AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 2002.
REGISTRATION NO. 333-84454
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
BAXTER INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 2834 36-0781620
(State or Other (Primary Standard
Jurisdiction of Industrial
Incorporation or Classification Code (I.R.S. Employer
Organization) Number) Identification No.)
-----------------
BAXTER INTERNATIONAL INC.
ONE BAXTER PARKWAY
DEERFIELD, ILLINOIS 60015
(847) 948-2000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-----------------
JAN STERN REED
CORPORATE SECRETARY AND ASSOCIATE GENERAL COUNSEL
BAXTER INTERNATIONAL INC.
ONE BAXTER PARKWAY
DEERFIELD, ILLINOIS 60015
(847) 948-2212
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
-----------------
Copies to:
James J. Lawless, Jr., David Saul, Esquire
Esquire Michael S. Dorf, Esquire
Dechert George F. Parker, Esquire
4000 Bell Atlantic Tower Wilson Sonsini Goodrich &
1717 Arch Street Rosati
Philadelphia, PA 19103 Professional Corporation
One Market
Spear Street Tower
Suite 3300
San Francisco, CA 94105
-----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after consummation of the merger described herein.
If the securities being registered on this Form are to be 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 DATE 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
[LOGO] FUSION/TM/
FUSION MEDICAL TECHNOLOGIES, INC.
we stop bleeding
April 4, 2002
Dear Fusion Stockholders:
I am writing to you today about our proposed merger with a subsidiary of
Baxter International Inc. Your board of directors believes that the access to
Baxter's strategic, financial and technical resources offered by the merger
will accelerate the growth of Fusion's business and maximize stockholder value.
If the merger is completed, each share of Fusion common stock will be
converted into a fraction of a share of Baxter common stock equal to $10.00,
subject to adjustments described in the accompanying document, divided by the
average closing price of one share of Baxter common stock for the ten
consecutive trading days ending on and including the third trading day prior to
the special meeting of Fusion stockholders. Baxter and Fusion intend to issue a
joint press release announcing the exchange ratio's then-current value after
the close of business on the third trading day prior to the special meeting of
Fusion stockholders. Baxter common stock is traded on The New York Stock
Exchange under the trading symbol "BAX", and closed at $57.90 per share on
April 2, 2002. We encourage you to obtain more recent quotations. The merger is
described more fully in the accompanying document.
You will be asked to vote upon the merger agreement and the transactions
described in the merger agreement at a special meeting of Fusion stockholders
to be held on May 3, 2002 at 9:00 a.m., local time, at Fusion's headquarters
located at 34175 Ardenwood Boulevard, Fremont, CA 94555. To complete the
merger, the holders of a majority of the outstanding shares of Fusion common
stock must adopt and approve the merger agreement and the transactions
described in the merger agreement. Only stockholders who held shares of Fusion
common stock at the close of business on March 28, 2002 will be entitled to
vote at the special meeting.
We are very excited by the opportunities we envision for the combined
company. YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS AND
CONDITIONS OF THE MERGER AND HAS UNANIMOUSLY DETERMINED THAT THE MERGER
AGREEMENT IS ADVISABLE, AND THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
DESCRIBED IN THE MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF
FUSION STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO ADOPT AND
APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED IN THE MERGER
AGREEMENT.
The accompanying document provides detailed information about Baxter,
Fusion and the merger. Please give all of this information your careful
attention. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE
SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 15 OF THE ACCOMPANYING
DOCUMENT.
You may obtain additional information about Fusion and Baxter without
charge by following the instructions in the section entitled "Where You Can
Find More Information" beginning on page 56 of the accompanying document.
YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
To vote your shares, you may use the enclosed proxy card or attend the special
meeting of stockholders described in the accompanying document. To adopt and
approve the merger agreement and the transactions described in the merger
agreement, you MUST vote "FOR" the proposal by following the instructions
stated on the enclosed proxy card. If you do not vote at all, it will, in
effect, count as a vote against the merger agreement and the merger. We urge
you to vote FOR this proposal, a necessary step in the combination of Fusion
and Baxter.
