AGREEMENT AND PLAN OF MERGER
by and among
THORATEC LABORATORIES CORPORATION
LIGHTNING ACQUISITION CORP.
THERMO ELECTRON CORPORATION
and
THERMO CARDIOSYSTEMS INC.
dated as of October 3, 2000
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of October 3, 2000 by and among Thoratec Laboratories Corporation, a
California corporation ("Thoratec"), Lightning Acquisition Corp., a
Massachusetts corporation and wholly owned subsidiary of Thoratec ("Merger
Sub"), Thermo Cardiosystems Inc., a Massachusetts corporation ("TCA"), and
Thermo Electron Corporation, a Delaware corporation and majority stockholder of
TCA ("TEC"), with respect to the following facts:
A. The respective boards of directors of Thoratec, Merger Sub, TCA and TEC
have approved and declared advisable the merger of Merger Sub with and into TCA
(the "Merger"), upon the terms and subject to the conditions set forth herein,
and have determined that the Merger and the other transactions contemplated by
this Agreement are fair to, and in the best interests of, their respective
stockholders.
B. Pursuant to the Merger, among other things, the outstanding shares of
TCA Common Stock, $0.10 par value ("TCA Common Stock"), will be converted into
the right to receive shares of Thoratec Common Stock, no par value ("Thoratec
Common Stock"), at the rate set forth herein.
C. Simultaneously with the execution and delivery of this Agreement and as
a condition and inducement to the parties' willingness to enter into this
Agreement, TEC and Thoratec are entering into a Shareholder Agreement (the
"Shareholder Agreement") and a Registration Rights Agreement (the "Registration
Rights Agreement").
D. For United States federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and subject to
and upon the terms and conditions of this Agreement and the applicable
provisions of Massachusetts Business Corporation Law (the "Massachusetts Law"),
(i) Merger Sub shall be merged with and into TCA, (ii) the separate corporate
existence of Merger Sub shall cease, and (iii) TCA shall be the surviving
corporation. TCA, as the surviving corporation after the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the Merger and the other
transactions contemplated hereby (the "Closing") will take place at 10:00 a.m.,
local time, on a date to be specified by the parties (the "Closing Date"), which
shall be no later than the third business day after satisfaction or waiver of
the conditions set forth in Articles VI and VII, unless another time or date is
agreed to by the parties hereto. The Closing shall take place at the offices of
Xxxxxx Xxxxxx White & XxXxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx,
or at such other location as the parties hereto shall mutually agree. At the
Closing, the parties hereto shall cause the Merger to be consummated by filing
Articles of Merger (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Massachusetts that, as appropriate, reflect the provisions of
this Agreement and are otherwise in accordance with the relevant provisions of
the Massachusetts Law (the time of such filing, or such later time as may be
agreed in writing by the parties and specified in the Articles of Merger, being
the "Effective Time").
1.3 Effects of the Merger. The effects of the Merger shall be as provided in
this Agreement, the Articles of Merger and the applicable provisions of the
Massachusetts Law. Without limiting the foregoing, at the Effective Time all the
property, rights, privileges, powers and franchises of TCA and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of TCA
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Subject to Section 5.8, from and after the Effective Time, the Articles
of Organization of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Organization of the Surviving Corporation,
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provided that the name of the Surviving Corporation shall be changed to a name
that does not include the word "Thermo" or any confusingly similar name.
(b) Subject to Section 5.8, from and after the Effective Time, the bylaws
of Merger Sub, as in effect immediately prior to the Effective Time, shall be
the bylaws of the Surviving Corporation.
1.5 Directors and Officers of the Surviving Corporation. At the Effective Time,
all of the directors and officers of TCA and Subsidiaries of TCA shall resign.
The directors and officers of Merger Sub immediately prior to the Effective Time
shall serve as the initial directors and officers of the Surviving Corporation,
until their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Stock. Pursuant to the Merger, and without any action on the
part of the holders of any outstanding shares of capital stock or securities of
TCA or Merger Sub:
(a) As of the Effective Time, each share of TCA Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of TCA
Common Stock to be canceled pursuant to Section 2.1(c) and other than TCA
Dissenting Shares (as defined in Section 2.3(f)) shall be automatically
converted into .835 (the "Exchange Ratio") of a fully paid and nonassessable
share of Thoratec Common Stock.
(b) As of the Effective Time, each holder of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
TCA Common Stock shall cease to have any rights with respect thereto, except the
right to receive (i) a certificate (or direct registration) representing the
number of whole shares of Thoratec Common Stock into which such shares have been
converted (the "Thoratec Certificates"), and (ii) cash in lieu of any aggregate
fractional share of Thoratec Common Stock in accordance with Section 2.1(f),
without interest.
(c) As of the Effective Time, each share of TCA Common Stock held of record
immediately prior to the Effective Time by TCA, Merger Sub, Thoratec or any
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Subsidiary (as defined in Section 2.1(g)) of TCA or of Thoratec shall be
canceled and extinguished without any conversion thereof.
(d) As of the Effective Time, each share of Common Stock, $0.001 par value,
of Merger Sub (the "Merger Sub Common Stock") issued and outstanding immediately
prior to the Effective Time shall be canceled, extinguished and automatically
converted into one validly issued, fully paid and nonassessable share of Common
Stock, $0.10 par value, of the Surviving Corporation. Each certificate
evidencing ownership of a number of shares of Merger Sub Common Stock shall be
deemed to evidence ownership of the same number of shares of Common Stock, $0.10
par value, of the Surviving Corporation.
(e) The Exchange Ratio shall be adjusted, or Thoratec shall make
appropriate provision, to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Thoratec Common Stock or TCA Common Stock),
extraordinary dividend or distribution, reorganization, recapitalization or
other like change with respect to Thoratec Common Stock or (subject to Section
5.1) TCA Common Stock occurring or having a record date or an effective date on
or after the date hereof and prior to the Effective Time.
(f) No fraction of a share of Thoratec Common Stock will be issued by
virtue of the Merger. Instead, each holder of shares of TCA Common Stock who
would otherwise be entitled to a fraction of a share of Thoratec Common Stock
(after aggregating all fractional shares of Thoratec Common Stock to be received
by such holder) shall receive from Thoratec an amount of cash (rounded down to
the nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the Thoratec Closing Value. For the purposes of this Agreement, "Thoratec
Closing Value" shall mean the closing price per share of Thoratec Common Stock
as reported on the Nasdaq National Market System ("Nasdaq") on the trading day
immediately preceding the Effective Time.
(g) For the purposes of this Agreement, the "Exchange Multiple" of any
quantity means the product obtained by multiplying such quantity by the Exchange
Ratio, and the "Exchange Quotient" of any quantity means the quotient obtained
from dividing such quantity by the Exchange Ratio. For purposes of this
Agreement, the term "Subsidiary", when used with respect to any Person, means
any corporation or other organization, whether incorporated or unincorporated,
of which (A) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person
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(through ownership of securities, by contract or otherwise) or (B) such Person
or any Subsidiary of such Person is a general partner of any general partnership
or a manager of any limited liability company. For purposes of this Agreement,
"Person" means any individual, group, organization, corporation, partnership,
joint venture, limited liability company, trust or entity of any kind.
2.2 TCA Options; TCA Purchase Plan.
(a) As of the Effective Time, Thoratec shall, to the full extent permitted
by applicable law, assume all of the stock options of TCA, whether or not vested
or immediately exercisable, outstanding immediately prior to the Effective Time
under the TCA Stock Plans (as defined below) (the "TCA Options"). For purposes
of this Agreement, "TCA Stock Plans" means TCA's 1999 Amended and Restated
Directors Stock Option Plan, 1999 Amended and Restated Equity Incentive Plan and
1999 Amended and Restated Non-Qualified Stock Option Plan. Each TCA Option,
whether or not exercisable at the Effective Time, shall, to the full extent
permitted by applicable law, be assumed by Thoratec in such a manner that it
shall vest and otherwise be exercisable upon the same terms and conditions as
under the TCA Stock Plan pursuant to which it was granted and the applicable
option agreement issued thereunder; provided that (i) each such option
thereafter shall be exercisable for a number of shares of Thoratec Common Stock
(rounded down to the nearest whole share) equal to the Exchange Multiple of the
number of shares of TCA Common Stock subject to such option, and (ii) the option
price per share of Thoratec Common Stock thereafter shall equal the Exchange
Quotient (rounded up to the nearest whole cent) of the option price per share of
TCA Common Stock subject to such option in effect immediately prior to the
Effective Time (the "Thoratec Exchange Options"). Prior to the Effective Time,
TCA shall make all adjustments provided for in the TCA Stock Plans with respect
to the TCA Options to facilitate the implementation of this Section 2.2(a).
(b) Effective November 1, 2000, TCA shall suspend participation in its
November 1, 1992 Amended and Restated Employee Stock Purchase Plan (the "TCA
Purchase Plan"). Accordingly, immediately before the Effective Time there will
be no outstanding purchase rights under the TCA Purchase Plan. Further, the TCA
Purchase Plan shall be terminated effective at the Effective Time, with the
result that no additional purchase rights shall be granted after the Effective
Time.
(c) TCA shall terminate its Deferred Compensation Plan for Directors (the
"Directors' Plan") so that as of the Effective Time no additional rights shall
be granted under the Directors' Plan. As of the Effective Time, each
then-outstanding right to purchase TCA Common Stock granted under the Directors'
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Plan shall be assumed by Thoratec in such a manner that each such purchase right
shall thereafter be exercisable for whole shares of Thoratec Common Stock
(rounded down to the nearest whole share) equal to the Exchange Multiple of the
number of shares of TCA Common Stock for which such purchase right would
otherwise have been exercisable determined as of the relevant grant date under
the Directors' Plan, with the exercise price for each share of Thoratec Common
Stock under those assumed purchase rights being equal to the Exchange Quotient
(rounded up to the nearest whole cent) of the price per share of TCA Common
Stock under those rights just before the Effective Time. Thoratec shall include
all such shares of Thoratec Common Stock issuable under the Directors' Plan in
the Registration Statement (as described in Section 3.24).
2.3 Exchange of Stock Certificates.
(a) At or prior to the Effective Time, Thoratec shall enter into an
agreement with a bank or trust company selected by Thoratec and reasonably
acceptable to TCA to act as the exchange agent for the Merger (the "Exchange
Agent").
(b) At or prior to the Effective Time, Thoratec shall supply or cause to be
supplied to or for the account of the Exchange Agent in trust for the benefit of
the holders of TCA Common Stock, for exchange pursuant to this Section 2.3: (i)
certificates (or direct registration) evidencing the shares of Thoratec Common
Stock issuable pursuant to Section 2.1 to be exchanged for outstanding shares of
TCA Common Stock, and (ii) cash in an aggregate amount sufficient to make the
payments in lieu of fractional shares provided for in Section 2.1(f).
(c) Within three business days after the transfer agent for the TCA Common
Stock delivers, to the Exchange Agent, the required information about the record
holders of TCA Common Stock as of the record time for determining the
stockholders of TCA who will receive the merger consideration, Thoratec shall
mail or shall cause to be mailed to each Holder a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the TCA Certificates shall pass, only upon proper delivery of
the TCA Certificates to the Exchange Agent) and instructions for surrender of
the TCA Certificates. Upon surrender to the Exchange Agent of a TCA Certificate,
together with such letter of transmittal duly executed, the Holder shall be
entitled to receive in exchange therefor: (i) certificates evidencing that
number of shares of Thoratec Common Stock issuable to such Holder in accordance
with this Article II; (ii) any dividends or other distributions that such Holder
has the right to receive pursuant to Section 2.3(d) and (iii) cash in respect of
fractional shares as provided in Section 2.1(f), and such TCA Certificate so
surrendered shall forthwith be canceled. No certificate representing shares of
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Thoratec Common Stock will be issued to a Person who is not the registered owner
of a surrendered TCA Certificate unless (i) the TCA Certificate so surrendered
has been properly endorsed or otherwise is in proper form for transfer, and (ii)
such Person shall either (A) pay any transfer or other tax required by reason of
such issuance or (B) establish to the reasonable satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with this Section 2.3, from and after the Effective Time, each TCA
Certificate shall be deemed to represent, for all purposes other than payment of
dividends, the right to receive a certificate representing the number of full
shares of Thoratec Common Stock as determined in accordance with this Article II
and cash in lieu of fractional shares as provided in Section 2.1(f). For
purposes of this Agreement, "TCA Certificate" means a certificate that
immediately prior to the Effective Time represented shares of TCA Common Stock,
and "Holder" means a person who holds one or more TCA Certificates as of the
Effective Time.
(d) No dividend or other distribution declared with respect to Thoratec
Common Stock with a record date after the Effective Time will be paid to Holders
of unsurrendered TCA Certificates until such Holders surrender their TCA
Certificates. Upon the surrender of such TCA Certificates, there shall be paid
to such Holders, promptly after such surrender, the amount of dividends or other
distributions, excluding interest, declared with a record date after the
Effective Time and not paid because of the failure to surrender TCA Certificates
for exchange.
(e) Notwithstanding anything to the contrary in this Agreement, neither the
Exchange Agent, Thoratec, the Surviving Corporation nor any party hereto shall
be liable to any holder of shares of TCA Common Stock for shares of Thoratec
Common Stock or cash in lieu of fractional shares delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Notwithstanding any provision of this Agreement to the contrary, the
shares of TCA Common Stock (i) held by a Holder who, acting in accordance with
Sections 85 et seq. of Chapter 156B of the Massachusetts Law, before the TCA
Special Meeting (as defined in Section 5.4(a)) has delivered to TCA a written
notice of such Holder's intention to demand payment in cash for such Holder's
shares of TCA Common Stock if the Merger is completed and (ii) that are not
voted in favor of the Merger, shall not be converted into a right to receive
shares of Thoratec Common Stock but rather shall entitle their Holder to receive
the appraised value of such shares under those sections of the Massachusetts
Law. (Shares of TCA Common Stock meeting the requirements of clauses (i) and
(ii) of the previous sentence are referred to in this Agreement as "TCA
Dissenting Shares".) If, however, after the Effective Time such Holder validly
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and effectively withdraws that Holder's right to demand payment for that
Holder's TCA Dissenting Shares, those shares shall be treated as if they had
been converted as of the Effective Time into the right to receive that number of
shares of Thoratec Common Stock set forth in Section 2.1(a), without interest
and irrespective of the then-value of such shares. Subject in all respects to
Sections 2.1 and 2.3, Thoratec shall then cause the Exchange Agent to deliver a
certificate representing those shares to that Holder.
(g) TCA shall give Thoratec: (A) prompt notice of any written demands for
payment of any TCA Common Stock, withdrawals of such demands, and any other
documents and written communications that relate to such demands, and (B) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Massachusetts Law. TCA shall not, except with the prior
written consent of Thoratec, make any payment with respect to any demands for
appraisal of TCA Common Stock or offer to settle or settle any such demands.
2.4 Lost, Stolen or Destroyed Certificates. In the event that any TCA
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue and pay in respect of such lost, stolen or destroyed TCA Certificates,
upon the making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Thoratec Common Stock as may be required pursuant to
Section 2.1 and cash in lieu of fractional shares, if any, as may be required
pursuant to Section 2.1(f) and any dividends or distributions payable pursuant
to Section 2.3(d); provided that Thoratec may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed TCA Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Thoratec or the Exchange Agent with respect to the TCA Certificates alleged to
have been lost, stolen or destroyed.
2.5 Tax Consequences. For United States federal income tax purposes, it is
intended by the parties hereto that the Merger qualify as a reorganization
within the meaning of Section 368(a) of the Code. The execution and delivery of
this Agreement by each party shall be considered the adoption of a plan of
reorganization by such party for purposes of Section 368 of the Code.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF TCA
TCA makes to Thoratec and Merger Sub the representations and warranties
contained in this Article III, in each case subject to the exceptions set forth
in the disclosure statement, dated as of the date hereof, delivered by TCA to
Thoratec prior to the execution of this Agreement (the "TCA Disclosure
Statement"). The TCA Disclosure Statement is arranged in schedules corresponding
to the numbered and lettered Sections of this Article III, and the disclosure in
any Schedule of the TCA Disclosure Statement shall qualify only the
corresponding Section of this Article III.
3.1 Organization, Etc.
(a) Each of TCA and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. Each
of TCA and its Subsidiaries is duly qualified as a foreign Person to do
business, and is in good standing, in each jurisdiction where the character of
its owned or leased properties or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a TCA Material
Adverse Effect. For the purposes of this Agreement, "TCA Material Adverse
Effect" means any change, event, circumstance or effect that is, or (including
with the passage of time) is likely to be or become, materially adverse to the
general affairs, business, operations, prospects, assets, condition (financial
or otherwise) or results of operations of TCA and its Subsidiaries taken as a
whole, provided that: (i) any adverse change, event, circumstance or effect
arising from or relating to general business or economic conditions which does
not affect TCA and its Subsidiaries in a materially disproportionate manner
compared to other entities in TCA's and its Subsidiaries' industries shall not
be deemed to constitute, and shall not be taken into account in determining,
whether there has been, a "TCA Material Adverse Effect" and (ii) any adverse
change, circumstance, event or effect arising from or relating to the
announcement or pendency of the Merger shall not be deemed to constitute, and
shall not be taken into account in determining whether there has been, a "TCA
Material Adverse Effect".
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(b) Neither TCA nor any of its Subsidiaries is in violation of any
provision of its Articles of Organization, bylaws or any other charter document.
Schedule 3.1(b) of the TCA Disclosure Statement sets forth (i) the full name of
each Subsidiary of TCA, its capitalization and the ownership interest of TCA and
each other Person (if any) therein, (ii) the jurisdiction in which each such
Subsidiary is organized, (iii) each jurisdiction in which TCA and each of its
Subsidiaries is qualified to do business as a foreign Person, (iv) a brief
summary of the business and material operations of each Subsidiary of TCA, and
(v) the names of the current directors and officers of TCA and of each
Subsidiary of TCA. TCA has made available to Thoratec accurate and complete
copies of the Articles of Organization, bylaws and any other charter documents,
as currently in effect, of TCA and each of its Subsidiaries.
3.2 Authority. TCA has full corporate power and authority to execute and deliver
this Agreement and the other agreements required to be signed by it under this
Agreement to complete the Merger (together, the "TCA Agreements") and, assuming
the approval of the Merger by a majority of the outstanding shares of TCA Common
Stock at the TCA Special Meeting or any adjournment or postponement thereof in
accordance with Massachusetts Law, consummate the Merger and the other
transactions contemplated hereby. TEC has full corporate power and authority to
execute and deliver this Agreement, the Shareholder Agreement, the Registration
Rights Agreement and the other agreements required to be signed by it under this
Agreement to complete the Merger (collectively, the "TEC Agreements") and
consummate the transaction contemplated thereby. The execution and delivery of
the TCA Agreements and the TEC Agreements and the consummation of the Merger and
the other transactions contemplated hereby and thereby, have been duly and
validly authorized by the boards of directors of TCA (with respect to the Merger
and the TCA Agreements) and TEC (with respect to the Merger and the TEC
Agreements), and no other corporate proceedings on the part of TCA or TEC are
necessary to authorize the TCA Agreements or the TEC Agreements or to consummate
the Merger and the other transactions contemplated hereby and thereby (other
than, with respect to the Merger, the approval of the Merger by a majority of
the outstanding shares of TCA Common Stock at the TCA Special Meeting or any
adjournment or postponement thereof in accordance with the Massachusetts Law).
The TCA Agreements have been duly and validly executed and delivered by TCA and,
assuming due authorization, execution and delivery by Thoratec and Merger Sub,
constitute valid and binding agreements of TCA, enforceable against TCA in
accordance with their terms, except to the extent that their enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles. The TEC Agreements have been duly and validly
executed and delivered by TEC and, assuming due authorization, execution and
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delivery by Thoratec and Merger Sub, constitute the valid and binding agreements
of TEC, enforceable against TEC in accordance with their terms, except to the
extent that their enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
3.3 No Violations, Etc. No filing with or notification to, and no permit,
authorization, consent or approval of, any domestic or foreign court,
administrative agency, commission, or other governmental or regulatory body,
authority or instrumentality ("Government Entity") is necessary on the part of
TCA or TEC for the consummation by TCA of the Merger or any of the other
transactions contemplated by the TCA Agreements or the TEC Agreements, or for
the exercise by Thoratec, TCA and their Subsidiaries of full rights to own and
operate their businesses as presently being conducted, except (i) for the filing
of the Articles of Merger as required by the Massachusetts Law, (ii) the
applicable requirements of the Securities Exchange Act of 1934, as amended
(together with the Rules and Regulations promulgated thereunder, the "Exchange
Act"), state securities or "blue sky" laws and state takeover laws, and (iii)
filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000
(xxx "XXX Xxx"). None of the execution and delivery of the TCA Agreements and
the TEC Agreements, the consummation of the Merger or any of the other
transactions contemplated hereby and thereby, or compliance by TCA and TEC with
all of the provisions hereof and thereof, or the exercise by Thoratec, TCA and
their Subsidiaries of full rights to own and operate their businesses after the
Merger as presently being conducted (subject to obtaining the approval of the
Merger by the holders of a majority of the outstanding shares of TCA Common
Stock at the TCA Special Meeting or any adjournment or postponement thereof in
accordance with the Massachusetts Law) will: (i) conflict with or result in any
breach of any provision of the Articles of Organization, bylaws or any other
charter document of TCA or any of its Subsidiaries, (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to TCA or any
of its Subsidiaries, or by which any of its properties or assets may be bound,
or (iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, or result in any material
change in, or give rise to any right of termination, cancellation, acceleration,
redemption or repurchase under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, contract,
agreement or other instrument or obligation to which TEC, TCA or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound. Schedule 3.3 of the TCA Disclosure Statement lists all
consents, waivers and approvals required to be obtained in connection with the
consummation of the transactions contemplated by the TCA Agreements or the TEC
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Agreements under any of TEC's, TCA's or any of their Subsidiaries' notes, bonds,
mortgages, indentures, deeds of trust, licenses or leases, contracts, agreements
or other instruments or obligations.
