AGREEMENT AND PLAN OF MERGER
DATED FEBRUARY 28, 2005
BY AND AMONG
XXXXXXX CARDIOLOGY SYSTEMS, INC.
CSQ HOLDING COMPANY,
HEART ACQUISITION CORPORATION,
RHYTHM ACQUISITION CORPORATION
AND
CARDIAC SCIENCE, INC.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of February 28, 2005 by and among Xxxxxxx Cardiology Systems, Inc., a
Delaware corporation ("Xxxxxxx"), CSQ Holding Company, a Delaware corporation
("Holding Company"), Rhythm Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Holding Company ("Xxxxxxx Merger Sub"), Heart
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Holding Company ("Cardiac Merger Sub"), and Cardiac Science, Inc., a Delaware
corporation ("Cardiac").
RECITALS
WHEREAS, Xxxxxxx and Cardiac each own one Holding Company Common Share;
WHEREAS, Xxxxxxx and Cardiac have organized Holding Company and Holding
Company has organized Xxxxxxx Merger Sub and Cardiac Merger Sub for the purpose
of effecting a business combination of Xxxxxxx and Cardiac pursuant to, and
subject to the terms of, this Agreement;
WHEREAS, the Boards of Directors of Cardiac and Xxxxxxx each have
determined that a business combination between Cardiac and Xxxxxxx is advisable
and in the best interests of their respective companies and stockholders and
presents an opportunity for Cardiac and Xxxxxxx to achieve long-term strategic
and financial benefits, and accordingly have agreed to effect the merger
provided for herein upon the terms and subject to the conditions set forth
herein;
WHEREAS, this Agreement provides that the Holding Company will acquire all
of the capital stock of each of Xxxxxxx and Cardiac through the merger of
Xxxxxxx Merger Sub with and into Xxxxxxx, with Xxxxxxx being the surviving
corporation and the merger of Cardiac Merger Sub with and into Cardiac, with
Cardiac being the surviving corporation;
WHEREAS, the parties hereto intend that the mergers provided for herein
shall qualify for U.S. federal income tax purposes as reorganizations under
Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (together
with the rules and regulations promulgated thereunder, the "Code") or as part of
an exchange under Section 351 of the Code;
WHEREAS, concurrent with the execution of this Agreement, and as a
condition and inducement to the parties willingness to enter into this
Agreement, Holding Company and Cardiac have entered into a Senior Note and
Warrant Conversion Agreement with those purchasers whose names are listed on the
signature pages thereto (the "Senior Note and Warrant Conversion Agreement");
and
WHEREAS, by resolutions duly adopted, the respective Boards of Directors
of Xxxxxxx, Cardiac, Xxxxxxx Merger Sub, Cardiac Merger Sub and Holding Company
have approved and adopted this Agreement and the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows.
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
(a) As used in this Agreement, the following terms have the
following meanings:
"Acquisition Proposal" means, with respect to any Person, any bona
fide written offer or proposal for, or indication of interest in, a merger,
consolidation, share exchange, business combination, reorganization,
recapitalization, liquidation, dissolution or other similar transaction
involving, or any purchase or acquisition of, twenty-five percent (25%) or more
of (i) any class of equity securities of such Person or (ii) the consolidated
assets of such Person, other than the transactions contemplated by this
Agreement.
"Action" means any action, appeal, petition, plea, charge,
complaint, claim, suit, demand, litigation, arbitration, mediation, hearing,
inquiry, investigation or similar event, occurrence, or proceeding.
"Affiliate" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "Control"
(including the correlative terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Breach" means any breach, inaccuracy, failure to perform, failure
to comply, conflict with, default, violation, acceleration, termination,
cancellation, modification, or required notification.
"Business Day" means any day other than a Saturday, Sunday or one on
which banks are authorized by law to close in Los Angeles, California.
"Cardiac Common Shares" means shares of common stock of Cardiac,
$0.001 par value per share.
"Cardiac Disclosure Letter" shall mean the written disclosure
schedule delivered by Cardiac to Xxxxxxx prior to the execution of this
Agreement, forming a part hereof and arranged in sections corresponding to the
numbered and lettered Sections contained in Article V; provided, however, that
disclosure in any section shall be deemed to have been set forth in all other
applicable sections where it is readily apparent that such disclosure is
applicable to such other sections notwithstanding the omission of any
cross-reference to such other section.
"Cardiac Options" means options to purchase Cardiac Common Shares
issued under the Cardiac Stock Plan or other options to purchase Cardiac Common
Shares which are set forth in Section 5.4 of the Cardiac Disclosure Letter.
"Cardiac SEC Documents" means all reports, filings, registration
statements and other documents filed by Cardiac with the SEC since December 31,
2002.
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"Cardiac Stock Plan" means Cardiac's 1997 Stock Option/Stock
Issuance Plan, as amended.
"DGCL" means the General Corporation Law of the State of Delaware.
"Environmental Law" means any international, national, provincial,
regional, federal, state, local, municipal and foreign statutes, laws
(including, without limitation, common law), judicial decisions, decrees,
regulations, ordinances, rules, judgments, orders, codes, injunctions, permits
or governmental agreements or other requirements relating to human health and
safety, to the environment, including, without limitation, natural resources, or
to pollutants, contaminants, wastes, or chemicals, petroleum products,
by-products or additives, asbestos, asbestos-containing material,
polychlorinated biphenyls, radioactive material, hazardous substances or wastes,
or any other substance (including any product) regulated as harmful or
potentially harmful to human health or the environment.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"FDA" means the United States Food and Drug Administration.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
"Governmental Entity" means any federal, state, municipal or local
governmental authority, any foreign or international governmental authority, or
any court, administrative or regulatory agency or commission or other
governmental agency.
"Holding Company Common Shares" means shares of common stock of
Holding Company, $0.001 par value per share.
"Intellectual Property" any or all of the following and all rights
in, arising out of, or associated therewith (in each case in any domestic or
foreign jurisdiction): (i) patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions, materials, methods,
discoveries and ideas (whether patentable or not); (iii) trade secrets,
proprietary information, know how, confidential information, technology and
technical data, formulations, and all documentation relating to any of the
foregoing and rights to limit the use of disclosure thereof by any person; (iv)
all copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto; (v) writings and other works, whether
copyrightable or not; (vi) all trade names, trademarks, service marks brand
names, certification marks, trade dress and other indications of origin, the
goodwill associated with the foregoing and registrations of, and applications in
any such jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application; (vii) all
databases and data collections and all rights therein; (viii) all computer
software including all source code, object code, firmware, development tools,
files, records and data, all media on which any of the foregoing is recorded;
and (ix) all web addresses, sites and domain names.
"IRS" means the United States Internal Revenue Service.
"Joint Proxy Statement/Prospectus" means the proxy statement used by
Xxxxxxx and Cardiac to solicit the approval of their respective stockholders of
the transactions contemplated by
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this Agreement, which shall include the prospectus of Holding Company relating
to the issuance of the Holding Company Common Shares pursuant to the Mergers.
"Knowledge" (and all correlative terms) as to any party means with
respect to any specific matter, that (i) any executive officer or director, or
(ii) any other officer of such party having primary responsibility for such
matter is actually aware of such matter.
"Law" means all laws, statutes and ordinances and all regulations,
rules, orders and other pronouncements of Governmental Entities having the
effect of law of the United States, any foreign country or any foreign or
domestic state, commonwealth, city, country, municipality, territory,
protectorate, possession or similar instrumentality or any Governmental Entity
thereof.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset;
provided, however, that the term "Lien" shall not include mechanics', carriers',
workers', repairers', materialmen's, warehousemen's and other similar liens
arising or incurred in the ordinary course of business.
"Material Adverse Effect" means any change, event, violation,
inaccuracy, circumstance or effect that (i) is materially adverse to the
financial condition, business or results of operations of a Person and its
Subsidiaries, taken as a whole, or (ii) would materially impair the ability of
such Person and its Subsidiaries, taken as a whole, to consummate the
transactions contemplated by this Agreement; provided, however, that in no event
shall any of the following be taken into account in determining whether there
has been or will be a Material Adverse Effect with respect to such Person:
changes, events, circumstances or effects caused by (A) changes in general
economic or market conditions (except to the extent those changes have a
materially disproportionate effect on such Person and its Subsidiaries relative
to other similarly situated Persons in the industries in which they operate),
(B) compliance with the terms and conditions of this Agreement, (C) the public
announcement of the transactions contemplated by this Agreement (D) any failure
by such Person to meet revenue or earnings projections in and of itself or (E)
any outbreak of major hostilities in which the United States is involved or any
act of terrorism within the United States or directed against its facilities or
citizens wherever located. "Cardiac Material Adverse Effect" means a Material
Adverse Effect in respect of Cardiac and its Subsidiaries, taken as a whole, and
"Xxxxxxx Material Adverse Effect" means a Material Adverse Effect in respect of
Xxxxxxx and its Subsidiaries, taken as a whole.
"Nasdaq" means the National Market System of the Nasdaq Stock
Market, Inc.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including any Governmental Entity.
"Xxxxxxx Common Shares" means shares of common stock of Xxxxxxx,
$0.001 par value per share.
"Xxxxxxx Disclosure Letter" shall mean the written disclosure
schedule delivered by Xxxxxxx to Cardiac prior to the execution of this
Agreement, forming a part hereof and arranged in sections corresponding to the
numbered and lettered Sections contained in Article IV provided, however, that
disclosure in any section shall be deemed to have been set forth in all other
applicable
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sections where it is readily apparent that such disclosure is applicable to such
other sections notwithstanding the omission of any cross-reference to such other
section.
"Xxxxxxx ESPP" means Quinton's 2002 Employee Stock Purchase Plan, as
amended.
"Xxxxxxx Options" means options to purchase Xxxxxxx Common Shares
issued under the Xxxxxxx Stock Plans or other options to purchase Xxxxxxx Common
Shares which are set forth in Section 4.4 of the Xxxxxxx Disclosure Letter.
"Xxxxxxx SEC Documents" means all reports, filings, registration
statements and other documents filed by Xxxxxxx with the SEC since December 31,
2002.
"Xxxxxxx Stock Plans" means Quinton's 2002 Stock Incentive Plan and
Quinton's 1998 Equity Incentive Plan.
"Registration Statement" means the Registration Statement on Form
S-4 registering under the Securities Act the Holding Company Common Shares
issuable in connection with the Mergers.
"Xxxxxxxx-Xxxxx Act" means the Xxxxxxxx-Xxxxx Act of 2002 and the
rules and regulations promulgated thereunder.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" when used with respect to any Person, means any other
Person, whether incorporated or unincorporated, of which (i) more than fifty
percent (50%) of the securities or other ownership interests or (ii) securities
or other interests having by their terms ordinary voting power to elect more
than fifty percent of the board of directors or others performing similar
functions with respect to such corporation or other organization, is directly
owned or controlled by such Person or by any one or more of its Subsidiaries.
"Superior Proposal" means an Acquisition Proposal (except that fifty
percent shall be substituted for twenty-five percent with respect to the
acquisition of securities or assets) which does not include a financing
condition and which is on terms which such Person's Board of Directors
determines in good faith (after consultation with its investment advisors and
outside legal counsel) (i) would result in a transaction, if consummated, that
is more favorable to such Person's stockholders, from a financial point of view
(taking into account, among other things, all legal, financial, regulatory and
other aspects of the proposal, including conditions to consummation) than the
transactions contemplated hereby and (ii) that the failure to approve such
Acquisition Proposal would be inconsistent with its fiduciary duties.
"Tax" or "Taxes" means 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 Treasury
Regulations Section 1.1502-6 (or similar provision of
5
state, local or foreign Law) or any agreements or arrangements with any other
Person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
---- -------
2004 Cardiac Financial Statements 5.8(b)
2004 Xxxxxxx Financial Statements 4.8(b)
Agreement Recitals
Burdensome Condition 8.1
Cardiac Recitals
Cardiac Certificate of Merger 2.3
Cardiac Contract 5.22
Cardiac Employee Plans 5.15(a)
Cardiac Exchange Ratio 3.1(c)(ii)
Cardiac Facilities 5.21(b)
Cardiac Financial Statements 5.8(a)
Cardiac Intellectual Property Rights 5.19(a)
Cardiac IP Liens 5.19(a)
Cardiac Leases 5.21(b)
Cardiac Merger 2.1(c)
Cardiac Merger Consideration 3.1(c)(ii)
Cardiac Merger Sub Recitals
Cardiac Recommendation 7.3
Cardiac Registered Intellectual Property 5.19(a)
Cardiac Returns 5.14
Cardiac Stockholder Approval 5.2
Cardiac Stockholders Meeting 7.3
Cardiac Surviving Corporation 2.1(c)
Certificate of Mergers 2.3
CIBC World Markets 5.20(a)
Closing 2.2
Code Recitals
Effective Time 2.3
ERISA 4.15(a)
Exchange Agent 3.3(a)
Exchanged Certificate 3.3(b)
Exchange Fund 3.3(a)
Holding Company Recitals
Holding Company Certificate of Incorporation 2.7
HSR Act 4.3
Mergers 2.1(c)
Merger Consideration 3.1(c)(ii)
Options 3.4(b)
Xxxxxxx Recitals
Xxxxxxx Certificate of Merger 2.3
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TERM SECTION
---- -------
Xxxxxxx Contract 4.22
Xxxxxxx Employee Plans 4.15(a)
Xxxxxxx Exchange Ratio 3.1(a)(ii)
Xxxxxxx Facilities 4.21(b)
Xxxxxxx Financial Statements 4.8(a)
Xxxxxxx Intellectual Property Rights 4.19(a)
Xxxxxxx IP Liens 4.19(a)
Xxxxxxx Leases 4.21(b)
Xxxxxxx Merger 2.1(a)
Xxxxxxx Mergers 2.1(b)
Xxxxxxx Merger Consideration 3.1(a)(ii)
Xxxxxxx Merger Sub Recitals
Xxxxxxx Recommendation 7.2
Xxxxxxx Registered Intellectual Property 4.19(a)
Xxxxxxx Returns 4.14
Xxxxxxx Stockholder Approval 4.2
Xxxxxxx Stockholders Meeting 7.2
Xxxxxxx Surviving Corporation 2.1(a)
Second Xxxxxxx Certificate of Merger 2.3
Second Xxxxxxx Mergers 2.1(b)
Senior Note and Warrant Conversion Agreement Recitals
SunTrust 4.20(a)
Termination Date 10.1(b)(iv)
ARTICLE II
TRANSACTIONS AND TERMS OF THE MERGERS
Section 2.1 Mergers. Subject to the terms and conditions of this
Agreement, at the Effective Time:
(a) Xxxxxxx Merger Sub shall be merged with and into Xxxxxxx in
accordance with the applicable provisions of the DGCL (the "Xxxxxxx Merger").
Xxxxxxx shall be the surviving corporation resulting from the Xxxxxxx Merger
(the "Xxxxxxx Surviving Corporation"), shall become a wholly owned Subsidiary of
Holding Company and shall continue to be governed by the laws of the State of
Delaware. The Xxxxxxx Merger shall have the effects set forth in the DGCL.
(b) Immediately after the Xxxxxxx Merger, Xxxxxxx Surviving
Corporation shall be merged with and into Holding Company in accordance with the
applicable provisions of the DGCL (the "Second Xxxxxxx Merger" and together with
the Xxxxxxx Merger, the "Xxxxxxx Mergers"). Holding Company shall be the
surviving corporation resulting from the Second Xxxxxxx Merger and shall
continue to be governed by the laws of the State of Delaware. The Second Xxxxxxx
Merger shall have the effects set forth in the DGCL.
(c) Immediately after the Second Xxxxxxx Merger, Cardiac Merger Sub
shall be merged with and into Cardiac in accordance with the applicable
provisions of the DGCL (the "Cardiac Merger" and, together with the Xxxxxxx
Mergers, the "Mergers"). Cardiac shall be the surviving corporation resulting
from the Cardiac Merger (the "Cardiac Surviving Corporation"), shall
7
become a wholly owned Subsidiary of Holding Company and shall continue to be
governed by the laws of the State of Delaware. The Cardiac Merger shall have the
effects set forth in the DGCL.
Section 2.2 Closing. The closing of the Mergers (the "Closing")
shall be held at the offices of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, 000 Xxxxxxx
Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx (or such other place as agreed by the
parties) at 10:00 a.m. Pacific time on a date to be specified by the parties,
which shall be the later of (a) the first Business Day after July 31, 2005 or
(b) the second Business Day after satisfaction or, to the extent permitted
hereby, waiver of the conditions set forth in Article IX (other than conditions
that by their nature are to be satisfied at the Closing, but subject to those
conditions), unless the parties hereto agree to another date or time.
Section 2.3 Effective Time. The Mergers and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Certificate of Merger reflecting the Xxxxxxx Merger (the "Xxxxxxx
Certificate of Merger"), the Certificate of Merger reflecting the Second Xxxxxxx
Merger (the "Second Xxxxxxx Certificate of Merger") and the Certificate of
Merger reflecting the Cardiac Merger (the "Cardiac Certificate of Merger" and,
together with the Xxxxxxx Certificate of Merger and the Second Xxxxxxx
Certificate of Merger, the "Certificates of Merger") shall each become effective
with the Secretary of State of the State of Delaware (the "Effective Time").
Subject to the terms and conditions of this Agreement, unless otherwise mutually
agreed upon in writing by the authorized officers of each party, the parties
shall cause the Effective Time to occur on the later of (a) the first Business
Day after July 31, 2005 or (b) the second Business Day after the satisfaction of
the conditions set forth in Article IX of the Agreement (other than (i) those
conditions that are waived by the party for whose benefit such conditions exist,
and (ii) any such conditions which, by their terms, are not capable of being
satisfied until the Closing, but subject to those conditions).
Section 2.4 Certificates of Incorporation.
(a) The Certificate of Incorporation of Xxxxxxx as in effect
immediately prior to the effective time of the Xxxxxxx Merger shall be the
Certificate of Incorporation of Xxxxxxx Surviving Corporation.
(b) The Certificate of Incorporation of Holding Company as in effect
immediately prior to the effective time of the Second Xxxxxxx Merger shall be
the Certificate of Incorporation of Holding Company until amended and restated
as contemplated in Section 2.7.
(c) The Certificate of Incorporation of the Cardiac Surviving
Corporation as in effect immediately prior to the effective time of the Cardiac
Merger shall be amended and restated as of the effective time of the Cardiac
Merger so as to contain the provisions, and only the provisions, contained
immediately prior to the effective time of the Cardiac Merger in the Certificate
of Incorporation of Cardiac Merger Sub, except that references to the name of
Cardiac Merger Sub shall be amended to reflect a change in such name to "Cardiac
Science Operating Company," until duly amended.
Section 2.5 Bylaws.
(a) The Bylaws of Xxxxxxx in effect immediately prior to the
effective time of the Xxxxxxx Merger shall be the Bylaws of Xxxxxxx Surviving
Corporation until duly amended or repealed.
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(b) The Bylaws of Holding Company in effect immediately prior to the
effective time of the Second Xxxxxxx Merger shall be the Bylaws of Holding
Company until amended and restated as contemplated in Section 2.7.
(c) The Bylaws of Cardiac Merger Sub in effect immediately prior to
the effective time of the Cardiac Merger shall be the Bylaws of the Cardiac
Surviving Corporation until duly amended or repealed.
Section 2.6 Officers and Directors.
(a) The directors of Xxxxxxx Merger Sub in office immediately prior
to the effective time of the Xxxxxxx Merger, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Xxxxxxx Surviving Corporation from and after the effective time of the Xxxxxxx
Merger in accordance with the Bylaws of the Xxxxxxx Surviving Corporation. The
officers of Xxxxxxx Merger Sub in office immediately prior to the effective time
of the Xxxxxxx Merger, together with such additional persons as may thereafter
be elected, shall serve as the officers of the Xxxxxxx Surviving Corporation
from and after the effective time of the Xxxxxxx Merger in accordance with the
Bylaws of the Xxxxxxx Surviving Corporation.
(b) The directors of Holding Company in office immediately prior to
the effective time of the Second Xxxxxxx Merger, together with such additional
persons as may thereafter be elected, shall serve as the directors of Holding
Company from and after the effective time of the Second Xxxxxxx Merger in
accordance with the Bylaws of Holding Company. The officers of Holding Company
in office immediately prior to the effective time of the Second Xxxxxxx Merger,
together with such additional persons as may thereafter be elected, shall serve
as the officers of Holding Company from and after the effective time of the
Second Xxxxxxx Merger in accordance with the Bylaws of Holding Company.
(c) The directors of Cardiac Merger Sub in office immediately prior
to the effective time of the Cardiac Merger, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Cardiac Surviving Corporation from and after the effective time of the Cardiac
Merger in accordance with the Bylaws of the Cardiac Surviving Corporation. The
officers of Cardiac Merger Sub in office immediately prior to the effective time
of the Cardiac Merger, together with such additional persons as may thereafter
be elected, shall serve as the officers of the Cardiac Surviving Corporation
from and after the effective time of the Cardiac Merger in accordance with the
Bylaws of the Cardiac Surviving Corporation.
