As Filed with the Securities and Exchange Commission on March 1, 2002
Registration No. 333-77048
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
Amendment No. 1
To
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
RESPIRONICS, INC.
(Exact name of registrant as specified in its charter)
-----------------
Delaware 3842 25-1304989
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation ClassificationCode Number)
ororganization)
1501 Ardmore Boulevard
Pittsburgh, Pennsylvania 15221
(412) 731-2100
(Address, including ZIP code, and telephone number, including area
code, of registrant's principal executive offices)
-----------------
James W. Liken
President and Chief Executive Officer
Respironics, Inc.
1501 Ardmore Boulevard
Pittsburgh, Pennsylvania 15221
(412) 731-2100
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
-----------------
Copies to:
Steven P. Fulton, Esq. David L. DeNinno, Esq. Thomas M. Haythe, Esq. John J. Butler, Esq.
Vice President and Reed Smith LLP General Counsel Torys LLP
General 435 Sixth Novametrix Medical 237 Park Avenue
CounselRespironics, Inc. AvenuePittsburgh, Pennsylvania Systems Inc. New York, New York 10017
1501 Ardmore Boulevard 15219 90 Park Avenue, 15th Floor (212) 880-6321
Pittsburgh, Pennsylvania (412) 288-3214 New York, New York 10016
15221 (212) 210-9583
(412) 473-4001
-----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE AND ALL OTHER CONDITIONS OF THE MERGER OF RESPIRONICS HOLDINGS, INC.,
A WHOLLY-OWNED SUBSIDIARY OF THE REGISTRANT, WITH AND INTO NOVAMETRIX MEDICAL
SYSTEMS INC. PURSUANT TO THE MERGER AGREEMENT DESCRIBED IN THE ENCLOSED PROXY
STATEMENT/PROSPECTUS HAVE BEEN SATISFIED OR WAIVED.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
-----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective time until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
[LOGO OF NOVAMETRIX]
March 6, 2002
To the Stockholders of
NOVAMETRIX MEDICAL SYSTEMS INC.
You are cordially invited to attend a special meeting of stockholders of
Novametrix Medical Systems Inc. to be held at 10:00 a.m., Eastern Daylight
Time, on April 9, 2002, at The Waldorf-Astoria, 301 Park Avenue, New York,
New York, unless postponed or adjourned to a later date. At the meeting, you
will be asked to consider and vote upon a proposal to merge Novametrix and
Respironics Holdings, Inc., a wholly-owned subsidiary of Respironics, Inc. If
the merger is completed, Novametrix will become a wholly-owned subsidiary of
Respironics, Inc.
Upon successful completion of the merger, you will receive shares of
Respironics common stock in exchange for your shares of Novametrix common
stock. Respironics common stock is listed on the Nasdaq Stock Market under the
trading symbol "RESP". This tax-free, stock-for-stock transaction is valued at
[$ ] per share to Novametrix stockholders based on Respironics' March 4, 2002
closing price of [$ ]. The actual exchange ratio will be determined based upon
the weighted average selling price of Respironics common stock during a 20-day
trading period prior to the closing and is subject to a collar as described
below.
Under the terms of the collar, if Respironics' weighted average selling
price is above $35.00 per share over a 20-day trading period ending three days
prior to the closing of the merger, you will receive Respironics common stock
in an amount equal to $8.75 per share of Novametrix common stock. If
Respironics' weighted average selling price is from $32.00 to $35.00 over the
relevant trading period, you will receive 0.25 shares of Respironics common
stock for each share of Novametrix common stock, resulting in an amount between
$8.00 and $8.75 per share. If Respironics' weighted average selling price is
from $30.00 to $31.99, you will receive Respironics common stock in an amount
equal to $8.00 per share of Novametrix common stock. If Respironics' weighted
average selling price is below $30.00, you will receive 0.2667 shares of
Respironics common stock for each share of Novametrix common stock unless
Novametrix exercises its right to terminate the merger as provided in the
merger agreement with Respironics Holdings. You will be entitled to receive
cash for any fractional share of Respironics common stock that you would
otherwise be entitled to receive in the merger. You will not recognize gain or
loss for federal income tax purposes as a result of the merger, except with
respect to cash received for fractional shares.
Your board of directors has approved the merger and the merger agreement
with Respironics Holdings and has determined that the merger and the merger
agreement are advisable, fair to and in the best interests of Novametrix and
its stockholders. Accordingly, the Novametrix board of directors recommends
that you vote FOR the adoption of the merger agreement at the special meeting.
Your vote is important, regardless of the number of shares you own. We
cannot complete the merger unless the holders of a majority of the outstanding
shares of Novametrix common stock vote to adopt the merger agreement. Holders
of outstanding shares of Novametrix common stock at the close of business on
February 8, 2002 are entitled to vote at the special meeting. Whether or not
you are able to attend the meeting personally, please complete, sign, date and
return the enclosed proxy card promptly in the accompanying envelope, which
requires no postage if mailed in the United States. You are, of course, welcome
to attend the meeting and vote in person, even if you have previously returned
your proxy card.
If you fail to return your proxy card or to vote in person at the meeting,
it will have the same effect as a vote against the merger. Regardless of the
number of shares you own, your vote is important.
The accompanying proxy statement/prospectus provides you with detailed
information about the merger. We encourage you to read this entire document
carefully. In particular, you should carefully consider the discussion in the
section entitled "Risk Factors" beginning on page 20, describing some of the
risks that you should consider in evaluating the merger.
I look forward to your support.
Sincerely,
/s/ William J. Lacourciere
William J. Lacourciere
Chairman and Chief Executive Officer
THIS PROXY STATEMENT/PROSPECTUS AND THE INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SHARES OF RESPIRONICS COMMON STOCK
TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated March 6, 2002 and is expected to be
first mailed to Novametrix stockholders on or about March 6, 2002.
[LOGO OF NOVAMETRIX]
-----------------
Notice of Special Meeting of Stockholders
to be held April 9, 2002
-----------------
Wallingford, Connecticut
March 6, 2002
To the Stockholders of
NOVAMETRIX MEDICAL SYSTEMS INC.:
A special meeting of the stockholders of Novametrix Medical Systems Inc.
will be held at The Waldorf-Astoria, 301 Park Avenue, New York, New York, on
April 9, 2002, at 10:00 a.m., Eastern Daylight Time, unless postponed or
adjourned to a later date. The purposes of the special meeting are for you to
consider and vote upon:
1. A proposal to adopt the Agreement and Plan of Merger dated as of
December 17, 2001, by and between Novametrix and Respironics Holdings,
Inc., a Delaware corporation and a direct wholly-owned subsidiary of
Respironics, Inc. In the merger, Novametrix will become a wholly-owned
subsidiary of Respironics, and all outstanding shares of Novametrix
common stock, other than any shares held by parties to the merger
agreement, will be converted into the right to receive a number of
shares of Respironics common stock pursuant to an exchange ratio to be
calculated based on the weighted average selling price of Respironics
common stock during the 20-day trading period ending three days prior to
the completion of the merger.
2. Any other business properly brought before the meeting, including any
adjournments or postponements of the special meeting, if necessary.
Only holders of record of shares of Novametrix common stock at the close of
business on February 8, 2002 will be entitled to notice of and to vote at the
special meeting or any adjournment or postponement of the special meeting. A
list of Novametrix stockholders entitled to vote at the special meeting will be
available during normal business hours at our executive offices in Wallingford,
Connecticut, for at least ten days prior to the special meeting for examination
by any stockholder for any purpose related to the special meeting.
Your vote is very important. We cannot complete the merger unless the
holders of a majority of the outstanding shares of Novametrix common stock
affirmatively vote to adopt the merger agreement. For more information about
the merger, please review the accompanying proxy statement/prospectus, and the
merger agreement attached as Annex A. Novametrix stockholders, including those
who do not vote in favor of adoption of the merger agreement, are not entitled
to appraisal rights, and do not have the right to demand payment for their
shares under the General Corporation Law of the State of Delaware in connection
with the merger.
All stockholders are cordially invited to attend the special meeting.
Whether or not you plan to attend the special meeting, you are urged to
complete and sign the enclosed proxy, and return it promptly to Novametrix. At
any time prior to being voted, proxies are revocable by delivering written
notice to Novametrix in accordance with the instructions set forth in the proxy
statement or by voting at the special meeting in person.
The Novametrix board of directors has approved the merger and the merger
agreement with Respironics Holdings, Inc. and has determined that the merger
and the merger agreement are advisable, fair to and in the best interests of
Novametrix and its stockholders. Accordingly, the Novametrix board recommends
that you vote FOR adoption of the merger agreement at the special meeting, as
described in detail in the accompanying proxy statement/prospectus.
By Order of the Board of Directors,
/s/ Joseph A. Vincent
Joseph A. Vincent, Secretary
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Novametrix and Respironics from other documents
that are not included in or delivered with this proxy statement/prospectus.
This information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference into this proxy
statement/prospectus by accessing the Securities and Exchange Commission's
website maintained at "http://www.sec.gov" or by requesting copies in writing
or by telephone from the appropriate company at the following addresses:
RESPIRONICS, INC. NOVAMETRIX MEDICAL
SYSTEMS INC.
1501 Ardmore Blvd. 5 Technology Drive
Pittsburgh, Pennsylvania Wallingford, Connecticut
15221 06492
Telephone (412) 731-2100 Telephone: (203) 265-7701
Attention: Dorita A. Attention: Joseph A.
Pishko, Corporate Vincent, Corporate
Secretary Secretary
If you would like to request documents, please do so by April 2, 2002, five
business days prior to the special meeting of Novametrix stockholders, in order
to receive them before the Novametrix special meeting. We will mail the
documents you request by first class mail, or another equally prompt means, by
the next business day after we receive your request.
See "Where You Can Find More Information" on page 84.
TABLE OF CONTENTS
Questions and Answers About the Merger and the Special Meeting.................................. 1
Summary......................................................................................... 5
The Companies................................................................................ 5
Respironics, Inc............................................................................. 5
Novametrix Medical Systems Inc............................................................... 6
Respironics Holdings, Inc.................................................................... 6
The Merger Agreement......................................................................... 7
Board of Directors Recommendation to Novametrix Stockholders................................. 11
Opinion of Novametrix's Financial Advisor.................................................... 12
The Novametrix Special Meeting............................................................... 12
Vote Required to Adopt the Merger Agreement.................................................. 12
The Voting Agreements........................................................................ 12
Interests of Certain Persons in the Merger................................................... 12
Stock Market Listing......................................................................... 13
Material United States Federal Income Tax Consequences of the Merger......................... 13
Accounting Treatment......................................................................... 13
No Appraisal Rights.......................................................................... 13
Material Differences Between Rights of Holders of Common Stock of Respironics and Novametrix. 13
Financial Summary............................................................................... 14
Market Price Data............................................................................ 14
Selected Historical Financial Data of Respironics............................................ 15
Selected Historical Financial Data of Novametrix............................................. 16
Selected Respironics and Novametrix Unaudited Proforma Combined Financial Data............... 17
Unaudited Comparative Per Share Data......................................................... 18
Historical Market Prices and Dividends....................................................... 19
Risk Factors.................................................................................... 20
Risks Related to the Merger.................................................................. 20
Risks Related to the Combined Businesses of Respironics and Novametrix....................... 23
Special Note Regarding Forward-Looking Statements............................................... 26
The Merger...................................................................................... 27
General...................................................................................... 27
Background of the Merger..................................................................... 27
Novametrix's Rationale for the Merger; Recommendation of the Novametrix Board of Directors... 30
Respironics' Rationale for the Merger........................................................ 31
Opinion of Novametrix's Financial Advisor.................................................... 32
Stock Market Listing......................................................................... 42
Material United States Federal Income Tax Consequences of the Merger......................... 42
Accounting Treatment......................................................................... 43
Regulatory Approvals......................................................................... 43
No Appraisal Rights.......................................................................... 44
Interests of Certain Persons in the Merger................................................... 44
Delisting and Deregistration of Novametrix Common Stock...................................... 46
Restrictions on Resales by Affiliates of Novametrix.......................................... 46
i
The Novametrix Special Meeting.............................................. 46
Purpose, Time and Place.................................................. 46
Record Date; Voting Power................................................ 47
Votes Required........................................................... 47
Share Ownership of Management and Certain Stockholders................... 47
Voting of Proxies........................................................ 48
Revocability of Proxies.................................................. 48
Solicitation of Proxies.................................................. 48
The Merger Agreement........................................................ 49
General.................................................................. 49
The Merger............................................................... 49
Merger Consideration..................................................... 49
Stock Options............................................................ 50
Stock Purchase Plan...................................................... 50
Warrants................................................................. 51
Cancellation............................................................. 51
Exchange of Shares of Novametrix Common Stock............................ 51
Representations and Warranties........................................... 52
Conduct of Business by Novametrix........................................ 52
Conduct of Business by Respironics....................................... 53
No Solicitation.......................................................... 54
Certain Other Covenants.................................................. 56
Conditions to Completion of the Merger................................... 58
Termination of the Merger Agreement...................................... 60
Amendment and Waiver; Parties in Interest................................ 62
Guarantee................................................................ 62
The Voting Agreements....................................................... 62
Agreement to Vote and Proxy.............................................. 62
Restrictions on Voting................................................... 63
Restrictions on Transfer................................................. 63
Termination.............................................................. 63
Effect of the Voting Agreements.......................................... 63
Security Ownership of Certain Beneficial Owners and Management of Novametrix 64
Certain Beneficial Owners................................................ 64
Directors and Executive Officers......................................... 65
Unaudited Pro Forma Combined Condensed Financial Data....................... 67
Notes to Unaudited Pro Forma Combined Condensed Financial Data.............. 71
ii
Comparison of Rights of Stockholders....................................................... 72
Authorized Capital Stock................................................................ 72
Number of Board of Directors............................................................ 72
Classification of Board of Directors.................................................... 72
Quorum at Board of Directors' Meetings.................................................. 73
Newly Created Directorships and Vacancies............................................... 73
Removal of Directors.................................................................... 73
Officers................................................................................ 73
Special Meetings of Stockholders........................................................ 74
Quorum at Stockholder Meetings.......................................................... 74
Stockholder Action by Written Consent................................................... 74
Advance Notice of Stockholder Proposals for Stockholder Meetings--Content of the Notice. 75
Advance Notice of Stockholder Proposals for Stockholder Meetings--Timing of the Notice.. 75
Amendment of Governing Documents........................................................ 76
Effect of Interested Stockholder Transactions and Fair Price Provision.................. 78
Liability of Directors.................................................................. 80
Indemnification of Directors and Officers............................................... 80
Stockholder Rights Plan................................................................. 82
Experts.................................................................................... 83
Legal Matters.............................................................................. 84
Submission of Future Novametrix Stockholder Proposals...................................... 84
Where You Can Find More Information........................................................ 84
Novametrix SEC Filings..................................................................... 86
Respironics SEC Filings.................................................................... 86
Annexes.................................................................................... 87
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
Q: What will happen in the proposed merger?
A: In the proposed merger, Respironics Holdings, the newly formed subsidiary of
Respironics will be merged with Novametrix. As a result, Novametrix will no
longer be a public company and will become a wholly-owned subsidiary of
Respironics. See "The Merger" on pages 27 through 46.
Q: Why are Novametrix and Respironics proposing the merger?
A: Novametrix and Respironics believe that the merger will enhance their
ability to deliver products and programs to their customers in the hospital
environment as well as customers in the infant care marketplace.
Additionally, the companies believe that the merger will offer opportunities
for development and introduction of innovative technologies for both new and
existing markets. See "The Merger--Novametrix's Rationale for the Merger;
Recommendation of the Novametrix Board of Directors" on pages 30 through 31
and "The Merger--Respironics' Rationale for the Merger" on pages 31 and 32.
Q: Are there risks associated with the merger?
A: Yes. We may not achieve the expected benefits of the merger because of, for
example, the risks and uncertainties discussed in the section entitled "Risk
Factors" on pages 20 through 25 and the section entitled "Special Note
Regarding Forward-Looking Statements" on page 26.
Q: Why is the Novametrix board of directors recommending that I vote for
adoption of the merger agreement?
A: In reaching its decision to approve the merger and the merger agreement and
to recommend adoption of the merger agreement by Novametrix stockholders,
the Novametrix board of directors considered the performance of Novametrix
as a stand-alone company in comparison with its performance as part of a
larger entity. Also, the Novametrix board of directors consulted with the
Novametrix management, as well as Novametrix's financial and legal advisors,
and considered the terms of the merger agreement and the transactions
contemplated by the merger agreement and the expected benefits of the
merger. The Novametrix board of directors unanimously approved the merger
agreement and the merger, and believes that the terms of the merger
agreement and the merger are advisable, fair to, and in the best interests
of, Novametrix and its stockholders.
Q: What will I receive in the merger?
A: Upon successful completion of the merger, you will receive shares of common
stock of Respironics (Nasdaq: RESP) (which we refer to in this proxy
statement/prospectus as Respironics common stock) in exchange for your
shares of Novametrix common stock. This tax-free, stock-for-stock
transaction is valued at [$ ] per share to Novametrix stockholders based on
the March 4, 2002 closing price of [$ ] per share of Respironics common
stock. The actual exchange ratio will be determined based upon the weighted
average selling price of Respironics common stock during the 20-day trading
period ending three days prior to the closing and is subject to a collar as
described below.
Under the terms of the collar, if the weighted average selling price of
Respironics common stock is above $35.00 per share over a 20-day trading
period ending three days prior to the closing of the merger, you will
receive Respironics common stock in an amount equal to $8.75 per share of
Novametrix common stock. If Respironics' weighted average selling price is
from $32.00 to $35.00 over the relevant trading period, you will receive
0.25 shares of Respironics common stock for each share of Novametrix common
stock, resulting in an amount between $8.00 and $8.75 per share. If
Respironics' weighted average selling price is between $30.00 and $31.99,
you will receive Respironics common stock in an amount equal to $8.00 per
share of Novametrix common stock. If Respironics' weighted average selling
price is below $30.00, you will receive 0.2667 shares of Respironics common
stock for each share of Novametrix common stock unless Novametrix exercises
its right to terminate the merger as provided in the merger agreement.
1
If the closing of the merger were to have occurred on March 4, 2002, each
issued and outstanding share of Novametrix common stock would have been
exchanged for 0.2667 of a share of Respironics common stock. Therefore, if
the closing of the merger were to have occurred on March 4, 2002, for each
share of Novametrix common stock you would have received Respironics common
stock having a value of $[ ] per share of Novametrix common stock, based on
the March 4, 2002 closing price of $[ ] per share of Respironics common
stock, and the total consideration paid to all holders of Novametrix common
stock would have been Respironics common stock with a total value of $[ ]
million, based on such March 4, 2002 closing price.
For a more complete description of the consideration you will receive, see
"The Merger Agreement--Merger Consideration" in the Summary on pages 7
through 8.
Q: When will I know the actual exchange ratio?
A: We will issue a press release prior to the closing of the merger that will
disclose the exchange ratio.
Q: Will I be able to sell the shares of Respironics common stock I receive in
the merger?
A: Yes. All Novametrix stockholders, other than those deemed to be affiliated
or controlling stockholders, will be free to sell the shares of Respironics
common stock they receive in the merger. Affiliates of Novametrix will be
able to sell their shares of Respironics common stock within the limits
permitted by Rule 145 under the Securities Act.
Q: What will happen to options or warrants to purchase shares of Novametrix
common stock?
A: Each option and each warrant to acquire shares of Novametrix common stock
outstanding immediately prior to the effective time of the merger will be
assumed by Respironics and converted into an option or warrant, as
applicable, to purchase shares of Respironics common stock. Each option or
warrant will be exercisable for the same number of shares of Respironics
common stock as the holder of such option or warrant would have been
entitled to receive pursuant to the merger had such holder exercised such
option or warrant in full immediately prior to the effective time of the
merger at an exercise price per share of Respironics common stock equal to
the aggregate exercise price for the shares of Novametrix common stock
otherwise purchasable pursuant to such option or warrant divided by the
number of full shares of Respironics common stock deemed purchasable
pursuant to such option or warrant.
Q: When do you expect the merger to be completed?
A: We expect to complete the merger as soon as possible after the special
meeting of Novametrix stockholders called to adopt the merger agreement and
the satisfaction or waiver of other conditions to the merger, including the
receipt of any necessary regulatory approvals. We anticipate the merger will
be completed on or about April 9, 2002.
Q: What if the merger is not completed?
A: If the merger is not completed, Novametrix will continue to operate as an
independent company, and neither Novametrix nor Respironics will be under
any obligation to acquire your Novametrix common stock. Novametrix may be
required to pay a termination fee if the merger is not completed for certain
reasons described under "The Merger Agreement--Termination of the Merger
Agreement" on pages 60 through 61.
Q: What are the tax consequences of the merger to Novametrix stockholders?
A: The merger has been structured so that Novametrix stockholders will not
recognize any gain or loss for United States federal income tax purposes as
a result of the merger, except with respect to any cash that Novametrix
stockholders receive in lieu of fractional shares of Respironics common
stock. The merger will not have any tax consequences for Respironics
stockholders. In addition, none of Novametrix, Respironics or Respironics
Holdings will recognize any gain or loss as a result of the merger.
2
To review the tax consequences of the merger to the Novametrix stockholders
in greater detail, see "The Merger--Material United States Federal Income
Tax Consequences of the Merger" on pages 42 through 43. The tax consequences
of the merger to you will depend on the specific facts of your own
situation. You should consult your tax advisor for a full understanding of
the tax consequences to you of the merger.
Q: What tax basis will holders of Novametrix common stock have in the
Respironics common stock they receive in the merger?
A: Your aggregate tax basis in your shares of Respironics common stock will
equal your current aggregate tax basis in your Novametrix common stock
reduced by the amount of basis allocable to fractional shares for which you
receive a cash payment.
Q: How will the merger be treated for accounting purposes?
A: The merger will be accounted for under the purchase method of accounting in
accordance with accounting principles generally accepted in the United
States. Accordingly, the cost to acquire Novametrix will be allocated by
Respironics to the tangible assets acquired and liabilities assumed based on
their fair values, with any excess being treated as goodwill and other
intangible assets.
Q: Will Respironics stockholders receive any shares as a result of the merger?
A: No. Respironics stockholders will continue to hold the Respironics shares
they currently own.
Q: On what am I being asked to vote?
A: You are being asked to vote on the adoption of the merger agreement.
Q: What other matters will be voted on at the Novametrix special meeting?
A: It is not expected that other matters will be voted on at the special
meeting, except possibly procedural business relating to an adjournment or
postponement of the special meeting if necessary. However, the purposes of
the special meeting include the conduct of any other business properly
brought before the meeting.
Q: What does the Novametrix board of directors recommend?
A: The Novametrix board of directors has approved the merger and the merger
agreement and recommends that Novametrix stockholders vote FOR the adoption
of the merger agreement.
Q: When and where is the Novametrix special meeting?
A: The special meeting of Novametrix stockholders to vote on the merger
agreement will be held at The Waldorf-Astoria, 301 Park Avenue, New York,
New York, on April 9, 2002, at 10:00 a.m., Eastern Daylight Time, unless
adjourned or postponed to a later date.
Q: Who can vote on the merger?
A: Holders of record of Novametrix common stock at the close of business on
February 8, 2002 can vote at the special meeting.
Q: What vote is required to adopt the merger agreement?
A: The merger agreement must be adopted by the holders of a majority of the
total number of outstanding shares of Novametrix common stock on February 8,
2002. If you do not vote, it will have the same effect as voting against the
merger.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please vote your shares as soon as possible. You
may vote your shares by signing and mailing the enclosed proxy card. You may
also vote your shares by calling the toll-free number listed on your proxy
card and following the recorded instructions or by going to the Internet
website listed on your proxy card and following the instructions.
3
Q: How will my proxy be voted?
A: If you complete your proxy it will be voted in accordance with your
instructions. If you sign and send in your proxy but do not indicate how you
want to vote, your proxy will be counted as a vote in favor of adoption of
the merger agreement. If you do not vote either in person or by proxy, it
will count as a vote against adoption of the merger agreement.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Yes, but only if you provide your broker with instructions on how to vote.
You should instruct your broker to vote your shares, following the
directions provided by your broker. Without instructions to your broker,
your shares will not be voted which will have the same effect as a vote
against adoption of the merger agreement.
Q: Can I change my vote after I mail my proxy card?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. If you are a stockholder of record, you can do this by:
. prior to the special meeting, delivering to Novametrix's corporate
secretary at 5 Technology Drive, Wallingford, Connecticut 06492, a written
notice of revocation bearing a later date or time than the proxy;
. submitting a later-dated proxy that has been properly executed; or
. attending the special meeting and voting in person. However, your
attendance alone will not revoke your proxy--you must also vote in person.
If you instructed a broker to vote your shares, you must follow your
broker's directions for changing those instructions.
Q: Is my vote important?
A: Yes. Your vote is very important. Adoption of the merger agreement requires
the affirmative vote of the holders of a majority of the outstanding shares
of Novametrix common stock. If you do not vote, it will have the same effect
as a vote against adoption of the merger agreement.
Q: Should I send in my stock certificates now?
A: No. After the merger, Respironics will send you written instructions for
sending in your Novametrix stock certificates.
Q: Do I have appraisal rights?
A: No. You will not be entitled to appraisal rights in connection with the
merger. See "The Merger--No Appraisal Rights" on page 44.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy card you should
contact:
Novametrix Medical Systems Inc.
5 Technology Drive
Wallingford, Connecticut 06492
Telephone: (203) 265-7701
Attention: Joseph A. Vincent, Corporate Secretary
Q: Where can I find more information about the companies?
A: You can find more information about Novametrix and Respironics from various
sources described under "Where You Can Find More Information" on page 84.
4
SUMMARY
We are sending this proxy statement/prospectus to holders of Novametrix
common stock. This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important
to you. For a more complete understanding of the merger and for a more complete
description of the terms of the merger, you should read this entire proxy
statement/prospectus carefully, including the merger agreement attached as
Annex A, the opinion of SunTrust Capital Markets, Inc., through its SunTrust
Robinson Humphrey subsidiary (SunTrust Robinson Humphrey) attached as Annex B,
and the additional documents to which we refer. You may obtain the information
incorporated by reference in this proxy statement/prospectus without charge by
following the instructions in the section entitled "Where You Can Find More
Information" on page 84. References in this proxy statement/prospectus to
"Respironics" and "Novametrix" include their respective subsidiaries unless
otherwise indicated. We have included page references parenthetically to direct
you to a more complete description of the topics presented in this summary.
The Companies
RESPIRONICS, INC.
1501 Ardmore Blvd.
Pittsburgh, Pennsylvania 15221
Telephone: (412) 731-2100
Respironics, Inc. is a Delaware corporation whose shares are currently
listed on the Nasdaq Stock Market under the symbol "RESP." Unless the context
indicates otherwise, references in this proxy statement/prospectus to a "fiscal
year" of Respironics refer to the twelve-month period ending on June 30 of the
year indicated.
Respironics, a recognized resource in the medical device market, provides
innovative products and unique programs to health care providers while helping
them to grow and manage their businesses efficiently. The company's focus is on
home care, hospital and international markets providing programs that manage
sleep disordered breathing, chronic obstructive pulmonary disease, asthma,
infant care and restrictive lung disorders.
Respironics' products are designed to reduce costs while improving the
effectiveness of patient care and are used primarily in the home and in
hospitals along with alternative care facilities and in emergency medical
settings. Respironics' primary product lines are:
. homecare products, including continuous positive airway pressure devices
and bi-level positive airway pressure devices used in the home for the
treatment of obstructive sleep apnea, a serious disorder characterized
by the repeated cessation of breathing during sleep, respiratory devices
including bi-level non-invasive ventilatory support units, portable
invasive volume ventilator units used in the home, home oxygen devices,
and diagnostic and monitoring systems;
. hospital products, including bi-level non-invasive ventilatory support
units, critical care units that can deliver both non-invasive and
invasive ventilation, and portable invasive volume ventilator units, all
of which are used in hospital or institutional settings; and
. asthma and allergy products.
Globally positioned, Respironics employs over 2,000 individuals worldwide
and has manufacturing facilities in several domestic and international
locations.
For additional information regarding Respironics, please see Respironics'
Form 10-K and other filings with the SEC, which are incorporated by reference
in this proxy statement/prospectus. See "Where You Can Find More Information"
on page 84.
5
The information contained on Respironics' website is not incorporated by
reference in this proxy statement/prospectus.
NOVAMETRIX MEDICAL SYSTEMS INC.
5 Technology Drive
Wallingford, Connecticut 06492
Telephone: (203) 265-7701
Novametrix is a Delaware corporation whose shares are currently listed on
the Nasdaq Stock Market under the symbol "NMTX."
Novametrix, founded in 1978, is a leading cardiorespiratory monitoring
company that develops, manufactures and markets proprietary state-of-the-art
non-invasive cardiorespiratory monitors, sensors and disposable accessories.
Its products include electronic medical sensors and monitors that
non-invasively provide continuous measurements of cardiac output, carbon
dioxide, oxygen saturation and respiratory mechanics parameters. Novametrix's
non-invasive technology is consistent with the trend toward
cost-effective non-invasive monitoring and away from invasive monitoring that
has many associated complications, including related infections. Novametrix's
products are distributed worldwide and are used in operating rooms, intensive
care units and emergency departments and during patient transport. Novametrix's
non-invasive sensors and monitoring technology are also incorporated into the
products of several leading manufacturers of multi-parameter monitoring systems.
In addition to cardiorespiratory monitoring, Novametrix provides
developmental care products and services that improve the quality of care for
premature infants through its Children's Medical Ventures unit. These products,
distributed primarily in the United States, are used in neonatal and pediatric
intensive care units of hospitals and also in the home.
For additional information regarding Novametrix's business, please see
Novametrix's Form 10-K and other filings with the SEC, which are incorporated
by reference into this proxy statement/prospectus. See "Where You Can Find More
Information" on page 84.
The information contained on Novametrix's website is not incorporated by
reference in this proxy statement/prospectus.
RESPIRONICS HOLDINGS, INC.
1501 Ardmore Blvd.
Pittsburgh, Pennsylvania 15221
Telephone: (412) 731-2100
Respironics Holdings, Inc., a Delaware corporation, is a direct wholly-owned
subsidiary of Respironics that was organized solely for purposes of completing
the merger.
6
The Merger Agreement (see pages 49 through 62)
The merger agreement is attached as Annex A to this proxy
statement/prospectus. We encourage you to read the merger agreement carefully
and in its entirety. It is the principal document governing the merger.
Merger Consideration (see page 49). If we complete the merger, you will
receive shares of Respironics common stock (Nasdaq: RESP) in exchange for your
shares of Novametrix common stock.
The merger agreement provides that, at the effective time of the merger,
each share of Novametrix common stock will be exchanged for a fraction of a
share of Respironics common stock. This fraction is referred to as the
"exchange ratio." Since the exchange ratio will fluctuate with the market price
of Respironics common stock and will be subject to a mechanism commonly
referred to as a "collar" that reduces your exposure to losses and gains from
market price fluctuation within certain market price ranges, the exact number
of shares of Respironics common stock that you will receive is not yet known.
The exchange ratio is calculated based on the weighted average selling price of
Respironics common stock over the 20 trading days immediately preceding (but
excluding) the third trading day prior to the closing of the merger (referred
to herein as the calculation period). The actual number of shares of
Respironics common stock that you will receive in exchange for your shares of
Novametrix common stock will be calculated at the time of the closing of the
merger.
The exchange ratio will be determined at the time of the merger as follows:
. if the weighted average selling price of a share of Respironics common
stock during the calculation period exceeds $35.00, the fraction will be
$8.75 divided by the weighted average selling price;
. if the weighted average selling price of a share of Respironics common
stock during the calculation period is equal to or exceeds $32.00 but is
equal to or below $35.00, the fraction will be 0.25 shares;
. if the weighted average selling price of a share of Respironics common
stock during the calculation period is equal to or exceeds $30.00 but is
equal to or below $31.99, the fraction will be $8.00 divided by the
weighted average selling price; and
. if the weighted average selling price of a share of Respironics common
stock during the calculation period is below $30.00, the fraction will
be fixed at 0.2667 shares. However, if the weighted average selling
price of a share of Respironics common stock is below $30.00, Novametrix
shall have the right to terminate the merger agreement. (See "The Merger
Agreement--Termination Rights" on page 60).
If the closing of the merger were to have occurred on March 4, 2002, each
issued and outstanding share of Novametrix common stock would have been
exchanged for 0.2667 of a share of Respironics common stock. Therefore, if the
closing of the merger were to have occurred on March 4, 2002, for each share of
Novametrix common stock you own, you would have received Respironics common
stock having a value of $[ ] per share of Novametrix common stock based on
the March 4, 2002 closing price of $[ ] per share of Respironics common
stock. In that case, the total consideration paid to all holders of Novametrix
common stock would have been Respironics common stock with a total value of
$[ ] million, based on such March 4, 2002 closing price.
The following table shows
. illustrative values of the exchange ratios that will result if the
20-day weighted average selling price of a share of Respironics common
stock during the calculation period is within a range of $25.00 to
$40.00 per share, representing the fraction of a share of Respironics
common stock that will be issued for one share of Novametrix common
stock at each of the Respironics 20-day weighted average selling prices
presented in the table; and
. illustrative values of the approximate consideration that would be
issued in connection with the merger for one share of Novametrix common
stock, which illustrative values are determined by multiplying
7
each of the Respironics 20-day weighted average selling prices presented
in the table by the corresponding exchange ratio.
Approximate
Consideration
Respironics Approximate Value per Share
Weighted-Average Exchange of Novametrix
Selling Price Ratio Common Stock*
------------- ----------- ---------------
$25.00 0.2667 $6.67
26.00 0.2667 6.93
27.00 0.2667 7.20
28.00 0.2667 7.47
29.00 0.2667 7.73
30.00 0.2667 8.00
31.00 0.2581 8.00
32.00 0.2500 8.00
33.00 0.2500 8.25
34.00 0.2500 8.50
35.00 0.2500 8.75
36.00 0.2431 8.75
37.00 0.2365 8.75
38.00 0.2303 8.75
39.00 0.2244 8.75
40.00 0.2188 8.75
--------
* See "Fluctuations in Market Price" below.
For example, using the above table, if the weighted-average selling price of
Respironics common stock was $32.00 during the calculation period and you owned
100 shares of Novametrix common stock, you would be entitled to receive 25
shares of Respironics common stock in the merger.
The values of Respironics common stock in the above table are illustrative
only and do not represent the actual amounts per share of Novametrix common
stock that might be realized by any Novametrix stockholder on or after
completion of the merger. The amount any Novametrix stockholder might realize
upon sale in the market of shares of Respironics common stock received in the
merger will depend upon the market price per share of Respironics common stock
at the time of sale, which will fluctuate depending upon any number of reasons,
including those specific to Respironics and those that influence the trading
prices of equity securities generally.
Fluctuations in Market Price. Because the Respironics weighted-average
selling price is an average, it is likely to be different from the actual
market value of a share of Respironics common stock on the date Respironics
issues shares of Respironics common stock to Novametrix stockholders. The
market value of shares of Respironics common stock to be issued in exchange for
each share of Novametrix common stock might actually be less than $8.00 on the
date Respironics issues those shares of Respironics common stock even if the
Respironics weighted average selling price is $30.00 or more.
No Solicitation (see pages 54 through 55). Novametrix has agreed, subject
to certain exceptions, that it will not solicit or knowingly encourage the
initiation of any inquiries or proposals regarding any merger, sale of
8
assets, sale of shares of capital stock or similar transactions involving
Novametrix or any of its subsidiaries that if consummated would constitute an
"Alternative Transaction." An Alternative Transaction means:
. any transaction pursuant to which any third party acquires more than 25%
of the outstanding shares of any class of Novametrix equity securities;
. a merger or other business combination involving Novametrix pursuant to
which any third party acquires more than 25% of the outstanding equity
securities of Novametrix or the entity surviving such merger or business
combination;
. any transaction pursuant to which any third party acquires or would
acquire control of assets of Novametrix or any significant subsidiary; or
. any other consolidation, business combination, recapitalization or
similar transaction involving Novametrix or any of its significant
subsidiaries, other than transactions contemplated by the merger
agreement.
Conditions to Completion of the Merger (see page 58). The obligations of
the parties to consummate the merger are subject to the satisfaction or waiver
of certain conditions before the merger will be completed. These include:
. the effectiveness under the Securities Act of the registration statement
of which this proxy statement/prospectus is a part and the SEC has not
issued any stop order suspending the effectiveness of the registration
statement;
. the adoption of the merger agreement by Novametrix stockholders;
. the receipt of unconditional regulatory approvals and authorizations
including under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and other required regulatory approvals and
authorizations;
. the absence of any order, stay or other legal restraint of any
governmental authority enjoining, prohibiting or materially adversely
affecting either Respironics or Novametrix or of any written threats of
any litigation or proceeding by any governmental authority which seeks
to enjoin or prohibit the merger or to impose material damages on either
party;
. the absence of any legal prohibition to complete the merger; and
. the approval for listing on the Nasdaq Stock Market of the shares of
Respironics common stock issuable to Novametrix stockholders.
The obligation of Respironics Holdings to consummate the merger is subject
to the satisfaction or waiver of certain conditions before the merger will be
completed. These include:
. the accuracy of the representations and warranties made by Novametrix in
the merger agreement;
. the performance by Novametrix of its obligations under the merger
agreement;
. the receipt of written agreements from all affiliates of Novametrix
agreeing to dispose of Respironics common stock received by them in the
merger in compliance with the securities laws;
. the receipt of executed employment agreements from William J.
Lacourciere, Philip F. Nuzzo, Anthony Pierry and Catherine Bush (all of
which have been received), which are not terminated, repudiated or
breached; and
. the receipt from Respironics' counsel of an opinion that the merger will
qualify as a tax-free reorganization.
9
The obligation of Novametrix to consummate the merger is subject to the
satisfaction or waiver of certain conditions before the merger will be
completed. These include:
. the accuracy of the representations and warranties made by Respironics
Holdings in the merger agreement;
. the performance by Respironics Holdings of its obligations under the
merger agreement; and
. the receipt from Novametrix's counsel of an opinion that the merger will
qualify as a tax-free reorganization.
The merger agreement may be terminated at any time prior to the completion
of the merger for various reasons. These include:
. by mutual written consent of Respironics Holdings and Novametrix;
. by either Respironics Holdings or Novametrix, if:
. the merger has not been completed by June 17, 2002. However, neither
party may terminate for this reason if its failure to fulfill any
obligation is the reason the merger has not been completed;
. at any time after a final determination denying any regulatory
clearance and/or approval required for the merger; or
. Novametrix stockholders have failed to adopt the merger agreement at
the special meeting;
. by Respironics Holdings, if:
. Novametrix materially breaches any of its representations,
warranties, covenants or agreements and the breach cannot be cured
within a specified time period; or
. notice of a regulatory clearance or approval from a government
authority or agency is received which contains a condition which in
Respironics' reasonable business judgment is adverse to the best
interests of the combined entities;
. by Novametrix, if:
. Respironics Holdings materially breaches any of its representations,
warranties, covenants or agreements and the breach cannot be cured
within a specified time period;
. the Novametrix board of directors has approved:
. an inquiry or proposal by a third party to effect any transaction
pursuant to which the third party would acquire more than 25% of
the outstanding shares of any class of Novametrix equity
securities;
. a merger involving Novametrix pursuant to which any third party
would acquire more than 25% of the outstanding equity securities
of Novametrix or the entity surviving such merger;
. any transaction pursuant to which any third party acquires or
would control assets of Novametrix or any significant subsidiary;
or
. any other consolidation, business combination, recapitalization
or similar transaction involving Novametrix or any of its
significant subsidiaries, other than transactions contemplated by
the merger agreement;
after determining, upon the basis of advice of outside counsel that
such action is necessary in order for the board to act in a manner
consistent with its fiduciary obligations under applicable law; or
10
. the 20-day weighted average selling price of a share of
Respironics common stock during the calculation period is less
than $30.00. However, Novametrix must exercise this right to
terminate within two business days following the termination of
the calculation period.
Termination Fees and Expenses (see page 61). Novametrix must pay
Respironics a fee of $3,400,000 and must pay up to $425,000 of Respironics'
expenses relating to the transactions contemplated by the merger agreement,
upon the first to occur of any of the following events:
. the Novametrix board of directors fails to recommend adoption of the
merger agreement to the Novametrix stockholders, or withdraws, modifies
or changes its recommendation of the merger agreement in a manner
adverse to Respironics or has resolved to do any of the foregoing, other
than under certain circumstances permitting termination of the merger
agreement by Novametrix or termination by mutual consent;
. Novametrix terminates the merger agreement after the Novametrix board of
directors approves:
. an inquiry or proposal by a third party to effect any transaction
pursuant to which the third party would acquire more than 25% of the
outstanding shares of any class of Novametrix equity securities;
. a merger involving Novametrix pursuant to which any third party would
acquire more than 25% of the outstanding equity securities of
Novametrix or the entity surviving such merger;
. any transaction pursuant to which any third party acquires or would
control assets of Novametrix or any significant subsidiary; or
. any other consolidation, business combination, recapitalization or
similar transaction involving Novametrix or any of its significant
subsidiaries, other than transactions contemplated by the merger
agreement;
after determining, upon the basis of advice of outside counsel that such
action is necessary in order for the board to act in a manner consistent
with its fiduciary obligations under applicable law; or
. Novametrix executes and delivers an agreement for, or the Novametrix
board of directors approves, within 12 months following the termination
of the merger agreement, other than termination under certain
circumstances permitting termination by Novametrix or termination by
mutual consent, a transaction involving:
. a merger or consolidation or any similar transaction involving
Novametrix or any of its significant subsidiaries;
. a purchase, lease or other acquisition of all or substantially all of
the assets of Novametrix or any of its significant subsidiaries; or
. a purchase or other acquisition of securities representing 30% or
more of the voting power of the common stock of Novametrix or any of
its significant subsidiaries.
Except as described above, all fees and expenses incurred in connection with
the merger agreement and the transactions contemplated by the merger agreement
will be paid by the party incurring such expenses, whether or not the merger is
consummated.
Board of Directors Recommendation to Novametrix Stockholders (see page 30)
The Novametrix board of directors has approved the merger agreement, the
merger and the other transactions contemplated by the merger agreement and has
determined that the merger and the merger
11
agreement are advisable, fair to and in the best interests of Novametrix and
its stockholders. The Novametrix board of directors recommends that you vote
FOR the adoption of the merger agreement at the special meeting.
Opinion of Novametrix's Financial Advisor (see page 32)
Among other factors that the Novametrix board of directors considered in
deciding to approve the merger, the Novametrix board of directors received and
considered an opinion from its financial advisor, SunTrust Robinson Humphrey,
as to the fairness, from a financial point of view, of the exchange ratio in
the merger to the holders of Novametrix common stock. We have attached to this
proxy statement/prospectus as Annex B the full text of SunTrust Robinson
Humphrey's written opinion, dated December 17, 2001. You should read this
opinion completely to understand the assumptions made, matters considered and
limitations on the review undertaken by SunTrust Robinson Humphrey in providing
its opinion. SunTrust Robinson Humphrey's opinion is addressed to the
Novametrix board of directors and does not constitute a recommendation to any
stockholder with respect to any matter relating to the proposed merger.
The Novametrix Special Meeting (see page 46)
The special meeting of Novametrix stockholders will be held at 10:00 a.m.,
Eastern Daylight Time, on April 9, 2002 at The Waldorf-Astoria, 301 Park
Avenue, New York, New York, unless adjourned or postponed to a later date.
At the special meeting, we will ask the holders of shares of Novametrix
common stock to:
. adopt the merger agreement; and
. conduct any other business properly brought before the meeting,
including any adjournments or postponements of the special meeting, if
necessary.
Vote Required to Adopt the Merger Agreement (see page 47)
Novametrix stockholders will vote on a proposal to adopt the merger
agreement. Adoption of this proposal requires the affirmative vote of the
holders of at least a majority of the outstanding shares of Novametrix common
stock.
The Voting Agreements (see page 62)
Certain stockholders of Novametrix, including the directors and executive
officers of Novametrix, representing approximately 9.8% of the voting power of
Novametrix shares as of the record date, have entered into voting agreements
with Respironics in which they agreed to vote in favor of adoption of the
merger agreement. We have attached a copy of the form of the voting agreement
as Annex C to this proxy statement/prospectus.
Interests of Certain Persons in the Merger (see page 44)
In addition to their interests as stockholders, the directors and executive
officers of Novametrix may have interests in the merger that are different
from, or in addition to, your interests. These interests exist because of
rights they may have under individual employment agreements, compensation
arrangements, or benefit and bonus plans. These interests include:
. the payment to certain executive officers of Novametrix of a success
bonus upon completion of the merger and the acceleration of vesting of
stock options held by the executive officers;
. the payment to each director of Novametrix of special compensation of
$25,000 in recognition of their services to Novametrix, including in
connection with the proposed merger, and additional grants of
12
stock options representing 15,000 shares of Novametrix common stock to
each director and the acceleration of vesting of stock options held by
the directors; and
. the continuance of directors' and officers' liability insurance, rights
of indemnification and advancement of expenses, in each case, for the
benefit of current and former Novametrix directors and executive
officers.
In addition, Novametrix and Respironics have entered into employment
agreements dated as of December 14, 2001 with each of William J. Lacourciere,
Chairman of the Board and Chief Executive Officer of Novametrix, and Philip F.
Nuzzo, Vice President of Product and Business Development of Novametrix. Each
of these employment agreements provides for continued employment of the
employee following completion of the merger.
The members of the Novametrix board of directors knew of these additional
interests and considered them when they approved the merger.
Stock Market Listing (see page 42)
The shares of Respironics common stock to be issued to Novametrix
stockholders in connection with the merger will be tradeable on the Nasdaq
Stock Market upon receipt by the Novametrix stockholders.
Material United States Federal Income Tax Consequences of the Merger (see page
42)
The parties have structured the merger so that in general, Respironics,
Respironics Holdings, Novametrix and their respective stockholders will not
recognize gain or loss for United States federal income tax purposes as a
result of the merger, except with respect to cash received by Novametrix
stockholders in lieu of fractional shares. It is a condition to the merger that
Novametrix and Respironics receive legal opinions to this effect from their
respective tax counsel.
The tax consequences of the merger to you will depend on the specific facts
of your own situation. You should consult your tax advisor for a full
understanding of the tax consequences to you of the merger.
Accounting Treatment (see page 43)
The merger will be accounted for under the purchase method of accounting in
accordance with accounting principles generally accepted in the United States.
Accordingly, the cost to acquire Novametrix will be allocated by Respironics to
the tangible assets acquired and liabilities assumed based on their fair
values, with any excess being treated as goodwill and other intangible assets.
No Appraisal Rights (see page 44)
Under Delaware law, Novametrix stockholders will not be entitled to exercise
dissenter's or appraisal rights or to demand payment for their shares in
connection with the merger.
Material Differences Between Rights of Holders of Common Stock of Respironics
and Novametrix (see page 72)
Novametrix stockholders, whose rights are currently governed by the
Novametrix certificate of incorporation, by-laws, stockholder rights plan and
Delaware law, will, upon completion of the merger, become stockholders of
Respironics, and their rights will be governed by Respironics' certificate of
incorporation, by-laws, stockholder rights plan and Delaware law.
13
FINANCIAL SUMMARY
Market Price Data
Novametrix common stock is traded on the Nasdaq Stock Market under the
symbol "NMTX". Respironics common stock is traded on the Nasdaq Stock Market
under the symbol "RESP". The following table presents:
. the 20-day weighted average selling price or last reported sale price,
as applicable, of one share of Respironics common stock, as reported on
the Nasdaq Stock Market;
. the 20-day weighted average selling price or last reported sale price,
as applicable, of one share of Novametrix common stock, as reported on
the Nasdaq Stock Market; and
. the value of the consideration to be paid for one share of Novametrix
common stock on an equivalent per share basis;
in each case on December 11, 2001, the last full trading day prior to
Novametrix's announcement that it was involved in negotiations with a potential
acquiror, on December 18, 2001, the last full trading day prior to the public
announcement of the execution of the merger agreement, and on March 4, 2002,
the last full trading day prior to the printing of this proxy
statement/prospectus, and assuming that the merger had been completed on these
dates. The equivalent per share data for Novametrix common stock has been
determined by multiplying the 20-day weighted average selling price or last
reported sale price, as applicable, of one share of Respironics common stock on
each of these dates by the applicable exchange ratio.
Value of Consideration
To Be Paid
Respironics Novametrix Per Share of
Common Common Novametrix
Stock Stock Common Stock
----------- ---------- ----------------------
20 day weighted average selling price on December 11, 2001 $31.65 $6.87 $8.00
20 day weighted average selling price on December 18, 2001 32.10 7.19 8.03
20 day weighted average selling price on February 26, 2002 27.15 7.05 [ ]*
--------
* Based on the March 4, 2002 closing price of $[ ] per share of Respironics
common stock.
As of February 8, 2002, there were approximately 8,809,406 shares of
Novametrix common stock outstanding and entitled to vote at the special
meeting. As of such date, there were approximately 765 record holders of
Novametrix common stock.
In addition, Novametrix has Class B Warrants that trade on the Nasdaq Stock
Market under the symbol "NMTXZ". The Class B Warrants are each exercisable for
one share of Novametrix common stock at an exercise price of $5.85 and are
scheduled to expire on March 8, 2002. The Class B Warrants are callable by
Novametrix under specified circumstances.
