EXHIBIT 2.1
CONFORMED COPY
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____________________________
STOCK AND ASSET PURCHASE AGREEMENT
____________________________
BETWEEN
SULZER MEDICA USA
HOLDING CO.
AND
GUIDANT CORPORATION
DATED AS OF SEPTEMBER 20, 1998
AS AMENDED FEBRUARY 1, 1999
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS
SECTION 1.01. Certain Defined Terms 2
ARTICLE II PURCHASE AND SALE 12
SECTION 2.01. Purchase and Sale of the Shares 12
SECTION 2.02. Purchase and Sale of Assets 12
SECTION 2.03. Assumption of Liabilities 12
SECTION 2.04. Purchase Price 12
SECTION 2.05. Closing 13
SECTION 2.06. Closing Deliveries by the Seller 14
SECTION 2.07. Closing Deliveries by the Purchaser 14
SECTION 2.08. Adjustment of Base Purchase Price 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER 17
SECTION 3.01. Incorporation and Authority of the Seller 17
SECTION 3.02. Incorporation and Authority of the Asset Sellers 17
SECTION 3.03. Incorporation and Authority of the Subsidiaries 18
SECTION 3.04. Subsidiaries; Capital Stock of the Subsidiaries 18
SECTION 3.05. No Conflict 18
SECTION 3.06. Consents and Approvals 19
SECTION 3.07. Financial Information 19
SECTION 3.08. Absence of Undisclosed Liabilities, Etc. 19
SECTION 3.09. Absence of Certain Changes or Events 20
SECTION 3.10. Litigation 20
SECTION 3.11. Compliance with Laws; Certain Regulatory Matters 20
SECTION 3.12. Licenses and Permits 20
SECTION 3.13. Environmental Matters 21
SECTION 3.14. Intellectual Property Rights 21
SECTION 3.15. Material Contracts 22
SECTION 3.16. Real Property 25
SECTION 3.17. Employee Benefit Matters 25
SECTION 3.18. Taxes 26
SECTION 3.19. Assets of the Electrophysiology Business 27
SECTION 3.20. FDA and Product Matters 27
SECTION 3.21. Product and Service Warranties 28
SECTION 3.22. Sales Representatives; Sales Data 28
SECTION 3.23. Certain Interests 28
SECTION 3.24. Brokers 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 29
SECTION 4.01. Incorporation and Authority of the Purchaser 29
SECTION 4.02. No Conflict 29
SECTION 4.03. Consents and Approvals 30
SECTION 4.04. Litigation 30
SECTION 4.05. Investment Purpose 00
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XXXXXXX 4.06. Brokers 30
ARTICLE V ADDITIONAL AGREEMENTS 30
SECTION 5.01. Conduct of Electrophysiology Business Prior to the Closing 30
SECTION 5.02. Investigation; Confidentiality 34
SECTION 5.03. Access to Information 36
SECTION 5.04. Books and Records 37
SECTION 5.05. Satisfaction of Conditions Precedent; Regulatory and Other
Authorizations; Notices and Consents 38
SECTION 5.06. Notification to Governmental Authorities; Litigation 39
SECTION 5.07. Non-Competition 39
SECTION 5.08. Intercompany Arrangements 40
SECTION 5.09. Use of the Seller's Name 40
SECTION 5.10. Insurance Coverage 41
SECTION 5.11. Guaranties 41
SECTION 5.12. Transition Services 42
SECTION 5.13. Notice of Developments 42
SECTION 5.14. Acquisition Proposals 42
SECTION 5.15. Audited Financial Statements 43
SECTION 5.16. Sales Representatives 43
SECTION 5.17. Sales Representative Guarantees 44
SECTION 5.18. Procedures Relating to United States Dual Sales Representatives 44
SECTION 5.19. Procedures Relating to Canadian Dual Sales Representatives 45
SECTION 5.20. Certain Intellectual Property Matters 47
SECTION 5.21. Further Action 48
ARTICLE VI EMPLOYEE MATTERS 49
SECTION 6.01. Offer of Employment; Continuation of Benefits 49
SECTION 6.02. Cash Compensation 49
SECTION 6.03. 401(k) Plan 49
ARTICLE VII TAX MATTERS 50
SECTION 7.01. Indemnity 50
SECTION 7.02. Tax Returns and Payments 51
SECTION 7.03. Refunds 52
SECTION 7.04. Contests 52
SECTION 7.05. Cooperation and Exchange of Information 54
SECTION 7.06. Conveyance Taxes 54
SECTION 7.07. Miscellaneous 55
ARTICLE VIII CONDITIONS TO CLOSING 55
SECTION 8.01. Conditions to Obligations of the Seller 55
SECTION 8.02. Conditions to Obligations of the Purchaser 56
ARTICLE IX INDEMNIFICATION 58
SECTION 9.01. Survival of Representations and Warranties and Certain Indemnities 58
SECTION 9.02. Indemnification by the Purchaser 59
SECTION 9.03. Indemnification by the Seller 61
ARTICLE X TERMINATION AND WAIVER 65
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SECTION 10.01. Termination 65
SECTION 10.02. Effect of Termination 66
SECTION 10.03. Waiver 66
ARTICLE XI GENERAL PROVISIONS 66
SECTION 11.01. Expenses 67
SECTION 11.02. Notices 67
SECTION 11.03. Public Announcements 68
SECTION 11.04. Headings 68
SECTION 11.05. Severability 68
SECTION 11.06. Entire Agreement 68
SECTION 11.07. Assignment; Fulfillment of Obligations 69
SECTION 11.08. No Third Party Beneficiaries 69
SECTION 11.09. Amendment 69
SECTION 11.10. Governing Law 69
SECTION 11.11. Payments on Behalf of Affiliates 70
SECTION 11.12. Counterparts 70
SECTION 11.13. Disclosure Schedule 70
SECTION 11.14. Currency 70
SECTION 11.15. Specific Performance 70
SECTION 11.16. Waiver of Jury Trial 71
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PAGE
EXHIBITS
Exhibit A - The First Tier Subsidiaries
Exhibit B - The Second Tier Subsidiaries
Exhibit 2.04(b)(i) - Designated Sales and Sales Representatives in the
United States
Exhibit 2.04(b)(ii) - Employment Agreement
Exhibit 5.12 - Transition Services Agreement
Exhibit 5.16(a) - Sales Representative Procedures
Exhibit 5.16(b) - Compensation and Sales Package
Exhibit 10.02(a)(i)(A) - Settlement Agreement
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STOCK AND ASSET PURCHASE AGREEMENT, dated as of September 20, 1998, as
amended February 1, 1999, between SULZER MEDICA USA HOLDING CO., a corporation
organized under the laws of the State of Delaware (the "Seller"), and GUIDANT
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CORPORATION, a corporation organized under the laws of the State of Indiana (the
"Purchaser").
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W I T N E S S E T H:
WHEREAS, the Seller, through various subsidiaries, Affiliates,
agencies and distributors, is engaged in the design, manufacture, marketing,
sale and distribution of cardiac rhythm management products (the
"Electrophysiology Business");
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WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, the Electrophysiology Business, upon the
terms and subject to the conditions set forth herein;
WHEREAS, as part of the sale of the Electrophysiology Business by the
Seller and the purchase of the Electrophysiology Business by the Purchaser
hereunder, the Seller will sell, or cause to be sold, to the Purchaser all of
the outstanding shares of capital stock and other equity interests, if any
(collectively, the "Shares"), of the subsidiaries or Affiliates of the Seller
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listed on Exhibit A hereto (collectively, the "First Tier Subsidiaries");
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WHEREAS, the First Tier Subsidiaries own, directly or indirectly,
equity interests in certain other entities listed on Exhibit B hereto
(collectively, the "Second Tier Subsidiaries" and, together with the First Tier
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Subsidiaries, the "Subsidiaries"); and
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WHEREAS, also as part of the sale of the Electrophysiology Business by
the Seller and the purchase of the Electrophysiology Business by the Purchaser
hereunder, Sulzer Medica Canada, Inc. ("Sulzer Canada" or the "Asset Sellers")
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will transfer all of its right, title and interest in and to certain of their
assets to the Purchaser or one of its Affiliates pursuant to Section 11.07 of
the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Seller and the Purchaser
hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
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following terms shall have the following meanings:
"Acquisition Proposal" shall have the meaning ascribed thereto in
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Section 5.14.
"Action" means any claim, action, suit, arbitration, inquiry,
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proceeding or investigation by or before any Governmental Authority or any
court, tribunal or judicial, quasi-judicial or arbitral body.
"Actual Operating Income" shall have the meaning ascribed thereto in
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Section 5.19(g).
"Adjusted Base Purchase Price" means the Base Purchase Price, as
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adjusted pursuant to Section 2.04(b) and Section 2.08, recalculated as if all of
the Sales Representatives in the United States who became representatives,
subrepresentatives, consultants or employees (principally in a sales or
marketing function) of the Purchaser or any of its Affiliates after the Closing
Date and on or prior to the six-month anniversary of the Closing Date (other
than solely as a result of remaining a Sales Representative of a Subsidiary
following the Closing under such Sales Representative's then current agreement)
had entered into Employment Agreements on or prior to the Closing Date.
"Affiliate" means, with respect to any specified Person, any other
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Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person.
"Affiliate Arrangements" shall have the meaning ascribed thereto in
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Section 3.23.
"Agreement" or "this Agreement" means this Stock and Asset Purchase
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Agreement, dated as of September 20, 1998, between the Seller and the Purchaser
(including the Exhibits hereto and the Disclosure Schedule) and all amendments
hereto made in accordance with the provisions hereof.
"Ancillary Agreements" means the Asset Transfer and Assumption
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Agreements and the Transition Services Agreement.
"Asset Sellers" shall have the meaning ascribed thereto in the
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recitals to this Agreement.
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"Asset Transfer and Assumption Agreements" means the agreements in
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form and substance reasonably satisfactory to the Purchaser and the Seller, to
be dated as of the Closing Date, pursuant to which the Asset Sellers will
transfer to the Purchaser the Sulzer Assets and the Purchaser will assume the
Sulzer Assumed Liabilities in accordance with the terms of this Agreement.
"Asset Transfer Taxes" shall have the meaning ascribed thereto in
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Section 7.06.
"Base Purchase Price" shall have the meaning ascribed thereto in
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Section 2.04.
"Basket Amount" shall have the meaning ascribed thereto in Section
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9.03.
"Business Day" means any day that is not a Saturday, a Sunday or other
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day on which banks are required or authorized by Law to be closed in The City of
New York.
"Canadian Distribution Period" shall have the meaning ascribed thereto
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in Section 5.19(a).
"Canadian Dual Sales Representative" shall have the meaning ascribed
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thereto in Section 5.19(a).
"Canadian Operating Income" for any period means the net pre-tax
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operating income of Carbomedics and its Affiliates arising from the sale of
products of Carbomedics in Canada in such period.
"Carbomedics" means Sulzer Carbomedics Inc.
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"Cardiac Stimulation Devices" means devices which electrically
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stimulate or shock the heart and which are suitable for use by or with human
patients. The term "Cardiac Stimulation Devices" includes, without limitation:
cardiac pacemakers, antiachycardia pacemakers, cardioverters, and
defibrillators, including combinations thereof, whether implantable or not;
pulse generators and other waveform generators for such devices; leads,
electrodes, sensors, capacitors, power sources, and all other components for
such devices; mechanisms for coupling such generators in a stimulating,
shocking, or sensing relationship to the heart; and data dispensing, processing,
and gathering systems for such devices, including programmers, pacing system
analyzers, defibrillation system analyzers, testers, encoders, decoders,
transmitters, receivers, and computer software-controlled systems, and including
the software. The term "Cardiac Stimulation Devices" excludes by way of example
and not limitation, muscle stimulators, nerve stimulators, bone growth
stimulators and associated devices, xxxxxx monitors, drug release pumps, cardiac
pumps, artificial hearts, prosthetic heart valves, catheter ablation devices,
imaging systems, catheter location systems, apparatus for revascularization or
correction of other physical defects in heart tissue, arrhythmia mapping
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devices, angioplasty devices and EKG monitors (other than pacing programmers)
which are standalone, non-ambulatory, and not intended for transtelephonic
monitoring.
"Clinical Application Research Studies" means post-approval clinical
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studies of market-released products that do not require an Investigational
Device Exemption from the FDA.
"Closing" shall have the meaning ascribed thereto in Section 2.05.
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"Closing Balance Sheet" means (i) for all purposes other than with
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regards to the preparation of the Closing Balance Sheet as contemplated by
Section 2.08 of the Purchase Agreement, the audited balance sheet (including the
related notes and schedules thereto) of the Electrophysiology Business, to be
prepared pursuant to Section 2.08(a) and to be dated as of the Closing Date and
(ii) solely for the purpose of preparation of the Closing Balance Sheet as
contemplated by Section 2.08 of the Purchase Agreement, the audited balance
sheet (including the related notes and schedules thereto) of the
Electrophysiology Business, to be prepared pursuant to Section 2.08(a) and to be
dated as 11:59 P.M., New York City time, on January 31, 1999.
"Closing Date" shall have the meaning ascribed thereto in Section
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2.05.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidentiality Agreement" shall have the meaning ascribed thereto in
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Section 5.02.
"control" (including the terms "controlled by" and "under common
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control with") means the possession, directly or indirectly or as trustee or
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executor, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise.
"Designated Financial Statements" shall have the meaning ascribed
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thereto in Section 5.15.
"Designated Sales" means the sales of the Electrophysiology Business
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in the United States during the period from January 1, 1998 through July 3, 1998
as set forth in Exhibit 2.04(b)(i), less any sales set forth in such Exhibit
2.04(b)(i) by any Sales Representative in the United States who dies after the
date hereof and prior to the Closing Date.
"Disclosed Items" means Items 2 and 3 in Section 3.14(b) of the
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Disclosure Schedule.
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"Disclosure Schedule" means the Disclosure Schedule delivered by the
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Seller to the Purchaser, dated as of the date hereof.
"Diversified Company" shall have the meaning ascribed thereto in
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Section 5.07.
"Electrophysiology Business" shall have the meaning ascribed thereto
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in the recitals to this Agreement.
"Employee" means (a) each person employed by a Subsidiary on the
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Closing Date and (b) each employee of the Asset Sellers listed in Section 6.01
of the Disclosure Schedule who accepts an offer of employment described in
Section 6.01.
"Employment Agreements" shall have the meaning ascribed thereto in
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Section 2.04.
"Encumbrance" means any security interest, pledge, mortgage, lien or
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encumbrance.
"Environmental Condition" means an act, omission, event, condition or
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circumstance (including, without limitation, the presence of any Hazardous
Substances at any location or the violation of or non-compliance with any
Environmental Law) that forms the basis for any Losses of any nature (whether
civil or criminal, arising under a theory of negligence or strict liability, or
otherwise) under or pursuant to any Environmental Law (including, without
limitation, any act, omission, event, condition or circumstances that does
require or, if known to a Governmental Authority, would require assessment,
investigation, abatement, corrective action, closure, removal or remediation
pursuant to any Environmental Law or that creates or constitutes a public or
private nuisance or trespass).
"Environmental Law" means any Law that regulates, establishes
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standards or requirements, or concerns liability with respect to the
environment, natural resources, safety, or health of humans or other organisms,
including with respect to the manufacture, distribution in commerce and use of
Hazardous Substances.
"Environmental Loss" shall have the meaning ascribed thereto in
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Section 9.03(c).
"ERISA" means the United States Employee Retirement Income Security
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Act of 1974, as amended.
"Excluded Liability" shall have the meaning ascribed thereto in
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Section 2.03.
"FDA" shall have the meaning ascribed thereto in Section 3.20.
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"Final Tax Amount" shall have the meaning ascribed thereto in Section
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7.02.
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"First Tier Subsidiaries" shall have the meaning ascribed thereto in
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the recitals to this Agreement.
"Foreign Seller Retirement Plan" shall have the meaning ascribed
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thereto in Section 3.17.
"Forward Looking Information" shall have the meaning ascribed thereto
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in Section 5.02.
"401(k) Plan Participants" shall have the meaning ascribed thereto in
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Section 6.03.
"Xxxxxxx" shall have the meaning ascribed thereto in Section 3.24.
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"Governmental Authority" means any government, governmental,
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regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial, quasi-judicial or arbitral body, or any certified private
organization authorized by Law to assess compliance with any Law.
"Governmental Order" means any order, writ, judgment, injunction,
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decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Substances" means any pollutant, contaminant, hazardous
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substance, hazardous waste, toxic substance, petroleum or petroleum-derived
substance, waste, or additive, asbestos, PCBs, radioactive material, or other
compound element, material or substance in any form whatsoever (including,
without limitation, products) regulated, restricted or addressed by, under or
pursuant to any Environmental Law.
"Xxxxxxxxx Litigation" means the Action entitled: Xxxxx Xxxxxxxxx,
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M.D. x. Xxxxxx Intermedics Inc., xx.xx., Civil Action No. G-97-500 (Dist. Ct.
S.D. Tex.), filed on September 10, 1997 in the United States District Court for
the Southern District of Texas.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
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1976, as amended, and the rules and regulations promulgated thereunder.
"Income Statements" shall have the meaning ascribed thereto in Section
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3.07.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
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of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, (d) all obligations of such Person as lessee under
leases that have been
7
or should be, in accordance with U.S. GAAP, recorded as capital leases, (e) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities and (f) all Indebtedness of others referred to in
clauses (a) through (e) above guaranteed directly or indirectly by such Person.
"Indemnification Cap" shall have the meaning ascribed thereto in
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Section 9.03.
"Independent Accounting Firm" shall have the meaning ascribed thereto
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in Section 2.08.
"Intellectual Property" means, collectively: all U.S. and foreign
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registered, unregistered and pending (i) trade names, trade dress, trademarks,
service marks, copyrights, assumed names, business names and logos, and all
registrations and applications therefor, together with all goodwill symbolized
thereby, (ii) all computer software, data files, source and object codes, user
interfaces, manuals and other specifications and documentation related to the
operation of products sold or currently contemplated by the Electrophysiology
Business to be sold by the Electrophysiology Business, and all registrations and
applications therefor, (iii) all patents, registered designs and invention
disclosures, and all grants, registrations and applications therefor and (iv)
all trade secrets, inventions, processes, formulae, know-how, concepts, ideas,
research and development, designs, business plans, strategies, marketing and
other information and customer lists.
"knowledge" and words of similar import mean, with respect to the
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Seller and each of the Subsidiaries and Asset Sellers, the actual knowledge,
after reasonable investigation, of a senior executive of the Electrophysiology
Business, the Seller or Sulzer Medica Ltd.
"Law" means any federal, state, canton, provincial, local or national
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statute, law, ordinance, regulation, rule, code, order or other requirement or
rule of law (including, without limitation, common law).
"Liabilities" means any and all debts, liabilities and obligations,
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whether accrued or fixed, absolute or contingent, matured or unmatured,
including, without limitation, those arising under any Law (including, without
limitation, any Environmental Law), Action or Governmental Order and those
arising under any contract, agreement, arrangement, commitment or undertaking.
"License Counterparty" shall have the meaning ascribed thereto in
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Section 5.20(a).
"Losses" shall have the meaning ascribed thereto in Section 9.02.
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"Licensed Intellectual Property" means (i) all Intellectual Property
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licensed or sublicensed by a Subsidiary and (ii) all Intellectual Property
licensed or sublicensed by an Asset Seller and principally related to the
Electrophy
siology Business.
"Material Adverse Effect" means any change in or effect on the
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Electrophysiology Business that, individually or in the aggregate with all other
changes and effects on the Electrophysiology Business, is materially adverse to
the business, operations, financial condition or results of operations of the
Electrophysiology Business taken as a whole, except for any such changes or
effects resulting from (a) this Agreement or the transactions contemplated
hereby or the announcement thereof, (b) changes in general economic or political
conditions and (c) changes in U.S. GAAP or in international accounting
standards.
"Material Contracts" shall have the meaning ascribed thereto in
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Section 3.15.
"Medihold Debt" means the Promissory Note, dated June 30 ,1997 granted
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by Sulzer Canada in favor of Medihold Limited set forth as Item 3 in Section
3.15(a)(i) of the Disclosure Schedule.
"Xxxxxxxx Portfolio" shall have the meaning ascribed thereto in
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Section 5.05.
"Xxxxxx Xxxxxxx" shall have the meaning ascribed thereto in Section
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4.06.
"Net Worth" of the Electrophysiology Business as of any date means the
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total assets minus the total liabilities of the Electrophysiology Business as
shown on a balance sheet as of such date.
"1998 Operating Income" shall have the meaning ascribed thereto in
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Section 5.19(g).
"1999 Operating Income" shall have the meaning ascribed thereto in
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Section 5.19(g).
"Non-Competition Period" shall have the meaning ascribed thereto in
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Section 5.07.
"Operating Income Statement" shall have the meaning ascribed thereto
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in Section 5.19(g).
"Owned Intellectual Property" means (a) all Intellectual Property in
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and to which a Subsidiary holds, or has a right to hold, right, title and
interest and (b) all Intellectual Property in and to which an Asset Seller
holds, or has a right to hold, right, title and interest and which relates
principally to the Electrophysiology Business.
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"Owned Real Property" means the real property owned by (a) any
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Subsidiary or (b) any Asset Seller and which relates principally to the
Electrophysiology Business, in each case together with all buildings and other
structures, facilities or improvements currently or hereafter located thereon.
"Permits" shall have the meaning ascribed thereto in Section 3.12.
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"Permitted Encumbrances" means (a) liens for Taxes and assessments not
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yet payable, for which adequate reserves, if required by U.S. GAAP, have been or
will be established on the Closing Balance Sheet or that are immaterial in
amount, (b) liens for Taxes, assessments and charges and other claims, the
validity of which is being contested in good faith, for which adequate reserves,
if required by U.S. GAAP, have been or will be established on Closing Balance
Sheet or that are immaterial in amount, (c) imperfections of title, liens,
security interests and other encumbrances the existence of which, individually
or in the aggregate, do not interfere with the current use of the property
encumbered thereby, (d) inchoate mechanics', materialmen's and similar liens for
construction in progress that are immaterial in amount and (e) workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of the Electrophysiology Business that are immaterial in amount.
"Person" means any individual, partnership, firm, corporation, limited
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liability company, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Pre-Closing Taxable Period" means (i) any Taxable period ending on or
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before the Closing Date and (ii) with respect to any Straddle Period, the
portion of such Taxable period that is on or before the Closing Date.
"Product Liability Claim" shall have the meaning ascribed thereto in
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Section 9.01.
"Purchase Price" shall have the meaning ascribed thereto in Section
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2.04.
"Purchaser" shall have the meaning ascribed thereto in the preamble to
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this Agreement.