Section 2.7 Organization of Holding Company. Cardiac and Xxxxxxx
have organized Holding Company under the laws of the State of Delaware for the
purposes of effecting the transactions contemplated hereby. The authorized
capital stock of Holding Company consists of one hundred (100) shares of Common
Stock, of which one (1) share is issued to and owned beneficially and of record
by Cardiac and one (1) share is issued to and owned beneficially and of record
by Xxxxxxx. Prior to the Effective Time, Cardiac and Xxxxxxx shall take, and
shall cause Holding Company to take, all requisite action to cause the
certificate of incorporation of Holding Company to be amended and restated in
the form attached hereto as Exhibit A-1 (the "Holding Company Certificate of
Incorporation") and the bylaws of Holding Company to be amended and restated in
the form attached hereto as Exhibit A-2, in each case as of immediately after
the effective time of the Cardiac Merger. The directors and officers of Holding
Company at, or immediately after, the effective time of the Cardiac Merger shall
be as provided in Section 8.9 and 8.10. Cardiac and
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Xxxxxxx shall take, and shall cause Holding Company to take, all requisite
action to cause Holding Company to change its name to "Cardiac Science
Corporation" and to cause the Nasdaq ticker symbol of Holding Company to be
changed to "DFIB" at or promptly after the effective time of the Cardiac Merger.
ARTICLE III
CONVERSION OF SECURITIES AND RELATED MATTERS
Section 3.1 Conversion of Capital Stock.
(a) Xxxxxxx Merger. At the effective time of the Xxxxxxx Merger, by
virtue of the Xxxxxxx Merger and without any action on the part of Xxxxxxx,
Holding Company or Xxxxxxx Merger Sub or the stockholders of any of the
foregoing, the securities of the constituent corporations to the Xxxxxxx Merger
shall be converted as follows:
(i) Each share of Xxxxxxx Merger Sub Common Stock issued and
outstanding immediately prior to the effective time of the Xxxxxxx Merger shall
be converted into and exchanged for the right to receive one share of common
stock of the Xxxxxxx Surviving Corporation
(ii) Each Xxxxxxx Common Share issued and outstanding
immediately prior to the effective time of the Xxxxxxx Merger shall be cancelled
and, at the effective time of the Xxxxxxx Merger, shall be converted into the
right to receive consideration (the "Xxxxxxx Merger Consideration") consisting
of a fraction of a Holding Company Common Share equal to 0.77184895 (the
"Xxxxxxx Exchange Ratio") and any payment for fractional shares as provided in
Section 3.2 hereof.
(b) Second Xxxxxxx Merger. At the effective time of the Second
Xxxxxxx Merger, by virtue of the Second Xxxxxxx Merger and without any action on
the part of Xxxxxxx Surviving Corporation, Holding Company or the stockholders
of any of the foregoing, each share of Xxxxxxx Surviving Corporation Common
Stock shall be cancelled.
(c) Cardiac Merger. At the effective time of the Cardiac Merger, by
virtue of the Cardiac Merger and without any action on the part of Cardiac,
Holding Company or Cardiac Merger Sub or the stockholders of any of the
foregoing, the securities of the constituent corporations shall be converted as
follows:
(i) Each share of Cardiac Merger Sub Common Stock issued and
outstanding immediately prior to the effective time of the Cardiac Merger shall
be converted into and exchanged for the right to receive one share of common
stock of the Cardiac Surviving Corporation.
(ii) Each Cardiac Common Share issued and outstanding
immediately prior to the effective time of the Cardiac Merger shall be cancelled
and, at the effective time of the Cardiac Merger, shall be converted into the
right to receive consideration (the "Cardiac Merger Consideration" and, together
with the Xxxxxxx Merger Consideration, the "Merger Consideration") consisting of
a fraction of a Holding Company Common Share equal to 0.10 (the "Cardiac
Exchange Ratio") and any payment for fractional shares as provided in Section
3.2 hereof.
(d) Holding Company Common Stock. Each share of Holding Company
Common Stock issued and outstanding immediately prior to the effective time of
the Xxxxxxx Merger
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shall be contributed to Holding Company, without payment of any consideration
therefor, and thereupon retired.
Section 3.2 Fractional Shares; Adjustments.
(a) Notwithstanding any other provision of this Agreement, each
holder of Cardiac Common Shares exchanged pursuant to the Cardiac Merger who
would otherwise have been entitled to receive a fraction of a Holding Company
Common Share (after taking into account all Cardiac Common Shares delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a Holding Company Common Share
multiplied by the product of the closing price of a Cardiac Common Share on
Nasdaq as of the last trading day immediately preceding the effective time of
the Cardiac Merger and the Cardiac Exchange Ratio. No such holder shall be
entitled to dividends, voting rights or any other rights as a stockholder in
respect of any fractional shares of Holding Company Common Stock. No interest
will be paid or accrued on the cash in lieu of fractional Holding Company Common
Shares.
(b) Notwithstanding any other provision of this Agreement, each
holder of Xxxxxxx Common Shares exchanged pursuant to the Xxxxxxx Merger who
would otherwise have been entitled to receive a fraction of a Holding Company
Common Share (after taking into account all Xxxxxxx Common Shares delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a Holding Company Common Share
multiplied by the product of the closing price of a Xxxxxxx Common Share on
Nasdaq as of the last trading day immediately preceding the effective time of
the Xxxxxxx Merger and the Xxxxxxx Exchange Ratio. No such holder shall be
entitled to dividends, voting rights or any other rights as a stockholder in
respect of any fractional shares of Holding Company Common Stock. No interest
will be paid or accrued on the cash in lieu of fractional Holding Company Common
Shares.
(c) If at any time during the period between the date hereof and the
Effective Time, any change in the outstanding shares of capital stock of Cardiac
or Xxxxxxx, as the case may be, or securities convertible or exchangeable into
capital stock of Cardiac or Xxxxxxx, as the case may be, shall occur by reason
of any reclassification, recapitalization, stock split or combination, exchange
or readjustment of shares, or any stock or cash dividend or distribution thereon
or a record date with respect to any of the foregoing shall occur during such
period, the Merger Consideration shall be appropriately adjusted to provide to
the holders of the Cardiac Common Shares and the Xxxxxxx Common Shares the same
economic effect as contemplated by this Agreement prior to the consummation of
such event.
Section 3.3 Exchange of Certificates.
(a) Exchange Agent. Promptly after the date hereof, Cardiac and
Xxxxxxx shall appoint a commercial bank or trust company as an exchange agent
(the "Exchange Agent") for the benefit of holders of Cardiac Common Shares and
Xxxxxxx Common Shares. At or immediately prior to the Effective Time, Holding
Company shall deposit with the Exchange Agent, for exchange in accordance with
this Section, through the Exchange Agent, (i) certificates evidencing the total
number of Holding Company Common Shares to be issued in the Mergers, and (ii)
cash in the amount necessary to pay amounts due pursuant to Section 3.2 (such
certificates for Holding Company Common Shares and such cash being hereinafter
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions in accordance with this Article III, deliver the
Holding Company Common Shares and cash contemplated to be issued pursuant to
this Article
11
III out of the Exchange Fund. Except as contemplated by Section 3.3(e), Section
3.3(f) or Section 3.3(g) hereof, the Exchange Fund shall not be used for any
other purpose.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Holding Company shall send, or will cause the Exchange Agent to
send, to each holder of record of Cardiac Common Shares and Xxxxxxx Common
Shares that were converted into the right to receive Holding Company Common
Shares and cash in lieu of fractional shares pursuant to this Article III, a
letter of transmittal and instructions (which shall be in customary form and
specify that delivery shall be effected, and risk of loss and title shall pass,
only upon delivery of the Cardiac Common Shares or Xxxxxxx Common Shares to the
Exchange Agent), for use in the exchange contemplated by this Section. Upon
surrender of a certificate representing Cardiac Common Shares or Xxxxxxx Common
Shares to the Exchange Agent (an "Exchanged Certificate"), together with a duly
executed letter of transmittal, the holder of such Exchanged Certificate shall
be entitled to receive in exchange therefor a certificate representing that
number of whole Holding Company Common Shares and cash which such holder has the
right to receive pursuant to the provisions of this Article III (after giving
effect to any required withholding tax). Until surrendered as contemplated by
this Section, each Exchanged Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the applicable Merger
Consideration and unpaid dividends and distributions thereon, if any, as
provided in this Article III. If any portion of the applicable Merger
Consideration is to be paid to a Person other than the Person in whose name the
Exchanged Certificate is registered, it shall be a condition to such payment
that the Exchanged Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Exchange Agent any transfer or other taxes required as
a result of such payment to a Person other than the registered holder of such
Exchanged Certificate or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable. If any Exchanged Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Exchanged Certificate to be lost, stolen
or destroyed and, if required by Holding Company, the posting by such Person of
a bond, in such reasonable amount as Holding Company may direct, as indemnity
against any claim that may be made against it with respect to such Exchanged
Certificate, the Exchange Agent will deliver, in exchange for such lost, stolen
or destroyed Exchanged Certificate, the proper amount of the applicable Merger
Consideration, together with any unpaid dividends and distributions on any such
Holding Company Common Shares, as contemplated by this Article III.
(c) Distributions with Respect to Unexchanged Shares. Whenever a
dividend or other distribution is declared by Holding Company in respect of the
Holding Company Common Shares, the record date for which is at or after the
Effective Time, that declaration shall include dividends or other distributions
in respect of all Holding Company Common Shares issuable pursuant to this
Agreement. No dividends or other distributions declared or made after the
Effective Time with respect to Holding Company Common Shares constituting part
of the Merger Consideration shall be paid to the holder of any unsurrendered
Certificates, and no cash payment in lieu of fractional shares shall be paid to
any such holder, until such Certificates are surrendered as provided in this
Section. Following such surrender, there shall be paid, without interest, to the
Person in whose name the Holding Company Common Shares have been registered (i)
at the time of such surrender, the amount of dividends or other distributions
with a record date at or after the Effective Time previously paid or payable on
the date of such surrender with respect to such whole Holding Company Common
Shares, less the amount of any withholding taxes that may be required thereon,
and (ii) at the appropriate payment date subsequent to surrender, the amount of
dividends or other distributions with a record date at or after the Effective
Time but prior to surrender and a payment
12
date subsequent to surrender payable with respect to such whole Holding Company
Common Shares, less the amount of any withholding taxes which may be required
thereon.
(d) No Further Ownership Rights. As of the Effective Time, all
Cardiac Common Shares and Xxxxxxx Common Shares outstanding immediately prior to
the Effective Time shall automatically be cancelled and retired and shall cease
to exist, and each holder of a Certificate representing any such Cardiac Common
Shares or Xxxxxxx Common Shares, as the case may be, shall cease to have any
rights with respect thereto, except the right to receive, upon surrender of such
Certificate, the applicable Merger Consideration. As of the Effective Time, the
stock transfer books of both parties shall be closed and there shall be no
further registration of transfers on each parties stock transfer books of
Cardiac Common Shares or Xxxxxxx Common Shares, as the case may be, outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to Holding Company for any reason, they shall be
cancelled and exchanged as contemplated by this Article III.
(e) Return of Merger Consideration. Upon demand by Holding Company,
the Exchange Agent shall deliver to Holding Company any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section that
remains undistributed to holders of Cardiac Common Shares and Xxxxxxx Common
Shares one year after the Effective Time. Holders of Certificates who have not
complied with this Section prior to such demand shall thereafter look only to
Holding Company for payment of any claim to the Merger Consideration and
dividends or distributions, if any, in respect thereof.
(f) No Liability. Neither Holding Company nor the Exchange Agent
shall be liable to any Person in respect of any Cardiac Common Shares (or
dividends or distributions with respect thereto) or Xxxxxxx Common Shares (or
dividends or distributions with respect thereto) for any amounts paid to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
(g) Withholding Rights. Holding Company shall be entitled to deduct
and withhold from the Merger Consideration (and any dividends or distributions
thereon) otherwise payable hereunder to any Person such amounts as it is
required to deduct and withhold with respect to the making of such payment under
any provision of federal, state, local or foreign income Tax Law. To the extent
that Holding Company so withholds those amounts, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
Cardiac Common Shares or Xxxxxxx Common Shares in respect of which such
deduction and withholding was made by Holding Company.
Section 3.4 Stock Options; ESPP; Warrants.
(a) Option Adjustment.
(i) As of the Effective Time of the Xxxxxxx Merger, each
outstanding Xxxxxxx Option shall thereafter entitle the holder thereof to
receive, upon the exercise thereof, that number of Holding Company Common Shares
(rounded down to the nearest whole share) equal to the product of (i) the number
of Xxxxxxx Common Shares subject to such Xxxxxxx Option immediately prior to the
Effective Time of the Xxxxxxx Merger and (ii) the Xxxxxxx Exchange Ratio, at an
exercise price per share (rounded up to the nearest whole cent) equal to (y) the
exercise price
13
per Xxxxxxx Common Share subject to such Xxxxxxx Option divided by (z) the
Xxxxxxx Exchange Ratio.
(ii) As of the Effective Time of the Cardiac Merger, each
outstanding Cardiac Option shall thereafter entitle the holder thereof to
receive, upon the exercise thereof, that number of Holding Company Common Shares
(rounded down to the nearest whole share) equal to the product of (i) the number
of Cardiac Common Shares subject to such Cardiac Option immediately prior to the
Effective Time of the Cardiac Merger and (ii) the Cardiac Exchange Ratio, at an
exercise price per share (rounded up to the nearest whole cent) equal to (y) the
exercise price per Cardiac Common Share subject to such Cardiac Option divided
by (z) the Cardiac Exchange Ratio.
(b) Assumption of Stock Plans. As of the Effective Time, Holding
Company shall assume in full, on the same terms and conditions the Xxxxxxx Stock
Plans and the Cardiac Stock Plan, including each Xxxxxxx Option and each Cardiac
Option (collectively, the "Options"), whether vested or unvested, subject to the
adjustment provided in Section 3.4(a). Except for the acceleration of unvested
Cardiac Options pursuant to the Cardiac Plan, the assumption of the Options by
Holding Company shall not terminate or modify (except as required under this
Agreement) any right of first refusal, right of repurchase, vesting schedule or
other restriction on transferability relating to such Option or the stock
issuable upon the exercise thereof. Continuous employment with Xxxxxxx (or any
Subsidiary thereof) or Cardiac (or any Subsidiary thereof), as the case may be,
shall be credited to an optionee for purposes of determining the number of
shares subject to exercise, vesting or repurchase after the Effective Time, and
the provisions in the Xxxxxxx Stock Plans or Cardiac Stock Plan, as the case may
be, and/or in any stock option agreement evidencing the terms and conditions of
any Option issued thereunder relating to the exercisability of any such Option
upon termination of an optionee's employment or service shall not be deemed
triggered until such time as such optionee shall be neither an employee or
service provider of Holding Company or any Subsidiary of Holding Company. After
such assumption, Holding Company shall issue, upon any partial or total exercise
of any Option assumed hereunder, in lieu of Xxxxxxx Common Shares or Cardiac
Common Shares, as the case may be, the number of Holding Company Common Shares
to which the holder of such option is entitled pursuant to this Agreement. The
assumption by Holding Company of Options hereunder shall not give holders of
such Options any additional benefits which they did not have immediately prior
to the Effective Time and shall not create any implied agreement for employment.
Holding Company shall file with the SEC as soon as practicable, and in any event
within five Business Days following the Effective Time, a registration statement
on Form S-8 (or such other appropriate form) under the Securities Act, covering
the Holding Company Common Shares to be issued upon the exercise of Options
assumed by Holding Company. Prior to the Effective Time, each of Xxxxxxx and
Cardiac shall make such amendments, if any, to the Xxxxxxx Stock Plans and
Cardiac Stock Plan, respectively, and any award or agreement evidencing an
Option issued thereunder as shall be necessary to permit such assumption in
accordance with this Section 3.4. It is the intention of the parties that (i)
the Options assumed by Holding Company shall qualify following the Effective
Time as incentive stock options as defined in Section 422 of the Code to the
same extent as such Options qualified as incentive stock options immediately
prior to the Effective Time, (ii) the assumption of Options provided by this
Section 3.4 shall satisfy the conditions of Section 424(a) of the Code and (iii)
the provisions of this Section 3.4 shall be applied consistent with this intent.
(c) ESPP. As of the Effective Time, Holding Company shall assume the
Xxxxxxx ESPP, the outstanding offering periods under the Xxxxxxx ESPP, and all
outstanding purchase rights
14
thereunder shall be converted (in accordance with the Xxxxxxx Exchange Ratio)
into rights to purchase Holding Company Common Shares (with the number of shares
rounded down to the nearest whole share and the purchase price as of the
offering date for each offering period in effect as of the Effective Time
rounded up to the nearest whole cent). All such converted purchase rights shall
be assumed by Holding Company, and each offering period in effect under the
Xxxxxxx ESPP immediately prior to the Effective Time shall be continued until
the end of such offering period in accordance with the terms of the Xxxxxxx
ESPP. From and after the Effective Time, all references to Xxxxxxx in the
Xxxxxxx ESPP and related documents shall be deemed to refer to Holding Company
(provided, that the purchase price as of the offering date for a relevant period
shall be determined with respect to the fair market value of Xxxxxxx Common
Shares on such date, as adjusted by this Section 3.4). Holding Company shall
take all corporate action necessary to reserve for issuance a sufficient number
of Holding Company Common Shares for issuance upon exercise of the purchase
rights under the Xxxxxxx ESPP assumed in accordance with this Section 3.4.
Holding Company shall file with the SEC as soon as practicable, and in any event
within five Business Days following the Effective Time, a registration statement
on Form S-8 under the Securities Act, covering the Holding Company Common Shares
to be issued upon the exercise of converted purchase rights hereunder. Prior to
the Effective Time, Xxxxxxx shall make such amendments, if any, to the Xxxxxxx
ESPP as shall be necessary to permit assumption of the Xxxxxxx ESPP in
accordance with this Section 3.4.
(d) Warrants. As of the Effective Time, warrants to purchase Xxxxxxx
Common Shares or Cardiac Common Shares which are outstanding immediately prior
to the Effective Time shall be assumed by the Holding Company at the Effective
Time and adjusted in the same manner as set forth in subparagraph (a)(i) and
(a)(ii), respectively, of this Section 3.4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXXX
Except as disclosed in the Xxxxxxx Disclosure Letter or the Xxxxxxx SEC
Documents filed since December 31, 2003 and prior to the date hereof (but
excluding any risk factor disclosure contained in such Xxxxxxx SEC Document
under the heading "Risk Factors" or "Forward Looking Information" and any other
disclosures included in any such Xxxxxxx SEC Document which are predictive or
forward-looking in nature), Xxxxxxx represents and warrants to Cardiac that:
Section 4.1 Corporate Existence and Power. Xxxxxxx is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers required to carry on its
business as now conducted. Xxxxxxx is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a Xxxxxxx Material Adverse Effect.
Xxxxxxx has heretofore made available to Cardiac true and complete copies of
Quinton's certificate of incorporation and bylaws as currently in effect.
Section 4.2 Corporate Authorization. The execution, delivery and
performance by Xxxxxxx of this Agreement and the consummation by Xxxxxxx of the
transactions contemplated hereby are within Quinton's corporate powers and,
except for the Xxxxxxx Stockholder Approval, have been duly authorized by all
necessary corporate action. Without limiting the generality of the foregoing,
the only vote of the holders of any class or series of capital stock of Xxxxxxx
required by Law to approve this Agreement, the Xxxxxxx Merger and/or any of the
other transactions contemplated hereby is the affirmative vote (the "Xxxxxxx
Stockholder Approval") of the holders of a
15
majority of the outstanding Xxxxxxx Common Shares in favor of the adoption and
approval of this Agreement and the Xxxxxxx Merger. Quinton's Board of Directors
has (a) determined that this Agreement and the transactions contemplated hereby,
including the Xxxxxxx Merger, are in the best interests of Xxxxxxx and its
stockholders, (b) approved this Agreement and the transactions contemplated
hereby, including for purposes of rendering Section 203 of the DGCL inapplicable
to this Agreement and the Xxxxxxx Merger and (c) resolved (subject to Section
7.4) to recommend to such stockholders that they vote in favor of adopting and
approving this Agreement and the Xxxxxxx Merger in accordance with the terms
hereof. Assuming that this Agreement constitutes the valid and binding
obligation of Cardiac, this Agreement constitutes a valid and binding agreement
of Xxxxxxx, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar Laws, now or hereafter in
effect, relating to or affecting creditors' rights and remedies and to general
principles of equity.
Section 4.3 Governmental Authorization. The execution, delivery and
performance by Xxxxxxx of this Agreement and the consummation by Xxxxxxx of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any Governmental Entity other than (a) the filing of the
Certificates of Merger in accordance with the DGCL; (b) compliance with any
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
0000 (xxx "XXX Xxx") or decrees thereunder applicable to Xxxxxxx; (c) compliance
with any applicable requirements of the Securities Act and the Exchange Act; (d)
such as may be required under any applicable state securities Laws; and (e) such
other consents, approvals, actions, orders, authorizations, registrations,
declarations and filings which, if not obtained or made, would not, individually
or in the aggregate, (x) be reasonably likely to have a Xxxxxxx Material Adverse
Effect or (y) prevent or materially impair the ability of Xxxxxxx to consummate
the transactions contemplated by this Agreement.
