or should be
made or consents, approvals, permits or authorizations are
required to be or should be obtained under any other
supranational, national, federal, state, foreign or local Law or
regulation or whether any consents, approvals or waivers are
required to be or should be obtained from other parties to loan
agreements or other contracts or instruments material to the
Companys business in connection with this Agreement, the
Merger or the consummation of the other transactions
contemplated
A-27
hereby and (B) in promptly making any such filings,
furnishing information required in connection therewith and
seeking to obtain timely any such consents, permits,
authorizations, approvals or waivers.
(b) The Company, Parent and Merger Sub shall:
(i) promptly notify the others of, and if in writing,
furnish the others with copies of (or, in the case of oral
communications, advise the others of the contents of) any
communication to such Person from a Governmental Entity and
permit the others to review and discuss in advance (and to
consider in good faith any comments made by the others in
relation to) any proposed written communication to a
Governmental Entity and (ii) keep the others reasonably
informed of any developments, meetings or discussions with any
Governmental Entity in respect of any filings, investigation, or
inquiry concerning the Merger, provided, that neither the
Company nor Parent shall be required to take any of the actions
described in clauses (i) and (ii) above, to the extent
that any Governmental Entity has expressly requested or
instructed the Company or Parent, as applicable, not to take any
such action.
(c) In furtherance and not in limitation of the foregoing,
if any objections are asserted with respect to the transactions
contemplated hereby under the HSR Act, FTC Act, Clayton Act,
Sherman Act or any Foreign Antitrust Law or if any
investigation, litigation or other administrative or judicial
action or proceeding is commenced or proposed or threatened to
be commenced challenging any of the transactions contemplated
hereby as violative of the HSR Act, FTC Act, Clayton Act,
Sherman Act or any Foreign Antitrust Law or which would
otherwise prevent, materially impede or materially delay the
consummation of the transactions contemplated hereby, each of
the Company, Parent and Merger Sub shall use its reasonable best
efforts to resolve, and to cooperate and assist the other
parties in resolving, any such objections, investigation or
litigation, action or proceeding. Notwithstanding anything to
the contrary in this Agreement, none of Parent, any of its
subsidiaries or the Surviving Corporation, will be required (and
the Company shall not, without the prior written consent of the
Parent, agree, but shall, if so directed by the Parent, agree,
effective after the Effective Time) to hold separate or divest
any of their respective assets or operations or enter into any
consent decree or licensing or other arrangement with respect to
any of their assets or operations or to otherwise take or commit
to take any action that limits its freedom of action with
respect to, or its ability to retain, as of and after the
Effective Time any businesses or assets of the Company, the
Parent or any of their respective affiliates.
(d) In the event that any litigation or other
administrative or judicial action is commenced challenging any
of the transactions contemplated hereby and such litigation,
action or proceeding seeks to prevent, materially impede or
materially delay the consummation of the Merger or any other
transaction contemplated by this Agreement, each of the Company,
Parent and Merger Sub shall cooperate with each other and use
its respective reasonable best efforts to contest and resist any
such litigation, action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent,
that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
(e) Neither Parent nor the Company shall, nor shall they
permit their respective Subsidiaries to, acquire or agree to
acquire any business, Person or division thereof, or otherwise
acquire or agree to acquire any assets (except in each case
pursuant to any agreement in effect on the date hereof), if the
entering into of a definitive agreement relating to or the
consummation of such acquisition, could reasonably be expected
to materially increase the risk of not obtaining the applicable
clearance, approval or waiver under the HSR Act or any Foreign
Antitrust Law with respect to the transactions contemplated by
this Agreement.
Section
5.06.
Indemnification
and Insurance
.
(a) Parent and Merger Sub
agree that all rights to indemnification, exculpation and
advancement of expenses existing in favor of the current or
former directors, officers and employees of the Company or any
of its Subsidiaries (each an Indemnified Person) as
provided in the Companys Certificate of Incorporation or
Bylaws, or the articles of organization, bylaws or similar
constituent documents of any of the Companys Subsidiaries,
or under any agreement listed on Section 3.16 of the
Disclosure Letter, as in effect as of the date hereof with
respect to matters occurring prior to or at the Effective Time
(including such matters that arise in whole or in part out of or
pertain to this Agreement or the transaction contemplated
hereby) and regardless of whether or not asserted or claimed
prior to or at or after the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period
of not less
A-28
than the statutes of limitations applicable to such matters.
From and after the Effective Time, Parent and the Surviving
Corporation shall, jointly and severally, honor and fulfill in
all respects such obligations.
(b) Prior to the Effective Time, the Company shall obtain,
in respect of acts or omissions occurring prior to or at the
Effective Time (including such acts or omissions in connection
with this Agreement and the transactions contemplated hereby),
policies of directors and officers liability
insurance (which may take the form of an extended reporting
period, endorsement or policy) covering the Company and other
Persons currently covered by the Companys existing
directors and officers liability insurance policies,
for a period of six years after the Effective Time, after
consultation with Parent and on terms at least as favorable to
the insured parties as the terms selected by Parent from the
alternatives described on Section 5.06(b) of the Disclosure
Letter and otherwise as reasonably acceptable to Parent, from
the Companys current insurer or another insurer reasonably
acceptable to Parent. From and after the Effective Time, the
Surviving Corporation will cause such policies to be maintained
in effect, for such period and on such terms so obtained by the
Company;
provided, however
, that (i) Parent may
substitute therefor coverage under Parents directors
and officers liability insurance or coverage under other
policies providing coverage on terms and conditions that are no
less advantageous to such persons than the Companys
existing policies; and (ii) neither Parent nor the
Surviving Corporation will be required, in order to maintain
such directors and officers liability insurance
policies or so substitute or so extend such coverage, to pay
aggregate premiums in excess of $430,000 (less any premium paid
by the Company prior to the Effective Time); and (iii) if
equivalent coverage cannot be obtained or can be obtained only
by paying aggregate premiums in excess of such amount, the
Surviving Corporation shall only be required to obtain coverage
in the greatest amount and scope as can be obtained by paying
aggregate premiums equal to such amount. This covenant shall not
be considered satisfied by the Company in all material respects
if the Company fails to obtain the insurance described in the
first sentence of this Section.
(c) Notwithstanding anything herein to the contrary, if any
Indemnified Person notifies the Surviving Corporation on or
prior to the sixth anniversary of the Effective Time that a
claim, action, suit, proceeding or investigation (whether
arising before, at or after the Effective Time) has been made
against such Indemnified Person, the provisions of this
Section 5.06 shall continue in effect until the final
disposition of such claim, action, suit, proceeding or
investigation.
(d) This Section 5.06 shall survive the consummation
of the Merger and is intended to benefit, and shall be
enforceable by, the Indemnified Persons and their respective
heirs and legal representatives.
(e) In the event that the Surviving Corporation or Parent
or any of their respective successors or assigns
(i) consolidates with or merges into any other Person and
shall not be the continuing or surviving Person of such
consolidation or merger or (ii) transfers of conveys all or
substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation or
Parent, as the case may be, shall succeed to the obligations set
forth in this Section 5.06. In addition , the Surviving
Corporation shall not distribute, sell, transfer or otherwise
dispose of any of its assets in a manner that would reasonably
be expected to render the Surviving Corporation unable to
satisfy its obligations under this Section 5.06.