3.4 Board Recommendation. The board of directors of TCA has, at a meeting duly
held on October 2, 2000: (i) approved and adopted the Merger and the TCA
Agreements, (ii) determined that the Merger and the TCA Agreements are fair to
and in the best interests of the stockholders of TCA and (iii) resolved to
recommend approval of the Merger and the TCA Agreements to the stockholders of
TCA. The board of directors of TEC has, at a meeting duly held on September 27,
2000: (i) approved and adopted the Merger and the TEC Agreements, (ii)
determined that the Merger and the TEC Agreements are fair to and in the best
interests of the stockholders of TEC, and (iii) resolved that TEC shall vote or
cause to be voted all of its shares of TCA Common Stock and any such shares held
by any Subsidiaries of TEC in favor of the Merger and the TEC Agreements at the
TCA Special Meeting, including any adjournments or postponements of that
meeting.
3.5 Fairness Opinion. TCA has received the opinion of X.X. Xxxxxx Securities
Inc. dated on or before the date of this Agreement to the effect that the
Exchange Ratio is fair to TCA's stockholders from a financial point of view, and
has provided a copy of that opinion to Thoratec.
3.6 Capitalization.
(a) The authorized capital stock of TCA consists of 100,000,000 shares of
TCA Common Stock. As of the date of this Agreement, there were 38,562,477 shares
of TCA Common Stock outstanding and 2,063,653 treasury shares. As of the date of
this Agreement, there were 4 3/4% subordinated convertible debentures due 2004
(the "TCA Debentures") outstanding in the aggregate principal amount of
$53,300,000. Neither the Merger nor any of the other transactions contemplated
by this Agreement will accelerate the date that any principal or interest is due
under any TCA Debentures, will constitute a default under any TCA Debentures,
will give rise to any rights of redemption respecting any TCA Debentures or will
confer any other rights respecting any TCA Debentures, except that the rights to
convert TCA Debentures into shares of TCA Common Stock shall become rights to
convert TCA Debentures into shares of Thoratec Common Stock, as adjusted to
reflect the Exchange Ratio.
(b) Except for the TCA Debentures, there are no warrants, options,
convertible securities, calls, rights, stock appreciation rights, preemptive
rights, rights of first refusal, or agreements or commitments of any nature
obligating TCA to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity interests of TCA, or
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obligating TCA to grant, issue, extend, accelerate the vesting of, or enter
into, any such warrant, option, convertible security, call, right, stock
appreciation right, preemptive right, right of first refusal, agreement or
commitment. To the knowledge of TCA and TEC, except for the Shareholder
Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to the capital stock of TCA.
(c) True and complete copies of each TCA Stock Plan, the Directors' Plan
and the TCA Purchase Plan, and of the forms of all agreements and instruments
relating to or issued under each thereof, have been made available to Thoratec.
Such agreements, instruments, and forms have not been amended, modified or
supplemented, and there are no agreements to amend, modify or supplement any
such agreements, instruments or forms.
(d) Schedule 3.6(d) of the TCA Disclosure Statement sets forth the
following information with respect to each TCA Option: the aggregate number of
shares issuable thereunder, the type of option, the grant date, the expiration
date, the exercise price and the vesting schedule. Each TCA Option was granted
in accordance with the terms of the TCA Stock Plan applicable thereto. The terms
of each of the TCA Stock Plans do not prohibit the assumption of the TCA Options
as provided in Section 2.2(a). Schedule 3.6(d) of the TCA Disclosure Statement
sets forth the following information with respect to the Directors' Plan: the
name of each director of TCA eligible to receive cash or TCA Common Stock under
the Directors' Plan, the amount of cash and TCA Common Stock issuable as of the
date of this Agreement to each such director and an estimate of such amounts as
of the Closing Date. Under the terms of the Directors' Plan, each director of
TCA will cease to accrue any rights under the Directors' Plan upon resignation
of such director at the Effective Time.
3.7 SEC Filings. TCA has filed with the Securities and Exchange Commission (the
"SEC") all required forms, reports, registration statements and documents
required to be filed by it with the SEC (collectively, all such forms, reports,
registration statements and documents filed after January 1, 1997 are referred
to herein as the "TCA SEC Reports"). All of the TCA SEC Reports complied as to
form, when filed, in all material respects with the applicable provisions of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act") and the Exchange Act. Accurate and
complete copies of the TCA SEC Reports have been made available to Thoratec. As
of their respective dates, the TCA SEC Reports (including all exhibits and
schedules thereto and documents incorporated by reference therein) did not, at
the time they were filed (or, if amended or superseded by a filing prior to the
13
date hereof, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. To the knowledge of TCA, no director or
officer of TCA has failed to comply with any filing requirements under Section
13 or Section 16(a) of the Exchange Act.
3.8 Financial Statements. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the TCA SEC
Reports (the "TCA Financial Statements"), (x) was prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be permitted
by the SEC on Form 10-Q under the Exchange Act) and (y) fairly presented the
consolidated financial position of TCA and its Subsidiaries in all material
respects as of the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of TCA, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount. The balance sheet of TCA contained
in TCA's Form 10-Q for the quarter ended June 30, 2000 (the "Reference Date") is
hereinafter referred to as the "TCA Balance Sheet."
3.9 Absence of Undisclosed Liabilities. Neither TCA nor any of its Subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) other than (i)
liabilities included in the TCA Balance Sheet and the related notes to the
financial statements, (ii) normal or recurring liabilities incurred in the
ordinary course of business consistent with past practice which, individually or
in the aggregate, are not and would not be reasonably likely to have a TCA
Material Adverse Effect, and (iii) liabilities under this Agreement.
3.10 Absence of Changes or Events. Except as contemplated by this Agreement,
since the Reference Date no TCA Material Adverse Effect has occurred and, in
addition, TCA and its Subsidiaries have not, directly or indirectly:
(a) purchased, otherwise acquired, or agreed to purchase or otherwise
acquire, any shares of capital stock or any indebtedness of TCA or any of its
Subsidiaries (including, without limitation, any TCA Debentures), or declared,
set aside or paid any dividend or otherwise made a distribution (whether in
cash, stock, debt or property or any combination thereof) in respect of their
capital stock (other than dividends or other distributions payable solely to TCA
or a wholly-owned Subsidiary of TCA);
14
(b) authorized for issuance, issued, sold, delivered, granted or issued any
options, warrants, calls, subscriptions or other rights for, or otherwise agreed
or committed to issue, sell or deliver any shares of any class of capital stock
of TCA or its Subsidiaries or any securities convertible into or exchangeable or
exercisable for shares of any class of capital stock of TCA or its Subsidiaries,
other than pursuant to and in accordance with the TCA Stock Plans, Directors'
Plan and TCA Purchase Plan other than as disclosed on Schedule 3.6 to the TCA
Disclosure Statement;
(c) (i) created or incurred any indebtedness for borrowed money exceeding
$250,000 in the aggregate, (ii) assumed, guaranteed, endorsed or otherwise as an
accommodation become responsible for the obligations of any other individual,
firm or corporation, made any loans or advances to any other individual, firm or
corporation (including, without limitation, TEC or any Subsidiary of TEC that is
not TCA or a Subsidiary of TCA) exceeding $100,000 in the aggregate, (iii)
entered into any oral or written agreement, commitment or transaction or
incurred any liability involving, in any one case, in excess of $100,000;
(d) instituted any change in accounting methods, principles or practices
other than as required by GAAP or the rules and regulations promulgated by the
SEC and disclosed in the notes to the TCA Financial Statements;
(e) revalued any assets, including without limitation, writing down the
value of inventory or writing off notes or accounts receivable in excess of
amounts previously reserved as reflected in the TCA Balance Sheet;
(f) suffered any damage, destruction or loss, whether covered by insurance
or not, except for such as would not, individually or in the aggregate exceed
$100,000;
(g) (i) increased in any manner the compensation of any of its directors,
officers or, other than in the ordinary course of business and consistent with
past practice, non-officer employees, (ii) granted any severance or termination
pay to any Person; (iii) entered into any oral or written employment,
consulting, indemnification or severance agreement with any Person; (iv) other
than as required by law, adopted, become obligated under, or amended any
employee benefit plan, program or arrangement; or (v) repriced any TCA Options;
(h) sold, transferred, leased, licensed, pledged, mortgaged, encumbered, or
otherwise disposed of, or agreed to sell, transfer, lease, license, pledge,
mortgage, encumber, or otherwise dispose of, any material properties, (including
15
intangibles, real, personal or mixed), it being understood that this clause (h)
does not extend to sales of inventory in the ordinary course of business;
(i) amended its Articles of Organization, bylaws, or any other charter
document, or effected or been a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(j) made any capital expenditure in any calendar month which, when added to
all other capital expenditures made by or on behalf of TCA and its Subsidiaries
in such calendar month resulted in such capital expenditures exceeding $150,000
in the aggregate;
(k) paid, discharged or satisfied any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liabilities (including accounts payable)
in the ordinary course of business and consistent with past practice, or
collected, or accelerated the collection of, any amounts owed (including
accounts receivable) other than their collection in the ordinary course of
business;
(l) waived, released, assigned, settled or compromised any material claim
or litigation, or commenced a lawsuit other than for the routine collection of
bills; or
(m) agreed or proposed to do any of the things described in the preceding
clauses (a) through (l) other than as expressly contemplated or provided for in
this Agreement. 3.11 Capital Stock of Subsidiaries. TCA is the record and
beneficial owner of all of the outstanding shares of capital stock or other
equity interests of each of its Subsidiaries. All of such shares have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights with respect thereto and are owned by TCA free and clear of
any claim, lien or encumbrance of any kind with respect thereto. There are no
proxies or voting agreements with respect to such shares, and there are not any
existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating TCA or any Subsidiaries to issue, transfer
or sell any shares of capital stock of any Subsidiary or any other securities
convertible into, exercisable for, or evidencing the right to subscribe for any
such shares. TCA does not directly or indirectly own any equity interest in any
Person except the Subsidiaries.
16
3.12 Litigation.
(a) There is no private or governmental claim, action, suit, investigation
or proceeding of any nature ("Action") pending or, to the knowledge of TCA or
TEC, threatened in writing against TCA or any of its Subsidiaries, or any of
their respective officers and directors (in their capacities as such), or
involving any of their assets, before any court, Government Entity, or
arbitration tribunal, except for those Actions which, individually or in the
aggregate, would not have a TCA Material Adverse Effect. There is no Action
pending or, to the knowledge of TCA, threatened which in any manner challenges,
seeks to, or is reasonably likely to prevent, enjoin, alter or delay any of the
transactions contemplated by the TCA Agreements or the TEC Agreements.
(b) There is no outstanding judgment, order, writ, injunction or decree of
any court, Government Entity, or arbitration tribunal in a proceeding to which
TCA, any Subsidiary of TCA, or any of their assets is or was a party or by which
TCA, any Subsidiary of TCA, or any of their assets is bound. 3.13 Insurance.
Schedule
3.13 of the TCA Disclosure Statement lists all insurance policies (including,
without limitation, workers' compensation insurance policies) covering any
business, properties, assets or operations of TCA or any of its Subsidiaries,
whether or not they are policies issued directly to TCA or any Subsidiary of TCA
(for example, because they have been issued to or procured by TEC), and all
claims in excess of $50,000 made against or under any such policies with respect
to TCA or any Subsidiary of TCA (but not other insured entities) since January
1, 1997. Neither TCA nor TEC has received notice of the cancellation or threat
of cancellation of any of such policy.
3.14 Contracts and Commitments.
(a) Schedule 3.14(a) of the TCA Disclosure Statement contains a complete
and accurate list of all agreements, understanding and arrangements, whether
written, oral or established through common practice, between TCA or any TCA
Subsidiary and any Person that directly or indirectly beneficially owns, or is
controlled by or under common control with any Person that beneficially owns,
more than five percent of the outstanding TCA Common Stock (the "TCA Related
Party Agreements"). True and correct copies of all TCA Related Party Agreements
have been provided to Thoratec. To the knowledge of TCA, the terms of the TCA
Related Party Agreements are no less favorable to TCA and its Subsidiaries than
could be obtained from a third party in an arms-length transaction.
17
(b) Except as filed (including by incorporation by reference to
earlier-filed documents) as an exhibit to the TCA SEC Reports filed after
January 1, 2000 or as identified on Schedule 3.14 to the TCA Disclosure
Statement (collectively the "TCA Contracts", it being understood that the
failure to identify an agreement, etc. on that schedule that is required to be
identified on that schedule shall nevertheless be considered a "TCA Contract"),
neither TCA nor any of its Subsidiaries is a party to or bound by any oral or
written contract, obligation or commitment of any type in any of the following
categories:
(i) agreements with any employees or consultants of TCA or any TCA
Subsidiary respecting their employment, consulting, salary, wages, bonuses,
incentive compensation, severance or retention pay, or other compensation,
except for those employees or consultants whose annual rate of
compensation, including potential bonuses and incentive compensation, is
less than $100,000;
(ii) agreements or plans under which benefits will be increased or
accelerated by the occurrence of any of the transactions contemplated by
the TCA Agreements or the TEC Agreements or under which the value of the
benefits will be calculated on the basis of any of the transactions
contemplated by such agreements;
(iii) agreements, contracts or commitments currently in force relating
to the disposition or acquisition of assets other than in the ordinary
course of business, or relating to an ownership interest in any
corporation, partnership, joint venture or other business enterprise;
(iv) agreements, contracts or commitments for the purchase of goods,
supplies or equipment: (A) which are with sole or single source suppliers
or (B) for a cost, for any one such agreement, contract and commitment, in
excess of $250,000 and which, in the case of this clause (B), provide for
purchase prices substantially greater than those presently prevailing for
such materials, supplies or equipment;
(v) guarantees or other agreements, contracts or commitments under
which TCA or any of its Subsidiaries is absolutely or contingently liable
for (A) the performance of any other Person (other than TCA or any of its
Subsidiaries), or (B) the whole or any part of the indebtedness or payment
obligations of any other Person (other than TCA or its Subsidiaries);
(vi) powers of attorney authorizing the incurrence of a material
obligation on the part of TCA or any of its Subsidiaries;
18
(vii) agreements, contracts or commitments which limit or restrict (A)
where TCA or any of its Subsidiaries may conduct business, (B) the type or
lines of business (current or future) in which they may engage, or (C) any
acquisition of assets or stock (tangible or intangible) by TCA or any of
its Subsidiaries;
(viii) agreements, contracts or commitments containing any agreement
with respect to a change of control of TCA or any of its Subsidiaries;
(ix) agreements, contracts or commitments for the borrowing or lending
of money, or the availability of credit (except credit extended by TCA or
any of its Subsidiaries to customers in the ordinary course of business and
consistent with past practice);
(x) any hedging, option, derivative or other similar transaction and
any foreign exchange position or contract for the exchange of currency; or
(xi) any joint marketing or joint development agreement, or any
license or distribution agreement relating to any TCA product or planned
product.
(c) Neither TCA nor any of its Subsidiaries, nor to TCA's knowledge any
other party to any TCA Contract, has materially breached, violated or defaulted
under, or received notice that it has breached, violated or defaulted under (nor
does there exist any condition under which, with the passage of time or the
giving of notice or both, could reasonably be expected to cause a material
breach, violation or default under), any TCA Contract.
(d) Each TCA Contract is a valid, binding and enforceable obligation of
TCA, and to TCA's knowledge of the other party or parties thereto, in accordance
with its terms, and in full force and effect, except for any TCA Related Party
Agreements that will be terminated as of the Effective Time and except where the
failure to be valid, binding, enforceable and in full force and effect would not
have a TCA Material Adverse Effect and to the extent enforcement may be limited
by applicable bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights or by general principles of equity.
(e) An accurate and complete copy of each TCA Contract has been made
available to Thoratec.
(f) The obligations to pay transaction bonuses or other compensation
occasioned by the Merger to the persons listed on Schedule 3.14(f) to the TCA
Disclosure Statement are obligations of TEC and not obligations of TCA or any
Subsidiary of TCA.
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3.15 Labor Matters; Employment and Labor Contracts.
(a) None of TCA or any of its Subsidiaries is a party to any union contract
or other collective bargaining agreement, nor to the knowledge of TCA, TEC or
any of their Subsidiaries are there any activities or proceedings of any labor
union to organize any of its employees. Each of TCA and its Subsidiaries is in
compliance with all applicable (i) laws, regulations and agreements respecting
employment and employment practices, (ii) terms and conditions of employment,
and (iii) occupational health and safety requirements, except for those failures
to comply which, individually or in the aggregate, would not have a TCA Material
Adverse Effect.
(b) There is no labor strike, slowdown or stoppage pending (or any labor
strike or stoppage threatened) against TCA or any of its Subsidiaries. No
petition for certification has been filed and is pending before the National
Labor Relations Board with respect to any employees of TCA or any of its
Subsidiaries. Neither TCA nor any of its Subsidiaries has any obligations under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any former employees or qualifying beneficiaries
thereunder, except for obligations that would not have, individually or in the
aggregate, a TCA Material Adverse Effect. There are no controversies pending or,
to the knowledge of TEC, TCA or any of its Subsidiaries, threatened, between TCA
or any of its Subsidiaries and any of their respective employees, which
controversies would have, individually or in the aggregate, a TCA Material
Adverse Effect.
3.16 Compliance with Laws. Neither TCA nor any of its Subsidiaries has violated
or failed to comply with any statute, law, ordinance, rule or regulation
(including without limitation relating to the export or import of goods or
technology) of any Government Entity, except where any such violations or
failures to comply would not, individually or in the aggregate, have a TCA
Material Adverse Effect. TCA and its Subsidiaries have all permits, licenses and
franchises from Government Entities required to conduct their businesses as now
being conducted and as proposed to be conducted, except for those, the absence
of which would not, individually or in the aggregate, have a TCA Material
Adverse Effect.
3.17 Intellectual Property Rights.
(a) TCA and its Subsidiaries own or have the right to use all intellectual
property used to conduct their respective businesses (such intellectual property
and the rights thereto are collectively referred to as the "TCA IP Rights"). No
20
royalties or other payments are payable to any Person with respect to
commercialization of any products presently sold by TCA or its Subsidiaries.
(b) The execution, delivery and performance of the TCA Agreements and the
consummation of the transactions contemplated hereby will not: (i) constitute a
material breach of any instrument or agreement governing any TCA IP Rights, (ii)
cause the modification of any terms of any licenses or agreements relating to
any TCA IP Rights including, but not limited to, the modification of the
effective rate of any royalties or other payments provided for in any such
license or agreement, (iii) cause the forfeiture or termination of any TCA IP
Rights, (iv) give rise to a right of forfeiture or termination of any TCA IP
Rights or (v) materially impair the right of TCA, Thoratec or any of their
Subsidiaries to use, sell or license any TCA IP Rights or portion thereof.
(c) Neither the manufacture, marketing, license, sale or intended use of
any product or technology currently licensed or sold or under development by TCA
or any of its Subsidiaries: (i) violates in any material respect any license or
agreement between TCA or any of its Subsidiaries and any third party or (ii) to
the knowledge of TCA, infringes in any material respect any patents or other
intellectual property rights of any other party. There is no pending or, to the
knowledge of TCA, threatened claim or litigation contesting the validity,
ownership or right to use, sell, license or dispose of any TCA IP Rights, or
asserting that any TCA IP Rights or the proposed use, sale, license or
disposition thereof, or the manufacture, use or sale of any TCA products,
conflicts or will conflict with the rights of any other party.
(d) TCA has provided to Thoratec a worldwide list of all patents, trade
names, trademarks and service marks, and applications for any of the foregoing
owned or possessed by TCA or any of its Subsidiaries.
(e) TCA has provided to Thoratec a true and complete copy of its standard
form of employee confidentiality agreement and taken commercially reasonable
steps to ensure that all key employees and scientific employees (whether or not
key) of TCA and its Subsidiaries have executed such an agreement. All scientific
consultants with access to proprietary information of TCA or any Subsidiary of
TCA have executed appropriate non-disclosure agreements with respect to such
proprietary information.
(f) Neither TCA nor any of its Subsidiaries is aware that any of its key or
scientific employees or scientific consultants is obligated under any contract,
covenant or other agreement or commitment of any nature, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's or consultant's best efforts to
promote the interests of TCA and its Subsidiaries or that would conflict with
21
the business of TCA or any of its Subsidiaries as presently conducted or
proposed to be conducted. Neither TCA nor any of its Subsidiaries has entered
into any agreement to indemnify any other person, including but not limited to
any employee or consultant of TCA or any of its Subsidiaries, against any charge
of infringement, misappropriation or misuse of any intellectual property, other
than indemnification provisions contained in purchase orders or customer
agreements arising in the ordinary course of business. All current and former
key or scientific employees and scientific consultants of any of TCA or any of
its Subsidiaries who in TCA's reasonable business judgment were appropriate have
signed valid and enforceable written assignments to TCA or one or more of its
Subsidiaries of any and all rights or claims in any intellectual property that
any such employee or consultant has or may have by reason of any contribution,
participation or other role in the development, conception, creation, reduction
to practice or authorship of any invention, innovation, development or work of
authorship or any other intellectual property that is used in the business of
TCA or any of its Subsidiaries, and TCA and its Subsidiaries possess signed
copies of all such written assignments by such employees and consultants.
(g) There are no existing licenses between International Technidyne
Corporation ("ITC"), on the one hand, and TEC or any Subsidiary of TEC, on the
other hand, respecting any intellectual property owned or used by ITC.
3.18 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" refers to any and all
federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities relating to taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity. For purposes of this Agreement, "Tax Return" or "Tax Returns" refers to
all federal, state and local and foreign returns, estimates, information
statements and reports relating to Taxes, in each case filed or required to be
filed with a Government Entity.