"Purchaser Indemnified Party" shall have the meaning ascribed thereto
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in Section 9.03.
"Purchaser Plan" shall have the meaning ascribed thereto in Section
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6.03.
"Purchaser's Accountants" shall have the meaning ascribed thereto in
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Section 2.08.
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"Reference Balance Sheet" shall have the meaning ascribed thereto in
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Section 3.07.
"Retained Names and Marks" shall have the meaning ascribed thereto in
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Section 5.09.
"Sales Representatives" means (i) the independent sales
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representatives and subrepresentatives of the Electrophysiology Business as of
the date of this Agreement and (ii) the direct sales employees of the
Electrophysiology Business as of the date of this Agreement.
"SEC" shall have the meaning ascribed thereto in Section 5.15.
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"Second Tier Shares" shall have the meaning ascribed thereto in
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Section 3.04.
"Second Tier Subsidiaries" shall have the meaning ascribed thereto in
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the recitals to this Agreement.
"Seller" shall have the meaning ascribed thereto in the preamble to
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this Agreement.
"Seller Benefit Plans" shall have the meaning ascribed thereto in
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Section 3.17.
"Seller 401(k) Plan" shall have the meaning ascribed thereto in
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Section 6.03.
"Seller Indemnified Party" shall have the meaning ascribed thereto in
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Section 9.02.
"Seller's Accountants" shall have the meaning ascribed thereto in
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Section 2.08.
"Settlement Agreement" shall mean a Settlement and License Agreement
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in the form attached hereto as Exhibit 10.02(a)(i)(A).
"Shares" shall have the meaning ascribed thereto in the recitals to
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this Agreement.
"Specified Products" means a product sold by the Electrophysiology
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Business as of the Closing Date.
"Straddle Period" means any taxable period beginning before and ending
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after the Closing Date.
"Straddle Period Return" shall have the meaning ascribed thereto in
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Section 7.02.
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"Subsequent Purchaser" shall have the meaning ascribed thereto in
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Section 5.05.
"Subsidiaries" shall have the meaning ascribed thereto in the recitals
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to this Agreement.
"Sulzer Assets" shall have the meaning ascribed thereto in Section
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2.02.
"Sulzer Assumed Liabilities" shall have the meaning ascribed thereto
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in Section 2.03.
"Sulzer Canada" shall have the meaning ascribed thereto in the
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recitals to this Agreement.
"Tachycardia Assets" means the Transferred Assets that are principally
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used in the Tachycardia Business as of the date of this Agreement, including,
without limitation, the Intellectual Property that constitutes Transferred
Assets, together with the employees of the Electrophysiology Business whose time
is principally devoted to the Tachycardia Business as of the date of this
Agreement (other than Sales Representatives, distributors or other Persons
principally devoted to a sales or marketing function), but excluding any
licenses under which any patents or patent applications are licensed to the
Electrophysiology Business and that, under the terms of such license, cannot be
sold or otherwise transferred to a Subsequent Purchaser.
"Tachycardia Business" means the portion of the Electrophysiology
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Business relating to the design, manufacture, marketing, sale and distribution
of tachycardia products (other than products used principally for cardiac
ablation or cardiac mapping).
"Tax" or "Taxes" means (a) all taxes, charges, fees, levies, duties,
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imposts or other similar assessments, including income, gross receipts, ad
valorem, excise, real property, personal property, windfall profit, sales, use,
transfer, stamp, licensing, withholding, business license, employment, payroll,
minimum, estimated and franchise taxes imposed by the United States or any
federal, state, canton, provincial, local or national government, or any
subdivision, agency or other similar Person of the United States or any such
government, and (b) any interest, fines, penalties, assessments or additions to
tax resulting from, attributable to or incurred in connection with any such tax
or taxes.
"Tax Items" shall have the meaning ascribed thereto in Section 7.02.
---------
"Tax Indemnified Party" shall have the meaning ascribed thereto in
---------------------
Section 7.04.
"Tax Indemnifying Party" shall have the meaning ascribed thereto in
----------------------
Section 7.04.
12
"Tax Return" means any form, return or report of or relating to Taxes.
----------
"Taxing Authority" means the United States Internal Revenue Service
----------------
and any other federal, state, canton, provincial, local, national or other
Governmental Authority having the power to impose a Tax or Taxes.
"Total Straddle Tax" shall have the meaning ascribed thereto in
------------------
Section 7.02.
"Transferred Assets" means the assets owned by any of the
------------------
Subsidiaries, together with the Sulzer Assets.
"Transition Services Agreement" shall have the meaning ascribed
-----------------------------
thereto in Section 5.12.
"2000 Operating Income" shall have the meaning ascribed thereto in
---------------------
Section 5.19(g).
"United States Distribution Period" shall have the meaning ascribed
---------------------------------
thereto in Section 5.18(a).
"United States Dual Sales Representative" shall have the meaning
---------------------------------------
ascribed thereto in Section 5.18(a).
"U.S. GAAP" means United States generally accepted accounting
---------
principles and practices as in effect from time to time and applied consistently
throughout the periods involved.
"Year-End Financial Statements" shall have the meaning ascribed
-----------------------------
thereto in Section 5.15.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and
-------------------------------
subject to the conditions of this Agreement, at the Closing, the Seller shall
sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the Purchaser, the Shares, and the
Purchaser shall purchase the Shares.
SECTION 2.02. Purchase and Sale of Assets. Upon the terms and
---------------------------
subject to the conditions of this Agreement and the Asset Transfer and
Assumption Agreements, the Seller shall cause the Asset Sellers to sell, assign,
transfer, convey and deliver to the Purchaser, and
13
the Purchaser shall purchase from the Asset Sellers, on the Closing Date, all of
the Asset Sellers' right, title and interest in and to the assets used in or
that relate principally to the Electrophysiology Business (the "Sulzer Assets").
-------------
SECTION 2.03. Assumption of Liabilities. Upon the terms and subject
-------------------------
to the conditions of this Agreement and the Asset Transfer and Assumption
Agreements, the Purchaser shall, on the Closing Date, assume, and agree to pay,
perform and discharge when due, any and all Liabilities of the Asset Sellers
that arise or relate principally to the Electrophysiology Business on or prior
to the Closing Date (the "Sulzer Assumed Liabilities"), except for Liabilities
--------------------------
that arise from the Medihold Debt (the "Excluded Liability").
------------------
SECTION 2.04. Purchase Price. (a) The aggregate purchase price for
--------------
the Shares and the Sulzer Assets shall be $850,000,000 (the "Base Purchase
-------------
Price"), subject to adjustment as provided in Section 2.04(b), Section 2.04(c)
and Section 2.08 (the purchase price as so adjusted being the "Purchase Price").
--------------
(b) If, on or prior to the Closing Date, all of the Sales
Representatives in the United States who are responsible for the Designated
Sales have entered into employment agreements substantially in the form attached
hereto as Exhibit 2.04(b)(ii) (the "Employment Agreements"), then there shall be
---------------------
no adjustment, pursuant to this Section 2.04(b), to the Base Purchase Price.
If, on or prior to the Closing Date, Sales Representatives in the United States
who are responsible for less than 100% of Designated Sales have entered into
Employment Agreements, then the Base Purchase Price will be reduced by
$1,500,000 for each percentage point (or portion of a percentage point)
reduction below 100% in the percentage of Designated Sales represented by such
Sales Representatives in the United States who have not entered into Employment
Agreements; provided, however, that in no event shall the Base Purchase Price be
-------- -------
adjusted below $775,000,000 pursuant to this Section 2.04(b). Solely for
purposes of illustration of the operation of the preceding sentence, if Sales
Representatives in the United States who are responsible for 72% of Designated
Sales enter into Employment Agreements on or prior to the Closing Date, the Base
Purchase Price will be reduced to $808,000,000; if Sales Representatives in the
United States who are responsible for 83.4% of Designated Sales enter into
Employment Agreements on or prior to the Closing Date, the Base Purchase Price
will be reduced to $824,500,000; if Sales Representatives in the United States
who are responsible for 50% or less of Designated Sales enter into Employment
Agreements on or prior to the Closing Date, the Base Purchase Price will be
reduced to $775,000,000, subject to either party's right to terminate this
Agreement pursuant to Section 10.01. Within five Business Days after each
execution of an Employment Agreement by the Purchaser or an Affiliate with a
United States Sales Representative, the Purchaser shall so notify the Seller.
(c) Notwithstanding anything to the contrary in this Agreement, if,
after the Closing Date and on or prior to the six-month anniversary thereof, a
Sales Representative in the United States who did not execute an Employment
Agreement on or prior to the Closing Date
14
becomes a representative, subrepresentative, consultant or employee (principally
in a sales or marketing function) of the Purchaser or any of its Affiliates
(other than solely as a result of remaining a Sales Representative of a
Subsidiary following the Closing under such Sales Representative's then current
agreement), then within five Business Days after the six-month anniversary of
the Closing Date, the Purchaser shall (i) provide to the Seller, a statement
setting forth, in reasonable detail, its calculation of the Adjusted Base
Purchase Price and (ii) pay to the Seller by wire transfer in immediately
available funds to an account designated in writing by the Seller to the
Purchaser the difference, if any, between (x) the Adjusted Base Purchase Price
and (y) the Base Purchase Price, as adjusted pursuant to Section 2.04(b) and
Section 2.08. Any payment by the Seller to the Purchaser pursuant to this
Section 2.04(c) shall be treated by the parties as an upward adjustment to the
Base Purchase Price in the amount of such payment.
(d) For all purposes of calculation pursuant to this Section 2.04,
the amount of Designated Sales for which each Sales Representative in the United
States is responsible shall be as set forth in Exhibit 2.04(b)(i).
(e) For purposes of this Section 2.04 "enter into an Employment
Agreement" or words of similar import requires that all conditions precedent in
such Employment Agreement (other than the occurrence of the Closing) be
satisfied or waived.
SECTION 2.05. Closing. Upon the terms and subject to the conditions
-------
of this Agreement, the sale and purchase of the Shares and the Sulzer Assets and
the assumption of the Sulzer Assumed Liabilities contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of
-------
Shearman & Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 A.M. New
York time on the third Business Day following the satisfaction or waiver of all
conditions to the obligations of the parties set forth in Article VIII, or at
such other place or at such other time or on such other date as the Seller and
the Purchaser may mutually agree upon in writing (the day on which the Closing
takes place being the "Closing Date"). The Closing shall be effective as of the
------------
opening of business, New York City time, on the Closing Date.
SECTION 2.06. Closing Deliveries by the Seller. At the Closing, the
--------------------------------
Seller shall deliver or cause to be delivered to the Purchaser:
(a) certificates representing the Shares duly endorsed in blank, or
accompanied by stock powers duly executed in blank with all necessary stock
transfer tax stamps affixed thereon;
(b) bills of sale, and such other instruments as may be reasonably
requested by the Purchaser to transfer the Sulzer Assets to the Purchaser
or to evidence such transfer on the public records;
15
(c) executed counterparts of the Ancillary Agreements; and
(d) the certificates and other documents required to be delivered
pursuant to Section 8.02.
SECTION 2.07. Closing Deliveries by the Purchaser. (a) At the
-----------------------------------
Closing, the Purchaser shall deliver to the Seller:
(a) the Base Purchase Price, as adjusted prior to the Closing
pursuant to Section 2.04(b), by wire transfer of immediately available
funds to the account or accounts designated in writing by the Seller to the
Purchaser at least two Business Days prior to the Closing;
(b) such documents as may be reasonably requested by the Seller to
effect the assumption by the Purchaser of the Sulzer Assumed Liabilities or
to evidence such assumption on the public records;
(c) executed counterparts of the Ancillary Agreements; and
(d) the certificates and other documents required to be delivered
pursuant to Section 8.01.
SECTION 2.08. Adjustment of Base Purchase Price. The Base Purchase
---------------------------------
Price, as adjusted pursuant to Section 2.04, shall be subject to further
adjustment after the Closing as specified in this Section 2.08:
(a) Closing Balance Sheet. As promptly as practicable, but in any
---------------------
event within 60 calendar days after the Closing Date, the Seller shall
deliver to the Purchaser the Closing Balance Sheet, together with a report
thereon of PricewaterhouseCoopers LLP (the "Seller's Accountants"), stating
--------------------
that the Closing Balance Sheet was prepared in accordance with U.S. GAAP
and on a basis consistent with the Reference Balance Sheet, and in
accordance with this Section 2.08. Consistency of preparation shall mean
that all methods, practices and policies used in the preparation of the
Reference Balance Sheet will be utilized in the preparation of the Closing
Balance Sheet; provided, however, that the following accounting methods and
-------- -------
provisions will be utilized for purposes of preparing and determining the
Closing Balance Sheet, regardless of whether or not such accounting methods
and provisions are in accordance with U.S. GAAP or the past practices of
the Electrophysiology Business:
(i) Excluded Assets. There shall be no assets reflected on the
---------------
Closing Balance Sheet that do not represent assets being transferred
to the Purchaser.
16
(ii) Unrecorded Assets. There shall be no assets reflected on
-----------------
the Closing Balance Sheet to the extent that such assets existed as of
July 3, 1998 but were not reflected on the Reference Balance Sheet,
regardless of whether or not such assets are being transferred to the
Purchaser.
(iii) Excluded Reserves/Liabilities. The Closing Balance Sheet
-----------------------------
shall reflect any and all Liabilities or reserves (including contra-
asset, valuation and Liability reserves) that are not being assumed
by, conveyed to or otherwise transferred to the Purchaser to the
extent such Liability or reserve is reflected on the Reference Balance
Sheet, including, without limitation, Liabilities or reserves that (i)
are subject to indemnification by the Seller or (ii) have been settled
as a result of any action taken by the Purchaser prior to,
contemporaneous with or subsequent to the Closing Date, except for
trade accounts payable, accrued payroll and any Liabilities that have
been paid by any Subsidiary or any Asset Seller in the ordinary course
of business prior to the Closing Date.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.08(b),
--------
the Closing Balance Sheet delivered by the Seller to the Purchaser shall be
deemed to be and shall be final, binding and conclusive on the parties
hereto.
(ii) The Purchaser may dispute any amounts reflected on the Closing
Balance Sheet, but only on the basis that the amounts reflected on the
Closing Balance Sheet were not arrived at in accordance with Section
2.08(a); provided, however, that the Purchaser shall have notified the
-------- -------
Seller and the Seller's Accountants in writing of each disputed item,
specifying the amount thereof in dispute and setting forth, in reasonable
detail, the basis for such dispute, within 45 Business Days of the Seller's
delivery of the Closing Balance Sheet to the Purchaser. In the event of
such a dispute, the Seller's Accountants, together with the Seller, and
Ernst & Young LLP (the "Purchaser's Accountants"), together with the
-----------------------
Purchaser, shall attempt to reconcile their differences, and any resolution
by them as to any disputed amounts shall be final, binding and conclusive
on the parties hereto. If the Persons named in the preceding sentence are
unable to resolve any such dispute within 45 Business Days of the Seller's
delivery of the Closing Balance Sheet to the Purchaser and the items
remaining in dispute are such that the Base Purchase Price would be
adjusted by at least $250,000, the Seller's Accountants and the Purchaser's
Accountants shall submit the items remaining in dispute for resolution to
an independent accounting firm of international reputation mutually
acceptable to the Seller and the Purchaser (the "Independent Accounting
----------------------
Firm"), which shall, within 30 Business Days after such submission,
----
determine and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and conclusive on
the Seller and the Purchaser. If the items successfully disputed by the
Purchaser are such that the Base Purchase Price would be adjusted by less
than $250,000, the items shall be deemed to be resolved in favor of the
Seller and shall not result in any adjustment of the
17
Base Purchase Price. Any amounts payable pursuant to this Section 2.08 that
are not in dispute shall be paid in accordance with paragraph (c) of this
Section 2.08, notwithstanding that other amounts may remain in dispute. The
fees and disbursements of the Independent Accounting Firm shall be shared
equally by the Purchaser and the Seller. In acting under this Agreement,
the Independent Accounting Firm shall be entitled to the privileges and
immunities of arbitrators.
(c) Base Purchase Price Adjustment. The Closing Balance Sheet
------------------------------
shall be deemed final for the purposes of this Section 2.08 upon the
earlier of (i) the failure of the Purchaser to notify the Seller of a
dispute within 45 Business Days of the Seller's delivery of the
Closing Balance Sheet to the Purchaser and (ii) the resolution of all
disputes pursuant to Section 2.08(b)(ii). Within three Business Days
of the Closing Balance Sheet being deemed final, a Base Purchase Price
adjustment shall be made as follows:
(i) in the event that the amount of Net Worth reflected on the
Closing Balance Sheet is less than $498,800,000, then the Base
Purchase Price, as adjusted pursuant to Section 2.04(b), shall be
adjusted downward in an amount equal to such shortfall, and the Seller
shall, within three Business Days of such determination, pay such
amount to the Purchaser by wire transfer in immediately available
funds to an account designated in writing by the Purchaser to the
Seller; and
(ii) in the event that the amount of Net Worth reflected on the
Closing Balance Sheet exceeds $498,800,000, then the Base Purchase
Price, as adjusted pursuant to Section 2.04(b), shall be adjusted
upward in an amount equal to the amount of such excess, and the
Purchaser shall, within three Business Days of such determination, pay
the amount of such excess to the Person designated in writing by the
Seller by wire transfer in immediately available funds to an account
designated in writing by the Purchaser to the Seller.
(d) Interest. Any payment required to be made by the Seller or the
--------
Purchaser pursuant to Section 2.08(c) shall bear interest from the Closing
Date through the date of payment at an interest rate equal to the London
Interbank Offered Rate for three-month Eurodollar deposits in effect from
time to time.
(e) Access. The Purchaser shall provide the Seller and the Seller's
------
Accountants with reasonable access during normal business hours to the
books, records, facilities and employees of the Electrophysiology Business,
and shall cooperate fully with the Seller and the Seller's Accountants, to
the extent required by the Seller and the Seller's Accountants in order to
prepare the Closing Balance Sheet. Upon the written
18
request of the Purchaser, the Seller's Accountants shall make their work
papers available to the Purchaser and the Purchaser's Accountants.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the Disclosure Schedule, the Seller hereby
represents and warrants to the Purchaser that:
SECTION 3.01. Incorporation and Authority of the Seller. The Seller
-----------------------------------------
is a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware and has all necessary corporate power and authority to
enter into this Agreement and the Ancillary Agreements to which it is to be a
party, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Any Affiliate of the Seller
that owns any of the Shares or any of the Sulzer Assets has the corporate power
and authority to sell such Shares or Sulzer Assets. The execution and delivery
by the Seller of this Agreement and each of the Ancillary Agreements to which it
is to be a party, the performance by the Seller of its obligations hereunder and
thereunder, and the consummation by the Seller of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of the Seller. This Agreement has been, and upon their execution
and delivery the Ancillary Agreements to which it is to be a party will be, duly
executed and delivered by the Seller, and (assuming due authorization, execution
and delivery by the Purchaser) this Agreement constitutes, and upon their
execution the Ancillary Agreements to which it is to be a party will constitute,
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms.
SECTION 3.02. Incorporation and Authority of the Asset Sellers. Each
------------------------------------------------
Asset Seller is a corporation or other legal entity duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has all necessary corporate
power and authority to enter into the Ancillary Agreements to which it is to be
a party, to carry out its obligations thereunder and to consummate the
transactions contemplated thereby. Each Asset Seller has the corporate power
and authority to own or operate or lease the Sulzer Assets owned, operated or
leased by it and to carry on that portion of the Electrophysiology Business
conducted by it as of the Closing Date, except for failures to have such power
and authority that do not have a Material Adverse Effect. The execution and
delivery by each of the Asset Sellers of the Ancillary Agreements to which it is
to be a party, the performance by each of the Asset Sellers of its obligations
thereunder, and the consummation by each Asset Seller of the transactions
contemplated thereby have been (or, on the Closing Date will be) duly authorized
by all requisite corporate action on the part of each Asset Seller. Upon their
execution and delivery, the Ancillary Agreements will be duly executed and
delivered by
19
each Asset Seller that is to be a party thereto, and (assuming due
authorization, execution and delivery by the Purchaser), the Ancillary Agreement
to which each Asset Seller is to be a party will constitute legal, valid and
binding obligations of each Asset Seller, enforceable against each such Asset
Seller in accordance with its terms.
SECTION 3.03. Incorporation and Authority of the Subsidiaries. Each
-----------------------------------------------
Subsidiary is a corporation or other legal entity duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each Subsidiary is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of that portion of the
Electrophysiology Business conducted by such Subsidiary makes such qualification
necessary, and each Subsidiary has all necessary corporate power and authority
to own, operate or lease the Transferred Assets owned, operated or leased by it
and to carry on that portion of the Electrophysiology Business conducted by such
Subsidiary as of the Closing Date, except for failures to be so qualified or to
have such power and authority that do not have a Material Adverse Effect.
SECTION 3.04. Subsidiaries; Capital Stock of the Subsidiaries. (a)
-----------------------------------------------
Section 3.04(a) of the Disclosure Schedule sets forth, with respect to each of
the Subsidiaries, its type of entity, the jurisdiction of its incorporation or
organization, its authorized capital stock, partnership capital or equivalent
and the number and type of its issued and outstanding shares of capital stock,
partnership interests or similar ownership interests and the record and
beneficial ownership thereof.
(b) There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments obligating the Seller or any of
its subsidiaries to issue or sell any shares of capital stock (or other
ownership interests having by their terms ordinary voting power) of, or equity
interests in, any Subsidiary. The Shares constitute all of the issued and
outstanding shares of capital stock of each First Tier Subsidiary and are owned
of record and beneficially solely by the Seller or an Affiliate of the Seller,
free and clear of all Encumbrances. All of the issued and outstanding shares of
capital stock (or other ownership interests having by their terms ordinary
voting power) of each Second Tier Subsidiary (the "Second Tier Shares") are
------------------
owned of record and beneficially, directly or indirectly, by a First Tier
Subsidiary. All of the Second Tier Shares have been duly authorized and validly
issued and are fully paid and nonassessable and were not issued in violation of
any preemptive rights. All of the Shares have been duly authorized and validly
issued and are fully paid and nonassessable and were not issued in violation of
any preemptive rights. There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any of the Shares or the Second Tier Shares.