Section
5.07.
Employee
Matters
.
(a) From and for the twelve
(12) month period following the Effective Time, except as
provided herein Parent shall provide, or shall cause to be
provided, to the employees of the Company and its Subsidiaries
as of the date hereof (the Company Employees)
compensation and employee benefits that are substantially
comparable, in the aggregate, to those offered by Parent and its
Subsidiaries generally pursuant to Parents and its
Subsidiaries employee benefit plans as may be in effect
from time to time, to the same extent as similarly situated
employees of Parent.
(b) With respect to each employee benefit plan of Parent
(Parent Benefit Plan) in which the Company Employees
participate after the Effective Time, for purposes of
determining vesting and entitlement to benefits, including for
severance benefits and vacation entitlement, service with the
Company (or predecessor employers to the extent the Company
provides past service credit) shall be treated as service with
Parent; provided, that such service shall not be recognized to
the extent that such recognition would result in a duplication
of benefits or to the extent that such service was not
recognized under the applicable Company
A-29
Plan. If applicable and to the extent possible under Parent
Benefit Plans (as reasonably amended to the extent necessary in
accordance with applicable law), Parent shall cause any and all
pre-existing condition (or actively at work or similar)
limitations, eligibility waiting periods and evidence of
insurability requirements under Parent Benefit Plans to be
waived with respect to such Company Employees and their eligible
dependents and shall provide them with credit for any
co-payments, deductibles, and offsets (or similar payments) made
during the plan year including the Effective Time for the
purposes of satisfying any applicable deductible,
out-of-pocket,
or similar requirements under any Parent Benefit Plans in which
they are eligible to participate after the Effective Time.
(c) Prior to the Effective Time, the Company shall provide
to Parent a true, complete and accurate list of all employees
that have been terminated by the Company or any of its
Subsidiaries since the date of this Agreement and through the
Effective Time. Nothing in this Agreement shall be deemed to
limit or otherwise affect the right of Parent or the Surviving
Corporation (i) to terminate employment or change the place
of work, responsibilities, status or description of any employee
or group of employees, or (ii) to terminate any employee
benefit plan without establishing a replacement plan to the
extent the Company would have had such right prior to the
Effective Time, in each case as Parent or the Surviving
Corporation may determine in its discretion.
(d) No provision in this Agreement shall modify or amend
any Plan unless this Agreement explicitly states that the
provision amends such Plan. This shall not prevent
the parties entitled to enforce this Agreement from enforcing
any provision in this Agreement, but no other party shall be
entitled to enforce any provision in this Agreement on the
grounds that it is an amendment to such Plan. If a party not
entitled to enforce this Agreement brings a lawsuit or other
action to enforce any provision in this Agreement as an
amendment to such Company Plan and that provision is construed
to be such an amendment despite not being explicitly designated
as one in this Agreement, that provision shall lapse
retroactively as of its inception, thereby precluding it from
having any amendatory effect. Notwithstanding anything herein to
the contrary, Parent shall take no action to amend, modify or
terminate, and Parent shall take all action necessary to assume
the Companys obligations under the employment, retention
and severance agreements set forth in Section 3.16(a)(xv)
of the Disclosure Letter.
Section
5.08.
Takeover
Laws
.
The Company shall take all reasonable
steps to exclude the applicability of, or to assist in any
challenge by Parent or Merger Sub to the validity or
applicability to the Merger or any other transaction
contemplated by this Agreement of, any Takeover Laws.
Section
5.09.
Proxy
Statement
.
The Company shall prepare and file
with the SEC, with the assistance of and subject to prior
consultation with Parent, as promptly as reasonably practicable
after the date hereof, a preliminary Proxy Statement (the
Preliminary Proxy Statement) relating to the Merger
as required by the Exchange Act and the rules and regulations
thereunder. Each of Parent and Merger Sub shall furnish to the
Company the information relating to it required by the Exchange
Act and the rules and regulations thereunder to be included in
the Preliminary Proxy Statement. The Company shall obtain and
furnish the information required to be included in the
Preliminary Proxy Statement, shall provide Parent with, and
consult with Parent regarding, any comments that may be received
from the SEC or its staff with respect thereto, shall, subject
to prior consultation with Parent, respond promptly to any such
comments made by the SEC or its staff with respect to the
Preliminary Proxy Statement, shall cause the Proxy Statement to
be mailed to the Companys stockholders at the earliest
reasonably practicable date and shall use its reasonable best
efforts (subject to Section 5.02) to obtain the necessary
approval of the Merger by its stockholders. If, at any time
prior to the Special Meeting, any information relating to the
Company, Parent, Merger Sub, any of their respective Affiliates,
this Agreement or the transactions contemplated hereby
(including the Merger), should be discovered by the Company or
Parent which should be set forth in an amendment or supplement
to the Proxy Statement, so that the Proxy Statement shall not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the
party that discovers such information shall promptly notify the
other party, and an appropriate amendment or supplement
describing such information shall be filed with the SEC, and to
the extent required by applicable Law, disseminated to the
stockholders of the Company. Except as Section 5.02
expressly permits, the Proxy Statement shall include
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the recommendation of the Board of Directors of the Company that
the stockholders adopt the agreement of merger set forth in this
Agreement.
Section
5.10.
Notification
of Certain Matters
.
The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to
the Company, of the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which is reasonably likely
(a) in the case of the Company, to cause any representation
or warranty of the Company contained in Sections 3.03,
3.04, 3.05, 3.10 or 3.17 of this Agreement (disregarding any
materiality or Material Adverse Effect qualification contained
therein) to be untrue or inaccurate in any material respect if
made as of any time at or prior to the Effective Time or
(b) to result in any material failure of such party to
comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied hereunder; provided, however, that
the delivery of any notice pursuant to this Section 5.10
shall not limit or otherwise affect the remedies available
hereunder to any of the parties receiving such notice.
Section
5.11.
Securityholder
Litigation
.
The Company shall give Parent the
opportunity to participate in the defense or settlement of any
securityholder litigation against the Company
and/or
its
directors relating to the transactions contemplated in this
Agreement, and no settlement shall be agreed to without
Parents prior consent.
Section
5.12.
Subsequent
Filings
.
Until the Effective Time, the
Company will use commercially reasonable efforts to timely file
with the SEC each form, report and document required to be filed
by the Company under the Exchange Act and will promptly make
available to Parent copies of each such report filed with the
SEC.
Section
5.13.
Pending
Litigation
.
Prior to the Effective Time, the
Company shall obtain and deliver to Parent a letter executed by
an authorized representative of its products liability insurance
provider, to the effect that the reported matters listed on
Section 3.10 of the Disclosure Letter have been accepted by
such insurance provider for coverage and will be covered after
the Effective Time, subject only to payment of the deductible
and the limits of the corresponding policy as set forth on
Section 3.18 of the Disclosure Letter. This covenant shall
not be considered satisfied by the Company in all material
respects if the Company fails to obtain the letter described in
the first sentence of this Section.
Section
5.14.
Press
Releases
.