Neither Respironics nor Novametrix has historically paid dividends on its
common stock. Following the merger, the declaration of dividends will be at the
discretion of the Respironics board of directors. However, Respironics expects
to retain its earnings for the development and expansion of its business and
the repayment of indebtedness and does not anticipate paying dividends on
Respironics common stock in the foreseeable future.
14
SELECTED HISTORICAL FINANCIAL DATA OF RESPIRONICS
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. We derived the historical
financial information from the audited financial statements of Respironics for
its fiscal years ended June 30, 1997 through 2001 and the unaudited financial
statements of Respironics for the six months ended December 31, 2001 and 2000.
It is Respironics' opinion that the unaudited financial statements include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the results for the periods. All information is presented in
accordance with accounting principles generally accepted in the United States.
The results of Respironics' operations for the six months ended December 31,
2001 and 2000 are not necessarily indicative of the results of operations for a
full year.
The following financial information is only a summary. You should read it
together with the historical financial statements and related notes contained
in this proxy statement/prospectus and in the annual reports and other
information that Respironics has filed with the SEC and incorporated by
reference into this proxy statement/prospectus. We have listed the documents
incorporated by reference under the heading "Where You Can Find More
Information" on page 84.
December 31
Six Months Ended Year Ended June 30
- ------------------------- -------------------------------------------------------------
For Period Ended: 2001 2000 2001 2000 1999 1998
----------------- ------------ ------------ ------------ ------------ ------------ ------------
Net Sales................... $224,792,310 $196,612,107 $422,437,862 $368,184,110 $357,570,743 $351,576,443
Income Before Income Taxes,
Restructuring Charges and
Credits, Merger Related
Costs, and Other
Non-Recurring Costs........ 29,929,355 23,834,346 54,724,453 37,771,787 40,870,564 45,265,565
Net Income (Loss)........... 18,059,373 14,300,607 33,571,284 5,752,284(1) 23,061,484(2) (1,824,734)(3)
Net Income (Loss) Per Share:
Basic..................... 0.59 0.48 1.12 0.19(1) 0.73(2) (0.06)(3)
Diluted................... 0.58 0.47 1.09 0.19(1) 0.72(2) (0.06)(3)
Cash dividends on common
stock...................... -- -- -- -- -- --
At Period End:
Total Assets................ 383,796,913 372,701,016 367,948,463 352,576,515 343,585,401 318,319,926
Working Capital............. 193,576,485 169,380,359 171,984,630 155,094,890 155,336,082 137,549,761
Long Term Obligations....... 79,648,070 107,404,925 80,055,378 108,095,093 99,374,180 69,316,177
Stockholders' Equity........ 255,442,415 210,128,859 235,268,148 191,105,893 194,521,446 200,839,893
-
For Period Ended: 1997
----------------- ------------
Net Sales................... $314,541,736
Income Before Income Taxes,
Restructuring Charges and
Credits, Merger Related
Costs, and Other
Non-Recurring Costs........ 46,134,246
Net Income (Loss)........... 26,424,752(3)
Net Income (Loss) Per Share:
Basic..................... 0.84(3)
Diluted................... 0.82(3)
Cash dividends on common
stock...................... --
At Period End:
Total Assets................ 294,769,375
Working Capital............. 110,565,838
Long Term Obligations....... 48,984,933
Stockholders' Equity........ 191,055,716
--------
(1) Includes the impact of restructuring charges, an addition to the allowance
for doubtful accounts, and a one-time reduction in income tax expense.
These costs reduced net income by $19,611,000 ($0.66 per share) in fiscal
year 2000.
(2) Includes the impact of an addition to the allowance for doubtful accounts
and restructuring charges. These costs reduced net income by $4,449,000 ($
0.14 per share) in fiscal year 1999.
(3) Includes the impact of merger charges and costs associated with an
unsolicited offer by another company to acquire Healthdyne Technologies,
Inc. (which merged with Respironics in February 1998). These costs reduced
net income by $29,095,000 ($0.88 per share) in fiscal year 1998 and
$1,289,000 ($0.04 per share) in fiscal year 1997.
15
SELECTED HISTORICAL FINANCIAL DATA OF NOVAMETRIX
The selected annual historical consolidated financial data of Novametrix
presented below was derived from Novametrix's audited annual consolidated
financial statements. The selected interim historical consolidated financial
data was derived from Novametrix's unaudited condensed consolidated financial
statements. The selected consolidated financial data is not necessarily
indicative of results to be expected for any future period and should be read
in conjunction with Novametrix's consolidated financial statements and
Novametrix's "Management's Discussion and Analysis of Financial Condition and
Results of Operations," each incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" on page 84.
Six Months Ended Fiscal Year Ended
----------------------- ------------------------------------------------------------
October 28, October 29, April 29, April 30, May 2, May 3, April 27,
For Period Ended: 2001 2000 2001 (1) 2000 (2) (3) 1999 1998 1997 (4)
----------------- ----------- ----------- ----------- ------------ ----------- ----------- -----------
Net sales..................... $24,789,011 $26,126,855 $54,682,263 $43,682,223 $32,864,673 $31,561,144 $28,253,750
Income before income taxes,
accounting changes and non-
recurring expenses........... 2,670,283 2,562,196 5,208,931 3,654,155 2,870,367 3,951,598 3,073,469
Net income.................... 1,722,283 1,653,196 618,677 2,241,281 2,066,667 2,903,598 4,923,559
Net income per share
Basic....................... 0.20 0.19 0.07 0.28 0.25 0.35 0.70
Diluted..................... 0.19 0.19 0.07 0.27 0.24 0.31 0.59
Cash dividends on common stock -- -- -- -- -- -- --
At period end
Total assets.................. 44,947,094 53,399,616 49,331,960 47,150,667 35,975,874 31,001,896 27,224,432
Working capital............... 18,304,779 17,828,858 16,954,750 17,520,691 15,233,539 18,602,648 10,831,127
Long-term debt, less
current portion............. 2,060,000 4,580,000 3,320,000 5,850,601 2,254,071 90,881 782,275
Redeemable preferred stock.... -- -- -- -- -- -- 1,000,000
Stockholders' equity.......... 33,088,717 32,025,335 31,113,693 30,265,822 24,655,944 27,032,439 18,109,926
--------
(1) Fiscal 2001 includes a reduction in income before income taxes and
non-recurring expenses of $4,249,883 from restructuring and other charges
recorded during the fourth quarter. Net income for fiscal 2001 was reduced
by $2,741,117, or $0.31, per basic and diluted share.
(2) Fiscal 2000 includes a reduction in first quarter earnings of $223,544, or
$0.03 per basic and diluted share, from the cumulative effect of a change
in accounting principle. Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities", was adopted by the Company on May 3, 1999
and required that start-up costs previously capitalized be written-off and
future startup costs be expensed as incurred.
(3) Reflects the acquisition of Children's Medical Ventures, Inc. on June 30,
1999.
(4) Fiscal 1997 includes income tax benefits of $4,030,000, or $0.58 per basic
share and $0.49 per diluted share, as a result of a reduction in the
Company's net deferred tax asset valuation allowance. Net income also
includes non-recurring expenses of $2,149,910, or $0.31 per basic share and
$0.26 per diluted share, pertaining to an attempted merger and related
proxy contest.
16
SELECTED RESPIRONICS AND NOVAMETRIX UNAUDITED
PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined condensed financial information
sets forth the combined results of operations for the fiscal year ended June
30, 2001 and the six month period ended December 31, 2001, as if the merger had
occurred at the beginning of the periods stated, and the financial position as
of December 31, 2001 as if the merger had occurred as of that date. Novametrix
has a fiscal year end, ending on the Sunday closest to April 30, which differs
from Respironics' June 30 fiscal year end, and accordingly the companies'
fiscal quarters also end on different dates. In order to develop unaudited pro
forma combined condensed financial statements using Respironics' fiscal year
and six month period end dates, Respironics' December 31, 2001 unaudited
balance sheet was combined with Novametrix's October 28, 2001 unaudited balance
sheet, Respironics' six month period ended December 31, 2001 unaudited income
statement was combined with Novametrix's six month period ended October 28,
2001 unaudited income statement, and Respironics' fiscal year end June 30, 2001
income statement was combined with Novametrix's fiscal year end April 29, 2001
income statement.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have actually occurred if the merger had been consummated at the
beginning of the periods stated, nor is it necessarily indicative of future
operating results or financial position. See "Unaudited Pro Forma Combined
Condensed Financial Data" on page 67 for additional information.
Six Month
Period Ended Fiscal Year Ended
December 31, 2001 June 30, 2001
----------------- -------------
(In Thousands, Except Per Share Data)
Income Statement Data:
Net Sales............................................ $249,581 $477,120
Income Before Income Taxes and Restructuring Charges. 31,649 58,180
Net Income........................................... 19,208 33,049
Diluted Net Income Per Share......................... 0.57 0.99
Balance Sheet Data (End of Period)
Total Assets......................................... 490,580
Working Capital...................................... 207,132
Long Term Obligations................................ 81,708
Stockholders' Equity................................. 345,618
17
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth certain historical and pro forma per share
data of Respironics and certain historical and pro forma equivalent per share
data of Novametrix. The pro forma combined and pro forma equivalent data is
based upon an exchange ratio of 0.2667 shares of Respironics common stock for
each share of Novametrix common stock outstanding immediately prior to the
merger. The pro forma equivalent data for Novametrix is calculated by
multiplying the Respironics pro forma combined amounts by the exchange ratio.
The following data is presented for informational purposes only and is not
necessarily indicative of the results that actually would have occurred if the
merger had been in effect during the periods presented nor is such data
necessarily indicative of future operating results or financial position. We
cannot assure you that the actual exchange ratio will be equivalent to the
exchange ratio assumed for the purposes of this table. See "Summary--The Merger
Agreement" on page 7 for more information regarding the exchange ratio.
The information set forth below should be read in conjunction with the
selected historical financial data of Respironics and Novametrix included
elsewhere in this proxy statement/prospectus. See "Financial Summary--Selected
Historical Financial Data of Respironics" on page 15, "Financial
Summary--Selected Historical Financial Data of Novametrix" on page 16 and
"Where You Can Find More Information" on page 84.
Six Month Period ended Fiscal year ended
December 31, 2001 June 30, 2001
- ---------------------- -----------------
Respironics:
Net income per common share
Historical........................ $ 0.58 $1.09
Pro forma combined................ 0.57 0.99
Cash dividend
Historical........................ 0 0
Pro forma combined................ 0 0
Book value per share at end of period
Historical........................ 8.37 7.75
Pro forma combined................ 10.50 9.86
Novametrix:
Net income per common share
Historical........................ 0.19 0.07
Pro forma equivalent.............. 0.15 0.26
Cash dividend
Historical........................ 0 0
Pro forma equivalent.............. 0 0
Book value per share at end of period
Historical........................ 3.77 3.57
Pro forma equivalent.............. 2.80 2.64
18
HISTORICAL MARKET PRICES AND DIVIDENDS
Novametrix common stock trades on the Nasdaq Stock Market under the symbol
"NMTX". Respironics common stock trades on the Nasdaq Stock Market under the
symbol "RESP". The following table sets forth, for the periods indicated, the
range of high and low sales price per share for Novametrix common stock and
Respironics common stock on the Nasdaq Stock Market, based on published
financial sources. No dividends were paid by Novametrix or Respironics during
any period indicated below. For current price information, Novametrix
stockholders are urged to consult publicly available sources.
Novametrix Common Stock Respironics Common Stock
---------------------- -----------------------
High Sale Low Sale High Sale Low Sale
--------- -------- --------- --------
Fiscal 2002 (1)
July 2001-September 2001... $7.10 $5.12 $37.00 $27.75
October 2001-December 2001. 8.25 5.98 37.05 30.54
January 2002-March 4, 2002. [ ] [ ] [ ] [ ]
Fiscal 2001 (1)
July 2000-September 2000... $7.25 $5.38 $19.13 $16.25
October 2000-December 2000. 6.13 3.50 34.00 15.69
January 2001-March 2001.... 5.50 3.88 30.75 22.94
April 2001-June 2001....... 6.35 4.06 35.13 26.19
Fiscal 2000 (1)
July 1999-September 1999... $5.19 $3.19 $15.13 $ 8.13
October 1999-December 1999. 5.88 3.00 8.69 7.50
January 2000-March 2000.... 8.50 4.31 15.94 7.94
April 2000-June 2000....... 6.97 4.63 18.00 11.25
--------
(1) Data conformed to Respironics' fiscal years. Novametrix's fiscal year ends
on the Sunday closest to April 30 of each year.
The following table sets forth for the periods indicated the range of high
and low sales price per share for the Respironics common stock and Novametrix
common stock on the Nasdaq Stock Market, based on published financial sources,
respectively, on December 11, 2001, the last full trading day prior to
Novametrix's announcement that it was involved in negotiations with a potential
acquiror, on December 18, 2001, the last full trading day prior to the public
announcement of the execution of the merger agreement, and on March 4, 2002,
the last full trading day prior to the printing of this proxy
statement/prospectus.
Novametrix Common Stock Respironics Common Stock
----------------------- ------------------------
High Sale Low Sale High Sale Low Sale
--------- -------- --------- --------
December 11, 2001 $7.39 $7.23 $32.75 $31.36
December 18, 2001 7.58 7.40 35.00 34.26
March 4, 2002....
19
RISK FACTORS
By voting to adopt the merger agreement, Novametrix stockholders will be
choosing to invest in Respironics common stock. An investment in Respironics
common stock involves risk. In addition to the other information contained in
or incorporated by reference into this proxy statement/prospectus, you should
carefully consider the following risk factors before deciding whether to vote
for the merger. If any of the following risks actually occurs, the business and
prospects of the combined Respironics and Novametrix may be adversely affected.
In such case, the trading price of Respironics common stock could decline and
you could lose all or part of your investment.
Risks Related to the Merger
The dollar value of the consideration that Novametrix stockholders will receive
in the merger may decrease between now and the completion of the merger due to
changes in the market value of Respironics common stock.
The exchange ratio is based on the market price for Respironics common stock
and will not be determined until shortly before the completion of the merger.
The market prices for the Respironics common stock cannot be predicted and
you should obtain current market quotations of the Respironics common stock,
which is listed on the Nasdaq Stock Market under the symbol "RESP".
The exchange ratio will be determined at the time of the merger as follows:
. If Respironics' weighted average stock price is above $35.00 during the
20-day trading period ending three days prior to the closing of the
merger, Novametrix stockholders will receive Respironics common stock in
an amount equal to $8.75 per Novametrix share.
. If Respironics' weighted average stock price is between $32.00 and
$35.00 during the 20-day trading period ending three days prior to the
closing of the merger, Novametrix stockholders will receive 0.25 shares
of Respironics common stock for each share of Novametrix common stock,
resulting in an amount between $8.00 and $8.75 per Novametrix share.
. If Respironics' weighted average stock price is between $30.00 and
$31.99 per share during the 20-day trading period ending three days
prior to the closing of the merger, Novametrix stockholders will receive
Respironics common stock in an amount equal to $8.00 per Novametrix
share.
. If Respironics' weighted average stock price is below $30.00 per share
during the 20-day trading period ending three days prior to the closing
of the merger, Novametrix stockholders will receive 0.2667 shares of
Respironics common stock for each share of Novametrix common stock,
unless Novametrix exercises its right to terminate the merger.
Because the exchange ratio will not be determined until the third trading
day before the completion of the merger, if you wish to vote by proxy and have
your vote counted at the special meeting, you will have to decide whether or
not to vote for adoption of the merger agreement and the issuance of
Respironics shares in the merger before knowing the actual exchange ratio.
Changes in the price of Respironics common stock between the date of this proxy
statement/prospectus and the third trading day before the closing of the merger
may cause the actual exchange ratio to vary significantly. The actual market
value of a share of Respironics common stock at the time of the closing of the
merger could be substantially different, including substantially less, than the
Respironics weighted average stock price during the 20-day period ending three
days prior to the closing of the merger. Because the date the merger is
completed will be later than the date of the special meeting, Novametrix
stockholders will not necessarily know the market value of the combined
Respironics common stock that they will receive in the merger at the time they
vote on the merger. See "The Merger Agreement--Merger Consideration" on page 49.
20
The risk of failing to successfully integrate Respironics and Novametrix may
result in the combined companies not achieving the anticipated potential
benefits of the merger.
The merger involves the combination of two companies that have previously
operated independently. Among the factors considered by the Respironics board
of directors and the Novametrix board of directors in connection with their
approval of the merger agreement were the opportunities for operating
efficiencies that they expect will ultimately result from the merger. The
integration of the companies' operations following the merger will require the
dedication of management resources in order to achieve the anticipated
operating efficiencies of the merger. While Respironics and Novametrix expect
to achieve savings in operating costs as a result of the merger, we cannot
assure you that difficulties encountered in integrating the operations of
Respironics and Novametrix will be overcome or that the benefits expected from
such integration will be realized. The difficulties of combining the companies'
operations include the necessity of coordinating geographically separated
organizations, integrating personnel with diverse business backgrounds and
combining different corporate cultures. The process of integrating operations
could cause an interruption of, or loss of momentum in, the activities of
either or both of the combined companies' businesses. The diversion of
management's attention and any difficulties encountered in connection with the
merger and the integration of the two companies' operations could have an
adverse effect on the business, revenues, level of expenses and operating
results of the combined companies.
Respironics and Novametrix may not achieve the benefits they expect from the
merger.
Respironics and Novametrix entered into the merger agreement with the
expectation that the merger will result in significant benefits to the combined
companies. Achieving the benefits of the merger depends on the timely,
efficient and successful execution of a number of post-merger events. Key
events include:
. offering the existing products and services of each company to the other
company's customers; and
. developing new products and services for both companies' respective
customers.
The execution of these post-merger events will involve risk and may not be
successful.
Existing products and services. Respironics initially intends to offer each
company's products and services to the customers of the other company. We
cannot assure you that either company's customers will have any interest in the
other company's products and services. The failure of these cross-marketing
efforts would diminish the synergies expected to be realized by the merger.
New products and services. Respironics intends to develop new products and
services. We cannot assure you that Respironics will be able to overcome the
technological, market-driven or other obstacles in developing new products and
services, or that there will be a market for any new products or services
developed by Respironics after the merger.
Respironics and Novametrix cannot offer you any assurances that they can
successfully integrate or realize the anticipated benefits of the merger. A
failure to do so could adversely affect the combined companies' business,
financial condition and operating results or could result in the loss of key
personnel or customers. In addition, the diversion of management's attention
from other important issues could adversely affect the combined companies.
21
The market price of Respironics common stock may decline as a result of the
merger.
The market price of Respironics common stock may decline as a result of the
merger for a variety of reasons, including if:
. the integration of Respironics and Novametrix is unsuccessful;
. Respironics does not achieve the perceived benefits of the merger as
rapidly as, or to the extent anticipated by, financial or industry
analysts; or
. the effect of the merger on Respironics' financial results is not
consistent with the expectations of financial or industry analysts.
If the merger does not occur, Novametrix will not benefit from the expenses it
has incurred in the pursuit of the merger.
Failure to complete the merger could negatively impact Novametrix's stock
price and future business and operations.
If the merger is not completed for any reason, Novametrix may be subject to
a number of material risks, including the following:
. Novametrix may be required to pay Respironics a fee of $3,400,000, plus
up to $425,000 of Respironics' expenses relating to the merger;
. the price of Novametrix common stock may decline to the extent that the
current market price of Novametrix common stock reflects a market
assumption that the merger will be completed; and
. expenses related to the merger must be paid even if the merger is not
completed and Novametrix will not benefit from the expenses it has
incurred in the pursuit of the merger.
In addition, Novametrix customers and suppliers may, in response to the
announcement of the merger, delay or defer decisions concerning Novametrix or
cease doing business with Novametrix. Any delay in or deferral of those
decisions by Novametrix customers or suppliers or any decision by Novametrix
customers or suppliers to cease doing business with Novametrix could have a
significant adverse effect on Novametrix, regardless of whether the merger is
ultimately completed. Similarly, current and prospective Novametrix employees
may experience uncertainty about their future roles with Respironics until
Respironics' strategies with regard to Novametrix are announced or executed.
This may adversely affect Novametrix's ability to attract and retain key
management, sales, marketing and technical personnel.
Further, if the merger agreement is terminated and Novametrix's board of
directors determines to seek another merger or business combination, it is not
certain that Novametrix will be able to find a partner willing to pay an
equivalent or more attractive price than the price to be paid in the merger.
Also, while the merger agreement is in effect, Novametrix is generally
prohibited from soliciting, initiating, encouraging or entering into
extraordinary transactions, such as a merger, sale of assets or other business
combination, with any other party.
The historical earnings of Respironics will be diluted by the merger.
The merger and the transactions contemplated thereby have a dilutive effect
on Respironics' historical net income per share on a pro forma combined basis
for the year ended June 30, 2001 and the six months ended December 31, 2001.
The "Unaudited Pro Forma Combined Condensed Statements of Income" on pages 67
through 71 illustrate the effect of the merger on historical net income per
share for the year ended June 30, 2001 and the six months ended December 31,
2001. On a historical basis for Respironics, net income per share was $1.09 for
the year ended June 30, 2001 and $0.58 for the six months ended December 31,
2001, as compared to $0.99 and $0.57 for the year ended June 30, 2001 and the
six months ended December 31, 2001, respectively, on a pro forma basis for the
combined companies, assuming an exchange ratio of 0.2667.
22
Substantial sales of Respironics common stock could occur after the merger and
cause fluctuations in the market price of the stock.
After the merger and assuming the conversion of the 8,809,406 shares of
Novametrix common stock outstanding on the Novametrix record date to shares of
Respironics common stock, approximately of the shares of Respironics
common stock issued to Novametrix stockholders will be freely tradable and an
additional shares of Respironics common stock will be tradable under Rules
144 and 145 under the Securities Act assuming, in each case, an exchange ratio
of 0.2667. As a result, substantial sales of Respironics common stock could
occur after the merger, including sales by those Novametrix stockholders and
current Respironics stockholders. Sales of a substantial number of such shares
of Respironics common stock could adversely affect or cause substantial
fluctuations in the market price of Respironics common stock and impair
Respironics' ability to raise additional capital through the sale of its equity
securities.
The market prices of Respironics common stock and Novametrix common stock
are, and are expected to continue to be, subject to significant fluctuations in
response to variations in quarterly operating results, announcements of
products and developments by competitors, trends in the health care industry in
general and the medical device industry in particular, and certain other
factors beyond the control of Respironics and Novametrix.
The combined companies will be dependent on key personnel.
The success of the combined companies is dependent upon the retention,
training and management of qualified employees, including key employees.
Competition for qualified sales, technical and other personnel is intense, and
we cannot assure you that the combined companies will be able to attract,
assimilate or retain highly qualified employees in the future. If the combined
companies are unable to retain and hire such personnel, its business, operating
results and financial condition may be adversely affected. Additions of new and
departures of existing personnel, particularly in key positions, can be
disruptive and have a material adverse effect on the combined companies'
business, operating results and financial condition. See "The Merger--Interests
of Certain Persons in the Merger--Employment Agreements" on pages 44 through 45
for a description of employment agreements to be entered into in connection
with the merger.
Risks Related to the Combined Businesses of Respironics and Novametrix
Pricing pressure and health care reform may adversely affect the combined
business.
The health care industry in the United States is experiencing a period of
extensive change. Changes in the law or new interpretations of existing laws
may affect the definition of permissible or impermissible activities, the
relative costs associated with doing business, the extent of coverage and the
amount of reimbursement by both government and third party payors. In addition,
economic forces, regulatory influences and political initiatives are subjecting
the health care industry to fundamental change. The health care industry is
experiencing market-driven reforms from forces within the industry that are
exerting pressure on health care companies to reduce health care costs. These
market-driven changes are resulting in industry-wide consolidation that may
increase the downward pressure on health care product margins, as larger buyer
and supplier groups exert pricing pressure on providers of medical devices and
other health care products. The ultimate timing or effect of legislative
efforts and market driven reforms cannot be predicted, and may impact the
business of the combined companies. We cannot assure you that any such efforts
or reforms will not have an adverse effect on the business, results of
operations or financial condition of the combined companies.
23
The combined companies will be dependent on third parties.
The businesses of Respironics and Novametrix depend upon relationships with
durable medical equipment manufacturers and distributors, hospitals, hospital
groups, purchasing organizations, physicians, physician groups, home health
care organizations, long-term care facilities, and other institutional health
care providers. We cannot assure you that the combined companies will be able
successfully to maintain and develop these third party relationships, or that
certain relationships will not be adversely affected by the merger. The loss of
or damage to existing relationships, or the failure to continue to develop
relationships of these kinds, could have a material adverse effect on the
business, results of operations and financial condition of the combined
companies after the merger.
The businesses of Respironics and Novametrix are also dependent to a large
extent upon the ability of customers to obtain adequate reimbursement from
third party payors, such as government and private insurance programs, for
reselling and renting products and performing procedures using the products of
the two companies. Governmental initiatives focused on achieving cost-effective
health care delivery could adversely affect the business of the combined
companies.
Managed care organizations have grown substantially in terms of the
percentage of the population in the United States that receives medical
benefits through such organizations. In addition, these organizations are
continuing to consolidate, and such consolidation may increase the ability of
such organizations to influence the practices and pricing involved in the
purchase of medical devices, including those sold by the combined companies
after the merger.
The cost and uncertainty of regulatory compliance may adversely affect the
combined business.
The business, financial condition and results of operations of the combined
business could be materially and adversely affected by any of the following
events, circumstances or occurrences related to the regulatory process:
. delays in initiating or completing clinical trials or in the receipt of
regulatory approvals;
. the failure to obtain regulatory approvals for products;
. significant limitations in the indicated uses for which approved
products may be marketed; or
. substantial costs incurred in obtaining such approvals.
There has been a trend in recent years both in United States and outside the
United States toward more stringent regulation of, and enforcement of
requirements applicable to, medical device manufacturers. At the present time,
there are no meaningful indications that this trend will change in the near
term or the long-term, either in the United States or abroad.
The uncertainty related to patents and proprietary rights may adversely affect
the combined business.
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. Companies in the
medical device industry have employed intellectual property litigation to gain
a competitive advantage. While Novametrix and Respironics periodically review
the scope of their patents and other relevant patents of which they are aware,
the question of patent infringement involves complex legal and factual issues.
Any conclusion regarding infringement may not be consistent with the resolution
of any such issues by a court. We cannot assure you that the business, results
of operations or the financial condition of the combined companies will not
suffer an adverse impact as a result of intellectual property claims that may
be commenced against the combined companies in the future.
24
The combined companies will be subject to intense competition, as technology
and markets are changing rapidly.
The medical device industry is characterized by rapidly evolving technology
and increased competition. Competitors of Respironics and Novametrix include
large medical companies, some of which have greater financial and technical
resources and broader product lines than Respironics and Novametrix, even on a
combined basis. There are a number of companies that currently offer, or are in
the process of developing, products that compete with products offered by
Respironics and Novametrix. Some of these competitors may have greater capital
resources, research and development staffs and experience in the medical device
industry. We cannot assure you that some of these competitors will not succeed
in developing technologies and products that are more effective than those
currently used, produced or sold by Respironics and Novametrix or that would
render some products offered by Respironics and Novametrix obsolete or
non-competitive.
The combined companies will be dependent upon new product development.
As existing products of Respironics and Novametrix become more mature and
their existing markets become more crowded, the importance to the combined
companies after the merger of developing or acquiring new products will
increase. The development of any such products will entail considerable time
and expense, including research and development costs or acquisition costs and
the time and expense required to obtain necessary regulatory approvals. We
cannot assure you that such development activities will yield products that can
be commercialized profitably or that any product acquisitions can be
consummated on commercially reasonable terms or at all. Any failure to acquire
or develop new products to supplement more mature products could have an
adverse effect on the business, results of operations and financial condition
of the combined companies.
Product liability exposure may adversely affect the combined business.
Because many of the products of both Respironics and Novametrix are intended
to be used in health care settings on patients who may be seriously or
critically ill, both companies are exposed to potential product liability
claims. Although both companies currently maintain significant levels of
product liability insurance coverage and Respironics plans to continue such
coverage after the merger, we cannot assure you that such product liability
insurance will continue to be available or that product liability claims will
not have an adverse effect on the business, results of operations or financial
condition of the combined companies.
Respironics and Novametrix produce and sell their products internationally
which subjects the combined business to risks of transacting business in
foreign countries.
Because sales of products by Respironics and Novametrix are often made
outside the United States and Respironics has foreign manufacturing operations
in the Peoples Republic of China and the Philippines, the international revenue
of the combined companies and the cost of goods sold are subject to the
following risks:
. foreign currency fluctuations;
. economic or political instability;
. foreign tax laws;
. shipping delays;
. various tariffs and trade regulations;
. restrictions and foreign medical regulations;
. customs duties, export quotas or other trade restrictions; and
. difficulty in protecting intellectual property rights.
Any of these factors could adversely affect the business, financial
condition and results of operations of the combined companies.
25
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain forward-looking statements in this document are subject to risks and
uncertainties. These statements may be made directly in this document or may be
"incorporated by reference" from other documents filed with the SEC.
Forward-looking statements include information regarding synergies,
efficiencies, cost savings, revenue enhancements, projected funds from
operations, asset portfolios and the timetable for completion of the merger.
Forward-looking statements in this document or those documents incorporated
by reference also include, among other things, statements regarding the intent,
belief or expectations of Respironics or Novametrix and frequently can be
identified by the use of words such as "may," "will," "should," "believes,"
"expects," "anticipates," "intends," "estimates" and other comparable terms.
For those statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
You should understand that the following important factors, in addition to
those risk factors discussed elsewhere in this document and in the documents
which are incorporated by reference, could affect the future results of
Respironics, Novametrix, and the combined companies after completion of the
merger, and could cause actual results or other outcomes to differ materially
from those expressed in our forward-looking statements:
. competitive pressures among health care products manufacturers,
distributors and service providers may increase significantly;
. general economic or business conditions, either internationally,
nationally or in the states in which Respironics or Novametrix are doing
business, may be less favorable than expected resulting in, among other
things, a reduced demand for health care products and services;
. legislative or regulatory changes may adversely affect the business of
Respironics or Novametrix; and
. changes may occur in the securities markets.
All subsequent written and oral forward-looking statements attributable to
Respironics, Novametrix or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this section. Neither Respironics nor Novametrix undertakes any
obligation to release publicly any revisions to the forward-looking statements
in this proxy statement/prospectus to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events.
26
THE MERGER
The discussion in this proxy statement/prospectus of the merger and the
principal terms of the merger agreement is subject to, and qualified in its
entirety by reference to, the merger agreement, a copy of which is attached to
this proxy statement/prospectus as Annex A and is incorporated by reference
into this proxy statement/prospectus.
General
Novametrix is furnishing this proxy statement/prospectus to you in
connection with the solicitation of proxies by the Novametrix board of
directors for use at the special meeting of Novametrix stockholders to be held
on April 9, 2002, and at any adjournments or postponements of the special
meeting. Respironics is furnishing this proxy statement/prospectus to you in
connection with its offer to issue shares of Respironics common stock in
exchange for your shares of Novametrix common stock.
At the special meeting, you will be asked to vote upon a proposal to adopt
the Agreement and Plan of Merger dated as of December 17, 2001 by and between
Novametrix and Respironics Holdings, Inc., a subsidiary of Respironics.
Background of the Merger
The Novametrix board of directors, as part of its ongoing oversight and
planning functions, has from time to time considered various financial and
other alternatives that might be available to increase the value of Novametrix
to its stockholders. In connection with these ongoing reviews, the Novametrix
board of directors met during the spring of 2001 to assess various possible
strategic alternatives available to Novametrix to increase stockholder value,
including a sale or business combination or the continued operation of
Novametrix as a stand alone entity under its then current business plan.
At a meeting of the Novametrix board of directors held in March 2001,
SunTrust Robinson Humphrey presented its preliminary analysis of strategic
alternatives available to Novametrix. SunTrust Robinson Humphrey discussed with
the Novametrix board of directors its preliminary views on an appropriate
valuation of Novametrix and its analysis of other related matters. Following
these discussions, the Novametrix board of directors directed SunTrust Robinson
Humphrey to undertake a more detailed valuation analysis and to undertake with
Novametrix management the identification of third parties who might have an
interest in acquiring Novametrix. Novametrix's management and SunTrust Robinson
Humphrey then identified a number of third parties who might have an interest
in acquiring Novametrix.
At a meeting of the Novametrix board of directors held on April 6, 2001, the
board authorized preliminary discussions with financial advisors to advise the
board on its strategic alternatives. On May 24, 2001, Novametrix engaged an
investment banking firm, SunTrust Robinson Humphrey, to assist Novametrix in
its consideration of various strategic alternatives, including a possible sale
of Novametrix.
Beginning in June 2001, SunTrust Robinson Humphrey approached 14 potential
buyers, including Respironics, in an effort to ascertain, on a preliminary
basis, their level of interest in acquiring Novametrix. The companies contacted
were chosen based on a variety of factors, including perceived interest in the
businesses in which Novametrix operates, familiarity with the medical device
industry, financial position and ability to consummate an acquisition of
Novametrix. Those entities expressing an interest in pursuing a possible
transaction were asked to sign agreements to protect the confidential nature of
the material prepared by Novametrix management to be provided to these parties.
Ten companies, including Respironics, signed confidentiality agreements and, in
July 2001, received a confidential memorandum prepared by Novametrix management.
27
In July 2001, Respironics engaged Parker/Hunter Incorporated as its
financial advisor in connection with the potential acquisition of Novametrix.
On July 10, 2001, representatives of SunTrust Robinson Humphrey made a
presentation to the Novametrix board of directors with respect to the status of
the discussions and meetings with potential bidders. At the meeting, SunTrust
Robinson Humphrey discussed a proposed timetable for the sale of Novametrix and
questions, comments and indications of possible interest being received from
potential bidders.
Between July 30, 2001 and August 13, 2001, Novametrix and its financial
advisors hosted introductory meetings in New York with each of the potential
acquirors of Novametrix. An introductory meeting with Respironics was held on
July 31, 2001. Senior representatives from both Novametrix and Respironics
attended this meeting, including Craig B. Reynolds, Executive Vice President
and Chief Operating Officer of Respironics, Daniel J. Bevevino, Vice President
and Chief Financial Officer of Respironics and Paul L. Woodring, President -
Hospital Division of Respironics, as well as William J. Lacourciere, Chairman
of the Board and Chief Executive Officer of Novametrix, Thomas M. Patton,
President and Chief Operating Officer of Novametrix, Joseph A. Vincent, Chief
Financial Officer of Novametrix and Philip F. Nuzzo, Vice President - Business
and Product Development of Novametrix. Messrs. Lacourciere, Patton, Vincent and
Nuzzo made a presentation discussing Novametrix's business, customers,
industry, and historical and projected financial performance. After this
presentation, Messrs. Lacourciere, Patton, Vincent and Nuzzo answered questions
and provided a broad overview as to how a potential combination may improve
both Novametrix's and Respironics' future prospects.
Following the introductory meetings, between August 16, 2001 and August 23,
2001, Novametrix received preliminary offers from four of the potential
acquirors of Novametrix.
At a meeting of the Novametrix board of directors held on August 23, 2001,
following a presentation by representatives of SunTrust Robinson Humphrey, the
Novametrix board authorized management to continue discussions and due
diligence with the four companies who made preliminary offers.
Beginning on August 27, 2001, Novametrix management provided the potential
acquirors with access to due diligence materials related to Novametrix's
business. Between August 27, 2001 and September 28, 2001, two potential bidders
withdrew their preliminary offers and withdrew from the process to purchase
Novametrix before reviewing due diligence materials based on price expectations
relative to a potential transaction.
After Novametrix made its initial presentation to Respironics on July 31,
2001, Respironics' commenced financial and business due diligence on
Novametrix, which continued through the execution of the merger agreement.
Respironics' due diligence efforts included conducting meetings with Novametrix
management, visiting Novametrix's facilities and reviewing financial and legal
documents provided by Novametrix.
Respironics and its advisors commenced legal due diligence at the offices of
Torys LLP, legal counsel to Novametrix, in mid-September 2001. Legal due
diligence continued through the execution of the merger agreement.
On September 28, 2001, SunTrust Robinson Humphrey sent letters to the
potential bidders that specified the procedures to be followed regarding
submission of final offers. The letter stated that offers were to include
information as to the price-per-share for Novametrix common stock, the source
of financing for the transaction, a timetable for completion, and regulatory
approvals that would be required to complete the transaction. Potential bidders
also received drafts of a proposed acquisition agreement and were instructed to
advise of any material departures from the agreement's terms in their bids.
On November 12, 2001, the Respironics board of directors held a meeting and
authorized management to proceed with their efforts to pursue a business
combination with Novametrix. Later that week, Respironics submitted an offer
pursuant to which Novametrix stockholders would receive consideration of $8.00
per share of Novametrix common stock in Respironics common stock in a tax free
merger.
28
On November 16, 2001, the Novametrix board of directors authorized
management to continue negotiations with Respironics and to evaluate merger
agreement terms and a possible exchange ratio "collar" or similar mechanism to
provide some protection to Novametrix stockholders with respect to the value of
the Respironics common stock to be received in the merger.
Between November 19, 2001 to November 28, 2001, financial representatives of
Novametrix and Respironics discussed and negotiated on numerous occasions the
terms of the proposed merger, including the price per share, the terms of a
collar, and matters relating to transaction structure and the timing of the
merger.
On November 26, 2001, the Novametrix board of directors received an update
on the status of merger negotiations, including price and collar provisions,
structure and timing.
On November 28, 2001, Novametrix entered into an agreement with Respironics
providing for an exclusive negotiating period through December 23, 2001 whereby
Novametrix agreed not to solicit, initiate or encourage any alternative
proposals.
From December 4, 2001 through December 5, 2001, Novametrix and its advisors
met with management of Respironics to conduct business and financial due
diligence on the business, operations and prospects for Respironics and its
common stock. Also during the week of December 4, 2001 through December 7,
2001, representatives of Torys LLP conducted legal due diligence.
From December 4, 2001 through December 17, 2001, legal and financial
representatives of Novametrix and Respironics discussed and negotiated on
numerous occasions various aspects of the proposed merger, the proposed terms
of the merger agreement, including the nature and extent of termination fees
and the conditions for consummation of the merger, and the proposed terms of
certain employment agreements. At the same time, Respironics and its advisors
provided expanded due diligence requests to Novametrix and continued to conduct
due diligence on Novametrix.
On December 12, 2001, Novametrix issued a press release stating that it was
"involved in negotiations with a potential acquiror regarding a potential
merger of Novametrix pursuant to which all of the Novametrix common stock would
be converted into common stock of the potential acquiror having a value of in
the range of $8.00 per share of the Novametrix common stock."
On December 17, 2001, the Novametrix board of directors met to consider the
proposed merger, including the merger agreement and related agreements. At
Novametrix's board meeting, Mr. Lacourciere, representatives of SunTrust
Robinson Humphrey, and Mr. Thomas M. Haythe, the general counsel of Novametrix,
addressed the board of directors about the business, financial and legal
implications, respectively, of a merger between Respironics and Novametrix and
the terms of the proposed merger agreement and related agreements. During that
meeting, representatives of SunTrust Robinson Humphrey informed the board that
in the opinion of SunTrust Robinson Humphrey, as of December 17, 2001, the
exchange ratio under the proposed merger agreement was fair, from a financial
point of view, to Novametrix stockholders. After discussion, the Novametrix
board of directors unanimously voted to approve the merger agreement and the
merger and unanimously resolved to recommend that Novametrix stockholders vote
to adopt the merger agreement at a special meeting to be held for that purpose.
At the meeting, the Novametrix board of directors approved an amendment to its
preferred stock rights plan in order to exempt the merger from the provisions
of the rights plan, exempted the merger from the supermajority voting
provisions set forth in the Novametrix certificate of incorporation, and
exempted the merger from the anti-takeover restrictions set forth in Delaware
law.
On December 17, 2001, Respironics' board of directors held a meeting with
its legal advisors, financial advisors and management, and discussed the final
terms and conditions of the merger as set forth in the merger agreement and
related agreements. Respironics' board of directors unanimously approved the
merger agreement and the related transactions, including the merger.
29
On December 18, 2001, the parties executed the merger agreement and related
documents. Immediately thereafter, Respironics and Novametrix issued a press
release announcing the proposed merger.
Novametrix's Rationale for the Merger; Recommendation of the Novametrix Board
of Directors
The Novametrix board of directors has approved the merger and the merger
agreement and has determined that the merger and the merger agreement are
advisable, fair to and in the best interest of Novametrix and its stockholders.
In approving the merger, the merger agreement and the transactions contemplated
thereby, and recommending that the holders of Novametrix common stock vote FOR
the adoption of the merger agreement at the special meeting, the Novametrix
board of directors considered a number of factors, including:
. the financial condition, results of operations, cash flow, earnings and
assets of Novametrix and the prospects of Novametrix if it remains an
independent company;
. the presentation of SunTrust Robinson Humphrey, and the opinion of
SunTrust Robinson Humphrey to the effect that, subject to the matters
set out in such opinion and subject to the assumptions, factors and
limitations set forth in their written opinion, the exchange ratio
established pursuant to the merger agreement is fair from a financial
point of view to Novametrix stockholders;
. the financial and other terms of the merger and the merger agreement;
. the recent and historical stock price performance of Novametrix common
stock and Respironics common stock;
. the potential strategic alternatives available to Novametrix and the
viability and risks associated with each alternative, including the
prospects for Novametrix on a stand-alone basis and the risks associated
with executing upon and achieving Novametrix's business plan, both
short-term and long-term;
. the fact that the merger will present the opportunity for the holders of
shares of Novametrix common stock to participate in a significantly
larger and more diversified company and, as stockholders of the combined
companies, to have greater liquidity in their shares and to benefit from
any future growth of the combined companies;
. the expectation of the Novametrix directors that the addition of
Novametrix's operations to those of Respironics would likely increase
the overall value and profitability of Respironics, tending to produce
greater stockholder value for Novametrix stockholders;
. the presentations by, and discussions of the terms of the merger
agreement with, Novametrix's senior management and SunTrust Robinson
Humphrey;
. the likelihood that the merger would be consummated, including the
experience, reputation and financial condition of Respironics;
. the consents and approvals required to consummate the merger, including
regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and any other antitrust laws, and the favorable
prospects for receiving such consents and approvals;
. the fact that while the merger agreement prohibits Novametrix from
soliciting proposals concerning an acquisition of Novametrix, the
Novametrix board of directors, in the exercise of its fiduciary duties,
would be able to provide information to, and engage in negotiations
with, a third party which makes an unsolicited superior acquisition
proposal, and that the Novametrix board of directors would be able to
terminate the merger agreement and accept a superior acquisition
proposal if it determined that its fiduciary duties so require, upon
payment to Respironics of a termination fee of $3,400,000, plus
reimbursement of Respironics' expenses up to a maximum of $425,000;
. the potential effect of the public announcement of the merger on
Novametrix's ability to attract and retain key management, sales,
marketing and technical personnel;
30
. the opportunity of the combined companies to reduce costs through
economies of scale that would not have been readily achievable by
Novametrix independently; and
. the strengths and weaknesses of Respironics' businesses and the key
attributes of the combined companies in terms of, among other things,
products, sales, customers, management and competitive position.
In view of the variety of factors considered in connection with its
evaluation of the merger, the Novametrix board of directors did not find it
practical to, and did not, quantify or otherwise assign relative weights to the
specific factors considered. Rather, the Novametrix board of directors viewed
its position and recommendations as being based on the totality of the
information presented to and considered by the Novametrix board of directors.
In addition, individual members of the Novametrix board of directors may have
given differing weight to different factors.
Respironics' Rationale for the Merger
The Respironics board of directors has concluded that the proposed merger is
in the best interests of Respironics and its stockholders because, among other
reasons, the merger would further Respironics' goal to be the leading worldwide
resource in providing innovative products and unique programs to help manage
and treat patients with sleep disorders and cardiopulmonary diseases and would
enhance its ability to fulfill its vision and strategies focused on helping
clinicians treat their patients, helping providers manage and grow their
businesses and helping patients improve their quality of life. The Respironics
board of directors concluded that the proposed merger will further such vision
and strategies because of its belief that, among other things:
. the combination of Respironics and Novametrix will result in a company
with unique capabilities in the hospital environment by bringing
together the therapeutic technologies of Respironics with the monitoring
capabilities of Novametrix;
. the developmental care products of Novametrix will complement the infant
management products and programs currently offered by Respironics;
. the cardiac output monitoring technologies of Novametrix will support
Respironics' initiatives in the congestive heart failure area; and
. Respironics' "critical mass" of products, revenues, profits, and assets
in certain markets will be increased significantly.
In reaching its conclusion that the proposed merger is fair to, and in the
best interests of, Respironics and its stockholders, the Respironics board of
directors also considered a number of factors, including, but not limited to,
the following:
. its knowledge of the business, operations, properties, assets, financial
condition, operating results, and prospects of Respironics and
Novametrix;
. current industry, economic and market conditions;
. presentations by Respironics management with respect to Respironics,
Novametrix and the merger;
. the terms of the merger agreement and the nature and amount of the
termination fees that may be payable under certain circumstances;
. the accounting and tax treatment of the merger; and
. the opportunity for Respironics stockholders to participate in a larger
and more diverse company.
31
In view of the variety of factors considered in connection with its
evaluation of the merger, the Respironics board of directors did not find it
practicable to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination. In addition,
individual members of the Respironics board of directors may have given
different weights to different factors.
Opinion of Novametrix's Financial Advisor
General. Pursuant to an engagement letter dated May 24, 2001, and an
extension letter dated December 10, 2001, extending the terms of the original
engagement through April 30, 2002, SunTrust Capital Markets, Inc., through its
SunTrust Robinson Humphrey subsidiary, was retained by Novametrix to advise the
Novametrix board of directors on its strategic alternatives and, as part of its
engagement, to render a written opinion with respect to the fairness, from a
financial point of view, to the common stockholders of Novametrix of the
exchange ratio of the proposed merger between Novametrix and Respironics
Holdings. On December 17, 2001, SunTrust Robinson Humphrey rendered a written
opinion to the Novametrix board of directors to the effect that, as of the date
of such opinion and based upon and subject to certain matters stated therein,
the exchange ratio of the proposed merger provided for in the merger agreement
is fair from a financial point of view to the common stockholders of Novametrix.
The full text of the opinion of SunTrust Robinson Humphrey, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex B and is incorporated into this proxy
statement/prospectus by reference. The description of the SunTrust Robinson
Humphrey opinion set forth herein is qualified in its entirety by reference to
the full text of the SunTrust Robinson Humphrey opinion. You are urged to read
the opinion in its entirety.
The opinion of SunTrust Robinson Humphrey is directed to the Novametrix
board of directors and relates only to the fairness of the exchange ratio from
a financial point of view, does not address any other aspect of the merger and
does not constitute a recommendation to any stockholder as to how such
stockholder should vote at the Novametrix stockholders meeting. The
consideration to be received by Novametrix stockholders in the merger was
determined on the basis of negotiations between Novametrix and Respironics and
was adopted by the Novametrix board.
Material and Information Considered with Respect to the Merger. In arriving
at its opinion, SunTrust Robinson Humphrey among other things:
. reviewed the merger agreement;
. reviewed certain publicly available information concerning Novametrix
and Respironics which SunTrust Robinson Humphrey believed to be relevant
to its analysis;
. reviewed certain historical and projected financial and operating data
concerning Novametrix furnished to SunTrust Robinson Humphrey by
Novametrix and certain historical and projected financial and operating
data concerning Respironics furnished to SunTrust Robinson Humphrey by
Respironics, in addition to publicly available financial forecasts
relating to Respironics;
. conducted discussions with members of management of Novametrix and
Respironics concerning their respective businesses, operations, present
financial conditions and prospects;
. reviewed the trading history of the common stock of Novametrix and
Respironics from December 1998 to the present;
32
. reviewed the historical market prices and trading activity for the
common stock of Novametrix and Respironics and compared them with those
of selected publicly traded companies which SunTrust Robinson Humphrey
deemed relevant;
. compared the historical and projected financial results and present
financial condition of Novametrix and Respironics with those of selected
publicly traded companies which SunTrust Robinson Humphrey deemed
relevant;
. reviewed the financial terms, to the extent publicly available, of
selected comparable merger and acquisition transactions which SunTrust
Robinson Humphrey deemed relevant;
. performed certain financial analyses with respect to the projected
future operating performance of Novametrix and Respironics; and
. reviewed other financial statistics and undertook other analyses and
investigations and took into account those other matters as SunTrust
Robinson Humphrey deemed appropriate.
In arriving at its opinion, SunTrust Robinson Humphrey assumed and relied
upon the accuracy and completeness of the financial and other information
provided to SunTrust Robinson Humphrey by Novametrix and Respironics without
independent verification. With respect to the financial forecasts of Novametrix
and Respironics, including estimates of the cost savings and other potential
synergies anticipated to result from the merger, SunTrust Robinson Humphrey has
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgments of the management of both Novametrix and
Respironics as to future financial performance of Novametrix and Respironics.
In arriving at its opinion, SunTrust Robinson Humphrey conducted only a limited
physical inspection of the properties and facilities of Novametrix and
Respironics. SunTrust Robinson Humphrey has not made or obtained any
evaluations or appraisals of the assets or liabilities of Novametrix or
Respironics.