SECTION 3.05. No Conflict. Assuming that all consents, approvals,
-----------
authorizations and other actions described in Section 3.06 of the Disclosure
Schedule have been obtained and all filings and notifications described in
Section 3.06 have been made, and except
20
as may result from any facts or circumstances relating solely to the Purchaser,
the execution, delivery and performance of this Agreement and the Ancillary
Agreements by the Seller and the Asset Sellers do not and will not (a) violate
or conflict with the Certificate of Incorporation or By-laws (or other similar
organizational documents) of the Seller, any Subsidiary or any Asset Seller, (b)
conflict with or violate any Law or Governmental Order applicable to the Seller,
any Subsidiary or any Asset Seller, (c) result in any breach of, or constitute a
default (or event that, with the giving of notice or lapse of time, or both,
would become a default) under, or cause, or give to others any rights of,
termination, amendment, acceleration or cancellation of, any Material Contract,
or require consent pursuant thereto, or (d) result in the creation of any
Encumbrance on (i) the Shares and the Second Tier Shares or (ii) the Transferred
Assets, except in any such case for any violations, conflicts, breaches,
defaults or other matters that would not have a Material Adverse Effect or
prevent or materially delay the consummation by the Seller and the Asset Sellers
of the transactions contemplated hereby.
SECTION 3.06. Consents and Approvals. The execution, delivery and
----------------------
performance of this Agreement by the Seller and the Ancillary Agreements by the
Seller and the Asset Sellers do not and will not require any consent, approval,
authorization or other action by, or filing with or notification to, any
Governmental Authority, except (a) the notification requirements of the HSR Act
and the requirements of any applicable non-United States antitrust or merger
control Laws, (b) where failure to obtain such consent, approval, authorization
or action, or to make such filing or notification, would not prevent or
materially delay the consummation by the Seller of the transactions contemplated
by this Agreement and the Ancillary Agreements and would not have a Material
Adverse Effect and (c) as may be necessary as a result of any facts or
circumstances relating solely to the Purchaser or any of its Affiliates.
SECTION 3.07. Financial Information. Set forth in Section 3.07 of
---------------------
the Disclosure Schedule is a true and complete copy of the unaudited balance
sheet of the Electrophysiology Business as of July 3, 1998 (the "Reference
---------
Balance Sheet") and the unaudited statements of income for the Electrophysiology
-------------
Business, for each of the fiscal years ended as of December 31, 1997, 1996 and
1995 (the "Income Statements"). The Reference Balance Sheet and the Income
-----------------
Statements (i) were prepared in accordance with the books of account and other
financial records of the Electrophysiology Business, (ii) except as noted
therein, have been prepared in accordance with U.S. GAAP applied on a basis
consistent with past practice of the Electrophysiology Business and (iii)
present fairly the consolidated financial condition and results of operations of
the Electrophysiology Business as of the dates thereof and for the periods then
ended in accordance with U.S. GAAP, applied on a basis consistent with past
practice of the Electrophysiology Business, subject to normally recurring year-
end adjustments in an immaterial amount.
SECTION 3.08. Absence of Undisclosed Liabilities, Etc. There are no
---------------------------------------
Liabilities of the Electrophysiology Business of a nature required to be
reflected on a balance sheet
21
prepared in accordance with U.S. GAAP, except (a) Liabilities set forth in or
otherwise disclosed in the Disclosure Schedule, (b) Liabilities reflected or
reserved against in the Closing Balance Sheet or referred to in the notes
thereto, and (c) Liabilities that would not have a Material Adverse Effect.
SECTION 3.09. Absence of Certain Changes or Events. Since July 3,
------------------------------------
1998, the Electrophysiology Business has been conducted in the ordinary course
consistent with past practice and, except as would not reasonably be expected to
have a Material Adverse Effect, there has not been: (i) any change in the
condition and repair of the Transferred Assets such that such condition and
repair are inconsistent with the uses in which such assets are presently
employed, ordinary wear and tear excepted; (ii) the occurrence of any fact,
event or circumstance described in Section 5.01(b); or (iii) any event or
occurrence that has had a Material Adverse Effect or reasonably would be
expected to have a Material Adverse Effect.
SECTION 3.10. Litigation. There are no Actions pending, or to the
----------
knowledge of the Seller, threatened against any Subsidiary or any Asset Seller,
that are reasonably likely to have a Material Adverse Effect or prevent or
materially delay the consummation by the Seller, the Asset Sellers or the
Subsidiaries of the transactions contemplated by this Agreement and the
Ancillary Agreements. As of the date hereof, there are no Actions brought by
any Subsidiary or Asset Seller and relating to the Electrophysiology Business.
The Electrophysiology Business is not subject to any outstanding material
Governmental Order.
SECTION 3.11. Compliance with Laws; Certain Regulatory Matters. (a)
------------------------------------------------
The Electrophysiology Business has been and is being conducted in compliance
with all Laws and Governmental Orders applicable to the Electrophysiology
Business, including, without limitation, the Foreign Corrupt Practices Act, and
none of the Seller, any Asset Seller or any Subsidiary has received any notice
to the effect that the Electrophysiology Business is not in compliance with any
applicable Law. Notwithstanding the foregoing, the representations and
warranties in this Section 3.11(a) do not apply to licenses and permits,
environmental matters, intellectual property rights, employee benefit matters
and Taxes, which matters are covered exclusively in Sections 3.12, 3.13, 3.14,
3.17 and 3.18, respectively.
(b) None of the Seller, any Affiliate of the Seller, including any
Subsidiary or Asset Seller, or any Sales Representative, nor, to the knowledge
of the Seller, any director, officer, agent, employee or other Person acting on
behalf of the Seller or any Affiliate of the Seller, including any Subsidiary or
Asset Seller, has, in connection with the Electrophysiology Business, used any
funds for unlawful contributions, payments, gifts or entertainment or to
unlawfully induce any Person to do business with the Electrophysiology Business,
or made any unlawful expenditures relating to political activity to government
officials or others with respect to the Electrophysiology Business.
22
SECTION 3.12. Licenses and Permits. Except as would not reasonably
--------------------
be expected to have a Material Adverse Effect, the Subsidiaries and the Asset
Sellers (a) hold all governmental licenses, permits and authorizations necessary
for the current use, occupancy and operation of the Electrophysiology Business
("Permits"), and are, and at all times from the date hereof through the Closing
-------
will be, in compliance with all such Permits, and (b) have made all required
filings with, or notifications to, all Governmental Authorities pursuant to
applicable requirements of all Laws applicable to the Electrophysiology
Business. Notwithstanding the foregoing, the representations and warranties in
this Section 3.12 do not apply to compliance with Laws, environmental matters,
intellectual property rights, employee benefit matters and Taxes, which matters
are covered exclusively in Sections 3.11, 3.13, 3.14, 3.17 and 3.18,
respectively.
SECTION 3.13. Environmental Matters. (a) To the knowledge of the
---------------------
Seller, except as would not reasonably be expected to have a Material Adverse
Effect: (i) there is not and has not been any Environmental Condition in respect
of the Electrophysiology Business (including, without limitation, any
Environmental Condition at, under or in or originating from (x) any premises or
property currently or formerly owned, leased or operated by the Subsidiaries or,
in connection with the Electrophysiology Business, the Asset Sellers or any of
their Affiliates or (y) any other location relating in any way to the
Electrophysiology Business); (ii) none of the Seller nor any of the Subsidiaries
nor, in connection with the Electrophysiology Business, the Asset Sellers or any
of their Affiliates is currently subject to any Governmental Order imposing
Liabilities arising under Environmental Laws in respect of the Electrophysiology
Business (including, without limitation, any Governmental Order imposing
Liabilities arising under Environmental Laws in respect of any premises or
property currently or formerly owned, leased or operated by any of them in
connection with the Electrophysiology Business).
(b) Except as would not reasonably be expected to have a Material
Adverse Effect, none of the Seller, the Subsidiaries, the Asset Sellers, or any
of their Affiliates has received any notice alleging that any Environmental
Condition exists in respect of the Electrophysiology Business (including,
without limitation, any Environmental Condition at, under or in or originating
from any premises or property currently or formerly owned, leased or operated by
the Subsidiaries or, in connection with the Electrophysiology Business, the
Asset Sellers or any of their Affiliates) or that the Seller or any of the
Subsidiaries or, in connection with the Electrophysiology Business, the Asset
Sellers or any of their Affiliates is or may be liable for any Environmental
Condition at any location.
(c) Notwithstanding anything to the contrary in this Agreement,
except as expressly set forth in this Section 3.13, the Seller makes no other
representation or warranty, express or implied, with respect to any matter
related to the environment or Environmental Laws.
SECTION 3.14. Intellectual Property Rights. (a) Section 3.14(a) of
----------------------------
the Disclosure Schedule sets forth a list of: (i) all patents, patent
applications, trademark applications and trademark registrations owned, as of
the date of this Agreement, by the
23
Subsidiaries or that constitute a Sulzer Asset, (ii) all licenses under which
any patents, patent applications, trademark applications and trademark
registrations are licensed, as of the date of this Agreement, to the
Subsidiaries by a third party or that constitute a Sulzer Asset and (iii) all
licenses pursuant to which any material Intellectual Property of the
Electrophysiology Business is licensed or sublicensed to a third party.
(b) Except as would not have a Material Adverse Effect: (i) neither
the Seller nor any of its Affiliates has received notice from any third party
regarding any assertion or claim challenging the validity of any Intellectual
Property used in the Electrophysiology Business; (ii) the conduct of the
Electrophysiology Business, as conducted as of the Closing Date, will not, to
the knowledge of the Seller, conflict with any Intellectual Property of any
third party; and (iii) neither the Seller nor any of its Affiliates has received
notice from any third party regarding any actual or potential infringement by
the Electrophysiology Business of any Intellectual Property of any third party.
(c) All of the Owned Intellectual Property is owned free and clear of
any Encumbrance, other than Permitted Encumbrances. From and after the Closing
Date, the Purchaser and its Affiliates shall have the right to use any and all
Owned Intellectual Property that immediately prior to the Closing Date was being
used in the conduct of the Electrophysiology Business.
(d) With respect to each license listed in Section 3.14(a)(ii) and
Section 3.14(a)(iii) of the Disclosure Schedule: (i) (A) neither the Seller nor
any Affiliate thereof, including, without limitation, any Subsidiary or any
Asset Seller, is, as of the date of this Agreement, or will be as of the Closing
Date, in material breach or material violation of, or material default under,
any such license; (B) to the knowledge of the Seller, no other party to any such
license is in material breach or violation of, or material default under any
such license; and (C) neither the Seller nor any Affiliate thereof has received
any notice alleging that it is in breach or violation of or default under such
license; and (ii) (A) such license is a valid agreement, arrangement or
commitment of a Subsidiary or an Asset Seller, enforceable against a Subsidiary
or an Asset Seller; (B) such license is enforceable by a Subsidiary or an Asset
Seller in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency, moratorium or similar Law affecting creditors rights
generally; and (C) such license, to the knowledge of the Seller, is, as of the
date of this Agreement, and will not, as a result of the transactions
contemplated hereby, cease to be, a valid license of each other party thereto,
enforceable in all material respects against each such party in accordance with
its terms.
(e) Notwithstanding anything to the contrary in this Agreement,
except as expressly set forth in this Section 3.14, the Seller makes no other
representation or warranty, expressed or implied, with respect to any matter
related to Intellectual Property.
24
SECTION 3.15. Material Contracts. (a) Section 3.15 of the
------------------
Disclosure Schedule lists (or in the case of oral items, accurately describes)
the following contracts, commitments and agreements (oral or written) relating
to the Electrophysiology Business (the "Material Contracts") in effect as of the
------------------
date of this Agreement to which any Subsidiary is a party or, to the knowledge
of the Seller, a third party beneficiary or that constitutes a Transferred
Asset:
(i) any contract or agreement (excluding routine checking account
overdraft agreements involving xxxxx cash amounts) under which (i) any
Subsidiary has created, incurred, assumed or guaranteed (or may create,
incur, assume or guarantee) Indebtedness in excess of $500,000 to Persons
not Affiliated with the Seller, (ii) any Asset Seller has created,
incurred, assumed or guaranteed (or may create, incur, assume or guarantee)
with respect to the Electrophysiology Business Indebtedness in excess of
$500,000 to Persons not Affiliated with the Seller or (iii) under which the
Seller or any of its Affiliates has granted a security interest or lien on
any of the Transferred Assets, whether tangible or intangible, to secure
such Indebtedness;
(ii) any lease of personal property to which any Subsidiary is a
party or that constitutes a Transferred Asset involving an annual expense
in excess of $500,000 that is not cancelable without penalty or further
payment upon 90 or fewer calendar days' notice;
(iii) any contract or agreement containing covenants limiting the
freedom of any Subsidiary or any Asset Seller to engage in any line of
business or to compete with any Person;
(iv) all contracts and agreements providing for Clinical Application
Research Studies;
(v) any contract or agreement granting to any Person any right to
market, distribute or resell any product of the Electrophysiology Business,
or to represent the Electrophysiology Business with respect to any such
product, or act as agent for any Subsidiary or any Asset Seller in
connection with the marketing, distribution, subdistribution or sale of any
product of the Electrophysiology Business, that, in any case, is not
cancelable within 90 calendar days without penalty or further payment;
(vi) any contract or agreement (i) between or among a Subsidiary, on
the one hand, and the Seller or any of its Affiliates, on the other hand
(other than contracts and agreements between Subsidiaries or with respect
to intercompany debt) or (ii) between an Asset Seller, on the one hand, and
the Seller or any of its Affiliates, on the other hand (other than
contracts and agreements between an Asset Seller and a Subsidiary or with
respect to intercompany debt) relating principally to the Electrophysiology
Business;
25
(vii) any contract or agreement establishing any joint venture,
strategic alliance, research and development relationship, or other
collaboration relating to the Electrophysiology Business;
(viii) any contract or agreement for the purchase or sale by the
Electrophysiology Business of products or services during the fiscal year
ended December 31, 1997 that resulted in, or during the fiscal year ending
December 31, 1998 reasonably is expected to result in, purchases or sales
by the Electrophysiology Business in excess of $2,500,000 and that is not
cancelable by any Subsidiary or any Asset Seller within 90 calendar days
without penalty or further payment;
(ix) any sole source supply contract for the purchase of any
material raw material, component or product that is otherwise not generally
available and that is used in the manufacture of any product of the
Electrophysiology Business;
(x) all agreements or outstanding purchase orders relating to
capital expenditures involving total payments of more than $1,000,000;
(xi) all contracts or agreements with any present or former officer,
employee or consultant of the Electrophysiology Business pursuant to which
such officers, employees or consultants are entitled to receive
compensation in excess of $100,000 on an annual basis;
(xii) all collective bargaining or other labor or union contracts or
agreements;
(xiii) all contracts and agreements (except for licenses, Permits and
authorizations) with any Governmental Authority to which any of the
Subsidiaries are party or that affects the Sulzer Assets;
(xiv) all guarantees and indemnities by the Seller or any Affiliate,
including, without limitation, any Subsidiary or any Asset Seller, to any
Person in connection with the supply of components or raw materials to the
Electrophysiology Business; and
(xv) all other contracts and agreements not otherwise described in
this Section 3.14, the absence of which would have a Material Adverse
Effect.
(b) Neither the Seller nor any Affiliate thereof, including,
without limitation, any Subsidiary or any Asset Seller, is, as of the date of
this Agreement, or will be, as of the Closing Date, in material breach or
material violation of, or material default under, any of the Material Contracts.
To the knowledge of the Seller, no other party to any of the Material Contracts
is in material breach or violation of, or material default under any of the
Material
26
Contracts. Neither the Seller nor any Affiliate thereof has received any written
notice alleging that it is in breach or violation of or default under a Material
Contract. Each Material Contract is (i) a valid agreement, arrangement or
commitment of a Subsidiary or an Asset Seller, enforceable against a Subsidiary
or an Asset Seller, (ii) enforceable by a Subsidiary or an Asset Seller, in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar Law affecting creditors'
rights generally and (iii) to the knowledge of the Seller, is, as of the date of
this Agreement, and will not, as a result of the transactions contemplated
hereby, cease to be, a valid agreement, arrangement or commitment of each other
party thereto, enforceable in all material respects against each such party in
accordance with its terms.
SECTION 3.16. Real Property. Section 3.16 of the Disclosure Schedule
-------------
sets forth a true and complete list as of the date of this Agreement of (i) all
contracts or agreement under which (A) any Subsidiary is a lessor, lessee,
sublessor, sublessee, or licensor or licensee of any real property or (B) any
Asset Seller is a lessor, lessee, sublessor, sublesee, or licensor or licensee
of real property used principally in the Electrophysiology Business, (ii) all
options or rights held or given by (A) any Subsidiary to sell, purchase or
acquire any ownership interest in real property, (B) any Asset Seller to sell,
purchase or acquire any ownership interest in real property used or intended to
be used principally in the Electrophysiology Business and (iii) a brief
description of each piece of Owned Real Property. Either a Subsidiary or an
Asset Seller has (A) good and marketable title to all Owned Real Property and to
all fixtures thereon, free and clear of any Encumbrances, except for Permitted
Encumbrances, and (B) the right to quiet enjoyment of the real properties listed
in Section 3.16(i) of the Disclosure Schedule and leased by any Subsidiary or
any Asset Seller as tenant for the full term of the lease thereof to the extent
provided in such lease. Each lease or other contract or agreement referred to
in Section 3.16 of the Disclosure Schedule is a valid contract or agreement
enforceable against a Subsidiary or Asset Seller that is a party thereto in
accordance with its terms and, to the knowledge of the Seller, of the other
parties thereto, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar Law affecting creditors' rights generally.
There are no options or rights of any third Person to acquire such leased
property or any ownership interest therein. None of the Subsidiaries or the
Asset Sellers is in default, or has received any written notice alleging that it
is in default, under the leases, ground leases, subleases, licenses, options or
other agreements of the Subsidiaries set forth in Section 3.16 of the Disclosure
Schedule. To the knowledge of the Seller, no other party to any such leases,
ground leases, licenses, options or other agreement is in default thereunder.
SECTION 3.17. Employee Benefit Matters. (a) Set forth in Section
------------------------
3.17(a) of the Disclosure Schedule is a list of each "employee benefit plan" (as
defined in Section 3(3) of ERISA) and all other material employee benefit,
bonus, incentive, deferred compensation, stock purchase, stock option,
severance, change in control and fringe benefit plans (other than any employment
or personnel policy, practice or procedure) maintained or contributed to by any
Subsidiary or Asset Seller for current or former employees or directors of the
Electrophysiology
27
Business, or with respect to which any Subsidiary or an Asset Seller could incur
liability under Section 4069, 4201 or 4212(c) of ERISA (collectively, the
"Seller Benefit Plans"). With respect to each Seller Benefit Plan, the Seller
--------------------
has made available to the Purchaser a true and complete copy of the following,
if any: (i) the most recent summary plan description for each Seller Benefit
Plan for which a summary plan description is required, (ii) such Seller Benefit
Plan, and each trust agreement relating to such Seller Benefit Plan, (iii) in
the case of each Seller Benefit Plan applicable to United States employees of
the Electrophysiology Business, the most recent annual report (Form 5500) filed
with the United States Internal Revenue Service, and (iv) the most recent
determination letter issued by the United States Internal Revenue Service with
respect to any Seller Benefit Plan qualified under Section 40l(a) of the Code.
(b) With respect to the Seller Benefit Plans, no event has occurred
and there exists no condition or set of circumstances in connection with which
any Subsidiary or Asset Seller could be subject to any liability under the terms
of such Seller Benefit Plans, ERISA, the Code or any other applicable Law that
would have a Material Adverse Effect. Except as would not have a Material
Adverse Effect, the Seller Benefit Plans and their related trusts intended to
qualify under Sections 401(a) and 501(a) of the Code, respectively, are so
qualified.
(c) Except as would not have a Material Adverse Effect, with
respect to each Seller Benefit Plan that is a retirement plan and is applicable
to non-United States employees (each, a "Foreign Seller Retirement Plan"):
------------------------------
(i) all employer and employee contributions to each separately
funded Foreign Seller Retirement Plan required by Law or by the terms of
such Foreign Seller Retirement Plan have been made, or if applicable,
accrued in accordance with normal accounting practices prevailing in the
country in which such plan is established;
(ii) all premiums due and all employer and employee contributions
collected in respect of each insured Foreign Seller Retirement Plan have
been paid;
(iii) all amounts required to be reserved under each book reserved
Foreign Seller Retirement Plan have been so reserved in accordance with
normal accounting practices prevailing in the country in which such plan is
established;
(iv) each Foreign Seller Retirement Plan required to be registered
with a Governmental Authority has been registered and has been maintained
in good standing with the appropriate Governmental Authorities; and
(v) no event has occurred and there exists no condition or set of
circumstances in connection with which any Subsidiary could be subject to
any Liability under any Seller Foreign Retirement Plan or under any
applicable Law with respect to any Seller Foreign Retirement Plan.
28
(d) There are no outstanding agreements or arrangements providing for
severance payments with respect to any employees of the Electrophysiology
Business that would have a Material Adverse Effect.
SECTION 3.18. Taxes. (a) (i) Each Subsidiary has timely filed or
-----
been included in, or will timely file or be included in, all material Tax
Returns required to be filed by it or in which it is to be included with respect
to Taxes for any period ending on or before the Closing Date, taking into
account any extension of time to file granted to, or obtained on behalf of, the
Seller, any Affiliate or any Subsidiary; and (ii) all Taxes shown to be payable
on such Tax Returns have been or will be paid.
(b) (i) The national income Tax Returns of each Subsidiary (and any
consolidated, combined or unitary group of which such Subsidiary is a member)
have been audited and settled, or are closed to assessment, for all years
through the fiscal year ending December 31, 1994; (ii) there is no claim or
assessment pending against any Subsidiary for any alleged deficiency in Taxes,
and the Seller does not know of any audit or investigation with respect to any
liability of any Subsidiary for Taxes; and (iii) there are no agreements in
effect to extend the period of limitations for the assessment or collection of
any Tax for which any Subsidiary may be liable.
SECTION 3.19. Assets of the Electrophysiology Business. (a) Upon
----------------------------------------
consummation of the transactions contemplated by this Agreement, the Purchaser
shall acquire, free and clear of all Encumbrances, except for Permitted
Encumbrances, or shall acquire the right to use, all the properties and assets
forming a part of, or used or held in, the Electrophysiology Business, and such
properties and assets, together with the rights of the Purchaser under the
Transition Services Agreement, shall be sufficient to permit the operation of
the Electrophysiology Business in substantially the same manner as it is
currently conducted, except, in each case, as would not reasonably be expected
to have a Material Adverse Effect. All of the material Transferred Assets are
in good working order and condition, normal wear and tear excepted. Neither the
Seller nor any Affiliate of the Seller (other than a Subsidiary or an Asset
Seller) has any rights of ownership, use or other rights with respect to any
material Transferred Assets.