Sincerely,
/s/ Philip M. Sawyer
Philip M. Sawyer
President, Chief Executive Officer
and Director
PLEASE DO NOT SEND YOUR STOCK CERTIFICATE(S) AT THIS TIME. IF THE MERGER IS
COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING
THE SURRENDER OF YOUR STOCK CERTIFICATE(S).
FUSION MEDICAL TECHNOLOGIES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 3, 2002
Dear Stockholder:
Notice is hereby given that a special meeting of Fusion stockholders will
be held at 9:00 a.m., local time, on May 3, 2002 at Fusion's headquarters
located at 34175 Ardenwood Boulevard, Fremont, CA 94555 for the following
purposes:
1. To consider and vote upon a proposal to adopt and approve the merger
agreement by and among Baxter International Inc., HB2002 Corporation, a wholly
owned subsidiary of Baxter, and Fusion and the transactions described in the
merger agreement. If the merger is completed:
. Fusion will become a wholly owned subsidiary of Baxter; and
. each outstanding share of Fusion common stock will be converted
into a fraction of a share of Baxter common stock equal to $10.00,
subject to adjustments described in the accompanying document,
divided by the average closing price of one share of Baxter common
stock for the ten consecutive trading days ending on and including
the third trading day prior to the special meeting of Fusion
stockholders; and
2. To transact such other business that may properly come before the
special meeting and any adjournment or postponement of the special meeting,
including, if submitted to a vote of the stockholders, a motion to adjourn the
special meeting to another time or place for the purpose of soliciting
additional proxies.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS AND CONDITIONS
OF THE MERGER AND HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT IS
ADVISABLE, AND THAT THE TERMS OF THE MERGER AGREEMENT AND THE MERGER ARE FAIR
TO AND IN THE BEST INTERESTS OF FUSION STOCKHOLDERS. YOUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE MERGER AGREEMENT AND THE
TRANSACTIONS DESCRIBED IN THE MERGER AGREEMENT.
We describe the merger agreement and the merger more fully in the
accompanying document, which we urge you to read.
Only Fusion stockholders of record at the close of business on March 28,
2002 are entitled to notice of and to vote at the special meeting or any
adjournment or postponement of the special meeting.
YOUR VOTE IS IMPORTANT. TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
SPECIAL MEETING, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN
THE MANNER DESCRIBED IN THE ACCOMPANYING DOCUMENT AT ANY TIME BEFORE IT HAS
BEEN VOTED AT THE SPECIAL MEETING. YOU MAY VOTE IN PERSON AT THE SPECIAL
MEETING EVEN IF YOU HAVE RETURNED A PROXY CARD.
By Order of the Board of Directors
/s/ Philip M. Sawyer
Philip M. Sawyer
President, Chief Executive Officer
and Director
Fremont, California
April 4, 2002
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
[LOGO] Baxter
BAXTER INTERNATIONAL INC.
PROSPECTUS
COMMON STOCK, PAR VALUE $1.00 PER SHARE
[LOGO] FUSION/TM/
FUSION MEDICAL TECHNOLOGIES, INC.
we stop bleeding
FUSION MEDICAL TECHNOLOGIES, INC.
PROXY STATEMENT
FOR A SPECIAL MEETING OF FUSION STOCKHOLDERS TO BE HELD ON MAY 3, 2002
This document relates to the proposed acquisition of Fusion Medical
Technologies, Inc., a Delaware corporation, by Baxter International Inc., a
Delaware corporation, under an Agreement and Plan of Merger and Reorganization,
dated as of February 26, 2002, by and among Baxter, HB2002 Corporation, a
Delaware corporation and wholly-owned subsidiary of Baxter, and Fusion. This
document is being furnished to Fusion stockholders in connection with the
solicitation of proxies by Fusion's board of directors for the special meeting
of Fusion stockholders to be held on May 3, 2002 and any adjournment or
postponement of this special meeting.