The SunTrust Robinson Humphrey opinion is necessarily based upon market,
economic and other conditions as they existed and could be evaluated on, and on
the information made available to SunTrust Robinson Humphrey as of, the date of
its opinion. The financial markets in general and the market for the common
stock of Novametrix and Respironics is subject to volatility, and SunTrust
Robinson Humphrey's opinion did not purport to address potential developments
in the financial markets or the market for the common stock of Novametrix or
Respironics after the date of its opinion. SunTrust Robinson Humphrey assumed
that the merger would be consummated on the terms described in the merger
agreement, without any waiver of any material terms or conditions by Novametrix
or Respironics. Subsequent developments may affect SunTrust Robinson Humphrey's
opinion and SunTrust Robinson Humphrey does not have any obligation to update,
revise, or reaffirm its opinion.
In preparing its opinion, SunTrust Robinson Humphrey performed a variety of
financial and comparative analyses, a summary of which is described below. A
summary of these analyses does not purport to be a complete description of the
analyses underlying SunTrust Robinson Humphrey's opinion. The preparation of a
fairness opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, is
not readily susceptible to summary description. Accordingly, SunTrust Robinson
Humphrey believes that its analyses must be considered as an integrated whole
and that selecting portions of its analyses and factors, without considering
all analyses and factors, could create a misleading or incomplete view of the
processes underlying such analyses and opinion. In its analyses, SunTrust
Robinson Humphrey made numerous assumptions with respect to Novametrix,
Respironics, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Novametrix and Respironics. The estimates contained in these analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by such
analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or
33
securities actually may be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty. SunTrust Robinson Humphrey's
opinion and financial analyses were only one of many factors considered by the
Novametrix board of directors in its evaluation of the proposed merger and
should not be viewed as determinative of the views of the Novametrix board of
directors or management with respect to the merger or the merger consideration.
Analysis of Novametrix.
Market Analysis of Selected Public Companies. SunTrust Robinson Humphrey
reviewed and compared selected publicly available financial, operating and
stock market data for Novametrix, with other selected publicly-traded companies
in the medical device industry which SunTrust Robinson Humphrey deemed
comparable to Novametrix. This group included the following eight diagnostic
patient monitoring, respiratory and neonatal care medical device companies:
Aspect Medical Systems, Inc. (Nasdaq: ASPM), CardioDynamics International Corp.
(Nasdaq: CDIC), Criticare Systems, Inc. (Nasdaq: CXIM), Datascope Corp.
(Nasdaq: DSCP), Invivo Corporation (Nasdaq: SAFE), Spacelabs Medical, Inc.
(Nasdaq: SLMD), Utah Medical Products, Inc. (Nasdaq: UTMD), and Vital Signs,
Inc. (Nasdaq: VITL).
For the eight selected public companies, SunTrust Robinson Humphrey
compared, among other things, Total Firm Value (defined as market
capitalization plus debt less cash and cash equivalents) as a multiple of: 1)
latest twelve months revenues, earnings before interest and taxes (referred to
herein as EBIT), and earnings before interest, taxes, depreciation and
amortization (referred to herein as EBITDA), 2) estimated calendar 2001 and
2002 revenues and 3) estimated calendar 2001 and 2002 EBIT. SunTrust Robinson
Humphrey also compared Total Equity Value (defined as market capitalization) as
a multiple of latest twelve months net income and estimated calendar 2001 and
2002 net income, and evaluated the published price/earnings (P/E) ratio divided
by expected per-share earnings growth (referred to herein as PEG Ratio) for the
comparable companies. All multiples were based on closing stock prices as of
December 10, 2001. Revenue, EBITDA, EBIT and Net Income results for the
comparable companies were based on historical financial information available
in public filings and press releases of the comparable companies. Revenue, EBIT
and net income estimates were based on research reports and First Call
consensus estimates. First Call is an information provider that publishes a
compilation of estimates of projected financial performance for public
companies produced by equity research analysts at leading investment banking
firms. The following table sets forth the mean, low and high multiples and
range of implied equity values per share for Novametrix indicated by this
analysis.
NOVAMETRIX
Implied Multiples for
Selected Companies
--------------------- Range of Implied Equity
Valuation Parameters Mean Low High Values Per Share
-------------------- ------ ------ ------ -----------------------
Firm Value to:
LTM Revenues as of October 31, 2001... 1.95x 0.91x 3.70x $5.05-$18.23
Estimated 2001 Revenues............... 2.42x 1.45x 3.52x $7.23-$16.40
Estimated 2002 Revenues............... 2.01x 1.42x 2.54x $7.33-$12.53
LTM EBIT as of October 31, 2001....... 9.76x 6.99x 11.41x $4.59-$ 7.00
Estimated 2001 EBIT................... 10.40x 10.21x 10.59x $6.27-$ 6.47
Estimated 2002 EBIT................... 9.14x 8.51x 9.77x $6.77-$ 7.66
LTM EBITDA as of October 31, 2001..... 7.82x 5.75x 9.41x $5.08-$ 7.83
Equity Value to:
LTM Net Income as of October 31, 2001. 15.38x 10.65x 19.83x $3.22-$ 5.99
Estimated 2001 Net Income............. 14.82x 10.46x 18.15x $3.33-$ 5.70
Estimated 2002 Net Income............. 12.20x 13.35x 13.78x $5.89-$ 6.08
34
None of the companies used in the market analysis of selected public
companies was identical to Novametrix. Accordingly, the analysis of comparable
public companies necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would affect the market values of
comparable companies.
Analysis of Selected Merger and Acquisition Transactions. SunTrust Robinson
Humphrey reviewed and analyzed the consideration paid and implied transaction
multiples in selected completed and pending mergers and acquisitions involving
diagnostic and therapeutic capital equipment medical device companies in the
cardiac and respiratory markets. The selected transactions are shown below.
Effective Date Acquirer Target
-------------- -------- ------
Pending General Electric Co. Imatron Inc.
08/01/01 Royal Philips Electronics Agilent Technologies Healthcare Solutions Group
09/20/01 GE Medical Systems, Inc. Data Critical Corp.
10/19/01 Royal Philips Electronics Marconi Medical Systems, Inc.
06/07/01 Data Critical Corp. VitalCom Inc.
11/30/01 Cardiac Science, Inc. Artema Medical AB
10/17/00 Tyco International, Inc. Mallinckrodt, Inc.
08/01/00 Welch Allyn Inc. Protocol Systems Inc.
01/08/99 Kimberly-Clark Corp. Ballard Medical Products
02/03/99 Smiths Industries PLC Biochem International Inc.
11/20/98 GE Medical Systems, Inc. Marquette Medical Systems Inc.
11/02/98 Tyco International, Inc. Graphic Controls Corp.
09/30/98 Medtronic, Inc. Physio-Control International Corp.
07/20/98 ALARIS Medical, Inc. Instromedix, Inc.
03/17/98 Hewlett-Packard Co. Heartstream, Inc.
02/11/98 Respironics, Inc. Healthdyne Technologies, Inc.
From this group of 16 transactions, SunTrust Robinson Humphrey selected the
following four transactions that involved diagnostic patient monitoring
companies more similar to the Novametrix business: Tyco
International/Mallinckrodt, Inc; Welch Allyn Inc./Protocol Systems, Smiths
Industries PLC/Biochem International Inc., and GE Medical Systems/Marquette
Medical Systems Inc. For these four selected comparable transactions, SunTrust
Robinson Humphrey compared the Total Firm Values in the selected transactions
as multiples of the latest twelve months revenues, EBITDA and EBIT and Total
Equity Values as multiples of Book Value and latest twelve months Net Income.
Historical revenues, EBITDA, EBIT, net income and Book Value were based on
publicly available information of the acquirer and/or target at the time of
announcement of the relevant transaction. The following table sets forth the
mean, low and high multiples and range of implied equity values for Novametrix
indicated by this analysis.
NOVAMETRIX
Implied Multiples for
Selected Companies
--------------------- Range of Implied Equity
Valuation Parameters Mean Low High Values Per Share
-------------------- ------ ------ ------ -----------------------
Firm Value to:
LTM Revenues through October 31, 2001... 2.01x 1.66x 2.54x $8.60-$12.75
LTM EBIT through October 31, 2001....... 16.02x 10.78x 19.90x $6.66-$11.63
LTM EBITDA through October 31, 2001..... 11.79x 8.22x 14.90x $6.93-$11.94
Equity Value to:
Book Value as of October 31, 2001....... 3.37x 2.85x 4.07x $8.30-$11.84
LTM Net Income through October 31, 2001. 27.08x 17.35x 40.89x $5.24-$12.35
35
No company utilized in the analysis of selected transactions is identical to
Novametrix. All multiples for the selected transactions were based on public
information available at the time of announcement of each transaction, without
taking into account differing market and other conditions during the period
during which the selected transactions occurred.
Discounted Cash Flow Analysis. SunTrust Robinson Humphrey performed a
discounted cash flow analysis of Novametrix under two scenarios based on
projections provided by Novametrix management: 1) a base case in which revenues
and net income are projected to grow at compound annual growth rates of
approximately 16% and 37%, respectively, from the twelve months ending January
31, 2002 to 2005 (referred to herein as base case projections), and 2) an
aggressive case in which revenues and net income are projected to grow at
compound annual growth rates of approximately 21% and 43%, respectively, from
the twelve months ending January 31, 2002 to 2005 (referred to herein as
aggressive case projections). Using management's base case projections SunTrust
Robinson Humphrey calculated a range of net present firm values for Novametrix
based on the projected Free Cash Flows (defined as earnings before interest and
after taxes plus depreciation and amortization expense minus capital
expenditures and increases in working capital) for the twelve months ending
January 31, 2003 through January 31, 2005. SunTrust Robinson Humphrey
calculated the weighted average cost of capital for the company and used
discount rates ranging from 16% to 22% and terminal value multiples of twelve
months ending January 2005 estimated EBITDA ranging from 7.0x to 10.0x. The
valuation based on this methodology produced a range of implied equity values
for Novametrix from $79.9 million to $123.8 million, and implied equity values
per share from $7.03 to $10.90.
Using management's aggressive case projections, SunTrust Robinson Humphrey
calculated a range of net present firm values for Novametrix based on the
projected Free Cash Flows for the twelve months ending January 31, 2002 through
January 31, 2005. SunTrust Robinson Humphrey used discount rates ranging from
16% to 22% and terminal value multiples of twelve months ending January 2005
estimated EBITDA ranging from 7.0x to 10.0x. The valuation based on this
methodology produced a range of implied equity values from $92.9 million to
$144.6 million, and implied equity values per share from $8.18 to $12.73.
Analysis of Respironics.
Market Analysis of Selected Public Companies. SunTrust Robinson Humphrey
reviewed and compared selected publicly available financial, operating and
stock market data for Respironics with comparable data for ResMed, Inc.
("ResMed"), a therapeutic respiratory company that is a direct competitor to
Respironics.
For the comparison between Respironics and ResMed, SunTrust Robinson
Humphrey compared, among other things, Total Firm Value as a multiple of: 1)
latest twelve months revenues, EBIT, and EBITDA, 2) estimated calendar 2001 and
2002 revenues, and 3) estimated calendar 2001 and 2002 EBIT. SunTrust Robinson
Humphrey also compared Total Equity Value as a multiple of latest twelve months
net income and estimated calendar 2001 and 2002 net income and evaluated the
published PEG Ratios. All multiples were based on closing stock prices as of
December 10, 2001. Historical results for ResMed were based on historical
financial information available in public filings and press releases for
ResMed. Revenue, EBIT and net income estimates were based on research reports
and First Call consensus estimates. The following table sets forth the
valuation multiples for ResMed and the implied equity values for Respironics
indicated by this analysis.
36
RESPIRONICS
ResMed Implied Equity Value
Valuation Parameters Multiples Per Share
-------------------- - --------- --------------------
Firm Value to:
LTM Revenues as of Sept. 30, 2001... 10.55x $149.79
Estimated 2001 Revenues............. 9.77x $144.33
Estimated 2002 Revenues............. 8.73x $146.89
LTM EBIT as of Sept. 30, 2001....... 37.33x $74.57
Estimated 2001 EBIT................. 34.40x $70.71
Estimated 2002 EBIT................. 31.29x $96.87
LTM EBITDA as of Sept. 30, 2001..... 31.44x $93.68
Equity Value to:
LTM Net Income as of Sept. 30, 2001. 59.49x $68.24
Estimated 2001 Net Income........... 56.52x $68.07
Estimated 2002 Net Income........... 45.58x $71.82
ResMed is not identical to Respironics. Accordingly, this analysis
necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of the two companies
reviewed and other factors that would affect their market values.
Analysis of Selected Merger and Acquisition Transactions. SunTrust Robinson
Humphrey reviewed and analyzed the consideration paid and implied transaction
multiples in selected completed and pending mergers and acquisitions involving
diagnostic and therapeutic capital equipment medical device companies in the
cardiac and respiratory markets. The selected transactions are shown below.
Effective Date Acquirer Target
-------------- -------- ------
Pending General Electric Co. Imatron Inc.
08/01/01 Royal Philips Electronics Agilent Technologies Healthcare Solutions Group
09/20/01 GE Medical Systems, Inc. Data Critical Corp.
10/19/01 Royal Philips Electronics Marconi Medical Systems, Inc.
06/07/01 Data Critical Corp. VitalCom Inc.
11/30/01 Cardiac Science, Inc. Artema Medical AB
10/17/00 Tyco International, Inc. Mallinckrodt, Inc.
08/01/00 Welch Allyn Inc. Protocol Systems Inc.
01/08/99 Kimberly-Clark Corp. Ballard Medical Products
02/03/99 Smiths Industries PLC Biochem International Inc.
11/20/98 GE Medical Systems, Inc. Marquette Medical Systems Inc.
11/02/98 Tyco International, Inc. Graphic Controls Corp.
09/30/98 Medtronic, Inc. Physio-Control International Corp.
07/20/98 ALARIS Medical, Inc. Instromedix, Inc.
03/17/98 Hewlett-Packard Co. Heartstream, Inc.
02/11/98 Respironics, Inc. Healthdyne Technologies, Inc.
SunTrust Robinson Humphrey calculated the Total Firm Value in the selected
transactions as multiples of the latest twelve months revenues, EBITDA and
EBIT. SunTrust Robinson Humphrey also compared Total Equity Value as a multiple
of book value and latest twelve months net income. Historical revenues, EBITDA,
EBIT and net income were based on publicly available information of the
acquirer and/or target at the time of announcement of the relevant transaction.
The following table sets forth the mean, low and high multiples and range of
implied equity values for Respironics indicated by this analysis.
37
RESPIRONICS
Implied Multiples for Selected Range of Implied
Companies Equity
------------------------------ Values Per
Valuation Parameters Mean Low High Share
-------------------- ------ ------ ------ ----------------
Firm Value to:
LTM Revenues through Sept. 30, 2001... 2.28x 0.73x 5.53x $ 8.43-$77.87
LTM EBIT through Sept. 30, 2001....... 19.74x 7.10x 32.30x $13.03-$64.34
LTM EBITDA through Sept. 30, 2001..... 17.96x 7.10x 30.25x $20.13-$90.10
Equity Value to:
Book Value as of Sept. 30, 2001....... 3.96x 1.04x 7.70x $ 8.36-$61.94
LTM Net Income through Sept. 30, 2001. 35.97x 17.35x 65.70x $19.91-$75.36
No company utilized in the analysis of selected transactions is identical to
Respironics. All multiples for the selected transactions were based on public
information available at the time of announcement of each transaction, without
taking into account differing market and other conditions during the period
during which the selected transactions occurred.
Discounted Cash Flow Analysis. SunTrust Robinson Humphrey performed a
discounted cash flow analysis of Respironics based upon projections provided by
Respironics management for fiscal years ended June 2002 and June 2003 and
projections for fiscal 2004 and 2005 calculated using similar growth rates and
margins to estimate the net present equity value of Respironics. SunTrust
Robinson Humphrey calculated a range of net present equity values for
Respironics based on its projected Free Cash Flow for the years ending December
31, 2001 through December 31, 2004. SunTrust Robinson Humphrey calculated the
weighted average cost of capital for the company and used discount rates
ranging from 10% to 14% and terminal value multiples of December 2004 estimated
EBITDA ranging from 10.0x to 12.0x. The valuation based on this methodology
produced a range of implied equity values for Respironics from $1.01 billion to
$1.34 billion and a range of share prices between $33.25 and $44.00 per share.
Analysis of Novametrix and Respironics on a Pro Forma Combined Basis.
Market Analysis of Selected Public Companies. SunTrust Robinson Humphrey
reviewed and compared selected publicly available financial data for Novametrix
and Respironics on a pro forma combined basis, with other selected
publicly-traded companies in the medical device industry which SunTrust
Robinson Humphrey deemed comparable to both Novametrix and Respironics. This
group included the following nine diagnostic and therapeutic patient monitoring
companies in the medical device industry: Aspect Medical Systems, Inc. (Nasdaq:
ASPM), CardioDynamics International. (Nasdaq: CDIC), Criticare Systems, Inc.
(Nasdaq: CXIM), Datascope Corporation (Nasdaq: DSCP), Invivo Corporation
(Nasdaq: SAFE), ResMed, Inc. (NYSE: RMD), Spacelabs Medical, Inc. (Nasdaq:
SLMD), Utah Medical Products, Inc. (Nasdaq: UTMD), and Vital Signs, Inc.
(Nasdaq: VITL).
For the nine selected companies, SunTrust Robinson Humphrey compared, among
other things, Total Firm Value as a multiple of: 1) latest twelve months
revenues, EBIT and EBITDA, 2) estimated calendar 2001 and 2002 revenues and 3)
estimated calendar 2001 and 2002 EBIT. SunTrust Robinson Humphrey also compared
Total Equity Value as a multiple of latest twelve months net income and
estimated calendar 2001 and 2002 net income and evaluated the published PEG
Ratios for the comparable companies. All multiples were based on closing stock
prices as of December 10, 2001. Revenue, EBITDA, EBIT and net income results
for the comparable companies were based on historical financial information
available in public filings and press releases of the comparable companies.
Revenue, EBIT and net income estimates were based on research reports and First
Call consensus estimates.
38
The following table sets forth the implied valuation multiples of
Respironics, Inc. and the average implied valuation multiples indicated from
the analysis of selected publicly traded comparable companies. The valuation
multiples for Respironics were used to calculate the implied equity values for
the pro forma combined results for Novametrix and Respironics. The valuation
multiples for Respironics were applied to pro forma results for Novametrix and
Respironics on a combined basis under two scenarios. The first scenario was
based on the base case projections provided by Novametrix management for fiscal
years ended April 2002 through 2005 and Respironics management's projections
for fiscal 2002 and 2003. The second scenario was based on the aggressive case
projections provided by Novametrix management for fiscal years ended April 2002
through 2005 and Respironics management's projections for fiscal 2002 and 2003.
The implied equity values per share for the pro forma combined companies are
based on 33.3 million pro forma shares outstanding. The implied equity prices
per share to Novametrix stockholders are based on an exchange ratio of 0.25
shares of Respironics common stock for each outstanding share of Novametrix
common stock.
PRO FORMA COMBINED
Pro Forma Combined Implied Equity Value Per
Implied Valuation Implied Equity Values Per Share to NMTX
Multiples Share (1) Stockholders (1)
- ----------------- ------------------------- ------------------------
Aggressive Aggressive
Valuation Parameters RESP Average Base Case Case Base Case Case
-------------------- ------ ------- --------- ---------- --------- ----------
Firm Value to:
LTM Revenues as of Sept. 30, 2001... 2.31x 1.95x $32.90 $32.90 $8.23 $8.23
Estimated 2001 Revenues............. 2.22x 2.42x $32.55 $32.68 $8.14 $8.17
Estimated 2002 Revenues............. 1.95x 2.01x $32.27 $32.81 $8.07 $8.20
LTM EBIT as of Sept. 30, 2001....... 16.23x 9.76x $32.22 $32.22 $8.05 $8.05
Estimated 2001 EBIT................. 15.77x 10.40x $32.09 $32.21 $8.02 $8.05
Estimated 2002 EBIT................. 12.18x 9.14x $32.12 $32.64 $8.03 $8.16
LTM EBITDA as of Sept. 30, 2001..... 10.93x 7.82x $31.99 $31.99 $8.00 $8.00
Equity Value to:
LTM Net Income as of Sept. 30, 2001. 27.75x 15.38x $31.97 $31.97 $7.99 $7.99
Estimated 2001 Net Income........... 26.58x 14.82x $32.13 $32.22 $8.03 $8.06
Estimated 2002 Net Income........... 21.52x 12.20x $34.25 $34.82 $8.56 $8.71
--------
(1) Pro Forma Combined Implied Equity Values Per Share calculated based on 33.3
million pro forma shares outstanding; Implied Equity Values Per Share to
Novametrix stockholders calculated based on an exchange ratio of 0.25.
None of the companies used in the market analysis of selected public
companies was identical to Novametrix or Respironics. Accordingly, the analysis
of comparable public companies necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies reviewed and other factors that would affect the market values of
comparable companies.
Analysis of Selected Merger and Acquisition Transactions. SunTrust Robinson
Humphrey reviewed and analyzed the consideration paid and implied transaction
multiples in selected completed and pending mergers and acquisitions involving
diagnostic and therapeutic capital equipment medical device companies in the
cardiac and respiratory markets. The selected transactions are shown below.
39
Effective Date Acquirer Target
-------------- -------- ------
Pending General Electric Co. Imatron Inc.
08/01/01 Royal Philips Electronics Agilent Technologies Healthcare Solutions Group
09/20/01 GE Medical Systems, Inc. Data Critical Corp.
10/19/01 Royal Philips Electronics Marconi Medical Systems, Inc.
06/07/01 Data Critical Corp. VitalCom Inc.
11/30/01 Cardiac Science, Inc. Artema Medical AB
10/17/00 Tyco International, Inc. Mallinckrodt, Inc.
08/01/00 Welch Allyn Inc. Protocol Systems Inc.
01/08/99 Kimberly-Clark Corp. Ballard Medical Products
02/03/99 Smiths Industries PLC Biochem International Inc.
11/20/98 GE Medical Systems, Inc. Marquette Medical Systems Inc.
11/02/98 Tyco International, Inc. Graphic Controls Corp.
09/30/98 Medtronic, Inc. Physio-Control International Corp.
07/20/98 ALARIS Medical, Inc. Instromedix, Inc.
03/17/98 Hewlett-Packard Co. Heartstream, Inc.
02/11/98 Respironics, Inc. Healthdyne Technologies, Inc.
SunTrust Robinson Humphrey calculated the Total Firm Value in the selected
transactions as multiples of the latest twelve months revenues, EBITDA and
EBIT. SunTrust Robinson Humphrey also compared Total Equity Value as a multiple
of book value and latest twelve months net income. Historical revenues, EBITDA,
EBIT and net income were based on publicly available information of the
acquirer and/or target at the time of announcement of the relevant transaction.
The following table sets forth the mean, low and high multiples and range of
implied equity values for Novametrix and Respironics on a pro forma combined
basis indicated by this analysis. The implied equity prices per share to
Novametrix stockholders are based on 33.3 million pro forma shares outstanding
and an exchange ratio of 0.25 shares of Respironics common stock for each
outstanding share of Novametrix common stock.
PRO FORMA COMBINED
Implied Multiples for Selected Range of Pro Forma Implied Equity
Companies Combined Implied Values Per Share
------------------------------ Equity Values to NMTX
Valuation Parameters Mean Low High Equity Values Stockholders (1)
-------------------- ------ ------ ------ --------------------- ----------------
(Dollars in millions)
Firm Value to:
LTM Revenues through Sept. 30, 2001... 2.28x 0.73x 5.53x $302.5-$2,678.3 $2.27-$20.11
LTM EBIT through Sept. 30, 2001....... 19.74x 7.10x 32.30x $449.8-$2,169.8 $3.38-$16.29
LTM EBITDA through Sept. 30, 2001..... 17.96x 7.10x 30.25x $680.4-$3,012.2 $5.11-$22.61
Equity Value to:
Book Value as of Sept. 30, 2001....... 3.96x 1.04x 7.70x $289.3-$2,142.6 $2.17-$16.09
LTM Net Income through Sept. 30, 2001. 35.97x 17.35x 65.70x $666.2-$2,522.1 $5.00-$18.93
--------
(1) Implied Equity Values Per Share to Novametrix stockholders calculated based
on 33.3 million pro forma shares outstanding and an exchange ratio of 0.25
shares of Respironics common stock for each outstanding share of Novametrix
common stock.
No company utilized in the analysis of selected transactions is identical to
Novametrix or Respironics. All multiples for the selected transactions were
based on public information available at the time of announcement of each
transaction, without taking into account differing market and other conditions
during the period during which the selected transactions occurred.
Discounted Cash Flow Analysis. SunTrust Robinson Humphrey performed a
discounted cash flow analysis of pro forma combined results for Novametrix and
Respironics under two scenarios to estimate the net
40
present equity value of Novametrix and Respironics on a pro forma combined
basis. The first scenario was based on the base case projections provided by
Novametrix management for fiscal years ended April 2002 through 2005 and
Respironics management's projections for fiscal 2002 and 2003 and projections
for Respironics for fiscal 2004 and 2005 calculated using similar growth rates
and margins. The second scenario was based on the aggressive case projections
provided by Novametrix management for fiscal years ended April 2002 through
2005 and Respironics management's projections for fiscal 2002 and 2003 and
projections for Respironics for fiscal 2004 and 2005 calculated using similar
growth rates and margins. SunTrust Robinson Humphrey calculated a range of net
present equity values for the pro forma combined companies based on the pro
forma combined projected Free Cash Flows for the years ending December 31, 2002
through December 31, 2004 under both scenarios. SunTrust Robinson Humphrey
calculated the weighted average cost of capital for the company and used
discount rates ranging from 9% to 14% and terminal value multiples of December
2004 estimated pro forma combined EBITDA ranging from 10.0x to 12.0x.
The valuation based on this methodology under the base case projections
produced a range of implied equity values for Novametrix and Respironics on a
pro forma combined basis from $1.14 billion to $1.55 billion and a range of
share prices between $34.27 and $46.52 per share based on 33.3 million pro
forma shares outstanding. The valuation also produced an implied equity value
per share to Novametrix stockholders ranging from $8.57 to
$11.63 based on an exchange ratio of 0.25 shares of Respironics common stock
for each outstanding share of Novametrix common stock.
The valuation based on this methodology under the aggressive case
projections produced a range of implied equity values for Novametrix and
Respironics on a pro forma combined basis from $1.16 billion to $1.58 billion
and a range of share prices between $34.94 and $47.42 per share based on 33.3
million pro forma shares outstanding. The valuation also produced an implied
equity value per share to Novametrix stockholders ranging from $8.73 to $11.86
based on an exchange ratio of 0.25 shares of Respironics common stock for each
outstanding share of Novametrix common stock.
Pro Forma Contribution Analysis. SunTrust Robinson Humphrey reviewed the
relative contribution that Novametrix and Respironics would make to a combined
pro forma company in terms of revenues, EBIT, and net income. This analysis was
based on projections for Novametrix provided by Novametrix management and
projections for Respironics provided by Respironics management. SunTrust
Robinson Humphrey considered two scenarios: one that included the base case
projections for Novametrix provided by Novametrix management and a second that
included the aggressive case projections provided by Novametrix management. For
purposes of this analysis, projected financial information for Respironics was
based upon projections provided by Respironics management for fiscal years
ending June 2002 and June 2003 and projections for fiscal 2004 and 2005
calculated using similar growth rates and margins. Under the scenario using
Novametrix's base case projections, the relative contribution of Novametrix to
the combined pro forma financial results ranged from a low of 8.7% (based on
EBIT for the twelve months ending December 31, 2001) to a high of 12.2% (based
on net income in the twelve months ending December 31, 2004). Under the
scenario using Novametrix's aggressive case projections, the relative
contribution of Novametrix to the combined pro forma financial results ranged
from a low of 8.9% (based on latest twelve months through September 30, 2001
net income) to a high of 14.0% (based on net income in the twelve months ending
December 31, 2004). Novametrix stockholders would own approximately 8.5% of the
pro forma combined companies based on 11,360,000 fully diluted shares of
Novametrix common stock outstanding and an exchange ratio of 0.25 shares of
Respironics common stock for each share of Novametrix common stock.
Other Factors. SunTrust Robinson Humphrey took into consideration various
other factors including historical market prices and trading volumes for
Novametrix common stock and the relationship between movements in Novametrix
common stock, movements in the common stock of selected comparable companies,
and movements in the S&P 500 Index, the Nasdaq Index, and the Russell 2000
Index.
41
Information Regarding SunTrust Robinson Humphrey. The Novametrix board of
directors selected SunTrust Robinson Humphrey to render a fairness opinion
because SunTrust Robinson Humphrey is a nationally recognized investment
banking firm with substantial experience in transactions similar to the merger.
SunTrust Robinson Humphrey is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, secondary distributions of listed
and unlisted securities and private placements.
Stock Market Listing
The Respironics common stock issuable pursuant to the merger in exchange for
Novametrix common stock will be listed on the Nasdaq Stock Market. The trading
symbol for Respironics common stock is "RESP". Following the merger, Novametrix
stockholders will no longer be able to trade shares of Novametrix common stock
on the Nasdaq Stock Market or any other exchange because such shares of
Novametrix common stock will have ceased to exist and therefore will no longer
be listed on any exchange.
Material United States Federal Income Tax Consequences of the Merger
The following summary discusses the anticipated material United States
federal income tax consequences of the merger to holders of Novametrix common
stock who exchange such stock for Respironics common stock in the merger. The
summary is based upon the Internal Revenue Code of 1986, as amended, or the
Code, applicable Treasury regulations under the Code and administrative rulings
and judicial authority as of the date hereof, all of which are subject to
change, possibly with retroactive effect. This discussion assumes that holders
of Novametrix shares hold such shares as capital assets. This discussion does
not address all aspects of United States federal income taxation that may be
relevant to a stockholder in light of that stockholder's particular
circumstances, or to stockholders subject to special rules, such as rules
relating to:
. financial institutions;
. mutual funds;
. tax-exempt organizations;
. insurance companies;
. dealers in securities or foreign currencies;
. traders in securities who elect to apply a mark-to-market method of
accounting;
. foreign stockholders;
. stockholders who acquired Novametrix shares under Novametrix's
equity-based compensation plans or otherwise as compensation, or through
a tax-qualified retirement plan; and
. stockholders who hold Novametrix shares as part of a hedge, straddle,
constructive sale or conversion transaction.
This discussion does not address any consequences arising under the laws of
any state, locality or foreign jurisdiction or under federal laws other than
the United States federal income tax laws.
You are strongly urged to consult your tax advisor as to the specific tax
consequences to you of the merger, including the applicability and effect of
federal, state, local and foreign income and other tax laws in your particular
circumstances.
The respective obligations of the parties to complete the merger are
conditioned on the receipt by Respironics of an opinion of Reed Smith LLP and
the receipt by Novametrix of an opinion of Torys LLP, on the closing date of
the merger, that the merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code. Such opinions of counsel will be based upon,
among other things, assumptions, representations and covenants, including those
contained in certificates of officers of Novametrix and Respironics, which
counsel will assume to be true, correct and complete. The opinions of counsel
are not binding on the Internal Revenue Service or the courts, and we cannot
assure you that the Internal Revenue Service will not challenge the conclusions
set forth in the opinions of counsel or that a court will not sustain such a
challenge.
42
Assuming the merger qualifies as a reorganization:
. No gain or loss will be recognized for United States federal income tax
purposes by holders of Novametrix shares who exchange their Novametrix
shares solely for Respironics shares pursuant to the merger, except, as
discussed below, with respect to cash, if any, received by Novametrix
stockholders in lieu of fractional shares of Respironics common stock.
. The aggregate adjusted tax basis of the Respironics shares received in
the merger by a Novametrix stockholder (treating fractional share
interests in Respironics shares as having been issued to such holder in
the merger and then sold for cash) will be the same as the aggregate
adjusted tax basis of the Novametrix shares surrendered in the merger.
. The holding period of the Respironics shares that a Novametrix
stockholder receives in the merger will include the period during which
such holder held the Novametrix shares surrendered in the merger.
. A Novametrix stockholder who receives cash in lieu of a fractional share
of Respironics common stock will be treated as having received the
fractional share pursuant to the merger and then having exchanged the
fractional share for cash in a redemption by Respironics resulting in
the recognition of gain or loss equal to the difference between the
amount of cash received and the portion of the tax basis of the shares
of Novametrix common stock allocable to the fractional share interest.
This gain or loss generally will be capital gain or loss and will be
long-term capital gain or loss if the Novametrix stockholder's holding
period in the fractional Respironics share is more than one year at the
effective time of the merger.
. No gain or loss will be recognized by Novametrix, Respironics or
Respironics Holdings as a result of the merger.
Certain non-corporate Novametrix stockholders may be subject to backup
withholding at a 30% rate on cash payments received in lieu of a fractional
share of Respironics common stock. Backup withholding will not apply, however,
to a Novametrix stockholder who:
. furnishes a correct taxpayer identification number and certifies that
such holder is not subject to backup withholding on the substitute Form
W-9 or successor form included in the letter of transmittal to be
delivered to Novametrix stockholders;
. provides a certification of foreign status on Internal Revenue Service
Form W-8 or successor form; or
. is otherwise exempt from backup withholding.
Accounting Treatment
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with accounting principles generally accepted in the
United States. For purposes of preparing Respironics' consolidated financial
statements, Respironics will establish a new accounting basis for Novametrix's
assets and liabilities based upon their fair values, the merger consideration
and the costs of the merger. Respironics believes that any excess of cost over
the fair value of the net assets of Novametrix will be recorded as goodwill and
other intangible assets.
Regulatory Approvals
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
Respironics and Novametrix were required to give notification and furnish
information to the Federal Trade Commission and the Antitrust Division of the
Department of Justice and to wait the specified waiting period before they can
complete the merger. Each of Novametrix and Respironics filed the required
notification and report forms with the Federal Trade Commission and the
Antitrust Division on January 17, 2002, which began a 30-day waiting period.
Early termination of the waiting period was granted on January 29, 2002. Even
though the waiting period has been
43
terminated, at any time before or after the merger, the Federal Trade
Commission or the Antitrust Division of the Department of Justice could, among
other things, seek to enjoin the completion of the merger or seek the
divestiture of substantial assets of Novametrix or Respironics. In addition,
the merger also is subject to state and foreign antitrust laws and could be the
subject of challenges by foreign authorities or state attorneys general under
those laws, or by private parties under federal or state antitrust laws.
No Appraisal Rights
Under Delaware law, Novametrix stockholders will not be entitled to exercise
dissenter's or appraisal rights or to demand payment for their shares in
connection with the merger.
Interests of Certain Persons in the Merger
In considering the recommendation of the Novametrix board of directors with
respect to the merger agreement and the merger, you should be aware that some
of Novametrix's directors and executive officers have interests in the merger
that are in addition to their interests as stockholders of Novametrix
generally. The Novametrix board of directors was aware of these interests and
considered them, among other matters, in approving the merger. These interests
are summarized below.
Employment Agreements. In contemplation of the merger, Novametrix and
Respironics entered into employment agreements with William J. Lacourciere,
Chairman of the Board and Chief Executive Officer of Novametrix, and Philip F.
Nuzzo, Vice President--Product and Business Development of Novametrix, that
become effective only upon the completion of the merger. Each of the employment
agreements has an initial term of one year following the merger and will be
automatically extended for additional terms of one year unless either party
advises the other, not less than 90 days prior to the expiration of the
then-current year of the term, that it does not wish to extend.
Pursuant to the employment agreements, after the merger Respironics will
employ Mr. Lacourciere as President, Cardiopulmonary Monitoring of Respironics,
and Mr. Nuzzo as Vice President of Product and Business Development,
Cardiopulmonary Monitoring of Respironics. Mr. Lacourciere will report to the
President of the Hospital Division of Respironics. Mr. Nuzzo will report to Mr.
Lacourciere.
Mr. Lacourciere will receive an annual base salary of $250,000. Mr.
Lacouricere is also eligible to receive a performance based bonus of up to 50%
of his annual pay. In connection with the merger, Mr. Lacourciere will be
granted options to purchase 20,000 shares of Respironics common stock at an
exercise price per share equal to the price of Respironics common stock on the
tenth business day following Mr. Lacourciere's start date with Respironics. The
options will become exercisable at a rate of 25% per year and remain
exercisable until ten years from their award date. Mr. Lacourciere will also
receive the health and welfare benefits currently in place for Novametrix
employees, the option to participate in a 401(k) plan and an auto allowance of
$817 per month.
Mr. Nuzzo will receive an annual base salary of $158,000. Mr. Nuzzo is also
eligible to receive a performance-based bonus of up to 35% of his annual pay.
In connection with the merger, Mr. Nuzzo will be granted options to purchase
8,000 shares of Respironics common stock at an exercise price per share equal
to the price of Respironics common stock on the tenth business day following
Mr. Nuzzo's start date with Respironics. The options will become exercisable at
a rate of 25% per year and remain exercisable until ten years from their award
date. Mr. Nuzzo will also receive the health and welfare benefits currently in
place for Novametrix employees, the option to participate in a 401(k) plan and
an auto allowance of $600 per month. Additionally, Mr. Nuzzo will receive an
annual retirement annuity in an amount equal to 7.5% of his base salary.
If the employment of Mr. Lacourciere or Mr. Nuzzo, respectively, is
terminated by Respironics without "cause" or by such employee for "good
reason", as such terms are defined in their respective employment
44
agreements, Mr. Lacourciere and Mr. Nuzzo will be entitled to receive (i) any
unpaid salary through the date of termination, (ii) base salary in the amount
then in effect for thirty-six months and twelve months, respectively, from the
date of termination; and (iii) continuation of health care coverage for
thirty-six months and twelve months, respectively, from the date of
termination. If Mr. Lacourciere retires from Respironics, he will not be
entitled to receive the termination payments described in this paragraph.
If Mr. Lacourciere ends his employment by retiring, Mr. Lacourciere will
receive a retirement benefit from Respironics following his retirement at or
after attaining age 65. Upon retirement, Respironics will pay Mr. Lacourciere
an amount equal to three times the higher of (a) $250,000 or (b) Mr.
Lacourciere's average annual compensation (salary and bonus, exclusive of the
success bonus being granted in connection with the merger (see "Success
Bonuses" below) during the five most recent taxable years prior to the date of
retirement. Mr. Lacourciere may also retire upon, or at any time subsequent to,
his attaining age 62, and prior to his attaining age 65, upon six months prior
notice to Respironics. In the event of a retirement at age 62, 63 or 64,
Mr. Lacourciere will receive 90%, 93.33% or 96.66%, respectively, of the
benefit he would have received if he retired after age 65. The retirement
benefit will be payable over 36 months.
Mr. Lacourciere is prohibited under his employment arrangements from
engaging in any business in competition with Respironics during the period of
his employment with Respironics and for four years thereafter. Mr. Nuzzo is
prohibited under his employment agreement from engaging in any business in
competition with Respironics during the period of his employment with
Respironics and for one year thereafter.
Success Bonuses. Upon completion of the merger, and in recognition of their
services to Novametrix, including in connection with the proposed merger,
certain executive officers of Novametrix will receive success bonuses as
follows:
William J. Lacourciere, Chairman of the Board and Chief Executive Officer $375,000
Thomas M. Patton, President and Chief Operating Officer.................. 200,000
Joseph A. Vincent, Executive Vice President and Chief Financial Officer.. 75,000
Philip F. Nuzzo, Vice President--Product and Business Development........ 55,000
Jeffery A. Baird, Corporate Controller and Treasurer..................... 44,000
Directors' Fees. Following execution of the merger agreement, and in
recognition of their services to Novametrix, including in connection with the
proposed merger, each director of Novametrix received an additional director's
fee in the amount of $25,000. Previously, each director received additional
grants of stock options representing 15,000 shares of Novametrix common stock.
Acceleration of Vesting of Stock Options. Novametrix has issued stock
options to certain directors, officers and employees under Novametrix's stock
option and equity incentive plans. Immediately prior to the merger, all options
to acquire shares of Novametrix common stock under Novametrix's stock option
and equity incentive plans will, by their terms, become immediately vested and
exercisable. As of the record date, Novametrix's directors and executive
officers held vested and unvested options to acquire an aggregate of 1,093,000
shares of Novametrix common stock with a weighted average exercise price of
$5.56 per share. Under the terms of the merger agreement, upon consummation of
the merger, each of these options, whether or not then exercisable, will be
converted into an option to acquire a number of shares of Respironics common
stock in such amounts and at such exercise prices as determined in the merger
agreement. The terms of each option will otherwise remain subject to the terms
of the applicable option plan and agreements as in effect immediately prior to
the effective time of the merger. See "The Merger Agreement--Stock Options" on
page 50.
Indemnification and Insurance.
Pre-Existing Indemnification and Insurance. Novametrix has entered into
separate indemnification agreements with each of its directors and officers
which require Novametrix, among other things, to indemnify
45
them against liabilities arising from their status as directors or officers to
the fullest extent permitted by the Novametrix certificate of incorporation and
Delaware law. In addition, the Novametrix certificate of incorporation provides
that Novametrix will indemnify its directors and officers to the fullest extent
permitted by Delaware law, including in circumstances in which indemnification
is otherwise discretionary under Delaware law. Novametrix also maintains
directors' and officers' liability insurance.
Additional Indemnification and Insurance. The merger agreement provides
that Respironics and the surviving corporation of the merger will, to the
fullest extent permitted by law, indemnify and hold harmless each of
Novametrix's present and former directors and officers against any costs or
expenses arising out of or pertaining to the transactions contemplated by the
merger agreement, or for any actions or omissions at or prior to the effective
time of the merger, in each case to the same extent provided in the Novametrix
certificate of incorporation, the Novametrix by-laws or any pre-existing
indemnification contract with the present or former director or officer. The
surviving corporation of the merger must maintain policies of directors' and
officers' liability insurance containing terms and conditions which are not
less advantageous than policies maintained by Novametrix prior to the effective
time of the merger for a period of six years following the closing of the
merger (provided that the surviving corporation of the merger is not required
to pay an annual premium for any policy in excess of 175% of the annual
premiums currently paid by Novametrix). See "The Merger
Agreement--Indemnification and Insurance" on page 56.
Delisting and Deregistration of Novametrix Common Stock
If the merger is completed, the shares of Novametrix common stock will cease
to exist and will be delisted from the Nasdaq Stock Market and deregistered
under the Securities Exchange Act of 1934. Consequently, following completion
of the merger, Novametrix stockholders will no longer be able to trade shares
of Novametrix common stock on any stock exchange.
Restrictions on Resales by Affiliates of Novametrix
The shares of Respironics common stock to be issued to Novametrix
stockholders in the merger will have been registered under the Securities Act
of 1933. These shares will be able to be traded freely and without restriction
by those stockholders not deemed to be "affiliates" of Novametrix as that term
is defined under the Securities Act. An affiliate of a corporation, as defined
by the rules promulgated under the Securities Act, is a person who directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with that corporation. Any subsequent transfer by an
affiliate of Novametrix must be one permitted by the resale provisions of Rule
145 promulgated under the Securities Act or as otherwise permitted under the
Securities Act. These restrictions are expected to apply to the directors and
executive officers of Novametrix.
THE NOVAMETRIX SPECIAL MEETING
Purpose, Time and Place
The special meeting will be held at The Waldorf-Astoria, 301 Park Avenue,
New York, New York, on April 9, 2002, at 10:00 a.m., Eastern Daylight Time,
unless postponed or adjourned to a later date. The purpose of the special
meeting is for the Novametrix stockholders to consider and vote upon a proposal
to adopt the merger agreement and conduct any other business properly brought
before the meeting, including any adjournments or postponements of the special
meeting. It is currently contemplated that no other matters will be considered
at the special meeting.
The Novametrix board of directors has approved the merger agreement, the
merger and the other transactions contemplated by the merger agreement and has
determined that the merger and the merger agreement are advisable, fair to, and
in the best interest of Novametrix and its stockholders. Accordingly, the
Novametrix board of directors recommends that Novametrix stockholders vote FOR
the adoption of the merger agreement.
46
Record Date; Voting Power
The Novametrix board of directors has fixed the close of business (5:00
p.m., Eastern Standard Time) on February 8, 2002 as the record date for
determining the holders of Novametrix common stock entitled to notice of, and
to vote at, the special meeting. Only holders of record of Novametrix common
stock at the close of business on the record date will be entitled to notice
of, and to vote at, the special meeting.
On the record date, approximately 8,809,406 shares of Novametrix common
stock were issued and outstanding and entitled to vote at the special meeting.
Holders of record of Novametrix common stock are entitled to one vote per share
on any matter which may properly come before the special meeting. If you are a
record holder of Novametrix common stock on the record date, you may vote your
shares of Novametrix common stock in person at the special meeting or by proxy
as described below under "Voting of Proxies."
The record stockholder number does not include the number of persons whose
Novametrix common stock is in nominee or "street name" accounts through
brokers. If you hold your shares of Novametrix common stock in this manner, you
must follow the directions provided by your broker regarding how to instruct
your broker to vote your shares. Most banks and brokers have provisions for
telephone and Internet voting. Check the material sent to you by them, or call
your account representative for more information.
A quorum is present at the special meeting if a majority of the outstanding
shares of Novametrix common stock is represented in person or by proxy. A
quorum is necessary to hold the special meeting. Any shares of Novametrix
common stock held in treasury by Novametrix or any of its subsidiaries are not
considered to be outstanding for purposes of determining a quorum. Once a share
of Novametrix common stock is represented at the special meeting, it will be
counted for the purpose of determining a quorum at the special meeting and any
adjournment of the special meeting unless the holder is present solely to
object to the special meeting. If a quorum is not present at the special
meeting, it is expected that the special meeting will be adjourned or postponed
to solicit additional proxies. However, if a new record date is set for the
adjourned meeting, then a new quorum will have to be established. Abstentions
and broker non-votes (which are shares held by brokers in street name that are
not entitled to vote at the special meeting due to the absence of specific
instructions from the beneficial owners of those shares) will be treated as
present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of business.
Votes Required
The affirmative vote of holders of a majority of the shares of Novametrix
common stock outstanding on the record date is required to adopt the merger
agreement. Under Delaware law, a Novametrix stockholder who abstains from
voting or who does not vote will have the same effect as if the stockholder had
voted against the adoption of the merger agreement. Brokers who hold shares of
Novametrix common stock as nominees will not have discretionary authority to
vote such shares in the absence of instructions from the beneficial owners of
those shares. Any shares that are not voted because the nominee-broker lacks
such discretionary authority will be counted and have the same effect as a vote
against the adoption of the merger agreement.
Share Ownership of Management and Certain Stockholders
At the close of business on the record date, directors, executive officers
and certain other members of senior management of Novametrix beneficially owned
and were entitled to vote approximately 863,638 shares of Novametrix common
stock, representing approximately 9.8% of the shares of Novametrix common stock
issued and outstanding on the record date. Each of those directors, executive
officers and members of senior management entered into a voting agreement with
Respironics in connection with the merger pursuant to which they agreed that,
until such voting agreements are terminated, they would each vote, or cause to
be voted, Novametrix common stock owned by such director, executive officer or
other member of senior management FOR the adoption of the merger agreement (see
"The Voting Agreements" on page 62).
47
Voting of Proxies
If you vote your shares of Novametrix common stock by signing a proxy and
returning it in time for the special meeting, your shares will be voted at the
special meeting in the manner specified in your proxy card. If your proxy is
properly executed but does not contain voting instructions, your proxy will be
voted FOR adoption of the merger agreement. If other matters are properly
presented before the special meeting, the persons named in your proxy will have
authority to vote in accordance with their judgment on any other such matter,
including, any proposal to adjourn or postpone the meeting or otherwise
concerning the conduct of the meeting. However, a proxy that has been
designated to vote against the adoption of the merger agreement will not be
voted, either directly or through a separate proposal, to adjourn the meeting
to solicit additional votes. It is not expected that any matter other than as
described in this proxy statement/prospectus will be brought before the special
meeting.
If you hold your shares in nominee or "street name" (which is the name of a
broker, bank or other record holder) you must either direct the record holder
of your shares on how to vote your shares or obtain a proxy from the record
holder to vote at the meeting.
Revocability of Proxies
If you complete and mail the enclosed proxy card, it will not preclude you
from voting in person at the special meeting. If you are a record holder of
Novametrix common stock, you may revoke a proxy at any time prior to your proxy
being voted at the special meeting by:
. delivering, prior to the special meeting, to Corporate Secretary,
Novametrix Medical Systems, Inc., 5 Technology Drive, Wallingford,
Connecticut 06492, a written notice of revocation bearing a later date
or time than your proxy;
. submitting a later-dated proxy that is properly executed; or
. attending the special meeting and voting in person.
Simply attending the special meeting will not revoke your proxy. If you
instructed a broker to vote your shares, you must follow your broker's
directions for changing those instructions. If an adjournment occurs and no new
record date is set, it will have no effect on the ability of stockholders of
record as of the record date to exercise their voting rights or to revoke any
previously delivered proxies.
Solicitation of Proxies
This proxy statement/prospectus is being furnished to you in connection with
the solicitation of proxies by the Novametrix board of directors from the
holders of Novametrix common stock for use at the Novametrix special meeting.