Section 4.4 Non-Contravention. The execution, delivery and
performance by Xxxxxxx of this Agreement and the consummation by Xxxxxxx of the
transactions contemplated hereby do not and will not (a) contravene or conflict
with Quinton's certificate of incorporation or bylaws, (b) assuming compliance
with the matters referred to in Section 4.3, contravene or conflict with or
constitute a violation of any provision of any Law, judgment, injunction, order
or decree binding upon or applicable to Xxxxxxx or any of its Subsidiaries, (c)
constitute a breach or default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Xxxxxxx or any of its
Subsidiaries or to a loss of any benefit or status to which Xxxxxxx or any of
its Subsidiaries is entitled under any provision of any material agreement,
contract or other instrument binding upon Xxxxxxx or any of its Subsidiaries or
any material license, franchise, permit or other similar authorization held by
Xxxxxxx or any of its Subsidiaries, or (d) result in the creation or imposition
of any Lien on any asset of Xxxxxxx or any of its Subsidiaries other than, in
the case of each of (b) and (d), any such items that would not, individually or
in the aggregate (x) be reasonably likely to have a Xxxxxxx Material Adverse
Effect or (y) prevent or materially impair the ability of Xxxxxxx to consummate
the transactions contemplated by this Agreement.
Section 4.5 Capitalization.
(a) The authorized capital stock of Xxxxxxx consists of (i)
65,000,000 Xxxxxxx Common Shares, of which 14,067,987 shares are issued and
outstanding as of the date of this Agreement, and (ii) 10,000,000 shares of
preferred stock, par value $0.001 per share, none of which are issued and
outstanding. As of the date of this Agreement, 2,715,918 Xxxxxxx Common Shares
were reserved for issuance upon exercise of options pursuant to the Xxxxxxx
Stock Plans and up to
16
704,878 Xxxxxxx Common Shares were reserved for issuance pursuant to outstanding
purchase rights pursuant to the Xxxxxxx ESPP. As of the date of this Agreement,
there are options to purchase 2,192,837 Xxxxxxx Common Shares issued and
outstanding pursuant to the Xxxxxxx Stock Plans. All of the outstanding shares
of capital stock of Xxxxxxx have been duly and validly issued and are fully paid
and nonassessable under the DGCL. None of the outstanding shares of capital
stock of Xxxxxxx has been issued in violation of any preemptive rights of the
current or past stockholders of Xxxxxxx.
(b) Except as set forth in Section 4.5(a) or in Section 4.5(b) of
the Xxxxxxx Disclosure Letter, there are no outstanding (i) shares of capital
stock, debt securities or other voting securities of Xxxxxxx, (ii) securities of
Xxxxxxx or any of its Subsidiaries convertible into or exchangeable for shares
of capital stock, debt securities or voting securities of Xxxxxxx, or (iii)
subscriptions, calls, contracts, commitments, understandings, restrictions,
arrangements, rights, warrants, options or other rights to acquire from Xxxxxxx,
or obligations of Xxxxxxx to issue, any capital stock, debt securities or other
voting securities or obligating Xxxxxxx to grant, extend or enter into any such
agreement or commitment. There are no outstanding obligations of Xxxxxxx to
repurchase, redeem or otherwise acquire any securities of Xxxxxxx. All warrants
or other securities convertible into Xxxxxxx Common Shares (other than options
to purchase Xxxxxxx Common Shares issued under the Xxxxxxx Option Plans) to be
assumed in the Xxxxxxx Merger pursuant to Section 3.4 are set forth in Section
4.5(b) of the Xxxxxxx Disclosure Letter. There are no outstanding obligations of
Xxxxxxx to grant, extend, accelerate the vesting of or enter into any option,
warrant, equity security or other security of Xxxxxxx. There are no Xxxxxxx
Common Shares that are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with Xxxxxxx. There are no registration rights and
voting trusts, proxies or other agreements or understandings to which Xxxxxxx or
any of its Subsidiaries is a party or is bound with respect to the voting of any
shares of capital stock of Xxxxxxx.
Section 4.6 Subsidiaries.
(a) Each Subsidiary of Xxxxxxx is a corporation duly incorporated or
an entity duly organized, and is validly existing and in good standing, under
the Laws of its jurisdiction of incorporation or organization, has all powers
and authority and all material governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted and is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, in each case
with such exceptions as, individually or in the aggregate, would not be
reasonably likely to have a Xxxxxxx Material Adverse Effect.
(b) Each of the outstanding shares of capital stock of, or other
ownership interest in, each Subsidiary of Xxxxxxx has been validly issued and is
fully paid and nonassessable. All of the outstanding capital stock of, or other
ownership interest, which is owned, directly or indirectly, by Xxxxxxx in, each
of its Subsidiaries is owned free and clear of any Lien and free of any other
limitation or restriction (including any limitation or restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests) with such exceptions as, individually or in the aggregate, would not
be reasonably likely to have a Xxxxxxx Material Adverse Effect. There are no
outstanding (i) securities of Xxxxxxx or any of its Subsidiaries convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities or ownership interests in any of its Subsidiaries, (ii) options,
warrants or other rights to acquire from Xxxxxxx or any of its Subsidiaries, and
no other obligation of Xxxxxxx or any of its Subsidiaries to issue, any capital
stock, voting
17
securities or other ownership interests in, or any securities convertible into
or exchangeable or exercisable for any capital stock, voting securities or
ownership interests in, any of its Subsidiaries or (iii) obligations of Xxxxxxx
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
outstanding securities of any of its Subsidiaries or any capital stock of, or
other ownership interests in, any of its Subsidiaries.
Section 4.7 The Xxxxxxx SEC Documents.
(a) Xxxxxxx has made available to Cardiac the Xxxxxxx SEC Documents.
Xxxxxxx has filed all reports, filings, registration statements and other
documents required to be filed by it with the SEC since December 31, 2002. No
Subsidiary of Xxxxxxx is required to file any form, report, registration
statement or prospectus or other document with the SEC.
(b) As of its filing date, each Xxxxxxx SEC Document complied with
the applicable requirements of the Securities Act and/or the Exchange Act, as
the case may be. No Xxxxxxx SEC Document filed or furnished pursuant to the
Exchange Act contained, as of its filing date or mailing date, as applicable,
any untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Xxxxxxx SEC
Document filed pursuant to the Securities Act, as amended or supplemented, if
applicable, contained, as of the date such document or amendment became
effective, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(c) Xxxxxxx has heretofore furnished to Cardiac a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Xxxxxxx with the SEC
pursuant to the Securities Act or the Exchange Act.
(d) Each required form, report and document containing financial
statements that has been filed with or submitted to the SEC since July 31, 2002,
was accompanied by the certifications required to be filed or submitted by
Quinton's chief executive officer and chief financial officer pursuant to the
Xxxxxxxx-Xxxxx Act, and at the time of filing or submission of each such
certification, such certification was true and accurate and complied with the
Xxxxxxxx-Xxxxx Act.
Section 4.8 Financial Statements.
(a) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Xxxxxxx SEC Documents
(the "Xxxxxxx Financial Statements") and the unaudited financial statements for
the quarter ended September 30, 2004 (without notes thereto) (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 Xxxxxxx and its Subsidiaries as at 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 Xxxxxxx, except that
the unaudited 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. Neither Xxxxxxx, any of its Subsidiaries nor, to Quinton's Knowledge,
any director, officer, employee, auditor, accountant or representative of
Xxxxxxx or
18
any of its Subsidiaries, has received or otherwise had or obtained knowledge of
any complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or
methods of Xxxxxxx or any of its Subsidiaries or its internal accounting
controls, including any complaint, allegation, assertion or claim that Xxxxxxx
or any of its Subsidiaries has engaged in questionable accounting or auditing
practices. No attorney representing Xxxxxxx or any of its Subsidiaries, whether
or not employed by Xxxxxxx or any of its Subsidiaries, has reported evidence of
a material violation of securities Laws, breach of fiduciary duty or similar
violation by Xxxxxxx or any of its officers, directors, employees or agents to
its Board of Directors or any committee thereof or to any director or officer of
Xxxxxxx.
(b) Xxxxxxx has made available to Cardiac an unaudited draft balance
sheet as of December 31, 2004 and the related unaudited draft statements of
operations, cash flows and changes in stockholders' equity for the year ended
December 31, 2004 (the "2004 Xxxxxxx Financial Statements"). To the Knowledge of
Xxxxxxx as of the date hereof, the 2004 Xxxxxxx Financial Statements (i) were
prepared in accordance with GAAP (except for the omission of notes thereto) and
(ii) fairly present the consolidated financial position of Xxxxxxx and its
Subsidiaries and the consolidated results of its operations and cash flows as of
and for the year ended December 31, 2004, consistent with the books and records
of Xxxxxxx.
Section 4.9 No Material Undisclosed Liabilities. As of the date
hereof, there are no liabilities of Xxxxxxx or of any Subsidiary of Xxxxxxx of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, in each case, that are required by GAAP to be set
forth on a consolidated balance sheet of Xxxxxxx, other than:
(i) liabilities or obligations disclosed or provided for in
the Xxxxxxx Financial Statements or disclosed in the notes thereto; and
(ii) liabilities or obligations incurred or arising in the
ordinary course of business after the date of the Xxxxxxx Financial Statements
included in the Xxxxxxx 10-Q relating to the quarter ended September 30, 2004 or
arising under this Agreement or incurred in connection with the transactions
contemplated hereby; and
(iii) other liabilities or obligations, which individually do
not exceed $25,000 and in the aggregate do not exceed $100,000.
Section 4.10 Information to Be Supplied.
(a) The information to be supplied in writing by Xxxxxxx expressly
for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus will (i) in the case of the Registration Statement, at the
time it becomes effective, 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 and (ii) in the case of the
remainder of the Joint Proxy Statement/Prospectus, at the time of the mailing
thereof and at the time of the Xxxxxxx Stockholders Meeting, not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, Xxxxxxx makes no representation or warranty with
respect to any statements made or incorporated by reference in the Joint Proxy
Statement/Prospectus based on information supplied in writing by Cardiac
expressly for use therein.
19
Section 4.11 Absence of Certain Changes. Since December 31, 2003,
except as contemplated by this Agreement, Xxxxxxx and its Subsidiaries have
conducted their business in the ordinary course consistent with past practice
and there has not been:
(a) any action, event, occurrence, development, change in method of
doing business, or state of circumstances or facts that, individually or in the
aggregate, has had or would be reasonably likely to have a Xxxxxxx Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any Xxxxxxx Common Shares (other than regular
quarterly cash dividends) or any repurchase, redemption or other acquisition by
Xxxxxxx or any of its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, Xxxxxxx or any of its
Subsidiaries;
(c) any transaction or commitment made by, or any contract,
agreement or settlement entered into by, or any judgment, order or decree to
which Xxxxxxx or any of its Subsidiaries is a party which relates to its assets
or business (including without limitation the acquisition or disposition of any
assets) or any relinquishment by Xxxxxxx or any of its Subsidiaries of any
contract or other right, in either case, material to Xxxxxxx and its
Subsidiaries taken as a whole, other than transactions, commitments, contracts,
agreements or settlements (including, without limitation, settlements of
litigation and Tax proceedings) in the ordinary course of business consistent
with past practice, contemplated by this Agreement, or agreed to in writing by
Cardiac; or
(d) any change by Xxxxxxx in accounting principles or methods (other
than as required by GAAP or Regulation S-X of the Exchange Act).
Section 4.12 Transactions with Affiliates. Since December 31, 2003,
no event has occurred that would be required to be reported by Xxxxxxx pursuant
to Item 404 of Regulation S-K promulgated by the SEC. Xxxxxxx has delivered to
Cardiac a list identifying all persons who may be deemed to be "affiliates" of
Xxxxxxx for purposes of Rule 145 under the Securities Act.
Section 4.13 Litigation. There is no material Action pending
against, or to the Knowledge of Xxxxxxx threatened against, Xxxxxxx or any of
its Subsidiaries or any of their respective assets or properties before any
arbitrator or Governmental Entity.
Section 4.14 Taxes. (a) All material Tax returns, statements,
reports and forms (collectively, the "Xxxxxxx Returns") required to be filed
with any Taxing authority by, or with respect to, Xxxxxxx and its Subsidiaries
were filed on a timely basis and were true, complete and correct except to the
extent that the failure to file or be true, complete and correct would not,
individually or in the aggregate, have a Xxxxxxx Material Adverse Effect; (b)
Xxxxxxx and its Subsidiaries have timely paid all material Taxes shown as due
and payable on the Xxxxxxx Returns (other than Taxes which are being contested
in good faith and for which adequate reserves are reflected on the Xxxxxxx
Financial Statements) except to the extent that the failure to pay would not,
individually or in the aggregate, have a Xxxxxxx Material Adverse Effect; (c)
Xxxxxxx and its Subsidiaries have made provision for all material Taxes payable
by them for which no Xxxxxxx Return has yet been filed except for inadequately
reserved Taxes that would not, individually or in the aggregate, have a Xxxxxxx
Material Adverse Effect; (d) no Taxing authority has asserted or initiated (or,
to the Knowledge of Xxxxxxx, threatened to assert or initiate) in writing any
action, suit, proceeding or claim against Xxxxxxx or any of its Subsidiaries
that, individually or in the aggregate,
20
would have a Xxxxxxx Material Adverse Effect; (e) there are no Liens for Taxes
on the assets of Xxxxxxx or any of its Subsidiaries other than Liens for Taxes
not yet due and payable or that would not, individually or in the aggregate,
have a Xxxxxxx Material Adverse Effect; (f) except for any year for which the
applicable statute of limitations has expired, neither Xxxxxxx nor any of its
Subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which Xxxxxxx was the common parent; (g) except
for any year for which the applicable statute of limitations has expired,
neither Xxxxxxx nor any of its Subsidiaries is obligated by any contract,
agreement or other arrangement to indemnify any other Person (other than Xxxxxxx
or any of its Subsidiaries) with respect to Taxes or to compensate any other
Person for any Tax payment or Tax liability under a Tax sharing or similar
agreement; (h) neither Xxxxxxx nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any contract,
agreement or other arrangement that under any circumstances could obligate it to
make any payments that will not be deductible under Code Sections 280G or
162(m); (i) neither Xxxxxxx nor any of its Subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code; (j) neither Xxxxxxx nor any of its Subsidiaries has engaged in a
transaction that is the same as or substantially similar to one of the types of
transactions that the IRS has determined to be a tax avoidance transaction and
identified by notice, regulation, or other form of published guidance as a
listed transaction, as set forth in Treasury Regulations Section 1.6011-4(b)(2);
and (k) neither Xxxxxxx nor any of its Subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code
(i) in the two (2) years prior to the date hereof, or (ii) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the Mergers.
Section 4.15 Employees and Employee Benefits.
(a) Xxxxxxx has made available to Cardiac each material "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), each material employment, severance or similar
contract, plan, arrangement or policy and each other material plan or
arrangement providing for compensation, bonuses, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred compensation
or insurance coverage (including any self-insured arrangements and, if
applicable, related trust agreements), all amendments thereto and the most
recent written summary descriptions thereof, together with the most recent
annual report (Form 5500 including, if applicable, Schedule B thereto) prepared
in connection with any such plan, (i) which is maintained, administered or
contributed to by Xxxxxxx or any of its Subsidiaries and covers any employee or
former employee of Xxxxxxx or any of its Subsidiaries, or (ii) with respect to
which Xxxxxxx or any of its Subsidiaries has or could have any material
liability or expense. Such plans are referred to collectively herein as the
"Xxxxxxx Employee Plans."
(b) Each Xxxxxxx Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and (i) has received an
unrevoked favorable determination letter from the IRS with respect to such
Xxxxxxx Employee Plan's qualified status under the Code, as amended by the Tax
Reform Act of 1986 and all subsequent legislation through what is commonly
referred to as "GUST," (ii) has remaining a period of time under the Code or
applicable Treasury regulations or IRS pronouncements in which to request, and
make any amendments necessary to obtain, such a letter from the IRS, or (iii) is
entitled, under IRS Announcement 2001-77, to rely on the favorable opinion or
advisory letter issued by the IRS to the prototype or volume submitter plan
21
sponsor of such Xxxxxxx Employee Plan. Nothing has occurred, or is reasonably
expected by Xxxxxxx that could adversely affect the qualification or exemption
of any such Xxxxxxx Employee Plan. Xxxxxxx will make available upon request to
Cardiac copies of the most recent IRS determination letters with respect to each
such Xxxxxxx Employee Plan. Each Xxxxxxx Employee Plan has been administered in
compliance with its terms and with the requirements prescribed by any and all
Laws, including but not limited to ERISA and the Code, which are applicable to
such Xxxxxxx Employee Plan except as would not be reasonably likely to have a
Xxxxxxx Material Adverse Effect. Xxxxxxx, each of its Subsidiaries and all other
Persons (including, without limitation, all fiduciaries) have, at all times and
in all material respects, properly performed all of their duties and obligations
(whether arising by operation of law or by contract) under or with respect to
such Xxxxxxx Employee Plan, including, without limitation, all reporting,
disclosure and notification obligations. All contributions, premiums and other
payments due or required to be paid to (or with respect to) each Xxxxxxx
Employee Plan have been timely paid, or, if not yet due, have been properly
accrued on the Xxxxxxx Financial Statements.
(c) Neither Xxxxxxx nor any of its Subsidiaries sponsors, maintains
or contributes to, and has never sponsored, maintained or contributed to (or
been obligated to sponsor, maintain or contribute to), (i) a "multiemployer
plan," as defined in Section 3(37) or Section 4001(a)(3) of ERISA, (ii) a
multiple employer plan within the meaning of Section 4063 or 4064 of ERISA or
Section 413(c) of the Code, (iii) an employee benefit plan, fund, program,
contract or arrangement that is subject to Section 302 of ERISA, Title IV of
ERISA or Section 412 of the Code, or (iv) a "multiple employer welfare
arrangement," as defined in Section 3(40) of ERISA.
(d) There are no actions, suits or claims (other than routine claims
for benefits) pending or, to the Knowledge of the Xxxxxxx, threatened with
respect to (or against the assets of) any Xxxxxxx Employee Plan except as would
not be reasonably likely to have a Xxxxxxx Material Adverse Effect, nor, to the
Knowledge of the Xxxxxxx, is there a basis for any such action, suit or claim.
No Xxxxxxx Employee Plan is currently under investigation, audit or review,
directly or indirectly, by the IRS, the U.S. Department of Labor or any other
governmental entity or agency except as would not be reasonably likely to have a
Xxxxxxx Material Adverse Effect, and, to the Knowledge of the Xxxxxxx, no such
action is contemplated or under consideration by the IRS, the U.S. Department of
Labor or any other Governmental Entity.
(e) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any Xxxxxxx
Employee Plan, employment or severance agreement to which Xxxxxxx or any of its
Subsidiaries is a party, trust or loan that will or may result in any material
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any current or former employee, executive or director
of Xxxxxxx or any of its Subsidiaries.
(f) To the Knowledge of Xxxxxxx, neither Xxxxxxx nor any of its
Subsidiaries maintains or contributes to any Xxxxxxx Employee Plan which
provides, or has any liability to provide, life insurance, medical or other
welfare benefits to any employee upon such employee's retirement or termination
of employment, except as required by Section 601 of ERISA and Section 4980B of
the Code.
(g) To the Knowledge of Xxxxxxx, there has been no amendment to,
written interpretation or announcement (whether or not written) to create, enter
into, contribute to or
22
otherwise relating to any Xxxxxxx Employee Plan which would increase materially
the expense of maintaining such Xxxxxxx Employee Plans in the aggregate above
the level of the expense incurred in respect thereof for the fiscal year ended
December 31, 2004.
(h) To the Knowledge of Xxxxxxx, Xxxxxxx and each of its
Subsidiaries is in substantial compliance with all applicable Laws respecting
employment, employment practices, terms and conditions of employment, wages,
hours and withholding. No work stoppage or labor strike against Xxxxxxx or any
Affiliate of Xxxxxxx is pending, threatened or reasonably anticipated. Xxxxxxx
does not know of any activities or proceedings of any labor union to organize
any Xxxxxxx employees. There are no Actions pending, or, to the Knowledge of
Xxxxxxx, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Xxxxxxx employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate, result
in any material liability to Xxxxxxx. Neither Xxxxxxx nor any of its
Subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. Neither Xxxxxxx nor any of its Subsidiaries is
presently, or has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Xxxxxxx employees and no
collective bargaining agreement is being negotiated with respect to Xxxxxxx
employees. Neither Xxxxxxx nor any of its Subsidiaries has incurred any material
liability or material obligation under the Worker Adjustment and Retraining
Notification Act or any similar Law which remains unsatisfied.
Section 4.16 Compliance with Laws; Xxxxxxxx-Xxxxx.
(a) Xxxxxxx and its Subsidiaries have all material licenses, permits
and qualifications necessary to conduct their businesses and own their
properties in each jurisdiction in which Xxxxxxx or its Subsidiaries currently
do business or own property, or in which such license, permit or qualification
is otherwise required. Xxxxxxx and its Subsidiaries have complied in all
material respects with all Laws applicable to their businesses and the present
use by Xxxxxxx and its Subsidiaries of their respective properties, and the
business conducted by Xxxxxxx and its Subsidiaries, does not violate in any
material respect any such Laws and Xxxxxxx and its Subsidiaries have timely
filed all reports and returns required by Law and all such returns and reports
are true and correct in all material respects, and there are no material
deficiencies with respect to such filings or submissions.