In the merger, each share of Fusion common stock will be converted into a
fraction of a share of Baxter common stock equal to $10.00, subject to
adjustments described below, divided by the average closing price of one share
of Baxter common stock for the ten consecutive trading days ending on and
including the third trading day prior to the special meeting of Fusion
stockholders.
At the Fusion special meeting, Fusion stockholders will vote on proposals:
. To adopt and approve the Agreement and Plan of Merger and
Reorganization, dated as of February 26, 2002, by and among
Baxter, HB2002 Corporation and Fusion and the transactions
described in the merger agreement; and
. To transact such other business as may properly come before the
special meeting or any adjournment thereof, including, if
submitted to a vote of the stockholders, a motion to adjourn the
special meeting to another time or place for the purpose of
soliciting additional proxies.
This document also constitutes the prospectus of Baxter with respect to
the issuance of Baxter common stock in connection with the merger. Baxter
common stock is traded on the New York Stock Exchange under the trading symbol
"BAX". On April 2, 2002, the closing price of Baxter common stock was $57.90
per share. We encourage you to obtain more recent quotations.
This document and the accompanying form of proxy are first being mailed
to Fusion stockholders on or about April 5, 2002.
All information in this document relating to Baxter has been furnished by
Baxter, and all information in this document relating to Fusion has been
furnished by Fusion.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 BELOW FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY FUSION STOCKHOLDERS WITH RESPECT TO THE
PROPOSED MERGER.
The date of this document is [______], 2002.
REFERENCE TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Baxter and Fusion from documents that are not included in or delivered
with this document. This information is available to you without charge upon
your written or oral request. You can obtain documents incorporated by
reference in this document by requesting them in writing or by telephone from
Baxter or Fusion, as the case may be, at the following addresses and telephone
numbers:
Baxter International Inc. Fusion Medical Technologies, Inc.
Investor Relations Investor Relations
One Baxter Parkway 34175 Ardenwood Boulevard
Deerfield, IL 60015 Fremont, CA 94555
(847) 948-4551 (510) 818-4600
If you would like to request documents, please do so by April 26, 2002 in
order to receive them before the special meeting.
In addition, see "Where You Can Find More Information" beginning on page
57 below.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER............................................................ 3
SUMMARY........................................................................................... 6
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BAXTER
INTERNATIONAL INC................................................................................ 13
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF FUSION
MEDICAL TECHNOLOGIES, INC........................................................................ 14
RISK FACTORS...................................................................................... 15
THE SPECIAL MEETING OF FUSION STOCKHOLDERS........................................................ 18
Purpose of the Special Meeting.............................................................. 18
Date, Time and Place of the Special Meeting................................................. 18
Record Date; Voting Rights and Outstanding Shares........................................... 18
Solicitation of Proxies; Expenses........................................................... 18
Quorum; Vote Required....................................................................... 18
Effect of Abstentions and Broker Non-votes.................................................. 18
Voting and Revocability of Proxies.......................................................... 19
Stock Ownership by Management............................................................... 19
Voting Agreements........................................................................... 19
THE MERGER........................................................................................ 20
Background of the Merger.................................................................... 20
Recommendation of Fusion's Board of Directors............................................... 23
Fusion's Reasons for the Merger............................................................. 23
Opinion of Fusion's Financial Advisor....................................................... 26
Interests of Directors and Officers of Fusion in the Merger................................. 31
Restrictions on Sale of Shares by Affiliates of Baxter and Fusion........................... 32
Baxter's Reasons for the Merger............................................................. 32
Material U.S. Federal Income Tax Consequences............................................... 33
Regulatory Filings and Approvals Required to Complete the Merger............................ 35
Accounting Treatment of the Merger.......................................................... 35
Appraisal Rights............................................................................ 35
Listing on the New York Stock Exchange of Baxter Common Stock to be Issued in the Merger.... 35
Delisting and Deregistration of Fusion Common Stock After the Merger........................ 35
THE MERGER AGREEMENT AND RELATED AGREEMENTS....................................................... 36