Novametrix generally will bear the cost of solicitation of proxies. In addition
to solicitation by mail, certain directors, officers and employees of
Novametrix and its subsidiaries may solicit proxies from stockholders in
person, by telephone, or by electronic means. These persons will not be paid
for soliciting proxies. Novametrix may also have brokerage houses and other
custodians, nominees and fiduciaries forward solicitation materials to the
beneficial owners of Novametrix common stock held of record. Novametrix will
reimburse these persons for their reasonable out-of-pocket expenses in
connection with soliciting proxies.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
48
THE MERGER AGREEMENT
General
This section describes the material provisions of the merger agreement,
Novametrix's obligations under the merger agreement and the Respironics
guarantee of Respironics Holdings' obligations under the merger agreement. This
description is not complete, and stockholders are encouraged to read the full
text of the merger agreement and the Respironics guarantee which are attached
as Annex A to this proxy statement/prospectus.
The Merger
General.
Unless the merger agreement is terminated as described below, no later than
the third business day after the satisfaction or waiver of the closing
conditions set forth in the merger agreement or on such date as Novametrix and
Respironics Holdings otherwise agree to, Respironics Holdings and Novametrix
will file merger documentation with the Secretary of State of the State of
Delaware, as prescribed by Delaware law, at which time the merger will be
effective.
At the effective time of the merger, upon the terms and subject to the
conditions of the merger agreement and the applicable provisions of the
Delaware General Corporation Law, the state law that applies to Novametrix and
Respironics Holdings, each of which is a Delaware corporation, Respironics
Holdings will be merged with and into Novametrix, the separate corporate
existence of Respironics Holdings will cease and Novametrix will continue as
the surviving corporation. Novametrix will then be a wholly-owned subsidiary of
Respironics.
Charter Documents; Directors and Officers.
The certificate of incorporation and by-laws of Respironics Holdings in
effect immediately prior to the effective time, which are required to contain
at that time the indemnification provisions described under "Indemnification
and Insurance" on page 56 below, will be the certificate of incorporation of
the surviving corporation, except that the name of the surviving corporation
will be changed to "Respironics Novametrix, Inc.", until thereafter amended in
accordance with the applicable provisions of the certificate of incorporation
and by-laws and as provided by the Delaware General Corporation Law.
From and after the effective time of the merger and until their respective
successors are duly elected or appointed and qualified, (i) the directors of
Respironics Holdings immediately prior to the effective time will be the
directors of the surviving corporation, each to hold office in accordance with
the certificate of incorporation and by-laws of the surviving corporation, and
(ii) the officers of Respironics Holdings immediately prior to the effective
time and some of the officers of Novametrix to the extent provided for by
certain employment agreements with present officers of Novametrix will be
officers of the surviving corporation (see "The Merger--Interests of Certain
Persons in the Merger" on pages 44 through 46).
Merger Consideration
Exchange Ratio.
The merger agreement provides that, at the effective time of the merger,
each share of Novametrix common stock will be exchanged for a fraction of a
share of Respironics common stock. This number is referred to as the "exchange
ratio." The exchange ratio will be determined as follows:
. if the 20-day weighted average selling price of a share of Respironics
common stock immediately preceding (but excluding) the third trading day
prior to the closing date of the merger exceeds $35.00, the fraction
will be $8.75 divided by the 20-day weighted average selling price;
49
. if the 20-day weighted average selling price of a share of Respironics
common stock immediately preceding (but excluding) the third trading day
prior to the closing date of the merger is equal to or exceeds $32.00
but is equal to or below $35.00, the fraction will be 0.25 shares;
. if the 20-day weighted average selling price of a share of Respironics
common stock immediately preceding (but excluding) the third trading day
prior to the closing date of the merger is equal to or exceeds $30.00
but is equal to or below $31.99, the fraction will be $8.00 divided by
the 20-day weighted average selling price; and
. if the 20-day weighted average selling price of a share of Respironics
common stock immediately preceding (but excluding) the third trading day
prior to the closing date of the merger is below $30.00, the fraction
will be fixed at 0.2667 shares. However, if the 20-day weighted average
selling price of a share of Respironics common stock is below $30.00,
Novametrix shall have the right to terminate the merger agreement. (See
"Termination Rights" on page 60).
The 20-day weighted average selling price of a share of Respironics common
stock immediately preceding (but excluding) the third trading day prior to the
closing date of the merger will be determined based on reports from the Nasdaq
Stock Market.
Adjustments to Exchange Ratio.
If any change in the outstanding shares of capital stock of Respironics or
Novametrix occurs from the date of the merger agreement until the effective
time of the merger, including any reclassification, recapitalization,
redenomination of share capital, stock split, reverse stock split or
combination, exchange or readjustment of shares or any stock dividend, the
exchange ratio and any amounts payable pursuant to the merger or the merger
agreement will be adjusted appropriately. The merger agreement prohibits
Novametrix from making any such changes while the merger agreement is in effect.
Fractional Shares of Respironics Common Stock.
No fractional shares of Respironics common stock will be issued in the
merger. Novametrix stockholders who would otherwise be entitled to a fraction
of a share of Respironics common stock will instead receive a cash payment,
without interest, determined by multiplying the fractional share to which such
holder would otherwise be entitled by the Respironics weighted average selling
price used in determining the exchange ratio.
Stock Options
Each option to acquire shares of Novametrix common stock outstanding
immediately prior to the effective time of the merger will, at the effective
time, become fully vested and exercisable and otherwise will continue to have,
and be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Novametrix stock option, the same
number of shares of Respironics common stock as the holder of such Novametrix
stock option would have been entitled to receive pursuant to the merger had
such holder exercised such Novametrix stock option in full immediately prior to
the effective time of the merger, rounded to the nearest whole number of shares
of Respironics common stock. The exercise price per share of these options to
purchase Respironics common stock, rounded to the nearest cent, will equal the
aggregate exercise price for the shares of Novametrix common stock otherwise
purchasable pursuant to such Novametrix stock option divided by the number of
full shares of Respironics common stock deemed purchasable pursuant to such
Novametrix stock option. The merger agreement prohibits Novametrix from issuing
any stock options in addition to those outstanding on the date of the merger
agreement.
Stock Purchase Plan
Beginning with the date of the merger agreement, Novametrix has not and will
not establish, or implement any decisions to establish, any new employee stock
purchase plans, nor will it extend the availability of the Novametrix stock
purchase plan to any employees not previously eligible to be included in the
Novametrix stock
50
purchase plan. Novametrix has suspended its current stock purchase plan until
the effective time of the merger, and all shares of Novametrix common stock
issued under the Novametrix stock purchase plan will be treated like all other
shares of Novametrix common stock.
Warrants
Each warrant to acquire shares of Novametrix common stock outstanding
immediately prior to the effective time of the merger will, at the effective
time, be deemed to constitute a warrant to acquire, on the same terms and
conditions as were applicable under such Novametrix warrant, the same number of
shares of Respironics common stock as the holder of such Novametrix warrant
would have been entitled to receive pursuant to the merger had such holder
exercised such Novametrix warrant in full immediately prior to the effective
time of the merger, rounded to the nearest whole number of shares of
Respironics common stock. The exercise price per share of these warrants to
purchase Respironics common stock, rounded to the nearest cent, will be equal
to the aggregate exercise price for the shares of Novametrix common stock
otherwise purchasable pursuant to such Novametrix warrant divided by the number
of full shares of Respironics common stock deemed purchasable pursuant to such
Novametrix warrant.
Cancellation
Each share of Novametrix common stock held by Novametrix or any of its
subsidiaries or owned by Respironics or Respironics Holdings immediately prior
to the effective time of the merger will be cancelled and extinguished at the
effective time and not exchanged for or otherwise converted into shares of
Respironics common stock.
Exchange of Shares of Novametrix Common Stock
As necessary from time to time following the effective time, Respironics
Holdings will make available to Mellon Investor Services L.L.C., as exchange
agent, (1) the shares of Respironics common stock required for the exchange of
shares of Novametrix common stock in the merger and (2) an amount of cash
sufficient to permit Mellon Investor Services to make the necessary payments of
cash in lieu of fractional shares of Respironics common stock.
Promptly after the consummation of the merger, Respironics will instruct
Mellon Investor Services to mail to each holder of record, as of the effective
time, of a certificate which immediately prior to the effective time
represented outstanding shares of Novametrix common stock whose shares were
converted into the right to receive shares of Respironics common stock, a
letter of transmittal and instructions as to how to surrender such certificates
in exchange for shares of Respironics common stock and payment for any
fractional shares of Respironics common stock.
Holders of certificates previously representing shares of Novametrix common
stock will not be paid dividends or distributions on the shares of Respironics
common stock (none of which have been declared to date) and will not be paid
cash in lieu of a fractional share of Respironics common stock until such
certificates are surrendered to Mellon Investor Services for exchange. When
such certificates are surrendered, the holder will receive any unpaid dividends
with a record date after the consummation of the merger (none of which have
been declared to date) and any cash in lieu of a fractional share of
Respironics common stock without interest. For all other corporate purposes,
these certificates will represent, from and after the consummation of the
merger, the right to receive the number of shares of Respironics common stock
and cash in respect of fractional shares of Respironics common stock into which
such shares of Novametrix common stock are actually converted in the merger.
51
Mellon Investor Services will deliver shares of Respironics common stock in
exchange for lost, stolen or destroyed certificates formerly representing
shares of Novametrix common stock if the owner of these certificates signs an
affidavit of loss, theft or destruction, as appropriate. Respironics Holdings
also may, in its discretion, require the holder of these lost, stolen or
destroyed certificates to deliver a bond in a reasonable sum as an indemnity
against any claim that might be made against Respironics, Respironics Holdings,
the surviving corporation or Mellon Investor Services with respect to allegedly
lost, stolen or destroyed certificates.
Any portion of the exchange fund consisting of cash and shares of
Respironics common stock which remains undistributed to the holders of shares
of Novametrix common stock for six months after the effective time will be
delivered to Respironics Holdings upon demand, and any holders of certificates
formerly representing shares of Novametrix common stock who have not
theretofore complied with the exchange instructions will thereafter look only
to Respironics Holdings for the shares of Respironics common stock and any cash
in respect of fractional shares of Respironics common stock to which they are
entitled, in each case without any interest thereon.
Representations and Warranties
Novametrix has made customary representations and warranties in the merger
agreement about itself and its subsidiaries. Respironics Holdings has made
customary representations and warranties in the merger agreement about
Respironics and its subsidiaries.
Conduct of Business by Novametrix
Novametrix has agreed to specified restrictions on its activities until
either the completion of the merger or the termination of the merger agreement.
In general, Novametrix is required to conduct its business, and will cause its
subsidiaries to conduct their businesses, only in the ordinary course of
business and in a manner consistent with past practice unless Respironics
Holdings otherwise agrees in writing. Novametrix will also use reasonable
commercial efforts to preserve substantially intact the business organization
of Novametrix and its subsidiaries, to keep available the services of the
present officers, employees and consultants of Novametrix and its subsidiaries
and to preserve the present relationships of Novametrix and its subsidiaries
with customers, suppliers and other persons with which Novametrix or any of its
subsidiaries has significant business relations. In particular, subject to
certain exceptions, Novametrix has agreed that neither it nor any of its
subsidiaries, without the prior written consent of Respironics Holdings, will,
among other things:
. amend or otherwise change the Novametrix certificate of incorporation or
by-laws;
. issue, sell, dispose of or encumber, any equity security, option or
other security convertible into or exercisable for equity securities
except to a limited extent to employees or directors pursuant to the
exercise of outstanding options or warrants;
. sell, dispose of or encumber any assets of Novametrix or any of its
subsidiaries, except in the ordinary course of business and in a manner
consistent with past practice, or dispositions of immaterial assets not
in excess of $50,000 in the aggregate;
. declare, set aside, make or pay any dividend or other distribution on
any of its capital stock other than a dividend to Novametrix by a
wholly-owned subsidiary of Novametrix;
. split, combine, redeem, repurchase or reclassify any of its capital
stock;
. amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire any of its or its subsidiaries'
securities (including options and warrants), except (1) under the terms
of certain existing agreements and (2) to the extent necessary to comply
with tax withholding obligations in connection with the exercise of
stock options;
52
. settle, pay or discharge any claim, suit or other action brought or
threatened against Novametrix with respect to or arising out of a
stockholder equity interest in Novametrix;
. make any acquisitions;
. incur any indebtedness for borrowed money (including any guarantees of
the indebtedness of another) other than (1) indebtedness outstanding on
the date of the merger agreement, (2) borrowings and reborrowings under
Novametrix's or any of its subsidiaries' credit facilities in an
aggregate amount not to exceed $500,000 in excess of the borrowings
outstanding under such credit facilities on the date of the merger
agreement and (3) other borrowings not in excess of $50,000 in the
aggregate;
. make any loans or advances, other than in the ordinary course of
business consistent with past practice;
. grant any severance or termination pay, except for obligations existing
on the date of the merger agreement or in accordance with past practice,
or generally enter into or amend any employment or severance agreement
with any current or prospective employee;
. authorize any capital expenditures or purchases of fixed assets which
are, in the aggregate, in excess of $375,000 over the period from the
date of the merger agreement to the effective date of the merger;
. increase the compensation or severance payable or to become payable to
its directors, officers, employees or consultants, except for increases
in salary, wages or bonuses of employees in accordance with past
practice or as required by obligations existing on the date of the
merger agreement;
. establish, adopt, enter into or amend any collective bargaining
agreement, benefit plan, trust, fund, policy or arrangement for the
benefit of any current or former directors, officers, employees or
consultants or any of their beneficiaries;
. change accounting policies or procedures;
. make any tax election or settle or compromise any U.S. federal, state,
local or non-U.S. tax liability;
. pay, discharge or satisfy any claims, liabilities or obligations in
excess of $100,000 in the aggregate other than in the ordinary course of
business and consistent with past practice;
. enter into, modify or renew any contract, agreement or arrangement,
whether or not in writing, for the licensing of its technology;
. enter into any contract, agreement or arrangement or any amendment,
modification or renewal to any contract, agreement or arrangement unless
Novametrix has the right to terminate such contract, agreement,
arrangement, amendment, modification or renewal without penalty upon 30
days written notice; or
. take, or agree in writing or otherwise to take, any of the actions
described above or any action which would make any of the
representations or warranties of Novametrix contained in the merger
agreement untrue or incorrect or prevent Novametrix from performing or
cause Novametrix not to perform its covenants under the merger agreement.
Conduct of Business by Respironics
Respironics Holdings has agreed to specified restrictions on Respironics'
activities until either the completion of the merger or the termination of the
merger agreement. In general, Respironics Holdings will take all action
necessary to cause Respironics to conduct its business and to cause its
subsidiaries to conduct their businesses in the ordinary course of business and
consistent with past practice, including actions taken by Respironics or its
subsidiaries in contemplation of the merger or other business acquisitions
otherwise in
53
compliance with the merger agreement. In particular, subject to certain
exceptions, neither Respironics nor any of its subsidiaries, without the prior
written consent of Novametrix, will:
. amend or otherwise change Respironics' certificate of incorporation or
by-laws;
. make or agree to make any acquisition of any business or assets or
disposition of assets which would materially delay or prevent the
consummation of the merger and the other transactions contemplated by
the merger agreement, other than an acquisition or disposition where the
value of such transaction is less than 10% of the market capitalization
of Respironics;
. declare, set aside, make or pay any dividend or other distribution on
any of its capital stock, other than a dividend to Respironics by a
wholly-owned subsidiary of Respironics;
. change accounting policies or procedures; or
. take, or agree in writing or otherwise to take, actions described above
or any action which would make any of the representations or warranties
of Respironics Holdings contained in the merger agreement untrue or
incorrect or prevent Respironics Holdings from performing or cause
Respironics Holdings not to perform its covenants under the merger
agreement.
No Solicitation
Novametrix has agreed that it will not solicit or knowingly encourage the
initiation of, including by way of furnishing information, any inquiries or
proposals regarding any merger, sale of assets, sale of shares of capital stock
or similar transactions involving Novametrix or any of its subsidiaries that if
consummated would constitute an "Alternative Transaction." An Alternative
Transaction means:
. any transaction pursuant to which any third party acquires more than 25%
of the outstanding shares of any class of Novametrix equity securities,
whether from Novametrix or pursuant to a tender offer, an exchange offer
or otherwise;
. a merger or other business combination involving Novametrix pursuant to
which any third party acquires more than 25% of the outstanding equity
securities of Novametrix or the entity surviving such merger or business
combination;
. any transaction pursuant to which any third party acquires or would
acquire control of assets of Novametrix or any significant subsidiary; or
. any other consolidation, business combination, recapitalization or
similar transaction involving Novametrix or any of its significant
subsidiaries, other than transactions contemplated by the merger
agreement.
Any inquiry or proposal by a third party to effect an Alternative
Transaction is referred to as an "Acquisition Proposal."
If the Novametrix board of directors, following consultation with
independent legal counsel, reasonably determines in good faith that such action
is or is reasonably likely to be required to discharge properly its fiduciary
duties, the Novametrix board of directors, after notice to Respironics
Holdings, is permitted to:
. furnish information to a third party which has made, but was not
solicited to make in violation of the merger agreement, a bona fide
Acquisition Proposal that the Novametrix board of directors concludes in
good faith after consulting with a nationally recognized investment
banking firm would, if consummated, reasonably be expected to constitute
a "Superior Proposal," as defined below; and
54
. consider and negotiate a bona fide Acquisition Proposal that the
Novametrix board of directors concludes in good faith after consulting
with a nationally recognized investment banking firm is a Superior
Proposal not solicited in violation of the merger agreement.
A Superior Proposal is any proposal made by a third party to acquire,
directly or indirectly, for cash and/or securities, all of Novametrix common
stock entitled to vote generally in the election of directors, or all or
substantially all of Novametrix's assets, on terms which the Novametrix board
of directors reasonably believes, after consultation with a nationally
recognized financial advisor and after taking into account the likelihood of,
and extra time required for, consummation of such Superior Proposal, and the
termination fee which will be payable to Respironics upon termination of the
merger agreement (see "Termination Fees and Expenses" on page 60), to be more
favorable from a financial point of view to Novametrix stockholders than the
merger and the transactions contemplated by the merger agreement, taking into
account at the time of determination any changes to the financial terms of the
merger proposed by Respironics Holdings, although a Superior Proposal may be
subject to a diligence review and other customary conditions.
Neither Novametrix nor the Novametrix board of directors may withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Respironics
Holdings, the approval by the Novametrix board of directors of the merger
agreement and the merger, except to the extent that the Novametrix board of
directors reasonably determines in good faith and after consultation with
independent legal counsel that it is or is reasonably likely to be required to
do so in order to discharge properly its fiduciary duties.
In addition, unless the merger agreement has been terminated in accordance
with its terms, Novametrix and the Novametrix board of directors may not enter
into any agreement with respect to, or otherwise approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or Alternative
Transaction.
The merger agreement expressly provides that the foregoing covenants do not
prohibit Novametrix from taking and disclosing to its stockholders a position
regarding an Alternative Transaction or Acquisition Proposal required by the
Exchange Act or from making any disclosure to its stockholders required by
applicable law, rule or regulation or by the Nasdaq Stock Market.
Novametrix has agreed:
. to immediately cease and cause to be terminated any discussions or
negotiations with any third party that were ongoing at the time of the
execution of the merger agreement;
. not to release any third party from the confidentiality and standstill
provisions of any agreement to which Novametrix is a party except for a
release from standstill provisions in connection with a Superior
Proposal;
. to notify Respironics Holdings promptly and no later than 24 hours after
receipt of, or modification or amendment to, any Acquisition Proposal or
any request for nonpublic information relating to Novametrix or any of
its subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of Novametrix and to disclose
to Respironics Holdings the terms of all Acquisition Proposals and the
identity of the person making all Acquisition Proposals and whether
Novametrix is providing or intends to provide the person making the
Acquisition Proposal with access to such requested information; and
. to promptly notify Respironics Holdings orally and in writing if it
enters into negotiations concerning any Acquisition Proposal.
Novametrix will ensure that the officers and directors of Novametrix and its
subsidiaries and any investment banker or other advisor or representative
retained by Novametrix are aware of the restrictions described above.
55
Certain Other Covenants
Consents; Approvals.
Each of Novametrix and Respironics Holdings will use its reasonable best
efforts, and Respironics Holdings will cause Respironics to use its reasonable
best efforts, to obtain, and to cooperate with each other in order to obtain,
all required consents, waivers, approvals, authorizations or orders. Each of
Novametrix and Respironics Holdings will make all filings required in
connection with the authorization, execution and delivery of the merger
agreement and the consummation by them of the transactions contemplated thereby.
Agreements with Respect to Affiliates.
Novametrix has identified to Respironics Holdings all persons who are
anticipated to be "affiliates" of Novametrix for purposes of Rule 145 under the
Securities Act at the time of the meeting of the Novametrix stockholders.
Novametrix will use its reasonable best efforts to cause each person identified
as an "affiliate" to deliver to Respironics a written agreement that he or she
will only dispose of shares of Respironics common stock to be received in the
merger in compliance with the securities laws.
Indemnification and Insurance.
For six years following the consummation of the merger, the certificate of
incorporation and by-laws of the surviving corporation will contain the same
indemnification provisions as currently set forth in the Novametrix certificate
of incorporation and by-laws, and these provisions will not be amended,
modified or otherwise repealed in any manner that would adversely affect the
rights thereunder of individuals who were directors, officers, employees or
agents of Novametrix at or prior to the consummation of the merger unless
otherwise required by law.
After the consummation of the merger, the surviving corporation will, to the
fullest extent permitted under applicable law or under its certificate of
incorporation or by-laws, indemnify and hold harmless each present and former
director, officer or employee of Novametrix or any of its subsidiaries against
any costs or expenses, judgments, fines, losses, claims, damages, liabilities
and amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to the transactions contemplated by
the merger agreement or otherwise with respect to any acts or omissions
occurring at or prior to the consummation of the merger, to the same extent as
provided in the Novametrix certificate of incorporation or by-laws or any
applicable contract or agreement as in effect on the date of the merger
agreement, in each case for a period of six years following the consummation of
the merger.
Following the merger, the surviving corporation will honor and fulfill in
all respects Novametrix's obligations under the indemnification agreements and
employment agreements with Novametrix's officers and directors existing at or
before the consummation of the merger.
In addition, for a period of not less than six years after the consummation
of the merger, the surviving corporation will provide Novametrix's current
directors and officers with an insurance and indemnification policy that
provides coverage for events occurring at or prior to the consummation of the
merger that is no less favorable than Novametrix's existing policy or, if
substantially equivalent insurance coverage is unavailable, the next best
available coverage; provided, however, that the surviving corporation will not
be required to pay an annual insurance premium in excess of 175% of the annual
premium currently paid by Novametrix for such insurance, but in such case will
purchase as much coverage as possible for such amount.
These provisions are not intended in any way to limit the rights of the
indemnified persons under the Novametrix certificate of incorporation and
by-laws or any agreements in existence on the date of the merger agreement or
permitted under the merger agreement, which rights are intended to survive the
merger and to be binding on the surviving corporation and its successors and
assigns.
56
Further Action/Tax Treatment.
The parties to the merger agreement will use all reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by the merger agreement,
to obtain in a timely manner all necessary waivers, consents and approvals and
to effect all necessary registrations and filings, and otherwise to satisfy or
cause to be satisfied all conditions precedent to each of their obligations
under the merger agreement. In addition, Respironics Holdings and Novametrix
will, and Respironics Holdings will cause Respironics to, use its reasonable
best efforts to cause the merger to qualify as a reorganization within the
meaning of Section 368(a) of the U.S. Internal Revenue Code, as specified in
the merger agreement, and will not, either before or after the consummation of
the merger, take any actions which, or fail to take any actions which, if not
taken, might reasonably be expected to prevent the merger from so qualifying.
Public Announcements.
Respironics Holdings and Novametrix will not issue any press release or make
any written public statement with respect to the merger or the merger agreement
and the transactions contemplated thereby without the prior consent of the
other party, which consent will not be unreasonably withheld. A party is
permitted to make disclosures without the consent of the other party as
required by law or the rules and regulations of the Nasdaq Stock Market, if the
disclosing party has used all reasonable efforts to consult with the other
party.
Shares of Respironics Common Stock.
Respironics Holdings will take all actions necessary so that Respironics
will issue to Respironics Holdings the shares of Respironics common stock to be
delivered to Novametrix stockholders in the merger. Respironics has also
guaranteed to use its reasonable best efforts to list on the Nasdaq Stock
Market the shares of Respironics common stock to be delivered in the merger
prior to the effective time of the merger.
Certain Employee Benefits.
The surviving corporation, at its sole discretion, will either continue the
current employee benefits of Novametrix or will provide each employee of
Novametrix or any of its subsidiaries at the effective time of the merger with
employee benefits that are comparable in the aggregate to those provided to
similarly situated employees of Respironics, with "similarly situated" to be
determined in light of the employee's responsibilities after the merger. It is
the intention of Respironics either to maintain existing employee benefits of
Novametrix or arrange for each employee of Novametrix or any of its
subsidiaries to become participants in Respironics' existing employee benefit
plans after the effective time of the merger.
With certain limited exceptions, the surviving corporation will recognize
service accrued by Novametrix employees prior to the effective time for all
purposes, will waive pre-existing condition limitations and eligibility waiting
periods under any group health plan and will give credit for amounts paid prior
to the effective time for purposes of applying deductibles, co-payments and
out-of-pocket maximums.
From and after the effective time of the merger, Respironics Holdings will
take all actions necessary so that Respironics will honor in accordance with
their terms all benefits and obligations under the Novametrix employee benefit
plans and all agreements with employees and consultants of Novametrix, each as
in effect on the date of the merger agreement or as amended pursuant to the
merger agreement.
These provisions may not be enforced against the surviving corporation by
any employee of Novametrix or any other person. Subject to compliance with
these provisions, they do not prevent the surviving corporation or any other
subsidiary of Respironics from amending or modifying any employee benefit plan,
program or arrangement in any respect in accordance with its terms or, subject
to the terms of the relevant plan, terminating, or modifying the terms and
conditions of, employment or other service of any person.
57
Conditions to Completion of the Merger
The obligations of the parties to consummate the merger are subject to the
satisfaction at or prior to the effective time of the following conditions:
. Effectiveness of Registration Statement. The registration statement of
which this proxy statement/prospectus is a part has become effective
under the Securities Act and the SEC has not issued any stop order
suspending the effectiveness of the registration statement, nor has the
SEC initiated or threatened any proceedings for that purpose or in
respect of this proxy statement/prospectus.
. Stockholder Adoption. The holders of a majority of the issued and
outstanding shares of Novametrix common stock have adopted the merger
agreement.
. Regulatory Clearances and Approvals.
. All waiting periods applicable to the consummation of the merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, have expired or been terminated;
. all material and necessary clearances and approvals for the merger
under any non-U.S. antitrust laws have been obtained;
. any other federal, state, local or foreign regulatory clearances and
approvals necessary to the consummation of the merger have been
obtained;
. all other waiting periods imposed by any governmental authority in
connection with such regulatory clearances have expired; and
. none of the regulatory clearances or approvals contain or impose any
conditions or requirements.
. Governmental Actions. No order, stay, decree, judgment or injunction of
any governmental authority, administrative agency or court of competent
jurisdiction enjoining, prohibiting or materially adversely affecting
the merger has been issued that has not been vacated, dismissed or
withdrawn as of the effective date of the merger, and there is no
pending or threatened (in writing) litigation or proceeding by any
governmental authority which seeks to enjoin or prohibit the merger or
to impose material damages on either Respironics or Novametrix because
of the merger.
. Illegality. No statute, rule, regulation or order has been enacted,
entered, enforced or deemed applicable to the merger which makes the
consummation of the merger illegal.
. NASD Quotation. The National Association of Securities Dealers, Inc.
must have approved for quotation on the Nasdaq Stock Market, all of the
shares of Respironics common stock to be issued in the merger.
In addition, Respironics Holdings' obligation to effect the merger is
subject to fulfillment of the following additional conditions:
. Representation and Warranties. The representations and warranties of
Novametrix set forth in the merger agreement will be true and correct to
the extent required in the merger agreement.
. Performance of Obligations. Novametrix will have performed and complied
in all material respects with all agreements, covenants and conditions
required by the merger agreement to be performed or complied with by it
prior to the effective time of the merger.
. Affiliates' Agreements. Respironics will have received a written
agreement from all persons identified by Novametrix as "affiliates" of
Novametrix for purposes of Rule 145 under the Securities Act that he or
she will only dispose of shares of Respironics common stock to be
received in the merger in compliance with the securities laws.
. Employment Agreements and Related Agreements. Respironics Holdings will
have received executed employment agreements from William J.
Lacourciere, Philip F. Nuzzo, Anthony Pierry and Catherine Bush (all of
which have been received), and which are not terminated, repudiated or
breached.
58
. Federal Tax Opinion. Respironics will have received the opinion of Reed
Smith LLP to the effect that
. the merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
. Respironics, Respironics Holdings and Novametrix will each be a
"party to a reorganization" within the meaning of Section 368(b) of
the Internal Revenue Code;
. no gain or loss will be recognized by Respironics, Respironics
Holdings or Novametrix as a result of the merger;
. except in connection with cash received in lieu of fractional shares,
no gain or loss will be recognized by Novametrix stockholders who
receive solely Respironics common stock (and cash in lieu of
fractional shares) on the exchange of their shares of Novametrix
common stock for shares of Respironics common stock;
. the aggregate basis of the shares of Respironics common stock to be
received by Novametrix stockholders will be the same as the aggregate
basis of the shares of Novametrix common stock exchanged therefor
(reduced by an amount attributable to fractional shares); and
. the holding period of the shares of Respironics common stock to be
received by Novametrix stockholders will include the period during
which shares of Novametrix common stock surrendered were held by the
Novametrix stockholder (provided such Novametrix common stock was
held as a capital asset in the hands of the Novametrix stockholder at
the time of the exchange).
In addition, Novametrix's obligation to effect the merger is subject to
fulfillment of the following additional conditions:
. Representation and Warranties. The representations and warranties of
Respironics Holdings set forth in the merger agreement will be true and
correct to the extent required in the merger agreement.
. Performance of Obligations. Respironics Holdings will have performed
and complied in all material respects with all agreements, covenants and
conditions required by the merger agreement to be performed or complied
with by it prior to the effective time of the merger.
. Federal Tax Opinion. Novametrix will have received the opinion of Torys
LLP to the effect that
. the merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
. Respironics, Respironics Holdings and Novametrix will each be a
"party to a reorganization" within the meaning of Section 368(b) of
the Internal Revenue Code;
. no gain or loss will be recognized by Respironics, Respironics
Holdings or Novametrix as a result of the merger;
. except in connection with cash received in lieu of fractional shares,
no gain or loss will be recognized by Novametrix stockholders who
receive solely Respironics common stock (and cash in lieu of
fractional shares) on the exchange of their shares of Novametrix
common stock for shares of Respironics common stock;
. the aggregate basis of the shares of Respironics common stock to be
received by Novametrix stockholders will be the same as the aggregate
basis of the shares of Novametrix common stock exchanged therefor
(reduced by an amount attributable to fractional shares); and
. the holding period of the shares of Respironics common stock to be
received by Novametrix stockholders will include the period during
which shares of Novametrix common stock surrendered were held by the
Novametrix stockholder (provided such Novametrix common stock was
held as a capital asset in the hands of the Novametrix stockholder at
the time of the exchange).
59
Termination of the Merger Agreement
Termination Rights.
The merger agreement may be terminated:
. by mutual written consent duly authorized by the respective boards of
directors of Respironics Holdings and Novametrix at any time prior to
the effective time of the merger;
. by Novametrix or Respironics Holdings in the event of a material breach
of a representation, warranty, covenant or agreement of the other party
in the merger agreement, which breach, if curable, has not been cured
within 30 days after written notice of the breach is given to the
breaching party by the party electing to terminate;
. by Novametrix or Respironics Holdings at any time after Novametrix
stockholders have failed to adopt the merger agreement, in a vote taken
at a meeting duly convened for that purpose, provided that the party
electing to terminate will have fulfilled each of its and its
subsidiaries' conditions described under "Conditions to Completion of
Merger" on page 58 above;
. by Novametrix or Respironics Holdings at any time after a final judicial
or regulatory determination (as to which all periods for appeal have
expired and no appeal will be pending) denying any regulatory clearance
and/or approval required for the merger;
. by Respironics Holdings within three business days after Respironics
Holdings delivers to Novametrix a notice of a regulatory clearance or
approval from a government authority or agency which contains or imposes
any condition or requirement which in Respironics Holdings' reasonable
business judgment is adverse to the best interests of the combined
entities;
. by Novametrix or Respironics Holdings if the effective time of the
merger has not occurred by June 17, 2002, provided that this right to
terminate may not be exercised by any party whose failure to fulfill any
obligation or satisfy any condition under the merger agreement has
caused or resulted in the failure of the effective time of the merger to
occur on or before such date;
. by Novametrix if the Novametrix board of directors has approved an
Acquisition Proposal (the definition of Acquisition Proposal is set
forth, and subject to the terms described, under "No Solicitation"
beginning on page 54 above), after determining, upon the basis of advice
of outside counsel that such action is necessary in order for the
Novametrix board of directors to act in a manner consistent with its
fiduciary obligations under applicable law; or
. by Novametrix if the 20-day weighted average selling price of a share of
Respironics common stock immediately preceding (but excluding) the third
trading day prior to the closing date of the merger is less than $30.00,
provided that Novametrix must exercise this right to terminate within
two business days after termination of the calculation period.
Termination Fees and Expenses.
Novametrix will pay Respironics a fee of $3,400,000, and will pay the
actual, documented and reasonable out-of-pocket expenses of Respironics and
Respironics Holdings relating to the transactions contemplated by the merger
agreement, including, but not limited to, reasonable fees and expenses of
counsel and accountants and out-of-pocket expenses (but not fees) of financial
advisors, of up to $425,000, upon the first to occur of any of the following
events:
. the Novametrix board of directors fails to recommend adoption of the
merger agreement by the Novametrix stockholders, or withdraws, modifies
or changes its recommendation of the merger in a manner adverse to
Respironics, or has resolved to do any of the foregoing, other than
following termination by mutual consent or under the following
circumstances permitting termination by Novametrix:
60
. a material breach of a representation, warranty, covenant or
agreement which breach, if curable, has not been cured by Respironics
within 30 days of written notice from Novametrix;
. at any time after a final judicial or regulatory determination
denying a regulatory clearance and/or approval required for the
merger;
. if the effective time of the merger has not occurred by June 17,
2002, provided that Novametrix's failure to fulfill an obligation or
satisfy a condition under the merger agreement has not caused, or
resulted in, the failure of the effective time to occur on or prior
to such date; or
. the 20-day weighted average selling price of a share of Respironics
common stock immediately preceding (but excluding) the third trading
day prior to the closing date of the merger is less than $30.00.
. Novametrix terminates the merger agreement following the Novametrix
board of directors' approval of an Acquisition Proposal (the definition
of Acquisition Proposal is set forth under "No Solicitation" beginning
on page 54 above); or
. Within 12 months following the termination of the merger agreement,
Novametrix executes and delivers a definitive agreement for, or the
Novametrix board of directors approves, a transaction, involving (i) a
merger or consolidation, or any similar transaction, involving
Novametrix or any significant subsidiary, (ii) a purchase, lease or
other acquisition of all or substantially all of the assets of
Novametrix or any significant subsidiary or (iii) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 30% or more of the voting power
of the Novametrix or any significant subsidiary (other than, in the case
of the transfer of securities of any significant subsidiary, transfers
between Novametrix and/or one or more of its subsidiaries), unless such
termination is by mutual consent or by Novametrix under the following
circumstances:
. a material breach of a representation, warranty, covenant or
agreement which breach, if curable, has not been cured by Respironics
within 30 days of written notice from Novametrix;
. at any time after a final judicial or regulatory determination
denying a regulatory clearance and/or approval required for the
merger;
. if the effective time of the merger has not occurred by June 17,
2002, provided that Novametrix's failure to fulfill an obligation or
satisfy a condition under the merger agreement has not caused, or
resulted in, the failure of the effective time to occur on or prior
to such date; or
. the 20-day weighted average selling price of a share of Respironics
common stock immediately preceding (but excluding) the third trading
day prior to the closing date of the merger is less than $30.00.
The fee and/or expenses described above are payable in immediately available
funds within five business day following the occurrence of the event requiring
such payment.
The fee payable under certain circumstances by Novametrix to Respironics is
intended, among other things, to compensate Respironics and Respironics
Holdings for their respective costs, including lost opportunity costs, if
certain actions or inactions by Novametrix or its stockholders lead to the
abandonment of the merger. This may have the effect of increasing the
likelihood that the merger will be consummated in accordance with the terms of
the merger agreement. The fee may also have the effect of discouraging other
persons from making an offer to acquire all of, or a significant interest in,
Novametrix by increasing the cost of any such acquisition.
Except as described above, all fees and expenses incurred in connection with
the merger agreement and the transactions contemplated by the merger agreement
will be paid by the party incurring such expenses, whether or not the merger is
consummated.
61
Amendment and Waiver; Parties in Interest
The parties to the merger agreement may amend the merger agreement in
writing by action taken by or on behalf of their respective boards of directors
at any time prior to the consummation of the merger. However, after approval of
the merger agreement by the Novametrix stockholders, the merger agreement
cannot be amended without stockholder approval if stockholder approval of the
amendment is required by law.
At any time prior to the consummation of the merger, any party to the merger
agreement may extend the time for the performance of any of the obligations or
other acts by the other, waive any inaccuracies in the representations and
warranties contained in the merger agreement or in any document delivered
pursuant to the merger agreement, or waive compliance with any of the
agreements or conditions contained in the merger agreement. This extension or
waiver will be valid if set forth in writing by the party or parties granting
this extension or waiver.
The merger agreement is binding upon and inures solely to the benefit of its
parties. Nothing in the merger agreement, express or implied, confers upon any
other person any right, benefit or remedy of any nature whatsoever, other than
certain indemnification and insurance obligations of Respironics Holdings and
Novametrix following the consummation of the merger which are intended for the
benefit of certain specified officers and directors of Novametrix and may be
enforced by these individuals, and other than the right of Novametrix
stockholders to receive the merger consideration if the merger is consummated,
but not otherwise. In addition, Respironics may enforce the fee and expenses
provisions described under "Termination Fees and Expenses" beginning on page 61
above.
Guarantee
Respironics has irrevocably guaranteed every representation, warranty,
covenant, agreement and other obligation of Respironics Holdings under the
merger agreement.
THE VOTING AGREEMENTS
The following is a summary of the material terms of the voting agreements.
This description is qualified by reference to the complete text of the form of
voting agreement, which is incorporated by reference and attached to this proxy
statement/prospectus as Annex C. Novametrix stockholders are encouraged to read
the form of the voting agreement carefully and in its entirety.
Agreement to Vote and Proxy
In connection with the merger agreement, each of Novametrix's directors and
executive officers and certain members of Novametrix's senior management
(collectively known as the Novametrix director and management stockholders)
entered into voting agreements with Respironics. At January 15, 2002, the
Novametrix director and management stockholders beneficially owned 863,638
outstanding shares of Novametrix common stock. These shares represented 9.8% of
the total issued and outstanding shares of Novametrix common stock at January
15, 2002.
Under the terms of the voting agreements, such directors, officers and
senior managers agreed that, until such voting agreements are terminated, he or
she would vote, or cause to be voted, all of his or her shares in favor of the
adoption of the merger agreement, and that each such director, officer and
senior manager will use his or her best efforts to cause any other shares of
Novametrix common stock over which he or she has or shares voting power to be
voted in favor of the merger agreement and the merger.
62
Each of the Novametrix director and management stockholders agreed not to
enter into any agreement or commitment with any person, the effect of which
would be inconsistent with or violate any of the provisions and agreements set
forth above.
Restrictions on Voting
Each of the Novametrix director and management stockholders agreed with
Respironics that, during the period commencing on the date of the voting
agreements and ending on the date that the voting agreements are terminated,
such Novametrix director and management stockholders will not vote or cause or
permit any of his or her shares to be voted in favor of any other merger,
consolidation, liquidation, or other transaction which would have the effect of
any person other than Respironics or its affiliate acquiring majority voting
control over Novametrix.
Restrictions on Transfer
Each of the Novametrix director and management stockholders entering into
voting agreements agreed with Respironics that, during the period commencing on
the date of the voting agreements and ending on the date that the voting
agreements are terminated, such Novametrix director and management stockholders
will not sell or otherwise transfer any of his or her shares:
. pursuant to any tender offer, exchange offer, or similar proposal made
by any person (other than Respironics or its affiliate);
. to any person seeking to obtain control of Novametrix, any of its
subsidiaries or any substantial portion of the assets of Novametrix or
any of its subsidiaries or to any other person (other than Respironics
or its affiliates) under circumstances where such sale or transfer may
reasonably be expected to assist a person seeking to obtain such
control; or
. for the principal purpose of avoiding his or her obligations under the
voting agreement.
Termination
The voting agreements will terminate upon the earlier of consummation of the
merger or the termination of the merger agreement in accordance with its terms.
Effect of the Voting Agreements
The voting agreements are intended to make it more likely that the merger
will be completed on the agreed terms. These agreements may have the effect of
making an acquisition or other business combination involving Novametrix by or
with a third party more difficult because the shares of Novametrix common stock
held pursuant to these agreements would be unable to be voted in favor of any
such acquisition or other business combination prior to the termination of the
merger agreement.
63
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF NOVAMETRIX
Certain Beneficial Owners
The stockholders (including any "group," as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) who, to the knowledge of the
Novametrix board of directors beneficially owned more than five percent of the
Novametrix common stock as of January 15, 2002, and their respective
shareholdings as of such date (according to information furnished by them to
Novametrix), are set forth in the following table. Except as indicated in the
footnotes to the table, all of such shares are owned with sole voting and
investment power.
Shares of Common Stock Percent
Name and Address Beneficially Owned of Class
---------------- ---------------------- --------
General Electric Company (1)
3135 Easton Turnpike
Fairfield, Connecticut 06431
GE Medical Systems, Inc. (1)
8200 West Tower Avenue
Milwaukee, Wisconsin 53223.......... 750,000 8.3%
Kairos Partners, LP (2)
Kairos Partners GP, LLC (2)
Aim High Enterprises, Inc. (2)
c/o Aim High Enterprises, Inc.
600 Longwater Drive, Suite 204
Norwell, Massachusetts 02061
StoneGate Partners, LLC (2)
45 Milk Street, 7th Floor
Boston, Massachusetts 02108......... 573,590........ 6.5%
Charles F. Manning, Jr., M.D. Group (3)
1831 Ox Bottom Road
Tallahassee, Florida 32312.......... 575,338 6.5%
William J. Lacourciere (4)
c/o Novametrix Medical Systems Inc.
5 Technology Drive
Wallingford, Connecticut 06492...... 459,466........ 5.2%
--------
(1) Information as to General Electric Company and GE Medical Systems, Inc. is
based upon a report on Schedule 13G filed with the SEC on March 16, 2000 by
General Electric and GE Medical. Such report indicates that GE Medical
beneficially owns an aggregate of 750,000 shares. General Electric
disclaims beneficial ownership of the shares of common stock issued to GE
Medical.
(2) Information as to Kairos Partners, LP, Kairos Partners GP, LLC, Aim High
Enterprises, Inc., and StoneGate Partners, LLC is based upon a report on
Schedule 13D filed with the Commission on November 14, 2001. Such report
indicates that Kairos Partners, LP beneficially owns an aggregate of
573,590 shares. Each of the other parties disclaims beneficial ownership of
the shares of common stock issued to Kairos Partners, LP.
(3) Information as to the Charles F. Manning, Jr., M.D. Group is based upon
reports on Schedule 13D filed with the SEC on April 10, 1997 by such group.
Such reports indicate that such group beneficially owns an aggregate of
575,338 shares, which includes 72,570 shares issuable on the exercise of
currently exercisable warrants.
(4) Includes (i) 5,907 shares held for the account of Mr. Lacourciere under the
Novametrix Medical Systems Inc. Employee Stock Ownership Plan, (ii) 1,000
shares issuable upon the exercise of currently exercisable warrants held by
Mr. Lacourciere, which warrants will expire on March 8, 2002, and (iii)
106,666 shares issuable upon the exercise of currently exercisable stock
options held by Mr. Lacourciere. Does not include an additional 13,334
shares issuable upon the exercise of stock options held by Mr. Lacourciere
which are not currently exercisable but will become exercisable in
connection with the merger.
64
Directors and Executive Officers
The following table sets forth, as of January 15, 2002, the number of shares
of Novametrix common stock beneficially owned by each of the directors, the
chief executive officer and each of the four highest paid executive officers of
Novametrix, and all directors and executive officers of Novametrix as a group,
according to information furnished by such persons to Novametrix.
Shares of Common Stock Percent
Name Beneficially Owned of Class
---- ---------------------- --------
Jeffery A. Baird.................................... 25,926 (1) *
Corporate Controller and Treasurer
Paul A. Cote........................................ 74,856 (2) *
Director of the Company
Vartan Ghugasian.................................... 84,166 (3) *
Director of the Company
Thomas M. Haythe.................................... 146,040 (4) 1.7%
Director of the Company
William J. Lacourciere.............................. 459,466 (5) 5.2%
Chairman of the Board, Chief Executive
Officer and Director of the Company
John P. Mahoney..................................... 190,258 (6) 2.2%
Director of the Company
Philip F. Nuzzo..................................... 77,419 (7) *
Vice President--Product and Business Development
Thomas M. Patton.................................... 81,300 (8) *
President and Chief Operating Officer
Photios T. Paulson.................................. 40,500 (9) *
Director of the Company
Steven J. Shulman................................... 41,000 (10) *
Director of the Company
Joseph A. Vincent................................... 110,133 (11) 1.2%
Executive Vice President, Chief Financial
Officer and Secretary
All directors and executive officers as a group
(eleven persons)................................. 1,331,064 (1)(2)(3)(4) 14.3%
(5)(6)(7)(8)
(9)(10)(11)
--------
* Less than one percent.
65
(1) Includes (i) 1,533 shares held for the account of Mr. Baird under the
Novametrix Medical Systems Inc. Employee Stock Ownership Plan, and (ii)
20,000 shares issuable upon the exercise of currently exercisable stock
options held by Mr. Baird.
(2) Includes 26,666 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Cote. Does not include an additional 38,334
shares issuable upon the exercise of stock options held by Mr. Cote which
are not currently exercisable but will become exercisable in connection
with the merger.
(3) Includes 1,000 shares issuable upon the exercise of currently exercisable
warrants held by Dr. Ghugasian, which warrants will expire on March 8,
2002, and 26,666 shares issuable upon the exercise of currently exercisable
stock options held by Dr. Ghugasian. Does not include an additional 38,334
shares issuable upon the exercise of stock options held by Dr. Ghugasian
which are not currently exercisable but will become exercisable in
connection with the merger.
(4) Includes 25,000 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Haythe. Does not include an additional 30,000
shares issuable upon the exercise of stock options held by Mr. Haythe which
are not currently exercisable but will become exercisable in connection
with the merger.
(5) Includes (i) 5,907 shares held for the account of Mr. Lacourciere under the
Novametrix Medical Systems Inc. Employee Stock Ownership Plan, (ii) 1,000
shares issuable upon the exercise of currently exercisable warrants held by
Mr. Lacourciere, which warrants will expire on March 8, 2002, and (iii)
106,666 shares issuable upon the exercise of currently exercisable stock
options held by Mr. Lacourciere. Does not include an additional 13,334
shares issuable upon the exercise of stock options held by Mr. Lacourciere
which are not currently exercisable but will become exercisable in
connection with the merger.
(6) Includes 10,400 shares issuable upon the exercise of currently exercisable
warrants held by Dr. Mahoney, which warrants will expire on March 8, 2002,
and 18,333 shares issuable upon the exercise of currently exercisable stock
options held by Dr. Mahoney. Does not include an additional 46,667 shares
issuable upon the exercise of stock options held by Dr. Mahoney which are
not currently exercisable but will become exercisable in connection with
the merger.
(7) Includes (i) 2,561 shares held for the account of Mr. Nuzzo under the
Novametrix Medical Systems Inc. Employee Stock Ownership Plan, and (ii)
68,998 shares issuable upon the exercise of currently exercisable stock
options held by Mr. Nuzzo. Does not include an additional 30,002 shares
issuable upon the exercise of stock options held by Mr. Nuzzo which are not
currently exercisable but will become exercisable in connection with the
merger.
(8) Includes 60,000 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Patton. Does not include an additional 315,000
shares issuable upon the exercise of stock options held by Mr. Patton which
are not currently exercisable but will become exercisable in connection
with the merger.
(9) Includes 10,000 shares issuable upon the exercise of currently exercisable
warrants held by Mr. Paulson, which warrants will expire on November 30,
2002, and 25,000 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Paulson. Does not include an additional 30,000
shares issuable upon the exercise of stock options held by Mr. Paulson
which are not currently exercisable but will become exercisable in
connection with the merger.
(10) Includes 35,000 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Shulman. Does not include an additional 30,000
shares issuable upon the exercise of stock options held by Mr. Shulman
which are not currently exercisable but will become exercisable in
connection with the merger.
(11) Includes (i) 3,176 shares held for the account of Mr. Vincent under the
Novametrix Medical Systems Inc. Employee Stock Ownership Plan,, (ii) 200
shares issuable upon the exercise of currently exercisable warrants held
by Mr. Vincent, which warrants will expire on March 8, 2002, and (iii)
58,999 shares issuable upon the exercise of currently exercisable stock
options held by Mr. Vincent. Does not include an additional 40,001 shares
issuable upon the exercise of stock options held by Mr. Vincent which are
not currently exercisable but will become exercisable in connection with
the merger.
66
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The merger will be accounted for under the purchase method of accounting in
accordance with accounting principles generally accepted in the United States.