(b) Xxxxxxx is in compliance with, and has complied, in all material
respects with (A) the applicable provisions of the Xxxxxxxx-Xxxxx Act and the
Exchange Act and (B) the applicable listing and corporate governance rules and
regulations of Nasdaq. There are no outstanding loans made by Xxxxxxx to any of
its executive officers (as defined under Rule 3b-7 under the Exchange Act) or
directors. Since the enactment of the Xxxxxxxx-Xxxxx Act, Xxxxxxx has not made
any loans to any such executive officer or director. Xxxxxxx has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act); such disclosure controls and procedures are
designed to ensure that information relating to Xxxxxxx, required to be
disclosed by Xxxxxxx in the reports that it files or submits under the Exchange
Act is accumulated and communicated to Quinton's principal executive officer and
its principal financial officer to allow timely decisions regarding required
disclosure, and such disclosure controls and procedures are effective to ensure
that information required to be disclosed by Xxxxxxx in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time
23
periods specified in SEC rules and forms. To the best of its Knowledge: Xxxxxxx
has established and maintains internal control over financial reporting (as such
term is defined in Rule 13a-15(f) under the Exchange Act); such internal
controls are designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP. Quinton's principal executive officer and its
principal financial officer have disclosed, based on their most recent
evaluation, to Quinton's auditors and the audit committee of the board of
directors of Xxxxxxx (x) all significant deficiencies and material weaknesses in
the design or operation of internal controls over financial reporting which are
reasonably likely to adversely affect Quinton's ability to record, process,
summarize and report financial data and have identified for its auditors any
material weaknesses in internal controls and (y) any fraud, whether or not
material, that involves management or other employees who have a significant
role in Quinton's internal controls. Since January 1, 2003, neither Xxxxxxx, nor
to the Knowledge of Xxxxxxx, any director, officer, employee, auditor,
accountant or representative of Xxxxxxx has received or otherwise had or
obtained knowledge of any material complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Xxxxxxx or its internal accounting
controls, including any material complaint, allegation, assertion or claim that
Xxxxxxx has engaged in questionable accounting or auditing practices. For
purposes of this paragraph, "principal executive officer" and "principal
financial officer" shall have the meanings given to such terms in the Exchange
Act.
(c) To the Knowledge of Xxxxxxx, no employee of Xxxxxxx has provided
or is providing information to any law enforcement agency regarding the
commission or possible commission of any crime or the violation or possible
violation of any applicable Law. Neither Xxxxxxx nor any of its Subsidiaries nor
any officer, employee, contractor, subcontractor or agent of Xxxxxxx or any such
Subsidiaries has discharged, demoted, suspended, threatened, harassed or in any
other manner discriminated against an employee of Xxxxxxx or any of its
Subsidiaries in the terms and conditions of employment because of any act of
such employee described in 18 U.S.C. Section 1514A(a).
Section 4.17 Environmental Matters. (i) No written notice,
notification, demand, request for information, citation, summons, complaint or
order has been received or made by, and no Action is pending or, the Knowledge
of Xxxxxxx, threatened by any Person against Xxxxxxx or any of its Subsidiaries,
with respect to any applicable Environmental Law, (ii) Xxxxxxx and its
Subsidiaries are and have been in compliance in all material respects with all
applicable Environmental Laws and (iii) there are no liabilities or obligations
of Xxxxxxx or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, direct or indirect, determined, determinable or otherwise,
arising under or relating to any Environmental Law (including, without
limitation, liabilities or obligations relating to divested properties or
businesses or predecessor entities) which would have a Xxxxxxx Material Adverse
Effect, and there are no facts, conditions, situations or set of circumstances
that have resulted or could reasonably be expected to result in or be the basis
for any such liabilities or obligations which would have a Xxxxxxx Material
Adverse Effect.
Section 4.18 Medical Device Regulatory Compliance.
(a) All medical devices of Xxxxxxx or any of its Subsidiaries that
are subject to regulation by the FDA and other applicable U.S. federal, state or
local regulatory agencies, are manufactured, produced, tested, developed,
processed, labeled, stored, distributed, and marketed in compliance with all
applicable regulations, guidelines and orders administered or issued by the FDA
and any other applicable U.S. federal, state and local regulatory agencies,
including without
24
limitation, the following (except where any failure to so comply would not
reasonably be expected to have, individually or in the aggregate, a Xxxxxxx
Material Adverse Effect):
- FDA Quality System Regulation;
- FDA Establishment Registration requirements;
- FDA Medical Device Listing requirements;
- FDA Premarket Notification (510(k)) regulations;
- FDA Labeling regulations; and
- FDA Medical Device Reporting regulations.
(b) All medical device manufacturing sites and facilities of Xxxxxxx
and its Subsidiaries are operated in compliance in all material respects with
the FDA's Establishment Registration requirements and Quality System Regulation
requirements at 21 C.F.R. Part 820, as applicable.
(c) Each medical device manufactured, produced, tested, developed,
processed, labeled, stored or distributed by or on behalf of Xxxxxxx or any of
its Subsidiaries (and any modification thereof, as applicable) has received
Section 510(k) clearance(s) from the FDA clearing such device for commercial
distribution. None of Quinton's or its Subsidiaries' current medical devices
(including any such device under development) are the subject of or require FDA
premarket approval, pre-clinical or clinical trial.
(d) To the Knowledge of Xxxxxxx, each medical device distributed,
sold or leased, or service rendered, by Xxxxxxx or any of its Subsidiaries
complies in all material respects with all applicable product safety and
electrical safety standards of each applicable product and electrical safety
agency, commission, board or other Governmental Entity.
(e) Neither Xxxxxxx nor any of its Subsidiaries, nor, to the
Knowledge of Xxxxxxx, any officer, employee or agent of Xxxxxxx or any of its
Subsidiaries, has made an untrue statement of a material fact or fraudulent
statement to the FDA or any other Governmental Entity, failed to disclose a
material fact required to be disclosed to the FDA or any other Governmental
Entity, or committed an act, made a statement, or failed to make a statement
that, at the time such disclosure was made, would reasonably be expected to
provide a basis for the FDA or any other Governmental Entity to invoke its
policy respecting fraud, untrue statements, bribery and illegal gratuities or
any similar policy.
(f) Other than as disclosed in the Xxxxxxx Disclosure Letter, there
are no FDA warning letters, recalls (either voluntary or mandatory), seizures,
revocations of prior FDA approval, internal stop-ships, banned or
administratively detained products or other enforcement actions or sanctions of
the FDA in connection with any medical devices currently manufactured, produced,
tested, developed, processed, labeled, stored or distributed by or on behalf of
Xxxxxxx or any of its Subsidiaries.
(g) Xxxxxxx and each of its Subsidiaries has obtained all necessary
foreign government agency licenses, approvals, permits and authorizations for
sale and distribution of its
25
medical devices, as applicable, to each foreign country or jurisdiction in which
such medical device is currently sold, leased, marketed or otherwise
commercially distributed and is in compliance with applicable Laws of such
countries and/or jurisdictions, except where any failure to so comply would not
reasonably be expected to have, individually or in the aggregate, a Xxxxxxx
Material Adverse Effect.
Section 4.19 Intellectual Property.
(a) All patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; registered trademarks and applications therefor;
and registered copyrights and applications therefor owned or controlled by
Xxxxxxx or its Subsidiaries (collectively, "Xxxxxxx Registered Intellectual
Property"), together with any other type of rights in Intellectual Property that
are owned or controlled by Xxxxxxx or any of its Subsidiaries and that (x)
relates to any Xxxxxxx product or (y) is otherwise material to the research,
development, manufacturing or commercialization of any Xxxxxxx product, are
collectively referred to herein as "Xxxxxxx Intellectual Property Rights".
Section 4.19 of the Xxxxxxx Disclosure Letter lists all Xxxxxxx Registered
Intellectual Property. All Xxxxxxx Intellectual Property Rights are either (i)
owned by, or subject to a valid license or a valid obligation of assignment to,
Xxxxxxx or its Subsidiaries free and clear of all mortgages, liens, security
interests, leases, pledges, encumbrances, equities, claims, charges, options,
written restrictions, rights of first refusal, title retention agreements or
other exceptions to title which affect the Xxxxxxx Intellectual Property Rights
or restrict the use by Xxxxxxx or any of its Subsidiaries of the Xxxxxxx
Intellectual Property Rights in any material way ("Xxxxxxx IP Liens"), or (ii)
controlled by Xxxxxxx or its Subsidiaries free and clear (to the Knowledge of
Xxxxxxx) of all Xxxxxxx IP Liens. Xxxxxxx and its Subsidiaries are the sole
legal and beneficial owners of all the Xxxxxxx Intellectual Property Rights.
There are no actions pending or, to the Knowledge of Xxxxxxx, threatened with
regard to the ownership or control by Xxxxxxx or any of its Subsidiaries of any
of the Xxxxxxx Intellectual Property Rights. To the Knowledge of Xxxxxxx and its
Subsidiaries, the Xxxxxxx Intellectual Property Rights have not been, and are
not being, infringed. To the Knowledge of Xxxxxxx and its Subsidiaries , the
Xxxxxxx Intellectual Property rights are valid and enforceable. To the Knowledge
of Xxxxxxx and its Subsidiaries, there are no facts or circumstances that could
impair the validity or enforceability of any of the Xxxxxxx Intellectual
Property Rights. Neither Xxxxxxx nor its Subsidiaries has received any
communications challenging the validity or enforceability of the Xxxxxxx
Intellectual Property Rights or their ownership of Xxxxxxx Intellectual Property
Rights. There are no pending or, to the Knowledge of Xxxxxxx or its
Subsidiaries, threatened claims that Xxxxxxx or any of its Subsidiaries has
infringed or is infringing (including with respect to the manufacture, use, sale
or importation by Xxxxxxx or any of its Subsidiaries of any commercial products
or to the operations of Xxxxxxx or any of its Subsidiaries) any Intellectual
Property of any Person. To the Knowledge of Xxxxxxx and its Subsidiaries , there
are no patent rights of any third Party that are known to be dominating,
interfering, or potentially dominating or interfering and that could be asserted
by a Person to exclude or prevent Xxxxxxx or its Subsidiaries or licensees from
manufacturing or commercializing their products. Neither Xxxxxxx nor its
Subsidiaries knows of any valid grounds for any bona fide claim that the conduct
of Quinton's or its Subsidiaries business will infringe or misappropriate any of
the Intellectual Property rights owned by any other Person.
(b) Xxxxxxx and its Subsidiaries have used commercially reasonable
efforts to maintain their confidential information and trade secrets in
confidence, including entering into licenses and contracts that generally
require licensees, contractors and other third Persons with access to such trade
secrets to keep such trade secrets confidential. All employees of Xxxxxxx and
its
26
Subsidiaries have entered into valid and binding agreements with Xxxxxxx and/or
its Subsidiaries (as the case may be) sufficient to vest title in Xxxxxxx or
such Subsidiaries of all Xxxxxxx Intellectual Property Rights created by such
employees in the scope of their employment. To the extent that any Xxxxxxx
Intellectual Property Rights have been developed or created by a third Party for
Xxxxxxx or any of its Subsidiaries, Xxxxxxx and/or such Subsidiaries have a
written agreement with such third Party with respect thereto and Xxxxxxx and/or
such Subsidiaries thereby either (i) has obtained ownership of, and is the
exclusive owner of, or (ii) has obtained a license (sufficient for the conduct
of its business as currently conducted and as proposed to be conducted) to all
such third Party's Intellectual Property in such work, material or invention by
operation of law or by valid assignment, to the fullest extent it is legally
possible to do so.
(c) Neither Xxxxxxx nor any of its Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Xxxxxxx
Intellectual Property Rights to any third Party within the last two years.
(d) Neither Xxxxxxx nor any of its Subsidiaries has given any
indemnities in connection with any Xxxxxxx Intellectual Property Rights to any
third Party other than indemnities given in the ordinary course of business or
that would not reasonably be expected to have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not result in the loss of, or otherwise adversely affect, any
ownership rights of Xxxxxxx or any of its Subsidiaries in any Xxxxxxx
Intellectual Property Rights or result in the breach or termination of any
license, contract or agreement to which Xxxxxxx or any of its Subsidiaries is a
party respecting any Xxxxxxx Intellectual Property Rights.
(f) Neither the consummation of the transactions contemplated by
this Agreement nor the transfer of any contracts, licenses, agreements or
Xxxxxxx Intellectual Property Rights will trigger any provision of any contract,
license or agreement of Xxxxxxx or any of its Subsidiaries that purports to
obligate Xxxxxxx or such Subsidiary to (i) grant to any third party any rights
or licenses with respect to any Xxxxxxx Intellectual Property Rights; or (ii)
increase the royalties or other amounts payable for licenses to Xxxxxxx
Intellectual Property Rights in excess of that being paid by Xxxxxxx and/or its
Subsidiaries prior to the Closing.
Section 4.20 Finders' Fees; Opinion of Financial Advisor.
(a) Except for SunTrust Xxxxxxxx Xxxxxxxx ("SunTrust"), there is no
investment banker, broker, finder or other intermediary who might be entitled to
any fee or commission from Xxxxxxx or any of its respective Affiliates in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Xxxxxxx.
(b) The Board of Directors of Xxxxxxx has received the opinion of
SunTrust to the effect that, as of the date of such opinion and subject to the
matters stated therein, the Xxxxxxx Exchange Ratio was fair from a financial
point of view to the holders of Xxxxxxx Common Shares, a copy of which opinion
will be made available to Cardiac solely for informational purposes after
receipt thereof by Xxxxxxx.
Section 4.21 Absence of Liens and Encumbrances; Real Property.
27
(a) Xxxxxxx and each of its Subsidiaries has good and valid title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of its material tangible properties and assets, real, personal and
mixed, used in its business, free and clear of any Liens except as reflected in
the Xxxxxxx Financial Statements and except for Liens for Taxes not yet
delinquent and such imperfections of title and encumbrances, if any, which would
not be material to Xxxxxxx.
(b) Neither Xxxxxxx nor any Subsidiary of Xxxxxxx owns any real
property. Section 4.21 of the Xxxxxxx Disclosure Letter sets forth a list of all
properties leased or otherwise occupied by Xxxxxxx or any of its Subsidiaries
for the operation of its business, including the address, the name of the
landlord, and the current base rent (the "Xxxxxxx Facilities"). Section 4.21 of
the Xxxxxxx Disclosure Letter identifies all of the leases or other occupancy
agreements with respect to the Xxxxxxx Facilities (the "Xxxxxxx Leases") and any
amendments or modifications to the Xxxxxxx Leases. No party other than Xxxxxxx,
its Subsidiaries or a subtenant identified in Section 4.21 of the Xxxxxxx
Disclosure Letter, as applicable, has the right to occupy any of the Xxxxxxx
Facilities. The execution and delivery of this Agreement by Xxxxxxx do not, and
the performance of this Agreement by Xxxxxxx will not, result in any breach of,
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Quinton's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any Xxxxxxx Lease.
Section 4.22 Agreements, Contracts and Commitments. Except as filed
as an exhibit to the Xxxxxxx SEC Documents, neither Xxxxxxx nor any of its
Subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any executive officer or director, other than those that are terminable by
Xxxxxxx or any of its Subsidiaries on no more than thirty (30) days' notice
without liability or financial obligation to Xxxxxxx;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in the ordinary course of business,
that would not reasonably be expected to have a Material Adverse Effect on
Xxxxxxx, or any guaranty of the obligations of a Subsidiary of Xxxxxxx;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Xxxxxxx or any of its Subsidiaries to
engage in any line of business or to compete with any person or which limits
Quinton's access to certain segments of a specified market;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Xxxxxxx or any of its Subsidiaries
after the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Xxxxxxx has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than Quinton's Subsidiaries;
28
(f) any dealer, distributor, joint marketing or development
agreement currently in force under which Xxxxxxx or any of its Subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of one hundred
twenty (120) days or less, or any material agreement pursuant to which Xxxxxxx
or any of its Subsidiaries have continuing material obligations to jointly
develop any intellectual property that will not be owned, in whole or in part,
by Xxxxxxx or any of its Subsidiaries and which may not be canceled without
penalty upon notice of one hundred twenty (120) days or less;
(g) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that is
material to Xxxxxxx and its Subsidiaries taken as a whole;
(h) any agreement, contract or commitment currently in force to
license any third party to manufacture or reproduce any Xxxxxxx product, service
or technology or any agreement, contract or commitment currently in force to
sell or distribute any Xxxxxxx products, service or technology except agreements
with distributors or sales representative in the normal course of business and
substantially in the form previously provided to Cardiac;
(i) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit (other than trade debt incurred in
the ordinary course of business);
(j) any settlement agreement entered into within three (3) years
prior to the date of this Agreement with respect to which Xxxxxxx has contingent
obligations of a material nature; or
(k) any other agreement, contract or commitment that, either
individually or taken together with all other contracts with the same party,
will, if fulfilled in accordance with its terms, result in payments being made
by Xxxxxxx in excess of $1,000,000 in the calendar year ending December 31,
2005.
Neither Xxxxxxx nor any of its Subsidiaries, nor to Quinton's Knowledge
any other party to a Xxxxxxx Contract (as defined below), is in breach,
violation or default under, and neither Xxxxxxx nor any of its Subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any of the agreements, contracts or
commitments to which Xxxxxxx or any of its Subsidiaries is a party or by which
it is bound that are either filed as an exhibit to any Xxxxxxx SEC Document or
required to be disclosed in the Xxxxxxx Disclosure Letter (any such agreement,
contract or commitment, a "Xxxxxxx Contract") in such a manner as would permit
any other party to cancel or terminate any such Xxxxxxx Contract, or would
permit any other party to seek material damages or other remedies (for any or
all of such breaches, violations or defaults, in the aggregate).
Section 4.23 Customers and Suppliers. None of the ten (10) largest
customers and ten (10) largest suppliers of Xxxxxxx (based on purchases during
the fiscal year ended December 31, 2004) has canceled or otherwise terminated,
or made any written threat to Xxxxxxx to cancel or otherwise terminate its
relationship with Xxxxxxx, or its usage of the services or products of Xxxxxxx,
and to the Knowledge of Xxxxxxx, no such customer or supplier intends to cancel
or otherwise terminate its relationship with Xxxxxxx or to materially decrease
its usage of the services or products of Xxxxxxx, as the case may be. Xxxxxxx
has not knowingly breached, so as to provide a benefit to
29
Xxxxxxx that was not intended by the parties, any agreement with, or engaged in
any fraudulent conduct with respect to, any customer or supplier of Xxxxxxx.
Section 4.23 of Xxxxxxx Disclosure Letter sets forth the names of the ten
largest customers (by dollar amount of sales) and ten largest suppliers (by
dollar amount of purchases) of Xxxxxxx for the year ended December 31, 2004, and
the dollar amount of sales and purchases for each such customer and supplier
during such periods.
Section 4.24 S-3 Eligibility. Xxxxxxx meets the registrant
requirements for the use of Form S-3. Xxxxxxx has no basis to believe that its
past or present independent public accountants will withhold their consent to
the inclusion, or incorporation by reference, of their audit opinion concerning
Quinton's financial statements which are to be included in the Registration
Statement.
Section 4.25 Nasdaq Qualification. Xxxxxxx meets the independent
director and audit committee requirements set forth in Nasdaq Marketplace Rule
4350.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CARDIAC
Except as disclosed in the Cardiac Disclosure Letter or the Cardiac SEC
Documents filed since December 31, 2003 and prior to the date hereof (but
excluding any risk factor disclosure contained in such Cardiac SEC Document
under the heading "Risk Factors" or "Forward Looking Information" and any other
disclosures included in any such Cardiac SEC Document which are predictive or
forward-looking in nature), Cardiac represents and warrants to Xxxxxxx that:
Section 5.1 Corporate Existence and Power. Cardiac is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers required to carry on its
business as now conducted. Cardiac is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a Cardiac Material Adverse Effect.
Cardiac has heretofore made available to Xxxxxxx true and complete copies of
Cardiac's certificate of incorporation and bylaws as currently in effect.
Section 5.2 Corporate Authorization. The execution, delivery and
performance by Cardiac of this Agreement and the consummation by Cardiac of the
transactions contemplated hereby are within Cardiac's corporate powers and,
except for the Cardiac Stockholder Approval, have been duly authorized by all
necessary corporate action. Without limiting the generality of the foregoing,
the only vote of the holders of any class or series of capital stock of Cardiac
required by Law to approve this Agreement, the Cardiac Merger and/or any of the
other transactions contemplated hereby is the affirmative vote (the "Cardiac
Stockholder Approval") of the holders of a majority of the outstanding Cardiac
Common Shares in favor of the adoption and approval of this Agreement and the
Cardiac Merger. Cardiac's Board of Directors has (a) determined that this
Agreement and the transactions contemplated hereby, including the Cardiac
Merger, are in the best interests of Cardiac and its stockholders, (b) approved
this Agreement and the transactions contemplated hereby, including for purposes
of rendering Section 203 of the DGCL inapplicable to this Agreement and the
Cardiac Merger and (c) resolved (subject to Section 7.4) to recommend to such
stockholders that they vote in favor of adopting and approving this Agreement
and the Cardiac Merger in accordance with the terms hereof. Assuming that this
Agreement constitutes the valid and binding obligation of Cardiac, this
Agreement constitutes a valid and binding agreement of Cardiac, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
30
moratorium and similar Laws, now or hereafter in effect, relating to or
affecting creditors' rights and remedies and to general principles of equity.