Each of the Company, Parent and
Merger Sub agrees that no public release or announcement
concerning the transactions contemplated hereby shall be issued
by any party without the prior written consent of the Company
and Parent (which consent shall not be unreasonably withheld,
conditioned or delayed), except as such release or announcement
may be required by Law or the rules or regulations of any
applicable United States or
non-U.S. securities
exchange or regulatory or governmental body to which the
relevant party is subject or submits, in which case the party
required to make the release or announcement shall use its
reasonable best efforts to allow each other party reasonable
time to comment on such release or announcement in advance of
such issuance, it being understood that the final form and
content of any such release or announcement, to the extent so
required, shall be at the final discretion of the disclosing
party.
Section
5.15.
Rule 16b-3
.
Notwithstanding
anything herein to the contrary, prior to the Effective Time,
the Company shall be permitted to take such steps as may be
reasonably necessary or advisable hereto to cause disposition of
Company equity securities (including derivative securities)
pursuant to the transactions contemplated by this Agreement by
each individual who is a director or officer of the Company to
be exempt under
Rule 16b-3
promulgated under the Exchange Act in accordance with that
certain No-Action Letter dated January 12, 1999 issued by
the SEC regarding such matters.
Section
5.16.
Stock
Options and Warrants
.
The Company shall,
prior to the Effective Time, obtain statements signed by each
holder of Existing Stock Options and Existing Warrants
confirming the exercise price and number of shares with respect
to each Existing Stock Option and Warrant held by such holder
and confirming that such Existing Stock Option and Warrant will
terminate as provided in Section 2.04, and take all other
action requested by Parent to effect the treatment of Existing
Stock Options and Existing Warrants set forth herein. This
covenant shall not be considered satisfied in all material
respects if the Company fails to
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(i) obtain each such statement, (ii) comply fully with
each advance notice obligation relating to Existing Stock
Options or Existing Warrants, or (iii) deliver evidence of
each such signed statement and notice to Parent. Any payment
made pursuant hereto to the holder of any Existing Stock Option
or Existing Warrant shall be reduced by any required income or
employment Tax withholding. To the extent that any amounts are
so withheld, those amounts shall be treated as having been paid
to the holder of such Existing Stock Option or Existing Warrant
for all purposes under this Agreement. Parent shall cause the
Surviving Corporation, or the Paying Agent, to make such
payments in respect of the Existing Stock Options and Existing
Warrants as promptly as practicable following the Effective Time
by wire transfers or checks payable to the holders of such
Existing Stock Options and Existing Warrants. The Company shall
take all requisite action so that the Stock Plan shall be
terminated as of the Effective Time.
Section
5.17.
Purchase
of Auction Rate Securities
.
On May 15,
June 10, July 25, August 23, and
September 18, 2008, unless this Agreement has been
terminated or the Effective Time has occurred prior to such
date, Parent shall purchase from the Company, and the Company
shall sell to Parent, on each such date, between $750,000 and
$1,100,000 par value of auction rate securities owned by
the Company, at purchase prices between approximately
86.7 percent and 88.2 percent of the par value thereof
(plus accrued but unpaid interest), as set forth on
Section 5.17 of the Disclosure Letter. Promptly following
delivery of such securities to an account designated by Parent
and delivery of third party consents or waivers, if any, that
are required to effect the transfer and sale, Parent shall pay
the purchase price set forth on Section 5.17 of the
Disclosure Letter with respect to such securities, by wire
transfer of immediately available funds to an account designated
by the Company.
Article VI
CONDITIONS
TO CONSUMMATION OF THE MERGER
Section
6.01.
Conditions
to Each Partys Obligation To Effect the
Merger
.
The respective obligations of the
parties to effect the Merger shall be subject to the
satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a)
Stockholder Approval.
The agreement
of merger contained in this Agreement shall have been adopted by
the requisite affirmative vote of the holders of Shares entitled
to vote thereon.
(b)
No Injunctions or Restraints;
Illegality.
No order, injunction or decree issued
by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the
Merger contemplated by this Agreement shall be in effect. No
statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any
Governmental Entity that prohibits or makes illegal consummation
of the Merger.
(c)
Required Antitrust Clearances.
Any
applicable waiting period (or extension thereof) relating to the
Merger under the Foreign Antitrust Laws set forth on
Section 6.01(c) of the Disclosure Letter and the HSR Act
(the Required Antitrust Clearances) shall have
expired or been terminated and any approvals or clearances
required thereunder shall have been obtained.
Section
6.02.
Conditions
to Obligations of Parent and Merger Sub
.
The
obligation of Parent and Merger Sub to effect the Merger is also
subject to the satisfaction, or waiver by Parent, at or prior to
the Effective Time, of the following conditions:
(a)
Representations and
Warranties.
Subject to the standard set forth in
Section 8.01(b), the representations and warranties of the
Company set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing as though
made on and as of the Closing (except that representations and
warranties that by their terms speak specifically as of the date
of this Agreement or another date shall be true and correct as
of such date) and Parent shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer
or the Chief Financial Officer of the Company to the foregoing
effect.
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(b)
Performance of Obligations of the
Company.
The Company shall have performed or
complied in all material respects all obligations required to be
performed or complied with by it under this Agreement at or
prior to the Effective Time; and Parent shall have received a
certificate signed on behalf of the Company by the Chief
Executive Officer or the Chief Financial Officer of the Company
to such effect.
(c)
No Material Adverse Effect.
No
Material Adverse Effect shall have occurred since the date of
this Agreement.
(d)
Appraisal Rights.
The aggregate
number Dissenting Shares shall not equal or exceed ten percent
(10%) of the number of Shares outstanding as of the record date
for the Special Meeting.
(e)
Third Party Expenses.
Parent shall
have received final statements reflecting all Third Party
Expenses, including unpaid amounts, from the third parties who
provided legal, accounting, investment banking, broker,
financial advisory, consulting or other services to the Company
in connection with this Agreement or the transactions
contemplated hereby.
(f)
Indebtedness.
Parent shall have
received a pay-off letter from Lighthouse Capital (and any other
lender pursuant to debt arrangements entered into after the date
hereof in accordance with Section 5.01) showing all
payments required to retire the Companys indebtedness and
release all related liens and to cancel warrants held by
Lighthouse Capital Partners (or any such other lender) as of the
Effective Time and providing for termination of all agreements
with the Company.
Section
6.03.
Conditions
to Obligations of the Company
.
The obligation
of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company at or prior to the
Effective Time of the following conditions:
(a)
Representations and
Warranties.
Subject to the standard set forth in
Section 8.01(c), the representations and warranties of Parent
and Merger Sub set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing
as though made on and as of the Closing (except that
representations and warranties that by their terms speak
specifically as of the date of this Agreement or another date
shall be true and correct as of such date) and the Company shall
have received a certificate signed on behalf of Parent by a duly
authorized executive officer of Parent to the foregoing effect.
(b)
Performance of Obligations of Parent and Merger
Sub.
Parent and Merger Sub shall have performed
or complied in all material respects all obligations required to
be performed or complied with by them under this Agreement at or
prior to the Effective Time, and the Company shall have received
a certificate signed on behalf of Parent by a duly authorized
executive officer of Parent to such effect.