(b) TCA and each of its Subsidiaries have filed all Tax Returns required to
have been filed by them, and have paid (or TCA has paid on behalf of its
Subsidiaries), all Taxes required to have been shown on such Tax Returns. The
most recent financial statements contained in the TCA SEC Reports reflect an
adequate accrual (which accruals were established in accordance with GAAP) for
the payment of all Taxes payable by TCA and its Subsidiaries, as of the date of
22
such financial statements. Except as reasonably would not have a TCA Material
Adverse Effect, no deficiencies for any Taxes have been proposed, asserted or
assessed against TCA or any of its Subsidiaries. Neither TCA nor any of its
Subsidiaries has filed for any extension of time to file any Tax Return which
has not since been filed. Neither TCA nor any of its Subsidiaries has been
included in a consolidated or combined Tax Return that has included TEC for any
period not now closed under all applicable statutes of limitations.
(c) Neither TCA nor any of its Subsidiaries is a party to any contract,
agreement, plan or arrangement including, but not limited to, the TCA
Agreements, covering any employee or former employee of TCA or any of its
Subsidiaries that: (i) could give rise to the payment of any amounts that would
constitute excess parachute payments within the meaning of Sections 280G of the
Code with respect to the change in ownership or control that may occur upon the
consummation of the Merger, or (ii) could give rise to the payment of any amount
that would constitute a parachute payment within the meaning of Sections 280G of
the Code with respect to any change in ownership or control of TCA occurring
after the Closing Date. During the taxable year ending on the Closing Date, TCA
and its Subsidiaries have not become obligated to make any payment the deduction
of which would be disallowed pursuant to Section 162(m) of the Code.
(d) None of TCA and its Subsidiaries has filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a Subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by TCA or any of its Subsidiaries.
(e) None of TCA and its Subsidiaries: (i) has received any notice that it
is being audited by any taxing authority, (ii) has granted any presently
operative waiver of any statute of limitations with respect to, or any extension
of a period for the assessment of, any Tax, (iii) has permitted any Tax lien to
be placed on any asset of TCA or any of its Subsidiaries, except with respect to
Taxes not yet due and payable or (iv) has availed itself of any Tax amnesty or
similar relief in any taxing jurisdiction.
(f) None of TCA and its Subsidiaries is aware of any reason why the Merger
will fail to qualify as a reorganization under the provisions of Section 368(a)
of the Code.
(g) TCA has not been a United States real property holding corporation
within the meaning of Section 897 of the Code at any time after June 30, 1995.
23
(h) Neither TCA nor any of its Subsidiaries has any liability for the Taxes
of any Person other than itself, TCA or another present Subsidiary of TCA.
Neither TCA nor any of its Subsidiaries is a party to any tax sharing or tax
indemnity agreement.
3.19 Employee Benefit Plans; ERISA.
(a) There are no "employee pension benefit plans" as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("TCA Pension Plans"), "welfare benefit plans" as defined in Section
3(1) of ERISA ("TCA Welfare Plans"), or stock bonus, stock option, restricted
stock, stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance, holiday, or vacation plans, or any other employee
benefit plan, program, policy or arrangement covering employees (or former
employees) employed in the United States that either is maintained or
contributed to by TCA or any TCA ERISA Affiliate (as hereinafter defined) or to
which TCA or any TCA ERISA Affiliate is obligated to make payments or otherwise
may have any liability (collectively, the "TCA Employee Benefit Plans") with
respect to employees or former employees of TCA or any of its Subsidiaries, or
any TCA ERISA Affiliate. For purposes of this Agreement, "TCA ERISA Affiliate"
means any person (as defined in Section 3(9) of ERISA) that is or has been a
member of any group of persons described in Section 414(b), (c), (m) or (o) of
the Code, including, without limitation, TCA or a Subsidiary.
(b) TCA and each of its Subsidiaries, and each of the TCA Pension Plans and
TCA Welfare Plans, are in compliance in all material respects with the
applicable provisions of ERISA, the Code and other applicable laws.
(c) All contributions to, and payments from, the TCA Pension Plans which
are required to have been made in accordance with the TCA Pension Plans have
been timely made.
(d) All TCA Pension Plans intended to qualify under Section 401 of the Code
have been determined by the Internal Revenue Service ("IRS") to be so qualified,
and no event has occurred and no condition exists with respect to the form or
operation of any TCA Pension Plan which would cause the loss of such
qualification or the imposition of any material liability, penalty or tax under
ERISA or the Code.
(e) There are no (i) investigations pending by any Government Entity
involving any TCA Pension Plan or TCA Welfare Plan, or (ii) pending or, to the
knowledge of TCA, threatened claims (other than routine claims for benefits),
24
suits or proceedings against any TCA Pension Plan or TCA Welfare Plan, against
the assets of any of the trusts under any TCA Pension Plan or TCA Welfare Plan
or against any fiduciary of any TCA Pension Plan or TCA Welfare Plan with
respect to the operation of such plan or asserting any rights or claims to
benefits under any TCA Pension Plan or TCA Welfare Plan or against the assets of
any trust under any such plan, except for those which would not, individually or
in the aggregate, give rise to any liability which would have a TCA Material
Adverse Effect. To the best of TCA's knowledge, there are no facts which would
give rise to any liability under this Section 3.19(e), except for those which
would not, individually or in the aggregate, either impair TCA's ability to
consummate the Merger or any of the other transactions contemplated hereby or
have a TCA Material Adverse Effect.
(f) None of TCA, any of its Subsidiaries or any employee of the foregoing,
nor any trustee, administrator, other fiduciary or any other "party in interest"
or "disqualified person" with respect to any TCA Pension Plan or TCA Welfare
Plan, has engaged in a "prohibited transaction" (as that term is defined in
Section 4975 of the Code or Section 406 of ERISA) other than such transactions
that would not, individually or in the aggregate, either impair TCA's ability to
consummate the Merger or any of the other transactions contemplated hereby or
have a TCA Material Adverse Effect.
(g) None of TCA, any of its Subsidiaries, or any TCA ERISA Affiliate
maintains or contributes to, nor has it ever maintained or contributed to, any
pension plan subject to Title IV of ERISA or Section 412 of the Code or Section
302 of ERISA. (h) None of TCA, any Subsidiary of TCA or any TCA ERISA Affiliate
has incurred any material liability under Title IV of ERISA that has not been
satisfied in full.
(i) None of TCA, any of its Subsidiaries or any TCA ERISA Affiliate has any
material liability (including any contingent liability under Section 4204 of
ERISA) with respect to any multiemployer plan, within the meaning of Section
3(37) of ERISA, covering employees (or former employees) employed in the United
States.
(j) With respect to each of the TCA Employee Benefit Plans, true, correct
and complete copies of the following documents have been made available to
Thoratec: (i) the plan document and any related trust agreement, including
amendments thereto, (ii) any current summary plan descriptions and other
material communications to participants relating to the TCA Employee Benefit
Plans, (iii) the three most recent Forms 5500, if applicable, and (iv) the most
recent IRS determination letter, if applicable.
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(k) None of the TCA Welfare Plans provides for continuing benefits or
coverage for any participant or any beneficiary of a participant following
termination of employment, except as may be required under COBRA, or except at
the expense of the participant or the participant's beneficiary. TCA and each of
its Subsidiaries which maintain a "group health plan" within the meaning of
Section 5000(b)(1) of the Code have complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder except where the failure to comply
would not, individually or in the aggregate, either impair TCA's ability to
consummate the Merger or any other transaction contemplated hereby or have a TCA
Material Adverse Effect.
(l) No liability under any TCA Pension Plan or TCA Welfare Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which TCA or any of its Subsidiaries
has received notice that such insurance company is in rehabilitation or a
comparable proceeding.
(m) The consummation of the transactions contemplated by the TCA Agreements
will not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable to or in respect of any employee of TCA or any of its Subsidiaries.
(n) Schedule 3.19(n) of the TCA Disclosure Statement lists each TCA Foreign
Plan (as hereinafter defined). TCA and each of its Subsidiaries and each of the
TCA Foreign Plans are in compliance with applicable laws, and all required
contributions have been made to the TCA Foreign Plans, except where the failure
to comply or make contributions would not, individually or in the aggregate,
either impair TCA's ability to consummate the Merger or any other transaction
contemplated hereby or have a TCA Material Adverse Effect. Each of the TCA
Foreign Plans that is a funded defined benefit pension plan has a fair market
value of plan assets that is greater than the plan's liabilities, as determined
in accordance with applicable laws. For purposes hereof, "TCA Foreign Plan"
means any plan, program, policy, arrangement or agreement maintained or
contributed to by, or entered into with, TCA or any Subsidiary with respect to
any employees (or former employees) employed outside the United States to the
extent the benefits provided thereunder are not mandated by the laws of the
applicable foreign jurisdiction.
(o) Each of the TCA Employee Benefit Plans and the TCA Foreign Plans can be
terminated by TCA within 30 days following the Effective Time in accordance with
the terms of such Plan and applicable law, without any additional contribution
to such TCA Employee Benefit Plan or TCA Foreign Plan or the payment of any
26
additional compensation or amount or the additional vesting or acceleration of
any vesting provided under the TCA Employee Benefit Plan or TCA Foreign Plan.
3.20 Environmental Matters.
(a) For purposes of this Agreement:
(i) "TCA Contractor" means any Person with which TCA or any Subsidiary
formerly or presently has any agreement or arrangement (whether oral or
written) under which such Person has or had physical possession of, and was
or is obligated to develop, test, process, manufacture or produce any
product or substance on behalf of TCA or any Subsidiary.
(ii) "Environment" means any land including, without limitation,
surface land and sub-surface strata, seabed or river bed, ecosystem and any
water (including, without limitation, coastal and inland waters, surface
waters and ground waters and water in drains and sewers) and air
(including, without limitation, air within buildings), other natural or
manmade structures above or below ground, and natural resources.
(iii) "Environmental Law" means any law or regulation, and any
judicial or administrative interpretation thereof, in each case relating to
the Environment or harm to or the protection of human health, animals,
plants or ecosystems, including, without limitation, laws relating to
public and workers health and safety, emissions, discharges or releases of
chemicals or any other pollutants or contaminants or industrial,
radioactive, dangerous, toxic or hazardous substances or wastes (whether in
solid or liquid form or in the form of a gas or vapor and including noise
and genetically modified organisms) into the Environment or otherwise
relating to the manufacture processing use, treatment, storage,
distribution, disposal transport or handling of substances or wastes.
Environmental Laws include, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended
("CERCLA"), the Resource Conservation and Recovery Act 42 USC, 6901 et
seq., the Hazardous Materials Transportation Act 49 USC, 6901 et seq., the
Clean Water Act 33, 1251 et seq., the Toxic Substances Control Act 15 USC,
2601 et seq., the Clean Air Act 42 USC, 7401 et seq., the Safe Drinking
Water Act 42 USC, 300f et seq., the Atomic Energy Act 42 USC, 2201 et seq.,
the Federal Food Drug and Cosmetic Act 21 USC, 136 et seq., and the Federal
Food Drug and Cosmetic Act 21 USC, 301 et seq., and equivalent statutes and
other laws in states and other jurisdictions of the United States and
countries other than the United States.
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(iv) "Environmental Permit" means any permit, license, consent,
approval, certificate, qualification, specification, registration and other
authorization, and the filing of all notifications, reports and
assessments, required by any federal, state, local or foreign government or
regulatory entity pursuant to any Environmental Law.
(v) "Hazardous Material" means any pollutant, contaminant, or
hazardous, toxic, medical, biohazardous, infectious or dangerous waste,
substance, gas, constituent or material, defined or regulated as such in,
or for purposes of, any Environmental Law, including, without limitation,
any asbestos, petroleum, oil (including crude oil or any fraction thereof),
radioactive substance, polychlorinated biphenyls, toxin, chemical, virus,
infectious disease or disease causing agent, and any other substances that
can give rise to liability under any Environmental Law.
(b) Except for such cases that, individually or in the aggregate, have not
and would not have a TCA Material Adverse Effect:
(i) Each of TCA and its Subsidiaries possesses all Environmental
Permits required under applicable Environmental Laws to conduct its current
business and to use and occupy the TCA Real Property (as defined below) for
its current business. All Environmental Permits are in full force and
effect and TCA and each of its Subsidiaries are, and to TCA's knowledge
have at all times been, in compliance with such Environmental Permits.
(ii) There are no facts or circumstances indicating that any
Environmental Permit possessed by TCA or any of its Subsidiaries would or
might be revoked, suspended, canceled or not renewed, and all appropriate
necessary action in connection with the renewal or extension of all
Environmental Permits possessed by TCA or any its Subsidiaries relating to
the current business and the TCA Real Property has been taken.
(iii) The execution and delivery of the TCA Agreements and the
consummation by TCA of the Merger and the other transactions contemplated
hereby and the exercise by Thoratec and the Surviving Corporation of rights
to own and operate the business of TCA and its Subsidiaries and use and
occupy the TCA Real Property and carry on its business as presently
conducted will not affect the validity or require the transfer of any
Environmental Permits held by TCA or any of its Subsidiaries and will not
require any notification, disclosure, registration, reporting, filing,
investigation or remediation under any Environmental Law.
28
(iv) TCA and each of its Subsidiaries and, to the knowledge of TCA,
all previous owners, lessees, operators and occupants of the real property
now or previously owned, leased or occupied by TCA or any of its
Subsidiaries (the "TCA Real Property"), are in compliance with, and within
the period of all applicable statutes of limitation, have complied with all
applicable Environmental Laws and have not received written notice of any
liability under any Environmental Law, and neither TCA or any of its
Subsidiaries nor any portion of the TCA Real Property is in violation of
any Environmental Law.
(v) There is no civil, criminal or administrative action, suit,
demand, claim, complaint, hearing, notice of violation, investigation,
notice or demand letter, proceeding or request for information pending or
any liability (whether actual or contingent) to make good, repair,
reinstate or clean up any of the TCA Real Property or any real property
previously owned, leased, occupied or used by TCA or any of its
Subsidiaries.
(vi) There has not been any disposal, spill, discharge, or release of
any Hazardous Material generated, used, owned, stored, or controlled by
TCA, any of its Subsidiaries, or respective predecessors in interest, on,
at, or under any TCA Real Property, or by any TCA Contractor, and there are
no Hazardous Materials located in, at, on, or under, or in the vicinity of,
any such facility or property, or at any other location, in any such case
that could reasonably be expected to require investigation, removal,
remedial, or corrective action by TCA or any of its Subsidiaries.
(vii) (A) Other than cleaning and office supplies normally used in the
operation of an office, Hazardous Materials have not been generated, used,
treated, handled or stored on, or transported to or from, or released on
any TCA Real Property or, any property adjoining any TCA Real Property; (B)
TCA and its Subsidiaries have disposed of all wastes, including those
wastes containing Hazardous Materials, in compliance with all applicable
Environmental Law and Environmental Permits; and (C) neither TCA nor any of
its Subsidiaries has transported or arranged for the transportation of any
Hazardous Materials to any location that is listed or proposed for listing
on the National Priorities List under CERCLA or on the CERCLIS or any
analogous state or country list or which is the subject of any
environmental claim.
(viii) There has not been any underground or above ground storage tank
or other underground storage receptacle or related piping, or any
impoundment or other disposal area containing Hazardous Materials located
on any TCA Real Property, and no asbestos or polychlorinated biphenyls have
been used or disposed of, or have been located at, on, or under any TCA
Real Property.
29
(ix) TCA and its Subsidiaries have taken all actions necessary under
applicable requirements of Environmental Law to register any products or
materials required to be registered by TCA or any of its Subsidiaries (or
any of their respective agents) thereunder.
(c) After a reasonable investigation made by TCA and TEC, TCA has made
available to Thoratec all records and files, including, but not limited to, all
assessments, reports, studies, audits, analyses, tests and data in possession of
TEC, TCA and its Subsidiaries concerning the existence of Hazardous Materials at
any TCA Real Property or concerning compliance by TCA and its Subsidiaries with,
or liability under, any Environmental Law.
3.21 Officer's Certificate as to Tax Matters. TCA knows of no reason why it will
be unable to deliver to Xxxxxx Xxxxxx White & XxXxxxxxx LLP and Xxxx and Xxxx
LLP, at the Closing, an officer's certificate in the form and substance of
Exhibit B to this Agreement. TCA shall use its best efforts to obtain and
deliver that certificate to both of those law firms. (There is no Exhibit A to
this Agreement.)
3.22 Affiliates. TCA has delivered to Thoratec in accordance with Section 5.9 a
list identifying all persons who, to TCA's knowledge, may be deemed to be
"affiliates" of TCA for purposes of Rule 145 under the Securities Act.
3.23 Finders or Brokers. Except for X.X. Xxxxxx Securities Inc. and The Beacon
Group Capital Services, LLC, whose fees have been disclosed to Thoratec, none of
TEC, TCA or any of their Subsidiaries has employed any investment banker,
broker, finder or intermediary in connection with any of the transactions
contemplated hereby who might be entitled to a fee or commission relating to the
Merger or any other transaction contemplated by this Agreement.
3.24 Registration Statement; Joint Proxy Statement/Prospectus. The information
to be supplied by TCA in writing for inclusion or incorporation by reference in
the Registration Statement on Form S-4 registering the Thoratec Common Stock to
be issued in the Merger (the "Registration Statement") as it relates to TCA, at
the time the Registration Statement is declared effective by the SEC, 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 not misleading. The information to be supplied by TCA in writing for
inclusion in the joint proxy statement/prospectus to be sent to the stockholders
of TCA in connection with the TCA Special Meeting and to the shareholders of
Thoratec in connection with the Thoratec Special Meeting (such joint proxy
statement/prospectus, as amended and supplemented, is referred to as the "Joint
30
Proxy Statement/Prospectus"), at the date the Joint Proxy Statement/Prospectus
is first mailed to stockholders, at the time of the TCA Special Meeting and the
Thoratec Special Meeting, and at the Effective Time 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 were made, not misleading. If, at any time
prior to the Effective Time, any event with respect to TCA or any of its
Subsidiaries shall occur which is required to be described in the Joint Proxy
Statement/Prospectus, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of TCA, Thoratec or both, as appropriate.
3.25 Title to and Condition of Property. TCA and its Subsidiaries have good and
valid title to all of their respective properties, interests in properties and
assets, real and personal, reflected in the TCA Balance Sheet or acquired after
the Reference Date, and have valid leasehold interests in all leased properties
and assets, in each case free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) liens for current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, or (iii) liens
securing debt reflected on the TCA Balance Sheet. Schedule 3.25 of the TCA
Disclosure Statement identifies each parcel of real property owned or leased by
TCA or any of its Subsidiaries. TCA's and its Subsidiaries' real and tangible
personal property has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it is used.
3.26 No Existing Discussions. As of the date hereof, none of TEC, TCA or any
their representatives is engaged, directly or indirectly, in any discussions or
negotiations with any other Person relating to any TCA Acquisition Proposal (as
defined in Section 5.2(c)).
3.27 Food and Drug Administration Matters.
(a) For purposes of this Agreement:
(i) "FDA" means the United States Food and Drug Administration and
corresponding regulatory agencies in other counties and states of the
United States.
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(ii) "FDA clearance and approval" means any pre-market notification or
pre-market approval application, consent, certificate, registration,
permit, license or other authorization, and the filing of any notification,
application, report or information, required by the FDA or any other
Government Entity pursuant to any FDA Law.
(iii) "FDA TCA Contractor" means any Person with which TCA or any
Subsidiary of TCA formerly or presently had or has any agreement or
arrangement (whether oral or written) under which that Person has or had
physical possession of, or was or is obligated to develop, test, process,
investigate, manufacture or produce, any FDA Regulated Product on behalf of
TCA or any Subsidiary of TCA.
(iv) "FDA Law" means any statute, regulation, judicial or
administrative interpretation, guideline, point-to-consider, recommendation
or standard international guidance relating to any FDA Regulated Product.
"FDA Law" includes, without limitation, the Federal Food, Drug, and
Cosmetic Act, 21 U.S.C. ss. 301 et seq., the FDA Modernization Act of 1997,
Stand Alone Provisions, Pub. L. No. 105-115, 111 Stat. 2295 (1997), and
equivalent statutes, regulations and guidances adopted by countries,
international bodies and other jurisdictions, in addition to the United
States, where TCA or any TCA Subsidiary (or, as the term "FDA Law" is used
in Section 4.25, where Thoratec or any Thoratec Subsidiary) has facilities,
does business, or directly or through others sells or offers for sale any
FDA Regulated Product.
(v) "FDA Regulated Product" means any product or component including,
without limitation, any medical device, that is studied, used, held or
offered for sale for human research or investigation or clinical use.
(b) TCA and each of its Subsidiaries possesses all FDA clearances and
approvals required under all applicable FDA Laws to conduct its current
businesses, to manufacture, hold and sell FDA Regulated Products, and to use and
occupy the TCA Real Property (defined in Section 3.20(b)(iv)). All FDA
clearances and approvals are in full force and effect.
(c) There are no facts or circumstances known to TCA that could lead to any
FDA clearances or approvals possessed by TCA or any of its Subsidiaries being
revoked, suspended, canceled or not renewed. TCA and its Subsidiaries have
submitted all necessary reports and filings to the FDA.
(d) The execution and delivery of the TCA Agreements, the consummation of
the Merger and the other transactions contemplated by the TCA Agreements, and
32
the exercise by TCA and its Subsidiaries of the rights to own and operate the
businesses of TCA and its Subsidiaries and to use and occupy the TCA Real
Property with respect to the TCA Real Property, as presently conducted and
operated, will not affect the validity or require the transfer of any FDA
clearances or approvals held by TCA or any of its Subsidiaries.
(e) TCA and its Subsidiaries and, to the knowledge of TCA, all previous
owners, lessees, operators and occupants of all TCA Real Property with respect
to the TCA Real Property, are in material compliance with, and have materially
complied with, all applicable FDA Laws and have not received (or, in the case of
such previous owners, lessees, operators and occupants, to the knowledge of TCA
have not received) any notice of any non-compliance with any FDA Laws within the
past three years.