Section 5.3 Governmental Authorization. The execution, delivery and
performance by Cardiac of this Agreement and the consummation by Cardiac of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any Governmental Entity other than (a) the filing of the
Certificates of Merger in accordance with the DGCL; (b) compliance with any
applicable requirements of the HSR Act or decrees thereunder applicable to
Cardiac; (c) compliance with any applicable requirements of the Securities Act
and the Exchange Act; (d) such as may be required under any applicable state
securities Laws; and (e) such other consents, approvals, actions, orders,
authorizations, registrations, declarations and filings which, if not obtained
or made, would not, individually or in the aggregate, (x) be reasonably likely
to have a Cardiac Material Adverse Effect or (y) prevent or materially impair
the ability of Cardiac to consummate the transactions contemplated by this
Agreement.
Section 5.4 Non-Contravention. The execution, delivery and
performance by Cardiac of this Agreement and the consummation by Cardiac of the
transactions contemplated hereby do not and will not (a) contravene or conflict
with Cardiac's certificate of incorporation or bylaws, (b) assuming compliance
with the matters referred to in Section 5.3, contravene or conflict with or
constitute a violation of any provision of any Law, judgment, injunction, order
or decree binding upon or applicable to Cardiac or any of its Subsidiaries, (c)
constitute a breach or default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Cardiac or any of its
Subsidiaries or to a loss of any benefit or status to which Cardiac or any of
its Subsidiaries is entitled under any provision of any material agreement,
contract or other instrument binding upon Cardiac or any of its Subsidiaries or
any material license, franchise, permit or other similar authorization held by
Cardiac or any of its Subsidiaries, or (d) result in the creation or imposition
of any Lien on any asset of Cardiac or any of its Subsidiaries other than, in
the case of each of (b) and (d), any such items that would not, individually or
in the aggregate (x) be reasonably likely to have a Cardiac Material Adverse
Effect or (y) prevent or materially impair the ability of Cardiac to consummate
the transactions contemplated by this Agreement.
Section 5.5 Capitalization.
(a) The authorized capital stock of Cardiac consists of (i)
160,000,000 Cardiac Common Shares, of which 86,219,215 shares are issued and
outstanding as of the date of this Agreement, and (ii) 1,000,000 shares of
preferred stock, par value $0.001 per share, none of which are issued and
outstanding. As of the date of this Agreement, 12,345,139 Cardiac Common Shares
were reserved for issuance upon exercise of options pursuant to the Cardiac
Stock Plan. As of the date of this Agreement, there are options to purchase
11,826,353 Cardiac Common Shares issued and outstanding pursuant to the Cardiac
Stock Plan. All of the outstanding shares of capital stock of Cardiac have been
duly and validly issued and are fully paid and nonassessable under the DGCL.
None of the outstanding shares of capital stock of Cardiac has been issued in
violation of any preemptive rights of the current or past stockholders of
Cardiac.
(b) Except as set forth in Section 5.5(a) or in Section 5.5(b) of
the Cardiac Disclosure Letter, there are no outstanding (i) shares of capital
stock, debt securities or other voting securities of Cardiac, (ii) securities of
Cardiac or any of its Subsidiaries convertible into or exchangeable for shares
of capital stock, debt securities or voting securities of Cardiac, or (iii)
subscriptions, calls, contracts, commitments, understandings, restrictions,
arrangements, rights,
31
warrants, options or other rights to acquire from Cardiac, or obligations of
Cardiac to issue, any capital stock, debt securities or other voting securities
or obligating Cardiac to grant, extend or enter into any such agreement or
commitment. There are no outstanding obligations of Cardiac to repurchase,
redeem or otherwise acquire any securities of Cardiac. All warrants or other
securities convertible into Cardiac Common Shares (other than options to
purchase Cardiac Common Shares issued under the Cardiac Option Plans) to be
assumed in the Cardiac Merger pursuant to Section 3.4 are set forth in Section
5.5(b) of the Cardiac Disclosure Letter. There are no outstanding obligations of
Cardiac to grant, extend, accelerate the vesting of or enter into any option,
warrant, equity security or other security of Cardiac. There are no Cardiac
Common Shares that are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with Cardiac. There are no registration rights and
voting trusts, proxies or other agreements or understandings to which Cardiac or
any of its Subsidiaries is a party or is bound with respect to the voting of any
shares of capital stock of Cardiac.
Section 5.6 Subsidiaries.
(a) Each Subsidiary of Cardiac is a corporation duly incorporated or
an entity duly organized, and is validly existing and in good standing, under
the Laws of its jurisdiction of incorporation or organization, has all powers
and authority and all material governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted and is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, in each case
with such exceptions as, individually or in the aggregate, would not be
reasonably likely to have a Cardiac Material Adverse Effect.
(b) Each of the outstanding shares of capital stock of, or other
ownership interest in, each Subsidiary of Cardiac has been validly issued and is
fully paid and nonassessable. All of the outstanding capital stock of, or other
ownership interest, which is owned, directly or indirectly, by Cardiac in, each
of its Subsidiaries is owned free and clear of any Lien and free of any other
limitation or restriction (including any limitation or restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests) with such exceptions as, individually or in the aggregate, would not
be reasonably likely to have a Cardiac Material Adverse Effect. There are no
outstanding (i) securities of Cardiac or any of its Subsidiaries convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities or ownership interests in any of its Subsidiaries, (ii) options,
warrants or other rights to acquire from Cardiac or any of its Subsidiaries, and
no other obligation of Cardiac or any of its Subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any of its Subsidiaries or (iii)
obligations of Cardiac or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding securities of any of its Subsidiaries or any
capital stock of, or other ownership interests in, any of its Subsidiaries.
Section 5.7 The Cardiac SEC Documents.
(a) Cardiac has made available to Xxxxxxx the Cardiac SEC Documents.
Cardiac has filed all reports, filings, registration statements and other
documents required to be filed by it with the SEC since December 31, 2002. No
Subsidiary of Cardiac is required to file any form, report, registration
statement or prospectus or other document with the SEC.
32
(b) As of its filing date, each Cardiac SEC Document complied with
the applicable requirements of the Securities Act and/or the Exchange Act, as
the case may be. No Cardiac SEC Document filed or furnished pursuant to the
Exchange Act contained, as of its filing date or mailing date, as applicable,
any untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Cardiac SEC
Document filed pursuant to the Securities Act, as amended or supplemented, if
applicable, contained, as of the date such document or amendment became
effective, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(c) Cardiac has heretofore furnished to Xxxxxxx a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Cardiac with the SEC
pursuant to the Securities Act or the Exchange Act.
(d) Each required form, report and document containing financial
statements that has been filed with or submitted to the SEC since July 31, 2002,
was accompanied by the certifications required to be filed or submitted by
Cardiac's chief executive officer and chief financial officer pursuant to the
Xxxxxxxx-Xxxxx Act, and at the time of filing or submission of each such
certification, such certification was true and accurate and complied with the
Xxxxxxxx-Xxxxx Act.
Section 5.8 Financial Statements.
(a) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Cardiac SEC Documents
(the "Cardiac Financial Statements") and the unaudited financial statements for
the quarter ended September 30, 2004 (without notes thereto) (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 Cardiac and its Subsidiaries as at 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 Cardiac, except that
the unaudited 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. Neither Cardiac, any of its Subsidiaries nor, to Cardiac's Knowledge,
any director, officer, employee, auditor, accountant or representative of
Cardiac or any of its Subsidiaries, has received or otherwise had or obtained
knowledge of any complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of Cardiac or any of its Subsidiaries or its internal accounting
controls, including any complaint, allegation, assertion or claim that Cardiac
or any of its Subsidiaries has engaged in questionable accounting or auditing
practices. No attorney representing Cardiac or any of its Subsidiaries, whether
or not employed by Cardiac or any of its Subsidiaries, has reported evidence of
a material violation of securities Laws, breach of fiduciary duty or similar
violation by Cardiac or any of its officers, directors, employees or agents to
its Board of Directors or any committee thereof or to any director or officer of
Cardiac.
(b) Cardiac has made available to Xxxxxxx an unaudited draft balance
sheet as of December 31, 2004 and the related unaudited draft statements of
operations, cash flows and changes in stockholders' equity for the year ended
December 31, 2004 (the "2004 Cardiac Financial
33
Statements"). To the Knowledge of Cardiac as of the date hereof, the 2004
Cardiac Financial Statements (i) were prepared in accordance with GAAP (except
for the omission of notes thereto) and (ii) fairly present the consolidated
financial position of Cardiac and its Subsidiaries and the consolidated results
of its operations and cash flows as of and for the year ended December 31, 2004,
consistent with the books and records of Cardiac.
Section 5.9 No Material Undisclosed Liabilities. As of the date
hereof, there are no liabilities of Cardiac or of any Subsidiary of Cardiac of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, in each case, that are required by GAAP to be set
forth on a consolidated balance sheet of Cardiac, other than:
(i) liabilities or obligations disclosed or provided for in
the Cardiac Financial Statements or disclosed in the notes thereto; and
(ii) liabilities or obligations incurred or arising in the
ordinary course of business after the date of the Cardiac Financial Statements
included in the Cardiac 10-Q relating to the quarter ended September 30, 2004 or
arising under this Agreement or incurred in connection with the transactions
contemplated hereby; and
(iii) other liabilities or obligations, which individually do
not exceed $25,000 and in the aggregate do not exceed $100,000.
Section 5.10 Information to Be Supplied.
(a) The information to be supplied in writing by Cardiac expressly
for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus will (i) in the case of the Registration Statement, at the
time it becomes effective, 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 and (ii) in the case of the
remainder of the Joint Proxy Statement/Prospectus, at the time of the mailing
thereof and at the time of the Cardiac Stockholders Meeting, not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, Cardiac makes no representation or warranty with
respect to any statements made or incorporated by reference in the Joint Proxy
Statement/Prospectus based on information supplied in writing by Xxxxxxx
expressly for use therein.
Section 5.11 Absence of Certain Changes. Since December 31, 2003,
except as contemplated by this Agreement, Cardiac and its Subsidiaries have
conducted their business in the ordinary course consistent with past practice
and there has not been:
(a) any action, event, occurrence, development, change in method of
doing business, or state of circumstances or facts that, individually or in the
aggregate, has had or would be reasonably likely to have a Cardiac Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any Cardiac Common Shares (other than regular
quarterly cash dividends) or any repurchase, redemption or other acquisition by
Cardiac or any of its Subsidiaries of any outstanding
34
shares of capital stock or other securities of, or other ownership interests in,
Cardiac or any of its Subsidiaries;
(c) any transaction or commitment made by, or any contract,
agreement or settlement entered into by, or any judgment, order or decree to
which Cardiac or any of its Subsidiaries is a party which relates to its assets
or business (including without limitation the acquisition or disposition of any
assets) or any relinquishment by Cardiac or any of its Subsidiaries of any
contract or other right, in either case, material to Cardiac and its
Subsidiaries taken as a whole, other than transactions, commitments, contracts,
agreements or settlements (including, without limitation, settlements of
litigation and Tax proceedings) in the ordinary course of business consistent
with past practice, contemplated by this Agreement, or agreed to in writing by
Xxxxxxx; or
(d) any change by Cardiac in accounting principles or methods (other
than as required by GAAP or Regulation S-X of the Exchange Act).
Section 5.12 Transactions with Affiliates. Since December 31, 2003,
no event has occurred that would be required to be reported by Cardiac pursuant
to Item 404 of Regulation S-K promulgated by the SEC. Cardiac has delivered to
Xxxxxxx a list identifying all persons who may be deemed to be "affiliates" of
Cardiac for purposes of Rule 145 under the Securities Act.
Section 5.13 Litigation. There is no material Action pending
against, or to the Knowledge of Cardiac threatened against, Cardiac or any of
its Subsidiaries or any of their respective assets or properties before any
arbitrator or Governmental Entity.
Section 5.14 Taxes. (a) All material Tax returns, statements,
reports and forms (collectively, the "Cardiac Returns") required to be filed
with any Taxing authority by, or with respect to, Cardiac and its Subsidiaries
were filed on a timely basis and were true, complete and correct except to the
extent that the failure to file or be true, complete and correct would not,
individually or in the aggregate, have a Cardiac Material Adverse Effect; (b)
Cardiac and its Subsidiaries have timely paid all material Taxes shown as due
and payable on the Cardiac Returns (other than Taxes which are being contested
in good faith and for which adequate reserves are reflected on the Cardiac
Financial Statements) except to the extent that the failure to pay would not,
individually or in the aggregate, have a Cardiac Material Adverse Effect; (c)
Cardiac and its Subsidiaries have made provision for all material Taxes payable
by them for which no Cardiac Return has yet been filed except for inadequately
reserved Taxes that would not, individually or in the aggregate, have a Cardiac
Material Adverse Effect; (d) no Taxing authority has asserted or initiated (or,
to the Knowledge of Cardiac, threatened to assert or initiate) in writing any
action, suit, proceeding or claim against Cardiac or any of its Subsidiaries
that, individually or in the aggregate, would have a Cardiac Material Adverse
Effect; (e) there are no Liens for Taxes on the assets of Cardiac or any of its
Subsidiaries other than Liens for Taxes not yet due and payable or that would
not, individually or in the aggregate, have a Cardiac Material Adverse Effect;
(f) except for any year for which the applicable statute of limitations has
expired, neither Cardiac nor any of its Subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group other than one of which
Cardiac was the common parent; (g) except for any year for which the applicable
statute of limitations has expired, neither Cardiac nor any of its Subsidiaries
is obligated by any contract, agreement or other arrangement to indemnify any
other Person (other than Cardiac or any of its Subsidiaries) with respect to
Taxes or to compensate any other Person for any Tax payment or Tax liability
under a Tax sharing or similar agreement; (h) neither Cardiac nor any of its
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any contract, agreement or
35
other arrangement that under any circumstances could obligate it to make any
payments that will not be deductible under Code Sections 280G or 162(m); (i)
neither Cardiac nor any of its Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(j) neither Cardiac nor any of its Subsidiaries has engaged in a transaction
that is the same as or substantially similar to one of the types of transactions
that the IRS has determined to be a tax avoidance transaction and identified by
notice, regulation, or other form of published guidance as a listed transaction,
as set forth in Treasury Regulations Section 1.6011-4(b)(2); and (k) neither
Cardiac nor any of its Subsidiaries has constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock intended
to qualify for tax-free treatment under Section 355 of the Code (i) in the two
(2) years prior to the date hereof, or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Mergers.
Section 5.15 Employees and Employee Benefits.
(a) Cardiac has made available to Xxxxxxx each material "employee
benefit plan," as defined in Section 3(3) of ERISA, each material employment,
severance or similar contract, plan, arrangement or policy and each other
material plan or arrangement providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation or insurance coverage (including any
self-insured arrangements and, if applicable, related trust agreements), all
amendments thereto and the most recent written summary descriptions thereof,
together with the most recent annual report (Form 5500 including, if applicable,
Schedule B thereto) prepared in connection with any such plan, (i) which is
maintained, administered or contributed to by Cardiac or any of its Subsidiaries
and covers any employee or former employee of Cardiac or any of its
Subsidiaries, or (ii) with respect to which Cardiac or any of its Subsidiaries
has or could have any material liability or expense. Such plans are referred to
collectively herein as the "Cardiac Employee Plans."
(b) Each Cardiac Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and (i) has received an
unrevoked favorable determination letter from the IRS with respect to such
Cardiac Employee Plan's qualified status under the Code, as amended by the Tax
Reform Act of 1986 and all subsequent legislation through what is commonly
referred to as "GUST," (ii) has remaining a period of time under the Code or
applicable Treasury regulations or IRS pronouncements in which to request, and
make any amendments necessary to obtain, such a letter from the IRS, or (iii) is
entitled, under IRS Announcement 2001-77, to rely on the favorable opinion or
advisory letter issued by the IRS to the prototype or volume submitter plan
sponsor of such Cardiac Employee Plan. Nothing has occurred, or is reasonably
expected by Cardiac that could adversely affect the qualification or exemption
of any such Cardiac Employee Plan. Cardiac will make available upon request to
Cardiac copies of the most recent IRS determination letters with respect to each
such Cardiac Employee Plan. Each Cardiac Employee Plan has been administered in
compliance with its terms and with the requirements prescribed by any and all
Laws, including but not limited to ERISA and the Code, which are applicable to
such Cardiac Employee Plan except as would not be reasonably likely to have a
Cardiac Material Adverse Effect. Cardiac, each of its Subsidiaries and all other
Persons (including, without limitation, all fiduciaries) have, at all times and
in all material respects, properly performed all of their duties and obligations
(whether arising by operation of law or by contract) under or with respect to
such Cardiac Employee Plan, including, without limitation, all reporting,
disclosure and notification obligations. All contributions, premiums and other
payments due or required to be paid to (or with respect to) each Cardiac
36
Employee Plan have been timely paid, or, if not yet due, have been properly
accrued on the Cardiac Financial Statements.
(c) Neither Cardiac nor any of its Subsidiaries sponsors, maintains
or contributes to, and has never sponsored, maintained or contributed to (or
been obligated to sponsor, maintain or contribute to), (i) a "multiemployer
plan," as defined in Section 3(37) or Section 4001(a)(3) of ERISA, (ii) a
multiple employer plan within the meaning of Section 4063 or 4064 of ERISA or
Section 413(c) of the Code, (iii) an employee benefit plan, fund, program,
contract or arrangement that is subject to Section 302 of ERISA, Title IV of
ERISA or Section 412 of the Code, or (iv) a "multiple employer welfare
arrangement," as defined in Section 3(40) of ERISA.
(d) There are no actions, suits or claims (other than routine claims
for benefits) pending or, to the Knowledge of the Cardiac, threatened with
respect to (or against the assets of) any Cardiac Employee Plan except as would
not be reasonably likely to have a Cardiac Material Adverse Effect, nor, to the
Knowledge of the Cardiac, is there a basis for any such action, suit or claim.
No Cardiac Employee Plan is currently under investigation, audit or review,
directly or indirectly, by the IRS, the U.S. Department of Labor or any other
governmental entity or agency except as would not be reasonably likely to have a
Cardiac Material Adverse Effect, and, to the Knowledge of the Cardiac, no such
action is contemplated or under consideration by the IRS, the U.S. Department of
Labor or any other Governmental Entity.
(e) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any Cardiac
Employee Plan, employment or severance agreement to which Cardiac or any of its
Subsidiaries is a party, trust or loan that will or may result in any material
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any current or former employee, executive or director
of Cardiac or any of its Subsidiaries.
(f) To the Knowledge of Cardiac, neither Cardiac nor any of its
Subsidiaries maintains or contributes to any Cardiac Employee Plan which
provides, or has any liability to provide, life insurance, medical or other
welfare benefits to any employee upon such employee's retirement or termination
of employment, except as required by Section 601 of ERISA and Section 4980B of
the Code.
(g) To the Knowledge of Cardiac, there has been no amendment to,
written interpretation or announcement (whether or not written) to create, enter
into, contribute to or otherwise relating to any Cardiac Employee Plan which
would increase materially the expense of maintaining such Cardiac Employee Plans
in the aggregate above the level of the expense incurred in respect thereof for
the fiscal year ended December 31, 2004.
(h) To the Knowledge of Cardiac, Cardiac and each of its
Subsidiaries is in substantial compliance with all applicable Laws respecting
employment, employment practices, terms and conditions of employment, wages,
hours and withholding. No work stoppage or labor strike against Cardiac or any
Affiliate of Cardiac is pending, threatened or reasonably anticipated. Cardiac
does not know of any activities or proceedings of any labor union to organize
any Cardiac employees. There are no Actions pending, or, to the Knowledge of
Cardiac, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Cardiac employee, including, without
limitation, charges of unfair labor
37
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to Cardiac.
Neither Cardiac nor any of its Subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. Neither
Cardiac nor any of its Subsidiaries is presently, or has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Cardiac employees and no collective bargaining agreement is
being negotiated with respect to Cardiac employees. Neither Cardiac nor any of
its Subsidiaries has incurred any material liability or material obligation
under the Worker Adjustment and Retraining Notification Act or any similar Law
which remains unsatisfied.
Section 5.16 Compliance with Laws; Xxxxxxxx-Xxxxx.
(a) Cardiac and its Subsidiaries have all material licenses, permits
and qualifications necessary to conduct their businesses and own their
properties in each jurisdiction in which Cardiac or its Subsidiaries currently
do business or own property, or in which such license, permit or qualification
is otherwise required. Cardiac and its Subsidiaries have complied in all
material respects with all Laws applicable to their businesses and the present
use by Cardiac and its Subsidiaries of their respective properties, and the
business conducted by Cardiac and its Subsidiaries, does not violate in any
material respect any such Laws and Cardiac and its Subsidiaries have timely
filed all reports and returns required by Law and all such returns and reports
are true and correct in all material respects, and there are no material
deficiencies with respect to such filings or submissions.