Article VII
TERMINATION;
AMENDMENT; WAIVER
Section
7.01.
Termination
.
This
Agreement may be terminated and the Merger may be abandoned at
any time (notwithstanding adoption of the agreement of merger
contained in this Agreement by the holders of the Company) prior
to the Effective Time (with any termination by Parent also being
an effective termination by Merger Sub):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent if any court of
competent jurisdiction or other Governmental Entity shall have
issued an order, decree or ruling, or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement
pursuant to this Section 7.01(b) shall have used its
reasonable best efforts to contest, appeal and remove such
order, decree, ruling or action and shall not be in violation of
Section 5.05 or otherwise in material violation of this
Agreement;
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(c) by either the Company or Parent, if the Effective Time
shall not have occurred on or before the End Date; provided,
however, that the right to terminate under this Section 7.01(c)
shall not be available to any party whose failure to fulfill in
any material respect any covenants and agreements of such party
set forth in this Agreement has caused or resulted in the
failure of the Effective Time to occur on or before the End Date;
(d) by either the Company (provided that it shall not be in
material breach of any of its obligations under
Section 5.02) or Parent, if the requisite affirmative vote
of the holders of Shares in favor of the adoption of the
agreement of merger contained in this Agreement shall not have
been obtained at the Special Meeting or at any adjournment or
postponement thereof, in each case at which a vote on such
adoption was taken;
(e) by either Parent or the Company, if there shall have
been a breach of any of the covenants or agreements (including
Section 5.02 and Section 5.04, under circumstances in
which Section 7.01(f)(i) is not applicable) or any of the
representations or warranties set forth in this Agreement on the
part of the Company, in the case of a termination by Parent, or
on the part of Parent or Merger Sub, in the case of a
termination by the Company, which breach, either individually or
in the aggregate, would result in the failure of the conditions
set forth in Section 6.02 or Section 6.03, as the case
may be, and which is not cured within 30 days following
written notice to the party committing such breach or by its
nature or timing cannot be cured;
(f) by Parent, if (i) the Company shall have knowingly
and materially breached its obligations under Section 5.02
or Section 5.04, or (ii) the Board of Directors of the
Company shall have taken any of the actions set forth in
Section 5.02(d) (i) through (iv) (or, in the case of
clause (ii) thereof, resolved to take any such action),
whether or not permitted by the terms hereof;
(g) by the Company at any time prior to the adoption of the
Agreement by the requisite vote of the holders of Shares if,
(i) the Company has determined that a bona fide,
unsolicited, written Acquisition Proposal constitutes a Superior
Proposal, (ii) the Companys Board of Directors, after
taking into account any modifications to the terms of this
Agreement and the Merger agreed to by Parent and Merger Sub
following receipt of a Notice of Superior Proposal, continues to
believe that such Acquisition Proposal constitutes a Superior
Proposal and (iii) on the date of such termination, the
Company enters into a definitive agreement for the transaction
contemplated by such Superior Proposal; provided, that the
termination described in this Section 7.01(g) shall not be
effective unless and until the Company shall have paid to Parent
the Fee described in Section 7.03(b)(v); or
(h) by Parent, if the Company, any Subsidiary of the
Company or any of their respective representatives shall have
engaged in discussions with any other Person in connection with
an Acquisition Proposal submitted in compliance with the
provisions of Section 5.02 that the Board of Directors has
not determined constitutes a Superior Proposal in accordance
with Section 5.02(e), and the Company, its Subsidiary and
such representatives shall not have ceased all discussions with
such Person prior to the later of (i) the end of the
30th Business Day following the first date of discussions
with such Person in connection with such Acquisition Proposal
and (ii) the end of the 10th Business Day following
the first date of discussions with any other Person in
connection with another Acquisition Proposal submitted by such
other Person in compliance with the provisions of
Section 5.02 prior to such 30th Business Day.
The party desiring to terminate this Agreement pursuant to
clause (b), (c), (d), (e), (f), (g) or (h) of this
Section 7.01 shall give written notice of such termination
to the other party in accordance with Section 8.04,
specifying the provision or provisions hereof pursuant to which
such termination is effected.
Section
7.02.
Effect
of Termination
.
If this Agreement is
terminated and the Merger is abandoned pursuant to
Section 7.01, this Agreement, except for the provisions of
Sections 5.03(b), 5.14, 7.02, 7.03 and Article VIII,
shall forthwith become void and have no effect, without any
liability on the part of any party or its directors, officers or
stockholders. Nothing in this Section 7.02 shall relieve
any party to this Agreement of liability for any willful breach
of this Agreement occurring prior to such termination.
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Section
7.03.
Fees
and Expenses
.
(a) Whether or not the
Merger is consummated, except as otherwise specifically provided
herein, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
(b) The Company shall pay to Parent the Fee if this
Agreement is terminated as follows:
(i) if (A) either party shall terminate this Agreement
pursuant to Section 7.01(c) without the Special Meeting
having been convened, (B) an Acquisition Proposal shall
have been made public and not irrevocably withdrawn prior to the
date specified in Section 7.01(c), and (C) any Alternative
Transaction is consummated, or an agreement in principle, letter
of intent, acquisition agreement or other similar agreement with
respect to any Alternative Transaction (a Company
Acquisition Agreement) is entered into, within
12 months after the date of such termination, then the
Company shall pay the Fee on the date of such consummation or
the execution of such Company Acquisition Agreement, whichever
is earlier;
(ii) if (A) this Agreement is terminated by Parent or
the Company pursuant to either (x) Section 7.01(d) or
(y) Section 7.01(c) where the Special Meeting has been
convened but the requisite affirmative vote of the holders of
Shares has not been obtained at the Special Meeting and
(B) an Acquisition Proposal shall have been made public and
not irrevocably withdrawn prior to the taking of the vote at the
Special Meeting, the Company shall reimburse Parent for
Parents reasonably documented out-of-pocket fees and
expenses (including reasonable legal fees and expenses) actually
incurred by Parent on or prior to the termination of this
Agreement in connection with the transactions contemplated by
this Agreement (Parent Expenses), as directed by
Parent in writing, which amount shall not exceed
$1 million; and if any Alternative Transaction is
consummated, or a Company Acquisition Agreement is entered into,
within 12 months after the date of such termination, then
the Company shall pay an amount equal to the Fee less the Parent
Expenses on the date of such consummation or the execution of
such Company Acquisition Agreement, whichever is earlier;
(iii) if (A) this Agreement is terminated by Parent
pursuant to Section 7.01(e) or Section 7.01(f)(i), as
the result of a knowing and material breach by the Company of
its covenants or agreements set forth in this Agreement,
(B) an Acquisition Proposal shall have been made known to
the Company or its stockholders and not irrevocably withdrawn
prior to the occurrence of such breach, and (C) if any
Alternative Transaction is consummated, or a Company Acquisition
Agreement is entered into, within 12 months after the date
of such termination, then the Company shall pay an amount equal
to the Fee on the date of such consummation or the execution of
such Company Acquisition Agreement, whichever is earlier;
(iv) if this Agreement is terminated by Parent pursuant to
Section 7.01(f)(ii), then the Company shall pay the Fee on
the Business Day immediately following such termination;
(v) if this Agreement is terminated by the Company pursuant
to Section 7.01(g), then the Company shall pay the Fee
prior to or simultaneously with the termination; or
(vi) if this Agreement is terminated by Parent pursuant to
Section 7.01(h), and any Alternative Transaction is
consummated, or a Company Acquisition Agreement is entered into,
within 12 months after the date of such termination, then
the Company shall pay the Fee on the date of such consummation
or the execution of such Company Acquisition Agreement,
whichever is earlier.