(f) There is no civil, criminal or administrative action, suit, demand,
claim, complaint, hearing, notice of violation, investigation, notice, demand
letter, proceeding or request for information pending or any liability (whether
actual or contingent) to comply with any FDA Laws that requires any change in
any manufacturing procedures by TCA or any Subsidiary of TCA or the repair,
reinstatement or clean-up of any TCA Real Property. There is no act, omission,
event or circumstance of which TCA or any of its Subsidiaries has knowledge that
may give rise to any such action, suit, demand, claim, complaint, hearing,
notice of violation, investigations, notice, demand letter, proceeding or
request, or any such liability: (i) against, involving or of TCA or any of its
Subsidiaries or (ii) against, involving or of any other Person (including,
without limitation, any FDA TCA Contractor) that could be imputed or attributed
to TCA or any Subsidiary of TCA.
(g) There has not been any material violation of any FDA Laws by TCA or its
Subsidiaries in their prior product developmental efforts, clinical studies,
submissions or reports to the FDA or any other Government Entity (or any failure
to make any such submission or report) that could reasonably be expected to
require investigation, corrective action or enforcement action.
(h) TCA, its Subsidiaries and their respective agents (in their capacities
as such agents) have registered with the FDA all facilities required to be
registered and have listed all FDA Regulated Products required to be listed with
the FDA.
3.28 Inventories. The inventories of TCA and its Subsidiaries consist of raw
materials and supplies, manufactured and purchased parts, work in progress and
finished products, all of which are merchantable and fit for the purposes for
which they were manufactured. Subject only to the reserves reflected on the TCA
33
Balance Sheet determined in a manner consistent with TCA's past practices, none
of those inventories is slow moving, obsolete, damaged or defective.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THUNDER AND MERGER SUB
Thoratec and Merger Sub jointly and severally make to TCA the
representations and warranties contained in this Article IV, in each case
subject to the exceptions set forth in the disclosure statement, dated as of the
date hereof, delivered by Thoratec to TCA prior to the execution of this
Agreement (the "Thoratec Disclosure Statement"). The Thoratec Disclosure
Statement is arranged in schedules corresponding to the numbered and lettered
Sections of this Article IV, and the disclosure in any schedule of the Thoratec
Disclosure Statement shall qualify only the corresponding Section of this
Article IV.
4.1 Organization, Etc.
(a) Each of Thoratec, its subsidiaries listed on Schedule 4.1(a) of the
Thoratec Disclosure Statement (the "Thoratec Subsidiaries") and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Thoratec and each Thoratec Subsidiary are duly qualified
to do business, and are each in good standing, in each jurisdiction where the
character of its owned or leased properties or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Thoratec
Material Adverse Effect. For purposes of this Agreement, "Thoratec Material
Adverse Effect" means any change, circumstance, event or effect that is, or
(including with the passage of time) is likely to be or become, materially
adverse to the general affairs, business, operations, prospects, assets,
condition (financial or otherwise) or results of operations of Thoratec and the
Thoratec Subsidiaries taken as a whole, provided that: (i) any adverse change,
event, circumstance or effect arising from or relating to general business or
economic conditions which does not affect Thoratec and the Thoratec Subsidiaries
in a materially disproportionate manner compared to other entities in Thoratec's
and the Thoratec Subsidiaries' industries shall not be deemed to constitute, and
shall not be taken into account in determining whether there has been, a
34
"Thoratec Material Adverse Effect" and (ii) any adverse change, circumstance,
event or effect arising from or relating to the announcement or pendency of the
Merger shall not be deemed to constitute, and shall not be taken into account in
determining whether there has been, a "Thoratec Material Adverse Effect".
(b) None of Thoratec, any Thoratec Subsidiary or Merger Sub is in violation
of any provision of its articles of incorporation, bylaws or any other charter
document. Schedule 4.1(b) of the Thoratec Disclosure Statement sets forth: (i)
the full name of each Thoratec Subsidiary, its capitalization and the ownership
interest of Thoratec and each other Person (if any) therein, (ii) the
jurisdiction in which each such Thoratec Subsidiary is organized, (iii) each
jurisdiction in which Thoratec and each of the Thoratec Subsidiaries is
qualified to do business as a foreign Person and (iv) a brief summary of the
business and material operations of each Thoratec Subsidiary. Thoratec has made
available to TCA and TEC accurate and complete copies of the articles of
incorporation, bylaws and any other charter documents, as currently in effect,
of Thoratec and each of the Thoratec Subsidiaries.
4.2 Authority Relative to This Agreement. Each of Thoratec and Merger Sub has
full corporate power and authority to execute and deliver the TCA Agreements and
the TEC Agreements and to consummate the Merger and the other transactions
contemplated hereby and thereby. The execution and delivery of the TCA
Agreements and the TEC Agreements, and the consummation of the Merger and the
other transactions contemplated hereby and thereby have been duly and validly
authorized by the board of directors of each of Thoratec and Merger Sub and no
other corporate proceedings on the part of either Thoratec or Merger Sub are
necessary to authorize the TCA Agreements and the TEC Agreements or to
consummate the Merger and the other transactions contemplated hereby and thereby
(other than, with respect to the Merger, the approval of the issuance of the
Thoratec Common Stock in the Merger at the Thoratec Special Meeting or any
adjournment or postponement thereof in accordance with California law). Each of
the TCA Agreements and the TEC Agreement has been duly and validly executed and
delivered by Thoratec (and in the case of this Agreement, Merger Sub) and,
assuming due authorization, execution and delivery by TCA, constitutes a valid
and binding agreement of each of Thoratec and Merger Sub, enforceable against
each of them in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
4.3 No Violations, Etc. No filing with or notification to, and no permit,
authorization, consent or approval of, any Government Entity is necessary on the
35
part of Thoratec or Merger Sub for the consummation by Thoratec or Merger Sub of
the Merger or the other transactions contemplated by the TCA Agreements or by
the TEC Agreements, or the exercise by Thoratec, TCA and their Subsidiaries of
full rights to own and operate their businesses as presently being conducted,
except (i) for the filing of the Articles of Merger as required by the
Massachusetts Law, (ii) the filing with the SEC and the effectiveness of the
Registration Statement, (iii) the applicable requirements of the Exchange Act
(including with respect to the Joint Proxy Statement/Prospectus), state
securities or "blue sky" laws, state takeover laws and the listing requirements
of Nasdaq and (iv) filings required under the HSR Act. None of the execution and
delivery of the TCA Agreements and the TEC Agreements, the consummation of the
Merger or any of the other transactions contemplated hereby and thereby,
compliance by Thoratec and Merger Sub with all of the provisions hereof and
thereof, or the exercise by Thoratec, TCA or any of their Subsidiaries of full
rights to own and operate their businesses after the Merger as presently being
conducted (subject to obtaining the approval of the issuance of the shares of
Thoratec Common Stock in the Merger by the Holders of a majority of the
outstanding shares of such stock at the Thoratec Special Meeting or any
adjournment or postponement thereof in accordance with the California Law) will
(i) conflict with or result in any breach of any provision of the articles of
incorporation, bylaws or any other charter document of Thoratec or any Thoratec
Subsidiary, (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Thoratec or any Thoratec Subsidiary, or by which any of
its properties or assets may be bound, or (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default under, or result in any material change in, or give rise to any right of
termination, cancellation, acceleration, redemption or repurchase under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
Thoratec or any Thoratec Subsidiary is a party or by which any of them or any of
their properties or assets may be bound. Schedule 4.3 of the Thoratec Disclosure
Statement lists all consents, waivers and approvals required to be obtained in
connection with the consummation of the transactions contemplated by the TCA
Agreements or the TEC Agreements under any of Thoratec's or any Thoratec
Subsidiary's notes, bonds, mortgages, indentures, deeds of trust, licenses or
leases, contracts, agreements or other instruments or obligations.
4.4 Board Recommendation. The board of directors of Thoratec has, at a meeting
duly held on October 2, 2000: (i) approved and adopted the Merger, the TCA
Agreements and the TEC Agreements, (ii) determined that the Merger, the TCA
Agreements and the TEC Agreements are fair to and in the best interests of the
shareholders of Thoratec and (iii) resolved to recommend the approval and
adoption of the Merger, the TCA Agreements and the TEC Agreements at the
36
Thoratec Special Meeting, including any adjournments or postponements of that
meeting.
4.5 Capitalization.
(a) The authorized capital stock of Thoratec consists of 100,000,000 shares
of Common Stock, no par value, of which there were 22,419,753 shares issued and
outstanding as of the date of this Agreement, and 2,500,000 shares of Preferred
Stock, no par value, of which no shares are issued or outstanding. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
$0.001 par value, 100 of which, as of the date hereof, are issued and
outstanding and are held by Thoratec. Merger Sub was formed for the purpose of
consummating the Merger and has no material assets or liabilities except as
necessary for such purpose. All outstanding shares of Thoratec Common Stock are
duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the articles of incorporation
or bylaws of Thoratec or any agreement to which Thoratec is a party or by which
it is bound.
(b) There are no warrants, options, convertible securities, calls, rights,
stock appreciation rights, preemptive rights, rights of first refusal, or
agreements or commitments of any nature obligating Thoratec to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests of Thoratec, or obligating Thoratec to grant,
issue, extend, accelerate the vesting of, or enter into, any such warrant,
option, convertible security, call, right, stock appreciation right, preemptive
right, right of first refusal, agreement or commitment. Schedule 4.5 to the
Thoratec Disclosure Statement sets forth the weighted average exercise price of
all outstanding options to purchase Thoratec Common Stock. To the knowledge of
Thoratec, except for the Shareholder Agreement there are no voting trusts,
proxies or other agreements or understandings with respect to the capital stock
of Thoratec.
(c) Schedule 4.5(c) of the Thoratec Disclosure Statement sets forth the
following information with respect to each outstanding option to purchase
Thoratec Common Stock: the aggregate number of shares issuable thereunder, the
type of option, the grant date, the expiration date, the exercise price and the
vesting schedule. Each option to purchase Thoratec Common Stock was granted in
accordance with the terms of the Thoratec stock option plan applicable thereto.
Schedule 4.5(c) of the Thoratec Disclosure Statement sets forth the following
information with respect to Thoratec's Amended 1996 Nonemployee Directors Stock
Option Plan: the name of each director of Thoratec eligible to receive options
under such plan, the number of options issuable as of the date of this Agreement
to each such director and an estimate of such amounts as of the Closing Date.
37
4.6 Registration Statement; Joint Proxy Statement/Prospectus. The information to
be supplied by Thoratec for inclusion or incorporation by reference in the
Registration Statement as it relates to Thoratec, the Thoratec Subsidiaries or
Merger Sub, at the time the Registration Statement is declared effective by the
SEC, 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 not misleading. The information to be supplied by
Thoratec for inclusion in the Joint Proxy Statement/Prospectus, at the date the
Joint Proxy Statement/Prospectus is first mailed to stockholders, at the time of
the TCA Special Meeting and the Thoratec Special Meeting, and at the Effective
Time 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 were
made, not misleading. If at any time prior to the Effective Time, any event with
respect to Thoratec or any Thoratec Subsidiary (including Merger Sub) shall
occur which is required to be described in the Joint Proxy Statement/Prospectus,
such event shall be so described, and an amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
shareholders of TCA, Thoratec or both, as appropriate.
4.7 SEC Filings. Thoratec has filed with the SEC all required forms, reports,
registration statements and documents required to be filed by it with the SEC
(collectively, all such forms, reports, registration statements and documents
filed after January 1, 1997 are referred to herein as the "Thoratec SEC
Reports"), all of which complied as to form when filed in all material respects
with the applicable provisions of the Securities Act and the Exchange Act, as
the case may be. Accurate and complete copies of the Thoratec SEC Reports have
been made available to TCA and TEC. As of their respective dates, the Thoratec
SEC Reports (including all exhibits and schedules thereto and documents
incorporated by reference therein) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date hereof, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. To the knowledge of Thoratec, no director or officer of Thoratec has
failed to comply with any filing requirements under Section 13 or Section 16(a)
of the Exchange Act.
4.8 Compliance with Laws. Neither Thoratec nor any Thoratec Subsidiary has
violated or failed to comply with any statute, law, ordinance, rule or
regulation (including, without limitation, relating to the export or import of
goods or technology) of any Government Entity, except where any such violations
or failures to comply would not, individually or in the aggregate, have a
38
Thoratec Material Adverse Effect. Thoratec and each Thoratec Subsidiary have all
permits, licenses and franchises from Government Entities required to conduct
their businesses as now being conducted and as proposed to be conducted, except
for those the absence of which would not, individually or in the aggregate, have
a Thoratec Material Adverse Effect.
4.9 Financial Statements. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Thoratec
SEC Reports (the "Thoratec Financial Statements"): (i) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (ii) fairly presented the consolidated
financial position of Thoratec and the Thoratec Subsidiaries in all material
respects as of the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of Thoratec, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not,
or are not expected to be, material in amount. The balance sheet of Thoratec
contained in Thoratec's Form 10-Q for the quarter ended July 1, 2000 is
hereinafter referred to as the "Thoratec Balance Sheet."
4.10 Absence of Undisclosed Liabilities. Neither Thoratec nor any Thoratec
Subsidiary has any liabilities (absolute, accrued, contingent or otherwise)
other than (i) liabilities included in the Thoratec Balance Sheet and the
related notes to the financial statements, (ii) normal or recurring liabilities
incurred in the ordinary course of business consistent with past practice,
which, individually or in the aggregate, are not or would not be reasonably
likely to have, a Thoratec Material Adverse Effect, and (iii) liabilities under
this Agreement.
4.11 Absence of Changes or Events. Except as contemplated by this Agreement,
since July 1, 2000 no Thoratec Material Adverse Effect has occurred and, in
addition, Thoratec and the Thoratec Subsidiaries have not, directly or
indirectly:
(a) purchased, otherwise acquired, or agreed to purchase or otherwise
acquire, any shares of capital stock or any indebtedness of Thoratec or any
Thoratec Subsidiary, or declared, set aside or paid any dividend or otherwise
made a distribution (whether in cash, stock, debt or property or any combination
thereof) in respect of their capital stock (other than dividends or other
distributions payable solely to Thoratec or a wholly owned Thoratec Subsidiary);
(b) authorized for issuance, issued, sold, delivered, granted or issued any
options, warrants, calls, subscriptions or other rights for, or otherwise agreed
39
or committed to issue, sell or deliver any shares of any class of capital stock
of Thoratec or any Thoratec Subsidiary or any securities convertible into or
exchangeable or exercisable for shares of any class of capital stock of Thoratec
or any Thoratec Subsidiary, other than pursuant to and in accordance with the
Thoratec stock option plans and warrants disclosed on Schedule 4.5 to the
Thoratec Disclosure Statement;
(c) (i) created or incurred any indebtedness for borrowed money exceeding
$250,000 in the aggregate, (ii) assumed, guaranteed, endorsed or otherwise as an
accommodation become responsible for the obligations of any other individual,
firm or corporation, made any loans or advances to any other individual, firm or
corporation exceeding $100,000 in the aggregate, (iii) entered into any oral or
written agreement, commitment or transaction or incurred any liability
involving, in any one case, in excess of $100,000;
(d) instituted any change in accounting methods, principles or practices
other than as required by GAAP or the rules and regulations promulgated by the
SEC and disclosed in the notes to the Thoratec Financial Statements;
(e) revalued any assets, including without limitation, writing down the
value of inventory or writing off notes or accounts receivable in excess of
amounts previously reserved as reflected in the Thoratec Balance Sheet;
(f) suffered any damage, destruction or loss, whether covered by insurance
or not, except for such as would not, individually or in the aggregate exceed
$100,000;
(g) (i) increased in any manner the compensation of any of its directors,
officers or, other than in the ordinary course of business and consistent with
past practice, non-officer employees, (ii) granted any severance or termination
pay to any Person; (iii) entered into any oral or written employment,
consulting, indemnification or severance agreement with any Person; (iv) other
than as required by law, adopted, become obligated under, or amended any
employee benefit plan, program or arrangement or (v) repriced any options
granted under the Thoratec stock option plans;
(h) sold, transferred, leased, licensed, pledged, mortgaged, encumbered, or
otherwise disposed of, or agreed to sell, transfer, lease, license, pledge,
mortgage, encumber, or otherwise dispose of, any material properties, (including
intangibles, real, personal or mixed), it being understood that this clause (h)
does not extend to sales of inventory in the ordinary course of business;
40
(i) amended its articles of incorporation, bylaws or any other charter
document, or effected or been a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(j) made any capital expenditure in any calendar month which, when added to
all other capital expenditures made by or on behalf of Thoratec and the Thoratec
Subsidiaries in such calendar month resulted in such capital expenditures
exceeding $150,000 in the aggregate;
(k) paid, discharged or satisfied any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liabilities (including accounts payable)
in the ordinary course of business and consistent with past practice, or
collected, or accelerated the collection of, any amounts owed (including
accounts receivable) other than their collection in the ordinary course of
business;
(l) waived, released, assigned. settled or compromised any material claim
or litigation, or commenced a lawsuit other than for the routine collection of
bills or
(m) agreed or proposed to do any of the things described in the preceding
clauses (a) through (l) other than as expressly contemplated or provided for in
this Agreement.
4.12 Capital Stock of Subsidiaries. Thoratec is the record and beneficial owner
of all of the outstanding shares of capital stock or other equity interests of
each Thoratec Subsidiary. All of such shares have been duly authorized and are
validly issued, fully paid, nonassessable and free of preemptive rights with
respect thereto and are owned by Thoratec free and clear of any claim, lien or
encumbrance of any kind with respect thereto. There are no proxies or voting
agreements with respect to such shares, and there are not any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating Thoratec or any Thoratec Subsidiary to issue, transfer or
sell any shares of capital stock of any Thoratec Subsidiary or any other
securities convertible into, exercisable for, or evidencing the right to
subscribe for any such shares. Thoratec does not directly or indirectly own any
equity interest in any Person except the Thoratec Subsidiaries.
41
4.13 Litigation.
(a) There is no Action pending or, to the knowledge of Thoratec, threatened
in writing against Thoratec or any Thoratec Subsidiary, or any of their
respective officers and directors (in their capacities as such), or involving
any of their assets, before any court, Governmental Entity or arbitration
tribunal, except for those Actions which, individually or in the aggregate,
would not have a Thoratec Material Adverse Effect. There is no Action pending
or, to the knowledge of Thoratec, threatened which in any manner challenges,
seeks to, or is reasonably likely to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
(b) There is no outstanding judgment, order, writ, injunction or decree of
any court, Governmental Entity or arbitration tribunal in a proceeding to which
Thoratec, any Thoratec Subsidiary or any of their assets is a party, or by which
Thoratec, any Thoratec Subsidiary or any of their assets is bound.
4.14 Insurance. Schedule 4.14 of the Thoratec Disclosure Statement lists all
insurance policies (including, without limitation, workers' compensation
insurance policies) covering any business, properties or assets of Thoratec or
any Thoratec Subsidiary, and all claims in excess of $50,000 made against any
such policies since January 1, 1997. All such policies are in effect, and true
and complete copies of all such policies have been made available to TCA and
TEC. Thoratec has not received any notice of the cancellation or threat of
cancellation of any of such policy.
4.15 Contracts and Commitments.
(a) Schedule 4.15(a) of the Thoratec Disclosure Statement contains a
complete and accurate list of all agreements, understanding and arrangements,
whether written, oral or established through common practice, between Thoratec
or any Thoratec Subsidiary and any Person that directly or indirectly
beneficially owns, or is controlled by or under common control with any Person
that beneficially owns, more than five percent of the outstanding Thoratec
Common Stock (the "Thoratec Related Party Agreements"). True and correct copies
of all Thoratec Related Party Agreements have been provided to TCA and TEC. To
the knowledge of Thoratec, the terms of the Thoratec Related Party Agreements
are no less favorable to Thoratec and the Thoratec Subsidiaries than could be
obtained from a third party in an arms-length transaction.
(b) Except as filed (including by incorporation by reference to
earlier-filed documents) as an exhibit to the Thoratec SEC Reports filed after
January 1, 2000 or as identified on Schedule 4.15(b) to the Thoratec Disclosure
Statement (collectively the "Thoratec Contracts", it being understood that the
42
failure to identify an agreement, etc. on that schedule that is required to be
identified on that schedule shall nevertheless be considered a "Thoratec
Contract"), neither Thoratec nor any Thoratec Subsidiary is a party to or bound
by any oral or written contract, obligation or commitment of any type in any of
the following categories:
(i) agreements with any employees or consultants of Thoratec or any
Thoratec Subsidiary respecting their employment, consulting, salary, wages,
bonuses, incentive compensation, severance or retention pay, or other
compensation, except for those employees or consultants whose annual rate
of compensation, including potential bonuses and incentive compensation, is
less than $100,000;
(ii) agreements or plans under which benefits will be increased or
accelerated by the occurrence of any of the transactions contemplated by
the TCA Agreements or the TEC Agreements or under which the value of the
benefits will be calculated on the basis of any of the transactions
contemplated by such agreements;
(iii) agreements, contracts or commitments currently in force relating
to the disposition or acquisition of assets other than in the ordinary
course of business, or relating to an ownership interest in any
corporation, partnership, joint venture or other business enterprise;
(iv) agreements, contracts or commitments for the purchase of goods,
supplies or equipment: (A) which are with sole or single source suppliers
or (B) for a cost, for any one such agreement, contract and commitment, in
excess of $250,000 and which, in the case of this clause (B), provide for
purchase prices substantially greater than those presently prevailing for
such materials, supplies or equipment;
(v) guarantees or other agreements, contracts or commitments under
which Thoratec or any Thoratec Subsidiary is absolutely or contingently
liable for (A) the performance of any other Person (other than Thoratec or
any Thoratec Subsidiary), or (B) the whole or any part of the indebtedness
or payment obligations of any other Person (other than Thoratec or any
Thoratec Subsidiary);
(vi) powers of attorney authorizing the incurrence of a material
obligation on the part of Thoratec or any Thoratec Subsidiary;
(vii) agreements, contracts or commitments which limit or restrict (A)
where Thoratec or any Thoratec Subsidiary may conduct business, (B) the
43
type or lines of business (current or future) in which they may engage or
(C) any acquisition of assets or stock (tangible or intangible) by Thoratec
or any Thoratec Subsidiary;
(viii) agreements, contracts or commitments containing any agreement
with respect to a change of control of Thoratec or any Thoratec Subsidiary;
(ix) agreements, contracts or commitments for the borrowing or lending
of money, or the availability of credit (except credit extended by Thoratec
or any Thoratec Subsidiary to customers in the ordinary course of business
and consistent with past practice);
(x) any hedging, option, derivative or other similar transaction and
any foreign exchange position or contract for the exchange of currency or
(xi) any joint marketing or joint development agreement, or any
license or distribution agreement relating to any Thoratec product or
planned product.