(b) The individuals set forth in Section 6.01 of the Disclosure
Schedule who are employees of Sulzer Cardiovascular AG constitute all of the
employees of Sulzer Cardiovascular AG whose time is principally devoted to the
Electrophysiology Business. The individuals set forth in Item 7 of Section 5.01
of the Disclosure Schedule do not devote their time principally to the
Electrophysiology Business.
SECTION 3.20. FDA and Product Matters. Except as set forth in
-----------------------
Section 3.20 of the Disclosure Schedule, there are no products now being
manufactured, sold or distributed
29
by the Electrophysiology Business that require any approval of the United States
Food and Drug Administration (the "FDA") or any other Governmental Authority
---
that regulates the safety, effectiveness, market clearances, design,
manufacturing, testing, distribution or market or post-market surveillance of
the products of the Electrophysiology Business, for which such approval has not
been obtained. All products being commercially distributed by any of the
Subsidiaries in any jurisdiction meet the applicable material legal requirements
of such jurisdiction with respect to their safety, effectiveness, market
clearance, marketing, and post market surveillance and all requisite material
governmental approvals, including, without limitation, all material product
registrations, have been duly obtained and are in full force and effect, and
there is no fact known to the Seller that reasonably would be expected to be the
basis for the FDA or any other Governmental Authority to rescind any approval
for any of the Electrophysiology Business's commercially distributed products.
There is no Action pending by the FDA or any other Governmental Authority and no
notice from the FDA or any other Governmental Authority has been received by the
Seller, any Subsidiary or any Asset Seller claiming that any product now being
commercially distributed or used in any clinical trials by the Electrophysiology
Business is defective or fails to meet any applicable regulatory standards or
that any Subsidiary or any Asset Seller has violated any applicable Laws
governing the design, manufacturing, testing, distribution, marketing or post-
market surveillance requirements for any such product. There are no recall
procedures or safety alerts pending or, to the knowledge of the Seller,
threatened against any Subsidiary, and no such proceeding has been brought
against any Subsidiary at any time in the past five years, relating to the
safety or efficacy of any of its or their products, and, to the knowledge of the
Seller, there is no fact that reasonably would be expected to be the basis for
any such action or proceeding. To the knowledge of the Seller, no institutional
review board, institutional review committee or other similar group or
Governmental Authority has terminated or recommended termination of a clinical
study of any product of the Electrophysiology Business.
SECTION 3.21. Product and Service Warranties. Except as set forth on
------------------------------
Section 3.21(b) of the Disclosure Schedule, none of the Seller, any of the Asset
Sellers or any of the Subsidiaries has received notice of, or has knowledge of,
any facts or circumstances that reasonably would be expected to be the basis for
any material claims (including, without limitation, claims for material product
liability, defects or breaches or product or service warranties) in connection
with the manufacture, production, sale, distribution or use of any of the
products or services of the Electrophysiology Business. No fact or circumstance
exists that would be the basis for any personal injury claim (including, without
limitation, any personal injury claim related to or arising out of the
processing of date and time data (including but not limited to calculating,
comparing and sequencing) from, into and between the years 1999 and 2000 and the
twentieth century and the twenty-first century with respect to products of the
Electrophysiology Business) arising from or relating to any product manufactured
by the Electrophysiology Business prior to or on the Closing Date. For purposes
of the preceding sentence, "manufactured" shall mean that the product
constitutes finished goods inventory.
30
SECTION 3.22. Sales Representatives; Sales Data. The information set
---------------------------------
forth in Section 3.22 of the Disclosure Schedule about the Sales Representatives
in the United States and their respective geographic territories, contractual
arrangements and sales results is accurate and complete in all material
respects.
SECTION 3.23. Certain Interests. Neither the Seller nor any of its
-----------------
Affiliates (with the exception of the other Subsidiaries and Asset Sellers) will
have as of the Closing, and no officer or director of the Seller or any of its
Affiliates, including, without limitation, the Subsidiaries and the Asset
Sellers, and, to the knowledge of the Seller, no relative or spouse (or relative
of such spouse) who resides with, or is a dependent of, any such officer or
director will have, as of the Closing, any Indebtedness outstanding to, or
contract, agreement or arrangement with, the Electrophysiology Business (such
contracts, agreements and other arrangements being referred to as "Affiliate
---------
Arrangements"), except for the contracts, agreements or other arrangements
------------
listed or described in Section 3.15(a)(i) and Section 3.15(a)(xi) of the
Disclosure Schedule.
SECTION 3.24. Brokers. Except for Xxxxxxx, Xxxxx & Co. ("Goldman"),
------- -------
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement or the Ancillary Agreements based upon arrangements made by or on
behalf of the Seller or any Subsidiary. The Seller is solely responsible for
the fees and expenses of Goldman.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.01. Incorporation and Authority of the Purchaser. The
--------------------------------------------
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of Indiana and has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Purchaser of
this Agreement and the Ancillary Agreements, the performance by the Purchaser of
its obligations hereunder and thereunder and the consummation by the Purchaser
of the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of the Purchaser. This Agreement has
been, and upon their execution the Ancillary Agreements will be, duly executed
and delivered by the Purchaser, and (assuming due authorization, execution and
delivery by the Seller) this Agreement constitutes, and upon their execution the
Ancillary Agreements will constitute, legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms.
31
SECTION 4.02. No Conflict. Assuming that all consents, approvals,
-----------
authorizations and other actions described in Section 4.03 have been obtained
and all filings and notifications described in Section 4.03 have been made, and
except as may result from any facts or circumstances relating solely to the
Seller or a Subsidiary, the execution, delivery and performance by the Purchaser
of this Agreement and the Ancillary Agreements to which the Purchaser is to be a
party do not and will not (a) violate or conflict with the Certificate of
Incorporation or By-laws (or other similar organizational documents) of the
Purchaser, (b) conflict with or violate any Law or Governmental Order applicable
to the Purchaser or (c) result in any breach of, or constitute a default (or
event that, with the giving of notice or lapse of time, or both, would become a
default) under, or cause, or give to others any rights of termination,
amendment, acceleration or cancellation of, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument to
which the Purchaser or any of its subsidiaries is a party or by which any of
their assets or properties is bound, except in any such case for any violations,
conflicts, breaches, defaults or other matters that would not prevent or
materially delay the consummation by the Purchaser of the transactions
contemplated hereby.
SECTION 4.03. Consents and Approvals. The execution, delivery and
----------------------
performance by the Purchaser of this Agreement and the Ancillary Agreements do
not and will not require any consent, approval, authorization or other action
by, or filing with or notification to, any Governmental Authority, except (a)
the notification requirements of the HSR Act and the requirements of any
applicable non-United States antitrust or merger control Laws, (b) where failure
to obtain such consent, approval, authorization or action, or to make such
filing or notification, would not prevent or materially delay the consummation
by the Purchaser of the transactions contemplated by this Agreement and the
Ancillary Agreements and (c) as may be necessary as a result of any facts or
circumstances relating solely to the Seller or any of its Affiliates.
SECTION 4.04. Litigation. There are no Actions pending or, to the
----------
knowledge of the Purchaser, threatened against the Purchaser that are reasonably
likely to prevent or materially delay the consummation by the Purchaser of the
transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 4.05. Investment Purpose. The Purchaser is acquiring the
------------------
Shares and the Second Tier Shares solely for the purpose of investment and not
with a view to, or for offer or sale in connection with, any distribution
thereof.
SECTION 4.06. Brokers. Except for Xxxxxx Xxxxxxx & Co. Incorporated
-------
("Xxxxxx Xxxxxxx"), no broker, finder or investment banker is entitled to any
--------------
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement
32
based upon arrangements made by or on behalf of the Purchaser. The Purchaser is
solely responsible for the fees and expenses of Xxxxxx Xxxxxxx.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Electrophysiology Business Prior to the
--------------------------------------------------
Closing. The Seller covenants and agrees that, between the date of this
-------
Agreement and the Closing Date, except as set forth in Section 5.01 of the
Disclosure Schedule (a true and complete copy of which has been furnished to the
Purchaser) or as contemplated by any other provision of this Agreement or any
Ancillary Agreement, unless the Purchaser shall otherwise agree in writing:
(a) the Seller shall cause the Subsidiaries and the Asset Sellers to
conduct the Electrophysiology Business in the ordinary course and
consistent with the Electrophysiology Business's past practice (including,
without limitation, with respect to purchasing, marketing, selling, paying
accounts payable or collecting accounts receivable). Without limiting the
generality of the foregoing, the Seller will cause the Subsidiaries and the
Asset Sellers to use all reasonable efforts to preserve substantially
intact the business organization and goodwill of the Electrophysiology
Business and keep available the services of their officers, employees and
consultants and, except as contemplated by the terms and provisions of this
Agreement, preserve the current relationships of the Electrophysiology
Business with its Sales Representatives, customers, suppliers and other
Persons with which the Electrophysiology Business has significant business
relationships; provided, however, that no action by any Subsidiary or Asset
-------- -------
Seller with respect to matters specifically addressed by any provision of
Section 5.01(b) shall be deemed a breach of this Section 5.01(a) unless
such action would constitute a breach of any such provision of Section
5.01(b).
(b) the Seller shall not and shall not permit (a) any Subsidiary or
(b) any Asset Seller with respect to the Electrophysiology Business to:
(i) amend the Certificate of Incorporation or By-laws or other
equivalent organizational document of any Subsidiary, or permit any
Subsidiary to merge or consolidate, or obligate itself to do so, with
or into any other entity;
(ii) issue or sell any shares of capital stock of, or other
equity interests in, any Subsidiary, or securities convertible into or
exchangeable for such shares or equity interests or permit the sale or
transfer of any Transferred Assets, except for sales of assets in the
ordinary course of business consistent with past practice;
33
(iii) permit any Subsidiary to declare, set aside, make or pay
any dividend or other distribution, payable in cash, stock, property
or otherwise, with respect to any of its capital stock or redeem or
otherwise purchase or acquire any of its capital stock or securities
convertible into or exchangeable or exercisable for capital stock;
(iv) permit any Subsidiary or any Asset Seller to establish or
increase any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or
other employee benefit plan of the Electrophysiology Business, or
otherwise increase the compensation payable or to become payable to
any officers, employees or consultants of the Electrophysiology
Business, except (A) in the ordinary course of business consistent
with past practice, (B) as may be required by Law or by existing
contractual arrangements that are disclosed in the Disclosure Schedule
or (C) increases in the compensation payable or to become payable to
non-executive employees that do not, in the aggregate, exceed $100,000
on an annualized basis;
(v) enter into any employment or severance agreement with any
employees of the Electrophysiology Business, or adopt or enter into
any collective bargaining agreement covering employees of the
Electrophysiology Business;
(vi) permit any Subsidiary to acquire (including, without
limitation, by merger, consolidation or acquisition of stock or
assets) any corporation, partnership, limited liability company, other
business organization or any division or assets thereof;
(vii) permit any Subsidiary to assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations
of any Person (other than another Subsidiary), or make any loans or
advances, or permit any Asset Seller to do any of the foregoing with
respect to the Electrophysiology Business;
(viii) permit any Subsidiary or any Asset Seller to make a
purchase, sale or pricing commitment with respect to the
Electrophysiology Business inconsistent with past practice or in
excess of the normal, ordinary and usual requirements;
34
(ix) permit the Electrophysiology Business to cease the filing
and prosecution of patent applications in accordance with past
practice, or fail to pay when due all royalties and other patent-
related payment obligations;
(x) permit or allow any of the Transferred Assets (whether
tangible or intangible) to be subjected to any Encumbrance, other than
Permitted Encumbrances and Encumbrances that are released at or prior
to the Closing;
(xi) except in the ordinary course of business consistent with
past practice, discharge or otherwise obtain the release of any
material Encumbrance on the Transferred Assets or pay or otherwise
discharge any material Liability of the Electrophysiology Business,
other than current material Liabilities incurred in the ordinary
course of business consistent with past practice;
(xii) fail to pay any creditor of the Electrophysiology Business
any amount owed to such creditor when such amount is due and no
reasonable defense to payment of the amount owed is available;
(xiii) permit the Electrophysiology Business to make any capital
expenditure or commitment for any capital expenditure in excess of (A)
the amount specified for capital expenditures in the budget of the
Electrophysiology Business in effect on the date of this Agreement (a
true and complete copy of which has been furnished to the Purchaser)
plus (B) $250,000;
(xiv) amend, terminate, cancel or compromise any material claim
of the Electrophysiology Business or the Subsidiaries or waive any
other rights of substantial value to the Electrophysiology Business or
the Subsidiaries in excess of $500,000;
(xv) make any change in any method of accounting or accounting
practice or policy used by the Electrophysiology Business other than
changes that are required by U.S. GAAP;
(xvi) allow any material Permit that was issued or relates to
the Electrophysiology Business or otherwise relates to any material
Transferred Asset to lapse or terminate;
(xvii) transfer any employees from the Seller or its Affiliates
(other than the Subsidiaries) to any Subsidiary; terminate,
discontinue, close or dispose of any office, facility or other
business operation, or terminate or lay off any employees (other than
terminations or layoffs of fewer than 25 employees) or implement any
early retirement, separation or program providing early retirement
window
35
benefits within the meaning of Section 1.401(a)-4 of the regulations
promulgated by the United States Department of Treasury under the Code
or announce or plan any such action or program for the future;
(xviii) disclose any material Intellectual Property to any
Person who is not subject to an obligation to maintain the
confidentiality thereof, or permit to lapse or abandon any material
Intellectual Property (or any registration or grant thereof or any
application relating thereto) to which, or under which, the
Electrophysiology Business has any right, title, interest or license;
(xix) permit any Subsidiary or Asset Seller with respect to the
Electrophysiology Business to change any material practice with
respect to Taxes or make, revoke or change any material election with
respect to Taxes;
(xx) fail to replenish inventories and supplies of the
Electrophysiology Business in the ordinary course of business
consistent with past practice;
(xxi) fail to renew any of the leases or subleases set forth in
Section 3.16 of the Disclosure Schedule or allow such leases or
subleases to expire or terminate, except in the ordinary course of
business consistent with good business practice;
(xxii) permit (A) any Subsidiary to incur any Indebtedness or
(B) any Asset Seller to incur any Indebtedness with respect to the
Electrophysiology Business, in the case of clauses (A) and (B) in
excess of $250,000 in the aggregate, except Indebtedness to any
Affiliates of the Seller;
(xxiii) enter into any Affiliate Arrangement;
(xxiv) permit any Subsidiary or Asset Seller with respect to the
Electrophysiology Business to enter into any new agreements with Sales
Representatives or distributors, or any amendment or any other
modifications to an existing agreement with a Sales Representatives,
any other sales representative or distributor (other than (A) a
renewal, on substantially identical terms, of an agreement that is
scheduled to expire within six months of the date of this Agreement,
and after consultation with the Purchaser regarding the terms of such
renewal, or (B) an agreement that creates no Liability for any
Subsidiary, any Asset Seller with respect to the Electrophysiology
Business or the Purchaser following the Closing and does not alter any
existing agreement in any manner adverse to any Subsidiary, any Asset
Seller with respect to the Electrophysiology Business or the Purchaser
following the Closing;
36
(xxv) amend, modify or supplement any Material Contract; or
(xxvi) enter into or amend any contract, agreement, commitment
or arrangement with respect to any matter set forth in this Section
5.01(b).
SECTION 5.02. Investigation; Confidentiality. (a) The Purchaser
------------------------------
acknowledges and agrees that it (i) has made its own inquiry and investigation
into, and based thereon has formed an independent judgment concerning, the
Electrophysiology Business, (ii) has been furnished with or given such adequate
access to such information about the Electrophysiology Business as it has
requested, (iii) has had independent legal, financial and technical advice
relating to the Electrophysiology Business and the terms of this Agreement and
the documents to be executed pursuant hereto and (iv) will not assert any claim
against the Seller or any of its Affiliates or any of the Seller's or its
Affiliates' respective directors, officers, employees, agents, stockholders,
consultants, investment bankers, accountants, counsel or representatives, or
hold the Seller or any such persons liable, for any inaccuracies, misstatements
or omissions with respect to information (other than the representations and
warranties of the Seller contained in this Agreement or any Ancillary Agreement)
furnished by the Seller or such persons concerning the Seller, the Subsidiaries
or the Electrophysiology Business. Any implied warranty or similar rights
applicable to any of the transactions contemplated hereby under the Law of any
jurisdiction is hereby expressly and irrevocably waived by each party hereto to
the fullest extent permitted by such Law, and each party hereto agrees that it
shall not seek to enforce any such implied warranties or similar rights against
the other party.
(b) In connection with the Purchaser's investigation of the
Electrophysiology Business, the Purchaser has received certain estimates,
projections and other forecasts for the Electrophysiology Business, and certain
plan and budget information (collectively, the "Forward Looking Information").
---------------------------
The Purchaser acknowledges that there are uncertainties inherent in attempting
to make such estimates, projections, forecasts, plans and budgets, that the
Purchaser is familiar with such uncertainties, that the Purchaser is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
estimates, projections, forecasts, plans and budgets so furnished to it, and
that the Purchaser will not assert any claim against the Seller or any of its
Affiliates or any of the Seller's or its Affiliates' respective directors,
officers, employees, agents, stockholders, consultants, investment bankers,
accountants, counsel or representatives, or hold the Seller or any such persons
liable with respect thereto, except as set forth in the proviso to the
immediately succeeding sentence. Accordingly, the Seller makes no
representation or warranty with respect to any estimates, projections,
forecasts, plans or budgets referred to in this Section 5.02; provided, however,
-------- -------
that the Seller represents and warrants to the Purchaser that the Seller
believes the methods, including, without limitation, the assumptions, used in
preparing the Forward Looking Information were reasonable.
(c) The terms of the letter agreement dated as of June 19, 1998 (the
"Confidentiality Agreement") between Xxxxxxx, as agent for the Seller, and the
--------------------------
Purchaser are
37
incorporated by reference herein and shall continue in full force and effect
until the Closing, at which time the Confidentiality Agreement and the
obligations of the Purchaser under this Section 5.02(c) shall terminate;
provided, however, that the Confidentiality Agreement shall not terminate with
-------- -------
respect to that portion of the Evaluation Material (as defined in the
Confidentiality Agreement) that is related to or concerns the Seller or its
Affiliates (other than the Electrophysiology Business) and which is identified
as such in writing by the Seller to the Purchaser on or prior to the Closing
Date; and provided, further, that notwithstanding anything in the
-------- -------
Confidentiality Agreement to the contrary, the Purchaser shall be permitted to
(i) employ, hire, enter into an independent contracting arrangement or agency
relationship with (in any case effective as of or following the consummation of
the Closing), or solicit in respect of the foregoing, any Sales Representative
or employee of the Subsidiaries, (ii) discuss the transactions contemplated
hereby with customers, suppliers, purchasers, distributors and regulators
(including, without limitation, the FDA) of the Electrophysiology Business, and
(iii) otherwise take the actions and engage in the transactions contemplated by
this Agreement. If this Agreement is, for any reason, terminated prior to the
Closing Date, the Confidentiality Agreement shall continue in full force and
effect thereafter in accordance with its terms. After the date of this
Agreement, the Seller shall use reasonable efforts to enforce the valid and
enforceable confidentiality agreements entered into with any other bidders for
the Electrophysiology Business in connection with the sale thereof. The Seller
shall control any litigation brought pursuant to the preceding sentence and
shall have the ability to enter into any settlement of such litigation with the
Purchaser's consent which will not be unreasonably withheld. With respect to
any such Actions brought on or prior to the six-month anniversary of the Closing
Date with respect to the solicitation or hiring of Sales Representatives, the
Seller shall retain one-third of the amount of any damages (net of costs and
expenses) recovered in connection therewith (up to an amount equal to $1,500,000
per applicable Sales Representative) and the remainder (net of costs and
expenses) shall be promptly paid over to the Purchaser. With respect to any
such Action brought after the six-month anniversary of the Closing Date, the
Seller shall promptly pay to the Purchaser any damages (net of costs and
expenses) recovered by the Seller in connection therewith or any Action other
than with respect to the solicitation or hiring of Sales Representatives.
(d) Following the Closing, the Seller agrees to, and will cause its
agents, representatives, Affiliates, employees, officers and directors to, (i)
treat and hold as confidential (and not disclose or provide access to any
Person), in a manner consistent with its practices prior to the date hereof, and
not to use except to prepare documents required to be filed with Governmental
Authorities or its financial statements or to discharge its obligations and
exercise its rights in respect of this Agreement, all information related to the
Electrophysiology Business previously treated by the Seller and its Affiliates
as confidential and any information received pursuant to Sections 5.03, 5.04,
5.18, 5.19 or 9.03(e), (ii) in the event that the Seller or any such agent,
representative, Affiliate, employee, officer or director becomes compelled by
Law (including any requirement of the New York Stock Exchange, the London Stock
Exchange or the Swiss Exchange) to disclose any such information, provide the
Purchaser with prompt written
38
notice of such requirement so that the Purchaser may seek a protective order or
other remedy or waive compliance with this Section 5.02(d) and (iii) in the
event that such protective order or other remedy is not obtained or is not
available, or the Purchaser waives compliance with this Section 5.02(d), furnish
only that portion of such confidential information that is legally required to
be provided and use all reasonable efforts to obtain assurances that
confidential treatment will be accorded such information; provided, however,
-------- -------
that this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Section 5.02(d) by the Seller, its agents, representatives, Affiliates,
employees, officers or directors.
SECTION 5.03. Access to Information. (a) From the date hereof until
---------------------
the Closing Date, upon reasonable notice, the Seller shall, and shall cause each
of its Affiliates and each of their respective officers, directors, employees,
auditors and agents to, (i) afford the officers, employees and authorized agents
and representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, personnel, books and records of the
Electrophysiology Business and (ii) furnish to the officers, employees and
authorized agents and representatives of the Purchaser such additional financial
and operating data and other information regarding the Electrophysiology
Business as the Purchaser may from time to time reasonably request; provided,
--------
however, that such investigation shall not unreasonably interfere with any of
-------
the businesses or operations of the Seller or any of its Affiliates.
(b) In order to facilitate the resolution of any claims made by or
against or incurred by the Seller or any Affiliate or for which the Seller or
any of its Affiliates remains liable, after the Closing Date, upon reasonable
notice, the Purchaser shall (i) afford the officers, employees and authorized
agents and representatives of the Seller reasonable access, during normal
business hours, to the offices, properties, books and records of the Purchaser
and its Affiliates in respect of the Electrophysiology Business relevant to such
claims, (ii) furnish to the officers, employees and authorized agents and
representatives of the Seller such additional financial and other information
regarding the Electrophysiology Business as the Seller or such officers,
employees and authorized agents and representatives may from time to time
reasonably request relevant to such claims and (iii) make available to the
Seller the employees of the Purchaser and its Affiliates in respect of the
Electrophysiology Business whose assistance, testimony or presence is necessary
to assist the Seller in evaluating any such claims and in defending such claims,
including the presence of such persons as witnesses in hearings or trials for
such purposes; provided, however, that such investigation shall not unreasonably
-------- -------
interfere with the business or operations of the Purchaser or any of its
Affiliates and provided further that the Seller shall reimburse the Purchaser
-------- -------
for any and all costs and expenses (including, with respect to clause (iii)
above, the salary of the employees for the time spent by such employees
complying with such clause (iii)) incurred in complying with this Section
5.03(b) and provided further that the Purchaser shall not be required pursuant
-------- -------
to this Section 5.03(b) to disclose or reveal any privileged information or any
attorney work product.