(b) Cardiac is in compliance with, and has complied, in all material
respects with (A) the applicable provisions of the Xxxxxxxx-Xxxxx Act and the
Exchange Act and (B) the applicable listing and corporate governance rules and
regulations of Nasdaq. There are no outstanding loans made by Cardiac to any of
its executive officers (as defined under Rule 3b-7 under the Exchange Act) or
directors. Since the enactment of the Xxxxxxxx-Xxxxx Act, Cardiac has not made
any loans to any such executive officer or director. Cardiac has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act); such disclosure controls and procedures are
designed to ensure that information relating to Cardiac, required to be
disclosed by Cardiac in the reports that it files or submits under the Exchange
Act is accumulated and communicated to Cardiac's principal executive officer and
its principal financial officer to allow timely decisions regarding required
disclosure, and such disclosure controls and procedures are effective to ensure
that information required to be disclosed by Cardiac in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms. To the best
of its Knowledge: Cardiac has established and maintains internal control over
financial reporting (as such term is defined in Rule 13a-15(f) under the
Exchange Act); such internal controls are designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP. Cardiac's
principal executive officer and its principal financial officer have disclosed,
based on their most recent evaluation, to Cardiac's auditors and the audit
committee of the board of directors of Cardiac (x) all significant deficiencies
and material weaknesses in the design or operation of internal controls over
financial reporting which are reasonably likely to adversely affect Cardiac's
ability to record, process, summarize and report financial data and have
identified for its auditors any material weaknesses in internal controls and (y)
any fraud, whether or not material, that involves management or other employees
who have a significant role in Cardiac's internal controls. Since January 1,
2003, neither Cardiac, nor to the Knowledge of Cardiac, any director, officer,
38
employee, auditor, accountant or representative of Cardiac has received or
otherwise had or obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of Cardiac or its
internal accounting controls, including any material complaint, allegation,
assertion or claim that Cardiac has engaged in questionable accounting or
auditing practices. For purposes of this paragraph, "principal executive
officer" and "principal financial officer" shall have the meanings given to such
terms in the Exchange Act.
(c) To the Knowledge of Cardiac, no employee of Cardiac has provided
or is providing information to any law enforcement agency regarding the
commission or possible commission of any crime or the violation or possible
violation of any applicable Law. Neither Cardiac nor any of its Subsidiaries nor
any officer, employee, contractor, subcontractor or agent of Cardiac or any such
Subsidiaries has discharged, demoted, suspended, threatened, harassed or in any
other manner discriminated against an employee of Cardiac or any of its
Subsidiaries in the terms and conditions of employment because of any act of
such employee described in 18 U.S.C. Section 1514A(a).
Section 5.17 Environmental Matters. (i) No written notice,
notification, demand, request for information, citation, summons, complaint or
order has been received or made by, and no Action is pending or, the Knowledge
of Cardiac, threatened by any Person against Cardiac or any of its Subsidiaries,
with respect to any applicable Environmental Law, (ii) Cardiac and its
Subsidiaries are and have been in compliance in all material respects with all
applicable Environmental Laws and (iii) there are no liabilities or obligations
of Cardiac or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, direct or indirect, determined, determinable or otherwise,
arising under or relating to any Environmental Law (including, without
limitation, liabilities or obligations relating to divested properties or
businesses or predecessor entities) which would have a Cardiac Material Adverse
Effect, and there are no facts, conditions, situations or set of circumstances
that have resulted or could reasonably be expected to result in or be the basis
for any such liabilities or obligations which would have a Cardiac Material
Adverse Effect.
Section 5.18 Medical Device Regulatory Compliance.
(a) All medical devices of Cardiac or any of its Subsidiaries that
are subject to regulation by the FDA and other applicable U.S. federal, state or
local regulatory agencies, are manufactured, produced, tested, developed,
processed, labeled, stored, distributed, and marketed in compliance with all
applicable regulations, guidelines and orders administered or issued by the FDA
and any other applicable U.S. federal, state and local regulatory agencies,
including without limitation, the following (except where any failure to so
comply would not reasonably be expected to have, individually or in the
aggregate, a Cardiac Material Adverse Effect):
- FDA Quality System Regulation;
- FDA Establishment Registration requirements;
- FDA Medical Device Listing requirements;
- FDA Premarket Notification (510(k)) regulations;
- FDA Labeling regulations; and
39
- FDA Medical Device Reporting regulations.
(b) All medical device manufacturing sites and facilities of Cardiac
and its Subsidiaries are operated in compliance in all material respects with
the FDA's Establishment Registration requirements and Quality System Regulation
requirements at 21 C.F.R. Part 820, as applicable.
(c) Each medical device manufactured, produced, tested, developed,
processed, labeled, stored or distributed by or on behalf of Cardiac or any of
its Subsidiaries (and any modification thereof, as applicable) has received
Section 510(k) clearance(s) from the FDA clearing such device for commercial
distribution. None of Cardiac's or its Subsidiaries' current medical devices
(including any such device under development) are the subject of or require FDA
premarket approval, pre-clinical or clinical trial.
(d) To the Knowledge of Cardiac, each medical device distributed,
sold or leased, or service rendered, by Cardiac or any of its Subsidiaries
complies in all material respects with all applicable product safety and
electrical safety standards of each applicable product and electrical safety
agency, commission, board or other Governmental Entity.
(e) Neither Cardiac nor any of its Subsidiaries, nor, to the
Knowledge of Cardiac, any officer, employee or agent of Cardiac or any of its
Subsidiaries, has made an untrue statement of a material fact or fraudulent
statement to the FDA or any other Governmental Entity, failed to disclose a
material fact required to be disclosed to the FDA or any other Governmental
Entity, or committed an act, made a statement, or failed to make a statement
that, at the time such disclosure was made, would reasonably be expected to
provide a basis for the FDA or any other Governmental Entity to invoke its
policy respecting fraud, untrue statements, bribery and illegal gratuities or
any similar policy.
(f) Other than as disclosed in the Cardiac Disclosure Letter, there
are no FDA warning letters, recalls (either voluntary or mandatory), seizures,
revocations of prior FDA approval, internal stop-ships, banned or
administratively detained products or other enforcement actions or sanctions of
the FDA in connection with any medical devices currently manufactured, produced,
tested, developed, processed, labeled, stored or distributed by or on behalf of
Cardiac or any of its Subsidiaries.
(g) Cardiac and each of its Subsidiaries has obtained all necessary
foreign government agency licenses, approvals, permits or authorizations for
sale and distribution of its medical devices, as applicable, to each foreign
country or jurisdictions in which such medical device is currently sold, leased,
marketed or otherwise commercially distributed and is in compliance with
applicable Laws of such countries and/or jurisdictions, except where any failure
to so comply would not reasonably be expected to have, individually or in the
aggregate, a Cardiac Material Adverse Effect.
Section 5.19 Intellectual Property.
(a) All patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; registered trademarks and applications therefor;
and registered copyrights and applications therefor owned or controlled by
Cardiac or its Subsidiaries (collectively, "Cardiac Registered Intellectual
Property"), together with
40
any other type of rights in Intellectual Property that are owned or controlled
by Cardiac or any of its Subsidiaries and that (x) relates to any Cardiac
product or (y) is otherwise material to the research, development, manufacturing
or commercialization of any Cardiac product, are collectively referred to herein
as "Cardiac Intellectual Property Rights". Section 5.19 of the Cardiac
Disclosure Letter lists all Cardiac Registered Intellectual Property. All
Cardiac Intellectual Property Rights are either (i) owned by, or subject to a
valid license or a valid obligation of assignment to, Cardiac or its
Subsidiaries free and clear of all mortgages, liens, security interests, leases,
pledges, encumbrances, equities, claims, charges, options, written restrictions,
rights of first refusal, title retention agreements or other exceptions to title
which affect the Cardiac Intellectual Property Rights or restrict the use by
Cardiac or any of its Subsidiaries of the Cardiac Intellectual Property Rights
in any material way ("Cardiac IP Liens"), or (ii) controlled by Cardiac or its
Subsidiaries free and clear (to the Knowledge of Cardiac) of all Cardiac IP
Liens. Cardiac and its Subsidiaries are the sole legal and beneficial owners of
all the Cardiac Intellectual Property Rights. There are no actions pending or,
to the Knowledge of Cardiac, threatened with regard to the ownership or control
by Cardiac or any of its Subsidiaries of any of the Cardiac Intellectual
Property Rights. To the Knowledge of Cardiac and its Subsidiaries, the Cardiac
Intellectual Property Rights have not been, and are not being, infringed. To the
Knowledge of Cardiac and its Subsidiaries , the Cardiac Intellectual Property
rights are valid and enforceable. To the Knowledge of Cardiac and its
Subsidiaries, there are no facts or circumstances that could impair the validity
or enforceability of any of the Cardiac Intellectual Property Rights. Neither
Cardiac nor its Subsidiaries has received any communications challenging the
validity or enforceability of the Cardiac Intellectual Property Rights or their
ownership of Cardiac Intellectual Property Rights. There are no pending or, to
the Knowledge of Cardiac or its Subsidiaries, threatened claims that Cardiac or
any of its Subsidiaries has infringed or is infringing (including with respect
to the manufacture, use, sale or importation by Cardiac or any of its
Subsidiaries of any commercial products or to the operations of Cardiac or any
of its Subsidiaries) any Intellectual Property of any Person. To the Knowledge
of Cardiac and its Subsidiaries , there are no patent rights of any third Party
that are known to be dominating, interfering, or potentially dominating or
interfering and that could be asserted by a Person to exclude or prevent Cardiac
or its Subsidiaries or licensees from manufacturing or commercializing their
products. Neither Cardiac nor its Subsidiaries knows of any valid grounds for
any bona fide claim that the conduct of Cardiac's or its Subsidiaries business
will infringe or misappropriate any of the Intellectual Property rights owned by
any other Person.
(b) Cardiac and its Subsidiaries have used commercially reasonable
efforts to maintain their confidential information and trade secrets in
confidence, including entering into licenses and contracts that generally
require licensees, contractors and other third Persons with access to such trade
secrets to keep such trade secrets confidential. All employees of Cardiac and
its Subsidiaries have entered into valid and binding agreements with Cardiac
and/or its Subsidiaries (as the case may be) sufficient to vest title in Cardiac
or such Subsidiaries of all Cardiac Intellectual Property Rights created by such
employees in the scope of their employment. To the extent that any Cardiac
Intellectual Property Rights have been developed or created by a third Party for
Cardiac or any of its Subsidiaries, Cardiac and/or such Subsidiaries have a
written agreement with such third Party with respect thereto and Cardiac and/or
such Subsidiaries thereby either (i) has obtained ownership of, and is the
exclusive owner of, or (ii) has obtained a license (sufficient for the conduct
of its business as currently conducted and as proposed to be conducted) to all
such third Party's Intellectual Property in such work, material or invention by
operation of law or by valid assignment, to the fullest extent it is legally
possible to do so.
41
(c) Neither Cardiac nor any of its Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Cardiac
Intellectual Property Rights to any third Party within the last two years.
(d) Neither Cardiac nor any of its Subsidiaries has given any
indemnities in connection with any Cardiac Intellectual Property Rights to any
third party other than indemnities given in the ordinary course of business or
that would not reasonably be expected to have a Cardiac Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not result in the loss of, or otherwise adversely affect, any
ownership rights of Cardiac or any of its Subsidiaries in any Cardiac
Intellectual Property Rights or result in the breach or termination of any
license, contract or agreement to which Cardiac or any of its Subsidiaries is a
party respecting any Cardiac Intellectual Property Rights.
(f) Neither the consummation of the transactions contemplated by
this Agreement nor the transfer of any contracts, licenses, agreements or
Cardiac Intellectual Property Rights will trigger any provision of any contract,
license or agreement of Cardiac or any of its Subsidiaries that purports to
obligate Cardiac or such Subsidiary to (i) grant to any third Party any rights
or licenses with respect to any Cardiac Intellectual Property Rights; or (ii)
increase the royalties or other amounts payable for licenses to Cardiac
Intellectual Property Rights in excess of that being paid by Cardiac and/or its
Subsidiaries prior to the Closing.
Section 5.20 Finders' Fees; Opinion of Financial Advisor.
(a) Except for CIBC World Markets Corp. ("CIBC World Markets"),
there is no investment banker, broker, finder or other intermediary who might be
entitled to any fee or commission from Cardiac or any of its respective
Affiliates in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Cardiac.
(b) The Board of Directors of Cardiac has received the opinion of
CIBC World Markets to the effect that, as of the date of such opinion and
subject to the matters stated therein, the Cardiac Exchange Ratio was fair from
a financial point of view to the holders of Cardiac Common Shares (other than
Perseus, LLC and its Affiliates), a copy of which opinion will be made available
to Xxxxxxx solely for informational purposes after receipt thereof by Cardiac.
Section 5.21 Absence of Liens and Encumbrances; Real Property.
(a) Cardiac and each of its Subsidiaries has good and valid title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of its material tangible properties and assets, real, personal and
mixed, used in its business, free and clear of any Liens except as reflected in
the Cardiac Financial Statements and except for Liens for Taxes not yet
delinquent and such imperfections of title and encumbrances, if any, which would
not be material to Cardiac.
(b) Neither Cardiac nor any Subsidiary of Cardiac owns any real
property. Section 5.21 of the Cardiac Disclosure Letter sets forth a list of all
properties leased or otherwise occupied by Cardiac or any of its Subsidiaries
for the operation of its business, including the address, the name of the
landlord, and the current base rent (the "Cardiac Facilities"). Section 5.21 of
the Cardiac Disclosure Letter identifies all of the leases or other occupancy
agreements with respect to
42
the Cardiac Facilities (the "Cardiac Leases") and any amendments or
modifications to the Cardiac Leases. No party other than Cardiac, its
Subsidiaries or a subtenant identified in Section 5.21 of the Cardiac Disclosure
Letter, as applicable, has the right to occupy any of the Cardiac Facilities.
The execution and delivery of this Agreement by Cardiac do not, and the
performance of this Agreement by Cardiac will not, result in any breach of, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Cardiac's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any Cardiac Lease.
Section 5.22 Agreements, Contracts and Commitments. Except as filed
as an exhibit to the Cardiac SEC Documents, neither Cardiac nor any of its
Subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any executive officer or director, other than those that are terminable by
Cardiac or any of its Subsidiaries on no more than thirty (30) days' notice
without liability or financial obligation to Cardiac;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in the ordinary course of business,
that would not reasonably be expected to have a Cardiac Material Adverse Effect,
or any guaranty of the obligations of a Subsidiary of Cardiac;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Cardiac or any of its Subsidiaries to
engage in any line of business or to compete with any person or which limits
Cardiac's access to certain segments of a specified market;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Cardiac or any of its Subsidiaries
after the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Cardiac has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than Cardiac's Subsidiaries;
(f) any dealer, distributor, joint marketing or development
agreement currently in force under which Cardiac or any of its Subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of one hundred
twenty (120) days or less, or any material agreement pursuant to which Cardiac
or any of its Subsidiaries have continuing material obligations to jointly
develop any intellectual property that will not be owned, in whole or in part,
by Cardiac or any of its Subsidiaries and which may not be canceled without
penalty upon notice of one hundred twenty (120) days or less;
43
(g) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that is
material to Cardiac and its Subsidiaries taken as a whole;
(h) any agreement, contract or commitment currently in force to
license any third party to manufacture or reproduce any Cardiac product, service
or technology or any agreement, contract or commitment currently in force to
sell or distribute any Cardiac products, service or technology except agreements
with distributors or sales representative in the normal course of business and
substantially in the form previously provided to Xxxxxxx;
(i) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit (other than trade debt incurred in
the ordinary course of business);
(j) any settlement agreement entered into within three (3) years
prior to the date of this Agreement with respect to which Cardiac has contingent
obligations of a material nature; or
(k) any other agreement, contract or commitment that, either
individually or taken together with all other contracts with the same party,
will, if fulfilled in accordance with its terms, result in payments being made
by Cardiac in excess of $1,000,000 in the calendar year ending December 31,
2005.
Neither Cardiac nor any of its Subsidiaries, nor to Cardiac's Knowledge
any other party to a Cardiac Contract (as defined below), is in breach,
violation or default under, and neither Cardiac nor any of its Subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any of the agreements, contracts or
commitments to which Cardiac or any of its Subsidiaries is a party or by which
it is bound that are either filed as an exhibit to any Cardiac SEC Document or
required to be disclosed in the Cardiac Disclosure Letter (any such agreement,
contract or commitment, a "Cardiac Contract") in such a manner as would permit
any other party to cancel or terminate any such Cardiac Contract, or would
permit any other party to seek material damages or other remedies (for any or
all of such breaches, violations or defaults, in the aggregate).
Section 5.23 Customers and Suppliers. None of the ten (10) largest
customers and ten (10) largest suppliers of Cardiac (based on purchases during
the fiscal year ended December 31, 2004) has canceled or otherwise terminated,
or made any written threat to Cardiac to cancel or otherwise terminate its
relationship with Cardiac, or its usage of the services or products of Cardiac,
and to the Knowledge of Cardiac, no such customer or supplier intends to cancel
or otherwise terminate its relationship with Cardiac or to materially decrease
its usage of the services or products of Cardiac, as the case may be. Cardiac
has not knowingly breached, so as to provide a benefit to Cardiac that was not
intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of Cardiac. Section 5.23 of
Cardiac Disclosure Letter sets forth the names of the ten largest customers (by
dollar amount of sales) and ten largest suppliers (by dollar amount of
purchases) of Cardiac for the year ended December 31, 2004, and the dollar
amount of sales and purchases for each such customer and supplier during such
periods.
Section 5.24 S-3 Eligibility. Cardiac meets the registrant
requirements for the use of Form S-3. Cardiac has no basis to believe that its
past or present independent public accountants
44
will withhold their consent to the inclusion, or incorporation by reference, of
their audit opinion concerning Cardiac's financial statements which are to be
included in the Registration Statement.
Section 5.25 Nasdaq Qualification. Cardiac meets the independent
director and audit committee requirements set forth in Nasdaq Marketplace Rule
4350.
ARTICLE VI
CONDUCT OF BUSINESS
Section 6.1 Interim Operations. Except as set forth in the Xxxxxxx
Disclosure Letter, in the case of Xxxxxxx, the Cardiac Disclosure Letter, in the
case of Cardiac, or as otherwise expressly contemplated hereby, without the
prior consent of the other party (which consent shall not be unreasonably
withheld or delayed), from the date hereof until the Effective Time, Xxxxxxx and
Cardiac shall, and shall cause each of their respective Subsidiaries to, conduct
their business in all material respects in the ordinary course consistent with
past practice and shall use commercially reasonable efforts to (i) preserve
intact its present business organization, (ii) maintain in effect all material
licenses, approvals and authorizations, including, without limitation, all
material licenses and permits that are required by applicable Laws for the
operation of its business and (iii) preserve existing relationships with its key
employees, its key agents, and its material customers, lenders, suppliers and
others having material business relationships with it. Without limiting the
generality of the foregoing, except as set forth in the Xxxxxxx Disclosure
Letter, in the case of Xxxxxxx, or the Cardiac Disclosure Letter, in the case of
Cardiac, or as otherwise expressly contemplated by this Agreement, from the date
hereof until the Effective Time, without the prior consent of the other party,
neither Xxxxxxx nor Cardiac shall, nor shall either permit any of its
Subsidiaries to:
(a) amend its certificate of incorporation or bylaws (or similar
governing documents);
(b) take any action that would prevent or materially impair the
ability of it to consummate the transactions contemplated by this Agreement,
including actions that would be reasonably likely to prevent or materially
impair its ability to obtain any consent, registration, approval, permit or
authorization required to be obtained from any Governmental Entity prior to the
Effective Time in connection with the execution and delivery of this Agreement
and the consummation of the Mergers and the other transactions contemplated by
this Agreement;
(c) split, combine or reclassify any shares of its capital stock or
any of its Subsidiaries which are not wholly-owned or declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock or any securities of any of
its Subsidiaries which are not wholly-owned, or redeem, repurchase or otherwise
acquire or offer to redeem, repurchase, or otherwise acquire any of its
securities or any securities of any of its Subsidiaries which are not
wholly-owned;
(d) issue, deliver or sell, or authorize the issuance, delivery or
sale of, any shares of its capital stock of any class or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such capital stock or any such convertible securities, other than
(A) the issuance of Xxxxxxx Common Shares or Cardiac Common Shares, as the case
may be, upon the exercise of stock options outstanding on the date hereof, (B)
the issuance of stock options in the ordinary course of business to purchase up
to 75,000 Xxxxxxx Common Shares or 350,000 Cardiac Common Shares, as the case
may be, pursuant to the Xxxxxxx Stock Plans or Cardiac Stock Plan, as
45
the case may be, in accordance with their present terms except that no such
stock options shall be issued to any executive officer of Xxxxxxx or Cardiac;
and (C) the issuance of Xxxxxxx Common Shares pursuant to the Xxxxxxx ESPP;
(e) other than expenses incurred in connection with this transaction
such as reasonable legal and accounting expenses, and investment banking
expenses, incur any capital expenditures or any obligations or liabilities in
respect thereof, except for those (i) contemplated by its capital expenditure
budget, (ii) incurred in the ordinary course of business, or (iii) not otherwise
described in clauses (i) and/or (ii) which are not in excess of an aggregate of
$100,000;
(f) acquire (whether pursuant to merger, stock or asset purchase or
otherwise) in one transaction or series of related transactions any assets of or
equity interests in any Person;
(g) sell, lease, license, encumber or otherwise dispose of any
assets (including, without limitation, intellectual property rights), other than
(i) in the ordinary course of business consistent with past practice, (ii)
equipment and property no longer used in the operation of its business, and
(iii) sales or other dispositions of assets related to discontinued operations;
(h) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others or
request any advances in respect of, or make any drawdowns on, any existing
indebtedness which advance or drawdown (together with other advances or
drawdowns made after the date of this Agreement) exceeds $100,000 in the
aggregate;
(i) enter into, amend, modify or terminate any material contract,
agreement or arrangement or otherwise waive, release or assign any material
rights, claims or benefits thereunder, except in the ordinary course of
business;
(j) (i) except in the ordinary course of business consistent with
past practice, or as required by Law or by an agreement existing on the date
hereof, increase the amount of compensation of any director or executive officer
or make any increase in or commitment to increase any employee benefits, (ii)
except as required by Law or by an agreement existing on the date hereof, adopt
any severance program or grant any material severance or termination pay to any
director, officer or employee, (iii) adopt or implement any employee retention
program or other incentive arrangement not in existence on the date hereof or
amend in any material respect such program or arrangement, (iv) adopt any
additional employee benefit plan or, except in the ordinary course of business,
make any material contribution to any existing plan (other than as required by
Law or such plan), or (v) except as may be required by Law or pursuant to any
agreement existing on the date hereof, amend in any material respect any Xxxxxxx
Employee Plan or Cardiac Employee Plan, as the case may be;
(k) change its (x) methods of accounting in effect at December 31,
2004, except as required by changes in GAAP or by Regulation S-X of the Exchange
Act, as concurred in by its independent public accountants or (y) fiscal year;
(l) other than in the ordinary course of business consistent with
past practice, make any Tax election or enter into any settlement or compromise
of any Tax liability that in either case is material to its business;
46
(m) pay, discharge, settle or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise)
other than (y) for an amount of $100,000 or less, or (z) ordinary course
repayment of indebtedness or payment of contractual obligations when due;
(n) commence any Action other than in accordance with past practice,
or settle or propose to settle, any Action for material money damages or
restrictions upon its operations;
(o) take any action that would cause any of its representations and
warranties herein to become untrue in any material respect; and
(p) agree, resolve or otherwise commit to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Joint Proxy Statement/Prospectus
(a) As promptly as practicable after the date hereof, Xxxxxxx and
Cardiac shall jointly prepare, and Holding Company shall file with the SEC, the
Registration Statement. Holding Company shall use commercially reasonable
efforts, and each of Xxxxxxx and Cardiac shall each cooperate with Holding
Company, to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Mergers. Each of Xxxxxxx and Cardiac shall mail the Joint Proxy
Statement/Prospectus to its respective stockholders as promptly as practicable
after the Registration Statement is declared effective under the Securities Act
and, if necessary, after the Joint Proxy Statement/Prospectus shall have been so
mailed, promptly circulate amended, supplemental or supplemented proxy material
and, if required in connection therewith, resolicit proxies. Each of Xxxxxxx and
Cardiac shall furnish all information concerning it and the holders of its
capital stock as reasonably requested by Holding Company for inclusion in the
Registration Statement.