Accordingly, the accompanying unaudited pro forma combined condensed financial
information gives effect to the transaction in accordance with the purchase
method of accounting. The unaudited pro forma combined condensed financial
information gives effect to the merger as though it were completed as of the
beginning of the periods stated and should be read in conjunction with:
1. Respironics' audited consolidated financial statements, including the
accounting policies and notes thereto, included in its Annual Report on
Form 10-K for the fiscal year ended June 30, 2001 and its unaudited
consolidated financial statements and notes thereto included in its
Quarterly Report on Form 10-Q for the quarterly and six month period
ended December 31, 2001.
2. Novametrix's audited consolidated financial statements, including the
accounting policies and notes thereto, included in its Annual Report on
Form 10-K for the fiscal year ended April 29, 2001 and its unaudited
consolidated financial statements and notes thereto included in its
Quarterly Reports on Form 10-Q for the quarterly and six month period
ended October 28, 2001.
The following unaudited pro forma combined condensed financial information
sets forth the combined results of operations for the fiscal year ended June
30, 2001 and the six month period ended December 31, 2001, and the financial
position as of December 31, 2001 as if the merger had occurred as of that date.
Novametrix has an April fiscal year end, which differs from Respironics' June
fiscal year end, and accordingly the companies' fiscal quarters also end on
different dates. In order to develop unaudited pro forma combined condensed
financial statements using Respironics' fiscal year and six month period end
dates, Respironics' December 31, 2001 unaudited balance sheet was combined with
Novametrix's October 28, 2001 unaudited balance sheet, Respironics' six month
period end December 31, 2001 unaudited income statement was combined with
Novametrix's six month period end October 28, 2001 unaudited income statement,
and Respironics' fiscal year end June 30, 2001 income statement was combined
with Novametrix's fiscal year end April 29, 2001 income statement.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have actually occurred if the merger had been consummated at the
beginning of the periods stated, nor is it necessarily indicative of future
operating results or financial position. The pro forma information does not
include adjustments to reflect the positive impact of cost reductions and other
synergies that are expected to be realized as a result of the merger. See the
Notes to the Unaudited Pro Forma Combined Condensed Financial Information for
information regarding significant assumptions and estimates used in preparing
these statements.
67
Unaudited Pro Forma Combined Condensed Balance Sheets
At December 31, 2001
(In Thousands)
Historical Pro Forma
---------------------- ----------------------
Respironics Novametrix Adjustments Combined
----------- ---------- ----------- --------
ASSETS
Cash and short-term investments......... $ 43,547 $ 205 $ 43,752
Trade accounts receivable............... 103,097 14,529 117,626
Inventories............................. 68,308 9,950 78,258
Other current assets.................... 27,331 3,419 30,750
-------- ------- --------
Total Current Assets............. 242,283 28,103 270,386
Property, Plant and Equipment (Net)..... 69,364 3,159 72,523
Other Assets............................ 13,523 6,546 $ 18,000(1) 38,069
Goodwill................................ 58,627 7,139 43,836(2) 109,602
-------- ------- --------- --------
$383,797 $44,947 $ 61,836 $490,580
======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses... $ 47,910 $ 5,845 $ 4,749(3) $ 58,504
Current portion of long-term obligations 797 3,953 4,750
-------- ------- --------- --------
Total Current Liabilities........ 48,707 9,798 4,749 63,254
Long Term Obligations................... 79,648 2,060 81,708
(33,089)(4)
Stockholders' Equity.................... 255,442 33,089 90,176(5) 345,618
-------- ------- --------- --------
$383,797 $44,947 $ 61,836 $490,580
======== ======= ========= ========
68
Unaudited Pro Forma Combined Condensed Statements of Income
Fiscal Year Ended June 30, 2001
(In Thousands Except Per Share Data)
Historical Pro Forma
--------------------- -----------------------
Respironics Novametrix Adjustments(9) Combined
----------- ---------- -------------- --------
Net Sales.................................... $422,438 $54,682 $477,120
Cost of goods sold........................... 223,362 24,882 248,244
Cost of goods sold--restructuring charges (6) 725 2,297 3,022
-------- ------- --------
198,351 27,503 225,854
Selling, general and administrative expenses. 122,554 19,165 $ 1,900(1) 143,619
Research and development expenses............ 15,281 4,493 19,774
Restructuring (credit) charges (6)........... (1,909) 2,100 191
Interest expense............................. 7,546 954 8,500
Other........................................ (1,029) (168) (1,197)
-------- ------- ------- --------
Income Before Income Taxes............ 55,908 959 (1,900) 54,967
Income taxes................................. 22,337 340 (759)(7) 21,918
-------- ------- ------- --------
Net Income............................ $ 33,571 $ 619 $(1,141) $ 33,049
======== ======= ======= ========
Diluted earnings per share (8)............... $ 1.09 $ 0.07 $ 0.99
======== ======= ========
Diluted shares outstanding (8)............... 30,886 8,847 (6,488) 33,245
======== ======= ======= ========
69
Unaudited Pro Forma Combined Condensed Statements of Income
Six Month Period Ended December 31, 2001
(In Thousands Except Per Share Data)
Historical Pro Forma
---------------------- -----------------------
Respironics Novametrix Adjustments(9) Combined
----------- ---------- -------------- --------
Net Sales................................... $224,792 $24,789 $249,581
Cost of goods sold.......................... 119,194 11,270 130,464
-------- ------- --------
105,598 13,519 119,117
Selling, general and administrative expenses 66,110 8,250 $ 950(1) 75,310
Research and development expenses........... 8,302 2,286 10,588
Interest expense............................ 1,867 242 2,109
Other....................................... (610) 71 (539)
-------- ------- ------- --------
Income Before Income Taxes........... 29,929 2,670 (950) 31,649
Income taxes................................ 11,870 948 (377)(7) 12,441
-------- ------- ------- --------
Net Income........................... $ 18,059 $ 1,722 $ (573) $ 19,208
======== ======= ======= ========
Diluted earnings per share (8).............. $ 0.58 $ 0.19 $ 0.57
======== ======= ========
Diluted shares outstanding (8).............. 31,403 8,873 (6,507) 33,769
======== ======= ======= ========
70
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(1) The final allocation of the purchase price to the fair value of assets
(including intangible assets) and liabilities has not been completed. For
the purposes of the unaudited pro forma combined condensed financial
information, a preliminary estimate of $18,000,000 has been allocated to
intangible assets. Based upon a preliminary estimate of the intangible
assets' useful lives, the estimated annual amortization expense related to
these intangible assets is $1,900,000 ($475,000 per quarter). This
estimated annual amortization expense is reflected in the unaudited pro
forma combined condensed statements of income.
(2) For the purposes of the unaudited pro forma combined condensed financial
information, the excess of the purchase price (including direct transaction
costs) over the net assets acquired has been allocated as follows:
Intangible assets--see (1) above $18,000,000
Goodwill........................ 43,836,234
-----------
Total........................... $61,836,284
===========
Additional fair value adjustments to Novametrix's assets and liabilities,
refinements of the allocation to intangible assets, and costs related to
integration activities are expected to be recorded in connection with the
merger, but such amounts are not determinable at this time, and are not,
therefore, included as pro forma adjustments in the unaudited pro forma
combined condensed financial information.
(3) Represents the increase in accrued expenses for estimated direct
transaction costs related to the merger.
(4) Represents the elimination of Novametrix's equity accounts.
(5) Reflects the assumed issuance to Novametrix stockholders of 2,339,643
shares of Respironics common stock having a fair value per share of $34.60
per share (equal to the closing price of Respironics common stock on the
last trading day prior to the announcement of the merger), based on an
assumed exchange ratio of 0.2667 shares of Respironics common stock for
each share of Novametrix common stock and based on 8,772,566 shares of
Novametrix common stock outstanding as of November 23, 2001. The actual
number of shares of Respironics common stock issued and the fair value of
those shares at the date of issuance will be determined at the effective
time of the merger based upon the exchange ratio and the number of shares
of Novametrix common stock then outstanding as more fully described in the
merger agreement. Also reflects the estimated fair value of outstanding
Novametrix stock options that will be converted to Respironics stock
options in the merger assuming an exchange ratio of 0.2667 shares of
Respironics common stock for each share of Novametrix common stock and
assuming a fair value per share of $34.60 for Respironics common stock
consistent with the assumption above.
(6) See Selected Historical Financial Data of Respironics and Novametrix for
information regarding the restructuring charges.
(7) Assumed tax benefit from the amortization of intangible assets.
(8) The unaudited pro forma combined diluted shares outstanding and related
diluted earnings per share amounts are based on Respironics' weighted
average number of common shares outstanding for the period plus the total
number of Respironics common shares estimated to be delivered to
Novametrix's stockholders in the merger. See Note (5) above for a
description of the assumptions made regarding the number of Respironics
common shares to be issued.
(9) The pro forma adjustments do not reflect the positive impact of cost
reductions and other synergies that are expected to be realized as a result
of the merger.
71
COMPARISON OF RIGHTS OF STOCKHOLDERS
Respironics and Novametrix are both organized under the laws of the State of
Delaware. Accordingly, any differences in the rights of holders of Respironics
common stock and Novametrix common stock will arise from differences in their
certificates of incorporation, by-laws and rights plans. Under the terms of the
merger agreement, Novametrix stockholders will receive Respironics common stock
in the merger. From and after the effective time of the merger, the rights of
Novametrix stockholders will be governed by Delaware law, Respironics'
certificate of incorporation, Respironics' by-laws and Respironics' rights
plan. The following is a summary of the material differences between the
current rights of Novametrix stockholders and the rights of Respironics
stockholders.
The following chart compares important rights of stockholders, but is not
intended to be complete and is qualified in its entirety by reference to the
Novametrix certificate of incorporation, the Novametrix by-laws, the Novametrix
rights plan, the Respironics certificate of incorporation, the Respironics
by-laws, the Respironics rights plan, and applicable provisions of Delaware
law. In addition, the identification of some of the differences in the rights
of these stockholders as material is not intended to indicate that other
differences that are equally important do not exist. We urge you to read
carefully the relevant provisions of Delaware law, as well as the full text of
the certificates of incorporation, by-laws and rights plans of both Respironics
and Novametrix. Copies of these documents are incorporated by reference into
this proxy statement/prospectus and will be sent to you upon request. See
"Where You Can Find More Information" on page 84.
--------------------------------------------------------------------------------------------------
NOVAMETRIX RESPIRONICS
--------------------------------------------------------------------------------------------------
Authorized Capital Stock The authorized capital stock The authorized capital stock
consists of 20 million shares of consists of 100 million shares of
common stock, par value $0.01 per common stock, par value $0.01 per
share, and 1 million shares of share.
preferred stock, par value $1.00
per share, of which 90,000 shares
have been designated Series A
Preferred Stock and 120,000
shares have been designated Series
B Preferred Stock.
--------------------------------------------------------------------------------------------------
Number of Board of The number of directors is fixed The number of directors is fixed
Directors from time to time by a vote of the from time to time by a vote of the
board of directors. The board of board of directors. The board of
directors may not be less than three directors is presently fixed at
nor more than nine directors. The twelve members.
board of directors is presently
fixed at seven members.
--------------------------------------------------------------------------------------------------
Classification of Board There are three classes of directors, Same as Novametrix.
of Directors with each class elected for a term
of three years and consisting as
nearly as possible of one-third of
the total number of directors on the
board of directors. At each annual
meeting of stockholders, one class
of directors is elected for a
three-year term, with the members
of each class to hold office until
72
NOVAMETRIX RESPIRONICS
----------------------------------------------------------------------------------------------------
their successors are elected and
qualified. Classification of
directors has the effect of making
it more difficult for stockholders to
change the composition of the
board of directors.
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Quorum at Board of A quorum at any meeting of the Same as Novametrix.
Directors' Meetings board of directors consists of a
majority of the total number of
directors, and a majority of
directors present at a meeting at
which a quorum is present is
required to approve an action of
the board of directors. Action may
also be taken by the unanimous
written consent of the board of
directors.
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Newly Created Any vacancy on the board of Any vacancy on the board of
Directorships and directors arising for any reason directors arising for any reason,
Vacancies other than removal by stockholders including any newly created
at a meeting called for that directorships, is filled by a
purpose, and any newly created majority vote of the remaining
directorship resulting from an directors, even if less than a
increase in the number of directors, quorum unless such vacancy was
may be filled by a majority vote of filled by the stockholders at the
the the remaining directors, even if same meeting at which such
less than a quorum, or by the sole director was removed or at a
remaining director. Directors special meeting of stockholders
elected to fill a vacancy or a newly called for that purpose.
created directorship will hold
office for a term to coincide with
the term of the class to which such
director was elected.
----------------------------------------------------------------------------------------------------
Removal of Directors Any or all directors may be Any or all directors may be
removed from office only for removed from office only for
cause at any meeting of cause by the holders of a majority
stockholders called for that of the shares then entitled to vote
purpose by the holders of a at an election of directors.
majority of the shares then entitled
to vote at an election of directors.
----------------------------------------------------------------------------------------------------
Officers Officers include a chairman of the Officers include a president, one or
board, a president, one or more more vice presidents, a secretary
executive vice presidents, one or and a treasurer, and may also
more vice presidents, a secretary include at the discretion of the
and a treasurer, and may also board of directors, a chairman. The
include at the discretion of the board of directors and the
board of directors one or more President of Respironics may also
assistant treasurers and assistant appoint other officers as they deem
----------------------------------------------------------------------------------------------------
73
NOVAMETRIX RESPIRONICS
-----------------------------------------------------------------------------------------------------------
secretaries. The board of directors necessary, provided that the Board
may also appoint other officers as may supersede action taken by the
they deem necessary. At any President to appoint officers. The
meeting of the board of directors certificate of incorporation and
called for that purpose, any officer by-laws are silent on the matter of
or agent may be removed from removal of officers.
office, with or without cause, by
the affirmative vote of a majority
of the entire board of directors.
-----------------------------------------------------------------------------------------------------------
Special Meetings of Stockholders Special meetings of the Special meetings of the
stockholders may be called by stockholders may only be called by
resolution of the board of directors, the president or by resolution of
by the chairman of the board, or the board of directors, for the
the president, or if approved by the purposes set forth in the notice of
resolution of the board of directors, the meeting.
by the holders of a majority of the
outstanding shares of capital stock
entitled to vote on matters that are
to be voted on at the special
meeting.
-----------------------------------------------------------------------------------------------------------
Quorum at Stockholder Meetings At any meeting of stockholders, Same as Novametrix.
the holders of shares representing a
majority of the votes entitled to be
cast by all holders of shares
outstanding and entitled to vote at
the meeting, present in person or
by proxy, will constitute a quorum.
If a quorum is not present at a
meeting, the stockholders entitled
to vote at the meeting may adjourn
the meeting from time to time until
a quorum is present.
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Stockholder Action by Written Unless otherwise approved by a Stockholder action by written
Consent majority of the directors who are consent of less than all of the
not affiliated with any related stockholders is authorized,
person and who were directors provided that such consent is
immediately prior to the time any signed by the holders of
related person became a related outstanding stock having not less
person, no action may be taken by than the minimum number of votes
stockholders except at an annual or that would be necessary to
special meeting actually held. authorize or take such action at a
Stockholder action may be effected meeting at which all shares entitled
by a written consent of the to vote thereon were present and
stockholders only with such board voted.
approval.
74
NOVAMETRIX RESPIRONICS
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Advance Notice of The certificate of incorporation Same as Novametrix.
Stockholder Proposals and by-laws provide for advance
for Stockholder notice procedures for stockholder-
Meetings--Content of proposed business to be considered
the Notice at stockholder meetings.
The stockholder notice must
contain:
. a brief description of, and the
reasons for, the business
desired to be brought before
the annual meeting;
. the name and record address
of the stockholder proposing
the business;
. the class or series and number
of shares that are owned
beneficially or of record by
the proposing stockholder;
. a description of any
arrangements or
understandings between the
stockholder and any person
regarding the proposed
business and any material
interest of the stockholder in
the proposed business; and
. a representation that the
stockholder intends to appear
at the meeting in person or by
proxy to bring such business
before the meeting.
-----------------------------------------------------------------------------------------------
Advance Notice of Notice of stockholder-proposed Notice must be delivered not less
Stockholder Proposals business for the annual meeting than 90 days prior to the
for Stockholder generally must be received in anniversary date of the date that
Meetings--Timing of the writing not more than 45 days and the proxy statement was released
Notice not less than 25 days prior to the in connection with the most recent
date of such meeting of previous annual meeting; except:
stockholders.
. If the notice relates to an
annual meeting that is to be
held on a date that is not
within 30 days before or after
such anniversary date:
a) notice by the stockholder
must be received before
the later of the (i) the
30th day following
75
NOVAMETRIX RESPIRONICS
--------------------------------------------------------------------------------------------------------
Advance Notice of the day notice of the date
Stockholder Proposals of the annual meeting
for Stockholder was first publicly
Meetings--Timing of disclosed or (ii) 120
Notice, calendar days before the
cont'd. date of such annual
meeting; and
b) in no event shall such
notice be received later
than 15 calendar days
prior to the mailing date
of the proxy materials.
. If the notice relates to a board
meeting to increase the
number of members of the
board of directors and there is
no public announcement of
this increase prior to 100 days
prior to such anniversary date,
notice will be timely with
respect to such new positions
if received prior to the end of
the 10th day following the
day on which such public
announcement is made.
. If the Notice relates to a
Special Meeting, notice must
be delivered to the Corporate
Secretary not less than 90
days prior to the Special
Meeting or prior to the end of
the 10th day following the
day on which a public
announcement of the special
meeting is made.
--------------------------------------------------------------------------------------------------------
Amendment of Governing Under Delaware law, an Same provision of Delaware law
Documents amendment to a corporation's applies.
certificate of incorporation
requires each of the following
unless a higher vote is required in
the corporation's certificate of
incorporation:
. a resolution of the
corporations's board of
directors recommending the
amendment;
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76
NOVAMETRIX RESPIRONICS
---------------------------------------------------------------------------------------------------
Amendment of Governing . the approval of holders of a The certificate of incorporation
Documents, cont'd. majority of all shares entitled requires approval by a 66 2/3% vote
to vote thereon, voting of all shares, as well as approval
together as a single class; and by a majority vote of disinterested
shares, if an amendment to the
. the approval of holders of a certificate of incorporation were to
majority of the outstanding come within the definition of a
stock of each class entitled to business combination involving an
vote on the amendment. interested stockholder.
The certificate of incorporation The certificate of incorporation
requires the affirmative vote of the authorizes the board of directors to
holders of 80% of the outstanding make, alter or repeal the by-laws.
shares entitled to vote, voting as a By-laws which would have the
single class, to amend some effect of limiting in any way the
articles of the certificate of rights the rights to indemnification
incorporation. provided by the certificate of
incorporation or increasing
The certificate of incorporation director liability may operate only
and by-laws require the vote by the prospectively.
board of directors or stockholders
to amend, repeal, alter, rescind or
adopt the by-laws, provided that
any such amendment, repeal,
alteration, rescission or adoption
by the stockholders requires the
affirmative vote of the holders of
at least 80% of the outstanding
shares entitled to vote, voting as a
single class.
As to other provisions and matters,
the certificate of incorporation and
by-laws are silent on the matter of
amending the certificate of
incorporation and, therefore,
Delaware law applies.
77
- NOVAMETRIX RESPIRONICS
-------------------------------------------------------------------------------------------------
Effect of Interested Delaware law generally prohibits a The by-laws contain a provision
Stockholder business combination between a electing not to be governed by this
Transactions and Fair corporation and an "interested section of Delaware law. This
Price Provision stockholder" within three years of provision of the by-laws may not
the time that person became an be amended by the board of
interested stockholder. An directors.
interested stockholder generally
includes a person who beneficially
owns 15% or more of the
outstanding voting stock of the
corporation. This provision does
not apply in some circumstances,
including if (i) the corporation's
board of directors approved the
interested stockholder transaction
prior to the date the interested
stockholder acquired his or her
shares, (ii) as a result of the
interested stockholder transaction,
the interested stockholder owned at
least 85% of the voting stock of
the corporation outstanding at the
time the transaction commenced
(excluding shares owned by
persons who are both directors and
officers and by employee stock
plans), or (iii) the interested
stockholder transaction is
approved by the board of directors
and the affirmative vote of 66 2/3%
of the outstanding voting stock
held by disinterested stockholders
at an annual or special meeting.
Neither the certificate of
incorporation nor by-laws contain
a provision electing not to be
governed by this section of
Delaware law.
78
- NOVAMETRIX RESPIRONICS
----------------------------------------------------------------------------------------------------
Effect of Interested The certificate of incorporation However, in addition to otherwise
Stockholder also provides that certain applicable voting requirements, the
Transactions and Fair transactions with a related person certificate of incorporation
Price Provision, require the affirmative vote of the requires approval of any business
cont'd. holders of 80% of the outstanding combination between or otherwise
shares entitled to vote, unless such involving Respironics and an
transactions have the approval of a interested stockholder, (a person or
majority of the directors who are entity that owns 20% of the voting
not affiliated with the related stock or is an affiliate or director
person and were directors of Respironics) by one of the
immediately prior to the time the following:
related person became a related
person.
The board of directors has taken . A majority of the directors of
the necessary action to make the Respironics who are not
foregoing provisions of the affiliated with the interested
Delaware anti-takeover laws and stockholder and were
the certificate of incorporation directors immediately prior to
inapplicable to the merger. the time the interested
stockholder became an
interested stockholder; or
. (a) the holders of at least
66 2/3% of the voting power of
all then outstanding voting
stock, voting together as a
single class, and (b) the
holders of at least a majority
of the voting power of the
then outstanding shares of
voting stock which are not
beneficially owned by
interested stockholders,
voting together as a single
class.
The certificate of incorporation
defines business combinations to
include a merger, consolidation,
liquidation, dissolution,
recapitalization, reclassification,
share exchange, or any sale, lease,
mortgage, pledge, transfer or other
disposition by Respironics or any
subsidiary of 10% or more of
Respironics' total assets or the
issuance of securities having an
aggregate fair market. value of
10% or more of total assets.
79
- NOVEMETRIX RESPIRONICS
--------------------------------------------------------------------------------------------
Liability of Directors Delaware law allows a corporation Same as Novametrix.
to limit the personal liability of
directors with certain exceptions.
Delaware law allows a corporation
to limit in this manner the personal
liability of a director, except for
liability for (a) any breach of the
director's duty of loyalty to the
corporation or its stockholders, (b)
acts or omissions not in good faith
which involve intentional
misconduct or a knowing violation
of law, (c) an unlawful payment of
a dividend or an unlawful stock
purchase or redemption or (d) any
transaction from which the director
derived an improper personal
benefit.
The certificate of incorporation
provides that, to the fullest extent
permitted by Delaware law, no
director shall be personally liable
to the company or its stockholders
for monetary damages for breach
of fiduciary duty as a director.
--------------------------------------------------------------------------------------------
Indemnification of Under Delaware law, a corporation Same as Novametrix, except as
Directors and Officers generally may indemnify its noted below.
officers and directors for expenses,
judgments or settlements actually
and reasonably incurred by them in
connection with suits and other
legal proceedings if they acted in
good faith and in a manner they
reasonably believed to be in or not
opposed to the best interests of the
corporation and, with respect to
any criminal proceeding, had no
reasonable cause to believe their
conduct was unlawful. If the action
is brought by or in the right of the
corporation, Delaware law limits
indemnification to the expenses
(including attorneys' fees)
reasonably incurred and provides
that no such indemnification can
be made when the individual is
adjudged liable to the corporation
unless and only to the extent the
Delaware Court of Chancery
80
NOVEMETRIX RESPIRONICS
- ---------- -----------
-------------------------------------------------------------------------------------------------
Indemnification of deems such indemnification fair
Directors and and reasonable under the
Officers, cont'd. circumstances.
Under Delaware law, a corporation
may advance expenses to directors
and officers as long as any director
or officer receiving an advance
undertakes to repay the amounts
advanced if it is ultimately
determined that such director or
officer was not entitled to be
indemnified.
Novametrix provides
indemnification, to the fullest
extent permitted by applicable law
to any person who is or was a
director or officer of the company
for any liability and expense in
connection with any actual or
threatened claim, action, suit or
proceeding, whether civil or
criminal, administrative or
investigative (including, without
limitation, any action, suit or
proceeding by or in the right of the
company to procure a judgment in
its favor) by reason of the fact that
such person is or was a director or
officer of the company.
The certificate of incorporation The certificate of incorporation
permits advancement of expenses requires advancement of expenses
upon receipt by Novametrix of upon receipt by Respironics of
such a written undertaking to such a written undertaking to
repay. repay.
81
Stockholder Rights Plan
Both Novametrix and Respironics entered into separate rights plans with
Mellon Investor Services L.L.C. (formerly, ChaseMellon Shareholder Services,
L.L.C.), as rights agent. A summary of the material provisions of the rights
plans are set forth below. The summaries do not include a complete description
of all of the terms of the rights plans. We urge you to read carefully the
Novametrix and Respironics rights plans, copies of which will be sent to you
upon request. See "Where You Can Find More Information" on page 84.
Both of the rights agreements provide that the rights will not become
exercisable until the distribution date of such rights which is the earlier of:
. the tenth day following a public announcement that a person or group of
affiliated or associated persons have acquired beneficial ownership of
20% or more of the Novametrix or Respironics common stock then
outstanding; and
. the tenth day or a later date to be determined by the Novametrix or
Respironics board of directors following the commencement of, or
announcement, of an intention to make, a tender offer or exchange offer
that would result in a person becoming the beneficial owner of 20% or
more of the Novametrix or Respironics common stock then outstanding.
At any time prior to the close of business on the tenth day after the
acquisition by a person of beneficial ownership of 20% or more of the
outstanding shares of Respironics common stock, the Respironics board of
directors may redeem the Respironics rights in whole at a redemption price of
$.01 per Respironics right, subject to adjustment. At any time prior to the
acquisition by a person of beneficial ownership of 20% or more of the
outstanding shares of Novametrix common stock, the Novametrix board of
directors may redeem the Novametrix rights in whole at a redemption price of
$.01 per Novametrix right, subject to adjustment. Immediately upon any
redemption of the Novametrix or Respironics rights, the right to exercise the
rights will terminate and the only right of the holders of rights will be to
receive the redemption price.
The rights plans are both designed to protect the interests of Novametrix or
Respironics and their stockholders against coercive takeover tactics. The
rights plans may have the effect of deterring additional takeover proposals.
Novametrix. Under the 1999 Novametrix rights agreement, one right, referred
to as a Novametrix right, attached to each share of Novametrix common stock
outstanding and, when exercisable, entitles the registered holder to purchase
from Novametrix 1/100 of a share of Novametrix preferred stock at an initial
purchase price of $25, subject to customary antidilution adjustments. If
Novametrix is acquired in a merger or other business combination transaction
and Novametrix is not the surviving corporation after the rights are
exercisable, as well as in certain other circumstances involving the
acquisition of Novametrix shares, each holder of a Novametrix right has the
right to receive, upon payment of the purchase price per unit, Novametrix
common stock, or in certain circumstances the acquiror's common stock, having a
value equal to two times the purchase price.
In connection with the merger, the Novametrix rights agreement was amended
to exempt the merger and the completion of the transactions contemplated by the
merger agreement from the provisions of the rights plan.
At any time after the acquisition by a person of beneficial ownership of 20%
or more of the outstanding shares of Novametrix common stock and before such
person acquires 50%, the Novametrix board of directors may exchange the
Novametrix rights, in whole or in part, at an exchange ratio of one share of
Novametrix common stock, or 1/100 of a Novametrix preferred share, per
Novametrix right (subject to adjustment).
Until the Novametrix rights are exercisable,
. the Novametrix rights will be evidenced by Novametrix common stock
certificates and will be transferred only with such certificates;
82
. new certificates issued after December 15, 1999 have contained a
notation incorporating the Novametrix rights plan by reference; and
. the surrender for transfer of any certificates representing outstanding
Novametrix common stock will also constitute the transfer of the
Novametrix rights associated with the Novametrix common stock
represented by such certificates.
If not previously exercised, the Novametrix rights will expire in December,
2009, unless Novametrix earlier redeems or exchanges the Novametrix rights or
shortens or extends the expiration date.
Respironics. Under the 1996 Respironics rights plan, each Respironics right
entitles the registered holder of Respironics common stock to purchase from
Respironics 1/100 of a share (referred to as a "unit") of Respironics common
stock at a price of $110 per unit, subject to customary antidilution
adjustments. If Respironics is acquired in a merger or other business
combination transaction and Respironics is not the surviving corporation after
the rights are exercisable, as well as in certain other circumstances involving
the acquisition of Respironics shares, each holder of a Respironics right has
the right to receive, upon payment of the purchase price per unit, Respironics
common stock having a value equal to two times the purchase price.
The Respironics rights are attached to all certificates representing shares
of Respironics common stock, including those shares issued pursuant to the
merger agreement, and no separate certificates were distributed with
respect to any Respironics rights. The Respironics rights will separate from
the Respironics common stock on the day on which the rights become exercisable.
Until the Respironics rights are exercisable,
. the Respironics rights will be evidenced by Respironics common stock
certificates and will be transferred only with such certificates;
. new certificates issued after July 26, 1996 have contained a notation
incorporating the Respironics rights plan by reference; and
. the surrender for transfer of any certificates representing outstanding
Respironics common stock will also constitute the transfer of the
Respironics rights associated with the Respironics common stock
represented by such certificates.
Accordingly, each share of Respironics common stock issued in the merger
will have one Respironics right attached to it.
The Respironics rights will expire in July, 2006 unless earlier redeemed by
Respironics.
EXPERTS
The consolidated financial statements and schedule of Respironics appearing
in Respironics' Annual Report (Form 10-K) for the year ended June 30, 2001,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information with respect to Respironics for the three and six-month periods
ended December 31, 2001, incorporated by reference in this Registration
Statement (Form S-4), Ernst & Young LLP has reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report, included in Respironics, Inc.
and Subsidiaries' Quarterly Report on Form 10-Q for the three and six-month
periods ended December 31, 2001, and incorporated herein by reference, states
that they did not audit and they do not express
83
an opinion on that interim financial information. Accordingly, the degree of
reliance on their report on such information should be restricted considering
the limited nature of the review procedures applied. The independent auditors
are not subject to the liability provisions of Section 11 of the Securities Act
of 1933 (the "Act") for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Act.
The consolidated financial statements and schedule of Novametrix appearing
in its Annual Report (Form 10-K) for the year ended April 29, 2001, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the Respironics common stock offered hereby will be passed
upon for Respironics by Reed Smith LLP. Certain legal matters regarding the
U.S. federal income tax consequences of the merger will be passed upon for
Novametrix by Torys LLP and for Respironics by Reed Smith LLP.
SUBMISSION OF FUTURE NOVAMETRIX STOCKHOLDER PROPOSALS
If the merger becomes effective in accordance with the terms of the merger
agreement, Novametrix will not hold a 2002 annual meeting of stockholders
because Novametrix will have become a wholly-owned subsidiary of Respironics in
the merger. If the merger does not become effective the 2002 annual meeting of
stockholders will be held and Novametrix stockholders may propose matters to be
presented at the 2002 annual meeting of stockholders. Any stockholder proposal
intended for inclusion in the proxy materials for the 2002 annual meeting of
stockholders must be received by Novametrix no later than May 8, 2002,
addressed to the Corporate Secretary of Novametrix at the address on the front
cover of this proxy statement/prospectus. Stockholders submitting proposals are
urged to submit their proposals by certified mail, return receipt requested.
WHERE YOU CAN FIND MORE INFORMATION
Novametrix and Respironics file annual, quarterly and current reports, proxy
and registration statements and other information with the Securities and
Exchange Commission. You may read and copy any reports, statements or other
information that the companies file at the SEC's public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
SEC in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. The
public filings of Novametrix and Respironics are also available to the public
from commercial document retrieval services and at the Internet web site
maintained by the SEC at "http://www.sec.gov." Reports, proxy statements and
other information concerning Novametrix and Respironics also may be inspected
at the offices of the Nasdaq Stock Market.
Respironics has filed a registration statement on Form S-4 to register with
the SEC the shares of Respironics common stock to be issued to Novametrix
stockholders in the merger. This proxy statement/prospectus is a part of that
registration statement and constitutes a prospectus of Respironics and a proxy
statement of Novametrix
84
for purposes of its special meeting. As allowed by SEC rules, this proxy
statement/prospectus omits certain information contained in the registration
statement and the exhibits to the registration statement. Any statements
contained in this proxy statement/prospectus concerning the provisions of any
other document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the registration
statement or otherwise filed with the SEC. Each statement is qualified in its
entirety by such reference.
The SEC allows Novametrix and Respironics to "incorporate by reference"
information into this proxy statement/prospectus. This means that the companies
can disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
deemed to be part of this proxy statement/prospectus, except for any
information superseded by information contained directly in the proxy
statement/prospectus. This proxy statement/prospectus incorporates by reference
the documents set forth below that Novametrix and Respironics have previously
filed with the SEC. These documents contain important information about the
companies.
85
NOVAMETRIX SEC FILINGS
Novametrix's Filing With the SEC Period
-------------------------------- ------
Annual Report on Form 10-K Fiscal year ended April 29, 2001
Quarterly Report on Form 10-Q Fiscal quarter ended July 29, 2001
Fiscal quarter ended October 28, 2001
Current Report on Form 8-K Filed on December 26, 2001
The description of shares of Novametrix common stock in Novametrix's
registration statement on Form 10 dated July 24, 1979, including any amendment
or report filed with the SEC for the purpose of updating such description
RESPIRONICS SEC FILINGS
Respironics' Filing With the SEC Period
-------------------------------- ------
Annual Report on Form 10-K Fiscal year ended June 30, 2001
Quarterly Report on Form 10-Q Fiscal quarter ended September 30, 2001
Fiscal quarter ended December 31, 2001
Current Report on Form 8-K Filed on December 21, 2001
The description of shares of Respironics common stock set forth in Respironics'
registration statement on Form 8-A, filed on June 28, 1996, including any
amendment or report filed with the SEC for the purpose of updating such
description
Novametrix and Respironics incorporate by reference into this proxy
statement/prospectus additional documents that either company may file with the
SEC between the date of this proxy statement/prospectus and the date of the
special meeting. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well
as registration statements and proxy statements.
Novametrix has supplied all information contained or incorporated by
reference into this proxy statement/prospectus relating to Novametrix, and
Respironics has supplied all such information relating to Respironics.
You can obtain a copy of any Respironics document or any Novametrix document
incorporated by reference from the appropriate company except for the exhibits
to those documents. You may also obtain these documents from the SEC or through
the SEC's Internet web site described above. Documents incorporated by
reference are available from the companies without charge, excluding all
exhibits other than exhibits specifically incorporated by reference as exhibits
into this proxy statement/prospectus. You may obtain documents incorporated by
reference into this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
Respironics, Inc. Novametrix Medical Systems Inc.
1501 Ardmore Blvd. 5 Technology Drive
Pittsburgh, Pennsylvania 15221 Wallingford, Connecticut 06492
Attention: Dorita A. Pishko, Corporate Secretary Attention: Joseph A. Vincent, Corporate Secretary
Telephone (412) 731-2100 Telephone: (203) 265-7701
If you would like to request documents from either company, please do so by
April 2, 2002 to receive them before the Novametrix special meeting. If you
request any of these documents from us we will mail them to you by first-class
mail, or similar means.
You should rely only on the information contained or incorporated by
reference into this proxy statement/prospectus in voting your shares at the
Novametrix special meeting. Novametrix and Respironics have not authorized
anyone to provide you with information that is different from what is contained
in this proxy statement/prospectus. This proxy statement/prospectus is dated
March 6, 2002. You should not assume that the information contained in the
proxy statement/prospectus is accurate as of any other date, and neither the
mailing of this proxy statement/prospectus to Novametrix stockholders nor the
issuance of Respironics' securities in the merger will create any implication
to the contrary.
86
ANNEXES
Annex A Agreement and Plan of Merger
Annex B Opinion of SunTrust Capital Markets, Inc., through its SunTrust
Robinson Humphrey subsidiary
Annex C Form of Voting Agreement
87
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
by and between
RESPIRONICS HOLDINGS, INC.
and
NOVAMETRIX MEDICAL SYSTEMS INC.
including
GUARANTEE
of
RESPIRONICS, INC.
Dated as of December 17, 2001
================================================================================
TABLE OF CONTENTS
Page
----
Article I MERGER........................................................ 6
Section 1.01. The Merger............................................. 6
Section 1.02. Company Action......................................... 6
Section 1.03. Effect of the Merger................................... 6
Section 1.04. Certificate of Incorporation; Bylaws................... 7
Section 1.05. Directors and Officers................................. 7
Section 1.06. Effect on Capital Stock................................ 7
Section 1.07. Exchange of Certificates............................... 8
Section 1.08. No Further Ownership Rights in the Company Common Stock 10
Section 1.09. Tax Consequences....................................... 11
Section 1.10. Taking of Necessary Action; Further Action............. 11
Article II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 11
Section 2.01. Organization and Qualification; Subsidiaries........... 11
Section 2.02. Certificate of Incorporation and Bylaws................ 12
Section 2.03. Capitalization......................................... 12
Section 2.04. Authority Relative to this Agreement................... 13
Section 2.05. No Conflict; Required Filings and Consents............. 14
Section 2.06. Compliance; Permits.................................... 16
Section 2.07. SEC Filings; Financial Statements...................... 16
Section 2.08. Absence of Certain Changes or Events................... 17
Section 2.09. No Undisclosed Liabilities............................. 17
Section 2.10. Absence of Litigation.................................. 17
Section 2.11. Employee Benefit Plans; Employment Agreements.......... 18
Section 2.12. Employment and Labor Matters........................... 20
Section 2.13. Registration Statement; Proxy Statement/Prospectus..... 21
Section 2.14. Restrictions on Business Activities.................... 21
Section 2.15. Title to Property...................................... 22
Section 2.16. Taxes.................................................. 22
Section 2.17. Environmental Matters.................................. 23
Section 2.18. Brokers................................................ 25
Section 2.19. Intellectual Property.................................. 25
Section 2.20. Interested Party Transactions.......................... 27
Section 2.21. Insurance.............................................. 27
Section 2.22. Product Liability and Recalls.......................... 27
Section 2.23. Opinion of Company Financial Advisor................... 27
Section 2.24. FDA and FTC Compliance................................. 27
Article III REPRESENTATIONS AND WARRANTIES OF ACQUIROR.................. 28
Section 3.01. Organization and Qualification; Subsidiaries........... 28
Section 3.02. Capitalization......................................... 28
Section 3.03. Authority Relative to this Agreement................... 29
Section 3.04. No Conflicts; Required Filings and Consents............ 29
Section 3.05. Compliance............................................. 30
Section 3.06. SEC Filings; Financial Statements...................... 31
Section 3.07. Absence of Certain Changes or Events................... 31
Section 3.08. No Undisclosed Liabilities............................. 31
Section 3.09. Absence of Litigation.................................. 32
Section 3.10. Registration Statement; Proxy Statement/Prospectus..... 32
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Page
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Section 3.11. Brokers........................................................ 32
Section 3.12. Ownership of Acquiror; No Prior Activities..................... 32
Section 3.13. Ownership Interest in the Company.............................. 33
Article IV CONDUCT OF BUSINESS PENDING THE MERGER............................... 33
Section 4.01. Conduct of Business by the Company Pending the Merger.......... 33
Section 4.02. No Solicitation................................................ 35
Section 4.03. Conduct of Business by Parent Pending the Merger............... 37
Article V ADDITIONAL AGREEMENT................................................. 38
Section 5.01. Stockholder Approval; Preparation of Registration Statement and
Proxy Statement/Prospectus..................................... 38
Section 5.02. Company Stockholders Meeting................................... 39
Section 5.03. Access to Information; Confidentiality......................... 40
Section 5.04. Consents; Approvals............................................ 40
Section 5.05. Agreements with Respect to Affiliates.......................... 41
Section 5.06. Indemnification and Insurance.................................. 41
Section 5.07. Notification of Certain Matters................................ 42
Section 5.08. Further Action/Tax Treatment................................... 43
Section 5.09. Public Announcements........................................... 43
Section 5.10. Shares of the Parent Common Stock.............................. 43
Section 5.11. Conveyance Taxes............................................... 44
Section 5.12. Stock Incentive Plans; Other Programs.......................... 44
Section 5.13. Certain Employee Benefits...................................... 45
Section 5.14. Accountant's Letters........................................... 46
Section 5.15. Compliance with State Property Transfer Statutes............... 46
Section 5.16. Cooperation with Phase I Survey................................ 46
Article VI CONDITIONS TO THE MERGER............................................. 46
Section 6.01. Conditions to Obligation of Each Party to Effect the Merger.... 46
Section 6.02. Acquiror Conditions............................................ 47
Section 6.03. Company Conditions............................................. 48
Article VII TERMINATION......................................................... 49
Section 7.01. Termination.................................................... 49
Section 7.02. Effect of Termination.......................................... 50
Section 7.03. Parent Fee..................................................... 51
Article VIII GENERAL PROVISIONS................................................. 52
Section 8.01. Effectiveness of Representations, Warranties and Agreements.... 52
Section 8.02. Notices........................................................ 52
Section 8.03. Certain Definitions............................................ 53
Section 8.04. Amendment...................................................... 54
Section 8.05. Waiver......................................................... 54
Section 8.06. Headings....................................................... 54
Section 8.07. Severability................................................... 54
Section 8.08. Entire Agreement............................................... 54
Section 8.09. Assignment..................................................... 55
Section 8.10. Parties in Interest............................................ 55
Section 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative.......... 55
Section 8.12. Governing Law; Jurisdiction.................................... 55
Section 8.13. Counterparts................................................... 55
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Section 8.14. WAIVER OF JURY TRIAL.... 55
Section 8.15. Performance of Guarantee 56
Section 8.16. Enforcement............. 56
GUARANTEE
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 17, 2001 (this
"Agreement"), by and between RESPIRONICS HOLDINGS, INC. ("Acquiror"), a
Delaware corporation and a direct, wholly-owned subsidiary of RESPIRONICS, INC.
("Parent"), a Delaware corporation, and NOVAMETRIX MEDICAL SYSTEMS INC., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Acquiror, Parent and the
Company have approved this Agreement, and declared that it is advisable that
Acquiror merge with and into the Company (the "Merger"), pursuant to and upon
the terms and subject to the conditions of this Agreement and in accordance
with the applicable provisions of the Delaware General Corporation Law
("Delaware Law"); and that the Merger, upon the terms and subject to the
conditions set forth in this Agreement, would be fair to and in the best
interest of their respective stockholders;
WHEREAS, Acquiror and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Sections 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder, and that the Merger and
other transactions contemplated by this Agreement be undertaken pursuant to
such plan. For accounting purposes, the Merger is intended to be accounted for
as a "purchase" under United States generally accepted accounting principles
("GAAP");
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to the Company's willingness to enter into this
Agreement, Parent has agreed fully and unconditionally to guarantee all the
representations, warranties, covenants, agreements and other obligations of
Acquiror in this Agreement (the "Guarantee"); and
WHEREAS, the Company and Acquiror desire to make certain representations,
warranties and agreements in connection with, and establish various conditions
precedent to, the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements hereinafter set forth, and intending to be
legally bound hereby the parties hereto agree as follows:
Definitions:
"Acquiror" is defined in the preamble.
"Acquiror Common Stock" is defined in Section 1.06(e).
"Acquisition Proposal" is defined in Section 4.02(a).
"Adverse Regulatory Condition Notice" is defined in Section 5.07.
"Adjusted Option" is defined in Section 5.12(a).
"Adjusted Warrant" is defined in Section 5.12(e).
"Affiliate Plan" is defined in Section 2.11(a).
"affiliates" is defined in Section 8.03(a).
"Agreement" is defined in the preamble.
"Alternative Transaction" is defined in Section 4.02(a).
"business day" is defined in Section 8.03(b).
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"CERCLA" is defined in Section 2.17(f).
"Certificates" is defined in Section 1.07(c).
"Certificate of Merger" is defined in Section 1.01.
"Class B Warrants" is defined in Section 2.03(a).
"Closing" is defined in Section 1.01.
"Closing Date" is defined in Section 1.01.
"COBRA" is defined in Section 2.11(b).
"Code" is defined in the recitals.
"Company" is defined in the preamble.
"Company Affiliates" is defined in Section 5.05.
"Company Agreements" is defined in Section 2.05(a).
"Company Business Combination" is defined in Section 7.03.
"Company Charter Documents" is defined in Section 2.02.
"Company Common Stock" is defined in Section 1.01.
"Company Disclosure Schedule" is defined in Section 2.01(a).
"Company Employee" is defined in Section 5.13(a).
"Company Employee Plans" is defined in Section 2.11(a).
"Company Financial Advisor" is defined in Section 1.02.
"Company Intellectual Property Assets" is defined in Section 2.19(a).
"Company Permits" is defined in Section 2.06(c).
"Company Preferred Stock" is defined in Section 2.03(a).
"Company Rights" is defined in Section 2.03(a).
"Company Stock Option Plans" is defined in Section 1.06(d).
"Company Stock Options" is defined in Section 1.06(d).
"Company Stock Purchase Plan" is defined in Section 1.06(d).
"Company Stockholders Meeting" is defined in Section 2.04(c).
"Company Warrant" is defined in Section 5.12(e).
"Confidentiality Agreement" is defined in Section 5.03(c).
"control" is defined in Section 8.03(c).
"Covered Persons" is defined in Section 5.06(c).
"Determination Date" is defined in Section 1.06(b).
"D&O Insurance" is defined in Section 5.06(d).
"Delaware Law" is defined in the recitals.
"DOL" is defined in Section 2.11(a).
"dollars" is defined in Section 8.03(d).
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"Effective Time" is defined in Section 1.01.
"Environmental Claim" is defined in Section 2.17(f).
"Environmental, Health and Safety Laws" is defined in Section 2.05(c).
"Environmental Laws" is defined in Section 2.17(f).
"ERISA" is defined in Section 2.11(a).
"Ernst & Young" is defined in Section 5.14.
"Exchange Act" is defined in Section 2.05(a).
"Exchange Agent" is defined in Section 1.07(a).
"Exchange Fund" is defined in Section 1.07(b).
"Exchange Ratio" is defined in Section 1.01.
"FDA" is defined in Section 2.24.
"FTC" is defined in Section 2.24.
"GAAP" is defined in the recitals.
"Governmental Authority" is defined in Section 2.05(c).
"Guarantee" is defined in the recitals.
"HSR Act" is defined in Section 2.05(c).
"Indemnified Parties" is defined in Section 5.06(b).
"Intellectual Property Assets" is defined in Section 2.19(a).
"IRS" is defined in Section 2.11(b).
"knowledge" is defined in Section 8.03(e).
"Material Adverse Effect" is defined in Section 2.01(b).
"Material Agreement" is defined in Section 3.04(b).
"Materials of Environmental Concern" is defined in Section 2.17(f).
"Merger" is defined in the recitals.
"Merger Consideration" is defined in Section 1.06(a).
"NASD" is defined in Section 1.06(b).
"Nasdaq" is defined in Section 1.06(b).
"Non-Competition Agreement" is defined in Section 2.11(h).
"Non-U.S. Monopoly Laws" is defined in Section 2.05(c).
"OSHA" is defined in Section 2.17(f).
"Other Warrants" is defined in Section 2.03(a).
"Parent" is defined in the preamble.
"Parent 2001 Form 10-K" is defined in Section 3.01(b).
"Parent Charter Documents" is defined in Section 3.01(a).
"Parent Common Stock" is defined in Section 1.01.
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"Parent Fee" is defined in Section 7.03.
"Parent Preferred Stock" is defined in Section 3.02(a).
"Parent SEC Documents" is defined in Section 3.05(a).
"Parent Share Price" is defined in Section 1.06(b).
"PCBs" is defined in Section 2.17(d).
"person" is defined in Section 8.03(f).
"Post 1996 Company SEC Documents" is defined in Section 2.07.
"Proxy Statement/Prospectus" is defined in Section 2.13(a).
"RCRA" is defined in Section 2.17(f).
"Regulatory Condition or Requirement" is defined in Section 6.01(c).
"Recommendations" is defined in Section 1.02(a).
"Reed Smith" is defined in Section 1.01.
"Registration Statement" is defined in Section 5.01(a).
"Restricted Period" is defined in Section 5.05.
"Rights Agreement" is defined in Section 2.03(a).
"SEC" is defined in Section 2.05(a).
"Securities Act" is defined in Section 5.01(a).
"Shares" is defined in the Section 1.01.
"Significant Company Subsidiary" is defined in Section 7.03(b).
"subsidiary or subsidiaries" is defined in Section 8.03(g).
"Subsidiary Documents" is defined in Section 2.02.
"Superior Proposal" is defined in Section 4.02(a).
"Surviving Corporation" is defined in Section 1.01.
"Tax" is defined in Section 2.16(d).
"Tax Return" is defined in Section 2.16(d).
"Third Party" is defined in Section 4.02(a).
"Third Party Intellectual Property Assets" is defined in Section 2.19(c).
"Torys" is defined in Section 4.02(a).
"TSCA" is defined in Section 2.17(f).
"Voting Debt" is defined in Section 2.03(a).
"2001 Company Balance Sheet" is defined in Section 2.09.
"2001 Parent Balance Sheet" is defined in Section 3.08.
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Article I
MERGER
SECTION 1.01. The Merger.