Effective Time of the Merger................................................................ 36
Conversion of Shares........................................................................ 36
Treatment of Fusion Stock Options, Stock Purchase Plan and Warrants......................... 37
Exchange of Certificates Representing Shares................................................ 38
Dividends................................................................................... 38
No Fractional Shares........................................................................ 38
Unclaimed Amounts........................................................................... 38
Lost Certificates........................................................................... 39
Interim Financing........................................................................... 39
Representations and Warranties.............................................................. 40
Ordinary Course Conduct..................................................................... 40
New York Stock Exchange Listing........................................ 42
No Solicitation........................................................ 42
Directors' and Officers' Indemnification and Insurance................. 43
Employee Benefits...................................................... 44
Consents and Approvals................................................. 44
Conditions to the Merger............................................... 44
Termination, Amendment and Waiver...................................... 45
Fees and Expenses...................................................... 46
Voting Agreements and Proxies.......................................... 47
COMPARISON OF STOCKHOLDERS' RIGHTS........................................... 48
General................................................................ 48
Classes of Common Stock of Baxter and Fusion........................... 48
Classified Board of Directors.......................................... 48
Number of Directors.................................................... 48
Removal of Directors................................................... 48
Filling Vacancies on the Board of Directors............................ 49
Ability to Call Special Meetings....................................... 49
Advance Notice Provisions for Stockholder Proposals and Nominations.... 49
Amendment of Certificates of Incorporation............................. 51
Amendment of Bylaws.................................................... 51
Rights Plans........................................................... 52
Indemnification of Directors and Officers.............................. 53
FUSION MEDICAL TECHNOLOGIES, INC.--SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT............................................ 54
STOCKHOLDER PROPOSALS........................................................ 55
LEGAL MATTERS................................................................ 55
EXPERTS...................................................................... 55
FORWARD-LOOKING STATEMENTS................................................... 55
WHERE YOU CAN FIND MORE INFORMATION.......................................... 56
INCORPORATION OF DOCUMENTS BY REFERENCE...................................... 58
Annex A--Agreement and Plan of Merger and Reorganization..................... A-1
Annex B--Form of Voting Agreement............................................ B-1
Annex C--Opinion of J.P. Morgan Securities Inc............................... C-1
- 2 -
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS FUSION PROPOSING THE MERGER?
A: The decision of Fusion's board of directors to recommend the merger is
based upon a number of potential benefits of the merger that Fusion's
board of directors believes will contribute to the success of the
combined company compared to Fusion continuing to operate as an
independent business. Fusion's board of directors believes that the
merger is fair to, and in the best interests of, Fusion stockholders. In
reaching its decision, Fusion's board of directors considered a variety
of factors, including the opinion of J.P. Morgan Securities Inc., its
financial advisor.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the transaction is completed, for each share of Fusion common stock
you hold, you will be entitled to receive a fraction of a share of Baxter
common stock equal to $10.00, subject to adjustments described in the
following paragraph, divided by the average closing price of one share of
Baxter common stock for the ten consecutive trading days ending on and
including the third trading day prior to the special meeting of Fusion
stockholders. This fraction is referred to as the exchange ratio. Baxter
and Fusion intend to issue a joint press release announcing the exchange
ratio's then-current value after the close of business on the third
trading day prior to the special meeting of Fusion stockholders.
The exchange ratio may be adjusted in the event of certain inaccuracies
in Fusion's representation in the merger agreement regarding its
capitalization, or in the event that Fusion borrows money under new loan
arrangements before the merger closes. These adjustments, if any, could
result in Fusion stockholders receiving fewer shares of Baxter common
stock. Assuming no such adjustments occur, the following table shows the
number of Baxter shares that you would receive in the merger based upon
various average market prices of Baxter common stock if you owned 100
Fusion common shares. The values shown are purely hypothetical, and the
actual average market price and the corresponding number of shares of
Baxter common stock that you will receive in the merger may be more or
less than the range of shares shown in the table.