(b) No filing of, or any amendment or supplement to, the Joint Proxy
Statement/Prospectus will be made by Holding Company without providing Xxxxxxx
and Cardiac the opportunity to review and comment thereon. Holding Company will
advise Xxxxxxx and Cardiac promptly after it receives notice thereof, of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Holding Company Common Shares issuable in connection with
the Mergers for offering or sale in any jurisdiction, or any request by the SEC
for amendment of the Joint Proxy Statement/Prospectus or comments thereon and
responses thereto or requests by the SEC for additional information. If at any
time prior to the Effective Time any information relating to either party, or
any of their respective Affiliates, officers or directors should be discovered
by Xxxxxxx or Cardiac, that should be set forth in an amendment or supplement to
the Registration Statement or the Joint Proxy Statement/Prospectus, so that
either of such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
that discovers such information shall promptly notify the other party hereto and
an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by Law, disseminated to
the stockholders of Xxxxxxx and Cardiac.
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(c) Xxxxxxx and Cardiac shall cooperate with one another in (i)
determining whether any other action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated hereby and
(ii) seeking any such other actions, consents, approvals or waivers or making
any such filings, furnishing information required in connection therewith and
seeking promptly to obtain any such actions, consents, approvals or waivers.
Each party shall permit the other party to review any communication given by it
to, and shall consult with each other in advance of any meeting or conference
with, any Governmental Entity or, in connection with any legal proceeding by a
private party, with any other Person, and to the extent permitted by the
applicable Governmental Entity or other Person, give the other party the
opportunity to attend and participate in such meetings and conferences, in each
case in connection with the transactions contemplated hereby.
Section 7.2 Xxxxxxx Stockholders Meeting. Xxxxxxx shall cause a
meeting of its stockholders (the "Xxxxxxx Stockholders Meeting") to be duly
called and held for the purpose of obtaining the Xxxxxxx Stockholder Approval as
soon as reasonably practicable after the Registration Statement is declared
effective under the Securities Act. Except as provided in Section 7.4, (a)
Quinton's Board of Directors shall recommend approval and adoption by its
stockholders of this Agreement (the "Xxxxxxx Recommendation"), and (b) Xxxxxxx
shall use commercially reasonable efforts to solicit the Xxxxxxx Stockholder
Approval.
Section 7.3 Cardiac Stockholders Meeting. Cardiac shall cause a
meeting of its stockholders (the "Cardiac Stockholders Meeting") to be duly
called and held for the purpose of obtaining the Cardiac Stockholder Approval as
soon as reasonably practicable after the Registration Statement is declared
effective under the Securities Act. Except as provided in Section 7.4, (a)
Cardiac's Board of Directors shall recommend approval and adoption by its
stockholders of this Agreement (the "Cardiac Recommendation"), and (b) Cardiac
shall use commercially reasonable efforts to solicit the Cardiac Stockholder
Approval.
Section 7.4 Acquisition Proposals; Board Recommendation.
(a) Each of Xxxxxxx and Cardiac agrees that it shall not, nor shall
it permit any of its Subsidiaries to, nor shall it authorize or knowingly permit
any officer, director, employee, investment banker, attorney, accountant, agent
or other advisor or representative of such party or any of its Subsidiaries,
directly or indirectly, to (i) take any action to solicit, initiate or
facilitate or encourage the submission of any Acquisition Proposal, (ii) engage
in any negotiations regarding, or furnish to any Person any non-public
information with respect to, or take any other action knowingly to facilitate
any inquiries or the making of any proposal that constitutes, or may be
reasonably expected to lead to, any Acquisition Proposal, (iii) grant any waiver
or release under any standstill or similar agreement with respect to any class
of such party's equity securities or (iv) other than in the manner contemplated
by Section 7.4(d), enter into any agreement with respect to any Acquisition
Proposal; provided, however, that each of Xxxxxxx and Cardiac may take any
actions described in the foregoing clauses (i), (ii), (iii), or (iv) in respect
of any Person who makes an unsolicited Acquisition Proposal, but only if (x)
such party's Board of Directors, after consultation with its investment advisors
and outside legal counsel, determines in its good faith judgment that either (A)
such Acquisition Proposal constitutes a Superior Proposal and provides written
notice of termination of this Agreement in accordance with Section 7.4(d) and
Section 10.1, or (B) such Acquisition Proposal could reasonably be expected to
result in a Superior Proposal, and (y) prior to furnishing any non-public
information to such Person, such Person shall have entered into a
confidentiality agreement
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with Xxxxxxx or Cardiac, as the case may be, on terms no less favorable to the
such party than the terms of the Mutual Non-Disclosure Agreement, dated July 7,
2004, between Xxxxxxx and Cardiac, agreeing to keep confidential any non-public
information received. In addition to the foregoing requirements, the Board of
Directors of such party shall be prohibited from taking such actions with
respect to an Acquisition Proposal unless the Board of Directors determines,
after consulting with its outside legal counsel, that the failure to do so would
be inconsistent with its fiduciary duties under the DGCL. In addition to the
foregoing, such party shall (i) provide the other party with at least
forty-eight (48) hours prior notice (or such lesser prior notice as provided to
the members of such party's Board of Directors) of any meeting of such party's
Board of Directors at which such party's Board of Directors is reasonably
expected to consider an Acquisition Proposal and (ii) provide the other party
with the same prior written notice of a meeting of such party's Board of
Directors at which such party's Board of Directors is reasonably expected to
recommend a Superior Proposal to its stockholders as is provided to such party's
Board of Directors together with a copy of the definitive documentation relating
to such Superior Proposal.
(b) Until this Agreement shall have been terminated pursuant to
Section 7.4(d), neither party's Board of Directors nor any committee thereof
shall recommend any Acquisition Proposal to such party's stockholders.
Notwithstanding the foregoing, nothing contained in this Section 7.4(b) or
elsewhere in this Agreement shall prevent either party's Board of Directors from
(i) complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act with respect
to any Acquisition Proposal or making any disclosure required by applicable Law
or (ii) withdrawing the Xxxxxxx Recommendation or Cardiac Recommendation, as the
case may be, if, after consulting with its outside legal counsel, the failure to
do so would be inconsistent with its fiduciary duties under the DGCL.
(c) Promptly (but in no event later than forty-eight (48) hours)
after receipt by either party or any of its Subsidiaries (or any of their
respective directors, officers, agents or advisors) of any Acquisition Proposal,
any request for non-public information or for access to the properties, books or
records of such party or any of its Subsidiaries or any request for a waiver or
release under any standstill or similar agreement, by any Person that has made
an Acquisition Proposal or indicates that it is considering making an
Acquisition Proposal, such party shall notify the other party (x) that a Person
may be considering making an Acquisition Proposal, and (y) of the identity of
such Person and, if an Acquisition Proposal is made, of the material terms of
such Acquisition Proposal. Each party shall keep the other party reasonably
informed of the status and material terms of any such Acquisition Proposal.
(d) Upon notice and in accordance with the terms of Section 10.1,
and subject to Section 10.4(c), either party may terminate this Agreement at any
time before the Xxxxxxx Stockholder Approval or Cardiac Stockholder Approval, as
applicable, is obtained if (i) such party's Board of Directors shall have
authorized such party, subject to the terms and conditions of this Agreement, to
enter into a binding agreement concerning a transaction that constitutes a
Superior Proposal, (ii) such party notifies the other party that it intends to
enter into such agreement, specifying the material terms and conditions of such
agreement, and (iii) within five Business Days of receiving the notice described
in (ii) above, the other party fails to propose and agree to enter into a
modification of this Agreement or, after proposing to enter into a modification
to this Agreement within such five Business Day period, such party's Board of
Directors determines by a majority vote in its good faith judgment, after
consultation with its investment advisors and outside legal counsel, that such
Acquisition Proposal previously determined to constitute a Superior Proposal
continues to be a Superior Proposal.
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ARTICLE VIII
COVENANTS OF CARDIAC AND XXXXXXX
Section 8.1 Commercially Reasonable Efforts. Subject to the terms
and conditions hereof, the parties will use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate the
transactions contemplated by this Agreement as promptly as practicable after the
date hereof, including (i) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions, filings,
Tax ruling requests and other documents and to obtain as promptly as practicable
all consents, waivers, licenses, orders, registrations, approvals, permits, tax
rulings and authorizations necessary or advisable to be obtained from any Person
and/or any Governmental Entity in order to consummate the Mergers or any of the
other transactions contemplated by this Agreement and (ii) taking all reasonable
steps as may be necessary to obtain all such material consents, waivers,
licenses, orders, registrations, approvals, permits, Tax rulings and
authorizations. In furtherance and not in limitation of the foregoing, each
party hereto agrees to make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby as promptly as practicable after the date hereof and to supply as
promptly as practicable any additional information and documentary material that
may be requested pursuant to the HSR Act and to take all other actions necessary
to cause the expiration or termination of the applicable waiting periods under
the HSR Act as soon as practicable, and (iii) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the transactions contemplated hereby, including seeking to have any
stay or temporary restraining order entered by any Governmental Entity vacated
or reversed. Nothing in this Section shall require either party to sell, hold
separate or otherwise dispose of or conduct its business in a specified manner,
or agree to sell, hold separate or otherwise dispose of or conduct its business
in a specified manner, or permit the sale, holding separate or other disposition
of, any assets of such party or the conduct of its business in a specified
manner, whether as a condition to obtaining any approval from a Governmental
Entity or any other Person or for any other reason (any such sale, holding
separate or other disposition or conduct of business shall be referred to herein
as a "Burdensome Condition").
Section 8.2 Public Announcements. The parties shall consult with
each other before issuing, and provide each other a reasonable opportunity to
review and comment upon, any press release or public statement with respect to
this Agreement and the transactions contemplated hereby and, except as may be
required by applicable Law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation; provided, however, that neither party
shall be required to consult with the other party with respect to the inclusion
in any press release or public statement of any information that is the same as,
or substantially similar to, information previously disclosed in compliance with
this Section 8.2.
Section 8.3 Access to Information; Notification of Certain Matters.
(a) From the date hereof until the Effective Time and subject to
applicable Law, Xxxxxxx and Cardiac shall (i) give to the other party, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records of such party,
(ii) furnish or make available to the other party, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such persons may reasonably request and
(iii) instruct its employees, counsel, financial advisors, auditors
50
and other authorized representatives to cooperate with the reasonable requests
of the other party in its investigation. Any investigation pursuant to this
Section 8.3(a) shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of the other party. All such
information shall be deemed proprietary information of the delivering party, and
shall, to the fullest extent permitted by Law, be kept confidential by the
receiving party and not used other than in connection with the transactions
contemplated by this Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 8.3(a) shall affect or be deemed to
modify any representation or warranty made by any party hereunder.
(b) Each party hereto shall give notice to each other party hereto,
as promptly as practicable after the event giving rise to the requirement of
such notice, of:
(i) any communication received by such party from, or given by
such party to, any Governmental Entity in connection with any of the
transactions contemplated hereby;
(ii) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; and
(iii) any fact, or of the occurrence or impending occurrence
of any event or circumstance, relating to it or any of its Subsidiaries which
would be reasonably likely to cause a breach of any representation, warranty,
covenant or agreement in this Agreement by such party or which has had or is
reasonably likely to have a Material Adverse Effect on such party; provided,
however, that the delivery of any notice pursuant to this Section 8.3(b) shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 8.4 Further Assurances. At and after the Effective Time, the
officers and directors of the Holding Company will be authorized to execute and
deliver, in the name and on behalf of Xxxxxxx and Cardiac, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Xxxxxxx and Cardiac, any other actions and things to vest, perfect or confirm of
record or otherwise in Holding Company and Cardiac Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of Xxxxxxx and Cardiac, as the case may be, acquired or to be acquired by
Holding Company and Cardiac Surviving Corporation as a result of, or in
connection with, the Mergers.
Section 8.5 Tax Matters. Xxxxxxx and Cardiac will use their
respective best efforts to cause the Mergers to be treated as reorganizations
under Section 368(a) of the Code or as an exchange under Section 351 of the
Code.
Section 8.6 Section 16 Matters. Xxxxxxx and Cardiac shall take all
such steps reasonably necessary to cause the transactions contemplated hereby
and any other acquisitions of equity securities of Holding Company (including
derivative securities) in connection with this Agreement by each individual
related to either Xxxxxxx or Cardiac who is subject to Section 16(a) of the
Exchange Act to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 8.7 Indemnification.
(a) Holding Company shall (i) indemnify and hold harmless, and
provide advancement of expenses to, all past and present directors, officers and
employees of Xxxxxxx and its
51
Subsidiaries (in all of their capacities) (a) to the same extent such persons
are indemnified or have the right to advancement of expenses as of the date of
this Agreement by Xxxxxxx pursuant to Quinton's certificate of incorporation,
bylaws and indemnification agreements, if any, in existence on the date hereof
with any directors, officers and employees of Xxxxxxx and its Subsidiaries and
(b) without limitation to clause (a), to the fullest extent permitted by Law, in
each case for acts or omissions occurring at or prior to the Effective Time
(including for acts or omissions occurring in connection with the approval of
this Agreement and the consummation of the transactions contemplated hereby),
(ii) include and cause to be maintained in effect in Holding Company's
certificate of incorporation and bylaws after the Effective Time, provisions
regarding elimination of liability of directors, indemnification of officers,
directors and employees and advancement of expenses which are no less
advantageous to the intended beneficiaries than the corresponding provisions
contained in the current certificate of incorporation and bylaws of Xxxxxxx and
(iii) (A) cause to be maintained for a period of six years after the Effective
Time the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by Xxxxxxx (provided that Holding
Company (or any successor) may substitute therefor one or more policies of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous to the insured) with respect to claims arising from facts or
events that occurred on or before the Effective Time; provided, however, that in
no event shall Holding Company be required to expend an amount in excess of two
hundred percent (200%) of the annual premium currently paid by Xxxxxxx for such
insurance; and, provided further that if the annual premiums of such insurance
coverage exceed such amount, Holding Company shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount, or (B) provide tail coverage for such persons covered by current
policies of directors and officers liability insurance and fiduciary liability
insurance maintained by Xxxxxxx, which tail coverage shall provide coverage for
six (6) years for acts prior to the Effective Time or terms no less favorable
than the terms of such current insurance coverage. The obligations of Holding
Company under this Section 8.7(a) shall not be terminated or modified in such a
manner as to adversely affect any indemnitee to whom this Section 8.7(a) applies
without the consent of such affected indemnitee (it being expressly agreed that
the indemnitees to whom this Section 8.7(a) applies shall be third party
beneficiaries of this Section 8.7(a)).
(b) Holding Company shall (i) indemnify and hold harmless, and
provide advancement of expenses to, all past and present directors, officers and
employees of Cardiac and its Subsidiaries (in all of their capacities) (a) to
the same extent such persons are indemnified or have the right to advancement of
expenses as of the date of this Agreement by Cardiac pursuant to Cardiac's
certificate of incorporation, bylaws and indemnification agreements, if any, in
existence on the date hereof with any directors, officers and employees of
Cardiac and its Subsidiaries and (b) without limitation to clause (a), to the
fullest extent permitted by Law, in each case for acts or omissions occurring at
or prior to the Effective Time (including for acts or omissions occurring in
connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby), (ii) include and cause to be maintained in
effect in the Cardiac Surviving Corporation's certificate of incorporation and
bylaws after the Effective Time, provisions regarding elimination of liability
of directors, indemnification of officers, directors and employees and
advancement of expenses which are no less advantageous to the intended
beneficiaries than the corresponding provisions contained in the current
certificate of incorporation and bylaws of Cardiac and (iii) (A) cause to be
maintained for a period of six years after the Effective Time the current
policies of directors' and officers' liability insurance and fiduciary liability
insurance maintained by Cardiac (provided that Holding Company (or any
successor) may substitute therefor one or more policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred on or before the Effective Time; provided,
52
however, that in no event shall Holding Company be required to expend in excess
of two hundred percent (200%) of the annual premium currently paid by Cardiac
for such insurance; and, provided further that if the annual premiums of such
insurance coverage exceed such amount, Cardiac shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount, or (B) provide tail coverage for such persons covered by current
policies of directors and officers liability insurance maintained by Cardiac,
which tail coverage shall provide coverage or six (6) years for acts prior to
the Effective Time or terms no less favorable than the terms of such current
insurance coverage. The obligations of Holding Company under this Section 8.7(b)
shall not be terminated or modified in such a manner as to adversely affect any
indemnitee to whom this Section 8.7(b) applies without the consent of such
affected indemnitee (it being expressly agreed that the indemnitees to whom this
Section 8.7 applies shall be third party beneficiaries of this Section 8.7(b)).
Section 8.8 Nasdaq Matters. Holding Company shall use commercially
reasonable efforts to cause the Holding Company Common Shares to be issued in
connection with the Mergers and the Holding Company Common Shares to be reserved
for issuance upon exercise of Cardiac Options and Xxxxxxx Options to be approved
for listing on Nasdaq, subject to official notice of issuance, prior to the
Closing Date.
Section 8.9 Holding Company Board of Directors. Prior to the
Effective Time, Xxxxxxx and Cardiac shall take all necessary actions so that the
Board of Directors of Holding Company shall consist of the following nine
members (with any vacancies to be designated upon the mutual agreement of
Xxxxxxx and Cardiac): Xxxxxxx X. Xxxxx, Chairman, Xxxxxxxx Xxxxxxx-Xxxxxxx,
Vice-Chairman, Xxxxx Xxxxxxx, W. Xxxxxx Xxxx, Xxx-Xxxxx Xxxxx, Xxxxxx X. Xxxxxx,
Xxxx X. Xxxxxx, Xxx X. Xxxxxx, III and Xxxxxxx X. X'Xxxxxxx, Xx.
Section 8.10 Holding Company Officers. Prior to the Effective Time,
Xxxxxxx and Cardiac shall take all necessary actions so that the officers of
Holding Company shall be as follows: Xxxx X. Xxxxxx, President and Chief
Executive Officer and Xxxxxxx X. Xxxxxxx, Senior Vice President, Chief Financial
Officer and Secretary.
Section 8.11 Consummation of Senior Note and Warrant Conversion.
Concurrently with or immediately after the Effective Time, the transactions
contemplated by the Senior Note and Warrant Conversion Agreement shall be
consummated by Holding Company, Cardiac and the other parties thereto. Prior to
the Effective Time, any amendment to the Senior Note and Warrant Conversion
Agreement shall require the prior written consent of Xxxxxxx.