For purposes of this Section 7.03(b), an Alternative
Transaction means any transaction of the type referred to
in the definition of Acquisition Proposal and an
Acquisition Proposal has the meaning specified in
Section 5.02(g)(i) except that the references therein to
15% shall be replaced by 50%.
(c) The Company acknowledges that the agreements contained
in this Section 7.03 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, Parent would not have entered into this
Agreement; accordingly, if the Company fails to promptly pay any
amounts due pursuant to this Section 7.03 and, in order to
obtain such payment, Parent commences a suit which results in a
judgment against the Company for the amount of the Fee set forth
in this Section 7.03, the Company shall pay to Parent
Parents reasonable costs and expenses (including
reasonable attorneys fees and expenses of enforcement) in
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connection with such suit, together with interest on the amounts
owed at the prime lending rate prevailing at such time, as
published in the Wall Street Journal, plus two percent per annum
from the date such amounts were required to be paid until the
date actually received by Parent. The Company acknowledges that
it is obligated to pay to Parent any amounts due pursuant to
this Section 7.03 whether or not the stockholders of the
Company have adopted the agreement of merger contained in this
Agreement.
Section
7.04.
Amendment
.
To
the extent permitted by applicable Law, this Agreement may be
amended by the Company, Parent and Merger Sub, at any time
before or after adoption of this Agreement by the stockholders
of the Company but, after any such stockholder approval, no
amendment shall be made which decreases the Merger Consideration
or which adversely affects the rights of the Companys
stockholders hereunder without the approval of the stockholders
of the Company. This Agreement may not be amended, changed,
supplemented or otherwise modified except by an instrument in
writing signed on behalf of all of the parties.
Section
7.05.
Extension;
Waiver; Remedies
.
(a) At any time prior
to the Effective Time, each party hereto may (i) extend the
time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in
the representations and warranties contained herein by any other
applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or
(iii) waive compliance by any party with any of the
agreements or conditions contained herein. Any agreement on the
part of any party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf
of such party.
(b) All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise
of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by
such party. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or to
insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right,
power or remedy or to demand such compliance.
Article VIII
MISCELLANEOUS
Section
8.01.
Representations
and Warranties
.
(a) The representations
and warranties made in Articles III and IV shall not
survive beyond the Effective Time.
(b) For purposes of determining whether any representation
or warranty of the Company contained in Article III is
untrue or incorrect for any purpose under this Agreement,
including for purposes of determining whether the conditions set
forth in Section 6.02(a) have been satisfied, the following
standards shall apply:
(i) any representation or warranty contained in
Article III (other than those referred to in clause (ii),
(iii), (iv) or (v) below) shall be deemed to be untrue
or incorrect only if the fact, circumstance, change or event
that resulted in such untruth or incorrectness, individually or
when taken together with all other facts, circumstances, changes
or events that result in such representation or warranty or any
other representation or warranty contained in Article III
(other than those referred to in clause (ii), (iii),
(iv) or (v) below) being untrue or incorrect, has had
or would be reasonably likely to have a Material Adverse Effect
with respect to the Company (disregarding for this purpose any
materiality qualification contained in any such representation
or warranty);
(ii) any representation and warranty contained in the first
sentence of Section 3.01 (Organization and Qualification),
Section 3.03 (Authority for this Agreement; Board Action),
Section 3.02(a) (Capitalization) (other than those referred
to in clause (iii) below), the first sentence of
Section 3.22 (Opinion) or the last sentence of
Section 3.24 (State Takeover Statues Inapplicable; Rights
Agreement) shall be deemed to be untrue and incorrect only if
such representation and warranty is untrue or incorrect in any
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material respect (disregarding for this purpose any materiality
qualification contained in any such representation or warranty);
(iii) The representations and warranties contained in the
first four sentences of Section 3.02(a) (Capitalization)
shall be deemed to be untrue and incorrect if the aggregate
number of shares set forth therein is more than one percent less
than the aggregate number of shares that should correctly have
been set forth therein; and
(iv) Any representation or warranty contained in
Section 3.06(a) (Absence of a Material Adverse Effect)
shall be deemed to be untrue and incorrect if such
representation or warranty is untrue or incorrect in any respect.
(c) For purposes of determining whether any representation
or warranty of the Parent and Merger Sub contained in
Article IV is untrue or incorrect for any purpose under
this Agreement, including for purposes of determining whether
the conditions set forth in Section 6.03 have been
satisfied, the following standard shall apply: any
representation or warranty of Parent or Merger Sub contained in
Article IV shall be deemed to be untrue or incorrect only
if the fact, circumstance, change or event that resulted in such
untruth or incorrectness, individually or when taken together
with all other facts, circumstances, changes or events that
result in such representation or warranty or any other
representation or warranty contained in Article IV being
untrue or incorrect, has had or would be reasonably likely to
have a material adverse effect on the ability of Parent or
Merger Sub to timely consummate the Merger.
Section
8.02.
Entire
Agreement; Assignment
.
This Agreement
supersedes all oral agreements and understandings and all
written agreements prior to the date hereof between or on behalf
of the parties with respect to the subject matter hereof, other
than the Confidentiality Agreement which shall remain in full
force and effect. This Agreement shall not be assigned by any
party by operation of law or otherwise without the prior written
consent of the other parties, provided, that Parent or Merger
Sub may assign any of their respective rights and obligations to
any direct or indirect Subsidiary of Parent, but no such
assignment shall relieve Parent or Merger Sub, as the case may
be, of its obligations hereunder.
Section
8.03.
Enforcement
of the Agreement; Jurisdiction
.
(a) The
parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and
provisions of this Agreement in the chancery courts of the State
of Delaware or in any Federal court located in the State of
Delaware, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit itself to the
personal jurisdiction of any such court with respect to any
dispute arising out of, relating to or in connection with this
Agreement or any transaction contemplated hereby, including the
Merger, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for
leave from any such court, and (iii) agrees that it will
not bring any action arising out of, relating to or in
connection with this Agreement or any transaction contemplated
by this Agreement, including the Merger, in any court other than
any such court. The parties irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions
contemplated hereby in the chancery courts of the State of
Delaware or in any Federal court located in the State of
Delaware, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has
been brought in an inconvenient forum. Each of the Company,
Parent and Merger Sub hereby agrees that service of any process,
summons, notice or document by U.S. registered mail to the
respective addresses set forth in Section 8.04 shall be
effective service of process for any proceeding arising out of,
relating to or in connection with this Agreement or the
transactions contemplated hereby, including the Merger.
(b) EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE
TO
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THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS,
AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS
SECTION 8.03(b)
HAS BEEN FULLY DISCUSSED BY EACH OF
THE PARTIES AND THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY
EXCEPTIONS. EACH PARTY HEREBY FURTHER WARRANTS AND REPRESENTS
THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO (OR
ASSIGNMENTS OF) THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT
A JURY) BY THE COURT.