Upon the terms and subject to the conditions contained in this Agreement,
and in accordance with the Delaware Law, at the Effective Time (as herein
defined), (i) Acquiror will merge with and into the Company, and the Company
shall continue as the surviving corporation (the "Surviving Corporation") in
such merger. The Merger shall become effective (the "Effective Time") at the
time of filing of, or at such later time specified in, a certificate of merger
(the "Certificate of Merger"), in the form required by and properly executed in
accordance with Delaware Law, filed with the Secretary of State of the State of
Delaware, in accordance with the provisions of Section 251 of Delaware Law. In
the Merger, (a) each outstanding share of Common Stock, par value $0.01 per
share ("Company Common Stock") of the Company (the "Shares", which term also
refers to and includes, unless the context otherwise requires, the associated
Company Rights as defined in Section 2.03), will be converted into shares of
Common Stock, par value $0.01 per share, of Parent ("Parent Common Stock")
(with cash in lieu of any fractional share) as provided in this Agreement (the
number of shares of Parent Common Stock into which shares of Company Common
Stock will be converted being referred to as the "Exchange Ratio") and (b) each
outstanding share of Common Stock, par value $0.01 per share, of Acquiror
("Acquiror Common Stock") will be converted into one share of Common Stock, par
value $0.01 per share, of the Surviving Corporation, which shall be held by
Parent.
The closing of the Merger (the "Closing") shall take place at the offices of
Reed Smith LLP ("Reed Smith"), 435 Sixth Avenue, Pittsburgh, PA 15219-1886, at
a time and date to be specified by the parties, which shall be no later than
the third business day after the satisfaction or waiver of the conditions set
forth in Article VI, or at such other time, date and location as the parties
hereto agree in writing (the "Closing Date").
SECTION 1.02. Company Action.
(a) The Company hereby represents that its Board of Directors, at a meeting
duly called and held, has by unanimous vote of the directors participating
therein (such directors constituting a quorum under the Company's Bylaws) (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are advisable and are fair to and in the best interest of
the Company's stockholders, (ii) approved this Agreement and the transactions
and other matters contemplated hereby, including the Merger, in accordance with
the requirements of the Delaware Law, and (iii) resolved to recommend approval
of the Merger and adoption of this Agreement by the Company's stockholders (the
"Recommendations"). The Company further represents that SunTrust Robinson
Humphrey Capital Markets (the "Company Financial Advisor") has rendered to the
Company's Board of Directors its opinion that, as of the date of such opinion,
the Exchange Ratio in the Merger is fair to such stockholders from a financial
point of view; and
(b) Each of the executive officers and directors of the Company has agreed
to vote his or her shares of Company Common Stock in favor of the Merger
pursuant to agreements entered into by each executive officer and director and
delivered to Acquiror contemporaneously with execution and delivery of this
Agreement.
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the Delaware Law. Without limiting the generality of the foregoing, at the
Effective Time, the Surviving Corporation shall possess all the property,
rights, privileges, powers and franchises of Acquiror and the Company, and
shall be subject to all debts, liabilities, restrictions, disabilities and
duties of Acquiror and the Company.
SECTION 1.04. Certificate of Incorporation; Bylaws. (a) At the Effective
Time, the Certificate of Incorporation of Acquiror, which shall comply with
Section 5.06, as in effect immediately prior to the Effective
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Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended, as provided by the Delaware Law and such Certificate
of Incorporation, except that the name of the Surviving Corporation shall be
changed to "RESPIRONICS NOVAMETRIX, INC."
(b) At the Effective Time, the Bylaws of Acquiror, which shall comply with
Section 5.06, as in effect immediately prior to the Effective Time, shall be
the Bylaws of the Surviving Corporation until thereafter amended, as provided
by the Delaware Law and such Bylaws.
SECTION 1.05. Directors and Officers. The directors of Acquiror
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation, and the officers of
the Acquiror immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified. Certain officers of the
Company shall be appointed officers of the Surviving Corporation, effective at
the Effective Time, to the extent provided in the Employment Agreements
identified in Section 6.02(c) of this Agreement, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 1.06. Effect on Capital Stock.
Subject to the terms and conditions of this Agreement, at the Effective
Time, by virtue of the Merger and without any action on the part of Acquiror,
the Company or the holders of the capital stock of the Company, Acquiror or
Parent, the following will occur:
(a) Conversion of the Company Common Stock. Each share of the Company
Common Stock issued and outstanding immediately prior to the Effective Time,
other than any shares of the Company Common Stock to be canceled pursuant to
Section 1.06(c), will be canceled and extinguished and automatically
converted (subject to Section 1.07(e)) into the right to receive the number
of the shares of the Parent Common Stock equal to the Exchange Ratio
(together with the cash in lieu of fractional shares of the Parent Common
Stock as specified below, the "Merger Consideration"). No fraction of a
Parent Common Share will be issued by virtue of the Merger, but in lieu
thereof, a cash payment shall be made pursuant to Section 1.07(e).
(b) Exchange Ratio. The Exchange Ratio shall be calculated on the
business day which is three (3) business days prior to the Closing Date
("Determination Date"). The Exchange Ratio shall be based on the weighted
average of the selling prices of a single share of Parent Common Stock as
reported on the Nasdaq National Market System ("Nasdaq") of the National
Association of Securities Dealers, Inc. ("NASD") for a period consisting of
20 consecutive trading days ending on the trading day prior to the
Determination Date, in each case as reported on Nasdaq ("Parent Share
Price").
(i) if the Parent Share Price as calculated on the Determination Date
equals or exceeds $32.00 per share but is equal to or below $35.00 per
share, the Exchange Ratio shall be 0.25;
(ii) if the Parent Share Price as calculated on the Determination
Date exceeds $35.00 per share, the Exchange Ratio shall be calculated by
dividing $8.75 by the Parent Share Price;
(iii) if the Parent Share Price as calculated on the Determination
Date equals or exceeds $30.00 per share but is equal to or below $31.99
per share, the Exchange Ratio shall be calculated by dividing $8.00 by
the Parent Share Price; and
(iv) if the Parent Share Price as calculated on the Determination
Date is below $30.00 per share, the Exchange Ratio shall be 0.2667,
subject to the Company's right to terminate this Agreement as more fully
described in Section 7.01(g) hereof.
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(c) Cancellation of the Company-Owned and Acquiror-Owned Stock. Each
share of the Company Common Stock, if any, held by the Company or any
subsidiary of the Company or owned by Parent or Acquiror immediately prior
to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(d) Stock Incentive Plans; Stock Purchase Plans; Warrants. At the
Effective Time, (i) all options or rights ("Company Stock Options") to
purchase Company Common Stock then outstanding, whether under (A) the
Company's 1990 Stock Option Plan, (B) the Company's 1994 Stock Option Plan,
(C) the Company's 1997 Long Term Incentive Plan, (D) the Company's 2000 Long
Term Incentive Plan, (E) the Company's 1999 Incentive Plan, or (F) any other
stock option or stock plan or agreement of the Company (collectively, the
"Company Stock Option Plans"), (ii) all rights outstanding under any of the
Company's stock purchase plans including, without limitation, the Company's
Employee Stock Purchase Plan (the "Company Stock Purchase Plan"), and (iii)
all warrants to purchase Company Common Stock, shall be treated in
accordance with Section 5.12 of this Agreement.
(e) Capital Stock of Acquiror. Each share of common stock, par value
$0.01 per share, of Acquiror (the "Acquiror Common Stock") issued and
outstanding immediately prior to the Effective Time shall constitute one
validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of the Surviving Corporation. Following the Effective
Time, each certificate evidencing ownership of shares of Acquiror Common
Stock shall evidence ownership of such shares of capital stock of the
Surviving Corporation.
(f) Adjustments to Exchange Ratio. If, during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Parent or the Company shall occur, including by
reason of any reclassification, recapitalization, redenomination of share
capital, stock split, reverse stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date
during such period, the Parent Share Price, the Exchange Ratio, the Merger
Consideration and any other amounts payable or to be delivered pursuant to
the Merger or otherwise pursuant to this Agreement shall be appropriately
adjusted.
SECTION 1.07. Exchange of Certificates.
(a) Exchange Agent. Mellon Investor Services, L.L.C. shall act as the
exchange agent (the "Exchange Agent") in the Merger.
(b) Exchange Fund. As necessary from time to time following the Effective
Time, Acquiror shall make available to the Exchange Agent, as needed for
exchange in accordance with this Article I, (i) the shares of the Parent Common
Stock required for exchange of the Shares in the Merger and (ii) an amount of
cash sufficient to permit the Exchange Agent to make the necessary payments of
cash in lieu of fractional shares of the Parent Common Stock in accordance with
Section 1.07(e) (such cash in lieu of fractional shares and the shares of the
Parent Common Stock, together with any dividends or distributions with respect
thereto, are hereinafter referred to as the "Exchange Fund").
(c) Exchange Procedures. Promptly after the Effective Time, Acquiror shall
instruct the Exchange Agent to mail to each holder of record, as of the
Effective Time, of a certificate or certificates ("Certificates") which
immediately prior to the Effective Time represented outstanding shares of the
Company Common Stock whose shares were converted into the right to receive the
Parent Common Stock pursuant to Section 1.06, (i) a letter of transmittal in
customary form (that shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall contain such other customary
provisions as Acquiror may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the shares of the
Parent Common Stock and cash in lieu of fractional shares. Upon surrender of
Certificates for cancellation to the Exchange Agent together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such
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Certificates shall be entitled to receive in exchange therefor solely that
number of whole shares of the Parent Common Stock into which their shares of
the Company Common Stock were converted at the Effective Time pursuant to
Section 1.06, cash in lieu of fractional shares that such holders have the
right to receive pursuant to Section 1.07(e) and any dividends or distributions
payable pursuant to Section 1.07(d), and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time, for all corporate purposes, to
evidence only the right to receive the whole number of shares of the Parent
Common Stock into which such shares of the Company Common Stock shall have been
so converted and the right to receive an amount in cash in lieu of any
fractional shares in accordance with Section 1.07(e) and any dividends or
distributions payable pursuant to Section 1.07(d). No interest will be paid or
accrued on any cash in lieu of fractional shares of the Parent Common Stock or
on any unpaid dividends or distributions payable to holders of Certificates. In
the event of a transfer of ownership of shares of the Company Common Stock that
is not registered in the transfer records of the Company, the proper whole
number of shares of the Parent Common Stock may be issued to a transferee if
the Certificate representing such shares of the Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made with respect to the Parent Common Stock with a
record date after the Effective Time will be paid to the holders of any
unsurrendered Certificates with respect to the Parent Common Stock represented
thereby until the holders of record of such Certificates shall surrender such
Certificates in accordance with Section 1.07(c). Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
that whole number of shares of the Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, cash in lieu of
fractional shares of the Parent Common Stock pursuant to Section 1.07(e), the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of the Parent
Common Stock and, at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender with respect to such
whole shares of the Parent Common Stock.
(e) Fractional Shares. No certificate or scrip representing fractional
shares of the Parent Common Stock will be issued in the Merger upon the
surrender for exchange of Certificates, and such fractional shares of the
Parent Common Stock will not entitle the owner thereof to vote or to any rights
of a holder of the shares of the Parent Common Stock. In lieu of any such
fractional shares of the Parent Common Stock, each holder of Certificates who
would otherwise have been entitled to a fraction of a Parent Common Share in
exchange for such Certificate (after taking into account all Certificates
delivered by such holder) pursuant to this Section shall receive from the
Exchange Agent, as applicable, a cash payment in lieu of such fractional Parent
Common Share, determined by multiplying (A) the fractional share interest to
which such holder would otherwise be entitled by (B) the Parent Share Price.
(f) Required Withholding. The Exchange Agent shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable pursuant
to this Agreement, and from any dividends or distributions payable pursuant to
Section 1.07(d), to any holder or former holder of the Company Common Stock
such amounts as may be required to be deducted or withheld therefrom under the
Code or under any provision of state, local or foreign tax law or under any
other applicable law. To the extent such amounts are so deducted or withheld,
such amounts shall be treated for all purposes under this Agreement as having
been paid to the person to whom such amounts would otherwise have been paid.
(g) Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, solely that
whole number of shares of the Parent Common Stock into which the shares of the
Company Common Stock represented by such Certificates were converted pursuant
to Section 1.06, cash in lieu of fractional shares of the Parent Common Stock,
if any, as may be required pursuant to Section 1.07(e) and any dividends or
distributions payable pursuant to Section 1.07(d);
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provided, however, that Acquiror may, in its discretion and as a condition
precedent to the delivery of any Parent Common Stock, cash and other
distributions, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, Acquiror, the Surviving Corporation
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
(h) No Liability. Notwithstanding anything to the contrary in this Section
1.07, neither the Exchange Agent, Parent, Acquiror, the Surviving Corporation
nor their respective affiliates shall be liable to a holder of shares of the
Parent Common Stock or Company Common Stock for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(i) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for six months
after the Effective Time shall be delivered to Acquiror, upon demand, and any
holders of Company Common Stock who have not theretofore complied with the
provisions of this Section 1.07 shall thereafter look only to Acquiror for
shares of the Parent Common Stock, any cash in lieu of fractional shares of the
Parent Common Stock to which they are entitled pursuant to Section 1.07(e) and
any dividends or other distributions with respect to shares of the Parent
Common Stock to which they are entitled pursuant to Section 1.07(d), in each
case, without any interest thereon.
SECTION 1.08. No Further Ownership Rights in the Company Common Stock.
All shares of the Parent Common Stock issued in accordance with the terms
hereof (including any cash paid in respect thereof pursuant to Sections 1.07(d)
and (e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to shares of Company Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
SECTION 1.09. Tax Consequences.
It is intended by the parties hereto that the Merger shall constitute a
"reorganization" within the meaning of Sections 368(a) of the Code. The parties
hereto adopt this Agreement as a "plan of reorganization" within the meaning of
sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
SECTION 1.10. Taking of Necessary Action; Further Action.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Acquiror, the
officers and directors of the Company, Acquiror and the Surviving Corporation
will take all such lawful and necessary or desirable action in the name of the
Company or Acquiror.
Article II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror as follows:
SECTION 2.01. Organization and Qualification; Subsidiaries.
(a) Each of the Company and its subsidiaries is an entity duly organized,
validly existing and (to the extent the concept of good standing exists in the
applicable jurisdiction) in good standing under the laws of the
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jurisdiction of its organization and has the requisite corporate or other power
and authority necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now being
conducted, except where the failure to have such other power or authority would
not reasonably be expected to have a Material Adverse Effect. Each of the
Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature
of its activities makes such qualification or licensing necessary, except for
such failures to be so duly qualified or licensed and in good standing that
would not reasonably be expected to have a Material Adverse Effect. A true and
complete list of all subsidiaries of the Company together with the jurisdiction
of organization of each such subsidiary and the percentage of each such
subsidiary's outstanding capital stock owned by the Company or another
subsidiary of the Company is contained in Section 2.01 of the written
disclosure schedule previously initialed on behalf of the Company and the
Acquiror (the "Company Disclosure Schedule"). Except as set forth in Section
2.01 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any equity or
similar interest in or is the general or limited partner of, any corporation,
partnership, joint venture or other business association or entity (other than
its wholly-owned subsidiaries), (i) with respect to which interest the Company
or a subsidiary has invested (and currently owns) or is required to invest
$50,000 or more, or (ii) which is a publicly-traded entity unless such interest
is held for investment by the Company or its subsidiary and comprises less than
five percent of the outstanding stock of such entity.
(b) "Material Adverse Effect," when used in connection with the Company or
any of its subsidiaries or Parent or any of its Subsidiaries, as the case may
be, means any change, effect, development or circumstance that is materially
adverse to the business, assets (including intangible assets), financial
condition, results of operations or prospects of the Company and its
subsidiaries or Parent and its subsidiaries, as the case may be, in each case
taken as a whole; provided, however, that the following shall be excluded from
the definition of Material Adverse Effect and from any determination as to
whether a Material Adverse Effect has occurred or may occur: changes, effects,
developments or circumstances (i) affecting (A) the medical equipment or
healthcare industries generally, (B) the United States securities markets
generally or (C) economic, regulatory, or political conditions generally, or
(ii) arising from or relating to this Agreement, the transactions contemplated
hereby or the announcement hereof or thereof, including, without limitation,
except as set forth in Section 2.01(b) of the Company Disclosure Schedule, any
effects on customers and suppliers, but excluding any effects on personnel.
SECTION 2.02. Certificate of Incorporation and Bylaws.
The Company has heretofore made available to Acquiror a complete and correct
copy of its Certificate of Incorporation and Bylaws as amended to date (the
"Company Charter Documents"), and the certificates of incorporation and bylaws
(or equivalent organizational documents) as amended to date of each of its
subsidiaries (the "Subsidiary Documents"). All such Company Charter Documents
and Subsidiary Documents are in full force and effect, except in the case of
Subsidiary Documents where the failure to be in force and effect would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Neither the Company nor any of its subsidiaries is in violation
of any of the provisions of its Certificate of Incorporation or Bylaws or
equivalent organizational documents, except for violations of the documents
which do not and are not reasonably likely to materially interfere with the
operations of such entity.
SECTION 2.03. Capitalization.
(a) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock, of
which 90,000 shares have been designated as Series A Preferred Stock, par value
$1.00 per share, and 120,000 shares have been designated Series B Preferred
Stock, par value $1.00 per share (collectively, the "Company Preferred Stock").
As of November 16, 2001, (i) 8,772,616 shares of Company Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable (excluding treasury shares which are issued but not outstanding,
all of which are not entitled to
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vote), and none of which has been issued in violation of preemptive or similar
rights, (ii) 1,662,950 shares of Company Common Stock were reserved for
existing grants and 317,004 shares of Company Common Stock were reserved for
future grants pursuant to the Company Stock Option Plans, (iii) 77,270 shares
of Company Common Stock were reserved and available for future issuance
pursuant to the Company Stock Purchase Plan, (iv) 566,735 shares of Company
Common Stock were reserved for issuance upon exercise of the Company's Class B
Warrants (the "Class B Warrants"), and (v) 358,179 shares of Company Common
Stock were reserved for issuance upon exercise of the Company's other
outstanding warrants to purchase Company Common Stock (the "Other Warrants").
As of November 16, 2001, there were no outstanding shares of Company Preferred
Stock. 90,000 shares of Series A Preferred Stock are reserved for issuance upon
exercise of the rights (the "Company Rights" or, individually, a "Company
Right") distributed in connection with that certain Rights Agreement dated as
of December 29, 1999 (the "Rights Agreement"). As of November 16, 2001, no
shares of Company Common Stock, Class B Warrants, or Other Warrants were held
by subsidiaries of the Company. Except as set forth in Section 2.03 of the
Company Disclosure Schedule, no change in such capitalization has occurred
since November 16, 2001 except for changes resulting from the exercise or
termination of stock options which were outstanding under the Company Stock
Option Plans and exercisable as of November 16, 2001 (or were outstanding under
the Company Stock Option Plans as of November 16, 2001 and became exercisable
in accordance with their terms thereafter), from the issuance of shares of the
Company Common Stock under the Company Stock Purchase Plan, pursuant to the
current offering period under such plan ending on December 31, 2001 and until
the suspension of such plan as provided in Section 5.12(d), from the exercise
of the Class B Warrants or the Other Warrants, or transactions permitted by
Section 4.01. Except as set forth in this Section 2.03 or Section 2.11 or in
Section 2.03 or Section 2.11 of the Company Disclosure Schedule and except for
this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character binding on the Company relating to
the issued or unissued capital stock of the Company or obligating the Company
to issue or sell any shares of capital stock of, or other equity interests in,
the Company. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable and will not be issued in
violation of preemptive or similar rights. There are no bonds, debentures,
notes or other indebtedness having voting rights (or convertible into
securities having such rights) ("Voting Debt") of the Company or any of its
subsidiaries issued and outstanding.
(b) Except as set forth in Section 2.03 of the Company Disclosure Schedule,
there are no obligations, contingent or otherwise, of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of the
Company Common Stock or the capital stock of any subsidiary. Except as set
forth in Section 2.03 of the Company Disclosure Schedule, there are no
obligations, contingent or otherwise, of the Company or any of its subsidiaries
to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such subsidiary or any other entity other
than guarantees of obligations of subsidiaries and intercompany book entry
transactions, in either case entered into in the ordinary course of business.
Except as set forth in Sections 2.01 or 2.03 of the Company Disclosure
Schedule, (i) all of the outstanding shares of capital stock (other than
directors' qualifying shares) of each of the Company's subsidiaries are duly
authorized, validly issued, fully paid and nonassessable, and (ii) all such
shares (other than directors' qualifying shares and a de minimis number of
shares owned by employees of such subsidiaries) are owned by the Company or
another subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations on the Company's voting rights, charges or
other encumbrances of any nature whatsoever. Except as set forth in Section
2.01, this Section 2.03 or Section 2.11 or in Section 2.03 or Section 2.11 of
the Company Disclosure Schedule and except for this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character binding on the Company's subsidiaries relating to the issued or
unissued capital stock of the Company's subsidiaries or obligating the
Company's subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, the Company's subsidiaries.
SECTION 2.04. Authority Relative to this Agreement.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and, subject to obtaining the necessary stockholder
approval of the Merger and adoption of this Agreement, to
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perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action,
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than the requisite approval of the Merger and adoption of this Agreement
by the Company's stockholders in accordance with Delaware Law and the Company
Charter Documents and the filing and recording of appropriate merger documents
as required by the Delaware Law). The affirmative vote of the holders of a
majority of the outstanding shares of the Company Common Stock is the only vote
of the holders of any class or series of the Company's capital stock necessary
to adopt this Agreement and the Merger.
(b) Assuming the accuracy of the representations and warranties in Section
3.13, the provisions of Section 203 of the Delaware Law and Article Twelfth of
the Company's Certificate of Incorporation will not apply to the Merger. No
other "fair price," "merger moratorium," "control share acquisition" or other
similar anti-takeover statute or regulation applies or purports to apply to
this Agreement or the Merger.
(c) As of the date hereof, the Board of Directors of the Company has by a
unanimous vote of those directors present (such directors constituting a quorum
under the Company's Bylaws) (i) determined that it is advisable and in the best
interest of the Company's stockholders for the Company to enter into this
Agreement and to consummate the Merger upon the terms and subject to the
conditions of this Agreement, (ii) approved this Agreement and the transactions
contemplated hereby in accordance with the applicable provisions of the
Delaware Law and the Company Charter Documents, (iii) authorized the
performance by the Company of this Agreement subject to such stockholder
approval as contemplated in Section 2.04(a), and (iv) recommended the approval
of the Merger and adoption of this Agreement by holders of the Company Common
Stock and directed that this Agreement be submitted for consideration by the
Company's stockholders at a meeting of the stockholders of the Company to
consider approval of the Merger and adoption of this Agreement (the "Company
Stockholders Meeting"). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Acquiror and the Parent of this Agreement and the Guarantee hereof,
respectively, this Agreement constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law).
(d) The Board of Directors of the Company has taken all actions necessary to
cause the Rights Agreement to be ineffective and not applicable as to the
Merger and any other transactions described in this Agreement. The execution of
this Agreement does not, and the consummation of the Merger and the other
transactions contemplated hereby will not, result in the grant of any rights to
any person under the Rights Agreement, or enable or require any outstanding
rights to be exercised, distributed or triggered. All such actions to cause the
Rights Agreement to be ineffective and not applicable as to the Merger and any
other transactions described in this Agreement have been duly and validly taken
by the Company's Board of Directors and are binding on and enforceable against
the Company.
SECTION 2.05. No Conflict; Required Filings and Consents.
(a) Subject to the following sentence, Section 2.05(a) of the Company
Disclosure Schedule includes, as of the date hereof, a list of (i) other than
intercompany obligations, all loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
guaranties, standby letters of credit (to which the Company or any subsidiary
is the responsible party), equipment leases or lease purchase agreements, each
in an amount equal to or exceeding $50,000 (other than leases outside the
United States providing for payments of not more than $50,000 per year) to
which the Company or any of its subsidiaries is a party or by which any of them
is bound; (ii) all contracts, agreements, commitments or other understandings
or arrangements to which the Company or any of its subsidiaries is a party or
by which any of them or any of their
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respective properties or assets is bound or affected, but excluding contracts,
agreements, commitments or other understandings or arrangements entered into in
the ordinary course of business and involving, in the case of any such
contract, agreement, commitment, or other understanding or arrangement,
individual payments or receipts by the Company or any of its subsidiaries of
less than $50,000 over the term of such contract, commitment, agreement, or
other understanding or arrangement; and (iii) all agreements which are required
to be filed as "material contracts" with the Securities and Exchange Commission
("SEC") pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, and the SEC's rules and regulations promulgated thereunder (the
"Exchange Act") but which have not been so filed with the SEC. The Agreements
listed on Schedule 2.05(a) of the Company Disclosure Schedule shall be
collectively referred to as the "Company Agreements". With regard to agreements
for the purchase or sale of raw materials or inventory or for the provision of
services in the ordinary course of business and licensing or royalty
arrangements, the thresholds referred to in clauses (i) and (ii) of the
preceding sentence shall be measured on an annual basis.
(b) Except as set forth in Section 2.05(b) and Sections 2.11(f) and (h) of
the Company Disclosure Schedule, the execution and delivery of this Agreement
by the Company does not, and the performance of this Agreement by the Company
will not, (i) conflict with or violate the Company Charter Documents, (ii)
assuming compliance with the matters referred to in Section 2.05(c), conflict
with or violate the Subsidiary Documents or any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which its or any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or impair the Company's
or any of its subsidiaries' rights or alter the rights or obligations of any
third party under, or give to others any rights of, or cause any, termination,
amendment, redemption, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on (including a right to purchase) any of the
properties or assets of the Company or any of its subsidiaries pursuant to, any
of the Company Agreements or any other note, bond, mortgage, indenture, credit
facility, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected, except in the case of clause (ii)
or (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require the
Company or any of its subsidiaries to make or seek any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental, administrative, judicial or regulatory authority, domestic or
foreign (each, a "Governmental Authority"), except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, state securities
laws, the pre-merger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), and Nasdaq; filings and consents under any
applicable non-U.S. laws intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade ("Non-U.S.
Monopoly Laws"); filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement ("Environmental, Health and Safety
Laws"); and the filing and recordation of an appropriate certificate of merger
as required by the Delaware Law; (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or materially delay consummation of the
Merger, or otherwise prevent or materially delay the Company from performing
its obligations under this Agreement and would not materially affect the
Surviving Corporation's ability to conduct its business after the Merger; or
(iii) as to which any necessary consents, approvals, authorizations, permits,
filings or notifications have heretofore been obtained or filed, as the case
may be, by the Company.
Section 2.06. Compliance; Permits.
(a) Except as set forth in Section 2.06(a) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) in any material respects, any law, rule,
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regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected or (ii) any Company Agreement, note, bond, mortgage, indenture, credit
facility, contract, agreement, letter of credit, pledge, guarantee, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties is bound or
affected except for any such conflicts or defaults which would not reasonably
be expected to result in an adverse effect on the Company in excess of $50,000
individually or $100,000 in the aggregate.
(b) Except as set forth in Schedule 2.06(b) of the Company Disclosure
Schedule, no investigation by any Governmental Authority with respect to the
Company or its subsidiaries is pending or, to the knowledge of the Company,
threatened. Neither Company nor any of its subsidiaries is subject to any
order, directive, warning letter or supervisory letter of, or agreement,
memorandum of understanding or similar arrangement (including board resolutions
adopted at the request of a regulatory authority) with, any Federal, state,
local or foreign regulatory authority restricting its operations, restricting
it from taking any action or requiring that certain actions be taken, and
Company has no knowledge that any such order, directive, supervisory letter,
agreement, memorandum of understanding or similar arrangement is threatened,
contemplated or under consideration by any such regulatory authority.
(c) Except as set forth in Section 2.06(c) of the Company Disclosure
Schedule, the Company and its subsidiaries hold all permits, licenses,
easements, variances, exceptions, consents, certificates, orders and approvals
from Governmental Authorities which are material to the operation of the
business of the Company and its subsidiaries, taken as a whole, as it is now
being conducted (collectively, the "Company Permits"). Except as set forth in
Section 2.06(c) of the Company Disclosure Schedule, the Company and its
subsidiaries are in compliance in all material respects with the terms of the
Company Permits.
SECTION 2.07. SEC Filings; Financial Statements.
(a) The Company has filed all reports, schedules, forms, statements and
other documents (including all exhibits thereto) required to be filed with the
SEC since April 28, 1996 (the "Post-1996 Company SEC Documents"). Except as set
forth in Section 2.07 of the Company Disclosure Schedule and taking into
account any amendments and supplements filed prior to the date of this
Agreement, such Post-1996 Company SEC Documents (i) were prepared in all
material respects in accordance with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light and at the time of the circumstances under which they were made, not
misleading. None of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Post-1996 Company SEC Documents was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto), and each
fairly presents in all material respects the consolidated financial position of
the Company and its subsidiaries at the respective dates thereof and the
consolidated results of its operations, stockholders' equity and cash flows for
the periods indicated, except that the unaudited interim financial statements
(i) should be read in conjunction with the audited consolidated financial
statements of the Company for the applicable fiscal year contained in the
Post-1996 Company SEC Documents, and (ii) were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
SECTION 2.08. Absence of Certain Changes or Events.
Except as set forth in Section 2.08 or 4.01 of the Company Disclosure
Schedule, and except as a result of acts or omissions after the date hereof
permitted under Section 4.01, since April 29, 2001, the Company has
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conducted its business in the ordinary course and there has not occurred: (i)
any changes, effects or circumstances constituting, or which would reasonably
be expected to constitute, individually or in the aggregate, a Material Adverse
Effect; (ii) any amendments or changes in the Company Charter Documents; (iii)
any material changes to any Company Employee Plans or other employee benefit
arrangements or agreements, including the establishment of any new such plans,
arrangements or agreements or the extension of coverage under any such plans,
arrangements or agreements to new groups of employees or other individuals,
(iv) any material damage to, destruction or loss of any asset of the Company
(whether or not covered by insurance); (v) any material change by the Company
in its accounting methods, principles or practices (other than as required by
GAAP); or (vi) other than in the ordinary course of business, any sale of a
material amount of assets of the Company. The executive management of the
Company is not aware of any Material Adverse Effect that would reasonably be
expected to occur as a result of or relating to (i) the execution and delivery
of this Agreement by the Company; (ii) the consummation of the transactions
contemplated hereby; (iii) the announcement of this Agreement or the
transactions contemplated hereby; or (iv) the performance by the Company of any
of its obligations under this Agreement.
SECTION 2.09. No Undisclosed Liabilities.
Except as set forth in Section 2.09 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries has any liabilities (whether or
not absolute, accrued, contingent or otherwise), except liabilities (a) in the
aggregate adequately provided for or disclosed in the Company's unaudited
balance sheet (including any related notes thereto) as of October 28, 2001
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
October 28, 2001 (the "2001 Company Balance Sheet"), (b) incurred in the
ordinary course of business and not required under GAAP to be reflected on the
2001 Company Balance Sheet, (c) incurred since October 28, 2001 if such
liability is in excess of $50,000 and is (a) not incurred in the ordinary
course of business, or (b) if incurred in the ordinary course of business, is a
nonrecurring payment to (i) a vendor not doing business with the Company on the
date of this Agreement, or (ii) an existing vendor doing business with the
Company on the date of this Agreement, but with respect to goods or services
not being provided by such vendor to the Company on the date of this Agreement,
or (d) incurred in connection with this Agreement or the Merger or the other
transactions contemplated hereby. Section 2.09 of the Company Disclosure
Schedule sets forth the amount of principal and unpaid interest outstanding
under each instrument evidencing indebtedness of the Company and its
subsidiaries. Section 2.09 of the Company Disclosure Schedule also sets forth
the amount of principal and unpaid interest outstanding under each instrument
evidencing indebtedness of the Company and its subsidiaries which will
accelerate or become due or result in a right of redemption or repurchase on
the part of the holder of such indebtedness (with or without due notice or
lapse of time) as a result of this Agreement, the Merger or the other
transactions contemplated hereby.
SECTION 2.10. Absence of Litigation.
Except as set forth in Section 2.10 and Section 2.19(c) of the Company
Disclosure Schedule or arising out of the transactions contemplated by this
Agreement (of which the executive management of the Company has no knowledge),
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of the senior management of the Company, threatened (except
those threatened matters that would not reasonably be expected individually to
exceed $100,000 or in the aggregate to exceed $500,000) against the Company or
any of its subsidiaries, or any properties or rights of the Company or any of
its subsidiaries, before any court, arbitrator or Governmental Authority.
SECTION 2.11. Employee Benefit Plans; Employment Agreements.
(a) "Company Employee Plans" shall mean all "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), all "employee welfare benefit plans" (as defined
in Section 3(l) of ERISA), and all other bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
similar fringe or employee benefit plans,
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programs or arrangements (including those which contain change of control
provisions or pending change of control provisions), and any employment,
executive compensation or severance agreements (including those which contain
change of control provisions or pending change of control provisions), as
amended, modified or supplemented, maintained or contributed to by the Company
or a subsidiary of the Company for the benefit of any former or current
employee, officer or director (or any of their beneficiaries) of the Company or
a subsidiary of the Company. The term "Affiliate Plan" shall mean any other
such plan, program or arrangement with respect to which the Company or any
subsidiary of the Company has or would reasonably be expected to have any
liability, either as a member of a controlled group of corporations or trades
or businesses, as defined under Section 414 of the Code and comparable
provisions of ERISA, or by contractual arrangement. Section 2.11(a) of the
Company Disclosure Schedule lists each Company Employee Plan and each Affiliate
Plan. With respect to each plan included on the Company Disclosure Schedule,
the Company shall indicate whether such plan includes a change of control
provision. With respect to each Company Employee Plan or Affiliate Plan listed
in Section 2.11(a) of the Company Disclosure Schedule, the Company has made
available to Acquiror, to the extent applicable: (i) each such written Company
Employee Plan and any related trust agreement, insurance and other contract
(including a policy), if any, the most recently prepared summary plan
description, if any, summary of material modifications the substance of which
is not already incorporated in the corresponding summary plan description or
Company Employee Plan document, if any, and written communications distributed
to plan participants that would reasonably be expected to materially modify the
terms of any Company Employee Plan, whether through information actually
conveyed in the communication or a failure to convey information; (ii) the
three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Company Employee Plan,
required to make such a filing; (iii) the most recent actuarial valuation, if
any, for each Company Employee Plan and Affiliate Plan subject to Title IV of
ERISA, to the extent applicable; (iv) the latest reports, if any, which have
been filed with the Department of Labor ("DOL") to satisfy the alternative
method of compliance for pension plans for certain selected employees pursuant
to DOL regulation Section 2520.104-23; and (v) the most recent favorable
determination letters issued for each Company Employee Plan and related trust
which is intended to be qualified under Section 401(a) of the Code (and, if an
application for such determination is pending, a copy of the application for
such determination).
(b) Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule, (i) none of the Company Employee Plans or Affiliate Plans promises or
provides material medical or other material welfare benefits to any director,
officer, employee or consultant (or any of their beneficiaries) after their
service with the Company or its subsidiary or affiliate terminates, other than
as required by Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA (hereinafter, "COBRA"), or any similar state or non-U.S. laws; (ii) none
of the Company Employee Plans or Affiliate Plans is a "multiemployer plan" as
such term is defined in Section 3(37) of ERISA and no Company Employee Plan or
Affiliate Plan has incurred any withdrawal liability that remains unsatisfied
and the transactions contemplated hereby are not reasonably likely to result in
the assessment of any withdrawal liability; (iii) neither the Company, any of
its subsidiaries, nor, to the knowledge of the Company, any other party in
interest or disqualified person (as defined in Section 3(14) of ERISA and
Section 4975 to the Code), has engaged in a transaction with respect to any
Company Employee Plan or Affiliate Plan which would reasonably be expected to
subject the Company or any subsidiary, directly or indirectly, to a tax,
penalty or other liability for prohibited transactions under ERISA or Section
4975 of the Code; (iv) with respect to the Company Employee Plans, neither the
Company or any of its subsidiaries, nor any executive of the Company or one of
its subsidiaries as fiduciary of the Company Employee Plans nor, to the
knowledge of the Company, any other fiduciary of any Company Employee Plan has
breached any of the responsibilities or obligations imposed upon fiduciaries
under Title I of ERISA; (v) all Company Employee Plans, and all Affiliate Plans
have been established and maintained in accordance with their terms and have
been operated in compliance, in all material respects, with the requirements of
applicable law (including, but not limited to, to the extent applicable, the
notification and other requirements of COBRA, the Health Insurance Portability
and Accountability Act of 1996, the Newborns' and Mothers' Health Protection
Act of 1996, the Mental Health Parity Act of 1996, and the Women's Health and
Cancer Rights Act of 1998); (vi) each Company Employee Plan which is intended
to be qualified under Section 401(a) of the Code is the subject of a favorable
determination letter from the Internal Revenue Service (the "IRS"), and nothing
has occurred which would reasonably be expected to result in the
disqualification of any
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such plan; (vii) all contributions required to be made with respect to any
Company Employee Plan (whether pursuant to the terms of such plan, Section 412
of the Code, any collective bargaining agreement, or otherwise) have been made
or accrued on the Company's financial statements on or before their due dates
(including any extensions thereof); and (viii) other than routine claims for
benefits made in the ordinary course of the operation of the Company Employee
Plans or Affiliate Plans, there are no pending, nor to the knowledge of the
senior management of the Company, any threatened (except those threatened
matters that would not reasonably be expected individually to exceed $100,000
or in the aggregate to exceed $500,000), claims, investigations or causes of
action with respect to any Company Employee Plan or Affiliate Plan, whether
made by a participant or beneficiary of such a plan, a governmental agency or
otherwise, against the Company or any subsidiary of the Company, any Company
director, officer or employee, any Company Employee Plan, or Affiliate Plan or
any fiduciary of a Company Employee Plan or Affiliate Plan.
(c) The Company has provided to Acquiror a true and complete list of each
current or former employee, consultant, officer or director of the Company or
any of its subsidiaries who, as of the date hereof, holds (i) any option to
purchase the Company Common Stock or commitments for future options, together
with the number of shares of the Company Common Stock subject to such option,
the exercise price of such option (to the extent determined as of the date
hereof), whether such option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code, and the expiration
date of such option; and (ii) any shares of Company Common Stock that are
unvested or subject to a repurchase option, risk of forfeiture or other
condition providing that such shares may be forfeited or repurchased by the
Company upon any termination of the stockholder's employment, directorship or
other relationship with the Company or any of its subsidiaries or which shares
are subject to performance-based vesting.
(d) To the extent not already included and so labeled in Section 2.11(a) or
such other section of the Company Disclosure Schedule as is specifically
referenced in Section 2.11(d) of the Company Disclosure Schedule, Section
2.11(d) of the Company Disclosure Schedule sets forth a true and complete (i)
list of all material outstanding agreements with any consultants who provide
services to the Company or any of its subsidiaries; (ii) list of all material
agreements with respect to the services of independent contractors or leased
employees who provide services to the Company or any of its subsidiaries,
whether or not they participate in any of the Company Employee Plans; (iii)
description of any situation in which a material portion of the workforce of a
component of the Company or its subsidiaries, whether such component is a
subsidiary, unit, work location, line of business or otherwise, is composed of
non common law employees, whether consultants, independent contractors or
otherwise, which description shall include, if applicable, representative
samples of agreements with such non common law employees; and (iv) list of all
worker council agreements of the Company or any of its subsidiaries with or
relating to its employees.
(e) No Company Employee Plan or Affiliate Plan is subject to Title IV of
ERISA.
(f) Except as set forth in Section 2.11(f) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement,
either alone or in combination with another event, will not (i) result in any
payment (including, without limitation, severance, golden parachute or bonus
payments or otherwise) becoming due pursuant to any Company Employee Plan to
any current or former director, officer, employee or consultant of the Company,
(ii) result in any increase in the amount of compensation or benefits payable
pursuant to any Company Employee Plan in respect of any director, officer,
employee or consultant of the Company, or (iii) accelerate the vesting or
timing of payment of any benefits or compensation payable pursuant to any
Company Employee Plan in respect of any director, officer, employee or
consultant of the Company.
(g) There are no complaints, charges or claims against the Company or any of
its subsidiaries pending or, to the knowledge of the Company, threatened to be
brought by or filed with any Governmental Authority based on, arising out of,
in connection with or otherwise relating to the classification of any
individual by the Company as an independent contractor or "leased employee"
(within the meaning of Section 414(n) of the Code) rather than
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as an employee, and no conditions exist under which the Company or any of its
subsidiaries is reasonably likely to incur any such liability.
(h) The Company has provided or made available to Acquiror (i) with respect
to each participant in the Company's executive severance plans, whether such
participant has entered into an agreement or a provision of an agreement
prohibiting or restricting such participant from accepting employment or
otherwise engaging in activity that is in competition with the business of the
Company or its subsidiaries (other than with respect to the use of confidential
information or trade secrets) after the termination of such individual's
employment with the Company (a "Non-Competition Agreement"); and (ii) a
description of those classes of employees that are required to execute a
Non-Competition Agreement.
SECTION 2.12. Employment and Labor Matters.
Except as set forth in Section 2.11(b) or Section 2.12 of the Company
Disclosure Schedule:
(a) Each of the Company and its subsidiaries is in compliance, in all
material respects, and has not failed to be in compliance, in any material
respect, as a result of which it would reasonably be expected now or in the
future to have liability, with all applicable U.S. and non-U.S. laws,
agreements and contracts relating to employment practices, terms and
conditions of employment, and the employment of former, current, and
prospective employees, independent contractors and "leased employees"
(within the meaning of Section 414(n) of the Code) of the Company or any of
its subsidiaries including all such U.S. and non-U.S. laws, agreements and
contracts relating to wages, hours, collective bargaining, employment
discrimination, immigration, disability, civil rights, human rights, fair
labor standards, occupational safety and health, workers' compensation, pay
equity, wrongful discharge and violation of the potential rights of such
former, current, and prospective employees, independent contractors and
leased employees, and has timely prepared and filed all appropriate forms
(including Immigration and Naturalization Service Form I-9) required by any
relevant Governmental Authority.
(b) Neither the Company nor any of its subsidiaries is a party to any
U.S. or non-U.S. collective bargaining agreement or other labor union
contract applicable to persons employed by the Company or its subsidiaries,
nor, to the knowledge of the Company, are there any activities or
proceedings of any labor union to organize any employees of the Company or
any of its subsidiaries.
(c) Neither the Company nor any of its subsidiaries is in breach of any
U.S. or non-U.S. collective bargaining agreement or labor union contract, or
has any strikes, slowdowns, work stoppages, lockouts, or any knowledge of
threats thereof, by or with respect to any employees of the Company or any
of its subsidiaries.
SECTION 2.13. Registration Statement; Proxy Statement/Prospectus.
(a) Subject to the accuracy of the representations of Acquiror in Section
3.10:
(i) the information supplied by the Company specifically for inclusion in
the Registration Statement pursuant to which the shares of the Parent Common
Stock to be issued in connection with the Merger will be registered with the
SEC shall not, at the respective times the Registration Statement (including
any amendments or supplements thereto) is filed with the SEC or is declared
effective by the SEC, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
included therein not misleading; and
(ii) the information supplied by the Company specifically for inclusion
in the proxy statement/prospectus in connection with the Company
Stockholders Meeting (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement/Prospectus") will
not, at the time the Proxy Statement/Prospectus is filed with the SEC or
first sent to stockholders or at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
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(b) If at any time prior to the Effective Time any event or circumstance
relating to the Company, any of its affiliates, officers or directors is
discovered by the Company which is required to be set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement/Prospectus,
the Company will promptly inform Acquiror.
(c) Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information supplied by Parent or Acquiror or any
of their respective affiliates which is included or incorporated by reference
in, or furnished in connection with the preparation of, the Registration
Statement or the Proxy Statement/Prospectus.
SECTION 2.14. Restrictions on Business Activities.
Except for this Agreement or as set forth in Section 2.14 of the Company
Disclosure Schedule, the Company is not a party to or the subject of any
agreement, judgment, injunction, order or decree binding upon the Company or
any of its subsidiaries which has or would reasonably be expected to have the
effect of prohibiting or impairing the conduct of business by the Company or
any of its subsidiaries as currently conducted by the Company or such
subsidiary, or restricting any transactions (including payment of dividends and
distributions) between the Company and its subsidiaries.
SECTION 2.15. Title to Property.
Except as set forth in Sections 2.15 and 2.19(b) of the Company Disclosure
Schedule, each of the Company and its subsidiaries has good title to all of its
owned real properties and other owned assets, free and clear of all liens,
charges and encumbrances, except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially
interfere with the present use of the property affected thereby, and except for
liens which secure indebtedness reflected in the 2001 Balance Sheet; and, all
leases pursuant to which the Company or any of its subsidiaries lease from
others material amounts of real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default or event of default).
SECTION 2.16. Taxes.
Except as set forth or referred to in Section 2.16 of the Company Disclosure
Schedule:
(a) The Company and each of its subsidiaries has timely and accurately
filed, or caused to be timely and accurately filed, all Tax Returns required
to be filed by it, and has paid, collected or withheld, or caused to be
paid, collected or withheld, all amounts of Taxes required to be paid,
collected or withheld, other than such Taxes for which adequate reserves in
the 2001 Company Balance Sheet have been established and which, if past due,
are being contested in good faith. Such Tax Returns are true and correct as
of the date hereof. There are no claims or assessments pending against the
Company or any of its subsidiaries for any alleged deficiency in any Tax,
there are no pending or, to the knowledge of the Company, threatened audits
or investigations for or relating to any liability in respect of any Taxes,
and the Company has not been notified in writing of any proposed Tax claims
or assessments against the Company or any of its subsidiaries (other than in
each case, claims or assessments for which adequate reserves in the 2001
Company Balance Sheet have been established and which, if past due, are
being contested in good faith and which claims or assessments being
contested in good faith would not, if determined adversely to the Company,
result in a Material Adverse Effect). Neither the Company nor any of its
subsidiaries has executed any waivers or extensions of any applicable
statute of limitations to assess any amount of Taxes. There are no
outstanding requests by the Company or any of its subsidiaries for any
extension of time within which to file any Tax Return or within which to pay
any amounts of Taxes shown to be due on any Tax Return. There are no liens
for amounts of Taxes on the assets of the Company or any of its subsidiaries
except for statutory liens for current Taxes not yet due and payable. There
are no outstanding powers of
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attorney enabling any party to represent the Company or any of its
subsidiaries with respect to Taxes. Other than with respect to the Company
and its subsidiaries, neither the Company nor any of its subsidiaries is
liable for Taxes of any other Person, or is currently under any contractual
obligation to indemnify any person with respect to any amounts of Taxes
(except for customary agreements to indemnify lenders or security holders in
respect of Taxes and except for provisions in agreements for the divestiture
of subsidiaries, assets or business lines of the Company or its subsidiaries
that require the Company or its subsidiaries (as applicable) to indemnify a
purchaser or purchaser group for amounts of Taxes of the Company or its
subsidiaries (as applicable) in the nature of sales or similar Taxes
incurred as a consequence of any such divestiture transactions), or is a
party to any tax sharing agreement or any other agreement providing for
payments by the Company or any of its subsidiaries with respect to any
amounts of Taxes.
(b) The Company and its subsidiaries have in all respects complied with
all applicable laws, rules, and regulations relating to the payment and
withholding of Taxes (including withholding of Taxes under Sections 1441 and
1442 of the Code or similar provisions under any foreign laws) and have,
within the time prescribed by law, withheld from employee wages and paid
over to the proper Governmental Authority all Taxes required to be so
withheld and paid over under applicable laws.
(c) The federal income Tax Returns of the Company and its subsidiaries
have been examined by the Internal Revenue Service (or the statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for periods through and including the fiscal year ended April 27,
1997, and no material deficiencies were asserted as a result of examinations
which have not been resolved and fully paid.
(d) For purposes of this Agreement, the term "Tax" shall mean (a) any
United States federal, national, state, provincial, local or other
jurisdictional income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, estimated, alternative, or add-on
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge imposed by any
Governmental Authority, together with any interest, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments, (b) liability for
the payment of any amounts described in clause (a) above as a result of
being a member of an affiliated, consolidated, combined, unitary or similar
group or as a result of transferor or successor liability and (c) liability
for the payment of any amounts as a result of being a party to any tax
sharing agreement or as a result of any agreement to indemnify any other
person with respect to the payment of any amounts of the type described in
clause (a) or (b) above. The term "Tax Return" shall mean a report, return
or other information (including any attached schedules or any amendments to
such report, return or other information) required to be supplied to or
filed with a Governmental Authority with respect to any Tax, including an
information return, claim for refund, amended return or declaration or
estimated Tax.
SECTION 2.17. Environmental Matters.
(a) Except as set forth in Section 2.17(a) to the Company Disclosure
Schedule, the operations and properties of the Company and its subsidiaries are
and at all times have been in compliance, in all material respects, with the
Environmental Laws, which compliance includes the possession by the Company and
its subsidiaries of all permits and governmental authorizations required under
applicable Environmental Laws, and compliance in all material respects with the
terms and conditions thereof.
(b) Except as set forth in Section 2.17(b) of the Company Disclosure
Schedule, there are no Environmental Claims, including claims based on
"arranger liability," pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries or against any person or entity
whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed.
(c) Except as set forth on Section 2.17(c) of the Company Disclosure
Schedule, there are no past or present actions, circumstances, conditions,
events or incidents, including the release, emission, discharge, presence or
disposal of any Materials of Environmental Concern, that are reasonably likely
to form the basis of any Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries have retained or
assumed.