(c) Neither Thoratec or any Thoratec Subsidiary, nor to Thoratec's
knowledge any other party to a Thoratec Contract, has materially breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under (nor does there exist any condition under which, with the
passage of time or the giving of notice or both, could reasonably be expected to
cause a material breach, violation or default under), any Thoratec Contract.
(d) Each Thoratec Contract is a valid, binding and enforceable obligation
of Thoratec, and to Thoratec's knowledge of the other party or parties thereto,
in accordance with its terms, and is in full force and effect, except where the
failure to be valid, binding, enforceable and in full force and effect would not
have a Thoratec Material Adverse Effect and to the extent enforcement may be
limited by applicable bankruptcy, insolvency, moratorium or other laws affecting
the enforcement of creditors' rights or by general principles of equity.
(e) An accurate and complete copy of each Thoratec Contract has been made
available to TCA and TEC.
4.16 Labor Matters; Employment and Labor Contracts.
(a) None of Thoratec or any Thoratec Subsidiary is a party to any union
contract or other collective bargaining agreement, nor to the knowledge of
Thoratec or any Thoratec Subsidiary are there any activities or proceedings of
any labor union to organize any of its employees. Each of Thoratec and the
44
Thoratec Subsidiaries is in compliance with all applicable (i) laws, regulations
and agreements respecting employment and employment practices, (ii) terms and
conditions of employment, and (iii) occupational health and safety requirements,
except for those failures to comply which, individually or in the aggregate,
would not have a Thoratec Material Adverse Effect.
(b) There is no labor strike, slowdown or stoppage pending (or any labor
strike or stoppage threatened) against Thoratec or any Thoratec Subsidiary. No
petition for certification has been filed and is pending before the National
Labor Relations Board with respect to any employees of Thoratec or any Thoratec
Subsidiary. Neither Thoratec nor any Thoratec Subsidiary has any obligations
under COBRA, with respect to any former employees or qualifying beneficiaries
thereunder, except for obligations that would not have, individually or in the
aggregate, a Thoratec Material Adverse Effect. There are no controversies
pending or, to the knowledge of Thoratec or any Thoratec Subsidiary, threatened,
between Thoratec or any Thoratec Subsidiary and any of their respective
employees, which controversies would have, individually or in the aggregate, a
Thoratec Material Adverse Effect.
4.17 Fairness Opinion. Thoratec has received the opinion of Xxxxxx Brothers Inc.
dated on or before the date of this Agreement to the effect that, as of the date
hereof, the Exchange Ratio is fair to Thoratec from a financial point of view,
and has provided a copy of that opinion to TCA and TEC.
4.18 Intellectual Property Rights.
(a) Thoratec and the Thoratec Subsidiaries own or have the right to use all
intellectual property used to conduct their respective businesses (such
intellectual property and the rights thereto are collectively referred to as the
"Thoratec IP Rights"). No royalties or other payments are payable to any Person
with respect to commercialization of any products presently sold by Thoratec or
the Thoratec Subsidiaries.
(b) The execution, delivery and performance of the TCA Agreements and the
consummation of the transactions contemplated hereby will not: (i) constitute a
material breach of any instrument or agreement governing any Thoratec IP Rights,
(ii) cause the modification of any terms of any licenses or agreements relating
to any Thoratec IP Rights including, but not limited to, the modification of the
effective rate of any royalties or other payments provided for in any such
license or agreement, (iii) cause the forfeiture or termination of any Thoratec
IP Rights, (iv) give rise to a right of forfeiture or termination of any
45
Thoratec IP Rights or (v) materially impair the right of Thoratec or any of the
Thoratec Subsidiaries to use, sell or license any Thoratec IP Rights or portion
thereof.
(c) Neither the manufacture, marketing, license, sale or intended use of
any product or technology currently licensed or sold or under development by
Thoratec or any of the Thoratec Subsidiaries: (i) violates in any material
respect any license or agreement between Thoratec or any of the Thoratec
Subsidiaries and any third party or (ii) to the knowledge of Thoratec, infringes
in any material respect any patents or other intellectual property rights of any
other party. There is no pending or, to the knowledge of Thoratec, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any Thoratec IP Rights, or asserting that any Thoratec IP
Rights or the proposed use, sale, license or disposition thereof, or the
manufacture, use or sale of any Thoratec products, conflicts or will conflict
with the rights of any other party.
(d) Thoratec has provided to TCA a worldwide list of all patents, trade
names, trademarks and service marks, and applications for any of the foregoing
owned or possessed by Thoratec or any of the Thoratec Subsidiaries.
(e) Thoratec has provided to TCA a true and complete copy of its standard
form of employee confidentiality agreement and taken commercially reasonable
steps to ensure that all key employees and scientific employees (whether or not
key) of Thoratec and the Thoratec Subsidiaries have executed such an agreement.
All scientific consultants with access to proprietary information of Thoratec or
any Thoratec Subsidiary have executed appropriate non-disclosure agreements with
respect to such proprietary information.
(f) Neither Thoratec nor any Thoratec Subsidiary is aware that any of its
key or scientific employees or scientific consultants is obligated under any
contract, covenant or other agreement or commitment of any nature, or subject to
any judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's or consultant's best efforts to
promote the interests of Thoratec and the Thoratec Subsidiaries or that would
conflict with the business of Thoratec or any of the Thoratec Subsidiaries as
presently conducted or proposed to be conducted. Neither Thoratec nor any of the
Thoratec Subsidiaries has entered into any agreement to indemnify any other
person, including but not limited to any employee or consultant of Thoratec or
any of the Thoratec Subsidiaries, against any charge of infringement,
misappropriation or misuse of any intellectual property, other than
indemnification provisions contained in purchase orders or customer agreements
arising in the ordinary course of business. All current and former key or
scientific employees and key consultants of any of Thoratec or any of the
Thoratec Subsidiaries who in Thoratec's reasonable business judgment were
46
appropriate have signed valid and enforceable written assignments to Thoratec or
one or more of the Thoratec Subsidiaries of any and all rights or claims in any
intellectual property that any such employee or consultant has or may have by
reason of any contribution, participation or other role in the development,
conception, creation, reduction to practice or authorship of any invention,
innovation, development or work of authorship or any other intellectual property
that is used in the business of Thoratec or any of the Thoratec Subsidiaries,
and Thoratec and the Thoratec Subsidiaries possess signed copies of all such
written assignments by such employees and consultants.
4.19 Taxes.
(a) Thoratec and each of the Thoratec Subsidiaries have filed all Tax
Returns required to have been filed by them, and have paid (or Thoratec has paid
on behalf of the Thoratec Subsidiaries), all Taxes required to have been shown
on such Tax Returns. The most recent financial statements contained in the
Thoratec SEC Reports reflect an adequate accrual (which accruals were
established in accordance with GAAP) for the payment of all Taxes payable by
Thoratec and the Thoratec Subsidiaries, as of the date of such financial
statements. Except as reasonably would not have a Thoratec Material Adverse
Effect, no deficiencies for any Taxes have been proposed, asserted or assessed
against Thoratec or any of the Thoratec Subsidiaries. Neither Thoratec nor any
of the Thoratec Subsidiaries has filed for any extension of time to file any Tax
Return which has not since been filed, in each case filed or required to be
filed with a Government Entity.
(b) Neither Thoratec nor any of the Thoratec Subsidiaries is a party to any
contract, agreement, plan or arrangement including, but not limited to, the TCA
Agreements, covering any employee or former employee of Thoratec or any of the
Thoratec Subsidiaries that: (i) could give rise to the payment of any amounts
that would constitute excess parachute payments within the meaning of Sections
280G of the Code with respect to the change in ownership or control that may
occur upon the consummation of the Merger or (ii) could give rise to the payment
of any amount that would constitute a parachute payment within the meaning of
Section 280G of the Code with respect to any change in ownership or control of
Thoratec occurring after the Closing Date. During the taxable year ending on the
Closing Date, Thoratec and the Thoratec Subsidiaries have not become obligated
to make any payment the deduction of which would be disallowed pursuant to
Section 162(m) of the Code.
(c) None of Thoratec and the Thoratec Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
47
of the Code apply to any disposition of a Subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Thoratec or any of the Thoratec
Subsidiaries.
(d) None of Thoratec and the Thoratec Subsidiaries: (i) has received any
notice that it is being audited by any taxing authority, (ii) has granted any
presently operative waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax, (iii) has permitted any
Tax lien to be placed on any asset of Thoratec or any of the Thoratec
Subsidiaries, except with respect to Taxes not yet due and payable or (iv) has
availed itself of any Tax amnesty or similar relief in any taxing jurisdiction.
(e) None of Thoratec and the Thoratec Subsidiaries is aware of any reason
why the Merger will fail to qualify as a reorganization under the provisions of
Section 368(a) of the Code.
(f) Thoratec has not been a United States real property holding corporation
within the meaning of Section 897 of the Code at any time after June 30, 1995.
(g) Neither Thoratec nor any of the Thoratec Subsidiaries has any liability
for the Taxes of any Person other than itself, Thoratec or another present
Thoratec Subsidiary. Neither Thoratec nor any of the Thoratec Subsidiaries is a
party to any tax sharing or tax indemnity agreement.
4.20 Employee Benefit Plans; ERISA.
(a) There are no "employee pension benefit plans" as defined in Section
3(2) of ERISA ("Thoratec Pension Plans"), "welfare benefit plans" as defined in
Section 3(1) of ERISA ("Thoratec Welfare Plans"), or stock bonus, stock option,
restricted stock, stock appreciation right, stock purchase, bonus, incentive,
deferred compensation, severance, holiday, or vacation plans, or any other
employee benefit plan, program, policy or arrangement covering employees (or
former employees) employed in the United States that either is maintained or
contributed to by Thoratec, any of the Thoratec Subsidiaries or any Thoratec
ERISA Affiliate (as hereinafter defined) or to which Thoratec, any of the
Thoratec Subsidiaries or any Thoratec ERISA Affiliate is obligated to make
payments or otherwise may have any liability (collectively, the "Thoratec
Employee Benefit Plans") with respect to employees or former employees of
Thoratec, any of the Thoratec Subsidiaries, or any Thoratec ERISA Affiliate. For
purposes of this Agreement, "Thoratec ERISA Affiliate" means any person (as
defined in Section 3(9) of ERISA) that is or has been a member of any group of
48
persons described in Section 414(b), (c), (m) or (o) of the Code, including,
without limitation, Thoratec or a Thoratec Subsidiary.
(b) Thoratec and each of the Thoratec Subsidiaries, and each of the
Thoratec Pension Plans and Thoratec Welfare Plans, are in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
applicable laws.
(c) All contributions to, and payments from, the Thoratec Pension Plans
which are required to have been made in accordance with the Thoratec Pension
Plans have been timely made.
(d) All Thoratec Pension Plans intended to qualify under Section 401 of the
Code have been determined by the IRS to be so qualified, and no event has
occurred and no condition exists with respect to the form or operation of any
Thoratec Pension Plan which would cause the loss of such qualification or the
imposition of any material liability, penalty or tax under ERISA or the Code.
(e) There are no (i) investigations pending by any Government Entity
involving any Thoratec Pension Plan or Thoratec Welfare Plan, or (ii) pending
or, to the knowledge of Thoratec, threatened claims (other than routine claims
for benefits), suits or proceedings against any Thoratec Pension Plan or
Thoratec Welfare Plan, against the assets of any of the trusts under any
Thoratec Pension Plan or Thoratec Welfare Plan or against any fiduciary of any
Thoratec Pension Plan or Thoratec Welfare Plan with respect to the operation of
such plan or asserting any rights or claims to benefits under any Thoratec
Pension Plan or Thoratec Welfare Plan or against the assets of any trust under
any such plan, except for those which would not, individually or in the
aggregate, give rise to any liability which would have a Thoratec Material
Adverse Effect. To the best of Thoratec's knowledge, there are no facts which
would give rise to any liability under this Section 4.20(e), except for those
which would not, individually or in the aggregate, either impair Thoratec's
ability to consummate the Merger or any of the other transactions contemplated
hereby or have a Thoratec Material Adverse Effect.
(f) None of Thoratec, any of the Thoratec Subsidiaries or any employee of
the foregoing, nor any trustee, administrator, other fiduciary or any other
"party in interest" or "disqualified person" with respect to any Thoratec
Pension Plan or Thoratec Welfare Plan, has engaged in a "prohibited transaction"
(as that term is defined in Section 4975 of the Code or Section 406 of ERISA)
other than such transactions that would not, individually or in the aggregate,
either impair Thoratec's ability to consummate the Merger or any of the other
transactions contemplated hereby or have a Thoratec Material Adverse Effect.
49
(g) None of Thoratec, any of the Thoratec Subsidiaries, or any Thoratec
ERISA Affiliate maintains or contributes to, nor has it ever maintained or
contributed to, any pension plan subject to Title IV of ERISA or Section 412 of
the Code or Section 302 of ERISA.
(h) None of Thoratec, any Thoratec Subsidiary or any Thoratec ERISA
Affiliate has incurred any material liability under Title IV of ERISA that has
not been satisfied in full.
(i) None of Thoratec, any of the Thoratec Subsidiaries or any Thoratec
ERISA Affiliate has any material liability (including any contingent liability
under Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA, covering employees (or former employees)
employed in the United States.
(j) With respect to each of the Thoratec Employee Benefit Plans, true,
correct and complete copies of the following documents have been made available
to TCA: (i) the plan document and any related trust agreement, including
amendments thereto, (ii) any current summary plan descriptions and other
material communications to participants relating to the Thoratec Employee
Benefit Plans, (iii) the three most recent Forms 5500, if applicable, and (iv)
the most recent IRS determination letter, if applicable.
(k) None of the Thoratec Welfare Plans provides for continuing benefits or
coverage for any participant or any beneficiary of a participant following
termination of employment, except as may be required under COBRA, or except at
the expense of the participant or the participant's beneficiary. Thoratec and
each of the Thoratec Subsidiaries which maintain a "group health plan" within
the meaning of Section 5000(b)(1) of the Code have complied with the notice and
continuation requirements of Section 4980B of the Code, COBRA, Part 6 of
Subtitle B of Title I of ERISA and the regulations thereunder except where the
failure to comply would not, individually or in the aggregate, either impair
Thoratec's ability to consummate the Merger or any other transaction
contemplated hereby or have a Thoratec Material Adverse Effect.
(l) No liability under any Thoratec Pension Plan or Thoratec Welfare Plan
has been funded nor has any such obligation been satisfied with the purchase of
a contract from an insurance company as to which Thoratec or any of its
Subsidiaries has received notice that such insurance company is in
rehabilitation or a comparable proceeding.
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(m) The consummation of the transactions contemplated by the Thoratec
Agreements will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable to or in respect of any employee of Thoratec or any of its
Subsidiaries.
(n) Schedule 4.20(n) of the Thoratec Disclosure Statement lists each
Thoratec Foreign Plan (as hereinafter defined). Thoratec and each of the
Thoratec Subsidiaries and each of the Thoratec Foreign Plans are in compliance
with applicable laws, and all required contributions have been made to the
Thoratec Foreign Plans, except where the failure to comply or make contributions
would not, individually or in the aggregate, either impair Thoratec's ability to
consummate the Merger or any other transaction contemplated hereby or have a
Thoratec Material Adverse Effect. Each of the Thoratec Foreign Plans that is a
funded defined benefit pension plan has a fair market value of plan assets that
is greater than the plan's liabilities, as determined in accordance with
applicable laws. For purposes hereof, "Thoratec Foreign Plan" means any plan,
program, policy, arrangement or agreement maintained or contributed to by, or
entered into with, Thoratec or any Thoratec Subsidiary with respect to any
employees (or former employees) employed outside the United States to the extent
the benefits provided thereunder are not mandated by the laws of the applicable
foreign jurisdiction.
4.21 Environmental Matters.
(a) For purposes of this Agreement, "Thoratec Contractor" means any Person
with which Thoratec or any Thoratec Subsidiary formerly or presently has any
agreement or arrangement (whether oral or written) under which such Person has
or had physical possession of, and was or is obligated to develop, test,
process, manufacture or produce any product or substance on behalf of Thoratec
or any Thoratec Subsidiary.
(b) Except for such cases that, individually or in the aggregate, have not
and would not have a Thoratec Material Adverse Effect:
(i) Each of Thoratec and the Thoratec Subsidiaries possesses all
Environmental Permits required under applicable Environmental Laws to
conduct its current business and to use and occupy the Thoratec Real
Property (as defined below) for its current business. All Environmental
Permits are in full force and effect and Thoratec and each Thoratec
Subsidiary are, and to Thoratec's knowledge have at all times been, in
compliance with such Environmental Permits.
(ii) There are no facts or circumstances indicating that any
Environmental Permit possessed by Thoratec or any of the Thoratec
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Subsidiaries would or might be revoked, suspended, canceled or not renewed,
and all appropriate necessary action in connection with the renewal or
extension of all Environmental Permits possessed by Thoratec or any
Thoratec Subsidiary relating to the current business and the Thoratec Real
Property has been taken.
(iii) The execution and delivery of the TCA Agreements and the
consummation by Thoratec of the Merger and the other transactions
contemplated hereby and the exercise by Thoratec and the Surviving
Corporation of rights to own and operate the business of Thoratec and the
Thoratec Subsidiaries and use and occupy the Thoratec Real Property and
carry on its business as presently conducted will not affect the validity
or require the transfer of any Environmental Permits held by Thoratec or
any of the Thoratec Subsidiaries and will not require any notification,
disclosure, registration, reporting, filing, investigation or remediation
under any Environmental Law.
(iv) Thoratec and each of the Thoratec Subsidiaries and, to the
knowledge of Thoratec, all previous owners, lessees, operators and
occupants of the real property now or previously owned, leased or occupied
by Thoratec or any of the Thoratec Subsidiaries (the "Thoratec Real
Property"), are in compliance with, and within the period of all applicable
statutes of limitation, have complied with all applicable Environmental
Laws and have not received written notice of any liability under any
Environmental Law, and neither Thoratec or any of the Thoratec Subsidiaries
nor any portion of the Thoratec Real Property is in violation of any
Environmental Law.
(v) There is no civil, criminal or administrative action, suit,
demand, claim, complaint, hearing, notice of violation, investigation,
notice or demand letter, proceeding or request for information pending or
any liability (whether actual or contingent) to make good, repair,
reinstate or clean up any of the Thoratec Real Property or any real
property previously owned, leased, occupied or used by Thoratec or any of
the Thoratec Subsidiaries.
(vi) There has not been any disposal, spill, discharge, or release of
any Hazardous Material generated, used, owned, stored, or controlled by
Thoratec, any of the Thoratec Subsidiaries, or respective predecessors in
interest, on, at, or under any Thoratec Real Property, or by any Thoratec
Contractor, and there are no Hazardous Materials located in, at, on, or
under, or in the vicinity of, any such facility or property, or at any
other location, in any such case that could reasonably be expected to
require investigation, removal, remedial, or corrective action by Thoratec
or any of the Thoratec Subsidiaries.
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(vii) (A) Other than cleaning and office supplies normally used in the
operation of an office, Hazardous Materials have not been generated, used,
treated, handled or stored on, or transported to or from, or released on
any Thoratec Real Property or, any property adjoining any Thoratec Real
Property; (B) Thoratec and the Thoratec Subsidiaries have disposed of all
wastes, including those wastes containing Hazardous Materials, in
compliance with all applicable Environmental Law and Environmental Permits;
and (C) neither Thoratec nor any of the Thoratec Subsidiaries has
transported or arranged for the transportation of any Hazardous Materials
to any location that is listed or proposed for listing on the National
Priorities List under CERCLA or on the CERCLIS or any analogous state or
country list or which is the subject of any environmental claim.
(viii) There has not been any underground or above ground storage tank
or other underground storage receptacle or related piping, or any
impoundment or other disposal area containing Hazardous Materials located
on any Thoratec Real Property, and no asbestos or polychlorinated biphenyls
have been used or disposed of, or have been located at, on, or under any
Thoratec Real Property.
(ix) Thoratec and the Thoratec Subsidiaries have taken all actions
necessary under applicable requirements of Environmental Law to register
any products or materials required to be registered by Thoratec or any of
the Thoratec Subsidiaries (or any of their respective agents) thereunder.
(c) After a reasonable investigation made by Thoratec, Thoratec has made
available to TCA all records and files, including, but not limited to, all
assessments, reports, studies, audits, analyses, tests and data in possession of
Thoratec and the Thoratec Subsidiaries concerning the existence of Hazardous
Materials at any Thoratec Real Property or concerning compliance by Thoratec and
the Thoratec Subsidiaries with, or liability under, any Environmental Law.
4.22 Finders or Brokers. Except for Xxxxxx Brothers Inc., whose fees have been
disclosed to TCA, neither Thoratec nor any Thoratec Subsidiary has employed any
investment banker, broker, finder or intermediary in connection with any of the
transactions contemplated hereby who might be entitled to a fee or commission
relating to the Merger or any other transaction contemplated by this Agreement.