Section
8.04.
Notices
.
All
notices, requests, claims, demands and other communications
hereunder shall be given (and shall be deemed to have been duly
received if given) by hand delivery in writing or by facsimile
or electronic transmission, in each case, with either
confirmation of receipt or confirmatory copy delivered by
internationally or nationally recognized courier services within
three Business Days following notification, as follows:
if to Parent or Merger Sub:
Medtronic, Inc.
World Headquarters
710 Medtronic Parkway
Minneapolis, MN
55432-5604
with separate copies thereof addressed to:
Attention: Senior Vice President, General Counsel and
Secretary
Facsimile:
(763) 572-5459
and to:
Attention: Vice President, Corporate Development
Facsimile:
(763) 505-2545
and to:
Vice President and Senior Legal Counsel
Medtronic Xomed, Inc.
6743 Southpoint Drive North
Jacksonville, FL 32216
Facsimile:
(904) 332-8914
if to the Company:
Restore Medical, Inc.
2800 Patton Road
St. Paul, MN 55113
Attention: President and Chief Executive Officer
Facsimile:
(651) 634-3213
With a copy to:
Dorsey & Whitney LLP
50 South Sixth Street
Minneapolis, MN 55402
Attention: Kenneth L. Cutler
Facsimile:
(612) 340-8700
A-38
or to such other address as the Person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above.
Section
8.05.
Governing
Law
.
This Agreement, and any dispute arising
out of, relating to, or in connection with this Agreement shall
be governed by and construed in accordance with the Laws of the
State of Delaware without giving effect to any choice or
conflict of Law provision or rule (whether of the State of
Delaware of any other jurisdiction) that would cause the
application of the Laws of any jurisdiction other than the State
of Delaware except matter relating to the internal corporate
affairs of Parent, which shall be governed by the laws of the
State of Minnesota.
Section
8.06.
Descriptive
Headings
.
The descriptive headings herein are
inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this
Agreement.
Section
8.07.
Parties
in Interest
.
This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any
nature whatsoever under or by reason of this Agreement except
for Section 5.06 (which is intended to be for the benefit
of the Persons referred to therein, and may be enforced by any
such Persons).
Section
8.08.
Counterparts
.
This
Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but all of which, taken together,
shall constitute one and the same agreement. A facsimile
signature of this Agreement shall be valid and have the same
force and effect as a manually signed original.
Section
8.09.
Certain
Definitions
.
For purposes of this Agreement,
the following terms shall have the following meanings:
(a)
Affiliate
and
Associate
shall have the meanings given to
such terms in Rule
12b-2
under
the Exchange Act;
(b)
beneficial ownership
shall have the
meaning given to such term in
Rule 13d-3
under the Exchange Act;
(c)
Business Day
shall have the meaning
given to such term in
Rule 14d-1(g)
under the Exchange Act;
(d)
End Date
means September 30,
2008;
(e)
Fee
means $1,500,000;
(f)
knowledge
of the Company with
respect to any matter means the actual knowledge of any of the
Companys senior executive officers of a particular fact,
or the knowledge that any of such officers would reasonably be
expected to have obtained after reviewing this Agreement and
making reasonable inquiry;
(g)
Material Adverse Effect
means any
occurrence, change, event, effect or circumstance that,
individually or in the aggregate, (a) is or would be
reasonably likely to be, materially adverse to the business,
results of operations or financial condition of the Company and
its Subsidiaries, taken as a whole, other than any occurrence,
change, event, effect or circumstance to the extent relating to
or resulting from (i) changes, after the date hereof, in
general economic conditions or securities or financial markets
in general, (ii) changes, after the date hereof, in Law or
GAAP, (iii) general changes, after the date hereof, in the
medical device industry, (iv) any outbreak or escalation of
hostilities or war (whether declared or not declared) or act of
terrorism, (v) the announcement or the existence of, or
compliance with, this Agreement and the transactions
contemplated hereby (including (but only if directly resulting
from the existence of this Agreement and the transactions
contemplated hereby and not resulting from the Companys
operations, financial position or performance) any claim,
litigation, cancellation of or delay in customer orders,
reduction in revenues or income, disruption of business
relationships or loss of employees), (vi) any change in the
Companys stock price or trading volume, in and of itself
(it being understood that the facts or occurrences giving rise
to such change may be deemed to constitute, or be
A-39
taken into account in determining, whether there has been, or
will be, a Material Adverse Effect), (vii) the failure of
the Company to meet projections of earnings, revenues or other
financial measures (whether such projections were made by the
Company or independent third parties), in and of itself (it
being understood that the facts or occurrences giving rise or
contributing to such failure may be deemed to constitute, or be
taken into account in determining, whether there has been, or
will be, a Material Adverse Effect), (viii) any action
taken with the express written consent of Parent, which consent
states explicitly that such consent excludes such action from
the definition of Material Adverse Effect hereunder; except in
the case of clauses (i), (ii), (iii) or (iv) to the
extent such occurrence, change, event, effect or circumstance
has a disproportionate effect on the Company and its
Subsidiaries, taken as a whole, as compared with other companies
in the medical device industry or (b) would, or would be
reasonably likely to, prevent or materially delay or materially
impair the ability of the Company or any of its Subsidiaries to
consummate the Merger and the other transactions contemplated by
this Agreement;
(h)
Person
shall mean any individual,
corporation, limited liability company, partnership,
association, trust, estate or other entity or
organization; and
(i)
Subsidiary
shall mean, when used
with reference to an entity, any other entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the Board of Directors or other
Persons performing similar functions, or a majority of the
outstanding voting securities of which, are owned directly or
indirectly by such entity.
(j)
Merger Consideration
means $1.60;
provided however, that if any of the following are untrue, the
Merger Consideration shall instead be an amount equal to the
Alternative Per Share Consideration:
(i) the number of outstanding Shares as of immediately
prior to the Effective Time does not exceed 15,731,094;
(ii) the Existing Stock Options and Existing Warrants are
exercisable to purchase only 3,412,414 Shares in the
aggregate,
(iii) each of the Existing Stock Options and Existing
Warrants is exercisable at a price no lower than the exercise
price set forth with respect to such Existing Stock Option or
Existing Warrant in Section 3.02(a) of the Disclosure
Letter;
provided further, however, that none of the foregoing shall be
untrue solely as a result of proper exercise of Existing Stock
Options or Existing Warrants between the date hereof and the
Effective Time.
(k)
Alternative Per Share Consideration
means a fraction, the numerator of which equals the
Aggregate Consideration (defined below), and the denominator of
which equals the sum of (i) the number of Shares
outstanding as of immediately prior to the Effective Time,
(ii) the number of Shares purchasable upon exercise of all
Existing Stock Options and Existing Warrants that have a per
share exercise price less than the Alternative Per Share
Consideration and that are outstanding as of immediately prior
to the Effective Time. The Existing Stock Options and Existing
Warrants referred to in clause (ii) above are referred to
herein as in the money Existing Stock Options and Existing
Warrants. The Alternative Per Share Consideration shall be
calculated and rounded to five decimal places, with the fifth
decimal place rounded up if the sixth decimal place is 5 or
more. Aggregate Consideration shall equal Twenty Six
Million Three Hundred Thirty Three Thousand Eight Hundred
Dollars ($26,333,800), plus the aggregate exercise price of all
in the money Existing Stock Options and Existing Warrants
outstanding as of the Effective Time.