AVERAGE MARKET PRICE OF NUMBER OF BAXTER COMMON SHARES
BAXTER COMMON STOCK RECEIVED PER 100 FUSION COMMON SHARES
------------------- -------------------------------------
$65.00 15
$60.00 16
$55.00 18
$50.00 20
$45.00 22
$40.00 25
$35.00 28
On April 2, 2002, the closing sale price per share of Baxter common stock
on the New York Stock Exchange was $57.90. We encourage you to obtain
more recent quotations.
You will not receive fractional shares of Baxter common stock. Instead,
you will receive cash, without interest, for any fractional share of
Baxter common stock you might otherwise have been entitled to receive
based upon the market price of Baxter common stock. The table above does
not reflect the amount of cash you will receive, if any, for any
fractional share you might otherwise have been entitled to receive.
Q: WHAT WILL HAPPEN TO FUSION OPTIONS?
A: Until the closing of the merger, all vested Fusion options will continue
to be exercisable in accordance with their terms. The merger agreement
provides that unvested Fusion stock options will become exercisable for a
period of time prior to the closing of the merger. Notice of this
exercise period will be sent to each option holder. The exercise of
unvested options will be contingent on the merger taking place, and the
actual exercise of each unvested option will not occur until immediately
prior to the closing of the merger. Fusion will adopt certain procedures
that will allow for the conversion of Fusion
- 3 -
options into Fusion common stock without the payment of cash by the
option holder, which procedures will be described in the notice to be
sent to option holders. All Fusion options, whether or not vested, will
terminate upon the closing of the merger if not earlier exercised.
Q: WHAT WILL HAPPEN TO FUSION'S EMPLOYEE STOCK PURCHASE PLAN?
A: The present offering and purchase periods under the Employee Stock
Purchase Plan will terminate on or prior to the closing date of the
merger, at which time each participant's election to purchase Fusion
common stock will be automatically exercised. Effective February 26,
2002, participation levels in the Employee Stock Purchase Plan were
frozen at existing levels and no new plan participants may be accepted.
Q: WHAT WILL HAPPEN TO FUSION WARRANTS?
A: Warrants to purchase Fusion common stock outstanding immediately before
the completion of the merger will become exercisable solely for Baxter
common stock. The number of shares of Baxter common stock which may be
purchased under each Fusion warrant will be equal to the number of Fusion
shares that were purchasable prior to the merger multiplied by the
exchange ratio. The exercise price per share will be the pre-merger
exercise price divided by the exchange ratio, rounded up to the nearest
whole cent.
Q: SHOULD I SEND IN MY FUSION SHARE CERTIFICATES NOW?
A: No. After we complete the transaction, Baxter will send instructions to
you explaining how to exchange your Fusion share certificates for the
appropriate number of shares of Baxter common stock.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger in the second quarter of 2002. Because
the merger is subject to various conditions, however, we cannot predict
its exact date of completion.
Q: WILL THE MERGER BE TAXABLE TO ME?
A: The merger is intended and expected to constitute, or to be part of a
series of transactions that together constitute, a "reorganization" for
U.S. federal income tax purposes. If the merger constitutes or is part of
a series of transactions that together constitute a reorganization,
Fusion stockholders generally will not recognize any gain or loss for
U.S. federal income tax purposes on the exchange of their Fusion shares
for shares of Baxter common stock in the merger, except for any gain
recognized in connection with any cash received for a fractional Baxter
share.
You should read "The Merger--Material U.S. Federal Income Tax
Consequences" beginning on page 33 for a more complete discussion of the
federal income tax consequences of the merger. Tax matters can be
complicated and the tax consequences of the merger to you will depend on
your particular tax situation. You should consult your tax advisor to
fully understand the tax consequences of the merger to you.
Q: DOES FUSION'S BOARD OF DIRECTORS RECOMMEND THE ADOPTION AND APPROVAL OF
THE MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED IN THE MERGER
AGREEMENT?
A: Yes. The board of directors of Fusion unanimously recommends the adoption
and approval of the merger agreement and the transactions described in
the merger agreement.
- 4 -
Q: WHAT VOTE OF FUSION STOCKHOLDERS IS REQUIRED TO ADOPT AND APPROVE THE
MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED IN THE MERGER AGREEMENT?