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(d) Except as set forth in Section 2.17(d) of the Company Disclosure
Schedule, (i) there are no off-site locations where the Company or any of its
subsidiaries has stored, disposed or arranged for the disposal of Materials of
Environmental Concern which have been listed on the National Priority List,
CERCLIS, or any state Superfund site list, and the Company and its subsidiaries
have not been notified that any of them is a potentially responsible party at
any such location; (ii) there are no underground storage tanks located on
property owned or leased by the Company or any of its subsidiaries; (iii) there
is no friable asbestos containing material contained in or forming part of any
building, building component, structure or office space owned, leased or
operated by the Company or any of its subsidiaries; and (iv) there are no
polychlorinated biphenyls ("PCBs") or PCB-containing items contained in or
forming part of any building, building component, structure or office space
owned, leased or operated by the Company or any of its subsidiaries.
(e) All Company Permits that the Company is required to have obtained under
Environmental Laws have been obtained and are maintained by the Company, were
duly issued by the appropriate Governmental Authority, are in full force and
effect and are not subject to appeal. The Company has not received notice, and
otherwise has no knowledge, that any Company Permit has been or will be,
rescinded, terminated, limited, or amended. No additional capital expenditures
will be required by the Company for purposes of compliance with the terms or
conditions of any Company Permits or Company Permit renewals. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not require the assignment or transfer of
any Company Permit, except for those Company Permits that may be assigned or
transferred on or prior to the Effective Time without the consent of any Person
and without causing any such Company Permit to be rescinded, terminated or
limited.
(f) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
investigation or notice (in each case in writing or, if not in writing, to
the knowledge of the senior management of the Company) by any person or
entity alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from the presence, or release or
threat of release into the environment, of any Materials of Environmental
Concern at any location, whether or not owned or operated by the Company or
any of its subsidiaries.
(ii) "Environmental Laws" means, as they exist on the date hereof, all
applicable United States federal, state, local and non-U.S. laws,
regulations, codes and ordinances, relating to pollution or protection of
human health (as relating to the environment or the workplace) and the
environment (including ambient air, surface water, ground water, land
surface or sub-surface strata), including laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern,
including, but not limited to Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.ss. 9601 et seq.,
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.ss. 6901 et seq.,
Toxic Substances Control Act ("TSCA"), 15 U.S.C.ss. 2601 et seq.,
Occupational Safety and Health Act ("OSHA"), 29 U.S.C.ss. 651 et seq., the
Clean Air Act, 42 U.S.C.ss. 7401 et seq., and the Clean Water Act, 33
U.S.C.ss. 1251 et seq., each as may have been amended or supplemented, and
any applicable environmental transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, hazardous materials, hazardous substances and hazardous
wastes, medical waste, toxic substances, petroleum and petroleum products
and by-products, asbestos-containing materials, PCBs, and any other
chemicals, pollutants, substances or wastes, in each case regulated under
any Environmental Law.
SECTION 2.18. Brokers.
No broker, finder or investment banker, other than the Company Financial
Advisor, the fees and expenses of which will be paid by the Company, is
entitled to any brokerage, finder's or other similar fee or commission in
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connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has heretofore
furnished to Acquiror a complete and correct copy of all agreements between the
Company and the Company Financial Advisor pursuant to which such firm would be
entitled to any payment relating to the transactions contemplated hereunder.
SECTION 2.19. Intellectual Property.
(a) As used herein, the term "Intellectual Property Assets" shall mean all
worldwide intellectual property rights (common law, statutory or otherwise),
including, without limitation, patents (including all reissues, divisions,
continuations and extensions), trademarks, service marks, trade names,
copyrights, and registrations and applications for any and all of the
foregoing, licenses and any other contractual rights, Internet domain names,
formulae, algorithms, designs, inventions, methodologies, specifications,
know-how, trade secrets, computer software programs and code (both object and
source), development tools and proprietary information, technologies and
processes, and all documentation and media describing or relating to the above,
in any format, whether hard copy or machine-readable only. As used herein,
"Company Intellectual Property Assets" shall mean the Intellectual Property
Assets used or owned by the Company or any of its subsidiaries.
(b) Except as set forth in Section 2.19(b) of the Company Disclosure
Schedule, the Company and/or each of its subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all the Company
Intellectual Property Assets that are used in and are material to the business
of the Company and its subsidiaries as currently conducted, without (i)
infringing or violating the valid and enforceable rights of others, (ii)
constituting a breach of any agreement, obligation, promise or commitment by
which the Company and/or its subsidiaries (as applicable) may be bound and/or
(iii) violating any laws, regulations, ordinances, codes or statutes in any
applicable jurisdiction.
(c) Except as set forth in Section 2.19(c) of the Company Disclosure
Schedule, no claims, actions, disputes, proceedings or allegations (i) have
been made or are currently pending or, to the Company's knowledge, threatened
by any person with respect to the Company Intellectual Property Assets,
including, without limitation, any claims, actions, disputes, proceedings or
allegations challenging the right of Company to use, possess, transfer, convey
or otherwise dispose of any Company Intellectual Property Assets, or (ii) have
been made or are currently pending or, to the Company's knowledge, threatened
by any person with respect to the Intellectual Property Assets of any third
party (the "Third Party Intellectual Property Assets") to the extent arising
out of any use, possession, transfer, reproduction, conveyance, distribution or
other disposition of, or of products or methods covered by or otherwise
relating to, such Third Party Intellectual Property Assets by or through the
Company or any of its subsidiaries.
(d) Except as set forth in Section 2.19(d) of the Company Disclosure
Schedule, there are no claims, actions, disputes, proceedings or allegations to
the effect that the manufacture, offer for sale, sale, licensing or use of any
product, system or method either (i) now used, offered for sale, sold or
licensed or, (ii) to the best of Company's knowledge as of the date hereof
(after reasonable due inquiry), scheduled for commercialization prior to the
first anniversary of the date hereof, in each case by or for the Company or any
of its subsidiaries, infringes on any Third Party Intellectual Property Assets.
(e) Section 2.19(e) of the Company Disclosure Schedule sets forth a true,
correct and complete list of the Company Intellectual Property Assets, which is
true, correct and complete in all material respects, except with regard to
clause (vii) below, which is true, correct and complete in all respects,
including, without limitation (i) all patents and patent applications, filings
and registrations owned by the Company and/or each of its subsidiaries
worldwide; (ii) all trademark and service mark registrations and all trademark
and service mark applications owned, used or held for use by the Company and/or
each of its subsidiaries worldwide; (iii) all common law trademarks, trade
dress, brand, product and service names, slogans, logos and distinctive
identifications owned, used or held for use by the Company and/or each of its
subsidiaries worldwide; (iv) all trade names owned, used or held for use by the
Company and/or each of its subsidiaries worldwide; (v) all copyright
registrations and
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copyright applications owned by the Company and/or each of its subsidiaries
worldwide; (vi) all Internet domain name registrations owned by the Company
and/or its subsidiaries worldwide; and (vii) all licenses owned, used or held
for use by the Company and/or each of its subsidiaries in which the Company
and/or each of its subsidiaries is (A) a licensor with respect to any of the
Company Intellectual Property Assets listed in Section 2.19(e) of the Company
Disclosure Schedule or (B) a licensee of any Third Party Intellectual Property
Assets, except for any licenses of software programs that are made commercially
available by third party licensors to any person "off the shelf." Except as set
forth in Section 2.19(e) of the Company Disclosure Schedule the Company and/or
each of its subsidiaries has made all filings and recordations required by any
governmental, judicial or regulatory agency (foreign or domestic) having
jurisdiction over such subject matter to protect and maintain its interest in
the patents, patent applications, trademark and service mark registrations
(including, with respect to all U.S. registered trademark and service marks,
Section 8 and 15 declarations, where applicable), trademark and service mark
applications, Internet domain names, copyright registrations and copyright
applications and licenses set forth in Section 2.19(e) of the Company
Disclosure Schedule.
(f) Except as set forth in Section 2.19(f) of the Company Disclosure
Schedule: (i) each U.S. and non-U.S. patent, trademark or service mark
registration and copyright registration of the Company and/or each of its
subsidiaries is valid and subsisting and (ii) each license of the Company
Intellectual Property Assets and Third Party Intellectual Property Assets
listed on Section 2.19(e) of the Company Disclosure Schedule is valid,
subsisting and enforceable and will be unaffected by the Merger; and (iii) all
statements and representations made by the Company and/or its subsidiaries (as
applicable) in any pending applications, filings or registrations concerning
the Company Intellectual Property Assets were true in all material respects as
of the time they were made.
(g) Except as set forth in Section 2.19(g) of the Company Disclosure
Schedule, to the knowledge of the senior management of the Company, there is no
unauthorized use, infringement, misappropriation or other violation of any of
the Company's Intellectual Property Assets by any third party, including,
without limitation, any employee, former employee, independent contractor or
consultant of the Company or any of its subsidiaries.
(h) The Company Intellectual Property Assets include all rights and
interests necessary to conduct the business of the Company as it is currently
conducted and as proposed to be conducted and such rights will not be adversely
affected by the Company or any other person claiming under or through the
Company or otherwise in connection with or arising from the execution and
delivery of this Agreement, the Merger or the consummation of any of the
transactions contemplated hereby.
SECTION 2.20. Interested Party Transactions.
Except as set forth in Section 2.20 of the Company Disclosure Schedule or
for events as to which the amounts involved do not, in the aggregate, exceed
$100,000, since the Company's proxy statement dated September 5, 2001, no event
has occurred that would be required to be reported as a Certain Relationship or
Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
SECTION 2.21. Insurance.
Except as set forth in Section 2.21 of the Company Disclosure Schedule, all
fire and casualty, general liability, business interruption, product liability
and sprinkler and water damage insurance policies maintained by the Company are
with reputable insurance carriers, provide adequate coverage for all normal
risks incident to the business of the Company and its subsidiaries and their
respective properties and assets and are in character and amount appropriate
for the businesses conducted by the Company.
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SECTION 2.22. Product Liability and Recalls.
(a) Except as set forth in Section 2.22 (a) of the Company Disclosure
Schedule, there is no claim, pending or, to the Company's knowledge,
threatened, against the Company or any of its subsidiaries for injury to person
or property of employees or any third parties suffered as a result of the sale
of any product or performance of any service by the Company or any of its
subsidiaries, including claims arising out of the defective or unsafe nature of
its products or services. To the knowledge of the Company, there is no basis
for such a claim, which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) Except as set forth in Section 2.22(b) of the Company Disclosure
Schedule, there is no pending or, to the knowledge of the Company, threatened
recall or investigation of any product sold by the Company.
SECTION 2.23. Opinion of Company Financial Advisor.
The Board of Directors of the Company has been advised by the Company
Financial Advisor to the effect that in its opinion, as of the date of this
Agreement, the Exchange Ratio in the Merger is fair from a financial point of
view to the Company's stockholders.
SECTION 2.24. FDA and FTC Compliance.
The Company is in compliance, in all material respects, with all applicable
laws, rules and regulations and requirements of the Federal Trade Commission
(the "FTC"), and the Food and Drug Administration (the "FDA") under the
provisions of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. (S) 321 et
seq. and its implementing regulations, 21 C.F.R. (S) 801 et seq., including,
but not limited to, (i) those laws relating to the filing of premarket
notifications or premarket approval applications for medical devices; (ii) the
registration with the FDA as a manufacturing establishment and currently
listing its marketed devices; (iii) the manufacture, storage and shipment of
products in compliance with FDA's standards for current good manufacturing
practices; and (iv) product labeling and promotion in accordance with all FTC
and FDA rules and interpretations. The Company has provided the Parent with
copies of any and all notices of prior compliance actions including complaints,
notice of violation letters, warning letters, 483 inspection reports, etc. sent
by any Government Authority since December 31, 1996, or has certified that no
such correspondence has been sent.
Article III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to the Company as follows:
SECTION 3.01. Organization and Qualification; Subsidiaries.
(a) Each of Parent and Acquiror is duly incorporated, validly existing and
in good standing (to the extent the concept of good standing exists in the
applicable jurisdiction) under the laws of its jurisdiction of incorporation
and has the requisite corporate and other power and authority necessary to own,
lease and operate the properties it purports to own, lease or operate and to
carry on its business as now conducted, except where the failure to have such
other power or authority would not reasonably be expected to have a Material
Adverse Effect. Each of Parent and Acquiror is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities make such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Acquiror has heretofore made
available to the Company true and complete copies of Parent's Certificate of
Incorporation and Bylaws, as amended to date (the "Parent Charter Documents").
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(b) Each subsidiary of Parent is an entity duly organized, validly existing
and in good standing (to the extent the concept of good standing exists in the
applicable jurisdiction) under the laws of its jurisdiction of organization,
has the requisite corporate or other power and authority necessary to own,
lease and operate the properties it purports to own, lease and operate and to
carry on its business as now conducted, except where the failure to have such
other power or authority would not reasonably be expected to have a Material
Adverse Effect. Each subsidiary of Parent is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified or in good standing would not reasonably be expected to have a
Material Adverse Effect. All of Parent's significant subsidiaries and their
respective jurisdictions of incorporation are included in the subsidiary list
contained in Parent's Annual Report on Form 10-K for the fiscal year ended June
30, 2001 (the "Parent 2001 Form 10-K").
(c) Acquiror was formed solely for the purpose of engaging in the
transactions contemplated hereby and has engaged in no business other than in
connection with the transactions contemplated by this Agreement.
SECTION 3.02. Capitalization.
(a) The authorized capital stock of Parent consists of 100,000,000 shares of
the Parent Common Stock. As of November 30, 2001, (i) 34,134,992 shares of the
Parent Common Stock were issued and outstanding, all of which are duly
authorized, validly issued, fully paid and non-assessable, and none of which
have been issued in violation of preemptive or similar rights and (ii) no
shares of the Parent Common Stock were held by subsidiaries of Parent. As of
November 30, 2001, no more than 2,691,705 shares of the Parent Common Stock
were reserved for issuance upon exercise of stock options issued under Parent's
stock option plans.
(b) Except (i) as set forth in Section 3.02(a), (ii) for changes since
November 30, 2001 resulting from the exercise of stock options, (iii) for
securities of Parent or its subsidiaries convertible into or exchangeable for
shares of capital stock or voting securities of Parent set forth in the Parent
SEC Documents and the conversion or exchange thereof, (iv) for other rights to
acquire immaterial (individually and in the aggregate) amounts of the Parent
Common Stock and changes resulting from the exercise thereof, (v) for changes
resulting from the grant of stock based compensation to directors or employees
of Parent or its subsidiaries or (vi) for changes resulting from the issuance
of stock or other securities in connection with a merger or other acquisition
or business combination, an underwritten public offering or an offering
pursuant to Rule 144A under the Securities Act approved by Parent's Board of
Directors and undertaken in compliance with Section 4.03(b), as applicable,
there are no outstanding (x) shares of capital stock or voting securities of
Parent, (y) securities of Parent convertible into or exchangeable for shares of
capital stock or voting securities of Parent or (z) options or other rights to
acquire from Parent or other obligations of Parent to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Parent. Except as set forth in the Parent SEC
Documents (as defined in Section 3.05), there are no outstanding obligations of
Parent or any of its subsidiaries to repurchase, redeem or otherwise acquire
any of its equity securities.
(c) The shares of the Parent Common Stock to be delivered as Merger
Consideration have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and nonassessable, and the issuance thereof is not subject
to any preemptive or other similar right.
SECTION 3.03. Authority Relative to this Agreement.
(a) The execution, delivery and performance by Acquiror of this Agreement,
the execution, delivery and performance by Parent of the Guarantee and the
consummation by Parent and Acquiror of the transactions contemplated hereby and
thereby, as applicable, are within the respective corporate powers of Parent
and Acquiror and have been duly and validly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by Acquiror and, assuming the due authorization, execution and
delivery
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by Company of this Agreement, this Agreement constitutes a valid and binding
obligation of Acquiror, enforceable against Acquiror in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law). The
Guarantee has been duly and validly executed and delivered by Parent and,
assuming the due authorization, execution and delivery by Company of this
Agreement, the Guarantee constitutes a valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity, including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether considered
in a proceeding in equity or at law).
(b) At a meeting duly called and held, or by written consent in lieu of
meeting, the Board of Directors of Acquiror has (i) determined that this
Agreement, the Merger and the other transactions contemplated hereby are fair
to and in the best interests of Acquiror and Parent, and (ii) approved this
Agreement and the transactions contemplated hereby. At a meeting duly called
and held, Parent's Board of Directors has approved the Guarantee and the
transactions contemplated thereby and the issuance of the shares of the Parent
Common Stock to be delivered to the Company stockholders in connection with the
Merger.
SECTION 3.04. No Conflicts; Required Filings and Consents.
(a) The execution, delivery and performance by Acquiror of this Agreement,
the execution, delivery and performance by Parent of the Guarantee and the
consummation by Acquiror and Parent of the Merger and the other transactions
contemplated hereby and thereby, as applicable, require no action by or in
respect of, or filing with, any Governmental Authority, other than (i) the
filing of a Certificate of Merger with respect to the Merger with the Secretary
of State of the State of Delaware, (ii) compliance with any applicable
requirements of the HSR Act and applicable Non-U.S. Monopoly Laws, (iii)
compliance with any applicable requirements of the Securities Act, the Exchange
Act, any applicable state securities laws and the Nasdaq, (iv) compliance with
Environmental, Health and Safety Laws and (v) any actions or filings the
absence of which would not be reasonably expected, individually or in the
aggregate, to have a Material Adverse Effect or materially impair the ability
of Acquiror to consummate the Merger and the other transactions contemplated by
this Agreement or the ability of Parent to fulfill its obligations under the
Guarantee.
(b) The execution, delivery and performance by Acquiror of this Agreement,
the execution, delivery and performance by Parent of the Guarantee and the
consummation by Acquiror and Parent of the Merger and other transactions
contemplated hereby and thereby, as applicable, do not and will not (i)
contravene, conflict with, or result in any violation or breach of any
provision of the Parent Charter Documents or the certificate of incorporation
or bylaws of Acquiror (or equivalent organizational documents), (ii) assuming
compliance with the matters referred to in Section 3.04(a), contravene,
conflict with or result in a violation or breach of any provision of any law,
rule, regulation, judgment, injunction, order or decree applicable to Parent or
any of its subsidiaries, (iii) require any consent or other action by any
person under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Parent or any of its subsidiaries is entitled
under any provision of any Material Agreement or instrument binding upon Parent
or any of its subsidiaries or any material license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of Acquiror and its subsidiaries; provided
that, for purposes of this Subsection 3.04(b)(iii), "Material Agreement" shall
mean any agreement identified in the Parent 2001 Form 10-K or in any of
Parent's quarterly reports on Form 10-Q filed with respect to any quarter of
its 2002 fiscal year or any agreement entered into since the date of Parent's
latest quarterly report on Form 10-Q that would be required to be so identified
in Parent's Annual Report on Form 10-K for the year ended June 30, 2002 or (iv)
result in the creation or imposition of any encumbrance on any material asset
of Parent or any of its subsidiaries.
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SECTION 3.05. Compliance.
(a) Except as set forth in the reports, schedules, forms, statements,
registration statements, proxy statements and other documents filed by the
Parent with the SEC since June 30, 1996 (the "Parent SEC Documents") and prior
to the date of this Agreement, including those incorporated therein by
reference and not superseded by other Parent SEC Documents, neither Parent nor
any of its subsidiaries is in conflict with, or in default or violation of, (i)
any law, rule, regulation, order, judgment or decree applicable to Parent or
any of its subsidiaries or by which its or any of their respective properties
is bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which Parent or any
of its subsidiaries or its or any of their respective properties is bound or
affected, except for any such conflicts, defaults or violations which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) No investigation by any Governmental Authority with respect to the
Parent or its subsidiaries is pending or, to the knowledge of Parent,
threatened, except as disclosed in the Parent SEC Documents and except for such
investigations which, if they resulted in adverse findings, would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.06. SEC Filings; Financial Statements.
(a) The Parent SEC Documents constitute all reports, schedules, forms,
statements and other documents (including all exhibits thereto) required to be
filed by Parent with the SEC since June 30, 1996. Except as set forth in the
Parent SEC Documents and taking into account any amendments and supplements
filed prior to the date of this Agreement, such Parent SEC Documents, (i) were
prepared in all material respects in accordance with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of and at the time of the circumstances under which they
were made, not misleading. None of the Parent's subsidiaries is required to
file with the SEC periodic reports pursuant to the Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Documents was prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Parent SEC
Documents), and each fairly presents in all material respects, the consolidated
financial position of Parent and its consolidated subsidiaries at the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated, except that for purposes of the foregoing
representation, the unaudited interim financial statements (i) should be read
in conjunction with the Parent's audited consolidated financial statements
contained in the applicable Parent SEC Documents, and (ii) were or are subject
to normal and recurring year end adjustments which were not or are not expected
to be material in amount.
SECTION 3.07. Absence of Certain Changes or Events.
Except as set forth in the Parent SEC Documents and for the sale of the
Parent's Colorado facility, since June 30, 2001, the business of Parent and its
subsidiaries has been conducted in the ordinary course and there has not
occurred: (i) any change, effect or circumstance, including any damage to,
destruction or loss of any asset of Parent (whether or not covered by
insurance) constituting, or which would reasonably be expected to constitute,
individually or in the aggregate, a Material Adverse Effect; (ii) any
amendments or changes in the Parent Charter Documents; (iii) any material
change by Parent in its accounting methods, principles or practices (other than
as required by GAAP); or (iv) any sale of a material amount of assets of
Parent, except in the ordinary course of business.
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SECTION 3.08. No Undisclosed Liabilities.
Except as set forth in the Parent SEC Documents, neither Parent nor any of
its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise), except liabilities (a) in the aggregate adequately provided for in
Parent's unaudited balance sheet (including any related notes thereto) as of
September 30, 2001 included in Parent's Quarterly Report on Form 10-Q for the
fiscal period ended September 30, 2001 (the "2001 Parent Balance Sheet"), (b)
incurred in the ordinary course of business and not required under GAAP to be
reflected on the 2001 Parent Balance Sheet, (c) incurred since September 30,
2001 in the ordinary course of business, (d) incurred in connection with this
Agreement or the Merger or the other transactions contemplated hereby, or (e)
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 3.09. Absence of Litigation.
Except as set forth in the Parent SEC Documents or arising out of the
transactions contemplated by this Agreement, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of Parent,
threatened against Parent or any of its subsidiaries, or any properties or
rights of Parent or any of its subsidiaries, before any court, arbitrator or
Governmental Authority, that would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
SECTION 3.10. Registration Statement; Proxy Statement/Prospectus.
(a) Subject to the accuracy of the representations of the Company in Section
2.13:
(i) the Registration Statement, as it may be amended, pursuant to which
the shares of the Parent Common Stock to be issued in connection with the
Merger will be registered with the SEC shall not, at the respective times
the Registration Statement (including any amendments or supplements thereto)
is filed with the SEC or is declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
included therein not misleading; and
(ii) the Proxy Statement/Prospectus will not, at the time the Proxy
Statement/Prospectus is filed with the SEC or first sent to the Company's
stockholders or at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, at such time and in light of the circumstances under which they
were made, not misleading.
(b) If at any time prior to the Effective Time any event or circumstance
relating to Parent, Acquiror or any of its affiliates, officers or directors
should be discovered by Acquiror which should be set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement/Prospectus,
Acquiror will promptly inform the Company.
(c) The Registration Statement and Proxy Statement/Prospectus shall comply
as to form in all material respects with the requirements of all applicable
laws, including the Securities Act and the Exchange Act.
(d) Notwithstanding the foregoing, Acquiror makes no representation or
warranty with respect to any information supplied by the Company which is
included or incorporated by reference in, or furnished in connection with the
preparation of, the Registration Statement or the Proxy Statement/Prospectus.
SECTION 3.11. Brokers.
Except for Parker/Hunter Incorporated, the fees and expenses of which will
be paid by Parent, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Acquiror or Parent who might be entitled to any fee or commission from
Acquiror, Parent or any of their respective affiliates in connection with the
transactions contemplated by this Agreement.
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SECTION 3.12. Ownership of Acquiror; No Prior Activities.
(a) Acquiror was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) Except for obligations or liabilities incurred by Acquiror in connection
with its incorporation or organization and the transactions contemplated by
this Agreement and except for this Agreement and any other agreements or
arrangements contemplated by this Agreement, Acquiror has not incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any person.
SECTION 3.13. Ownership Interest in the Company.
Other than by reason of this Agreement or the transactions contemplated
hereby, neither Acquiror nor any of its affiliates is, or has been at any time
during the previous three years, an "interested stockholder" of the Company, as
that term is defined in Section 203 of the Delaware Law.
Article IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Acquiror shall otherwise agree in
writing, and except as set forth in Section 4.01 of the Company Disclosure
Schedule, the Company shall conduct its business and shall cause the businesses
of its subsidiaries to be conducted only in, and the Company and its
subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company shall
use reasonable commercial efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep available the
services of the present officers, employees and consultants of the Company and
its subsidiaries and to preserve the present relationships of the Company and
its subsidiaries with customers, suppliers and other persons with which the
Company or any of its subsidiaries has significant business relations. By way
of amplification and not limitation, except as contemplated by this Agreement,
neither the Company nor any of its subsidiaries shall, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Acquiror,
which, in the case of clauses (c), (d)(iv), e(ii), (e)(iv), (f), (h), (i) or
(j) will not be unreasonably withheld or delayed:
(a) amend or otherwise change the Company Charter Documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) in the Company, any of its subsidiaries or affiliates (except for
the issuance of shares of Company Common Stock issuable pursuant to Company
Stock Options outstanding on the date hereof, pursuant to payroll
withholding elections made prior to December 1, 2001 under the Company Stock
Purchase Plan and effected with respect to the current offering period
ending on December 31, 2001, and pursuant to the exercise of the Class B
Warrants or the Other Warrants);
(c) sell, pledge, dispose of or encumber any assets of the Company or any
of its subsidiaries (except for (i) sales of assets in the ordinary course
of business and in a manner consistent with past practice, (ii) dispositions
of obsolete or worthless assets, and (iii) sales of immaterial assets not in
excess of $50,000 in the aggregate);
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(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly-owned
subsidiary of the Company may declare and pay a dividend to its parent, (ii)
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, (iii) except (A) as
required by the terms of any security or agreement as in effect on the date
hereof and set forth in Sections 2.11(f) or 4.01 of the Company Disclosure
Schedule and (B) to the extent necessary to effect withholding to meet
minimum tax withholding obligations in connection with the exercise of any
Company Stock Option, amend the terms or change the period of exercisability
of, purchase, repurchase, redeem or otherwise acquire, or permit any
subsidiary to amend the terms or change the period of exercisability of,
purchase, repurchase, redeem or otherwise acquire, any of its securities or
any securities of its subsidiaries, including, without limitation, shares of
Company Common Stock, or any option, warrant or right, directly or
indirectly, to acquire any such securities, or propose to do any of the
foregoing, or (iv) settle, pay or discharge any claim, suit or other action
brought or threatened against the Company with respect to or arising out of
a stockholder equity interest in the Company;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money, except for
(A) indebtedness outstanding on the date hereof and listed on Section 4.01
of the Company Disclosure Schedule, (B) borrowings and reborrowings under
the Company's or any of its subsidiaries' credit facilities listed on
Section 4.01 of the Company Disclosure Schedule in an aggregate amount not
to exceed $500,000 in excess of the amount listed on Section 4.01 of the
Company Disclosure Schedule on the date hereof, and (C) other borrowings not
in excess of $50,000 in the aggregate; (iii) issue any debt securities or
assume, guarantee (other than guarantees of obligations of the Company's
subsidiaries entered into in the ordinary course of business and except as
required by any agreement in effect on the date hereof and identified in
Section 4.01 of the Company Disclosure Schedule) or endorse, or otherwise as
an accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business
consistent with past practice (but not loans or advances to employees of the
Company to fund the exercise price of Company Stock Options or otherwise to
purchase shares of the Company Common Stock, except rights of employees to
receive such loans or advances as such rights exist on November 1, 2001);
(iv) authorize any capital expenditures or purchases of fixed assets which
are, in the aggregate, in excess of $375,000 over the period from the date
hereof to the Effective Date; or (v) enter into or materially amend any
contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 4.01(e);
(f) except as set forth in Section 4.01 of the Company Disclosure
Schedule, as required by law or as provided in an existing obligation of the
Company, (i) increase the compensation or severance payable or to become
payable to its directors, officers, employees or consultants, except for
increases in salary, wages or bonuses of employees of the Company or its
subsidiaries, including in connection with promotions, in accordance with
past practices; (ii) grant any severance or termination pay (except to make
payments required to be made under obligations existing on the date hereof
in accordance with the terms of such obligations or in accordance with past
practice) to, or enter into or amend any employment or severance agreement,
with any current or prospective employee of the Company or any of its
subsidiaries, except for promotions in the ordinary course of business and
any new hire employees (x) whose annual salary does not exceed $80,000, (y)
whose severance benefits do not exceed two weeks' salary per year of service
to the Company and (z) who may be terminated without penalty (except for
severance) for any reason by the Company (or the Surviving Corporation) upon
not more than 30 days notice; or (iii) establish, adopt, enter into or amend
any collective bargaining agreement, Company Employee Plan, including,
without limitation, any plan that provides for the payment of bonuses or
incentive compensation, trust, fund, policy or arrangement for the benefit
of any current or former directors, officers, employees or consultants or
any of their beneficiaries, except, in each case, as may be required by law
or existing agreement or as would not result in a material increase in the
cost of maintaining such collective bargaining agreement, Company Employee
Plan, trust, fund, policy or arrangement;
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(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except as required by a change in GAAP occurring after the date
hereof;
(h) make any Tax election or settle or compromise any United States
federal, state, local or non-U.S. Tax liability;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $100,000 in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Post-1996 Company SEC Documents or incurred in
the ordinary course of business and consistent with past practice or
incurred in connection with this Agreement and the transactions contemplated
hereby;
(j) enter into, modify or renew any contract, agreement or arrangement,
whether or not in writing, for the licensing of its technology;
(k) enter into any contract, agreement or arrangement or any amendment,
modification or renewal to any contract, agreement or arrangement unless the
Company shall have the right to terminate any such contract, agreement,
arrangement, amendment, modification or renewal without penalty upon 30 days
written notice; or
(l) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (k) above, or any action which would
reasonably be expected to make any of the representations or warranties of
the Company contained in this Agreement untrue or incorrect or prevent the
Company from performing or cause the Company not to perform its covenants
hereunder.
Additionally, notwithstanding any other provision hereof, the Company shall
use its commercially reasonable efforts to obtain any and all written consents
of customers which, pursuant to the terms of any contracts, agreements or
arrangements with such customers, are required to permit the transfer of, or to
prevent the termination, of such contracts, agreements or arrangements in
connection with, or as a result of, the transactions contemplated by this
Agreement, except if and insofar as the failure to obtain such consents would
not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 4.02. No Solicitation.
(a) The Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company or any of its
subsidiaries, solicit or knowingly encourage the initiation of (including by
way of furnishing information) any inquiries or proposals regarding any merger,
sale of assets, sale of shares of capital stock (including, without limitation,
by way of a tender offer) or similar transactions involving the Company or any
subsidiaries of the Company that if consummated would constitute an Alternative
Transaction (as defined below) (any of the foregoing inquiries or proposals
being referred to herein as an "Acquisition Proposal"). Nothing contained in
this Agreement shall prevent the Board of Directors of the Company from (i)
furnishing information to a third party which has made a bona fide Acquisition
Proposal that the Board of Directors of the Company concludes in good faith
after consulting with a nationally recognized investment banking firm, which
may be the Company Financial Adviser, would, if consummated, reasonably be
expected to constitute a Superior Proposal (as defined below) not solicited in
violation of this Agreement, provided that such third party has executed an
agreement with confidentiality provisions substantially similar to those then
in effect between the Company and Parent or a subsidiary of Parent or (ii)
subject to compliance with the other terms of this Section 4.02, including
Sections 4.02(c) and (d), considering and negotiating a bona fide Acquisition
Proposal that the Board of Directors of the Company concludes in good faith
after consulting with a nationally recognized investment banking firm, which
may be the Company Financial Adviser, would, if consummated, constitute a
Superior Proposal not solicited in violation of this Agreement; provided,
however, that, as to each of clauses (i) and (ii), the Board of Directors of
the Company reasonably determines in good faith (after due
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consultation with independent counsel, which may be Torys LLP ("Torys")) that
it is or is reasonably likely to be required to do so in order to discharge
properly its fiduciary duties.
For purposes of this Agreement, "Alternative Transaction" means any of (i) a
transaction pursuant to which any person (or group of persons) other than
Acquiror or its affiliates (a "Third Party") acquires or would acquire more
than 25% of the outstanding shares of any class of equity securities of the
Company, whether from the Company or pursuant to a tender offer or exchange
offer or otherwise, (ii) a merger or other business combination involving the
Company pursuant to which any Third Party acquires or would acquire more than
25% of the outstanding equity securities of the Company or the entity surviving
such merger or business combination, (iii) any transaction pursuant to which
any Third Party acquires or would acquire control of assets (including for this
purpose the outstanding equity securities of subsidiaries of the Company and
securities of the entity surviving any merger or business combination including
any of the Company's subsidiaries) of the Company, or any Significant Company
Subsidiary, or (iv) any other consolidation, business combination,
recapitalization or similar transaction involving the Company or any
Significant Company Subsidiary, other than the transactions contemplated by
this Agreement; provided, however, that the term Alternative Transaction shall
not include any acquisition of securities by a broker dealer in connection with
a bona fide public offering of such securities.
For purposes of this Agreement, a "Superior Proposal" means any proposal
made by a Third Party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, all of the Company Common Stock entitled
to vote generally in the election of directors or all or substantially all the
assets of the Company, on terms which the Board of Directors of the Company
reasonably believes (after consultation with a financial advisor of nationally
recognized reputation, which may be the Company Financial Advisor and after
taking into account the likelihood of, and extra time required for,
consummation of such Superior Proposal, and the Parent Fee pursuant to Section
7.03 hereof) to be more favorable from a financial point of view to its
stockholders than the Merger and the transactions contemplated by this
Agreement taking into account at the time of determination any changes to the
financial terms of this Agreement proposed by Acquiror; provided, however, that
a Superior Proposal may be subject to a due diligence review of confidential
information and to other customary conditions.
(b) The Company shall notify Acquiror promptly (but in no event later than
24 hours) after receipt of any Acquisition Proposal, or any modification of or
amendment to any Acquisition Proposal, or any request for nonpublic information
relating to the Company or any of its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or any subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Acquiror shall be made orally
and in writing, and shall indicate the identity of the person making the
Acquisition Proposal or intending to make an Acquisition Proposal or requesting
non-public information or access to the books and records of the Company or any
subsidiary, the terms of any such Acquisition Proposal or modification or
amendment to an Acquisition Proposal, and whether the Company is providing or
intends to provide the person making the Acquisition Proposal with access to
information concerning the Company as provided in Section 4.02(a). The Company
shall keep Acquiror fully informed, on a current basis, of any material changes
in the status and any material changes or modifications in the material terms
of any such Acquisition Proposal, indication or request. The Company shall also
promptly notify Acquiror, orally and in writing, if it enters into negotiations
concerning any Acquisition Proposal.
(c) Except to the extent the Board of Directors of the Company reasonably
determines in good faith (after due consultation with independent counsel,
which may be Torys) that it is or is reasonably likely to be required to act to
the contrary in order to discharge properly its fiduciary duties (and, with
respect to the approval, recommendation or entering into any, Acquisition
Proposal, it may take such contrary action only after the second full business
day following Acquiror's receipt of written notice of the Board of Directors'
intention to do so), neither the Company nor the Board of Directors of the
Company shall withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Acquiror, the approval by such Board of Directors of this Agreement
or the Merger.
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(d) The Company and the Board of Directors of the Company shall not enter
into any agreement (other than a confidentiality agreement entered into not in
violation of Section 4.02(a)) with respect to, or otherwise approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or
Alternative Transaction, unless this Agreement has been terminated in
accordance with its terms.
(e) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its stockholders a position required by Rule 14e-2(a)
or Rule 14d-9 promulgated under the Exchange Act or from making any disclosure
to its stockholders required by applicable law, rule or regulation or by Nasdaq.
(f) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Acquiror)
conducted heretofore with respect to any of the foregoing. The Company agrees
not to release any third party from the confidentiality and standstill
provisions of any agreement to which the Company is a party, except for a
release from standstill provisions in connection with a Superior Proposal.
(g) The Company shall ensure that the officers and directors of the Company
and the Company's subsidiaries and any investment banker or other advisor or
representative retained by the Company are aware of the restrictions described
in this Section 4.02. It is understood that any violation of the restrictions
set forth in this Section 4.02 by any officer or director of the Company or its
subsidiaries, by any investment banker, attorney or other advisor or
representative of the Company retained in connection with this Agreement and
the transactions contemplated hereby or by any other advisor or representative
of the Company at the direction or with the consent of the Company shall be
deemed to be a breach of this Section 4.02 by the Company.
SECTION 4.03. Conduct of Business by Parent Pending the Merger.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement and the consummation of the
Merger, Acquiror covenants and agrees that, unless the Company shall otherwise
agree in writing, Acquiror shall take all action necessary so that (i) Parent
shall conduct its business, and cause the businesses of its subsidiaries to be
conducted, in the ordinary course of business and consistent with past
practice, including actions taken by Parent or its subsidiaries in
contemplation of the Merger or other business acquisitions otherwise in
compliance with this Agreement, and (ii) Parent shall not directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Company, which shall not be unreasonably withheld or delayed:
(a) amend or otherwise change the Parent Charter Documents;
(b) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person, or dispose of any assets,
which, in any such case, would materially delay or prevent the consummation
of the Merger and the other transactions contemplated by this Agreement,
provided, however, the Parent may acquire or agree to acquire any business
or any corporation, partnership, association or other business organization
or division thereof, or otherwise acquire or agree to acquire any assets of
any other person, or dispose of any assets, in all cases, without the
consent of the Company if the value of such transaction is less than 10% of
the market capitalization of the Parent. (For the purposes of this section,
market capitalization of the Parent shall equal the product of the total
number of outstanding shares of the Parent multiplied by the closing price
of such shares on Nasdaq on the date of determination.)
(c) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of any of its capital stock, except that a wholly owned subsidiary of Parent
may declare and pay a dividend to its parent, and except that Parent may
declare and pay regular quarterly cash dividends consistent with past
practice;
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(d) take any action to change its accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except as required by a change in GAAP occurring after the date
hereof; or
(e) take or agree in writing or otherwise to take any of the actions
described in Sections 4.03(a) through (d) above that would make any of the
representations or warranties of Acquiror contained in this Agreement untrue
or incorrect or prevent Acquiror from performing or cause Acquiror not to
perform its covenants hereunder.
Article V
ADDITIONAL AGREEMENTS
Section 5.01. Stockholder Approval; Preparation of Registration Statement
and Proxy Statement/Prospectus.
(a) As soon as practicable after the date of this Agreement, the Company
shall, and Acquiror shall cause Parent to, prepare and file with the SEC under
the Securities Act of 1933, as amended, and the SEC's rules and regulations
promulgated thereunder (the "Securities Act") a registration statement on Form
S-4 to register the offer and sale of the Parent Common Stock pursuant to the
Merger (the "Registration Statement") which will include the Proxy
Statement/Prospectus therein. The Company shall, and Acquiror shall cause
Parent to, use all reasonable efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing and to maintain such effectiveness for so long as shall be required
for the issuance of the shares of the Parent Common Stock in the Merger.
Following the time the Registration Statement is declared effective, Acquiror
shall cause Parent to file the final prospectus included therein under Rule
424(b) promulgated pursuant to the Securities Act. Acquiror agrees to provide
the Company with, and to consult with the Company regarding, any comments that
may be received from the SEC or its staff with respect to the Registration
Statement promptly after receipt thereof.
(b) The Company shall use all reasonable efforts to cause the Proxy
Statement/Prospectus to be mailed to the Company's stockholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act. Acquiror shall also cause Parent to take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to be
taken under the applicable state securities laws in connection with the
issuance of the shares of the Parent Common Stock in the Merger, and the
Company shall furnish to Parent all information concerning the Company and the
holders of capital stock of the Company as may be reasonably requested in
connection with any such action and the preparation, filing and distribution of
the Proxy Statement/Prospectus. No filing of, or amendment or supplement to, or
correspondence to the SEC or its staff with respect to, the Registration
Statement or the Proxy Statement/Prospectus will be made by the Company or the
Parent, without providing the other party a reasonable opportunity to review
and comment thereon.
(c) Acquiror will advise the Company, promptly after Parent receives notice
thereof, of the time when the Registration Statement has become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the shares of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. The Company will advise Acquiror, promptly after it
receives notice thereof, of any request by the SEC for the amendment of the
Proxy Statement/Prospectus or comments thereon and responses thereto or
requests by the SEC for additional information. If at any time prior to the
Effective Time any information relating to the Company or Acquiror, or any of
their respective affiliates, officers or directors, should be discovered by the
Company or Acquiror which should be set forth in an amendment or supplement to
either of the Registration Statement or the Proxy Statement/Prospectus so that
any of such documents would not include
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any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such
information shall promptly notify the other party hereto and an appropriate
amendment or supplement describing such information shall be promptly filed
with the SEC and, to the extent required by law, disseminated to the
stockholders of the Company.
(d) The Proxy Statement/Prospectus shall include the recommendation of the
Board of Directors of the Company in favor of approval of the Merger and
adoption of this Agreement. Notwithstanding anything to the contrary set forth
in this Section 5.01 or Section 5.02, the Company shall not be obligated to
take the action set forth in the preceding sentence of this Section 5.01(c) or
to take the actions set forth in Section 5.02 to the extent that the Board of
Directors of the Company determines in connection with a Superior Proposal
pursuant to Section 4.02 hereof (after due consultation with independent
counsel, which may be Torys) that such action is, or is reasonably likely to
be, inconsistent with the proper discharge of its fiduciary duties.
SECTION 5.02. Company Stockholders Meeting.
(a) The Company shall, prior to or as soon as practicable following the date
upon which the Registration Statement becomes effective, establish a record
date for, duly call, give notice of, convene and hold the Company Stockholders
Meeting as promptly as practicable for the purpose of voting upon the adoption
of this Agreement, and the Company shall use all reasonable efforts to cause
the Proxy Statement/Prospectus to be mailed to the Company's stockholders and
to hold the Company Stockholders Meeting as promptly as practicable after the
Registration Statement is declared effective under the Securities Act. The
Company shall solicit from its stockholders proxies in favor of approval of the
Merger and adoption of this Agreement and shall take all other reasonable
action necessary or advisable to secure the vote or consent of stockholders in
favor of such approval and adoption.
(b) Acquiror agrees to vote all of the Shares, if any, beneficially owned by
Acquiror, Parent or any of their subsidiaries in favor of approval of the
Merger and adoption of this Agreement at the Company Stockholders Meeting and
to take such other actions to effectuate as promptly as practicable the Merger
in accordance with Section 252 of the Delaware Law, on the terms and subject to
the conditions set forth in this Agreement.
SECTION 5.03. Access to Information; Confidentiality.
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements (from which such party shall use reasonable efforts
to be released), the Company shall (and shall cause its subsidiaries to) (i)
afford to the officers, employees, accountants, counsel and other
representatives of the Parent, reasonable access during reasonable hours,
during the period after the execution and delivery of this Agreement and prior
to the Effective Time to its properties, books, contracts, commitments and
records, (ii) during such period furnish promptly to the Parent all information
concerning the business, properties and personnel of the Company, as the Parent
may reasonably request, and (iii) make available to the Parent the appropriate
individuals (including attorneys, accountants and other professionals) for
discussion of the Company's business, properties and personnel as the Parent
may reasonably request.
(b) Acquiror shall cause Parent and its subsidiaries to afford to the
officers, employees, accountants, counsel and other representatives of the
Company reasonable access during reasonable hours, during the period after the
execution and delivery of this Agreement and prior to the Effective Time to (i)
certain financial records of the Parent and (ii) the appropriate individuals
(including attorneys, accountants and other professionals) for discussion of
the parent's business, properties and personnel as the Company may reasonably
request. For the avoidance of doubt, the Parent will not assemble and provide
access to all of its non-public information.
(c) The information provided by the parties pursuant to Sections 5.03(a) and
(b) above shall be kept confidential in accordance with the terms of the
confidentiality agreements, dated July 5, 2001 and August 9, 2001, respectively
(collectively, the "Confidentiality Agreement"), between Parent and the
Company. This Section 5.03 (c) shall survive the termination of this Agreement.
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SECTION 5.04. Consents; Approvals.
The Company and Acquiror shall each use its reasonable best efforts (and
Acquiror shall cause Parent to use its reasonable best efforts) to obtain and
to cooperate with each other in order to obtain as promptly as practicable all
consents, waivers, approvals, authorizations or orders (including, without
limitation, all United States and non-U.S. governmental and regulatory rulings
and approvals), and the Company and Acquiror shall make (and Acquiror shall
cause Parent to make) as promptly as practicable all filings (including,
without limitation, all filings with United States and non-U.S. governmental or
regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by the Company and Acquiror and the consummation
by them of the transactions contemplated hereby. The Company and Acquiror shall
promptly furnish (and Acquiror shall cause Parent to furnish) all information
required to be included in the Proxy Statement/Prospectus and the Registration
Statement, or for any application or other filing to be made pursuant to the
rules and regulations of any United States or non-U.S. governmental body in
connection with the transactions contemplated by this Agreement. The Company
shall, and Acquiror shall cause Parent to, cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under
Section 5.01 and this Section 5.04 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder.
SECTION 5.05. Agreements with Respect to Affiliates.
At or prior to the date the Proxy Statement/Prospectus is first mailed to
stockholders, Company will furnish to Parent a list of all persons known to the
Company who at the date of the Company Stockholders Meeting may be deemed to be
"affiliates" of the Company within the meaning of Rule 145 under the Securities
Act ("Company Affiliates"). The Company will use its reasonable best efforts to
cause each Company Affiliate to deliver to Parent prior to the date the Proxy
Statement/Prospectus is first mailed to stockholders of the Company a written
agreement providing that such person will not sell, pledge, transfer or
otherwise dispose of the shares of Parent Common Stock to be received by such
person in the Merger except in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder.
SECTION 5.06. Indemnification and Insurance.
(a) The Certificate of Incorporation and Bylaws of the Surviving Corporation
shall contain all the provisions with respect to indemnification set forth in
the Company Charter Documents on the date hereof, which provisions shall not be
amended, modified or otherwise repealed for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
as of the Effective Time of individuals who at or prior to the Effective Time
were directors, officers, employees or agents of the Company, unless such
modification is required after the Effective Time by law and then only to the
minimum extent required by such law.
(b) The Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Certificate of
Incorporation or Bylaws, indemnify and hold harmless each present and former
director, officer or employee of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining to the
transactions contemplated by this Agreement or (y) otherwise with respect to
any acts or omissions occurring at or prior to the Effective Time, to the same
extent as provided in the Company Charter Documents or any applicable contract
or agreement as in effect on the date hereof and disclosed on Section 5.06(b)
of the Company Disclosure Schedule, in each case for a period of six years
after the Effective Time. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time) and subject to the specific terms of any indemnification contract, (i)
any counsel retained by the Indemnified Parties for any period after the
Effective Time shall be reasonably satisfactory to the Surviving Corporation,
(ii) after the Effective Time, the Surviving Corporation shall pay the
reasonable fees and expenses of such counsel, promptly after statements
therefor are received; provided that the Indemnified Parties shall be required
to reimburse the
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Surviving Corporation for such payments in the circumstances and to the extent
required by the Company Charter Documents, any applicable contract or agreement
or applicable law; and (iii) the Surviving Corporation will cooperate in the
defense of any such matter; provided, however, that the Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld); and provided, further,
that, in the event that any claim or claims for indemnification are asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until the disposition of any and all
such claims. The Indemnified Parties as a group may retain only one law firm to
represent them in each applicable jurisdiction with respect to any single
action unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties, in which case each Indemnified Party with respect to whom
such a conflict exists (or group of such Indemnified Parties who among them
have no such conflict) may retain one separate law firm in each applicable
jurisdiction.
(c) The Surviving Corporation shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements and
employment agreements and arrangements (the employee parties under such
agreements and arrangements being referred to as the "Covered Persons") with
the Company's directors and officers existing at or before the Effective Time
that are listed in Section 5.06(c) of the Company Disclosure Schedule.
(d) In addition, Acquiror shall provide, or cause the Surviving Corporation
to provide, for a period of not less than six years after the Effective Time,
the Company's current directors and officers with an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time (the "D&O Insurance") that is no less favorable than the
existing policy or, if substantially equivalent insurance coverage is
unavailable, the next best available coverage; provided, however, that Acquiror
and the Surviving Corporation shall not be required to pay an annual premium
for the D&O Insurance in excess of 175% of the annual premium currently paid by
the Company for such insurance, but in such case shall purchase as much such
coverage as possible for such amount.
(e) From and after the Effective Time, Acquiror shall unconditionally
guarantee the timely payment of all funds owing by, and the timely performance
of all other obligations of, the Surviving Corporation under this Section 5.06.