4.23 Title to and Condition of Property. Thoratec and the Thoratec Subsidiaries
have good and valid title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the Thoratec Balance
Sheet or acquired after the Reference Date, and have valid leasehold interests
in all leased properties and assets, in each case free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or character,
53
except (i) liens for current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties, or (iii) liens securing debt reflected on the Thoratec Balance
Sheet. Schedule 4.23 of the Thoratec Disclosure Statement identifies each parcel
of real property owned or leased by Thoratec or any Thoratec Subsidiary.
Thoratec's and the Thoratec Subsidiaries' real and tangible personal property
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it is used. 4.24 Officer's Certificate as to
Tax Matters. Thoratec does not know of any reason why it will be unable to
deliver to Xxxxxx Xxxxxx White & XxXxxxxxx LLP and Xxxx and Xxxx LLP, at the
Closing, an officer's certificate in the form and substance of Exhibit C to this
Agreement. Thoratec shall use its best efforts to obtain and deliver that
certificate to both of those firms.
4.25 Food and Drug Administration Matters.
(a) For purposes of this Agreement, "FDA Thoratec Contractor" means any
Person with which Thoratec or any Thoratec Subsidiary formerly or presently had
or has any agreement or arrangement (whether oral or written) under which that
Person has or had physical possession of, or was or is obligated to develop,
test, process, manufacture or produce, any FDA Regulated Product on behalf of
Thoratec or any Thoratec Subsidiary.
(b) Thoratec and each Thoratec Subsidiary possesses all FDA clearances and
approvals required under all applicable FDA Laws to conduct its current
businesses, to manufacture, hold and sell FDA Regulated Products, and to use and
occupy the Thoratec Real Property (defined in Section 4.21(b)(iv)). All FDA
clearances and approvals are in full force and effect.
(c) There are no facts or circumstances known to Thoratec that could lead
to any FDA clearances or approvals possessed by Thoratec or any Thoratec
Subsidiary being revoked, suspended, canceled or not renewed. Thoratec and each
Thoratec Subsidiary have submitted all necessary reports and filings to the FDA.
(d) The execution and delivery of the TCA Agreements, the consummation of
the Merger and the other transactions contemplated by the TCA Agreements, and
the exercise by Thoratec and the Thoratec Subsidiaries of the rights to own and
54
operate the businesses of Thoratec and the Thoratec Subsidiaries and to use and
occupy the Thoratec Real Property with respect to the Thoratec Real Property, as
presently conducted and operated, will not affect the validity or require the
transfer of any FDA clearances or approvals held by Thoratec or any Thoratec
Subsidiary.
(e) Thoratec and the Thoratec Subsidiaries and, to the knowledge of
Thoratec, all previous owners, lessees, operators and occupants of all Thoratec
Real Property with respect to the Thoratec Real Property, are in material
compliance with, and have materially complied with, all applicable FDA Laws and
have not received (or, in the case of such previous owners, lessees, operators
and occupants, to the knowledge of Thoratec have not received) any notice of any
non-compliance with any FDA Laws within the past three years.
(f) There is no civil, criminal or administrative action, suit, demand,
claim, complaint, hearing, notice of violation, investigation, notice, demand
letter, proceeding or request for information pending or any liability (whether
actual or contingent) to comply with any FDA Laws that requires any change in
any manufacturing procedures by Thoratec or any Thoratec Subsidiary or the
repair, reinstatement or clean-up of any Thoratec Real Property. There is no
act, omission, event or circumstance of which Thoratec or any Thoratec
Subsidiary has knowledge that may give rise to any such action, suit, demand,
claim, complaint, hearing, notice of violation, investigations, notice, demand
letter, proceeding or request, or any such liability: (i) against, involving or
of Thoratec or any Thoratec Subsidiary or (ii) against, involving or of any
other Person (including, without limitation, any FDA Thoratec Contractor) that
could be imputed or attributed to Thoratec or any Thoratec Subsidiary.
(g) There has not been any material violation of any FDA Laws by Thoratec
or any Thoratec Subsidiary in their prior product developmental efforts,
clinical studies, submissions or reports to the FDA or any other Government
Entity (or any failure to make any such submission or report) that could
reasonably be expected to require investigation, corrective action or
enforcement action.
(h) Thoratec, Thoratec Subsidiaries and their respective agents (in their
capacities as such agents) have registered with the FDA all facilities required
to be registered and have listed all FDA Regulated Products required to be
listed with the FDA.
4.26 Inventories. The inventories of Thoratec and the Thoratec Subsidiaries
consist of raw materials and supplies, manufactured and purchased parts, work in
progress and finished products, all of which are merchantable and fit for the
purposes for which they were manufactured. Subject only to the reserves
reflected on the Thoratec Balance Sheet determined in a manner consistent with
55
Thoratec's past practices, none of those inventories is slow moving, obsolete,
damaged or defective.
ARTICLE V
COVENANTS
5.1 Conduct of Business During Interim Period. Except as contemplated or
required by this Agreement, as set forth on Schedule 5.1 to the TCA Disclosure
Statement or Schedule 5.1 to the Thoratec Disclosure Statement, or as expressly
consented to in writing by Thoratec or TCA, as the case may be, during the
period from the date of this Agreement to the earlier of the termination of this
Agreement and the Effective Time, each of TCA and its Subsidiaries, on the one
hand, and Thoratec and the Thoratec Subsidiaries, on the other hand, shall (i)
conduct its operations according to its ordinary and usual course of business
consistent with past practice, (ii) use commercially reasonable efforts to
preserve intact its business organization, to keep available the services of its
officers and employees in each business function and to maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with it, and (iii) not take any action which would adversely
affect its ability to consummate the Merger or the other transactions
contemplated hereby. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, prior to the earlier
of the termination of this Agreement and the Effective Time, neither TCA nor any
of its Subsidiaries will, without the prior written consent of Thoratec, and
neither Thoratec nor any Thoratec Subsidiary will, without the prior written
consent of TCA, directly or indirectly, do any of the following:
(a) enter into, violate, extend, amend or otherwise modify or waive any of
the terms of (i) any joint venture, license, or agreement relating to the joint
development or transfer of technology or TCA IP Rights or Thoratec IP Rights, as
the case may be, or (ii) except in the ordinary course of business and
consistent with past practice, any other agreements, commitments or contracts;
(b) split, combine or reclassify any shares of its capital stock;
(c) except as permitted in Section 5.4(e) or (f), as appropriate, of this
Agreement, authorize, solicit, propose or announce an intention to authorize,
56
recommend or propose, or enter into any agreement in principle or an agreement
with any other Person with respect to, any plan of liquidation or dissolution,
any acquisition of a material amount of assets or securities, any disposition of
a material amount of assets or securities, any material change in
capitalization, or any partnership, association, joint venture, joint
development, technology transfer, or other material business alliance;
(d) fail to renew any insurance policy naming it as a beneficiary or a loss
payee, or take any steps or fail to take any steps that would permit any
insurance policy naming it as a beneficiary or a loss payee to be canceled,
terminated or materially altered, except in the ordinary course of business and
consistent with past practice and following written notice to Thoratec or TCA,
as the case may be;
(e) maintain its books and records in a manner other than in the ordinary
course of business and consistent with past practice;
(f) enter into any hedging, option, derivative or other similar transaction
or any foreign exchange position or contract for the exchange of currency other
than in the ordinary course of business and consistent with past practice;
(g) institute any change in its accounting methods, principles or practices
other than as required by GAAP, or the rules and regulations promulgated by the
SEC, or revalue any assets, including without limitation, writing down the value
of inventory or writing off notes or accounts receivables;
(h) in respect of any Taxes, make or change any material election, change
any accounting method, enter into any closing agreement, settle any material
claim or assessment, or consent to any extension or waiver of the limitation
period applicable to any material claim or assessment except as required by
applicable law;
(i) suspend, terminate or otherwise discontinue any planned or ongoing
material research and development activities, programs or other such activities;
(j) issue any capital stock or debt instruments (other than upon conversion
or exercise of existing options, warrants or debt instruments that have been
disclosed in Section 3.6 or 4.5 of this Agreement or the related schedules to
the related disclosure statements), or any options, warrants or other rights to
purchase or acquire any capital stock or debt instruments;
(k) purchase any capital stock or debt instruments, or any options,
warrants or other rights to purchase or acquire any capital stock or debt
instruments or
57
(l) take or agree to take, any of the actions described in Section 3.10, in
the case of TCA, or Section 4.11, in the case of Thoratec, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
5.2 No Solicitation.
(a) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VIII, TEC, TCA and their
Subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly: (i) solicit, initiate, encourage or induce the making, submission or
announcement of any TCA Acquisition Proposal (as hereinafter defined), (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any TCA Acquisition Proposal, (iii) engage in
discussions with any Person with respect to any TCA Acquisition Proposal, except
as to the existence of these provisions, (iv) approve, endorse or recommend any
TCA Acquisition Proposal or (v) enter into any letter of intent or similar
document or any contract agreement or commitment contemplating or otherwise
relating to any TCA Acquisition Transaction. Notwithstanding anything to the
contrary contained in this Section 5.2 or in any other provision of this
Agreement, TEC, TCA and their boards of directors: (i) may participate in
discussions or negotiations with or furnish information to any third party that,
after the date of this Agreement, makes an unsolicited TCA Acquisition Proposal
(a "TCA Potential Acquiror") or approve an unsolicited TCA Acquisition Proposal
if the respective board is advised by its financial advisor that the TCA
Potential Acquiror submitting such TCA Acquisition Proposal has the financial
wherewithal to consummate that TCA Acquisition Proposal, and that board
determines in good faith (A) after receiving written advice from its financial
advisor, that such TCA Acquisition Proposal is a TCA Superior Offer (as defined
in Section 5.4(e)), and (B) following consultation with outside legal counsel,
that the failure to participate in such discussions or negotiations or to
furnish such information or approve the TCA Acquisition Proposal would violate
the board's fiduciary duties under applicable law and even in the absence of
this Section 5.2. TCA and TEC agree that any non-public information furnished to
a TCA Potential Acquiror will be pursuant to a confidentiality and
nonsolicitation agreement containing provisions at least as favorable to TCA as
the confidentiality and nonsolicitation provisions of the Confidentiality
Agreements (as defined in Section 5.3). If TCA or TEC shall determine to provide
any information as described above, or shall receive a TCA Acquisition Proposal,
58
it shall promptly, and in any event within 24 hours, inform Thoratec in writing
as to that fact and shall furnish to Thoratec the identity of the recipient of
such information to be provided and/or the TCA Potential Acquiror and the terms
of such TCA Acquisition Proposal.
(b) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VIII, Thoratec and the
Thoratec Subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly: (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Thoratec Acquisition Proposal (as hereinafter
defined), (ii) participate in any discussions or negotiations regarding, or
furnish to any Person any non-public information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Thoratec Acquisition
Proposal, (iii) engage in discussions with any Person with respect to any
Thoratec Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Thoratec Acquisition Proposal or (v)
enter into any letter of intent or similar document or any contract agreement or
commitment contemplating or otherwise relating to any Thoratec Acquisition
Transaction. Notwithstanding anything to the contrary contained in this Section
5.2 or in any other provision of this Agreement, Thoratec and its board of
directors may participate in discussions or negotiations with or furnish
information to any third party that, after the date of this Agreement, makes an
unsolicited Thoratec Acquisition Proposal (a "Thoratec Potential Acquiror") or
approve an unsolicited Thoratec Acquisition Proposal if the board is advised by
its financial advisor that the Thoratec Potential Acquiror submitting such
Thoratec Acquisition Proposal has the financial wherewithal to consummate that
Thoratec Acquisition Proposal, and the board determines in good faith, following
consultation with outside legal counsel, that the failure to participate in such
discussions or negotiations or to furnish such information or approve the
Thoratec Acquisition Proposal would violate the board's fiduciary duties under
applicable law and even in the absence of this Section 5.2. Thoratec agrees that
any non-public information furnished to a Thoratec Potential Acquiror will be
pursuant to a confidentiality and nonsolicitation agreement containing
provisions at least as favorable to Thoratec as the confidentiality and
nonsolicitation provisions of the Confidentiality Agreements (as defined in
Section 5.3). If Thoratec shall determine to provide any information as
described above, or shall receive any Thoratec Acquisition Proposal, it shall
promptly, and in any event within 24 hours, inform TCA and TEC in writing as to
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that fact and shall furnish to TCA and TEC the identity of the recipient of such
information to be provided and/or the Thoratec Potential Acquiror and the terms
of such Thoratec Acquisition Proposal.
(c) For purposes of this Agreement, "TCA Acquisition Proposal" means any
offer or proposal (other than an offer or proposal by Thoratec) relating to any
TCA Acquisition Transaction. For purposes of this Agreement, "TCA Acquisition
Transaction" means any transaction or series of related transactions involving:
(A) any purchase from TCA or acquisition by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of TCA or any tender offer or exchange offer that if consummated
would result in any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning 15%
or more of the total outstanding voting securities of TCA or any merger,
consolidation, business combination or similar transaction involving TCA; (B)
any sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than 15% of the assets of TCA or (C) any liquidation or
dissolution of TCA.
(d) For purposes of this Agreement, "Thoratec Acquisition Proposal" means
any offer or proposal relating to any Thoratec Acquisition Transaction. For
purposes of this Agreement, "Thoratec Acquisition Transaction" means any
transaction or series of related transactions involving: (A) any purchase from
Thoratec or acquisition by any person or "group" (as defined under Section 13(d)
of the Exchange Act and the rules and regulations thereunder) of more than a 15%
interest in the total outstanding voting securities of Thoratec or any tender
offer or exchange offer that if consummated would result in any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 15% or more of the total outstanding
voting securities of Thoratec or any merger, consolidation, business combination
or similar transaction involving Thoratec; (B) any sale, lease (other than in
the ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than 15% of the
assets of Thoratec or (C) any liquidation or dissolution of Thoratec.
(e) In addition to the obligations of TCA and TEC set forth in Section
5.2(a), TCA and TEC as promptly as practicable shall advise Thoratec orally and
in writing of any TCA Acquisition Proposal or any request for non-public
information or inquiry which TCA or TEC reasonably believes would lead to a TCA
Acquisition Proposal or to any TCA Acquisition Transaction, the material terms
and conditions of such TCA Acquisition Proposal, request or inquiry, and the
60
identity of the Person or group making any such TCA Acquisition Proposal or any
amendment or modification thereto, request or inquiry. TCA and TEC shall keep
Thoratec informed as promptly as practicable in all material respects of the
status and details (including material amendments or proposed material
amendments) of any such TCA Acquisition Proposal, request or inquiry.
(f) In addition to the obligations of Thoratec set forth in Section 5.2(b),
Thoratec as promptly as practicable shall advise TCA and TEC orally and in
writing of any Thoratec Acquisition Proposal or any request for non-public
information or inquiry which Thoratec reasonably believes would lead to a
Thoratec Acquisition Proposal or to any Thoratec Acquisition Transaction, the
material terms and conditions of such Thoratec Acquisition Proposal or any
amendments or modifications thereto, request or inquiry, and the identity of the
Person or group making any such Thoratec Acquisition Proposal, request or
inquiry.
5.3 Access to Information. From the date of this Agreement until the Effective
Time, TCA and Thoratec shall each afford to the other and their authorized
representatives (including counsel, consultants, accountants, auditors and
agents) reasonable access during normal business hours and upon reasonable
notice to all of its facilities, personnel and operations and to all of its and
its Subsidiaries books and records, shall permit the other and its authorized
representatives to conduct inspections as they may reasonably request and shall
instruct its officers and those of its Subsidiaries to furnish such persons with
such financial and operating data and other information with respect to its
business and properties as they may from time to time reasonably request,
subject to the restrictions set forth in the Confidentiality Agreements dated as
of March 15, 2000 and July 26, 2000 between Thoratec and TCA (the
"Confidentiality Agreements").
5.4 Special Meetings; Registration Statement; Board Recommendations.
(a) TCA Special Meeting. Promptly after the date hereof, TCA will take all
action necessary in accordance with Massachusetts Law and its Articles of
Organization and bylaws to convene a meeting of TCA's stockholders to consider
adoption and approval of this Agreement and approval of the Merger (the "TCA
Special Meeting") to be held as promptly as practicable, and in any event (to
the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement. Subject to Section
5.4(e), TCA will use its commercially reasonable efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its stockholders required by the rules of the
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American Stock Exchange or Massachusetts Law to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, TCA may
adjourn or postpone the TCA Special Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Joint Proxy
Statement/Prospectus is provided to TCA's stockholders in advance of a vote on
the Merger and this Agreement or, if as of the time for which the TCA Special
Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus) there are insufficient shares of TCA Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the TCA Special Meeting. TCA shall ensure that the TCA
Special Meeting is called, noticed, convened, held and conducted, and that all
proxies solicited by TCA in connection with the TCA Special Meeting are
solicited, in compliance with the Massachusetts Law, TCA's Articles of
Organization and bylaws, the rules of the American Stock Exchange and all other
applicable legal requirements. TCA's obligation to call, give notice of, convene
and hold the TCA Special Meeting in accordance with this Section 5.4(a) shall
not be limited to or otherwise affected by the commencement, disclosure,
announcement or submission to TCA of any TCA Acquisition Proposal, or by any
withdrawal, amendment or modification of the recommendation of the board of
directors of TCA with respect to the Merger or this Agreement.
(b) Thoratec Special Meeting. Promptly after the date hereof, Thoratec will
take all action necessary in accordance with California Law and its articles of
incorporation and bylaws to convene a meeting of Thoratec's shareholders to
consider the issuance of Thoratec Common Stock in the Merger (the "Thoratec
Special Meeting") to be held as promptly as practicable, and in any event (to
the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement. Subject to Section
5.4(f), Thoratec will use its commercially reasonable efforts to solicit from
its shareholders proxies in favor of the issuance of Thoratec Common Stock in
the Merger and will take all other action necessary or advisable to secure the
vote or consent of its shareholders required by the rules of Nasdaq or
California Law to obtain such approval. Notwithstanding anything to the contrary
contained in this Agreement, Thoratec may adjourn or postpone the Thoratec
Special Meeting to the extent necessary to ensure that any necessary supplement
or amendment to the Joint Proxy Statement/Prospectus is provided to Thoratec's
shareholders in advance of a vote on the issuance of Thoratec Common Stock in
the Merger and this Agreement or, if as of the time for which the Thoratec
Special Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus) there are insufficient shares of Thoratec Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
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conduct the business of the Thoratec Special Meeting. Thoratec shall ensure that
the Thoratec Special Meeting is called, noticed, convened, held and conducted,
and that all proxies solicited by Thoratec in connection with the Thoratec
Special Meeting are solicited, in compliance with the California Law, Thoratec's
articles of incorporation and bylaws, the rules of Nasdaq and all other
applicable legal requirements. Thoratec's obligation to call, give notice of,
convene and hold the Thoratec Special Meeting in accordance with this Section
5.4(b) shall not be limited to or otherwise affected by the commencement,
disclosure, announcement or submission to Thoratec of any Thoratec Acquisition
Proposal, or by any withdrawal, amendment or modification of the recommendation
of the board of directors of Thoratec with respect to the issuance of Thoratec
Common Stock in the Merger.
(c) Subject to Section 5.4(e): (i) the board of directors of TCA shall
recommend that TCA's stockholders vote in favor of and adopt and approve this
Agreement and approve the Merger at the TCA Special Meeting; (ii) the Joint
Proxy Statement/Prospectus shall include a statement to the effect that the
board of directors of TCA has recommended that TCA's stockholders vote in favor
of and adopt and approve this Agreement and the Merger at the TCA Special
Meeting; and (iii) neither the board of directors of TCA nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify in a manner adverse to Thoratec, the recommendation of the board
of directors of TCA that TCA's stockholders vote in favor of and adopt and
approve this Agreement and the Merger.
(d) Subject to Section 5.4(f): (i) the board of directors of Thoratec shall
recommend that Thoratec's shareholders vote in favor of the issuance of Thoratec
Common Stock in the Merger at the Thoratec Special Meeting; (ii) the Joint Proxy
Statement/Prospectus shall include a statement to the effect that the board of
directors of Thoratec has recommended that Thoratec's shareholders vote in favor
of the issuance of Thoratec Common Stock in the Merger at the Thoratec Special
Meeting; and (iii) neither the board of directors of Thoratec nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify in a manner adverse to TCA, the recommendation of Thoratec's
board of directors of Thoratec that Thoratec's shareholders vote in favor of the
issuance of Thoratec Common Stock in the Merger.
(e) Nothing in this Agreement shall prevent the board of directors of TCA
from withholding, withdrawing, amending or modifying its recommendation in favor
of the Merger if (i) a TCA Superior Offer (as defined below) is made to TCA and
is not withdrawn, (ii) TCA shall have provided written notice to Thoratec (a
"Notice of TCA Superior Offer") advising Thoratec that TCA has received a TCA
Superior Offer, specifying the material terms and conditions of such TCA
Superior Offer and identifying the Person or entity making such TCA Superior
Offer, (iii) Thoratec shall not have, within five business days of Thoratec's
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receipt of the Notice of TCA Superior Proposal, made an offer that the TCA board
of directors by a majority vote determines in its good faith judgment (based on
the written advice of its financial advisor) to be at least as favorable to
TCA's stockholders as such TCA Superior Offer (it being agreed that the TCA
board of directors shall convene a meeting to consider any such offer by
Thoratec promptly following the receipt thereof), (iv) the board of directors of
TCA concludes in good faith, after consultation with its outside counsel, that,
in light of such TCA Superior Offer, the withholding, withdrawal, amendment or
modification of such recommendation is required in order for the board of
directors of TCA to comply with its fiduciary obligations to TCA's stockholders
under applicable law and (v) TCA shall not have violated any of the restrictions
set forth in Section 5.2 or this Section 5.4(e). TCA shall provide Thoratec with
at least three business days prior notice (or such lesser prior notice as
provided to the members of TCA's board of directors but in no event less than 24
hours) of any meeting of TCA's board of directors at which TCA's board of
directors is reasonably expected to consider any TCA Acquisition Transaction.