39
(c) Notwithstanding the foregoing, the Seller shall not be required,
prior to the Closing Date, to disclose, or cause the disclosure of, to the
officers, employees or authorized agents or representatives of the Purchaser (or
provide access to any offices, properties, books or records of the Seller or any
of its Affiliates that could result in the disclosure to such persons or others
of) any confidential information relating to pricing and marketing plans, to the
extent that the Seller reasonably believes, upon advice of counsel, that
disclosure of such information would create a significant risk of a violation of
any antitrust or competition Law, nor shall the Seller be required to permit or
cause others to permit the officers, employees or authorized agents or
representatives of the Purchaser to copy or remove from the offices or
properties of the Seller or any of its Affiliates any documents, drawings or
other materials that might reveal any such confidential information.
SECTION 5.04. Books and Records. (a) Except as otherwise provided
-----------------
in Article VII, the Purchaser agrees that it shall preserve and keep all
material books and records in respect of the Electrophysiology Business that the
Seller transfers to the Purchaser in the Purchaser's possession for such period
as is required by applicable Law or, if no such period is required by applicable
law, for a period of at least two years from the Closing Date. After such two-
year period, before the Purchaser shall dispose of any of such books and
records, at least 90 calendar days' prior written notice to such effect shall be
given by the Purchaser to the Seller, and the Seller shall be given an
opportunity during such 90-day period, at its cost and expense, to remove and
retain all or any part of such books and records as the Seller may select.
During the applicable period, duly authorized representatives of the Seller
shall, upon reasonable notice, have access thereto during normal business hours
to examine, inspect and copy such books and records.
(b) If, in order properly to prepare documents required to be filed
with Governmental Authorities or its financial statements or required under any
applicable Law, it is necessary that either party hereto (or any of their
respective Affiliates) or any successors be furnished with additional
information relating to the Electrophysiology Business, and such information is
in the possession of the other party hereto or any of its Affiliates, such party
agrees to use its best efforts to furnish such information to such other party
as soon as reasonably practicable, at the cost and expense of the party being
furnished such information.
SECTION 5.05. Satisfaction of Conditions Precedent; Regulatory and
----------------------------------------------------
Other Authorizations; Notices and Consents. (a) The Seller and the Purchaser
------------------------------------------
shall use all reasonable efforts to cause the satisfaction of the conditions
precedent contained in Article VIII. Each party hereto shall use all reasonable
efforts to obtain all authorizations, consents, orders and approvals of all
Governmental Authorities that may be or become necessary for its and its
Affiliates' execution and delivery of, and the performance of their obligations
pursuant to, this Agreement and the Ancillary Agreements and shall cooperate
fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto agrees to
make an appropriate filing of a Notification and Report Form pursuant to the HSR
Act with
40
respect to the transactions contemplated hereby as promptly as practicable, and
in any event within ten Business Days of the date hereof, and to supply promptly
any additional information and documentary material that may be requested
pursuant to the HSR Act. The parties hereto acknowledge that time shall be of
the essence in this Agreement and agree not to take any action or omit to take
any action that will have the effect of unreasonably delaying, impairing or
impeding the receipt of any required authorizations, consents, orders or
approvals.
(b) Notwithstanding the foregoing, the Purchaser shall not be
required to sell, license or otherwise dispose of or hold separate or in trust,
the Shares, the Second Tier Shares or any of the Transferred Assets or any part
of the Electrophysiology Business or any assets or businesses of the Purchaser
or any of its Affiliates, except that the Purchaser shall take promptly any or
all of the following actions to the extent necessary to eliminate any concerns
on the part of any Governmental Authority with jurisdiction over the enforcement
of any applicable antitrust laws, anti-competition or similar laws regarding the
legality under any antitrust Law, anti-competition or similar Law of the
Purchaser's acquisition of the Electrophysiology Business: selling or otherwise
disposing of to any Person except St. Jude Medical, Inc., Angeion Corporation,
Xxxxxxx & Xxxxxxx, Boston Scientific Corp., Arterial Vascular Engineering, Inc.
or any Affiliates thereof (a "Subsequent Purchaser"), or holding separate
--------------------
(through the establishment of a trust or otherwise) the Tachycardia Assets
(other than the patents and patent applications contained therein) and in
connection therewith (i) granting or causing to be granted to a Subsequent
Purchaser and its Affiliates for use in connection with the operation of the
Tachycardia Assets a perpetual, non-sublicenseable, royalty-free license of the
(A) patents or patent applications owned or licensed (if sublicenseable) by the
Electrophysiology Business, (B) patents or patent applications licensed (if
sublicenseable) by the Electrophysiology Business that constitute Tachycardia
Assets but under the terms of such license cannot be sold or otherwise
transferred to a Subsequent Purchaser, and (C) patents originally assigned to
Xxxxxxxxxx Xxxxxxxx and presently sublicensed to Cardiac Pacemakers, Inc.,
including, without limitation, U.S. Patent Nos. 4,223,678; 4,316,472; 4,407,288;
and 4,572,191 (the "Xxxxxxxx Portfolio"), (ii) if a Subsequent Purchaser does
------------------
not have adequate facilities to manufacture products for the Tachycardia
Business, agree to manufacture such products for the Subsequent Purchaser for a
one-year period from the date of the Subsequent Purchaser's acquisition of the
Tachycardia Assets and (iii) covenant not to bring any Action against the
Subsequent Purchaser and any of its Affiliates for infringement of U.S. Patent
Nos. 4,388,927 and 4,557,266; provided, however, that nothing herein shall
-------- -------
obligate the Purchaser to (i) license the Xxxxxxxx Portfolio to a Subsequent
Purchaser and its Affiliates on terms and conditions that permit such license to
be transferrable to another Person (except that such license shall be
transferable to another Person in connection with the sale or transfer of all or
substantially all of the Tachycardia Assets to a Subsequent Purchaser), (ii)
grant any license under this Section 5.05(b)(i) to a Subsequent Purchaser who
does not agree to grant to the Purchaser a royalty-free (except for pass-through
royalty obligations of the Subsequent Purchaser to a Person un-Affiliated with
the Subsequent Purchaser), perpetual license to the Cardiac Stimulation Devices
patents owned by or licensed to the Subsequent Purchaser which license is
transferable by the Purchaser to another Person in the
41
sale or transfer of all or substantially all of the Purchaser or Cardiac
Pacemakers, Inc. to another Person or (iii) grant any license under this Section
5.05(b)(i) to a Subsequent Purchaser who does not agree to admit the validity
and enforceability of the Xxxxxxxx Portfolio; and provided further that
-------- -------
notwithstanding anything to the contrary in this Section 5.05(b)(i), the
Purchaser shall be permitted to pass-through to a Subsequent Purchaser any
royalty obligations of the Purchaser or its Affiliates to any Person under the
Xxxxxxxx Portfolio or under any license which is sublicensed pursuant to Section
5.05(b)(i).
(c) The Seller shall give promptly such notices to third parties and
use reasonable efforts to obtain such third party consents (not including the
consents of any Governmental Authorities) as may be necessary in connection with
the transactions contemplated by this Agreement and the Ancillary Agreements;
provided that the Seller and its Affiliates shall not be required to make any
--------
payment to any such Person to induce such Person to grant such consent or
waiver.
SECTION 5.06. Notification to Governmental Authorities; Litigation.
----------------------------------------------------
(a) The Purchaser and the Seller shall comply in all material respects with all
material applicable Laws requiring notification of the transactions contemplated
by this Agreement.
(b) Within thirty calendar days after the date of this Agreement, the
Seller shall deliver or cause to be delivered to the Purchaser (i) a list of all
Actions that, to the knowledge of the Seller, are pending or threatened against
any Subsidiary, or any Asset Seller and relating to the Electrophysiology
Business, and (ii) a list of all Governmental Orders to which, to the knowledge
of the Seller, the Electrophysiology Business is subject.
SECTION 5.07. Non-Competition. (a) For a period of three years
---------------
after the Closing Date (the "Non-Competition Period"), neither the Seller nor
----------------------
any Affiliate of the Seller will manufacture, sell or distribute Cardiac
Stimulation Devices; provided, however, that the foregoing shall not prohibit
-------- -------
the Seller or any Affiliate of the Seller from (i) acquiring, directly or
indirectly, securities of any Person traded in a public market that sells any
Cardiac Stimulation Devices; provided that the Seller and its Affiliates do not,
--------
in the aggregate, own more than 5% of any class of securities of such Person; or
(ii) acquiring a company (the "Diversified Company") or a business (x) having
-------------------
not more than 15% of its gross revenues attributable to the manufacture, sale or
distribution of Cardiac Stimulation Devices, or (y) having more than 15% of its
gross revenues attributable to the manufacture, sale or distribution of Cardiac
Stimulation Devices, as long as, with respect to such Diversified Company or
business acquired that shall have derived more than 15% of its gross revenues
from the manufacture, sale or distribution of Cardiac Stimulation Devices, the
Seller shall have divested itself within 12 months of its acquisition of such
Diversified Company of the assets, divisions or businesses of such Diversified
Company that sell Cardiac Stimulation Devices.
42
(b) During the Non-Competition Period, neither the Seller nor any
Affiliate of the Seller will (i) induce or attempt to induce any Sales
Representative, employee, contractor, distributor or consultant of the
Electrophysiology Business or the Purchaser's cardiac rhythm management
business to terminate his or her representation of, or employment or consultancy
with, the Electrophysiology Business or the Purchaser's cardiac rhythm
management business, (ii) hire or attempt to hire any Person who is then, or at
any time within the preceding one-year period from the date hereof was, a Sales
Representative, employee, contractor, distributor or consultant of the
Electrophysiology Business or the Purchaser's cardiac rhythm management business
or (iii) induce or attempt to induce any customer, supplier, licensee,
contractor, distributor or other business relation of the Electrophysiology
Business or the Purchaser's cardiac rhythm management business to cease doing
business with the Electrophysiology Business or the Purchaser's cardiac rhythm
management business.
SECTION 5.08. Intercompany Arrangements. (a) Prior to the Closing
-------------------------
Date, the Seller shall cause any contract or arrangement that is disclosed (or
should have been disclosed) in Section 3.15(a)(vi) of the Disclosure Schedule,
other than those contracts or arrangements set forth in Section 5.08 of the
Disclosure Schedule, to be terminated or otherwise amended to exclude any
Subsidiaries as a party thereto.
(b) Immediately prior to the consummation of the Closing, the Seller
shall contribute, or cause to be contributed, to the capital of the
Subsidiaries, the difference between (i) the intercompany Indebtedness owed by
the Subsidiaries to the Seller and its Affiliates (other than the Subsidiaries)
as of the Closing Date and (ii) the intercompany Indebtedness owed by the Seller
and its Affiliates (other than the Subsidiaries) to the Subsidiaries as of the
Closing Date and all such intercompany Indebtedness shall be of no further force
or effect.
SECTION 5.09. Use of the Seller's Name. Notwithstanding any other
------------------------
provision of this Agreement to the contrary, no interest in or right to use the
name "Sulzer", "Sulzermedica" or "Sulzer Medica" or any other corporate name of
the Seller or its Affiliates (other than those listed in Section 5.09 of the
Disclosure Schedule) or any logo, trademark or trade name or any derivation
thereof of the Seller or its Affiliates with respect to, or associated with, the
foregoing (collectively, the "Retained Names and Marks") is being transferred to
------------------------
the Purchaser pursuant to the transactions contemplated hereby, and the use of
any Retained Names and Marks in connection with the Electrophysiology Business
by the Purchaser and its Affiliates shall cease as of the Closing Date. The
Purchaser, promptly following the Closing Date, will, and will cause its
Affiliates to, (a) remove or obliterate all the Retained Names and Marks from
its signs, purchase orders, invoices, sales orders, labels, letterheads,
shipping documents, and other items and materials of the Electrophysiology
Business and otherwise, and not to put into use after the Closing Date any such
items and materials not in existence on the Closing Date that bear any Retained
Name or Xxxx or any name, xxxx or logo similar thereto and (b) change the
corporate name of each Subsidiary whose corporate name includes the name
"Sulzer", "Sulzermedica" or "Sulzer Medica" or any name, xxxx or logo similar
thereto, to another corporate name that does not include the name "Sulzer",
"Sulzermedica" or "Sulzer Medica" or
43
any name, xxxx or logo similar thereto. Notwithstanding the foregoing, the
Purchaser, its Affiliates and the Subsidiaries may, for a period of six months
following the Closing Date, use any purchase orders, invoices, sales orders,
labels, letterheads, or shipping documents existing on the Closing Date that
bear any Retained Name or Xxxx or any name, xxxx or logo similar thereto where
the removal of any Retained Name or Xxxx or any such similar name, xxxx or logo
would be impractical. The Purchaser agrees that the Seller and its Affiliates
shall have no responsibility for claims by third parties arising out of, or
relating to, the use after the Closing Date by the Purchaser, the Subsidiaries
or any Affiliate thereof of any Retained Name or Xxxx. In addition, the
Purchaser, its Affiliates and the Subsidiaries may sell or otherwise dispose of
inventory bearing any such name, xxxx or logo until after they have received
permission from the FDA or other applicable Governmental Authority to change
such name, xxxx or logo and for a six month period beginning after the date of
such permission. Nothing in this Section 5.09 shall be construed to require the
Purchaser nor any of its Affiliates or the Subsidiaries to modify, replace,
amend, revise or recall any documents or devices that are in the possession of
doctors, Sales Representatives, distributors or other third parties.
SECTION 5.10. Insurance Coverage. Effective 12:01 a.m. on the
------------------
Closing Date, the Subsidiaries and the Transferred Assets shall cease to be
insured by the Seller's or its Affiliates' (other than the Subsidiaries')
insurance policies, and the Purchaser shall have no rights or obligations with
respect to any such policy.
SECTION 5.11. Guaranties. The Purchaser shall use all reasonable
----------
efforts to cause the Seller and its Affiliates (other than the Subsidiaries) to
be released as of the Closing, or as soon thereafter as possible, from all
indemnities, guaranties and guaranty obligations of the Seller and such
Affiliates relating to obligations of the Subsidiaries or otherwise relating to
or for the benefit of any Subsidiary or the Electrophysiology Business,
including, without limitation, the indemnities, guaranties and guaranty
obligations listed in Section 5.11 of the Disclosure Schedule. The Purchaser
agrees to indemnify the Seller and its Affiliates for any and all Losses
incurred by the Seller and its Affiliates after the date of this Agreement
arising out of any indemnity, guaranty or guaranty obligation listed in Section
5.11 of the Disclosure Schedule, whether or not such Losses accrued prior to, on
or after the Closing. The Purchaser also agrees to indemnify the Seller and its
Affiliates for any and all Losses incurred by the Seller and its Affiliates
after the date of this Agreement arising out of any material indemnity, guaranty
or guaranty obligation referred to in the first sentence of this Section 5.11
that is not listed in Section 5.11 of the Disclosure Schedule, whether or not
such Losses accrued prior to, on or after the Closing, provided, however, that
-------- -------
the Purchaser shall not be required to indemnify the Seller for any such
indemnity, guaranty or guaranty obligation to the extent the failure to disclose
such arrangement or any claim in respect thereof in the Disclosure Schedule
constitutes any breach of a representation or warranty made by the Seller under
this Agreement.
SECTION 5.12. Transition Services. Following the Closing Date, the
-------------------
Seller shall provide, or cause to be provided, to the Purchaser certain services
that are currently
44
provided by the Seller and its Affiliates to the Electrophysiology Business, all
as more fully set forth in a transition services agreement substantially in the
form attached hereto as Exhibit 5.12 (the "Transition Services Agreement") to be
-----------------------------
entered into by the Seller and the Purchaser as of the Closing Date. Except as
specifically set forth in the Transition Services Agreement no other services
will be provided to the Purchaser or any of its Affiliates by the Seller or its
Affiliates.
SECTION 5.13. Notice of Developments. Prior to the earlier of the
----------------------
Closing or termination of this Agreement, the Seller shall notify promptly, and
in any event within five Business Days, the Purchaser in writing, of (i) all
events, circumstances, facts and occurrences arising subsequent to the date of
this Agreement that are reasonably likely to result in any breach of a
representation or warranty or covenant of the Seller in this Agreement or that
are reasonably likely to have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any material
respect and (ii) all other material developments affecting the assets,
liabilities, business, financial condition, operations, results of operations,
employee relations or prospects of any Subsidiary or the Electrophysiology
Business.
SECTION 5.14. Acquisition Proposals. Except in connection with the
---------------------
transactions contemplated hereby, none of the Seller, an Asset Seller, any
Subsidiary or any Affiliate, agent, representative, employee, officer or
director of the Seller, an Asset Seller or any Subsidiary shall (a) take any
action to solicit, initiate submission of or knowingly encourage any Acquisition
Proposal, (b) participate in any substantive discussions or negotiations
regarding an Acquisition Proposal with any Person other than the Purchaser and
its representatives, (c) furnish any information with respect to or afford
access to the properties, books or records of the Electrophysiology Business to
any Person in connection with an Acquisition Proposal other than the Purchaser
and its representatives or (d) otherwise knowingly cooperate in any way with, or
knowingly assist or participate in, facilitate or encourage, any effort or
attempt by any Person other than by the Purchaser and its representatives to do
or seek any of the foregoing. The Seller shall promptly notify the Purchaser
upon receipt of any offer with respect to an Acquisition Proposal and shall not
accept any such offer for so long as this Agreement remains in effect. For
purposes hereof, an "Acquisition Proposal" shall include any acquisition or
--------------------
purchase by a Person who is not an Affiliate of the Purchaser of all or a
portion of the Shares, the Second Tier Shares, the Transferred Assets or any
equity interest in the Electrophysiology Business, any merger or business
combination with any Subsidiary or Asset Seller, any public or private offering
of capital stock of any Subsidiary (or any security convertible into or
exchangeable or exercisable for capital stock of any Subsidiary), or any other
acquisition involving the Electrophysiology Business, except for any acquisition
or purchase of inventory of the Electrophysiology Business in the ordinary
course of business consistent with past practice.
SECTION 5.15. Audited Financial Statements. The Seller shall deliver
----------------------------
to the Purchaser, as promptly as practicable following the date hereof, but in
any event prior to the earlier of the Closing or 60 calendar days after the date
of this Agreement, balance sheets, income statements and cash flow statements of
the Electrophysiology Business (a) as of and for
45
the years ended December 31, 1995, 1996 and 1997 (the "Year-End Financial
------------------
Statements") and (b) as of and for the six months ended June 30, 1998 and 1997
----------
(together with the Year-End Financial Statements, the "Designated Financial
--------------------
Statements"), which shall be (i) in the case of clause (a) above, audited by,
----------
and include the unqualified report thereon with respect to the Year-End
Financial Statements, of, the Seller's Accountants and (ii) in compliance in all
respects with Regulation S-X of the Securities and Exchange Commission (the
"SEC"). The Seller shall cause the Seller's Accountants to deliver to the
---
Purchaser such consents to the inclusion of such financial statements in filings
with the SEC of the Purchaser as the Purchaser shall reasonably request. The
Seller shall cause the Seller's Accountants to consult with the Purchaser during
the course of the audit, and to take into account the Purchaser's comments
concerning the form of the Designated Financial Statements. If the Designated
Financial Statements and the report on the Year-End Financial Statements are
delivered to the Purchaser on or prior to the date that is 30 calendar days
after the date of this Agreement, the Purchaser shall pay the actual fees and
expenses of the Seller's Accountants incurred in connection with the preparation
of the Designated Financial Statements, up to a maximum amount of $200,000, and
the remainder of such fees and expenses shall be paid by the Seller, and if the
Designated Financial Statements and the report thereon are delivered to the
Purchaser after 30 calendar days after the date of this Agreement, the fees and
expenses of Seller's Accountants incurred in connection with the preparation of
the Designated Financial Statements shall be paid by the Seller.
SECTION 5.16. Sales Representatives. (a) Subject to Exhibit 5.16(a),
---------------------
as soon as practicable after the date of this Agreement the Purchaser shall
offer to each Sales Representative in the United States the opportunity to
execute an Employment Agreement. In connection with such solicitation, the
parties shall adhere to and abide by the procedures set forth in Exhibit
5.16(a). In connection with the solicitation referred to in the preceding
sentence, each Employment Agreement shall contain the compensation and sales
package set forth in Exhibit 5.16(b). After the Closing, the Purchaser or one
of its Affiliates shall use reasonable efforts to enforce the valid and
enforceable agreements of the Sales Representatives in the United States who do
not execute an Employment Agreement. The Purchaser shall control any litigation
brought pursuant to the preceding sentence and shall have the ability to enter
into any settlements of such litigation with the Seller's consent which will not
be unreasonably withheld. Prior to the Closing, the Seller, if requested by
Purchaser, shall cause the Subsidiaries to use reasonable efforts to enforce the
valid and enforceable agreements of the Sales Representatives who do not execute
Employment Agreements. Prior to the Closing, the Seller shall control any
litigation brought pursuant to the preceding sentence and shall have the ability
to enter into settlements of such litigation with the Purchaser's consent which
will not be unreasonably withheld With respect to any such Actions referred to
in this Section 5.16(a) and brought on or prior to the six-month anniversary of
the Closing Date, the Seller shall be entitled to one-third of the amount of any
damages (net of costs and expenses) recovered in connection therewith (up to an
amount equal to $1,500,000 per applicable Sales Representative) and the
remainder (net of costs and expenses) shall be promptly paid over to the
Purchaser. With respect to any such Action
46
brought after the six-month anniversary of the Closing Date, the Purchaser shall
be entitled to any damages recovered in connection therewith.
(b) On or prior to the Closing Date, the Seller shall and shall cause
all of its Affiliates (other than the Subsidiaries) to fully and unconditionally
release any and all Sales Representatives (other than the United States Dual
Sales Representatives) from any and all agreements, contracts and other
arrangements (oral or written) with any Sales Representatives (other than the
United States Dual Sales Representatives) for the sale or distribution of
products that are not manufactured, sold or distributed by the Electrophysiology
Business on the date of this Agreement and pay all amounts due and owing to such
Sales Representatives, except for such amounts being disputed in good faith.