ARTICLE IX
CONDITIONS TO THE MERGERS
Section 9.1 Conditions to the Obligations of Each Party. The
obligations of Xxxxxxx and Cardiac to consummate the Mergers are subject to the
satisfaction of the following conditions:
(a) the Xxxxxxx Stockholder Approval and Cardiac Stockholder
Approval shall have been obtained;
(b) the Holding Company Common Shares to be issued in the Mergers
shall have been authorized for listing on Nasdaq, subject to official notice of
issuance;
53
(c) (i) 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 no proceedings for that purpose shall have been initiated by the SEC and
not concluded or withdrawn and (ii) all state securities or "blue sky"
authorizations necessary to carry out the transactions contemplated hereby shall
have been obtained and be in effect;
(d) any applicable waiting period under the HSR Act relating to the
Mergers shall have expired or been earlier terminated without the imposition of
any Burdensome Condition;
(e) no Governmental Entity of competent authority or jurisdiction
shall have issued any order, injunction or decree, or taken any other action,
that is in effect and restrains, enjoins or otherwise prohibits the consummation
of the Mergers nor is there pending any action that seeks to restrain, enjoin or
otherwise prohibit the consummation of the Mergers;
(f) the parties shall have obtained or made all consent, approvals,
actions, orders, authorizations, registrations, declarations, announcements and
filings contemplated by Section 4.3 and Section 5.3 which if not obtained or
made (i) would render consummation of the Merger illegal or (ii) would be
reasonably likely to have a Material Adverse Effect on the Holding Company,
after giving effect to the Mergers;
Section 9.2 Conditions to the Obligations of Xxxxxxx. The
obligations of Xxxxxxx to consummate the Xxxxxxx Mergers are subject to the
satisfaction of the following further conditions:
(a) Cardiac shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of Cardiac contained in this
Agreement (without giving effect to any materiality, Material Adverse Effect or
similar qualifications included therein) shall have been true and correct when
made and at and as of the Effective Time as if made at and as of such time
(except to the extent any such representation or warranty expressly speaks as of
an earlier date, in which case it shall be true and correct as of such date),
except for such inaccuracies as would not be reasonably likely, individually or
in the aggregate, to have a Cardiac Material Adverse Effect;
(c) Xxxxxxx shall have received certificates signed by the Chief
Executive Officer or Chief Financial Officer of Cardiac to the foregoing effect;
(d) between the date hereof and the Closing, there shall have
occurred no event or circumstance having a Cardiac Material Adverse Effect; and
(e) Xxxxxxx shall have received the opinion of Xxxxxxx Coie LLP,
counsel to Xxxxxxx, to the effect that, for federal income tax purposes, the
Xxxxxxx Mergers will qualify as a reorganization within the meaning of Section
368(a) of the Code or as part of an exchange under Section 351 of the Code (it
being agreed that the parties shall each provide reasonable cooperation
including making reasonable representations to Xxxxxxx Coie LLP to enable it to
render such opinion).
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Section 9.3 Conditions to the Obligations of Cardiac. The
obligations of Cardiac to consummate the Cardiac Merger are subject to the
satisfaction of the following further conditions:
(a) Xxxxxxx shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of Xxxxxxx contained in this
Agreement (without giving effect to any materiality, Material Adverse Effect or
similar qualifications included therein) shall have been true and correct when
made and at and as of the Effective Time as if made at and as of such time
(except to the extent any such representation or warranty expressly speaks as of
an earlier date, in which case it shall be true and correct as of such date),
except for such inaccuracies as would not be reasonably likely, individually or
in the aggregate, to have a Xxxxxxx Material Adverse Effect;
(c) Cardiac shall have received certificates signed by the Chief
Executive Officer or Chief Financial Officer of Xxxxxxx to the foregoing effect;
(d) between the date hereof and the Closing, there shall have
occurred no event or circumstance having a Xxxxxxx Material Adverse Effect; and
(e) Cardiac shall have received the opinion of Xxxxxxxxx Xxxxx
Xxxxxxx & Xxxxx, counsel to Cardiac, to the effect that, for federal income tax
purposes, the Cardiac Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code or as part of an exchange under Section 351 of the
Code (it being agreed that the parties shall each provide reasonable cooperation
including making reasonable representations to Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
to enable it to render such opinion).
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated, and the
Mergers abandoned, at any time prior to the Effective Time by written notice by
the terminating party to the other parties (except if such termination is
pursuant to Section 10.1(a)):
(a) by mutual written agreement of Xxxxxxx and Cardiac;
(b) by either Xxxxxxx or Cardiac, if
(i) there shall be any Law that makes consummation of the
Mergers illegal or otherwise prohibited or any judgment, injunction, order or
decree of any Governmental Entity having competent jurisdiction enjoining
Xxxxxxx or Cardiac from consummating the Mergers is entered and such judgment,
injunction, judgment or order shall have become final and nonappealable and,
prior to such termination, the parties shall have used their respective
commercially reasonable efforts to resist, resolve or lift, as applicable, such
Law, regulation, judgment, injunction, order or decree; provided, however, that
the right to terminate this Agreement under this Section 10.1(b)(i) shall not be
available to any party whose breach of any provision of or whose failure to
perform any obligation under this Agreement has been the cause of such Law,
judgment, injunction, order or decree; or
55
(ii) the Xxxxxxx Stockholder Approval shall not have been
obtained at the Xxxxxxx Stockholders Meeting (including any adjournment or
postponement thereof); provided, however, that the right to terminate this
Agreement under this Section 10.1(b)(ii) shall not be available to Xxxxxxx if
Xxxxxxx'x action or failure to act has been a principal cause of or resulted in
the failure of the Xxxxxxx Merger to be approved by the Xxxxxxx stockholders; or
(iii) the Cardiac Stockholder Approval shall not have been
obtained at the Cardiac Stockholders Meeting (including any adjournment or
postponement thereof); provided, however, that the right to terminate this
Agreement under this Section 10.1(b)(iii) shall not be available to Cardiac if
Cardiac's action or failure to act has been a principal cause of or resulted in
the failure of the Cardiac Merger to be approved by the Cardiac stockholders; or
(iv) the Mergers shall not have been consummated by September
30, 2005 (the "Termination Date"); provided, however, that in the event the
Mergers have not been consummated by the Termination Date as a result of the
conditions set forth in either Section 9.1(c), (d) or (f) not being satisfied,
the Termination Date shall be December 31, 2005; provided, further, that the
right to terminate this Agreement under this Section 10.1(b)(iv) 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 Mergers to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement.
(c) by Xxxxxxx, if a breach of any representation, warranty,
covenant or agreement on the part of Cardiac set forth in this Agreement shall
have occurred which would cause the conditions set forth in Sections 9.2(a) or
(b) not to be satisfied, and either such condition shall be incapable of being
satisfied or such breach or failure to perform has not been cured within 30 days
after notice of such breach or failure to perform has been given by Xxxxxxx to
Cardiac;
(d) by Cardiac, if a breach of any representation, warranty,
covenant or agreement on the part of Xxxxxxx set forth in this Agreement shall
have occurred which would cause the conditions set forth in Sections 9.3(a) or
(b) not to be satisfied, and either such condition shall be incapable of being
satisfied or such breach or failure to perform has not been cured within 30 days
after notice of such breach or failure to perform has been given by Cardiac to
Xxxxxxx;
(e) by Cardiac, (i) if Quinton's Board of Directors shall have (A)
amended, modified, withdrawn, conditioned or qualified the Xxxxxxx
Recommendation in a manner materially adverse to Cardiac, (B) failed to make the
Xxxxxxx Recommendation, or (C) approved or recommended to the stockholders of
Xxxxxxx an Acquisition Proposal; (ii) if an Acquisition Proposal shall have been
announced or otherwise publicly known and Quinton's Board of Directors shall
have (A) failed to recommend against acceptance of such by its stockholders
(including by taking no position, or indicating its inability to take a
position, with respect to the acceptance of such Acquisition Proposal involving
a tender offer or exchange offer by its stockholders) or (B) failed to reconfirm
its approval and recommendation of this Agreement and the transactions
contemplated hereby within ten (10) Business Days of the first announcement or
other public knowledge of such Acquisition Proposal; or (iii) if there has been
a willful and material breach by Xxxxxxx of Section 7.4;
(f) by Xxxxxxx, (i) if Cardiac's Board of Directors shall have (A)
amended, modified, withdrawn, conditioned or qualified the Cardiac
Recommendation in a manner materially adverse to Xxxxxxx, (B) failed to make the
Cardiac Recommendation or (C) approved or
56
recommended to the stockholders of Cardiac an Acquisition Proposal; (ii) if an
Acquisition Proposal shall have been announced or otherwise publicly known and
Cardiac's Board of Directors shall have (A) failed to recommend against
acceptance of such by its stockholders (including by taking no position, or
indicating its inability to take a position, with respect to the acceptance of
such Acquisition Proposal involving a tender offer or exchange offer by its
stockholders) or (B) failed to reconfirm its approval and recommendation of this
Agreement and the transactions contemplated hereby within ten (10) Business Days
of the first announcement or other public knowledge of such Acquisition
Proposal; or (iii) if there has been a willful and material breach by Cardiac of
Section 7.4;
(g) subject to Section 10.4(c), by Cardiac pursuant to Section
7.4(d) as a result of a Superior Proposal relating to Cardiac; and
(h) subject to Section 10.4(c), by Xxxxxxx pursuant to Section
7.4(d) as a result of a Superior Proposal relating to Xxxxxxx.
Section 10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1 (including any such termination by way of Section
7.4(d)), there shall be no liability or obligation on the part of Cardiac or
Xxxxxxx, or any of their respective officers, directors, stockholders, agents or
Affiliates, except as set forth in Sections 10.2, 10.3 and 10.4 of this
Agreement, which shall remain in full force and effect and survive any
termination of this Agreement; provided, however, neither Xxxxxxx nor Cardiac
shall be relieved of or released from any liabilities or damages arising out of
its material breach of or material failure to perform its obligations under this
Agreement, except that the payment of the termination fee pursuant to Section
10.4 shall be in lieu of any and all liabilities or damages arising out of such
party's material breach or material failure to perform its obligations under
this Agreement.
Section 10.3 Expenses. Whether or not the Mergers are consummated,
all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, except that each of Xxxxxxx and Cardiac shall bear and pay one-half of
the filing and printing fees incurred in connection the Registration Statement
and Joint Proxy Statement/Prospectus and the filing fees required under the HSR
Act.
Section 10.4 Termination Fee.
(a) Xxxxxxx shall pay to Cardiac a termination fee in the amount of
$4,000,000 if this Agreement is terminated solely as follows:
(i) if Cardiac shall terminate this Agreement pursuant to
Section 10.1(e);
(ii) if Xxxxxxx shall terminate this Agreement pursuant to
Section 10.1(h); or
(iii) if (A) Xxxxxxx terminates this Agreement pursuant to
Section 10.1(b)(ii), (B) prior to such termination, any Person or "group" (as
defined in Section 13(d) of the Exchange Act), other than Cardiac, shall have
made an Acquisition Proposal or shall have publicly announced an intention
(whether or not conditional or withdrawn) to make an Acquisition Proposal and
(C) Xxxxxxx enters into a definitive agreement with respect to, or consummates,
a transaction
57
contemplated by such Acquisition Proposal within twelve (12) months of the date
this Agreement is terminated.
(b) Cardiac shall pay to Xxxxxxx a termination fee in the amount of
$4,000,000 if this Agreement is terminated solely as follows:
(i) if Xxxxxxx shall terminate this Agreement pursuant to
Section 10.1(f);
(ii) if Cardiac shall terminate this Agreement pursuant to
Section 10.1(g); or
(iii) if (A) Cardiac terminates this Agreement pursuant to
Section 10.1(b)(iii), (B) prior to such termination, any Person or "group" (as
defined in Section 13(d) of the Exchange Act), other than Xxxxxxx, shall have
made an Acquisition Proposal or shall have publicly announced an intention
(whether or not conditional or withdrawn) to make an Acquisition Proposal and
(C) Cardiac enters into a definitive agreement with respect to, or consummates,
a transaction contemplated by such Acquisition Proposal within twelve (12)
months of the date this Agreement is terminated.
(c) The termination fee required to be paid pursuant to Section 10.4
shall be paid prior to, and shall be a pre-condition to the effectiveness of,
termination of this Agreement pursuant to Sections 10.1(g) or (h). Any other
payment of the termination fee required to be made shall be made not later than
two (2) Business Days after termination of this Agreement or, in the case of any
termination fee due under Sections 10.4(a)(iii) or 10.4(b)(iii), within two (2)
Business Days after the consummation of such Acquisition Proposal.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Survival. The representations and warranties contained
in this Agreement shall not survive the Effective Time. The covenants contained
in Articles II, III, X and XI shall survive the Effective Time.
Section 11.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (a) upon receipt if delivered
personally, (b) upon confirmation if given by facsimile or (c) on the first
Business Day following dispatch if sent by an internationally recognized
overnight courier service, such as Federal Express, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to Cardiac, to: Cardiac Science Inc.
0000 Xxxx Xxxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to: Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
58
Facsimile: (000) 000-0000
if to Xxxxxxx, to: Xxxxxxx Cardiology Systems, Inc.
0000 Xxxxx Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx
Attention: Xxxxxxx X. Xxxxxxxxx, Esq. and
Xxxx X. XxXxxx, Esq.
Facsimile: (000) 000-0000
Section 11.3 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by Xxxxxxx and Cardiac or in the case
of a waiver, by the party against whom the waiver is to be effective; provided,
however, that after the Xxxxxxx Stockholder Approval or Cardiac Stockholder
Approval, no such amendment or waiver shall, without the further approval of
such stockholders, be made that would require such approval under any applicable
Law.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.
Section 11.4 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party hereto. Any purported
assignment in violation hereof shall be null and void.
Section 11.5 Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Delaware
without reference to its principles of conflicts of laws.
Section 11.6 Counterparts; Effectiveness; Third Party Beneficiaries.
This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by the other party hereto.
Except as expressly set forth in Section 8.7 (Indemnification), no provision of
this Agreement is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
59
Section 11.7 Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in a state court located in Portland, Oregon, and each of the parties
hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by Law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.2 shall be deemed
effective service of process on such party.
Section 11.8 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at Law or in
equity.
Section 11.9 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof.
Section 11.10 Attorneys' Fees. If any action, suit or other
proceeding is instituted to remedy, prevent or obtain relief from a default in
the performance by either party of any of its obligations under this Agreement,
the prevailing party shall recover all of such party's attorneys' fees incurred
in each and every such action, suit or other proceeding, including any and all
appeals or petitions therefrom. As used in this Section 11.10, attorneys' fees
shall be deemed to mean the full and actual costs of any legal services actually
performed in connection with the matters involved calculated on the basis of the
usual fee charged by the attorney performing such services and shall not be
limited to "reasonable attorneys' fees" as defined in any statute or rule of
court.
[signature page to follow]
60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be duly executed by their respective authorized officers as of the
day and year first written above.
XXXXXXX CARDIOLOGY SYSTEMS, INC.
By /s/ Xxxx X. Xxxxxx
--------------------------------------------
John R. Hinson, President and
Chief Executive Officer
RHYTHM ACQUISITION CORPORATION
By /s/ John R. Hinson
--------------------------------------------
John R. Hinson, Chief Executive Officer
CARDIAC SCIENCE, INC.
By /s/ Raymond W. Cohen
--------------------------------------------
Raymond W. Cohen, Chairman and
Chief Executive Officer
HEART ACQUISITION CORPORATION
By /s/ Raymond W. Cohen
--------------------------------------------
Raymond W. Cohen, President
CSQ HOLDING COMPANY
By /s/ John R. Hinson
--------------------------------------------
John R. Hinson, Chief Executive Officer
61
Table of Contents
Page
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions........................................................2
ARTICLE II
TRANSACTIONS AND TERMS OF THE MERGERS
Section 2.1 Mergers............................................................7
Section 2.2 Closing............................................................8
Section 2.3 Effective Time.....................................................8
Section 2.4 Certificates of Incorporation......................................8
Section 2.5 Bylaws.............................................................8
Section 2.6 Officers and Directors.............................................9
Section 2.7 Organization of Holding Company....................................9
ARTICLE III
CONVERSION OF SECURITIES AND RELATED MATTERS
Section 3.1 Conversion of Capital Stock.......................................10
Section 3.2 Fractional Shares; Adjustments....................................11
Section 3.3 Exchange of Certificates..........................................11
Section 3.4 Stock Options; ESPP; Warrants.....................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QUINTON
Section 4.1 Corporate Existence and Power.....................................15
Section 4.2 Corporate Authorization...........................................15
Section 4.3 Governmental Authorization........................................16
Section 4.4 Non-Contravention.................................................16
Section 4.5 Capitalization....................................................16
Section 4.6 Subsidiaries......................................................17
Section 4.7 The Quinton SEC Documents.........................................18
Section 4.8 Financial Statements..............................................18
Section 4.9 No Material Undisclosed Liabilities...............................19
Section 4.10 Information to Be Supplied........................................19
Section 4.11 Absence of Certain Changes........................................20
Section 4.12 Transactions with Affiliates......................................20
Section 4.13 Litigation........................................................20
Section 4.14 Taxes.............................................................20
Section 4.15 Employees and Employee Benefits...................................21
Section 4.16 Compliance with Laws; Sarbanes-Oxley..............................23
Section 4.17 Environmental Matters.............................................24
Section 4.18 Medical Device Regulatory Compliance..............................24
Section 4.19 Intellectual Property.............................................26
Section 4.20 Finders' Fees; Opinion of Financial Advisor.......................27
Section 4.21 Absence of Liens and Encumbrances; Real Property..................27
Section 4.22 Agreements, Contracts and Commitments.............................28
Section 4.23 Customers and Suppliers...........................................29
Section 4.24 S-3 Eligibility...................................................30
Section 4.25 Nasdaq Qualification..............................................30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CARDIAC
Section 5.1 Corporate Existence and Power.....................................30
i
Table of Contents
(continued)
Page
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Section 5.2 Corporate Authorization...........................................30
Section 5.3 Governmental Authorization........................................31
Section 5.4 Non-Contravention.................................................31
Section 5.5 Capitalization....................................................31
Section 5.6 Subsidiaries......................................................32
Section 5.7 The Cardiac SEC Documents.........................................32
Section 5.8 Financial Statements..............................................33
Section 5.9 No Material Undisclosed Liabilities...............................34
Section 5.10 Information to Be Supplied........................................34
Section 5.11 Absence of Certain Changes........................................34
Section 5.12 Transactions with Affiliates......................................35
Section 5.13 Litigation........................................................35
Section 5.14 Taxes.............................................................35
Section 5.15 Employees and Employee Benefits...................................36
Section 5.16 Compliance with Laws; Sarbanes-Oxley..............................38
Section 5.17 Environmental Matters.............................................39
Section 5.18 Medical Device Regulatory Compliance..............................39
Section 5.19 Intellectual Property.............................................40
Section 5.20 Finders' Fees; Opinion of Financial Advisor.......................42
Section 5.21 Absence of Liens and Encumbrances; Real Property..................42
Section 5.22 Agreements, Contracts and Commitments.............................43
Section 5.23 Customers and Suppliers...........................................44
Section 5.24 S-3 Eligibility...................................................44
Section 5.25 Nasdaq Qualification..............................................45
ARTICLE VI
CONDUCT OF BUSINESS
Section 6.1 Interim Operations................................................45
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Joint Proxy Statement/Prospectus..................................47
Section 7.2 Quinton Stockholders Meeting......................................48
Section 7.3 Cardiac Stockholders Meeting......................................48
Section 7.4 Acquisition Proposals; Board Recommendation.......................48
ARTICLE VIII
COVENANTS OF CARDIAC AND QUINTON
Section 8.1 Commercially Reasonable Efforts...................................50
Section 8.2 Public Announcements..............................................50
Section 8.3 Access to Information; Notification of Certain Matters............50
Section 8.4 Further Assurances................................................51
Section 8.5 Tax Matters.......................................................51
Section 8.6 Section 16 Matters................................................51
Section 8.7 Indemnification...................................................51
Section 8.8 Nasdaq Matters....................................................53
Section 8.9 Holding Company Board of Directors................................53
Section 8.10 Holding Company Officers..........................................53
Section 8.11 Consummation of Senior Note and Warrant Conversion................53
ARTICLE IX
CONDITIONS TO THE MERGERS
Section 9.1 Conditions to the Obligations of Each Party.......................53
ii
Table of Contents
(continued)
Page
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Section 9.2 Conditions to the Obligations of Quinton..........................54
Section 9.3 Conditions to the Obligations of Cardiac..........................55
ARTICLE X
TERMINATION
Section 10.1 Termination.......................................................55
Section 10.2 Effect of Termination.............................................57
Section 10.3 Expenses..........................................................57
Section 10.4 Termination Fee...................................................57
ARTICLE XI
MISCELLANEOUS
Section 11.1 Survival..........................................................58
Section 11.2 Notices...........................................................58
Section 11.3 Amendments; No Waivers............................................59
Section 11.4 Successors and Assigns............................................59
Section 11.5 Governing Law.....................................................59
Section 11.6 Counterparts; Effectiveness; Third Party Beneficiaries............59
Section 11.7 Jurisdiction......................................................60
Section 11.8 Enforcement.......................................................60
Section 11.9 Entire Agreement..................................................60
Section 11.10 Attorneys' Fees...................................................60
iii