Subject to applicable laws, nothing contained in this Section 5.4(e) shall limit
TCA's obligation to hold and convene the TCA Special Meeting (regardless of
whether the recommendation of the board of directors of TCA shall have been
withdrawn, amended or modified). For purposes of this Agreement, "TCA Superior
Offer" means an unsolicited, bona fide written offer made by a third party to
consummate any of the following transactions: (i) a merger or consolidation
involving TCA pursuant to which the stockholders of TCA immediately preceding
such transaction hold less than a majority of the equity interests in the
surviving or resulting entity of such transaction or (ii) the acquisition by any
Person or group (including by way of a tender offer or an exchange offer or a
two-step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger, directly or indirectly, of ownership of 100% of
the then outstanding shares of capital stock of TCA on terms that the board of
directors of TCA determines, in its reasonable good faith judgment (based on the
written advice of its financial advisor) to be more favorable to the TCA
stockholders than the terms of the Merger, provided that any such offer shall
not be deemed to be a "TCA Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not fully committed.
(f) Nothing in this Agreement shall prevent the board of directors of
Thoratec from withholding, withdrawing, amending or modifying its recommendation
in favor of the issuance of Thoratec Common Stock in the Merger if (i) a
Thoratec Superior Offer (as defined below) is made to Thoratec and is not
withdrawn, (ii) Thoratec shall have provided written notice to TCA and TEC (a
"Notice of Thoratec Superior Offer") advising TCA and TEC that Thoratec has
received a Thoratec Superior Offer, specifying the material terms and conditions
of such Thoratec Superior Offer and identifying the Person or entity making such
Thoratec Superior Offer, (iii) the board of directors of Thoratec concludes in
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good faith, after consultation with its outside counsel, that, in light of such
Thoratec Superior Offer, the withholding, withdrawal, amendment or modification
of such recommendation is required in order for the board of directors of
Thoratec to comply with its fiduciary obligations to Thoratec's shareholders
under applicable law and (iv) Thoratec shall not have violated any of the
restrictions set forth in Section 5.2 or this Section 5.4(f). Thoratec shall
provide TCA and TEC with at least three business days prior notice (or such
lesser prior notice as provided to the members of Thoratec's board of directors
but in no event less than 24 hours) of any meeting of Thoratec's board of
directors at which Thoratec's board of directors is reasonably expected to
consider any Thoratec Acquisition Transaction. Subject to applicable laws,
nothing contained in this Section 5.4(f) shall limit Thoratec's obligation to
hold and convene the Thoratec Special Meeting (regardless of whether the
recommendation of the board of directors of Thoratec shall have been withdrawn,
amended or modified). For purposes of this Agreement, "Thoratec Superior Offer"
means an unsolicited, bona fide written offer made by a third party to
consummate any of the following transactions: (i) a merger or consolidation
involving Thoratec pursuant to which the shareholders of Thoratec immediately
preceding such transaction hold less than a majority of the equity interests in
the surviving or resulting entity of such transaction or (ii) the acquisition by
any Person or group (including by way of a tender offer or an exchange offer or
a two-step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger, directly or indirectly, of ownership of 100% of
the then outstanding shares of capital stock of Thoratec on terms that the board
of directors of Thoratec determines, in its reasonable good faith judgment
(based on the written advice of its financial advisor) to be more favorable to
the Thoratec shareholders than the terms of the Merger, provided that any such
offer shall not be deemed to be a "Thoratec Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not fully
committed.
(g) Nothing in this Agreement shall prohibit TCA or its board of directors
or Thoratec or its board of directors from taking and disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act.
(h) As promptly as practicable after the execution of this Agreement, TCA
and Thoratec shall mutually prepare, and TCA shall file with the SEC, a
preliminary form of the Joint Proxy Statement/Prospectus. As promptly as
practicable following receipt of SEC comments on such preliminary Joint Proxy
Statement/Prospectus, Thoratec and TCA shall mutually prepare a response to such
comments. Upon resolution of all comments, Thoratec shall file the Registration
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Statement with the SEC. Thoratec and TCA shall use all commercially reasonable
efforts to have the preliminary Joint Proxy Statement/Prospectus cleared by the
SEC and the Registration Statement declared effective by the SEC as promptly as
practicable. Thoratec shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with Thoratec Common
Stock to be issued in exchange for the shares of TCA Common Stock. Thoratec and
TCA shall promptly furnish to each other all information, and take such other
actions (including, without limitation, using all commercially reasonable
efforts to provide any required consents of their respective independent
auditors), as may reasonably be requested in connection with any action by any
of them in connection with the preceding sentences of this Section 5.4(h).
Whenever any party learns of the occurrence of any event which is required to be
set forth in an amendment or supplement to the Joint Proxy Statement/Prospectus,
the Registration Statement or any other filing made pursuant to this Section
5.4(h), Thoratec or TCA, as the case may be, shall promptly inform the other of
such occurrence and cooperate in filing with the SEC or its staff and/or mailing
of such amendment or supplement to the stockholders of TCA, Thoratec or both, as
appropriate.
(i) Subject to Section 5.4(e), the Joint Proxy Statement/Prospectus shall
contain the recommendation of the board of directors of TCA in favor of the
approval and adoption of the Merger and this Agreement.
(j) Subject to Section 5.4(f), the Joint Proxy Statement/Prospectus shall
contain the recommendation of the board of directors of Thoratec in favor of the
issuance of Thoratec Common Stock in the Merger.
(k) Subject to the next sentence, TEC shall vote (or cause to be voted) all
the shares of TCA Common Stock held directly or indirectly by it in favor of
this Agreement and the Merger at the TCA Special Meeting and any adjournments or
postponements thereof. However, TEC shall be excused from that obligation if,
but only if, the TCA board of directors withholds or withdraws its
recommendation in accordance with Section 5.4(e).
5.5 Commercially Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, Thoratec, Merger
Sub, TEC and TCA shall use their commercially reasonable efforts to take, or
cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or appropriate under this Agreement and applicable laws to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation:
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(i) entering into or causing their appropriate Subsidiaries to enter
into the agreements required to be entered into by them or those
Subsidiaries as referenced in Sections 7.1 and 7.2 of this Agreement, (ii)
satisfying the other conditions to closing set forth in those sections over
which they have control or influence, (iii) promptly filing Notification
and Report Forms under the HSR Act with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division") and responding as promptly as practicable to any
inquiries received from the FTC or the Antitrust Division for additional
information or documentation, (iv) using commercially reasonable efforts to
obtain all necessary governmental and private party consents, approvals or
waivers, and (v) using commercially reasonable efforts to lift any legal
bar to the Merger.
(b) Notwithstanding anything to the contrary in this Agreement, none of
Thoratec, TCA or any of their respective Subsidiaries shall be required to (i)
divest, hold separate or license any business, product line or assets, (ii) take
any action or accept any limitation that could reasonably be expected to have a
Thoratec Material Adverse Effect or a TCA Material Adverse Effect or (iii) agree
to any of the foregoing in order to effect or facilitate the Merger.
5.6 Public Announcements. Before issuing any press release or otherwise making
any public statement with respect to the Merger or any of the other transactions
contemplated hereby, Thoratec, Merger Sub, TEC and TCA shall consult with each
other as to its form and substance, and agree not to issue any such press
release or general communication to employees or make any public statement prior
to obtaining the consent of the others (which shall not be unreasonably withheld
or delayed), except as may be required by applicable law or by the rules and
regulations of or listing agreement with Nasdaq, The American Stock Exchange,
the New York Stock Exchange or as may otherwise be required by Nasdaq, The
American Stock Exchange, the New York Stock Exchange or the SEC.
5.7 Notification of Certain Matters. TCA and TEC shall promptly notify Thoratec,
and Thoratec shall promptly notify TCA and TEC, of the occurrence or
non-occurrence of any event the respective occurrence or non-occurrence of which
would be likely to cause any condition to the obligations of the notifying party
to effect the Merger not to be fulfilled. TCA and TEC shall give prompt notice
to Thoratec, and Thoratec shall give prompt notice to TCA and TEC, of any
communication from any Person alleging that the consent of such Person is or may
be required in connection with the Merger or other transactions contemplated
hereby.
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5.8 Indemnification.
(a) The articles of organization and bylaws of the Surviving Corporation
shall contain, and Thoratec shall cause the Surviving Corporation to fulfill and
honor, the provisions with respect to indemnification and exculpation that are
substantially identical to those set forth in the articles of organization and
bylaws of TCA as of the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of any of the Indemnified Parties. In addition, Thoratec shall guarantee the
obligations of TCA pursuant to any indemnification agreements between TCA and
any of the Indemnified Parties. "Indemnified Parties" shall include each person
who is or was a director or officer of TCA or any Subsidiary of TCA at any time
before the Effective Time, and each person who serves or has in the past served
at the request of TCA or any subsidiary of TCA as a director, officer, trustee,
partner, fiduciary, employee or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or enterprise at any time
before the Effective Time. Notwithstanding the foregoing, Thoratec's and the
Surviving Corporation's obligations set forth in this Section 5.8(a) are in all
respects conditioned upon TEC's performance of its obligations set forth in
Section 5.8(b).
(b) For a period of six years after the Effective Time, TEC shall maintain
in effect directors' and officers' liability insurance covering those persons
who are (as of the Closing) or at any time before the Closing were directors or
officers of TCA or any of TCA's Subsidiaries on terms comparable to those of the
directors' and officers' liability insurance policy currently maintained by TEC.
Thoratec shall reimburse TEC for the costs of that policy not to exceed $75,000
per year.
(c) Each Indemnified Party shall comply with the reasonable requests of the
Surviving Corporation or Thoratec in defending or settling any action hereunder,
provided that no proposed settlement of any such action need be considered by
any Indemnified Party unless (A) such settlement involves no finding or
admission of any liability by any Indemnified Party, and (B) the sole relief
provided in connection with such settlement is monetary damages that are paid in
full by the Surviving Corporation or Thoratec.
5.9 Affiliate Agreements. Concurrently with the execution and delivery hereof,
TCA shall deliver to Thoratec a list (reasonably satisfactory to counsel for
Thoratec), setting forth the names of all persons who are expected to be, at the
Effective Time, in TCA's reasonable judgment, Affiliates of TCA. TCA shall
furnish such information and documents as Thoratec may reasonably request for
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the purpose of reviewing such list. TCA shall deliver a written agreement in
substantially the form of Exhibit D hereto (a "TCA Affiliate Agreement")
executed by each person (other than TEC) identified as an Affiliate in the list
furnished pursuant to this Section 5.9 within ten days after the execution of
this Agreement.
5.10 Nasdaq Listing. Prior to the Effective Time, Thoratec shall file with
Nasdaq a notification form for listing additional shares with respect to the
shares of Thoratec Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger.
5.11 Resignation of Directors and Officers. Without prejudice to TEC's rights
under the Shareholder Agreement, prior to the Effective Time TCA shall deliver
to Thoratec at no cost the resignations of such directors and officers of TCA
and its Subsidiaries as Thoratec shall specify at least ten business days prior
to the Closing, effective at the Effective Time.
5.12 Consents of Thoratec's and TCA's Accountants. Each of Thoratec and TCA
shall use commercially reasonable efforts to cause its independent accountants
to deliver to Thoratec a consent, dated the date on which the Registration
Statement shall become effective, in form reasonably satisfactory to Thoratec
and customary in scope and substance for consents delivered by independent
public accountants in connection with the Registration Statement and the Joint
Proxy Statement/Prospectus.
5.13 Ancillary Agreements. Concurrently with the execution hereof, TEC and
Thoratec are executing and delivering the Shareholder Agreement and the
Registration Rights Agreement.
5.14 Form S-8. No later than 10 days after the Effective Time, Thoratec shall
file with the SEC a Registration Statement, on Form S-8 or other appropriate
form under the Securities Act, to register Thoratec Common Stock issuable upon
exercise of the Thoratec Exchange Options.
5.15 SEC Filings.
(a) TCA will deliver promptly to Thoratec true and complete copies of each
report, registration statement or statement mailed by it to its security holders
generally or filed by it with the SEC, in each case subsequent to the date
hereof and prior to the Effective Time. As of their respective dates, such
reports, including the consolidated financial statements included therein, and
statements (excluding any information therein provided by Thoratec or Merger
Sub, as to which TCA makes no representation) will not contain any untrue
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statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply in all
material respects with all applicable requirements of law. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in such reports, (x) shall comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (y) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) shall fairly present the consolidated
financial position of TCA and its Subsidiaries in all material respects as of
the respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount.
(b) Thoratec will deliver promptly to TCA true and complete copies of each
report, registration statement and other statement mailed by it to its security
holders generally or filed by it with the SEC, in each case subsequent to the
date hereof and prior to the Effective Time. As of their respective dates, such
reports, including the consolidated financial statements included therein, and
statements (excluding any information therein provided by TCA, as to which
Thoratec makes no representation) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading and will comply in all material respects
with all applicable requirements of law. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in
such reports (x) shall comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, (y) shall be prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (z) shall fairly present the consolidated financial position of Thoratec and
the Thoratec Subsidiaries in all material respects as of the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount.
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5.16 Employee Benefit Matters.
(a) With respect to the "401(k) plan" maintained by TEC in which employees
of TCA and its Subsidiaries participate, effective as of the Closing TEC shall
cause the accrued benefits of such employees under that plan to be fully vested
and immediately distributable to or on behalf of those employees to the full
extent permitted by law. As soon as practicable after the Closing, Thoratec
shall cause the employees of TCA and its Subsidiaries to be eligible to
participate in the 401(k) plan maintained by Thoratec and to allow such
employees to elect to roll over their distributable accrued benefits under the
401(k) plan maintained by TEC, including any outstanding loans of such
employees, to Thoratec's 401(k) plan.
(b) The current severance policy of TCA and its Subsidiaries with respect
to their employees is set forth in the TCA Employee Policy and Procedure Manual
(the January 2000 version, as modified September 27, 2000), a copy of which has
been provided to Thoratec. After the Closing, Thoratec shall cause TCA and the
Subsidiaries of TCA to honor that policy for qualifying terminations of
employment, occurring within 12 months after the Closing, of persons who are
employed by TCA or any such Subsidiary just before the Closing. Nothing in this
Section 5.16(b) shall in any manner diminish TCA's Parent's obligations
referenced in Section 3.14(f).
(c) With respect to the participation of employees of TCA and its
Subsidiaries in the Thoratec Welfare Plans, Thoratec shall (i) cause to be
waived any pre-existing condition limitations, (ii) give effect, in determining
any deductible and maximum out-of-pocket limitations, to claims incurred and
amounts paid by, and amounts reimbursed to, such employees with respect to
similar plans maintained by TCA immediately before the Closing and (iii)
recognize all credited service for purposes of eligibility and level of benefits
to the same extent such service was recognized under similar plans maintained by
TCA immediately before the Closing. Thoratec shall make appropriate arrangements
to allow the use by TCA employees of any accrued benefits under any cafeteria
plan (as defined in Section 125 of the Code) which was maintained by TCA or any
of its Subsidiaries for such employees.
(d) Thoratec shall provide any required notice under the Worker Adjustment
and Retraining Notification Act and any other applicable law and to otherwise
comply with any such statute with respect to any "plant closing" or "mass
layoff" (as defined in that act) or similar event affecting employees of TCA or
any TCA Subsidiary and occurring after the Closing.
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(e) Thoratec shall provide any required notice under COBRA for any persons
employed by TCA or any Subsidiary of TCA.
5.17 Notification of Certain Matters. TCA and TEC shall give prompt notice to
Thoratec, and Thoratec shall give prompt notice to TCA and TEC, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time, (ii) any material failure of the TCA or TEC, Thoratec or Merger
Sub, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, (iii) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with any transaction contemplated by
this Agreement, or (iv) any facts or circumstances arise that could reasonably
be expected to result in an TCA Material Adverse Effect or a Thoratec Material
Adverse Effect, as the case may be.
5.18 Relinquishment of Name. Within 60 days after the Closing, TCA shall cease,
and shall cause its Subsidiaries to cease, using the name "Thermo" or any
confusingly similar name in its business and operations. However, TCA and its
Subsidiaries shall not be required to remove the "Thermo" name from any products
or product components that are in inventory as of the Closing or that are
completed within one year after the Closing. Nothing in this Section 5.18 shall
require that TCA or any Subsidiary of TCA cancel any order for any product,
product component, literature or other item that includes the "Thermo" name,
placed before the Closing, if its doing so would constitute a breach of any
obligation or result in any requirement to pay any material termination or
cancellation fee. Without time limit, Thoratec, TCA and the Subsidiaries of TCA
shall be permitted to explain that TCA is the same company that was formerly
named "Thermo Cardiosystems Inc." and that TCA's Subsidiaries are subsidiaries
of that company.
5.19 Special Retention Agreements. Upon request by Thoratec including, if
Thoratec so requests, promptly after this Agreement is signed, TCA shall
cooperate with Thoratec: (a) to adopt a written retention plan, containing such
terms and conditions as Thoratec shall prescribe (subject to the consent of TCA,
which Thoratec shall not unreasonably withhold), for the benefit of those of
TCA's and TCA's Subsidiaries' key employees whom Thoratec identifies with TCA's
assistance, under which (subject to whatever further conditions Thoratec may
prescribe) rights will vest if and when the Merger closes and (b) shall deliver
a copy of that plan to those employees.
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5.20 Cooperation in Tax Matters. Until the applicable statutes of limitations
(including any extensions) have expired, TEC and TCA shall each: (i) provide the
other with such assistance as the other may reasonably request in connection
with the preparation or amendment of any Tax Return or in connection with any
audit or other examination by any taxing authority or any judicial or
administrative proceedings relating to liability for any Taxes respecting any
period ending on or before the Closing Date or that otherwise includes the
Closing Date, (ii) retain and provide the other with any records or other
information that may be relevant to any such Tax Return, audit, examination,
proceeding or determination and (iii) provide the other with any final
determination of any such audit, examination, proceedings or determination that
affects any amount required to be shown on any such Tax Return. Without limiting
the generality of the foregoing, TEC and TCA shall each retain, until the
applicable statutes of limitations (including any extensions) have expired,
copies of all Tax Returns, supporting work schedules and other records and
information that may be relevant to such Tax Returns as may be necessary to
allow it to satisfy its obligations under this Section 5.20 and shall not
destroy or otherwise dispose of any such records without first providing the
other with a reasonable opportunity to review and copy them. To the extent TEC
reasonably requests, TCA and Thoratec shall agree to maintain the
confidentiality of any information furnished by TEC under this Section 5.20,
provided that TCA and Thoratec may use such information in connection with any
Tax Return of Thoratec, TCA or any Subsidiary of TCA, any communication to or
from any taxing authority, and in connection with any controversy regarding any
Taxes payable or paid by Thoratec, TCA or any Subsidiary of TCA. Without
limiting the generality of any of the foregoing, during the period ending 60
days after the Effective Time TEC shall use its commercially reasonable efforts
to secure for TCA and TCA's Subsidiaries any tax benefit to which they are
entitled as a result of any settlement or other agreement between TEC and any
tax authority.
5.21 Environmental Insurance. Thoratec may choose to assess, before the Closing,
whether to purchase so-called "environmental insurance" with respect to one or
more of the properties that are occupied by TCA or Subsidiaries of TCA. If
Thoratec does choose to make that assessment, TEC and TCA shall cooperate with
Thoratec to assist that assessment including, for example, by permitting one or
more representatives of Thoratec or prospective insurers to inspect those
properties and records relating to those properties, provided that that
inspection shall not extend beyond those non-invasive procedures and steps that
comprise a so-called "ASTM Phase I Environmental Site Assessment" and provided
further that, before the Closing, any information generated by such inspection
shall not be disclosed to any Governmental Entity or third party, other than a
prospective insurer, except and only to the extent required by law. Nothing in
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this Section 5.21 shall be construed to diminish any of the representations and
warranties set forth in Article III including, for example, those set forth in
Section 3.20.
5.22 ITC Patent. ITC holds U.S. Patent No. 5731212 (the "Patent"). TEC has
requested that ITC grant a license under the Patent to TEC or an affiliate of
TEC that is not TCA or a Subsidiary of TCA. However, Thoratec has not as yet had
an opportunity to assess whether that is an appropriate or desirable course of
action for ITC. Accordingly, promptly after this Agreement is signed, TEC will
give Thoratec access to ITC personnel and information relevant to the Patent and
its applications in order to enable Thoratec to make that assessment. Thoratec
will make that assessment in good faith and a commercially reasonable manner.
Thoratec will then advise TEC whether Thoratec is prepared to license the Patent
to TEC or such an affiliate and, if so, in what field or fields of use, in which
case Thoratec and TEC shall then, in good faith, exercise commercially
reasonable efforts to negotiate such a license.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the fulfillment on or before the Effective Time of
each of the following conditions, any one or more of which may be waived in
writing by all the parties hereto:
6.1 Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect and no proceedings for such purpose shall
be pending before or threatened by the SEC.
6.2 TCA Stockholder Approval. The approval of a majority of the outstanding
shares of TCA Common Stock for adoption of the Merger Agreement and approval of
the Merger shall have been obtained at the TCA Special Meeting or any
adjournment or postponement thereof.
6.3 Thoratec Shareholder Approval. The approval of a majority of the outstanding
shares of Thoratec Common Stock in favor of the issuance of Thoratec Common
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Stock in the Merger shall have been obtained at the Thoratec Special Meeting or
any adjournment or postponement thereof.
6.4 Listing of Additional Shares. The shares of Thoratec Common Stock issuable
in connection with the Merger shall have been approved for listing on Nasdaq.
6.5 Governmental Clearances. The waiting periods applicable to consummation of
the Merger under the HSR Act shall have expired or been terminated. Other than
the filing of the Articles of Merger which shall be accomplished as provided in
Section 1.2, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Government Entity the failure of which to obtain or comply with would be
reasonably likely to have a TCA Material Adverse Effect or a Thoratec Material
Adverse Effect shall have been obtained or filed.