SECTION 5.17. Sales Representative Guarantees. The Seller shall use
-------------------------------
all reasonable efforts to cause the Purchaser and its Affiliates to be released
as of the Closing from all Liabilities arising under or in connection with the
agreements set forth in 9.03(a) of the Disclosure Schedule.
SECTION 5.18. Procedures Relating to United States Dual Sales
-----------------------------------------------
Representatives. (a) The Purchaser shall cause each Sales Representative in the
---------------
United States who currently sells products of Carbomedics (as set forth in
Section 5.18 of the Disclosure Schedule) and who becomes a representative,
subrepresentative, consultant or employee of the Purchaser (principally in a
sales or marketing function) ("United States Dual Sales Representatives") to
----------------------------------------
continue to distribute the products of Carbomedics during the six-month period
following the Closing Date (the "United States Distribution Period") for and on
---------------------------------
behalf of Carbomedics, in substantially the same manner in which such products
were sold prior to the Closing Date. The Purchaser shall in good faith permit
and make available support, facilities, services and personnel of a similar
nature as are available for the sale of the Purchaser's other products, and
shall not in any way discourage the sale of Carbomedics' products by the United
States Dual Sales Representatives during the United States Distribution Period.
(b) The Seller shall pay, or cause to be paid, to the Purchaser, for
further remittance to the United States Dual Sales Representatives, all
commissions which would have been required to be paid to such United States Dual
Sales Representatives under the terms of their sales representative agreements
in effect immediately prior to the Closing with respect to all sales of products
of Carbomedics during the United States Distribution Period, and the Purchaser
shall promptly remit such commission payments to the respective United States
Sales Representatives. The Seller and its Affiliates shall have no other
obligations to the Purchaser and its Affiliates or to the United States Dual
Sales Representatives arising out of the distribution of products of Carbomedics
following the Closing.
(c) The Purchaser shall promptly remit to Carbomedics any payments
received by the Purchaser or any of its Affiliates in respect of sales of
products of Carbomedics, and shall
47
use all reasonable efforts to cause any United States Dual Sales Representatives
who receives any such payments to promptly remit such payments to Carbomedics.
(d) Subject to Section 5.02(d), the Purchaser shall permit the Seller
and its employees and agents reasonable access during normal business hours (or
otherwise upon reasonable prior notice) to the United States Dual Sales
Representatives, and shall provide the Seller with such data and records as the
Seller may reasonably request for the purposes of allowing the Seller to monitor
the Purchaser's performance of its obligations under this Section 5.18.
(e) Upon 30 calendar days' written notice by the Seller to the
Purchaser, the Seller may terminate the distribution of Carbomedics' products by
any individual United States Dual Sales Representative. After the date of such
termination, neither the Seller or any of its Affiliates, on the one hand, nor
the Purchaser or any of its Affiliates, on the other hand, shall have any
obligation or liability to the other with respect to such United States Dual
Sales Representative pursuant to this Section 5.18, except for any payment
obligations pursuant to this Section 5.18 that accrued thereunder prior to the
date of termination.
(f) The Seller shall indemnify and hold harmless all Purchaser
Indemnified Parties from and against any and all Losses arising out of or in
connection with the sale of Carbomedics' products pursuant to this Section 5.18,
without regard to any baskets, caps, survival periods or other limitations set
forth in this Agreement; provided, however, that the Seller shall not be
-------- -------
obligated to indemnity or hold harmless any Purchaser Indemnified Party for
Losses arising out of or in connection with any alteration or modification of
any such product by a Purchaser Indemnified Party.
SECTION 5.19. Procedures Relating to Canadian Dual Sales
------------------------------------------
Representatives. (a) During the two-year period following the Closing Date (the
---------------
"Canadian Distribution Period"), the Purchaser shall distribute, or cause one or
----------------------------
more of its Affiliates to distribute, in Canada the products of Carbomedics, in
substantially the same manner in which such products were sold prior to the
Closing Date, solely through the Sales Representatives in Canada who currently
sell products of Carbomedics and who become representatives, subrepresentatives,
consultants or employees of the Purchaser (principally in a sales or marketing
function) ("Canadian Dual Sales Representatives"). The Purchaser shall in good
-----------------------------------
faith permit and make available support, facilities, services and personnel of a
similar nature as are available for the sale of the Purchaser's other products,
and shall not in any way discourage, the sale of Carbomedics' products by the
Canadian Dual Sales Representatives during the Canadian Distribution Period.
(b) The Seller shall reimburse the Purchaser for 30% of the cash
compensation paid to each Canadian Dual Sales Representative by the Purchaser
and its Affiliates in respect of the Canadian Distribution Period (or, in the
event the Seller terminates distribution by a Canadian Dual Sales Representative
pursuant to Section 5.19(e), such shorter period during which such Canadian Dual
Sales Representative actually distributes Carbomedics' products). Such
reimbursement shall be paid promptly, but in any event within 15 Business Days
after notification by the Purchaser thereof. The Seller and its Affiliates
shall have no other obligations to the
48
Purchaser and its Affiliates or to the Canadian Dual Sales Representatives
arising out of the distribution of products of Carbomedics following the
Closing.
(c) The Purchaser shall promptly remit to Carbomedics any payments
received by the Purchaser or any of its Affiliates in respect of sales of
products of Carbomedics, and shall use all reasonable efforts to cause any
Canadian Dual Sales Representative who receives any such payments to promptly
remit such payments to Carbomedics.
(d) Subject to Section 5.02(d), the Purchaser shall permit the
Seller and its employees and agents reasonable access during normal business
hours (or otherwise upon reasonable prior notice) to the Canadian Sales
Representatives, and shall provide the Seller with such data and records as the
Seller may reasonably request for the purposes of allowing the Seller to monitor
the Purchaser's performance of its obligations under this Section 5.19.
(e) Upon 30 calendar days' written notice by the Seller to the
Purchaser, the Seller may terminate the distribution of Carbomedics' products by
any individual Canadian Dual Sales Representative. After the date of such
termination, neither the Seller or any of its Affiliates, on the one hand, nor
the Purchaser or any of its Affiliates, on the other hand, shall have any
obligation or liability to the other with respect to such Canadian Dual Sales
Representative pursuant to this Section 5.19, except for any payment obligations
pursuant to this Section 5.19 that accrued hereunder prior to the date of
termination.
(f) The Seller shall use all commercially reasonable efforts to
replace as soon as practicable following the Closing the Canadian Dual Sales
Representatives with another distribution network adequate for the needs of the
business of Carbomedics in Canada.
(g) (i) On or prior to August 31, 2000, the Seller shall provide the
Purchaser with a statement (the "Operating Income Statement") setting forth
--------------------------
the Canadian Operating Income for the calendar year 1998 (the "1998
----
Operating Income"), the Canadian Operating Income for the calendar year
----------------
1999 (the "1999 Operating Income") and the Canadian Operating Income for
---------------------
the first six calendar months of the year 2000 (the "2000 Operating Income"
---------------------
and, together with the 1999 Operating Income, the "Actual Operating
----------------
Income"). 1998 Operating Income, 1999 Operating Income and 2000 Operating
Income shall be calculated, to the extent applicable, in a manner
consistent with the preparation of the Income Statements.
(ii) The Purchaser may dispute the amount of the 1998 Operating
Income, the 1999 Operating Income or the 2000 Operating Income set forth on
the Operating Income Statement, but only on the basis that the 1998
Operating Income, 1999 Operating Income or 2000 Operating Income was not
arrived at in accordance with Section 5.19(g)(i); provided, however, that
-------- -------
the Purchaser shall have notified the Seller and the Seller's Accountants
in writing of the disputed amount, setting forth, in reasonable detail, the
basis for such dispute, within 45 Business Days of Seller's delivery of the
Operating Income Statement to the Purchaser. In the event of such a
dispute, the Seller's Accountants, together with the Seller, and the
Purchaser's Accountants, together with the Purchaser,
49
shall attempt to reconcile their differences, and any resolution by them as
to any disputed amounts shall be final, binding and conclusive on the
parties hereto. If the Persons named in the preceding sentence are unable
to resolve any such dispute within 45 Business Days of receipt by the
Seller of the Purchaser's notification, then the items remaining in dispute
shall be submitted for arbitration to the Independent Accounting Firm which
shall, within 30 Business Days after such submission, determine and report
to the Seller and the Purchaser upon such remaining disputed items, and
such report shall be final, binding and conclusive on the Seller and the
Purchaser. The fees and disbursements of the Independent Accounting Firm
shall be allocated evenly between the Seller and the Purchaser.
(iii) The Operating Income Statement shall be deemed final for the
purposes of this Section 5.19 upon the earlier of (i) the failure of the
Purchaser to notify the Seller of a dispute within 45 Business Days of the
Seller's delivery of the Operating Income Statement to the Purchaser or
(ii) the resolution of all disputes pursuant to Section 5.19(g)(ii).
(iv) Within five business days after the Operating Income Statement
is deemed final pursuant to Section 5.19(g)(iii), in the event that the
Actual Operating Income reflected thereon is less than 1.5 times the 1998
Operating Income reflected thereon, the Purchaser shall pay by wire
transfer in immediately available funds to an account specified in writing
by the Seller to the Purchaser, the difference between (A) the Actual
Operating Income and (B) the 1998 Operating Income Statement multiplied by
the number 1.5.
(v) Subject to Section 5.02(d), the Seller shall provide the
Purchaser and the Purchaser's Accountants with full access to the books,
records and employees of the Seller and its Affiliates, and shall cooperate
fully with the Purchaser and the Purchaser's Accountants, to the extent
required by the Purchaser and the Purchaser's Accountants to adequately
examine the preparation of the Operating Income Statement.
(h) The Seller shall indemnify and hold harmless all Purchaser
Indemnified Parties from and against any and all Losses arising out of or in
connection with the sale of Carbomedics' products pursuant to this Section 5.19,
without regard to any baskets, caps, survival periods or other limitations set
forth in this Agreement; provided, however, that the Seller shall not be
-------- -------
obligated to indemnity or hold harmless any Purchaser Indemnified Party for
Losses arising out of or in connection with any alteration or modification of
any such product by a Purchaser Indemnified Party.
SECTION 5.20. Certain Intellectual Property Matters. (a) Not later
-------------------------------------
than the 90th calendar day following the date of this Agreement, the Purchaser
shall inform the Seller whether it elects to permit the Seller to pursue and
enter into, or cause a Subsidiary to enter into, a license agreement with either
or both of Angeion Corporation and Biotronik Inc. (each, a "License
-------
Counterparty") covering all the Cardiac Stimulation Devices related patents of
------------
the License Counterparty, including all patents issued after the Closing Date
from applications filed on or before the Closing Date or from applications filed
after the Closing Date if such applications claim priority to applications filed
before the Closing Date. Such license shall be transferable or
50
sublicensable to the Purchaser without any cost, limitation or other expense to
the Purchaser on a worldwide, irrevocable, perpetual, royalty-free, non-
exclusive basis. The Seller agrees to consult with the Purchaser regarding the
terms of such license. If the Seller obtains such a license, the Seller shall
have no further liability or obligations to any Purchaser Indemnified Party
arising out of or in connection with the Disclosed Item relating to the License
Counterparty who entered into such license. In order to obtain such license, the
Seller shall be permitted to grant a worldwide, irrevocable, perpetual, royalty-
free, non-exclusive license or sublicense to the License Counterparty to all
patents and patent applications which are part of the Owned Intellectual
Property and the Licensed Intellectual Property, including all patents issued
after the Closing Date from applications filed on or before the Closing Date or
from applications filed after the Closing Date if such applications claim
priority to applications filed before the Closing Date.
(b) In the event the Purchaser elects to permit the Seller to pursue
and enter into, or cause a Subsidiary to enter into, the license referred to in
Section 5.20(a), and the Seller is unable to obtain such license, the Seller
shall indemnify the Purchaser Indemnified Parties against and hold them harmless
from all Losses actually incurred by them arising out of or relating to the
Disclosed Items, without regard to any baskets, caps, survival periods or other
limitations set forth elsewhere in this Agreement. Such indemnification shall
be governed by the terms of Sections 9.03(d) through (h).
(c) In the event the Purchaser elects not to permit the Seller to
pursue and enter into, or cause a Subsidiary to enter into, the license referred
to in Section 5.20(a), the Seller shall indemnify the Purchaser Indemnified
Parties against and hold them harmless from all Losses actually incurred by them
arising out of or relating to the Disclosed Items to the extent such Losses
relate to the sale of Specified Products that are or have been sold at any time
prior to the second anniversary of the Closing Date, without regard to any
baskets, caps, survival periods or other limitations set forth elsewhere in this
Agreement. Such indemnification shall be governed by the terms of Sections
9.03(d) through (h).
(d) Except as expressly set forth in this Section 5.20, the Seller
shall have no liability or obligation to any Purchaser Indemnified Party arising
out of or in connection with the Disclosed Items.
SECTION 5.21. Further Action. Each of the parties hereto shall
--------------
execute and deliver such documents and other papers and take such further action
as may be reasonably required to carry out the provisions hereof and to make
effective the transactions contemplated hereby.
ARTICLE VI
EMPLOYEE MATTERS
51
SECTION 6.01. Offer of Employment; Continuation of Benefits. On or
---------------------------------------------
prior to the Closing Date, the Purchaser shall, or shall cause the Subsidiaries
to, offer to employ, effective on the Closing Date, each person listed in
Section 6.01 of the Disclosure Schedule. Following the Closing Date, the
Purchaser shall, or shall cause the Subsidiaries to, provide each Employee with
benefits (including, without limitation, pension and welfare benefits) that are
no less favorable than the benefits provided by the Purchaser to its similarly
situated employees. To the extent that service is relevant for vesting or
benefit calculations or allowances (including, without limitation, entitlements
to vacation and sick days) under any plan or arrangement maintained in order to
provide the benefits described in the previous sentence, such plan or
arrangement shall credit Employees for service at or prior to the Closing Date
with the Subsidiaries or Asset Sellers, provided that past service credit under
a plan intended to be qualified under section 401(a) of the Code shall be
limited to no more than five (5) years of service. Nothing in this Section 6.01
shall be construed in any way to increase or extend the obligations of any
Subsidiary under the terms of such Seller Benefit Plans or to restrict existing
rights of any Subsidiary to terminate or modify such Seller Benefit Plans.
SECTION 6.02. Cash Compensation. For a period of one year following
-----------------
the Closing Date (or, if shorter, such period of time following the Closing
during which such Employee is employed by the Purchaser or any of its
Affiliates), the Purchaser shall ensure that each Employee shall continue to be
paid base salary at no lower a rate than that in effect on the Closing Date with
respect to such Employee; provided, however, that the Purchaser may make
-------- -------
appropriate adjustments to such salary based on merit and performance in a
manner consistent with the treatment of other similarly situated employees of
the Purchaser and its Affiliates.
SECTION 6.03. 401(k) Plan. Effective as of the Closing Date, all
-----------
Employees who are participants ("401(k) Plan Participants") in the Sulzer Medica
------------------------
USA Inc. Retirement Plan (the "Seller 401(k) Plan") shall no longer accrue
------------------
benefits under the Seller 401(k) Plan and the Seller shall take all actions
necessary to achieve this result. As of the Closing Date, the Seller shall
cause each such 401(k) Plan Participant to be fully vested in such person's
account balance in the Seller 401(k) Plan. As soon as practicable following the
Closing Date, the Seller shall cause the transfer of an amount representing the
aggregate account balances of the 401(k) Plan Participants determined as of the
plan valuation date coinciding with or next following the Closing Date, adjusted
for the actual return thereon from such valuation date to the date of account
balance transfer, to the trustee, designated by the Purchaser, of a qualified
trust established or maintained by the Purchaser as described in the immediately
succeeding sentence; provided, however, that no transfer will occur until the
-------- -------
Purchaser completes a due diligence review with respect to the Seller 401(k)
Plan that the Purchaser deems reasonably necessary to protect the qualified
status of the transferee plan. On or as soon as practicable following the
Closing Date, the Purchaser shall establish or make available to the 401(k) Plan
Participants a savings plan intended to be qualified under Sections 401(a) and
401(k) of the Code (the "Purchaser Plan"), which shall provide (a) for immediate
--------------
eligibility after participation for each 401(k) Plan Participant, (b) each such
401(k) Plan Participant with an account balance that,
52
following the transfer described in the preceding sentence, is at least equal to
the amount transferred to the Purchaser Plan in respect of such participant's
interest in the Seller 401(k) Plan and (c) vesting and eligibility provisions
that are no less favorable than those of the Seller 401(k) Plan as of the
Closing Date. The Purchaser Plan shall accept the transfer of outstanding loans
to 401(k) Plan Participants from the Seller 401(k) Plan with respect to the
401(k) Plan Participants who are employees of the Purchaser or the Subsidiaries
on the transfer date and shall provide for the continued administration of such
transferred loans in accordance with the provisions of the Purchaser Plan. The
Purchaser shall provide the Seller with a legal opinion or other assurance,
reasonably satisfactory to the Seller, of the Purchaser Plan's qualification
under Sections 401(a) and 401(k) of the Code.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity. (a) With respect to the sale of the
---------
Shares, the Seller agrees to indemnify and hold harmless the Purchaser against
the following Taxes (except to the extent that such Taxes are attributable to
Taxes that have been specifically reserved for on the Closing Balance Sheet)
and, except as otherwise provided in Section 7.04, against any loss, damage,
liability or expense, including reasonable fees for attorneys and other outside
consultants, incurred in contesting or otherwise in connection with any such
Taxes: (i) Taxes imposed on any Subsidiary with respect to any Pre-Closing
Taxable Period or that are allocable to any Subsidiary pursuant to Section
7.01(b) for a Pre-Closing Taxable Period; (ii) Taxes imposed on any member of
any affiliated group with which any of the Subsidiaries file or have filed a Tax
Return on a consolidated or combined basis for a Taxable period beginning before
the Closing Date; and (iii) Taxes imposed on any Subsidiary as a result of any
breach of warranty or misrepresentation under Section 3.18. The Purchaser shall
be responsible for Taxes and associated expenses with respect to the Shares and
the sale thereof not allocated to the Seller pursuant to the preceding sentence.
(b) In the case of Taxes that are payable with respect to a Straddle
Period, the portion of any such Tax that is allocable to the Pre-Closing Taxable
Period shall be:
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts, or (y) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as provided
under Section 7.06), deemed equal to the amount that would be payable if
the Taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect to
the assets of any Subsidiary or otherwise measured by the level of any
item, deemed to be the
53
amount of such Taxes for the entire period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Taxes for the
immediately preceding period), multiplied by a fraction the numerator of
which is the number of calendar days in the period ending on the Closing
Date and the denominator of which is the number of calendar days in the
entire period.
SECTION 7.02. Tax Returns and Payments. (a) With respect to each
------------------------
federal, state, local, canton, provincial or national income Tax Return of any
jurisdiction that is filed by the Seller, as the reporting entity, on a
consolidated, combined, group or unitary basis, the Seller shall cause to be
included in such Tax Return for the period ending on or before, or that include
the Closing Date, all items of income, gain, loss, deduction and credit or other
items (collectively, "Tax Items") of the Subsidiaries that are required to be
---------
included therein, shall file timely such Tax Return with the appropriate Taxing
Authority and shall timely pay all Taxes due with respect to the periods covered
by such Tax Return.
(b) With respect to each separate company Tax Return and each
consolidated, combined, group or unitary Tax Return (other than the Tax Returns
described in Section 7.02(a)) covering a Taxable period ending on or before the
Closing Date that is required to be filed after the Closing Date for, by or with
respect to any of the Subsidiaries, the Seller shall cause such Tax Return to be
prepared, shall cause to be included in such Tax Return all Tax Items required
to be included therein, and shall cause the original of such Tax Return to be
delivered, along with the amount of any Tax required to be paid with such Tax
Return, to the Purchaser at least ten calendar days prior to the due date
(including extensions) of such Tax Return. The Purchaser shall cause such Tax
Return to be timely filed and shall remit the amount of any Taxes paid by the
Seller pursuant to this paragraph (b) to the appropriate Taxing Authority.
(c) With respect to each Tax Return (other than the Tax Returns
described in Section 7.02(a)), covering a Straddle Period that is required to be
filed for, by or with respect to any of the Subsidiaries (a "Straddle Period
---------------
Return"), the Purchaser shall cause such Straddle Period Return to be prepared
------
and shall cause to be included in such Straddle Period Return all Tax Items
required to be included therein. The Purchaser shall determine in accordance
with the provisions of Section 7.01(b), subject to review and agreement by the
Seller, the portion, if any, of the Tax due with respect to the period covered
by such Straddle Period Return which is attributable to the Pre-Closing Taxable
Period. At least twenty calendar days prior to the due date (including
extensions) of such Straddle Period Return, the Purchaser shall deliver to the
Seller a copy of such Straddle Period Return along with the Purchaser's
calculation of the amount of Tax attributable to the Pre-Closing Taxable Period.
The Purchaser shall cause the respective Subsidiary to file timely such Straddle
Period Return with the appropriate Taxing Authority and to pay timely the amount
of Taxes shown to be due on such Straddle Period Return.
54
(d) When all such Straddle Period Returns have been filed, the
Purchaser shall prepare a statement within twenty calendar days of the filing of
the final Straddle Period Return showing the aggregate amount of Taxes allocable
to the Pre-Closing Taxable Period as reflected on such Straddle Period Returns
(the "Final Tax Amount") and shall submit such statement to the Seller for
----------------
review and agreement thereupon by the parties hereto. Upon agreement by the
parties hereto on the amount of the Final Tax Amount, to the extent the Final
Tax Amount exceeds the sum of (i) the aggregate amount of Taxes previously paid
by the Seller with respect to any Straddle Period plus (ii) the aggregate amount
of Taxes accrued on the Closing Balance Sheet (the sum of (i) and (ii) is
referred to as the "Total Straddle Tax"), the Seller shall promptly pay to the
Purchaser such excess amount. To the extent the total Straddle Tax is greater
than the Final Tax Amount, the Purchaser shall promptly pay the Seller such
excess amount. If, with respect to any Straddle Period Return, the Purchaser
and the Seller are unable to agree on the amount of Taxes allocable to the Pre-
Closing Taxable Period, the resolution of such dispute shall be referred to an
Independent Accounting Firm (as defined in Section 2.08(b)(ii)) and the
decisions of such firm shall be final and binding on the Seller and the
Purchaser.
(e) All Tax Returns to be prepared pursuant to this Section 7.02
shall be prepared in a manner consistent with practices followed in prior years
except for changes required by Law.