(l)
Third Party Expenses
means expenses
incurred, or to be incurred through the Effective Time, by the
Company in connection with this Agreement or the transactions
contemplated hereby, including, without limitation, all legal,
accounting, investment banking, broker, financial advisory,
consulting and all other fees and expenses of third parties.
A-40
Section
8.10.
Interpretation
.
The
words hereof, herein,
hereby, herewith and words of similar
import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of
this Agreement, and article, section, paragraph and schedule
references are to the articles, sections, paragraphs and
schedules of this Agreement unless otherwise specified. Whenever
the words include, includes or
including are used in this Agreement they shall be
deemed to be followed by the words without
limitation. The words describing the singular number shall
include the plural and vice versa, words denoting either gender
shall include both genders and words denoting natural persons
shall include all Persons and vice versa. The phrases the
date of this Agreement, the date hereof,
of even date herewith and terms of similar import,
shall be deemed to refer to the date set forth in the preamble
to this Agreement. Any reference in this Agreement to a date or
time shall be deemed to be such date or time in Minneapolis,
Minnesota, unless otherwise specified. The parties have
participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of
proof shall arise favoring or disfavoring any Person by virtue
of the authorship of any provision of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES FOLLOW.]
A-41
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all at or on the date and year first above
written.
MEDTRONIC, INC.
Name: Gary L. Ellis
|
|
|
|
Title:
|
Senior Vice President and Chief Financial Officer
|
MRM MERGER CORPORATION
Name: Thomas M. Tefft
|
|
|
|
Title:
|
Vice President and Controller
|
RESTORE MEDICAL, INC.
|
|
|
|
By:
|
/s/ J.
Robert Paulson, Jr.
|
Name: J. Robert Paulson, Jr.
|
|
|
|
Title:
|
President and Chief Executive Officer
|
A-42
APPENDIX B
[Letterhead
of Piper Jaffray & Co.]
Personal and Confidential
April 20, 2008
Board of Directors
Restore Medical, Inc.
2800 Patton Road
St. Paul, MN 55113
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of common stock of
Restore Medical, Inc. (the Company) of the Per Share
Price (as defined below) to be exchanged pursuant to the
Agreement and Plan of Merger (the Agreement) to be
entered into among the Company, Medtronic, Inc.
(Acquiror) and MRM Merger Corp. (Merger
Sub), a newly formed wholly-owned subsidiary of Acquiror.
The Agreement provides for the merger (the Merger)
of the Merger Sub with and into the Company pursuant to which,
among other things, each share of common stock of the Company
will be converted into the right to receive $1.60 in cash (the
Per Share Price). The terms and conditions of the
Merger are more fully set forth in the Agreement. Capitalized
terms not otherwise defined will have the same meaning as in the
Agreement.
We, as a customary part of our investment banking business,
engage in the valuation of businesses and their securities in
connection with mergers and acquisitions, underwriting and
secondary distributions of securities, private placements and
valuations for estate, corporate and other purposes. We have
acted as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company which is
contingent upon the consummation of the Merger. We will also
receive a fee from the Company for providing this opinion, which
is not contingent upon consummation of the Merger and will be
credited against the fee for financial advisory services. The
Company has also agreed to indemnify us against certain
liabilities in connection with our services. We have in the past
performed investment banking services for Acquiror, including
acting as financial advisor in various transactions, for which
we received customary fees. Specifically, within the last two
years we have received customary fees from Acquiror related to
advisory services performed in connection with a single
transaction. Although we are not currently engaged by Acquiror,
we have an ongoing relationship with Acquiror and plan to seek
to provide investment banking services to Acquiror in the
future. In the ordinary course of our business, we and our
affiliates may actively trade securities of the Company and
Acquiror for our own account or the account of our customers
and, accordingly, we may at any time hold a long or short
position in such securities. We also provide research coverage
relating to common stock of the Acquiror.
In connection with our review of the Merger, and in arriving at
our opinion, we have: (i) reviewed and analyzed the
financial terms of the Agreement; (ii) reviewed and
analyzed certain financial and other data with respect to the
Company publicly available or made available to us from internal
records of the Company; (iii) reviewed and analyzed certain
internal financial projections for the Company on a stand-alone
basis prepared for financial planning purposes and furnished to
us by the management of the Company; (iv) conducted
discussions with members of the senior management of the Company
and members of the Companys Board of Directors with
respect to the business and prospects of the Company on a
stand-alone basis; (v) reviewed the reported prices and
trading activity of Company common stock; (vi) compared the
financial performance of the Company with that of certain other
publicly-traded companies deemed by us to be comparable to the
Company; (vii) reviewed the financial terms, to the extent
publicly available, of certain comparable merger transactions;
and (viii) performed a discounted cash flows analysis for
the Company on a stand-alone basis. In addition, we have
conducted such other analyses, examinations and inquiries and
B-1
considered such other financial, economic and market criteria as
we have deemed necessary in arriving at our opinion.
We have relied upon and assumed the accuracy and completeness of
the financial, accounting and other information discussed with
or reviewed by us and have not independently verified such
information. We have further relied upon the assurances of the
Companys management that the information provided has been
prepared on a reasonable basis in accordance with industry
practice, and that they are not aware of any information or
facts that would make the information provided to us incomplete
or misleading. Without limiting the generality of the foregoing,
for the purpose of this opinion, we have assumed that the
Company is not party to any material pending transaction,
including any external financing, recapitalization, acquisition
or merger, other than the Merger, and with respect to financial
forecasts, pro forma adjustments, estimates of net operating
loss tax benefits and other estimates and forward-looking
information relating to the Company reviewed by us, we have
assumed that such information reflects the best currently
available estimates and judgments of the Companys
management. We express no opinion as to any financial forecasts,
pro forma adjustments, net operating loss or other estimates or
forward-looking information of the Company or the assumptions on
which they were based. We have relied, with your consent, on
advice of the outside counsel and the independent accountants to
the Company, and on the assumptions of the management of the
Company, as to all accounting, legal, tax and financial
reporting matters with respect to the Company, the Acquiror and
the Agreement.
We have assumed that the executed Agreement will be in all
material respects identical to the last draft reviewed by us. We
have relied upon and assumed, without independent verification,
that (i) the representations and warranties of all parties
to the Agreement and all other related documents and instruments
that are referred to therein are true and correct,
(ii) each party to such agreements will fully and timely
perform all of the covenants and agreements required to be
performed by such party, (iii) the Merger will be
consummated pursuant to the terms of the Agreement without
amendments thereto and (iv) all conditions to the
consummation of the Merger will be satisfied without waiver by
any party of any conditions or obligations thereunder. In
arriving at our opinion, we have assumed that all the necessary
regulatory approvals and consents required for the Merger will
be obtained in a manner that will not adversely affect the
Company or alter the terms of the Merger.