6.6 Tax Matters. Each of Thoratec and Merger Sub shall have received an opinion
of Xxxxxx Xxxxxx White & XxXxxxxxx LLP, counsel to Thoratec and Merger Sub, and
TCA shall have received an opinion of Xxxx and Xxxx LLP, counsel to TCA, each
such opinion dated as of the Effective Time, substantially to the effect that on
the basis of the facts, representations and assumptions set forth in such
opinions, (i) the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code; (ii) each of Thoratec, Merger Sub and TCA will be a
party to such reorganization within the meaning of Section 368(b) of the Code;
and (iii) except with respect to cash received in lieu of fractional share
interests in Thoratec Common Stock or upon the exercise of dissenters' appraisal
rights, no gain or loss will be recognized, for United States federal income tax
purposes, by a stockholder of TCA as a result of the Merger with respect to the
shares of TCA Common Stock converted into Thoratec Common Stock. If counsel to
either Thoratec or TCA does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to such party if counsel to
the other party renders such opinion in the required form to such party.
6.7 Statute or Decree. No writ, order, temporary restraining order, preliminary
injunction or injunction shall have been enacted, entered, promulgated or
enforced by any court or other tribunal or governmental body or authority, which
remains in effect, and prohibits the consummation of the Merger or otherwise
makes it illegal, nor shall any Government Entity have instituted any action,
suit or proceeding which remains pending and which seeks to enjoin, restrain or
prohibit the consummation of the Merger in accordance with the terms of this
Agreement.
6.8 TCA Dissenting Shares. Holders of shares of TCA Common Stock shall not have
satisfied the requirements of clauses (i) and (ii) of Section 2.3(f) with
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respect to 5% or more of the shares of TCA Common Stock outstanding at the
record date for the TCA Special Meeting.
6.9 Thoratec Dissenting Shares. Holders of shares of Thoratec Common Stock shall
not have satisfied the requirements of Sections 1300(b)(2) and (3) of the
California Law with respect to 5% or more of the shares of Thoratec Common Stock
outstanding at the record date for the Thoratec Special Meeting.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF TCA AND THORATEC
7.1 Additional Conditions To The Obligations Of TCA. The obligations of TCA to
effect the Merger shall be subject to the fulfillment of each of the following
additional conditions, any one or more of which may be waived in writing by TCA:
(a) The representations and warranties of Thoratec and Merger Sub contained
in this Agreement shall be true and correct, in all material respects as of the
Effective Time, with the same force and effect as if made at the Effective Time,
provided that the word "material" in this sentence shall be ignored when
considered with reference to a representation or warranty that already includes
a quantitative qualification (for example, a dollar threshold, a reference to
"material" or "materiality", or a reference to a "Thoratec Material Adverse
Effect".
(b) Thoratec and Merger Sub shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement
to be performed or complied with by them on or prior to the Closing Date.
(c) Thoratec and Merger Sub shall have furnished a certificate or
certificates of Thoratec and Merger Sub executed on behalf of one or more of
their respective officers to evidence compliance with the conditions set forth
in Sections 7.1(a) and (b) of this Agreement.
(d) There shall not have occurred, since the date hereof, any Thoratec
Material Adverse Effect.
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(e) At the option of TEC: (i) Thoratec, TCA and TEC shall have entered into
a collateral and security agreement pursuant to which TCA will grant to TEC a
first priority security interest in and to $45,000,000 to secure payment on the
TCA Debentures on the other terms and conditions set forth in Exhibit E-1 to
this Agreement, (ii) Thoratec, TCA, TEC and a trustee shall have entered into a
collateral and security agreement pursuant to which TCA will grant to a trustee
a first priority security interest in and to $45,000,000 to secure payment on
the TCA Debentures and on the other terms and conditions set forth in Exhibit
E-2 to this Agreement or (iii) Thoratec shall have secured a standby letter of
credit in favor of TEC or a trustee in the amount of $45,000,000 to secure
payment on the TCA Debentures on the other terms and conditions set forth in
Exhibit E-3 to this Agreement, provided that TEC notify Thoratec of its election
in writing at least 30 days before the date scheduled for the Special Thoratec
Meeting and provided further that, in each case, TEC shall be responsible for
all third party fees and costs associated with any agreement or letter of credit
entered into pursuant to this Section 7.1(e). Notwithstanding the foregoing, if
TEC elects the agreement in clause (i) above, TEC may, at any time after the
Effective Time, substitute the agreement in clause (ii) or the letter of credit
in clause (iii) at its sole cost and expense and Thoratec shall (and shall cause
TCA to) execute any documents or agreements reasonably necessary to effectuate
that election.
7.2 Additional Conditions To The Obligations Of Thoratec And Merger Sub. The
obligations of Thoratec and Merger Sub to effect the Merger shall be subject to
the fulfillment of each of the following additional conditions, any one or more
of which may be waived in writing by Thoratec:
(a) The representations and warranties of TCA contained in this Agreement
shall be true and correct, in all material respects as of the Effective Time,
provided that the word "material" in this sentence shall be ignored when
considered with reference to a representation or warranty that already includes
a quantitative qualification (for example, a dollar threshold, a reference to
"material" or "materiality", or a reference to a "TCA Material Adverse Effect".
(b) TCA shall have performed and complied in all material respects with all
agreements and obligations required by this Agreement to be performed or
complied with by it on or prior to the Closing Date.
(c) TCA shall have furnished a certificate of TCA executed by one or more
of its officers to evidence compliance with the conditions set forth in Sections
7.2(a) and (b) of this Agreement.
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(d) Any consents, approvals, notifications, disclosures, and filings and
registrations listed or required to be listed in Schedule 3.3 of the TCA
Disclosure Statement shall have been obtained or made.
(e) There shall not have occurred, since the date hereof, any TCA Material
Adverse Effect.
(f) TEC shall have entered into the Termination of Corporate Services
Agreement in substantially the form of Exhibit F to this Agreement.
(g) TEC and all the Subsidiaries of TEC (other than TCA and the
Subsidiaries of TCA) shall have paid in full all advances and other payables
that are due and owing to TCA or any Subsidiary of TCA and regardless of their
due date, net of all advances and other payables that are due and owing to TEC
and Subsidiaries of TEC (other than TCA and Subsidiaries of TCA) by TCA and
Subsidiaries of TCA regardless of their due date. At the Closing, the Chief
Financial Officer of TCA and TEC shall furnish Thoratec with a certificate
itemizing all such advances and payables in whatever reasonable detail Thoratec
may request.
(h) After giving effect to the net payment referenced in Section 7.2(g),
but before giving effect to the arrangements adopted under Section 7.1(e) and
before payment of the fees owed to X.X. Xxxxxx Securities Inc. and The Beacon
Group Capital Services, LLC, TCA's consolidated "cash and cash equivalents" and
"short-term investments available for sale" as of the Closing Date, determined
in the same way that those items were determined in preparing the TCA Financial
Statements, shall total at least $125,700,000.
(i) TEC and TCA shall have entered into an Amendment No. 2 to the August
19, 1988 Sublease Agreement respecting the property located in Woburn,
Massachusetts in the form of Exhibit G to this Agreement. TEC shall also have
provided Thoratec with written evidence, reasonably satisfactory to Thoratec,
that the term of such Sublease Agreement and the term of the lease dated
November 1983 between WGO Limited Partnership and TEC, as successor to
Thermedics Inc., has been extended to February 28, 2004.
(j) TCA shall have timely exercised its right to extend, through June 30,
2001, its sublease with Sycamore Networks, Inc. respecting the premises located
in Chelmsford, Massachusetts that are currently leased there by TCA.
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ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
stockholders of TCA or Thoratec:
(a) by mutual written consent duly authorized by the boards of directors of
Thoratec and TCA;
(b) by either TCA or Thoratec if the Merger shall not have been consummated
by March 1, 2001 (the "End Date") for any reason, provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a material breach of this Agreement;
(c) by either TCA or Thoratec if a court of competent jurisdiction or other
Government Entity shall have issued an order, decree or ruling or taken any
other action, in any case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, which order, decree, ruling or
other action is final and nonappealable;
(d) by TCA or Thoratec if the required approval of the stockholders of TCA
contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote at a meeting of TCA stockholders duly
convened therefore or at any adjournment thereof if the final vote is taken in
fact or the meeting is completed without such a vote having been taken and the
meeting is not postponed or adjourned, provided that the right to terminate this
Agreement under this Section 8.1(d) shall not be available to TCA where the
failure to obtain TCA stockholder approval shall have been caused by (i) the
action or failure to act of TCA and such action or failure to act constitutes a
breach by TCA of this Agreement or (ii) a breach of any of the TEC Agreements by
TEC;
(e) by TCA or Thoratec if the required approval of the shareholders of
Thoratec contemplated by this Agreement shall not have been obtained by reason
of the failure to obtain the required vote at a meeting of Thoratec shareholders
79
duly convened therefore or at any adjournment thereof if the final vote is taken
in fact or the meeting is completed without such a vote having been taken and
the meeting is not postponed or adjourned, provided that the right to terminate
this Agreement under this Section 8.1(e) shall not be available to Thoratec
where the failure to obtain Thoratec shareholder approval shall have been caused
by the action or failure to act of Thoratec and such action or failure to act
constitutes a breach by Thoratec of this Agreement;
(f) by Thoratec (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of TCA) if a
TCA Triggering Event (as defined below) shall have occurred;
(g) by TCA (at any time prior to the approval of the issuance of Thoratec
Common Stock in the Merger by the required vote of the stockholders of Thoratec)
if a Thoratec Triggering Event (as defined below) shall have occurred;
(h) by TCA, upon a breach of any representation, warranty, covenant or
agreement on the part of Thoratec set forth in this Agreement, or if any
representation or warranty of TCA shall have become untrue, in either case such
that the conditions set forth in Section 7.1(a) or Section 7.1(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided that such inaccuracy in Thoratec's
representations and warranties or breach by Thoratec remains uncured on the date
which is ten business days following written notice of such breach or inaccuracy
from TCA to Thoratec (it being understood that TCA may not terminate this
Agreement pursuant to this paragraph (h) if it shall have materially breached
this Agreement and remains in breach of this agreement as of the date of such
termination);
(i) by Thoratec, upon a breach of any representation, warranty, covenant or
agreement on the part of TCA set forth in this Agreement, or if any
representation or warranty of TCA shall have become untrue, in either case such
that the conditions set forth in Section 7.2(a) or Section 7.2(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided that such inaccuracy in TCA's
representations and warranties or breach by TCA remains uncured on the date
which is ten business days following written notice of such breach or inaccuracy
from Thoratec to TCA (it being understood that Thoratec may not terminate this
Agreement pursuant to this paragraph (i) if it shall have materially breached
this Agreement and remains in breach of this agreement as of the date of such
termination);
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(j) by TCA if the average closing price per share of the Thoratec Common
Stock, as reported on Nasdaq for the 20 trading-day period ending with the fifth
full trading day immediately preceding the common date that the Thoratec Special
Meeting and the TCA Special Meeting are initially scheduled to occur, as set
forth in the Joint Proxy Statement/Prospectus originally mailed to the
shareholders of TCA and Thoratec, is less than $14.00, provided that, in order
to avail itself of this right, TCA must give written notice of termination to
Thoratec within 48 hours after that 20-trading day period ends or
(k) by Thoratec if the average closing price per share of the Thoratec
Common Stock, as reported on Nasdaq for the 20 trading-day period ending with
the fifth full trading day immediately preceding the common date that the
Thoratec Special Meeting and the TCA Special Meeting are initially scheduled to
occur, as set forth in the Joint Proxy Statement/Prospectus originally mailed to
the shareholders of TCA and Thoratec, is less than $11.00, provided that, in
order to avail itself of this right, Thoratec must give written notice of
termination to TCA and TEC within 48 hours after that 20-trading day period
ends.
(l) For the purposes of this Agreement, a "TCA Triggering Event" shall be
deemed to have occurred if: (i) the board of directors of TCA or any committee
thereof shall for any reason have withdrawn or shall have amended or modified in
a manner adverse to Thoratec its recommendation in favor of, the adoption and
approval of the Agreement or the approval of the Merger; (ii) TCA shall have
failed to include in the Joint Proxy Statement/Prospectus the recommendation of
the board of directors of TCA in favor of the adoption and approval of the
Agreement and the approval of the Merger; (iii) the board of directors of TCA
fails to reaffirm its recommendation in favor of the adoption and approval of
the Agreement and the approval of the Merger within ten days after Thoratec
requests in writing that such recommendation be reaffirmed; (iv) the board of
directors of TCA or any committee thereof shall have approved or recommended any
TCA Acquisition Proposal or (v) a tender or exchange offer relating to
securities of TCA shall have been commenced by a Person unaffiliated with
Thoratec, and TCA shall not have sent to its security holders pursuant to Rule
14e-2 promulgated under the Securities Act, within ten business days after such
tender or exchange offer is first published, sent or given, a statement
disclosing that TCA recommends rejection of such tender or exchange offer.
(m) For the purposes of this Agreement, a "Thoratec Triggering Event" shall
be deemed to have occurred if: (i) the board of directors of Thoratec or any
committee thereof shall for any reason have withdrawn or shall have amended or
81
modified in a manner adverse to TCA its recommendation in favor of the issuance
of Thoratec Common Stock in the Merger; (ii) Thoratec shall have failed to
include in the Joint Proxy Statement/Prospectus the recommendation of the board
of directors of Thoratec in favor of the issuance of Thoratec Common Stock in
the Merger; (iii) the board of directors of Thoratec fails to reaffirm its
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Merger within ten days after TCA requests in writing that such
recommendation be reaffirmed; (iv) the board of directors of Thoratec or any
committee thereof shall have approved or recommended any Thoratec Acquisition
Proposal or (v) a tender or exchange offer relating to securities of Thoratec
shall have been commenced by a Person unaffiliated with TCA, and Thoratec shall
not have sent to its security holders pursuant to Rule 14e-2 promulgated under
the Securities Act, within ten business days after such tender or exchange offer
is first published, sent or given, a statement disclosing that Thoratec
recommends rejection of such tender or exchange offer.
8.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1 will be effective immediately upon the delivery of a
valid written notice of the terminating party to the other parties hereto. In
the event of the termination of this Agreement as provided in Section 8.1, this
Agreement shall be of no further force or effect, except (i) as set forth in
Section 5.3, this Section 8.2, Section 8.3 and Article IX, each of which shall
survive the termination of this Agreement, and (ii) nothing herein shall relieve
any party from liability for any breach of this Agreement. No termination of
this Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreements, all of which obligations shall survive termination
of this Agreement in accordance with their terms.
8.3 Fees and Expenses.
(a) General. Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with the TCA Agreements and the transactions contemplated
hereby (including the fees for filings under the HSR Act) shall be paid by the
party incurring such expenses whether or not the Merger is consummated, provided
that: (i) Thoratec and TCA shall share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred in relation to the
printing and filing (with the SEC) of the Joint Proxy Statement/Prospectus
(including any preliminary materials related thereto), and the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto and (ii) TEC shall pay all of Thoratec's and TCA's fees and
expenses incurred in putting in place and implementing the arrangements
contemplated by Section 7.1(e).
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(b) TCA Payments. If this Agreement is terminated by Thoratec or TCA, as
applicable, pursuant to Sections 8.1(d) or (f) or TCA breaches Section 5.4(e) or
TEC breaches Section 5.4(k), then TCA and TEC (jointly and severally) shall
promptly, but in no event later than two days after the date of such
termination, pay Thoratec a fee equal to $12 million in immediately available
funds (the "TCA Termination Fee"). TCA and TEC acknowledge that the agreements
contained in this Section 8.3(b) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, Thoratec
would not have entered into this Agreement. Accordingly, if TCA and TEC fail to
pay in a timely manner the amounts due pursuant to this Section 8.3(b) and, in
order to obtain such payment, Thoratec makes a claim that results in a judgment
against TCA or TEC for the amounts set forth in this Section 8.3(b), TCA and TEC
shall pay to Thoratec its reasonable costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 8.3(b) at the prime rate of
The Chase Manhattan Bank in effect on the date such payment was required to be
made.
(c) Thoratec Payments. If this Agreement is terminated by TCA or Thoratec,
as applicable, pursuant to Sections 8.1(e) or (g) or Thoratec breaches Section
5.4(f), then Thoratec shall promptly, but in no event later than two days after
the date of such termination, pay TCA a fee equal to $12 million (in the case of
a termination under Section 8.1(g) or a breach under Section 5.4(f)) and $3
million (in the case of a termination under Section 8.1(e)) in immediately
available funds (in either such case, the "Thoratec Termination Fee"). Thoratec
acknowledges that the agreements contained in this Section 8.3(c) are an
integral part of the transactions contemplated by this Agreement and that,
without these agreements, TCA and TEC would not have entered into is Agreement.
Accordingly, if Thoratec fails to pay in a timely manner the amounts due
pursuant to this Section 8.3(c) and, in order to obtain such payment, TCA or TEC
makes a claim that results in a judgment against Thoratec for the amounts set
forth in this Section 8.3(c), Thoratec shall pay to TCA and TEC their respective
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 8.3(c) at the prime rate of The Chase Manhattan Bank
in effect on the date such payment was required to be made.
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ARTICLE IX
MISCELLANEOUS
9.1 Amendment and Modification. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of Thoratec, Merger
Sub, TCA and TEC at any time prior to the Effective Time, provided that after
approval of this Agreement by the stockholders of TCA or Thoratec, no such
amendment or modification shall change the amount or form of the consideration
to be received by TCA's stockholders in the Merger.
9.2 Waiver of Compliance; Consents. Any failure of Thoratec or Merger Sub, on
the one hand, or TCA or TEC, on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by TCA or TEC (with
respect to any failure by Thoratec or Merger Sub) or Thoratec or Merger Sub
(with respect to any failure by TCA or TEC), respectively, only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 9.2.
9.3 Investigations. The respective representations and warranties of Thoratec,
Merger Sub, TCA and TEC contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto.
9.4 Notices. All notices and other communications hereunder shall be in writing
and shall be delivered personally by overnight courier or similar means or sent
by facsimile with written confirmation of receipt, to the parties at the
addresses specified below (or at such other address for a party as shall be
specified by like notice. Any such notice shall be effective upon receipt, if
personally delivered or on the next business day following transmittal if sent
by confirmed facsimile. Notices shall be delivered as follows:
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(a) if to TCA or TEC,
to: Thermo Electron Corporation
00 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
with a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile (000) 000-0000
Attention: Xxx X. Xxxxxxxx, Esq.
(b) if to Thoratec Thoratec Laboratories Corporation
or Merger Sub, 0000 Xxxxxxxxxx Xxxxx
to: Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: D. Xxxxx Xxxxxxxx
with a copy to: Xxxxxx Xxxxxx White & XxXxxxxxx LLP
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: August X. Xxxxxxx, Esq.
9.5 Assignment; Third Party Beneficiaries. Neither this Agreement nor any right,
interest or obligation hereunder shall be assigned by any of the parties hereto
without the prior written consent of the other parties. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement is not intended to confer any
rights or remedies upon any Person other than: (i) the parties to this Agreement
and (ii) with respect only to Section 5.8, the Indemnified Parties.
9.6 Termination of Cross License Agreement. Effective if and when the Merger
closes and without the necessity for any additional documentation or action by
85
any party: (a) the Intellectual Property Cross License Agreement dated as of
August 19, 1988, between TCA and, by succession, TEC is terminated; (b) TCA and
its Subsidiaries release TEC and its Subsidiaries (other than TCA and its
Subsidiaries) from all obligations and liabilities under that agreement and (c)
TEC and its Subsidiaries (other than TCA and its Subsidiaries) release TCA and
its Subsidiaries from all obligations and liabilities under that agreement.
9.7 Governing Law. This Agreement shall be governed by the laws of the State of
California without reference to principles of conflicts of laws.
9.8 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9.9 Severability. In case any one or more of the provisions contained in this
Agreement should be finally determined to be invalid, illegal or unenforceable
in any respect against a party hereto, it shall be adjusted if possible to
effect the intent of the parties. In any event, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific jurisdiction
where such final determination shall have been made.
9.10 Interpretation. The Article and Section headings contained in this
Agreement are solely for the purpose of reference and shall not in any way
affect the meaning or interpretation of this Agreement. The word "including"
shall be deemed to mean "including without limitation."
9.11 Entire Agreement. This Agreement and the other documents signed and dated
as of the date of this Agreement, including the exhibits hereto and thereto, and
the documents and instruments referred to herein and therein (including the TCA
Disclosure Statement and the Thoratec Disclosure Statement), embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no representations, promises,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein and therein.
9.12 Definition of "law". When used in this Agreement "law" refers to any
applicable law (whether civil, criminal or administrative) including, without
limitation, common law, statute, statutory instrument, treaty, regulation,
directive, decision, code, order, decree, injunction, resolution or judgment of
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any government, quasi-government, supranational, federal, state or local
government, statutory or regulatory body, court, or agency.
9.13 Rules of Construction. Each party to this Agreement has been represented by
counsel during the preparation and execution of this Agreement, and therefore
waives any rule of construction that would construe ambiguities against the
party drafting the agreement.
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IN WITNESS WHEREOF, Thoratec, Merger Sub, TCA and TEC have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
THORATEC LABORATORIES CORPORATION
By: /s/ D. Xxxxx Xxxxxxxx
----------------------------------
Name: D. Xxxxx Xxxxxxxx
Title: President and Chief Executive
Officer
LIGHTNING ACQUISITION CORP.
By: /s/ D. Xxxxx Xxxxxxxx
----------------------------------
Name: D. Xxxxx Xxxxxxxx
Title: President and Chief Executive
Officer
THERMO ELECTRON CORPORATION
By: /s/ Xxxx Xxxxx-Xxxxxxx
----------------------------------
Name: Xxxx Xxxxx-Xxxxxxx
Title: Vice President and Chief Financial
Officer
THERMO CARDIOSYSTEMS INC.
By: /s/ Xxxx Xxxxx-Xxxxxxx
----------------------------------
Name: Xxxx Xxxxx-Xxxxxxx
Title: Vice President and Chief Financial
Officer
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