SECTION 7.03. Refunds. Any Tax refund (including any interest with
-------
respect thereto) relating to any Subsidiary for any Taxable period prior to the
Closing Date (except for any refund included on the Closing Balance Sheet, which
shall be the property of the Purchaser, and if paid to the Seller, shall be paid
over promptly to the Purchaser) shall be the property of the Seller, and if
received by the Purchaser or any Subsidiary shall be paid over promptly to the
Seller. The Purchaser shall not elect to carry back any loss or credit arising
after the Closing Date to a Taxable period beginning before the Closing Date.
SECTION 7.04. Contests. (a) If a claim shall be made by any Taxing
--------
Authority that, if successful, would result in the indemnification of a party
(the "Tax Indemnified Party") under this Article VII, the Tax Indemnified Party
---------------------
shall promptly notify the party (the "Tax Indemnifying Party") obligated under
----------------------
this Article VII to indemnify the Tax Indemnified Party in writing of such fact;
provided, however, that a failure to give such notice shall not affect the Tax
-------- -------
Indemnified Party's right to indemnification under this Article VII except to
the extent, if any, that, but for such failure, the Tax Indemnifying Party could
have avoided all or a portion of the Tax Liability in question. Such notice
shall contain factual information (to the extent known to the Tax Indemnified
Party) describing the asserted Tax Liability in reasonable detail and shall
include copies of any notice or other document received from any Taxing
Authority in respect of such asserted Tax Liability. If a request is made by
any Taxing Authority to interview, depose or otherwise question any employee of
or service provider to the Tax Indemnified Party with respect to any matter
subject to indemnification under Article VII, including without limitation any
summons or subpoena (collectively "Interview"), then the Tax Indemnified Party
shall notify
55
and consult with the Tax Indemnifying Party before consenting to any such
Interview, and take such actions with respect to such Interview request as the
Tax Indemnifying Party reasonably requests.
(b) The Tax Indemnifying Party shall determine the method of any
contest of any claim under Section 7.04(a) and shall control the conduct
thereof; provided, however, that the Tax Indemnifying Party shall permit the Tax
-------- -------
Indemnified Party to consult, at its own expense, with the Tax Indemnifying
Party in such defense through counsel chosen by the Tax Indemnified Party. If
the contest or appeal of such claim requires that all or a portion of the
contested Taxes (or a bond in respect thereof) be paid as a jurisdictional
prerequisite, the Tax Indemnifying Party shall advance to the Tax Indemnified
Party the amount of such Taxes or fee for such bond (but in no event shall the
amount of such advance exceed the Tax Indemnifying Party's liability under this
Agreement). The Tax Indemnified Party shall take such action in connection with
contesting such claim as the Tax Indemnifying Party shall request in writing
from time to time, including the selection of counsel and experts and the
execution of powers of attorney; provided, however, that the Tax Indemnified
-------- -------
Party shall not be required to take any such action unless, within 30 calendar
days after delivery of the notice required by Section 7.04(a) to the Tax
Indemnifying Party (or such earlier date that any payment of Taxes is due by the
Tax Indemnified Party but in no event earlier than ten calendar days after the
Tax Indemnifying Party's receipt of such notice), the Tax Indemnifying Party
requests that such claim be contested and agrees to pay to the Tax Indemnified
Party any and all reasonable out-of-pocket costs and expenses incurred by the
Tax Indemnified Party in connection with contesting such claim, including,
without limitation, the reasonable fees of outside advisors, attorneys and
accountants. The Tax Indemnified Party shall not be required to make any
payment of such claim for at least 30 calendar days (or such shorter period as
may be required by applicable Law) after the delivery of the notice required by
this subsection, shall give to the Tax Indemnifying Party any information
reasonably requested by the Tax Indemnifying Party relating to such claim, and
otherwise shall cooperate with the Tax Indemnifying Party in order to contest
effectively any such claim. Notwithstanding the provisions of this Section
7.04(b) the Tax Indemnifying Party shall not settle any claim or take any other
action if, as a result of such action, the Taxes payable by Purchaser for a
taxable period not covered by the indemnity pursuant to Section 7.01(a) would be
materially increased and such increase would create a permanent difference in
Purchaser's aggregate Tax Liability for taxable periods after the Closing Date
taking into account any deductions or other Tax benefits related to the matters
settled.
(c) Subject to the provisions of Section 7.04(b), the Tax Indemnified
Party shall enter into a settlement of such contest with the applicable Taxing
Authority or prosecute such contest to a determination in a court, all as the
Tax Indemnifying Party may request.
(d) Promptly after the extent of the liability of the Tax Indemnified
Party with respect to a claim shall be established by the final judgment or
decree of a court or a final and binding settlement with a Taxing Authority
having jurisdiction thereof, the Tax Indemnifying
56
Party shall pay, subject to Sections 9.02(b), 9.03(b) and 9.03(d), to the Tax
Indemnified Party the amount of any Taxes to which the Tax Indemnified Party may
become entitled by reason of the provisions of this Section 7.04.
(e) Notwithstanding anything to the contrary in this Article VII, any
interest, penalties, fines, assessments or additions to any Tax resulting from
or attributable to the failure of the Tax Indemnified Party to act in a timely
manner, including in filing Tax Returns, responding to Tax audits or other
inquiries or making payments, shall not be indemnifiable hereunder and shall be
the sole responsibility of the Tax Indemnified Party.
(f) The indemnification provided in this Article VII shall be the
sole remedy for any claim in respect of Taxes. In the event of a conflict
between the provisions of this Article VII and any other provisions of this
Agreement (except for Sections 9.02(b), 9.03(b) and 9.03(d)), the provisions of
this Article VII shall control.
SECTION 7.05. Cooperation and Exchange of Information. Upon the
---------------------------------------
terms set forth in Section 5.03 of this Agreement, the Seller and the Purchaser
will provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended Tax Return
or claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, participating in or conducting any audit or other proceeding in respect
of Taxes or making representations to or furnishing information to parties
subsequently desiring to purchase any of the Subsidiaries or any part of the
Electrophysiology Business from the Purchaser. Such cooperation and information
shall include providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules, related work papers and documents relating
to rulings or other determinations by Taxing Authorities. The Seller and the
Purchaser shall make their respective employees and the employees of their
Affiliates available on a basis mutually convenient to both parties to provide
explanations of any documents or information provided hereunder. Each of the
Seller and the Purchaser shall retain all Tax Returns, schedules and work
papers, records and other documents in its possession relating to Tax matters of
the Subsidiaries for each Taxable period first ending after the Closing Date and
for all prior Taxable periods until the later of (i) the expiration of the
period of limitations for the assessment of Taxes applicable to the relevant
Taxable periods to which such Tax Returns and other documents relate, without
regard to extensions of the period of limitations except to the extent notified
by the other party in writing of such extensions for the respective Tax periods,
or (ii) six years following the due date (including extension) for such Tax
Returns. Any information obtained under this Section 7.05 shall be kept
confidential in accordance with Section 5.02 except as may be otherwise
necessary in connection with the filing of Tax Returns or claims for refund or
in conducting an audit or other proceeding.
SECTION 7.06. Conveyance Taxes. The Seller shall be liable for all
----------------
real property transfer or gains, sales, use, transfer, value added, stock
transfer, and stamp taxes, any transfer, recording, registration, and other
fees, and any similar Taxes which become payable in
57
connection with the sale and transfer of the Sulzer Assets contemplated by this
Agreement and the Asset Transfer and Assumption Agreements (the "Asset Transfer
--------------
Taxes"). The Purchaser and the Seller shall each be liable for 50% of all real
-----
property transfer or gains, sales, use, transfer, value added, stock transfer,
and stamp taxes, any transfer, recording, registration, and other fees, and any
similar Taxes other than the Asset Transfer Taxes which become payable in
connection with the transactions contemplated by this Agreement. The Seller and
the Purchaser shall cooperate to file such applications and documents as shall
permit any such Tax to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure. The Seller and the
Purchaser shall execute and deliver all instruments and certificates necessary
to comply with the foregoing.
SECTION 7.07. Miscellaneous. (a) The Seller and the Purchaser agree
-------------
to treat all payments made by either of them to or for the benefit of the other
(including any payments to any Subsidiary) under this Article VII, under other
indemnity provisions of this Agreement and for any misrepresentations or
breaches of warranties or covenants as adjustments to the Purchase Price or as
capital contributions for Tax purposes and that such treatment shall govern for
purposes hereof except to the extent that the Laws of a particular jurisdiction
provide otherwise.
(b) There is no contract, plan or arrangement covering any Person
that, individually or collectively, reasonably would be expected to give rise to
the payment of any amount that would not be deductible by the Seller or any
Subsidiary by reason of Section 280G of the Code.
(c) Any Tax sharing agreement or arrangement between the Seller and
any Subsidiary shall be deemed to be canceled at the Closing with respect to
such Subsidiary unless terminated prior to the Closing.
(d) Notwithstanding any provision in this Agreement to the contrary,
the obligations of the Seller to indemnify and hold harmless the Purchaser and
the Subsidiaries pursuant to this Article VII, and the representations and
warranties contained in Section 3.18, shall terminate at the close of business
on the 60th calendar day following the expiration of the period of limitations
for the assessment of Taxes applicable to the Tax Liabilities in question.
(e) For purposes of this Article VII, "the Purchaser" and "the
Seller", respectively, shall include each member of the affiliated group of
corporations of which it is or becomes a member (other than the Subsidiaries,
except to the extent expressly referenced).
58
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Seller. The
---------------------------------------
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) Representations and Warranties; Covenants. The representations
-----------------------------------------
and warranties of the Purchaser contained in this Agreement shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made as of the Closing, other than such representations and
warranties as are made as of another date (provided, however, that if any
-------- -------
portion of any representation or warranty is already qualified by
materiality or similar qualifiers, for purposes of determining whether this
Section 8.01(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects), except as would
not, individually or in the aggregate, materially and adversely affect the
consummation of the transactions contemplated by this Agreement; the
covenants and agreements contained in this Agreement to be complied with by
the Purchaser at or before the Closing shall have been complied with in all
material respects; and the Seller shall have received a certificate of the
Purchaser to such effect signed by a duly authorized officer thereof;
(b) Competition Waiting Period. Any waiting period (including any
--------------------------
extension thereof) under the HSR Act applicable to the transactions
contemplated hereby shall have expired or shall have been terminated, and
all consents, authorizations, orders and approvals required pursuant to any
antitrust or competition Law in any jurisdiction which is material to the
Electrophysiology Business shall have been obtained;
(c) No Order. No Governmental Authority shall have enacted, issued,
--------
promulgated, enforced or entered any Law or Governmental Order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions;
(d) Ancillary Agreements. The Purchaser shall have duly executed and
--------------------
delivered to the Seller counterparts of each of the Ancillary Agreements;
(e) Resolutions. The Seller shall have received a true and complete
-----------
copy, certified by the Secretary or an Assistant Secretary of the
Purchaser, of the resolutions duly and validly adopted by the Board of
Directors of the Purchaser evidencing its
59
authorization of the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby; and
(f) Incumbency Certificate. The Seller shall have received a
----------------------
certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures of the officers of the Purchaser
authorized to sign this Agreement and the Ancillary Agreements.
SECTION 8.02. Conditions to Obligations of the Purchaser. The
------------------------------------------
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) Representations and Warranties; Covenants. The representations
-----------------------------------------
and warranties of the Seller contained in this Agreement shall have been
true and correct when made and shall be true and correct as of the Closing,
with the same force and effect as if made as of the Closing (provided,
--------
however, that if any portion of any representation or warranty is already
-------
qualified by materiality, Material Adverse Effect or similar qualifiers,
for purposes of determining whether this Section 8.02(a) has been satisfied
with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true and
correct in all respects), other than such representations and warranties as
are made as of another date, except as would not have, individually or in
the aggregate, a Material Adverse Effect; the covenants and agreements
contained in this Agreement to be complied with by the Seller at or before
the Closing shall have been complied with in all material respects; and the
Purchaser shall have received a certificate of the Seller to such effect
signed by a duly authorized officer thereof;
(b) Competition Waiting Period. Any waiting period (including any
--------------------------
extension thereof) under the HSR Act applicable to the transactions
contemplated hereby shall have expired or shall have been terminated, and
all consents, authorizations, orders and approvals required pursuant to any
antitrust or competition Law in any jurisdiction which is material to the
Electrophysiology Business shall have been obtained;
(c) No Order. No Governmental Authority shall have enacted, issued,
--------
promulgated, enforced or entered any Law or Governmental Order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions;
(d) Ancillary Agreements. The Seller or the appropriate Asset Seller
--------------------
shall have duly executed and delivered to the Purchaser each of the
Ancillary Agreements;
60
(e) Legal Opinion. The Purchaser shall have received one or more
-------------
legal opinions, in form and substance reasonably satisfactory to the
Purchaser, from Shearman & Sterling or in-house legal counsel of the Seller
or its Affiliates, or such other legal counsel reasonably satisfactory to
the Purchaser, substantially to the effect set forth in Sections 3.01,
3.02, 3.03 and the antepenultimate and penultimate sentences of Section
3.04(b) (provided, however, that no legal opinion shall be required
-------- -------
pursuant to this Section 8.02(e) with respect to any Subsidiary or Asset
Seller that is not incorporated under the laws of a State of the United
States);
(f) Employment Agreements. Sales Representatives in the United States
---------------------
who are responsible for at least 50% of Designated Sales, as contemplated
by Section 2.04(b), shall have entered into Employment Agreements (and the
conditions precedent in such Employment Agreements (other than the
occurrence of the Closing) shall have been satisfied or waived);
(g) Resolutions. The Purchaser shall have received a true and
-----------
complete copy, certified by the Secretary or an Assistant Secretary of the
Seller and each Asset Seller, of the resolutions duly and validly adopted
by the Board of Directors of the Seller and each Asset Seller evidencing
its authorization of the execution and delivery of this Agreement and the
Ancillary Agreements to which it is to be a party and the consummation of
the transactions contemplated hereby and thereby;
(h) Incumbency Certificate. The Purchaser shall have received a
----------------------
certificate of the Secretary or an Assistant Secretary of the Seller
certifying the names and signatures of the officers of the Seller
authorized to sign this Agreement and the Ancillary Agreements;
(i) Resignations. The Seller shall have delivered to the Purchaser
------------
written resignations dated as of the Closing Date or evidence of removal
reasonably satisfactory to the Purchaser on or prior to the Closing Date of
all of the directors of each Subsidiary; and
(j) Production Capacity. The Electrophysiology Business shall, as of
-------------------
the Closing Date, have available to it manufacturing facilities and related
personnel to operate such facilities adequate to substantially fulfill the
currently anticipated production requirements of the Electrophysiology
Business.
61
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties and Certain
------------------------------------------------------
Indemnities. (a) Subject to the limitations and other provisions of this
-----------
Agreement, the representations and warranties of the parties hereto contained
herein shall survive the Closing and shall remain in full force and effect until
the second anniversary of the Closing Date; provided, however, that (i) the
-------- -------
representations and warranties set forth in Section 3.18 shall survive as
provided in Section 7.07(d), (ii) insofar as any claim is made by a Purchaser
Indemnified Party for the breach of the representation warranty of the Seller
contained in the penultimate sentence of Section 3.21 (a "Product Liability
-----------------
Claim"), such representation and warranty shall, for purposes of such claim by
-----
the Purchaser, survive for a period of ten years following the Closing Date,
(iii) the representations and warranties set forth in Section 3.01 through
Section 3.04 shall, subject to applicable statutes of limitations, survive
indefinitely, (iv) the representations and warranties set forth in Section 3.13
shall not survive the Closing and shall have no force or effect following the
Closing, and (v) the representations and warranties set forth in Section 3.14
that are not qualified by knowledge shall not survive the Closing and shall have
no force or effect following the Closing. The indemnities contemplated by this
Article IX shall remain in full force and effect, notwithstanding any
investigation made by any Person at any time and shall survive indefinitely with
respect to any claim made by any Purchaser Indemnified Party or Seller
Indemnified Party prior to the end of the applicable survival period set forth
in this Section 9.01(a) or in Section 9.01(b).
(b) Notwithstanding anything to the contrary in this Agreement, the
obligation of the Seller to indemnify and hold harmless the Purchaser
Indemnified Parties pursuant to Section 9.03(c) shall expire on the tenth
anniversary of the Closing Date and thereafter no claim may be asserted nor may
any action be commenced against the Seller pursuant to Section 9.03(c).
(c) Notwithstanding anything to the contrary in this Agreement,
subject to applicable statutes of limitations, the obligation of the Seller to
indemnify and hold harmless the Purchaser Indemnified Parties pursuant to
Sections 9.03(a)(ii), 9.03(a)(iii), 9.03(a)(iv) and 9.03(a)(v) shall survive
indefinitely.
SECTION 9.02. Indemnification by the Purchaser. (a) The Purchaser
--------------------------------
agrees, subject to the other terms and conditions of this Agreement, to
indemnify the Seller and its Affiliates, officers, directors, employees, agents,
representatives, successors and assigns (each a "Seller Indemnified Party")
------------------------
against and hold them harmless from all Liabilities, obligations, judgments,
penalties, fines, losses, damages, claims, costs and expenses (including
reasonable attorney's, consultants' and experts' fees) (collectively, "Losses")
------
actually incurred by them arising out of or relating to (i) the breach of any
representation or warranty of the Purchaser
62
herein or in the Ancillary Agreements (provided, however, that if any portion of
-------- -------
any representation or warranty is qualified by "materiality" or similar
qualifiers, for purposes of determining whether such representation or warranty
has been breached for purposes of this Section 9.02(a)(i), such portion of such
representation or warranty shall be read as is if not so qualified),(ii) the
breach of any covenant or agreement of the Purchaser herein (other than Article
VII, it being understood that the sole remedy for breach thereof shall be
pursuant to Article VII) or in the Ancillary Agreements, (iii) all claims by
third parties that arise out of, or relate to, the use, after the Closing Date,
by the Purchaser or any of its Affiliates or the Subsidiaries of any Retained
Name or Xxxx and (iv) the conduct of the Electrophysiology Business following
the Closing (except for any such Losses arising out of or in any way related
solely to any breach of any covenant, agreement, representation or warranty by
the Seller herein or for which the Seller is required to provide indemnification
pursuant to Section 9.03, 5.18, 5.19 or 5.20). Notwithstanding anything in
Article IX to the contrary, the sole remedy for breach of the representations,
warranties, covenants and agreements arising under Article VII shall be pursuant
to Article VII. Notwithstanding anything in Article IX to the contrary, no claim
may be asserted nor may any action be commenced against the Purchaser pursuant
to Section 9.02(a)(i), unless written notice of such claim or action is received
by the Purchaser describing in reasonable detail, in light of the information
available to the Seller, the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the date on which the
representation or warranty on which such claim or action is based ceases to
survive as set forth in Section 9.01. Notwithstanding anything to the contrary
in this Agreement, no claim may be made against the Purchaser for
indemnification pursuant to Section 9.02(a)(i) with respect to any individual
item of Loss or items of Losses arising out of substantially similar facts and
circumstances, unless such item or items of Losses exceed $100,000, and no claim
may be made against the Purchaser pursuant to Section 9.02(a)(i) unless the
aggregate of all Losses to the Seller Indemnified Parties shall exceed $8
million, and the Purchaser shall then be required to pay or be liable for the
entire amount of any such Losses. Notwithstanding anything to the contrary in
this Agreement, no Seller Indemnified Party shall be indemnified pursuant to
Section 9.02(a)(i), if and to the extent that the aggregate of all Losses of the
Seller Indemnified Parties for which the Seller Indemnified Parties shall have
received indemnification pursuant to Section 9.02(a)(i), shall have exceeded an
amount equal to 30% of the Base Purchase Price.
(b) Payments by the Purchaser pursuant to Section 9.02(a) shall be
limited to the amount of any Loss that remains after deducting therefrom any Tax
benefit to the Seller Indemnified Parties actually realized by the Seller
Indemnified Parties and any insurance proceeds and any indemnity, contribution
or other similar payment actually recovered by the Seller Indemnified Parties
from any third party with respect thereto. The Seller Indemnified Parties shall
use all reasonable efforts to seek and recover any Tax benefits, any insurance
proceeds and any indemnity, contribution or other similar payments available to
each of them with respect to any Loss for which such Seller Indemnified Party
seeks indemnification pursuant to Section 7.01 or 9.02(a).
63
(c) A Seller Indemnified Party shall give the Purchaser prompt
written notice of any claim, assertion, event or proceeding by or in respect of
a third party of which a Seller Indemnified Party has knowledge concerning any
Loss as to which a Seller Indemnified Party requests indemnification hereunder;
provided, however, that the failure to give such notice shall not relieve the
-------- -------
Purchaser from any Liability or obligation pursuant to this Section 9.02 unless
and only to the extent the Purchaser is materially prejudiced thereby. The
Purchaser shall have the right to assume and control, through counsel reasonably
acceptable to the Seller, the defense or settlement of any such claim or
proceeding at its own expense; provided, however, that the Purchaser shall not
-------- -------
enter into any settlement, other than a settlement for monetary damages only
which includes a release of the Seller Indemnified Party of all liability in
connection with such claim or proceeding, without the prior written consent of
the Seller Indemnified Party (which consent shall not be unreasonably withheld).
If the Purchaser elects to assume the defense of any such claim or proceeding,
the Seller Indemnified Party may participate in such defense, but in such case
the expenses of the Seller Indemnified Party shall be paid by the Seller
Indemnified Party. The Seller Indemnified Party shall provide the Purchaser
with reasonable access to its records and personnel relating to any such claim,
assertion, event or proceeding during normal business hours and shall otherwise
cooperate with the Purchaser in the defense or settlement thereof, and the
Purchaser shall reimburse the Seller Indemnified Party for all the reasonable
out-of-pocket expenses of such Seller Indemnified Party in connection therewith;
provided, however, that neither the Seller nor the Purchaser shall be required
-------- -------
pursuant to this Section 9.03 to disclose any privileged information or any
attorney work product. If the Purchaser elects to assume the defense of any
such claim or proceeding, the Seller Indemnified Party shall not pay, or permit
to be paid, any part of any claim or demand arising from such asserted
liability, unless the Purchaser consents in writing to such payment or unless
the Purchaser, subject to the last sentence of this Section 9.02(c), withdraws
from the defense of such asserted liability, or unless a final judgment from
which no appeal may be taken by or on behalf of the Purchaser is entered against
the Seller Indemnified Party for such liability. If the Purchaser shall fail to
undertake any such defense, the Seller Indemnified Party shall have the right to
undertake the defense or settlement thereof, at the Purchaser's expense. If the
Seller Indemnified Party assumes the defense of any such claim or proceeding
pursuant to this Section 9.02(c) and proposes to settle such claim or proceeding
prior to a final judgment thereon or to forgo appeal with respect thereto, then
the Seller Indemnified Party shall give the Purchaser prompt written notice
thereof and the Purchaser shall have the right to participate in the settlement
or assume or reassume the defense of such claim or proceeding.