(f) Nothing contained in this Section 5.06 is intended to limit in any
manner and at any time rights that any Indemnified Party may have under and in
accordance with all provisions of the Company Charter Documents, including, but
not limited to, rights under the respective Article of the Company's Restated
Certificate of Incorporation and the respective Article of the Company's Bylaws
in each case dealing with indemnification, or any contract or agreement in
effect on the date hereof or whose execution following the date hereof is
permitted by the terms of this Agreement, which rights shall survive the
Effective Time and shall be binding on the Surviving Corporation and all
successors and assigns of the Surviving Corporation, in accordance with their
respective terms.
(g) This Section 5.06 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation,
the Indemnified Parties and the Covered Persons, shall be binding on all
successors and assigns of the Surviving Corporation and shall be enforceable by
the Indemnified Parties and the Covered Persons.
SECTION 5.07. Notification of Certain Matters.
The Company shall give prompt notice to Acquiror, and Acquiror shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would reasonably be expected to
cause any representation or warranty contained in this Agreement to be
materially untrue or inaccurate, or (ii) any failure of the Company or
Acquiror, as the case may be, materially to comply with or
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satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice; and provided further that failure to give such notice
shall not be treated as a breach of covenant for purposes of Section 7.01(b)
unless the failure to give such notice results in material prejudice to the
other party. Parent shall promptly notify the Company if Parent considers any
Regulatory Condition or Requirement (as defined in Section 6.01) to be in
Parent's reasonable business judgement adverse to the best interests of the
combined entities (an "Adverse Regulatory Condition Notice").
SECTION 5.08. Further Action/Tax Treatment.
(a) Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied
all conditions precedent to its obligations under this Agreement. The foregoing
covenant shall include, without limitation, the obligation of the Company to
agree to divest, abandon, license, hold separate or take similar action with
respect to any assets (tangible or intangible) which are, in the aggregate, not
material to the Company (but shall not include any obligation by Parent or
Acquiror to agree to divest, abandon, license, hold separate or take similar
action with respect to any assets, tangible or intangible).
(b) Notwithstanding anything herein to the contrary, each of Acquiror and
the Company shall, and Acquiror shall cause Parent to, use its reasonable best
efforts to cause the Merger to qualify, and will not (either before or after
the Merger) take any actions, or fail to take any action, which could
reasonably be expected to prevent the Merger from qualifying as a
reorganization under the provisions of Section 368(a) of the Code. Acquiror
shall, and shall cause the Surviving Corporation and Parent to, report, to the
extent required by the Code or the regulations thereunder, the Merger for
United States federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. Each of Acquiror and the Company shall
make, and shall cause their affiliates (including Parent) to make, such
representations, warranties and covenants as shall be requested reasonably in
the circumstances by Reed Smith and Torys in order for such firms to render
their opinions referred to in Section 6.02 and 6.03.
SECTION 5.09. Public Announcements. Acquiror and the Company shall
consult with each other before issuing any press release or making any written
public statement with respect to the Merger or this Agreement and the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement without the prior consent of the other party,
which shall not be unreasonably withheld; provided, however, that either party
may, without the prior consent of the other, issue such press release or make
such public statement as may upon the advice of counsel be required by law
(including, without limitation, Rules 165 and 425 under the Securities Act and
Rule 14a-12 under the Exchange Act) or the rules and regulations of Nasdaq if
it has used all reasonable efforts to consult with the other party.
SECTION 5.10. Shares of the Parent Common Stock.
(a) Acquiror shall take all action necessary so that Parent shall transfer
to Acquiror the shares of the Parent Common Stock to be delivered by Acquiror
to the holders of Company Common Stock in the Merger.
(b) Acquiror will take all action necessary so that Parent will use its
reasonable best efforts to cause the shares of the Parent Common Stock to be
delivered by Acquiror to the holders of Company Common Stock in the Merger to
be listed, upon official notice of issuance, on the Nasdaq prior to the
Effective Time.
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SECTION 5.11. Conveyance Taxes.
Acquiror and the Company shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications, or other documents
regarding (i) any real property transfer or gains, sales, use, transfer, value
added, stock transfer and stamp taxes, (ii) any transfer, recording,
registration and other fees, and (iii) any similar taxes which become payable
in connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time, and the Company shall be
responsible for the payment of all such taxes and fees.
SECTION 5.12. Stock Incentive Plans; Other Programs.
(a) At the Effective Time, each Company Stock Option under the Company Stock
Option Plans, whether vested or unvested, shall be deemed to constitute an
option (an "Adjusted Option") to acquire, on the same terms and conditions as
were applicable under such Company Stock Option, the same number of shares of
Parent Common Stock as the holder of such Company Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time (rounded to the nearest
whole number), at a price per share (rounded to the nearest whole cent) equal
to (y) the aggregate exercise price for the Shares otherwise purchasable
pursuant to such Company Stock Option divided by (z) the number of full shares
of Parent Common Stock deemed purchasable pursuant to such Company Stock Option
in accordance with the foregoing; provided, however, that in the case of any
Company Stock Option to which Section 422 of the Code applies, the option
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option shall be determined in accordance
with the foregoing, subject to such adjustments as are necessary in order to
satisfy the requirements of Section 424(a) of the Code.
(b) Acquiror will cause Parent to take all corporate action necessary to
reserve for issuance as of or as soon as administratively practicable after the
Effective Time a sufficient number of shares of the Parent Common Stock for
delivery upon exercise of the Adjusted Options and to deliver to holders of
Adjusted Options, upon the exercise of such options, shares of the Parent
Common Stock registered pursuant to the Securities Act and listed on Nasdaq.
(c) Beginning on the date hereof, the Company shall not establish any new
employee stock purchase plans or extend the availability of the Company Stock
Purchase Plan to any employees not previously eligible to be included in the
Company Stock Purchase Plan, or, in either case, implement any decisions to do
the same, whether or not such decisions have been communicated to employees.
The Company shall suspend the Company Stock Purchase Plan through the Effective
Time at the end of the current offering period ending December 31, 2001. All
shares of Company Common Stock under the Company Stock Purchase Plan shall be
treated as all other shares of Company Common Stock. Acquiror shall, to the
extent legally and administratively feasible, enable employees of the Company
and its subsidiaries to participate in Parent's employee stock purchase plan,
in a manner consistent with the current practice of Acquiror's affiliates.
(d) The Company agrees to take any and all action necessary pursuant to the
terms of the Company Stock Purchase Plan to effect the aforementioned
suspension of such plan.
(e) At the Effective Time, each Class B Warrant or Other Warrant (each, a
"Company Warrant") shall be deemed to constitute a warrant (each, an "Adjusted
Warrant") to acquire, on the same terms and conditions as were applicable under
such Company Warrant, the same number of shares of Parent Common Stock as the
holder of such Company Warrant would have been entitled to receive pursuant to
the Merger had such holder exercised such Company Warrant in full immediately
prior to the Effective Time (rounded to the nearest whole number), at a price
per share (rounded to the nearest whole cent) equal to (y) the aggregate
exercise price for the Shares otherwise purchasable pursuant to such Company
Warrant divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Company Warrant in accordance with the foregoing.
Acquiror will cause Parent to take all corporate action necessary to reserve
for issuance as of or as soon as
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administratively practicable after the Effective Time a sufficient number of
shares of the Parent Common Stock for delivery upon exercise of the Adjusted
Warrants and to deliver to holders of Adjusted Warrants, upon the exercise of
such Adjusted Warrants, shares of the Parent Common Stock registered pursuant
to the Securities Act and listed on Nasdaq.
SECTION 5.13. Certain Employee Benefits.
(a) The Surviving Corporation, at its sole discretion, shall either continue
the current employee benefits of the Company or shall provide the employees of
the Company or any subsidiary of the Company (each, a "Company Employee") with
employee benefits that are comparable in the aggregate to those provided to
similarly situated employees of the Parent (with similar situations to be
determined in light of the Company Employee's new post-Merger
responsibilities). It is the intention of the Parent either to maintain
existing Company employee benefits or arrange for the Company Employees to
become participants in Parent's existing employee benefit plans after the
Effective Time. For the avoidance of doubt, it is understood that the Surviving
Corporation shall have no obligation to provide Company Employees with
post-termination welfare or pension benefits, except to the extent required by
applicable law or contractual agreement.
(b) With respect to the benefits provided pursuant to this Section 5.13, (i)
service accrued by Company Employees during employment with the Company and its
subsidiaries (including any predecessor entity) prior to the Effective Time
shall be recognized for all purposes, except for benefit accruals with respect
to defined benefit pension plans, (ii) any and all pre-existing condition
limitations (to the extent such limitations did not apply to a pre-existing
condition under the applicable Company Employee Plan) and eligibility waiting
periods under any group health plan shall be waived with respect to such
Company Employees and their eligible dependents, and (iii) Company Employees
shall be given credit for amounts paid under a Company Employee Plan during the
applicable period for purposes of applying deductibles, co-payments and
out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the employee welfare plans in which any Company
Employee becomes entitled to participate.
(c) From and after the Effective Time, Acquiror shall cause the Surviving
Corporation to honor in accordance with their terms all benefits and
obligations under the Company Employee Plans, and consulting agreements
including without limitation each employment, retirement, severance and change
in control agreement, plan or arrangement, each as in effect on the date of
this Agreement (or as amended as contemplated hereby or with the prior written
consent of Acquiror); provided, however, that nothing herein shall prevent the
Surviving Corporation or any other subsidiary of Parent from amending,
modifying or terminating any employee benefit plan, program or arrangement in
any respect in accordance with its terms or, subject to the terms of the
Company Employee Plans (as so amended, modified or terminated, if applicable),
modifying or terminating the terms and conditions of employment or other
service of any particular employee or any other person, except in any such case
as precluded by law or the terms of a Company Employee Plan.
(d) It is expressly agreed that the provisions of Section 5.13 are not
intended to be for the benefit of or otherwise enforceable by any third party,
including, without limitation, any Company Employees.
(e) The Company shall amend its 401(k) savings plan and any other Company
Employee Plan which permits participants to elect to invest in stock of the
Company, where necessary, to preclude any additional purchases of stock of the
Company, as of a date no later than five (5) days prior to the date of this
Agreement, and the Company shall communicate this amendment to the participants
in such plans.
SECTION 5.14 . Accountant's Letters.
Upon reasonable notice from the other party, the Company shall use its best
efforts to cause Ernst & Young LLP ("Ernst & Young") to deliver to Acquiror,
and Acquiror shall use its best efforts to cause Ernst & Young to deliver to
the Company, a letter covering such matters as are reasonably requested by
Acquiror or the Company, as the case may be, and as are customarily addressed
in accountants' "comfort letters."
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SECTION 5.15. Compliance with State Property Transfer Statutes.
The Company agrees that it shall use its reasonable commercial efforts to
comply promptly with all requirements of applicable state property transfer
laws as may be required by the relevant state agency and shall take all action
necessary to cause the transactions contemplated hereby to be effected in
compliance with applicable state property transfer laws. The Company, after
consultation with Acquiror, shall determine which actions must be taken prior
to or after the Effective Time to comply with applicable state property
transfer laws. The Company agrees to provide Acquiror with any documents
required to be submitted to the relevant state agency prior to submission, and
the Company shall not take any action to comply with applicable state property
transfer laws without Acquiror's prior consent, which consent shall not be
unreasonably withheld or delayed. Acquiror shall provide, and shall take all
action necessary such that Parent shall provide to the Company any assistance
reasonably requested by the Company with respect to such compliance.
SECTION 5.16. Cooperation with Phase I Survey.
The Company shall cooperate and shall cause its employees, representatives
and agents, and the employees, representatives and agents of its subsidiaries
to cooperate with the Parent or the Parent's agent, if the Parent, at its
option and expense, conducts a Phase I environmental survey relating to the
compliance of the operations and properties of the Company and its subsidiaries
with Environmental Laws.
Article VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that
purpose and no similar proceeding in respect of the Proxy
Statement/Prospectus shall have been initiated or threatened by the SEC;
(b) Stockholder Approval. This Agreement shall have been adopted by the
requisite vote of the stockholders of the Company;
(c) Regulatory Clearances & Approvals. All waiting periods applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated; all clearances and approvals required to be obtained in respect
of the Merger prior to the Effective Time under any Non-U.S. Monopoly Laws
shall have been obtained, except where the failure to have obtained any such
clearances or approvals with respect to any Non-U.S. Monopoly Laws would not
reasonably be expected to have a Material Adverse Effect on the Company or
Parent; any other Federal, state, local or foreign regulatory clearances and
approvals necessary to the consummation of the Merger shall have been
obtained; and all other waiting periods imposed by any Federal, state, local
and foreign governmental authority in connection therewith shall have
expired. None of such regulatory clearances or approvals shall contain or
impose any conditions or requirements, including without limitation
requirements relating to divestiture of product lines, manufacturing
operations, one or more subsidiaries or divisions or any other material
assets or require that Parent sell or license any rights to any of its
tangible or intangible properties or those of the combined entities (a
"Regulatory Condition or Requirement");
(d) Governmental Actions. Neither Parent nor the Company shall be
subject to any order, stay, decree, judgment or injunction of any
Governmental Authority or court of competent jurisdiction which
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enjoins, prohibits or materially adversely affects the Merger that has not
been vacated, dismissed or withdrawn as of the Effective Time, or to any
pending or threatened (in writing) litigation or proceeding by any
Governmental Authority or agency which seeks to enjoin or prohibit the
Merger or to impose material damages on either party or any of Parent's
directors or officers by reason thereof;
(e) Illegality. No statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal; and
(f) NASD Quotation. NASD shall have approved for quotation on the
Nasdaq, upon official notice of issuance, all of the shares of Parent Common
Stock to be issued in the Merger.
SECTION 6.02. Acquiror Conditions
The obligations of Acquiror to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) Representations and Warranties; Performance of Obligations. Except
as otherwise consented to in writing by Acquiror or contemplated by this
Agreement, the representations and warranties of the Company contained
herein shall be true and correct as of the date hereof and as of the date of
the Closing as though made on such date (except that any representation or
warranty which specifically relates to an earlier date shall be true and
correct as of such earlier date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "Material Adverse Effect"
set forth therein) would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect. The Company shall have performed
or complied in all material respects with all agreements, covenants and
conditions under this Agreement required to be performed or complied with by
the Company at or prior to the Closing; and Parent shall have received a
certificate to each of the foregoing effects signed by the principal
executive officer and the principal accounting and financial officers of the
Company.
(b) Affiliates' Agreements. Parent shall have received from each of the
persons identified by the Company pursuant to Section 5.05(a) hereof an
executed counterpart of the agreement of Company Affiliates contemplated by
such Section.
(c) Employment Agreements and Related Agreements. Each of the Employment
Agreements and related agreements executed on or before the date of this
Agreement by William J. Lacourciere, Philip F. Nuzzo, Anthony Pierry and
Catherine Bush shall not have been terminated, repudiated or breached by the
individual party thereto, except in the case of termination due to death or
disability of the individual party thereto as provided in the applicable
Employment Agreement and related agreements.
(d) Corporate Legal Opinion. Parent shall have received from Torys,
counsel for the Company, an opinion dated the Closing Date and in the form
attached hereto as Exhibit 6.02(d).
(e) Federal Tax Opinion. There shall have been received by Parent, to be
included as an exhibit to the Registration Statement, an opinion of Reed
Smith, to the effect that:
(i) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and Parent, Acquiror and the Company will
each be a "party to a reorganization" within the meaning of Section
368(b) of the Code;
(ii) No gain or loss will be recognized by Parent, Acquiror or the
Company as a result of the Merger;
(iii) Except for cash received in lieu of fractional shares, no gain
or loss will be recognized by the stockholders of the Company who
receive solely Parent Common Stock (and cash in lieu of fractional
shares) on the exchange of their shares of Company Common Stock for
shares of Parent Common Stock;
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(iv) The basis of the shares of Parent Common Stock to be received by
the stockholders of the Company will be the same as the basis of the
shares of Company Common Stock (reduced by any amount allocable to
fractional share interests for which cash is received) exchanged
therefor; and
(v) The holding period of the shares of Parent Common Stock to be
received by the stockholders of the Company will include the period
during which the Company Common Stock surrendered in exchange therefor
was held by the Company stockholder, provided such Company Common Stock
was held as a capital asset in the hands of the Company stockholder at
the time of the exchange.
SECTION 6.03. Company Conditions
The obligations of Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) Representations and Warranties; Performance of Obligations. Except
as otherwise consented to in writing by the Company or contemplated by this
Agreement, the representations and warranties of Acquiror contained herein
shall be true and correct as of the date hereof and as of the date of the
Closing as though made on such date (except that any representation or
warranty which specifically relates to an earlier date shall be true and
correct as of such earlier date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "Material Adverse Effect"
set forth therein) would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect; Acquiror shall have performed or
complied in all material respects with all agreements, covenants and
conditions under this Agreement required to be performed or complied with by
Acquiror at or prior to the Closing; and the Company shall have received a
certificate to each of the foregoing effects signed by the principal
executive officer and the principal accounting and financial officers of
Parent.
(b) Tax Opinion. The Company shall have received from Torys, counsel for
Company, an opinion in form and substance reasonably satisfactory to the
Company as to such matters as the Company may reasonably request and to the
effect that:
(i) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and Parent, Acquiror and the Company will
each be a "party to a reorganization" within the meaning of Section
368(b) of the Code;
(ii) No gain or loss will be recognized by Parent, Acquiror or the
Company as a result of the Merger;
(iii) Except for cash received in lieu of fractional shares, no gain
or loss will be recognized by the stockholders of the Company who
receive solely Parent Common Stock (and cash in lieu of fractional
shares) on the exchange of their shares of Company Common Stock for
shares of Parent Common Stock;
(iv) The basis of the shares of Parent Common Stock to be received by
the stockholders of the Company will be the same as the basis of the
shares of Company Common Stock (reduced by any amount allocable to
fractional share interests for which cash is received) exchanged
therefor; and
(v) The holding period of the shares of Parent Common Stock to be
received by the stockholders of the Company will include the period
during which the Company Common Stock surrendered in exchange therefor
was held by the Company stockholder, provided such Company Common Stock
was held as a capital asset in the hands of the Company stockholder at
the time of the exchange.
(c) Corporate Legal Opinion. The Company shall have received from Reed
Smith, counsel for Parent and Acquiror, an opinion dated the Closing Date
and in the form attached hereto as Exhibit 6.03(c).
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Article VII
TERMINATION
SECTION 7.01. Termination.
Notwithstanding prior approval by the stockholders of the Company or
Acquiror, this Agreement may be terminated and the Merger abandoned:
(a) by mutual written consent duly authorized by the Board of Directors
of each of the parties hereto at any time prior to the Effective Time; or
(b) by the Company or Acquiror in the event of a material breach of a
representation, warranty, covenant or agreement of the other party contained
herein, which breach, if curable, has not been cured within 30 days after
written notice of such breach is given to the breaching party by the party
electing to terminate; or
(c) by the Company or Acquiror at any time after the stockholders of the
Company shall fail to approve this Agreement, in a vote taken at a meeting
duly convened for that purpose, provided that the party electing to
terminate shall have performed its obligations under Sections 6.02 or 6.03
hereof, if applicable; or
(d) (i) by the Company or Acquiror at any time after a final judicial or
regulatory determination (as to which all periods for appeal have expired
and no appeal shall be pending) denying any regulatory clearance and/or
approval required for the Merger or (ii) by Acquiror within three (3)
business days after Acquiror delivers to the Company an Adverse Regulatory
Condition Notice; or
(e) by the Company or Acquiror if the Effective Time shall not have
occurred on or before six (6) months after the date hereof; provided,
however, that the right to terminate this Agreement under this Section
7.01(e) shall not be available to any party whose failure to fulfill any
obligation or satisfy any condition under this Agreement shall have caused,
or resulted in, the failure of the Effective Time to occur on or before such
date; or
(f) by the Company if the Company's Board of Directors shall have
approved an Acquisition Proposal (subject to the terms and conditions set
forth in Section 4.02) after determining, upon the basis of advice of
outside counsel that such action is necessary in order for the Board of
Directors to act in a manner consistent with its fiduciary obligation under
applicable law; or
(g) by the Company if the Parent Share Value per share shall be below
$30.00 on the Determination Date, provided, that, the Company must exercise
this right to terminate within two (2) business days after the Determination
Date. If the Company does not exercise this right to terminate within two
business days after the Determination Date, the Exchange Ratio shall be
fixed at 0.2667 shares of Parent Common Stock per share of Company Common
Stock as provided in Section 1.06(b)(iv) hereof and this section shall not
give the Company the right to terminate this Agreement.
Termination pursuant to subparagraphs (b) through (g) of this Section 7.01
shall be effected by written notice provided by the terminating party in
accordance with Section 8.02 hereof.
SECTION 7.02. Effect of Termination.
In the event of termination of this Agreement as provided in Section 7.01,
this Agreement shall forthwith become void, and there shall be no liability on
the part of either party or its affiliates or its or their respective officers,
directors or stockholders except (i) as set forth in Sections 5.03(c), 7.03,
8.12 and 8.14 hereof or (ii) in the event of a willful breach of this Agreement
or any willful misrepresentation made by such party hereunder (it being
understood that (x) the provisions of Section 7.03 do not constitute a sole or
exclusive remedy for any such willful breach or misrepresentation and (y) the
mere existence of a Material Adverse Effect, by itself, shall not constitute
such a willful breach by the Company).
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SECTION 7.03. Parent Fee.
(a) The Company hereby agrees to pay Parent, subject to the terms and
conditions of this Section 7.03, upon the occurrence of the events specified in
this Section, a fee (the "Parent Fee") of $3,400,000 plus actual, documented
and reasonable out-of-pocket expenses, relating to the transactions
contemplated by this Agreement (including, but not limited to, reasonable fees
and expenses of counsel and accountants and out-of-pocket expenses (but not
fees of financial advisors)), but in no event shall expenses in excess $425,000
be reimbursed.
(b) Parent shall be entitled to payment of the Parent Fee if:
(i) The Board of Directors of the Company shall fail to recommend, or
shall withdraw, modify or change its recommendation referred to in Section
5.02 hereof in a manner adverse to Parent or shall have resolved to do any
of the foregoing other than under circumstances permitting termination by
the Company pursuant to Section 7.01(b), (d), (e) or (g) hereof or by mutual
consent pursuant to Section 7.01(a);
(ii) The Company shall terminate this Agreement pursuant to Section
7.01(f) hereof; or
(iii) The Company shall execute and deliver a definitive agreement for,
or Company's Board of Directors shall approve, a Company Business
Combination within twelve (12) months following the termination of this
Agreement unless such termination is by the Company pursuant to Section
7.01(b), (d), (e) or (g) hereof or by mutual consent pursuant to Section
7.01(a).
As used herein, "Company Business Combination" shall mean (i) a merger or
consolidation, or any similar transaction, involving the Company or any
Significant Company Subsidiary, (ii) a purchase, lease or other acquisition of
all or substantially all of the assets of Company or any Significant Company
Subsidiary or (iii) a purchase or other acquisition (including by way or
merger, consolidation, share exchange or otherwise) of securities representing
30% or more of the voting power of the Company or any Significant Company
Subsidiary (other than, in the case of the transfer of securities of any
Significant Company Subsidiary, transfers between the Company and/or one or
more of the Company Subsidiaries). "Significant Company Subsidiary" shall mean
each Company Subsidiary which in the most recent fiscal year of the Company
accounted for more than 20% of the consolidated assets of the Company and the
Company Subsidiaries or which accounted for more than 20% of the consolidated
income of the Company and the Company Subsidiaries for each of the most recent
three fiscal years of the Company; provided, however, that with respect to
Company Subsidiaries created or acquired after the date hereof, if thereafter
such entity, in a fiscal year, accounts for more than 20% of the consolidated
assets of the Company and the Company Subsidiaries in such fiscal year or
accounts for more than (x) 20% of the consolidated income of the Company and
the Company Subsidiaries in the year of creation or acquisition, (y) 20% of the
consolidated income of the Company and the Company Subsidiaries for each of the
two most recent fiscal years in the two years following creation or acquisition
and (z) thereafter, 20% of the consolidated income of the Company and the
Company Subsidiaries for each of the most recent three fiscal years, it shall
be deemed to be a Significant Company Subsidiary for such fiscal year.
(c) The Parent Fee shall be payable in immediately available funds within
five (5) business days after the occurrence of the event giving rise to such
payment.
(d) Except as set forth in this Section 7.03, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated.
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Article VIII
GENERAL PROVISIONS
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements.
Except as otherwise provided in this Section 8.01, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, except that the agreements set forth in Article I and
Sections 5.06 and 5.08(b) and any other agreement in this Agreement which
contemplates performance after the Effective Time shall survive the Effective
Time indefinitely and those set forth in Sections 7.02 and 7.03 and this
Article VIII shall survive termination indefinitely. The Confidentiality
Agreement shall survive termination of this Agreement in accordance with its
terms.
SECTION 8.02. Notices.
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made if and when
delivered personally or by overnight courier to the parties at the following
addresses (or at such other address as shall be specified by like notice):
(a) If to Acquiror or Parent:
RESPIRONICS HOLDINGS, INC.
1501 Ardmore Blvd.
Pittsburgh, PA 15221
Attn: Steven Fulton, Esq.
Telephone: 412-473-4001
RESPIRONICS, INC.
1501 Ardmore Blvd.
Pittsburgh, PA 15221
Attn: Steven Fulton, Esq.
Telephone: 412-473-4001
With a copy (which shall not constitute notice) to:
Reed Smith LLP
435 Sixth Avenue
Pittsburgh, PA 15219-1886
Attn: David L. DeNinno, Esq.
Telephone: (412) 288-3214
(b) If to the Company:
NOVAMETRIX MEDICAL SYSTEMS INC.
5 Technology Drive
Wallingford, CT 06492
Attn: Chief Executive Officer
Telephone: (203) 265-7701
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With a copy (which shall not constitute notice) to:
Thomas M. Haythe, Esq.
90 Park Avenue
15th Floor
New York, New York 10016
Telephone: (212) 210-9583
and a copy to:
Torys LLP
237 Park Avenue
New York, NY 10017
Attn: John J. Butler, Esq.
Telephone:(212) 880-6000
SECTION 8.03. Certain Definitions.
For purposes of this Agreement, the term:
(a) "affiliates", with respect to any person, means a person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in
Wilmington, Delaware are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "dollars" or "$" means United States dollars;
(e) "knowledge" means, with respect to any matter in question, that the
executive officers, or the responsible employee having primary or
substantial oversight responsibility for the matter, of the Company, any
subsidiary of the Company, Acquiror, Parent or any subsidiary of Parent, as
the case may be, have or at any time had actual knowledge of such matter,
provided, however, when used with respect to senior management of the
Company, knowledge includes the knowledge of any Company Employee at the
level of department head or any other higher-ranking Company Employee.
(f) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Acquiror, Parent or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Acquiror, Parent or such other person, as the case
may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.
When reference is made in this Agreement to the Company, Acquiror or Parent,
such reference shall include their respective subsidiaries, as and to the
extent the context so requires, whether or not explicitly stated in this
Agreement.
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SECTION 8.04. Amendment.
This Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of the Merger and
adoption of this Agreement by the stockholders of the Company, no amendment may
be made which by law requires further approval or adoption by such stockholders
without such further approval or adoption. This Agreement may not be amended,
except by an instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver.
At any time prior to the Effective Time, any party hereto may with respect
to any other party hereto (a) extend the time for the performance of any of the
obligations or other acts, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto,
or (c) waive compliance with any of the agreements or conditions contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
SECTION 8.06. Headings.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 8.07. Severability.
(a) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions 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 manner adverse to any party. Upon a
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 to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
(b) The Company and Acquiror agree that the Parent Fee provided in Section
7.03 is fair and reasonable in the circumstances. If a court of competent
jurisdiction shall nonetheless, by a final, nonappealable judgment, determine
that the amount of the Parent Fee exceeds the maximum amount permitted by law,
then the amount of the Parent Fee shall be reduced to the maximum amount
permitted by law in the circumstances, as determined by such court of competent
jurisdiction.
SECTION 8.08. Entire Agreement.
This Agreement and the Guarantee hereof constitute the entire agreement and
supersede all prior agreements and undertakings (other than the Confidentiality
Agreement), both written and oral, among the parties, or any of them, with
respect to the subject matters hereof and thereof, except as otherwise
expressly provided herein or therein.
SECTION 8.09. Assignment.
This Agreement shall not be assigned by operation of law or otherwise,
except that all or any of the rights of Acquiror hereunder may be assigned to
Parent or any direct or indirect wholly-owned subsidiary of Parent provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.
A-52
SECTION 8.10. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended to
or shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement, including, without
limitation, by way of subrogation, other than Section 5.06 (which is intended
to be for the benefit of the Indemnified Parties and Covered Persons and may be
enforced by such Indemnified Parties and Covered Persons) and Section 7.03
(which contains provisions intended to be for the benefit of Parent and may be
enforced by Parent) and other than the right of the stockholders of the Company
to receive the Merger Consideration if, but only if, the Merger is consummated
and not otherwise.
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 8.12. Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of Delaware.
(b) Each of the parties hereto submits to the exclusive jurisdiction of the
courts of the State of Delaware and the federal courts of the United States
having jurisdiction over Wilmington, Delaware, with respect to any claim or
cause of action arising out of this Agreement or the transactions contemplated
hereby.
SECTION 8.13. Counterparts.
This Agreement may be executed in two or more counterparts, and by the
different parties hereto in separate counterparts (by facsimile or original
signature), 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 8.14. WAIVER OF JURY TRIAL.
EACH OF ACQUIROR AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.15. Performance of Guarantee.
Unless otherwise previously performed, Acquiror shall cause Parent to
perform all of its obligations under the Guarantee.
SECTION 8.16. Enforcement.
The parties agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms. It is accordingly agreed that the parties shall be entitled to
specific performance of the terms hereof, this being in addition to any other
remedy to which they are entitled at law or in equity.
* * *
A-53
IN WITNESS WHEREOF, Acquiror and the Company have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
RESPIRONICS HOLDINGS, INC.
By: /s/ James W. Liken
-----------------------------------
Name: James W. Liken
Title: President and Chief
Executive Officer
NOVAMETRIX MEDICAL SYSTEMS INC.
By: /s/ William J. Lacourciere
-----------------------------------
Name: William J. Lacourciere
Title: Chairman and Chief
Executive Officer
A-54
GUARANTEE
RESPIRONICS, INC. ("Parent") irrevocably guarantees each and every
representation, warranty, covenant, agreement and other obligation of Acquiror,
and/or any of its permitted assigns (and where any such representation or
warranty is made to the knowledge of Acquiror, such representation or warranty
shall be deemed made to the knowledge of Parent), and the full and timely
performance of their respective obligations under the provisions of the
foregoing Agreement between RESPIRONICS HOLDINGS, INC. and NOVAMETRIX MEDICAL
SYSTEMS INC. This is a guarantee of payment and performance, and not of
collection, and Parent acknowledges and agrees that this guarantee is full and
unconditional, and no release or extinguishment of Acquiror's obligations or
liabilities (other than in accordance with the terms of the Agreement), whether
by decree in any bankruptcy proceeding or otherwise, shall affect the
continuing validity and enforceability of this guarantee, as well as any
provision requiring or contemplating performance by Parent.
Parent hereby waives, for the benefit of the Company, (i) any right to
require the Company as a condition of payment or performance by Parent, to
proceed against Acquiror or pursue any other remedy whatsoever and (ii) to the
fullest extent permitted by law, any defenses or benefits that may be derived
from or afforded by law which limit the liability of or exonerate guarantors or
sureties, except to the extent that any such defense is available to Acquiror.
Without limiting in any way the foregoing guarantee, Parent covenants and
agrees to take all actions to enable Acquiror to adhere to the provisions of
Sections 1.01, 1.06, 1.07, 1.09, 1.10, 4.03, 5.01, 5.03, 5.04, 5.08, 5.10, 5.12
and 5.15 and each other provision of the Agreement which requires an act or
omission on the part of Parent or any of its subsidiaries to enable Acquiror to
comply with its obligations under the Agreement.
The provisions of Article VIII of the Agreement are incorporated herein,
mutatis mutandis.
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement.
Parent understands that the Company is relying on this guarantee in entering
into the Agreement and may enforce this guarantee as if Parent were a party to
the Agreement.
RESPIRONICS, INC.
By: /s/ James W. Liken
-----------------------------------
Name: James W. Liken
Title: President and Chief
Executive Officer
A-55
ANNEX B
SunTrust Robinson Humphrey
--------------------------------------------------------------------------------
Capital Markets Investment Banking
A Division of SunTrust Capital Markets, Inc.
December 17, 2001
Board of Directors
Novametrix Medical Systems Inc.
5 Technology Drive
Wallingford, CT 06492
Ladies and Gentlemen:
We understand that Novametrix Medical Systems Inc. (the "Company") is
considering a proposed transaction with Respironics, Inc. ("Respironics")
whereby Respironics Holding, Inc. will merge with the Company which as a result
will become a wholly-owned subsidiary of Respironics (the "Proposed
Transaction"). We understand that under the terms of the Proposed Transaction,
each outstanding share of Company common stock will be converted into the right
to receive a fraction of a share of common stock of Respironics valued at $8.00
to $8.75 per share of Company common stock (the "Exchange Ratio") as summarized
below. The terms and conditions of the Proposed Transaction are set forth in
more detail in the Agreement and Plan of Merger between the Company and
Respironics, dated December 17, 2001 (the "Merger Agreement").
The Exchange Ratio shall be based on the weighted average of the selling
prices of a single share of Respironics common stock as reported on the Nasdaq
National Market System for a period consisting of 20 consecutive trading days
ending on the trading day which is three (3) business days prior to the Closing
Date (the "Respironics Share Price" and "Determination Date"). Per the Merger
Agreement, the Exchange Ratio will be determined as follows: (i) if the
Respironics Share Price as calculated on the Determination Date equals or
exceeds $32.00 per share but is equal to or below $35.00 per share, the
Exchange Ratio shall be 0.25; (ii) if the Respironics Share Price as calculated
on the Determination Date exceeds $35.00 per share, the Exchange Ratio shall be
calculated by dividing $8.75 by the Respironics Share Price; (iii) if the
Respironics Share Price as calculated on the Determination Date equals or
exceeds $30.00 per share but is equal to or below $31.99 per share, the
Exchange Ratio shall be calculated by dividing $8.00 by the Respironics Share
Price; and (iv) if the Respironics Share Price as calculated on the
Determination Date is below $30.00 per share, the Exchange Ratio shall be fixed
at 0.2667 if the Company does not exercise its right to terminate the Merger
Agreement within two (2) business days after the Determination Date.
You have asked us whether, in our opinion, the Exchange Ratio in the
Proposed Transaction is fair, from a financial point of view, to the
stockholders of the Company.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement; (2) certain publicly available information concerning the Company
and Respironics which we believe to be relevant to our inquiry; (3) financial
and operating information with respect to the business, operations and
prospects of the Company furnished to us by the Company; (4) financial and
operating information with respect to the business, operations and prospects of
Respironics furnished to us by Respironics; (5) a trading history of the
Company's Common Stock from December 1998 to the present and a trading history
of Respironics' Common Stock from December 1998 to the present; (6) a
comparison of the historical financial results and present financial condition
of the Company and Respironics with those of certain publicly traded companies
which we deemed relevant; (7) an analysis of the projected performance of the
Company and Respironics on a pro forma combined basis; and (8) a
125 Broad Street, 3rd Floor New York, NY 10004 Ph 212.291.4200
www.suntrustrh.com
Member New York Stock Exchange, Inc.
B-1
Board of Directors
Novametrix Medical Systems, Inc.
December 17, 2001
Page 2
--------
comparison of the financial terms of the Proposed Transaction with the publicly
available financial terms of certain other recent transactions which we deemed
relevant. We have also had discussions with the senior management personnel of
both the Company and Respironics concerning the business, operations, assets,
present condition and future prospects, of their respective businesses. In
addition, we undertook such other studies, analyses and investigations as we
deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the financial and other information discussed with
or reviewed by us in arriving at our opinion. With respect to the Company and
Respironics financial forecasts provided to or discussed with us, we have
assumed, at the direction of the management of the Company and Respironics
without independent verification or investigation, that such forecasts have
been reasonably prepared on bases reflecting the best currently available
information, estimates and judgments of the management of both the Company and
Respironics as to its future financial performance. In arriving at our opinion,
we have conducted only a limited physical inspection of the properties and
facilities of the Company and Respironics and have not made nor obtained any
evaluations or appraisals of the assets or liabilities, contingent or
otherwise, of the Company or Respironics. We have assumed that the Proposed
Transaction will be consummated in accordance with the terms of the Merger
Agreement and that the Proposed Transaction will be accounted for as a purchase
under generally accepted accounting principles and will be treated as a
tax-free reorganization for federal income tax purposes. We have also assumed
that all material governmental, regulatory or other consents and approvals
necessary for the consummation of the Proposed Transaction will be obtained
without any adverse effect on the Company or on the expected benefits of the
Proposed Transaction. Our opinion is necessarily based upon market, economic
and other conditions as they exist on, and can be evaluated as of, the date of
this letter. We express no opinion as to the underlying valuation, future
performance or long-term viability of the Company or Respironics. We do not
express any opinion as to the potential price of Respironics common stock when
issued pursuant to the Merger Agreement or the prices at which Respironics
stock will trade following the date hereof or subsequent to the closing of the
Proposed Transaction. We do not have any obligation to update or revise the
opinion.
We have been retained by the Board of Directors of the Company to act as
financial advisor to the Company in connection with the Proposed Transaction
and will receive a fee for our services. In addition, the Company has agreed to
indemnify us for certain liabilities arising out of our engagement. In the
ordinary course of our business, we and our affiliates may actively trade in
the securities of Novametrix and Respironics for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
This opinion is for the benefit of the Board in its evaluation of the
Proposed Transaction. It does not constitute a recommendation as to how any
stockholder should act or vote with respect to any matters relating to the
Proposed Transaction. This opinion may be referred to and may be reproduced in
full in any filing made by the Company with the Securities and Exchange
Commission in connection with the Proposed Transactions.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the Exchange Ratio in the Proposed Transaction is fair, from a
financial point of view, to the stockholders of the Company.
Very truly yours,
/s/ Suntrust Robinson Humphrey
Capital Markets, Inc.
SUNTRUST ROBINSON HUMPHREY CAPITAL
MARKETS, INC.
B-2
Exhibit A
--------------------------------------------------------------------------
RESP 20-day NMTX per
Trading Average Price Share Value Exchange Ratio
--------------------------------------------------------------------------
Greater than $35.00 Fixed at $8.75 Ratio changes to maintain $8.75
$32.00 to $35.00 $8.00 to $8.75 Fixed ratio of 0.25
$30.00 to $32.00 Fixed at $8.00 Ratio changes to maintain $8.00
Less than $30.00 The exchange ratio is fixed at 0.2667
subject to NMTX right to terminate.
--------------------------------------------------------------------------
B-3
ANNEX C
Novametrix Medical Systems Inc.
5 Technology Drive
Wallingford, CT 06492
December 17, 2001
Respironics, Inc.
1501 Ardmore Boulevard
Pittsburgh, PA 15221
Ladies and Gentlemen:
The undersigned understands that Respironics Holdings, Inc. ("Merger
Subsidiary"), a wholly-owned subsidiary of Respironics, Inc. ("Respironics"),
is about to enter into an Agreement and Plan of Merger (the "Merger Agreement")
with Novametrix Medical Systems Inc. ("Novametrix"). The Merger Agreement
provides for the merger of Merger Subsidiary with and into Novametrix (the
"Merger") and the conversion of outstanding shares of Novametrix Common Stock
into Respironics Common Stock in accordance with the formula therein set forth.
In order to induce Respironics to cause Merger Subsidiary to enter into the
Merger Agreement, and intending to be legally bound hereby, the undersigned
represents, warrants and agrees that at the Novametrix Stockholders Meeting
contemplated by Section 5.02 of the Merger Agreement and any adjournment or
postponement thereof the undersigned will, in person or by proxy, vote or cause
to be voted in favor of the Merger Agreement and the Merger the shares of
Novametrix Common Stock beneficially owned by the undersigned individually or,
to the extent of the undersigned's proportionate voting interest, jointly with
other persons, as well as (to the extent of the undersigned's proportionate
voting interest) any other shares of Novametrix Common Stock over which the
undersigned may hereafter acquire beneficial ownership in such capacities
(collectively, the "Shares"). The undersigned further agrees that the
undersigned will use the undersigned's best efforts to cause any other shares
of Novametrix Common Stock over which the undersigned has or shares voting
power to be voted in favor of the Merger Agreement and the Merger.
The undersigned further represents, warrants and agrees that until the
earlier of (i) the consummation of the Merger or (ii) the termination of the
Merger Agreement in accordance with its terms, the undersigned will not,
directly or indirectly:
(a) vote any of the Shares, or cause or permit any of the Shares to be
voted in favor of any other merger, consolidation, plan of liquidation, sale
of assets, reclassification or other transaction involving Novametrix or any
of its subsidiaries which would have the effect of any person other than
Respironics or its affiliate acquiring control over Novametrix, any of its
subsidiaries or any substantial portion of the assets of Novametrix or any
of its subsidiaries. As used herein, the term "control" means (i) the
ability to direct the voting of 30% or more of the outstanding voting
securities of a person having ordinary voting power in the election of
directors or in the election of any other body having similar functions or
(ii) the ability to direct the management and policies of a person, whether
through ownership of securities, through any contract, arrangement or
understanding or otherwise; or
(b) sell or otherwise transfer any of the Shares, or cause or permit any
of the Shares to be sold or otherwise transferred (i) pursuant to any tender
offer, exchange offer or similar proposal made by any person (other than
Respironics or its affiliate), (ii) to any person seeking to obtain control
of Novametrix, any of its subsidiaries or any substantial portion of the
assets of Novametrix or any of its subsidiaries or to any other person
(other than Respironics or its affiliate) under circumstances where such
sale or transfer
C-1
may reasonably be expected to assist a person seeking to obtain such control
or (iii) for the principal purpose of avoiding the obligations of the
undersigned under this agreement.
It is understood and agreed that this agreement relates solely to the
capacity of the undersigned as a shareholder or other beneficial owner of the
Shares and is not in any way intended to affect the exercise by the undersigned
of the undersigned's responsibilities as a director or officer of Novametrix or
any of its subsidiaries. This agreement will terminate upon the earlier of
consummation of the Merger of the termination of the Merger Agreement in
accordance with the its terms.
Very truly yours,
_____________________________________
Accepted and Agreed to:
RESPIRONICS, INC.
By __________________________________________________________________________
Title _______________________________________________________________________
Date: _______________________________________________________________________
C-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of Delaware General Corporation Law. Section 145 of the Delaware
General Corporation Law (the "DGCL") provides that a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 145 also provides that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit, if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability, but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
To the extent that a director, officer, employee or agent of the corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to above, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
Any such indemnification (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct
set forth above. Such determination shall be made:
(a) by a majority vote of the directors who were not parties to such
action, suit or proceeding, even though less than a quorum; or
(b) if there are no such directors, or, if such directors so direct, by
independent legal counsel in a written opinion; or
(c) by the stockholders.
II-1
Section 145 permits a Delaware business corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have
the power to indemnify such person against such liability.
Section 102(b)(7) of the Delaware General Corporation Law. Section 102(b)(7)
of the DGCL provides that a corporation may set forth in its Certificate of
Incorporation a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL regarding the
unlawful payment of dividends or approval of unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision shall eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision becomes effective.
Certificate of Incorporation Provision on Liability of Directors and
Indemnification. Respironics' Amended and Restated Certificate of Incorporation
(the "Charter") provides that, to the fullest extent permitted by the DGCL, no
director of the registrant shall be personally liable to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Charter also provides that the registrant shall indemnify, to the fullest
extent permitted by applicable law, any person who is or was a director or
officer of the registrant for any liability and expense in connection with any
actual or threatened claim, action, suit or proceeding, whether civil or
criminal, administrative or investigative (including, without limitation, any
action, suit or proceeding by or in the right of the registrant to procure a
judgment in its favor) by reason of the fact that such person is or was a
director or officer of the registrant.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The exhibits filed with this Registration Statement, are
listed in the Exhibit Index hereto and are incorporated herein by reference.
(b) Financial Statement Schedules. All financial statement schedules have
been omitted because they are not applicable or the required information is
shown in the financial statements or related notes thereto incorporated by
reference in the Proxy Statement/Prospectus.
(c) Report, Opinion or Appraisal. Information provided pursuant to Item
4(b) of Form S-4 (Opinions of Financial Advisors) is furnished as Annex B to
the Proxy Statement/Prospectus.
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
II-2
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes as follows:
(1) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the Registration Statement shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(2) that prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933, as amended, and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(4) that insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described
under Item 20 above, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(5) to respond to requests for information that is incorporated by
reference into the Proxy Statement/Prospectus pursuant to Items 4, 10(b), 11
or 13 of Form S-4, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(6) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it become effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Pittsburgh, Commonwealth of Pennsylvania, on the 28th day of February, 2002.
RESPIRONICS, INC.
By: /s/ JAMES W. LIKEN
-----------------------------------
James W. Liken
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to registration statement has been signed by the following persons in the
capacities indicated as of February 28, 2002.
Signature Capacity
--------- --------
/s/ JAMES W. LIKEN President and Chief Executive Officer
----------------------------- and Director (Principal Executive
James W. Liken Officer)
/s/ DANIEL J. BEVEVINO Vice President and Chief Financial
----------------------------- Officer (Principal Financial and
Daniel J. Bevevino Accounting Officer)
* Director
-----------------------------
Daniel P. Barry
* Director
-----------------------------
Donald H. Jones
* Director
-----------------------------
Joseph C. Lawyer
* Director
-----------------------------
Gerald E. McGinnis
* Director
-----------------------------
Douglas A. Cotter, Ph.D.
* Director
-----------------------------
James H. Hardie
* Director
-----------------------------
J. Terry Dewberry
* Director
-----------------------------
Craig B. Reynolds
* Director
-----------------------------
Candace L. Littell
* Director
-----------------------------
Sean McDonald
----------------------------- Director
John C. Miles II
*Steven P. Fulton, attorney-in-fact for the indicated directors.
II-4
RESPIRONICS, INC.
FORM S-4
REGISTRATION STATEMENT
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit No. Exhibit
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2.1 Agreement and Plan of Merger, by and between Respironics Holdings, Inc. and Novametrix
Medical Systems Inc., including Guarantee of Respironics, Inc. dated as of December 17,
2001, filed herewith as Annex A.
3.1 Restated Certificate of Incorporation of Respironics, Inc., filed as Exhibit 3.2 to
Amendment No. 1 to Form S-1, Registration No. 33-20899 and incorporated herein by
reference.
3.2 Amendment to Restated Certificate of Incorporation of Respironics, Inc., filed as
Exhibit 3.2 to Form S-1, Registration No. 33-39938 and incorporated herein by reference.
3.3 Amendment to Restated Certificate of Incorporation of Respironics, Inc., filed as
Exhibit 4.2 to Registration Statement on Form S-8, Registration No. 33-36459 and
incorporated herein by reference.
3.4 Amendment to Restated Certificate of Incorporation of Respironics, Inc., filed as
Exhibit 4.2 to Registration Statement on Form S-8, Registration No. 33-89308 and
incorporated herein by reference.
3.5 Amendment to Restated Certificate of Incorporation of Respironics, Inc., filed as
Exhibit 3.5 to Form 10-Q for fiscal quarter ended December 31, 1996 and incorporated
herein by reference.
3.6 By-Laws of Respironics, Inc., filed as Exhibit 3.4 to Amendment No. 2 to Form S-1,
Registration No. 33-20899 and incorporated herein by reference.
3.7 Amendment to by-laws of Respironics, Inc. on June 3, 1998, filed as Exhibit 3.7 to
Form 10-K for the fiscal year ended June 30, 1998, and incorporated herein by reference.
3.8 Amendment to by-laws of Respironics, Inc. on November 18, 1998, filed as Exhibit 3.8 to
Form 10-Q for fiscal quarter ended December 31, 1998, and incorporated herein by
reference.
4.1 Respironics Rights Plan, previously filed as Exhibit 1 to the Respironics, Inc. Registration
Statement on Form 8-A (File No. 000-16723) dated June 28, 1996, and incorporated
herein by reference.
5.1 Opinion of Reed Smith LLP regarding the legality of the shares of Common Stock being
registered, filed herewith.
8.1 Opinion of Reed Smith LLP as to certain tax matters, filed herewith.
8.2 Opinion of Torys LLP as to certain tax matters, filed herewith.
9.1 Form of Voting Trust Agreement, filed herewith as Annex C.
15.1 Acknowledgement of Ernst & Young LLP, filed herewith.
23.1 Consent of Reed Smith LLP (included in Exhibit 5.1).
23.2 Consent of Reed Smith LLP (included in Exhibit 8.1).
23.3 Consent of Torys LLP (included in Exhibit 8.2).
23.4 Consent of Ernst & Young LLP, filed herewith.
II-5
Exhibit No. Exhibit
----------- -------
23.5 Consent of Ernst & Young LLP, filed herewith.
23.6 Consent of SunTrust Robinson Humphrey, (included in Exhibit 99.2 filed herewith as
Annex B).
24.1 Powers of Attorney, filed as Exhibit 24.1 to original registration statement on Form S-4,
Registration No. 333-77048 and incorporated herein by reference.
99.1 Form of Proxy, for use by stockholders of Novametrix Medical Systems Inc., included with
the Proxy Statement/Prospectus, filed herewith.
99.2 Opinion of SunTrust Robinson Humphrey, filed herewith as Annex B.
II-6