In arriving at our opinion, we have not performed any appraisals
or valuations of any specific assets or liabilities (fixed,
contingent or other) of the Company, and have not been furnished
with any such appraisals or valuations, nor have we evaluated
the solvency of the Company under any state or federal law
relating to bankruptcy, insolvency or similar matters. The
analyses performed by us in connection with this opinion were
going concern analyses. We express no opinion regarding the
liquidation value of the Company or any other entity. Without
limiting the generality of the foregoing, we have undertaken no
independent analysis of any pending or threatened litigation,
governmental proceedings or investigations, possible unasserted
claims or other contingent liabilities, to which either the
Company or its affiliates is a party or may be subject and at
the Companys direction and with its consent, our opinion
makes no assumption concerning and therefore does not consider,
the possible assertion of claims, outcomes, damages or
recoveries arising out of any such matters. No company or
transaction used in any analysis for purposes of comparison is
identical to the Company or the Merger. Accordingly, an analysis
of the results of the comparisons is not mathematical; rather,
it involves complex considerations and judgments about
differences in the companies and transactions to which the
Company and the Merger were compared and other factors that
could affect the public trading value or transaction value of
the companies.
This opinion is necessarily based upon the information available
to us and facts and circumstances as they exist and are subject
to evaluation on the date hereof; events occurring after the
date hereof could materially affect the assumptions used in
preparing this opinion. We are not expressing any opinion herein
as to the price at which shares of common stock of the Company
have traded or such stock may trade following announcement of
the Merger or at any future time. We have not undertaken to
reaffirm or revise this opinion or otherwise comment upon any
events occurring after the date hereof and do not have any
obligation to update, revise or reaffirm this opinion.
B-2
This opinion is directed to the Board of Directors of the
Company in connection with its consideration of the Merger and
is not intended to be and does not constitute a recommendation
to any stockholder of the Company as to how such stockholder
should vote with respect to the Merger. Except with respect to
the use of this opinion in connection with the proxy statement
relating to the Merger in accordance with our engagement letter
with the Company, this opinion shall not be published or
otherwise used, nor shall any public references to us be made,
without our prior written approval. This opinion has been
approved for issuance by the Piper Jaffray Opinion
Committee.
This opinion addresses solely the fairness, from a financial
point of view, to holders of common stock of the Company of the
proposed Per Share Price set forth in the Agreement and does not
address any other terms or agreement relating to the Merger. We
were not requested to opine as to, and this opinion does not
address, the basic business decision to proceed with or effect
the Merger, Acquirors ability to fund the Per Share Price,
or the fairness of the amount or nature of compensation to the
Companys officers, directors or employees, or any class of
such persons, relative to the Per Share Price proposed to be
paid to holders of common stock of the Company. We express no
opinion as to whether any alternative transaction might produce
consideration for the Companys stockholders in excess of
the amount contemplated in the Merger.
Based upon and subject to the foregoing and based upon such
other factors as we consider relevant, it is our opinion that
the Per Share Price is fair, from a financial point of view, to
the holders of common stock of the Company as of the date hereof.
Sincerely,
PIPER JAFFRAY & CO.
B-3
APPENDIX C
SECTION 262
OF THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE
§
262. Appraisal Rights
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
C-1
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
C-2
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding, the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholder(s) entitled
to an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting
C-3
corporation pursuant to subsection (f) of this section and
who has submitted such stockholders certificates of stock
to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however, that this provision shall not affect the
right of any stockholder who has not commenced an appraisal
proceeding or joined that proceeding as a named party to
withdraw such stockholders demand for appraisal and to
accept the terms offered upon the merger or consolidation within
60 days after the effective date of the merger or
consolidation, as set forth in subsection (e) of this
section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
C-4
Restore Medical, Inc.
SPECIAL MEETING OF STOCKHOLDERS
Wednesday, July 16, 2008
10:30 a.m. Central Time
Dorsey & Whitney LLP
Seattle Room
50 South Sixth Street, Suite 1500
Minneapolis, Minnesota 55402
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Restore Medical, Inc.
2800 Patton Road
St. Paul, Minnesota 55113
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proxy
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This proxy is solicited by the Board of Directors for use at the Special Meeting of
Stockholders to be held on July 16, 2008.
The undersigned stockholder of Restore Medical, Inc., a Delaware corporation, hereby
acknowledges receipt of the Notice of Special Meeting of Stockholders and Proxy Statement each
dated June 11, 2008 and hereby appoints J. Robert Paulson, Jr. and Christopher R. Geyen,
each as proxy and attorney-in-fact, with full power of substitution, on behalf and in the name of
the undersigned to represent the undersigned at the Special Meeting of Stockholders of Restore
Medical, Inc. to be held on July 16, 2008 at 10:30 a.m., local time, at
the offices of Dorsey & Whitney LLP located at 50 South Sixth Street, Suite 1500, Minneapolis,
Minnesota 55402, and at any postponement or adjournment thereof, and to vote all shares of common
stock which the undersigned would be entitled to vote if then and there personally present, on the
matters set forth on the reverse side.
See reverse for voting instructions.
There are three ways to vote your Proxy.
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
VOTE BY PHONE TOLL FREE 1-800-560-1965 QUICK
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EASY
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IMMEDIATE
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Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days
a week, until 12:00 p.m. noon (CT) on July 15, 2008.
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Please have your proxy card and the last four digits of your Social
Security Number or taxpayer identification number available. Follow
the simple instructions the voice provides you.
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VOTE BY INTERNET http://www.eproxy.com/rest/ QUICK
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EASY
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IMMEDIATE
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Use the Internet to vote your proxy 24 hours a day, 7 days a week
until 12:00 p.m. noon (CT) on July 15, 2008.
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Please have your proxy card and the last four digits of your Social
Security Number or taxpayer identification number available. Follow
the simple instructions to obtain your records and create an
electronic ballot.
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VOTE
BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope weve provided or
return it to
Restore Medical, Inc.,
c/o Shareowner Services
SM
, P.O. Box 64873, St. Paul,
MN 55164-0873.
If you vote by Phone or Internet, please do not mail your Proxy Card
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Please detach here
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The Board of Directors Recommends a Vote FOR Items 1 and 2.
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1.
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Proposal to
adopt the Agreement
and Plan of Merger,
dated as of
April 22, 2008,
among Medtronic,
Inc., MRM Merger
Corporation and
Restore Medical,
Inc. and approve
the merger.
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For
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Against
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Abstain
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2.
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Proposal to adjourn the special meeting, if necessary,
to solicit additional proxies.
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For
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Against
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Abstain
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THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED 1)
FOR
THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER; (2)
FOR
THE
ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE
INSUFFICIENT VOTES AT THE TIME OF THE SPECIAL MEETING TO ADOPT THE MERGER AGREEMENT AND APPROVE THE
MERGER; AND AS THE PROXY HOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS THAT ARE PROPERLY BROUGHT
BEFORE THE MEETING.
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Address Change? Mark Box
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Indicate changes below:
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Date:
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Signature(s) in Box
Please sign exactly as your name(s) appear on the Proxy. If held in joint tenancy, all persons
must sign. Trustees, administrators, etc., should include title and authority. Corporations should
provide full name of corporation and title of authorized officer
signing the proxy.
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