(d) The Seller hereby acknowledges and agrees that (except in the
case of fraud, in which case the Seller reserves any and all rights and remedies
available to it) its sole and exclusive remedy with respect to any and all
claims relating to the subject matter of this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby shall be
pursuant to the indemnification provisions set forth in Article VII and in this
Article IX and specific performance as contemplated by Section 11.15. In
furtherance of the foregoing, the Seller hereby waives, to the fullest extent
permitted under applicable Law, any and all rights,
64
claims and causes of action it may have against the Purchaser or any of its
Affiliates arising under or based upon any Law (including, without limitation,
any such rights, claims or causes of action arising under or based upon common
law or otherwise) with respect to any and all claims relating to the subject
matter of this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby except as set forth in the preceding sentence
(except in the case of fraud, in which case the Seller reserves any and all
rights and remedies available to it).
(e) Except as expressly set forth in this Agreement and the Ancillary
Agreements, the Purchaser is not making any representation, warranty, covenant
or agreement with respect to the matters contained herein. Anything herein to
the contrary notwithstanding, no breach of any representation, warranty,
covenant or agreement contained herein shall give rise to any right on the part
of the Seller, after the consummation of the purchase and sale of the
Electrophysiology Business contemplated by this Agreement, to rescind this
Agreement or any of the transactions contemplated hereby (except in the case of
fraud, in which case the Seller reserves any and all rights and remedies
available to it).
(f) Notwithstanding anything to the contrary in this Agreement, the
Purchaser shall not be liable to or otherwise responsible to the Seller or any
of its Affiliates or any other Person for consequential, incidental or punitive
damages or for diminution in value or lost profits that arise out of or relate
to this Agreement or the performance or breach thereof.
SECTION 9.03. Indemnification by the Seller. (a) The Seller agrees,
-----------------------------
subject to the other terms and conditions of this Agreement, to indemnify the
Purchaser and its Affiliates, officers, directors, employees, agents,
representatives, successors and assigns (each a "Purchaser Indemnified Party")
---------------------------
against and hold them harmless from all Losses actually incurred by them arising
out of or relating to (i) the breach of any representation or warranty of the
Seller herein (other than breaches of representations or warranties in Section
3.13 or breaches of representations or warranties in Section 3.14 that are not
qualified by knowledge) or in the Ancillary Agreements (provided, however, that
-------- -------
if any portion of any representation or warranty is qualified by "materiality",
"Material Adverse Effect" or similar qualifier, for purposes of determining
whether such representation or warranty has been breached for purposes of this
Section 9.03(a)(i) such portion of such representation or warranty shall be read
as is if not so qualified), (ii) the breach of any covenant or agreement of the
Seller herein or in the Ancillary Agreements, (iii) all Liabilities to any
Person arising under or in connection with the agreements set forth in Section
9.03(a) of the Disclosure Schedule (iv) all Liabilities arising under or in
connection with the Xxxxxxxxx Litigation and (v) the Excluded Liability.
Notwithstanding anything in Article IX to the contrary, the sole remedy for
breach of the representations, warranties, covenants and agreements arising
under Section 3.18 and Article VII shall be pursuant to Article VII.
Notwithstanding anything in this Article IX to the contrary, no claim may be
asserted nor may any action be commenced against the Seller pursuant to Section
9.03(a)(i) or Section 9.03(c) unless written notice of such claim or action is
received by the Seller describing in reasonable detail, in light of the
information available to the Purchaser, the
65
facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the representation or warranty or
obligation to indemnify on which such claim or action is based ceases to survive
or expires as set forth in Section 9.01.
(b) Notwithstanding anything to the contrary in this Agreement, no
claim may be made against the Seller for indemnification pursuant to Section
9.03(a)(i) (except with respect to a Product Liability Claim) with respect to
any individual item of Loss or items of Losses arising out of substantially
similar facts and circumstances, unless such item or items of Losses exceed
$100,000, and no claim may be made against the Seller pursuant to Section
9.03(a)(i) (except with respect to a Product Liability Claim) unless the
aggregate of all such Losses of the Purchaser Indemnified Parties referred to in
Section 9.03(a)(i) (other than those with respect to a Product Liability Claim)
shall exceed $8 million (the "Basket Amount"), and the Seller shall then be
-------------
required to pay or be liable for the entire amount of any such Losses.
Notwithstanding anything in this Agreement to the contrary, no Purchaser
Indemnified Party shall be indemnified pursuant to Sections 7.01(a) and
9.03(a)(i) if, and to the extent that the aggregate of all Losses of the
Purchaser Indemnified Parties for which the Purchaser Indemnified Parties
previously shall have received indemnification pursuant to Section 9.03(a)(i),
together with the aggregate of all amounts with respect to Taxes for which the
Purchaser previously shall have received indemnification pursuant to Section
7.01(a), shall have exceeded an amount equal to 30% of the Base Purchase Price
(the "Indemnification Cap"). Notwithstanding anything to the contrary in this
-------------------
Agreement, a Purchaser Indemnified Party shall be permitted to make a claim
against the Seller for indemnification pursuant to (i) Sections 9.03(a)(ii),
9.03(a)(iii), 9.03(a)(iv) and 9.03(a)(v), (ii) Section 9.03(a)(i) with respect
to a Product Liability Claim,(iii) a claim for breach of a representation or
warranty set forth in Section 3.01 through 3.04 or (iv) Section 9.03(c),
regardless of whether or not the aggregate of all Losses pursuant to Section
9.03(a)(i) exceeds the Basket Amount or the Indemnification Cap (and the
Purchaser Indemnified Party shall be entitled to recover the full amount of any
Losses that the Seller is required by this Agreement to pay to the Purchaser
Indemnified Parties with respect to such claim).
(c) The Seller agrees, subject to the other terms and conditions of
this Agreement, to indemnify the Purchaser Indemnified Parties against and hold
them harmless from (i) 75% of the first $50 million of Environmental Losses,
(ii) 90% of the next $100 million of Environmental Losses and (iii) 100% of all
Environmental Losses in excess of $150 million. "Environmental Losses" means
Losses actually incurred by the Purchaser Indemnified Parties arising out of or
relating to any Environmental Condition (including, without limitation, (x) the
presence of Hazardous Substances at, on, or under, the migration of Hazardous
Substances to or from, the transportation of Hazardous Substances to or from, or
the disposal or recycling at any location of any Hazardous Substances generated
at any premises or property currently or formerly owned, leased, occupied or
used by or in connection with the Electrophysiology Business at or prior to the
Closing or (y) any violation of or non-compliance with any Environmental Law)
relating to the Electrophysiology Business occurring at or prior to the Closing.
66
(d) Payments by the Seller pursuant to Section 7.01(a), Section
9.03(a) and Section 9.03(c) shall be limited to the amount of any Loss that
remains after deducting therefrom (i) any Tax benefit to the Purchaser
Indemnified Parties actually realized by the Purchaser Indemnified Parties, (ii)
any insurance proceeds and any indemnity, contribution or other similar payment
actually recovered by the Purchaser Indemnified Parties from any third party
with respect thereto, and (iii) any reserves provided for the item in question
in the Closing Balance Sheet. The Purchaser Indemnified Parties shall use all
reasonable efforts to seek and recover any Tax Benefits, any insurance proceeds
and any indemnity, contribution or similar payments available to each of them
with respect to any Loss for which such Purchaser Indemnified Party seeks
indemnification pursuant to Section 7.01(a), Section 9.03(a) or Section 9.03(c).
(e) A Purchaser Indemnified Party shall give the Seller prompt
written notice of any claim, assertion, event or proceeding by or in respect of
a third party of which such Purchaser Indemnified Party has knowledge concerning
any Loss as to which such Purchaser Indemnified Party requests indemnification
hereunder; provided, however, that the failure to give such notice shall not
-------- -------
relieve the Seller from any Liability or obligation pursuant to this Section
9.03 unless and only to the extent that the Seller is materially prejudiced
thereby. (The Seller hereby acknowledges receipt of notice from the Purchaser
with respect to any Losses arising under or in connection with the agreements
set forth in Section 9.03(a) of the Disclosure Schedule.) The Seller shall have
the right to assume and control, through counsel reasonably acceptable to the
Purchaser, the defense or settlement of any such claim or proceeding at its own
expense; provided, however, that the Seller shall not enter into any settlement,
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other than a settlement for monetary damages only which includes a release of
the Purchaser Indemnified Party of all liability in connection with such claim
or proceeding, without the prior written consent of the Purchaser Indemnified
Party (which consent shall not be unreasonably withheld). If the Seller elects
to assume the defense of any such claim or proceeding, the Purchaser Indemnified
Party may participate in such defense, but in such case the expenses of the
Purchaser Indemnified Party shall be paid by the Purchaser Indemnified Party.
The Purchaser Indemnified Party shall provide the Seller with reasonable access
to its records and personnel relating to any such claim, assertion, event or
proceeding during normal business hours and shall otherwise cooperate with the
Seller in the defense or settlement thereof, and the Seller shall reimburse the
Purchaser Indemnified Party for all its reasonable out-of-pocket expenses in
connection therewith; provided, however, that neither the Purchaser or the
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Seller shall be required pursuant to this Section 9.03 to disclose any
privileged information or any attorney work product. If the Seller elects to
assume the defense of any such claim or proceeding, the Purchaser Indemnified
Party shall not pay, or permit to be paid, any part of any claim or demand
arising from such asserted liability unless the Seller consents in writing to
such payment or unless the Seller, subject to the last sentence of this Section
9.03(e), withdraws from the defense of such asserted liability or unless a final
judgment from which no appeal may be taken by or on behalf of the Seller is
entered against the Purchaser Indemnified Party for such liability. If the
Seller shall fail to undertake any such defense, the Purchaser Indemnified Party
shall have the right to undertake the defense or settlement thereof, at the
Seller's expense. If the Purchaser
67
Indemnified Party assumes the defense of any such claim or proceeding pursuant
to this Section 9.03(e) and proposes to settle such claim or proceeding prior to
a final judgment thereon or to forgo any appeal with respect thereto, then the
Purchaser Indemnified Party shall give the Seller prompt written notice thereof
and the Seller shall have the right to participate in the settlement or assume
or reassume the defense of such claim or proceeding.
(f) The Purchaser hereby acknowledges and agrees (except in the case
of fraud, in which case the Purchaser reserves any and all rights and remedies
available to it) that its sole and exclusive remedy with respect to any and all
claims relating to the subject matter of this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby, including,
without limitation, all claims with respect to matters relating to Intellectual
Property, shall be pursuant to the indemnification provisions set forth in
Sections 5.18, 5.19 or 5.20, Article VII and in this Article IX and specific
performance as contemplated by Section 11.15. In furtherance of the foregoing,
the Purchaser hereby waives, to the fullest extent permitted under applicable
Law, any and all rights, claims and causes of action it may have against the
Seller or any of its Affiliates arising under or based upon any Law (including,
without limitation, any such rights, claims or causes of action arising under or
based upon common law or otherwise) with respect to any and all claims relating
to the subject matter of this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby except as set forth in the
preceding sentence (except in the case of fraud, in which case the Purchaser
reserves any and all rights and remedies available to it).
(g) Except as expressly set forth in this Agreement and the Ancillary
Agreements, the Seller is not making any representation, warranty, covenant or
agreement with respect to the Electrophysiology Business or any other matter
contained herein, including without limitation, with respect to matters related
to Intellectual Property. Anything herein to the contrary notwithstanding, no
breach of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of the Purchaser, after the
consummation of the purchase and sale of the Electrophysiology Business
contemplated hereby, to rescind this Agreement or any of the transactions
contemplated hereby (except in the case of fraud, in which case the Purchaser
reserves any and all rights and remedies available to it).
(h) Notwithstanding anything to the contrary in this Agreement, the
Seller shall not be liable to or otherwise responsible to the Purchaser or any
of its Affiliates or any other Person for consequential, incidental or punitive
damages or for diminution in value or lost profits that arise out of or relate
to this Agreement or the performance or breach thereof.
68
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any
-----------
time prior to the Closing:
(a) by the mutual written consent of the Seller and the Purchaser; or
(b) by either the Seller or the Purchaser, if the Closing shall not
have occurred prior to March 31, 1999; provided, however, that the right to
-------- -------
terminate this Agreement under this Section 10.01(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or shall have resulted in, the failure of the
Closing to occur prior to such date; or
(c) by either the Seller or the Purchaser, in the event of the
issuance of a final, nonappealable Governmental Order restraining or
prohibiting the transactions contemplated hereby; or
(d) by the Purchaser if, between the date hereof and the time
scheduled for the Closing, the Seller shall not have complied in all
material respects with any material covenant or agreement to be complied
with by it and contained in this Agreement;
(e) by the Seller if, between the date hereof and the time scheduled
for the Closing, the Purchaser shall not have complied in all material
respects with any material covenant or agreement to be complied with by it
and contained in this Agreement;
(f) by the Seller, (i) at any time during the period commencing on
the 46th calendar day after the date of this Agreement and ending 10
Business Days from the date thereof, if Sales Representatives in the United
States who are responsible for at least 25% of the Designated Sales have
not entered into Employment Agreements (and with respect to whom all
conditions precedent (other than the occurrence of the Closing) in such
Employment Agreements have not been satisfied or waived) within 45 calendar
days after the date of this Agreement and the Purchaser has not irrevocably
waived the condition set forth in Section 8.02(f) or (ii) the Purchaser has
failed to comply with the covenants and agreements set forth in the last
sentence of Section 2.04(b) such that the Seller has not been notified
whether Sales Representatives in the United States who are responsible for
at least 25% of Designated Sales have entered into Employment Agreements
within 45 calendar days after the date of this Agreement; or
(g) by the Seller, (i) at any time during the period commencing on
the 61st calendar day after the date of this Agreement and ending 10
Business Days from the date
69
thereof, if Sales Representatives in the United States who are responsible
for at least 50% of the Designated Sales have not entered into Employment
Agreements (and with respect to whom all conditions precedent (other than
the occurrence of the Closing) in such Employment Agreements have not been
satisfied or waived) within 60 calendar days after the date of this
Agreement and the Purchaser has not irrevocably waived the condition set
forth in Section 8.02(f) or (ii) the Purchaser has failed to comply with
the covenants and agreements set forth in the last sentence of Section
2.04(b) such that the Seller has not been notified whether Sales
Representatives in the United States who are responsible for at least 50%
of Designated Sales have entered into Employment Agreements within 60
calendar days after the date of this Agreement.
SECTION 10.02. Effect of Termination. (a) In the event of the
---------------------
termination of this Agreement by either party prior to the consummation of the
Closing pursuant to any provision of this Agreement:
(i) the Seller shall, within three business days after such
termination, deliver or cause to be delivered to the Purchaser an executed
counterpart of the Settlement Agreement; and
(ii) the Purchaser shall, within three business days after such
termination, deliver or cause to be delivered to the Seller: (A) an
executed counterpart of the Settlement Agreement and (B) $200,000,000 in
cash; provided, however, that if the Agreement is terminated by either
-------- -------
party pursuant to Section 10.01(b) and the condition set forth in Section
8.02(f) is not fulfilled as of the date of such termination (or irrevocably
waived by the Purchaser prior to the third Business Day before March 31,
1999), the amount of the payment shall be $250,000,000 in cash. Such
payment shall be made by wire transfer in immediately available funds to an
account for the benefit of Sulzer Intermedics Inc. as designated in writing
by the Seller to the Purchaser.
(b) In the event of termination of this Agreement as provided in
Section 10.01, this Agreement shall forthwith become void and there shall be no
further liability on the part of any party hereto (a) except as set forth in
Sections 5.02(c), 10.02(a) and 11.01 and (b) nothing herein shall relieve either
party from liability for any breach hereof.
SECTION 10.03. Waiver. Either party hereto may (a) extend the time
------
for the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto or (c)
waive compliance with any of the agreements of the other party contained herein.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party to be bound thereby.
70
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. Except as otherwise specified in this
--------
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred; provided, however, that no such costs or expenses shall be
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borne by any Subsidiary.
SECTION 11.02. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 11.02):
(a) if to the Seller:
Sulzer Medica USA Holding Co.
Xxxxxxxxxxxxxx 00
0000 Xxxxxxxxxx, Xxxxxxxxxxx
Telecopy No.: 011-41-52-262-0059
Attention: Secretary
with copies to:
Sulzer Medica USA
000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx Xxxxx
and
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.,
Xxxxxxx X. Xxxxx, Esq.
71
(b) if to the Purchaser:
Guidant Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: General Counsel
with copies to:
Guidant Corporation
0000 Xxxxxxx Xxxxxx Xxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
and
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx Xxxx, Esq.,
Xxxxxxxx Xxxxxxxx, Esq.
SECTION 11.03. Public Announcements. Except as required by Law or by
--------------------
the requirements of any securities exchange on which the securities of a party
hereto are listed, no party to this Agreement shall make, or cause to be made,
any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without the prior written consent of the other party, and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement.
SECTION 11.04. Headings. The descriptive headings contained in this
--------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
72
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. This Agreement (including the
----------------
Disclosure Schedule and Exhibits hereto) constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, other than the
Confidentiality Agreement, with respect to the subject matter hereof. In the
event of any conflict between the terms of this Agreement and the terms of any
Ancillary Agreement, the terms of this Agreement shall prevail.
SECTION 11.07. Assignment; Fulfillment of Obligations. (a) This
--------------------------------------
Agreement shall not be assigned without the express written consent of the
Seller and the Purchaser (which consent may be granted or withheld in the sole
discretion of the Seller and the Purchaser), except that either party hereto may
assign its rights hereunder to an Affiliate of such party and the Purchaser may
assign its rights hereunder to purchase the Tachycardia Assets to a Subsequent
Purchaser solely in connection with the sale or transfer of the Tachycardia
Assets pursuant to Section 5.05; provided, however, that any such assignment
-------- -------
shall not relieve the assigning party of its obligations hereunder.
Notwithstanding anything to the contrary in this Agreement, the Purchaser shall
be permitted to assign its rights under Section 9.03(c) to receive
indemnification with respect to a particular parcel of Owned Real Property to a
Person who purchases or otherwise acquires such parcel of Owned Real Property
from the Purchaser and such rights shall be assignable to any subsequent Person
who purchases or otherwise acquires such property.
(b) Any obligation of any party to any other party under this
Agreement, which obligation is performed, satisfied or fulfilled by an Affiliate
of such party, shall be deemed to have been performed, satisfied or fulfilled by
such party.
SECTION 11.08. No Third Party Beneficiaries. Except as set forth in
----------------------------
the provisions of Article IX relating to the Seller Indemnified Parties or the
Purchaser Indemnified Parties, this Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person, including, without limitation, any Sales Representatives, any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or
---------
modified except by an instrument in writing signed by, or on behalf of, the
Seller and the Purchaser.
SECTION 11.10. Governing Law. This Agreement shall be governed by
-------------
the laws of the State of New York. All actions and proceedings arising out of
or relating to this Agreement
73
or the Ancillary Agreements shall be heard and determined in any New York State
or federal court sitting in the City of New York, County of Manhattan, and the
parties hereto hereby irrevocably submit to the exclusive jurisdiction of such
courts in any such action or proceeding and irrevocably waive any defense of an
inconvenient forum to the maintenance of any such action or proceeding.
SECTION 11.11. Payments on Behalf of Affiliates. Payments made or
--------------------------------
received by the Seller pursuant to Article II, Article VII or Article IX hereof
shall, in appropriate circumstances, be made on behalf of, or received in trust
for the benefit of, the Affiliate of the Seller that is the appropriate seller
of Shares. Payments made or received by the Purchaser pursuant to Article II,
Article VII, Article IX or Section 10.02 hereof shall, in appropriate
circumstances, be made on behalf of, or received in trust for the benefit of,
the relevant Subsidiary or Affiliate of the Purchaser. The Seller or the
Purchaser, as the case may be, may direct in writing any such payment to be made
by or to the appropriate Affiliate, and the other party shall comply with any
such direction received at least two Business Days prior to the date such
payment is due.
SECTION 11.12. Counterparts. This Agreement may be executed in one
------------
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.13. Disclosure Schedule. The parties hereto acknowledge
-------------------
that certain matters set forth in the Disclosure Schedule are included for
informational purposes only, notwithstanding the fact that, because they do not
rise above applicable materiality thresholds or otherwise, they would not be
required to be set forth therein by the terms of this Agreement, and that
disclosure of such matters shall not be taken as an admission by the Seller or
any of its Affiliates that such disclosure is required to be made under the
terms of any provision of this Agreement and in no event shall the disclosure of
such matters be deemed or interpreted to broaden or otherwise amplify the
representations and warranties contained in this Agreement. Disclosure of any
fact or item in a section of the Disclosure Schedule shall be deemed to be
disclosed with respect to another section if a cross-reference appears.
SECTION 11.14. Currency. Unless otherwise specified in this
--------
Agreement, all references to currency, monetary values and dollars set forth
herein shall mean United States (U.S.) dollars and all payments hereunder shall
be made in United States dollars.
SECTION 11.15. Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
74
SECTION 11.16. Waiver of Jury Trial. Each of the parties hereto
--------------------
irrevocably and unconditionally waives trial by jury in any legal action or
proceeding relating to this Agreement, the Ancillary Agreements or the
transactions contemplated hereby and thereby and for any counterclaim therein.
[The Remainder of This Page is Intentionally Left Blank]
75
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SULZER MEDICA USA HOLDING CO.
By: /s/ Xx. Xxxxx Xxxxxx
---------------------------------
Xx. Xxxxx Xxxxxx
Agent
GUIDANT CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------
Xxxxx X. Xxxxxxxxx
Chairman of the Board of Directors
SULZER MEDICA LTD. hereby agrees to cause the Seller to perform each
and every obligation of the Seller under this Agreement and the Ancillary
Agreements (as each may be amended, waived, modified or extended from time to
time pursuant to the terms thereof without notice to Sulzer Medica Ltd.) and
guarantees the performance thereof. The Purchaser need not exhaust its remedies
against the Seller prior to enforcing its rights pursuant to this Guarantee
against Sulzer Medica Ltd.
SULZER MEDICA USA HOLDING CO.
By: /s/ Xx. Xxxxx Xxxxxx
---------------------------------
Xx. Xxxxx Xxxxxx
Agent
GUIDANT CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------
Xxxxx X. Xxxxxxxxx
Chairman of the Board of Directors
[EXHIBITS AND SCHEDULES INTENTIONALLY OMITTED]