A: For Fusion to complete the merger, Fusion stockholders holding at least a
majority of the outstanding shares of Fusion common stock must vote to
adopt and approve the merger agreement and the transactions described in
the merger agreement. If you do not vote your Fusion shares, the effect
will be a vote against the merger.
Q: HOW DO I VOTE?
A: Following your review of this document, mail your signed proxy card in
the enclosed return envelope as soon as possible so that your shares are
represented at the special meeting. You also may attend the meeting in
person instead of submitting a proxy.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: If your shares are held in "street name" by your broker, your broker will
vote your shares only if you provide instructions on how to vote. You
should follow the directions provided by your broker regarding how to
instruct your broker to vote your shares. If you do not instruct your
broker how to vote your shares, your shares will be counted present at
the special meeting for purposes of determining whether a quorum is
present, but will not be voted, which will have the effect of voting
against the merger.
Q: CAN I CHANGE MY VOTE AFTER MAILING MY PROXY?
A: Yes. You may change your vote by delivering a signed notice of revocation
or a later-dated, signed proxy card to Fusion's Corporate Secretary at
Fusion's executive offices up to the last business day before the special
meeting, or to the chairman of the special meeting on the day of the
special meeting. You also may change your vote by attending the special
meeting and voting in person.
Q: WHAT HAPPENS IF I DO NOT INDICATE HOW TO VOTE MY PROXY?
A: If you do not include instructions on how to vote your properly executed
and delivered proxy card, your shares will be voted FOR the adoption and
approval of the merger agreement and the transactions described in the
merger agreement.
Q: WHAT HAPPENS IF I DO NOT RETURN A PROXY CARD?
A: Not returning your proxy card will have the same effect as voting against
the adoption and approval of the merger agreement and the transactions
described in the merger agreement.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. Under applicable law, you are not entitled to appraisal rights in
connection with the merger.
Q: ARE THERE ANY RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE
MERGER?
A: Yes. We have set out under the heading "Risk Factors" beginning on page
15 of this document a number of risk factors that you should consider.
Q: WHO CAN I CALL WITH QUESTIONS?
A: If you have any questions about the transaction, please call Fusion
Medical Technologies, Inc. Investor Relations at (510) 818-4610 or write
to Fusion Medical Technologies, Inc. Investor Relations, 34175 Ardenwood
Boulevard, Fremont, CA 94555.
- 5 -
SUMMARY
The following summary highlights selected information from this document
and may not contain all of the information that is important to you. You should
carefully read this entire document, including the annexes, and the other
documents we refer to for a more complete understanding of the merger. In
addition, Baxter and Fusion incorporate by reference into this document
important business and financial information about Baxter and Fusion. You may
obtain the information incorporated by reference into this document without
charge by following the instructions in the section entitled "Where You Can
Find More Information" beginning on page 57 of this document. References in
this document to "Fusion" mean Fusion Medical Technologies, Inc., a Delaware
corporation, and its subsidiaries. References in this document to "Baxter" mean
Baxter International Inc., a Delaware corporation, and its subsidiaries. When
we refer to "we", "us" or "our", we mean Baxter International Inc. and its
subsidiaries. When we refer to the "combined company", we mean Baxter and
Fusion following completion of the merger.
THE COMPANIES
BAXTER INTERNATIONAL INC.
One Baxter Parkway
Deerfield, Illinois 60015
(847) 948-2000
Baxter engages in the worldwide development, manufacture and distribution
of a diversified line of products, systems and services used primarily in the
health care field. We manufacture products in 28 countries and sell them in
over 100 countries. Health care is concerned with the preservation of health
and with the diagnosis, cure, mitigation and treatment of disease and body
defects and deficiencies. Our products are used by hospitals, clinical and
medical research laboratories, blood and blood dialysis centers, rehabilitation
centers, nursing homes, doctors' offices and by patients, at home, under
physician supervision.
We operate as a global leader in critical therapies for life-threatening
conditions. Our continuing operations are comprised of three segments:
. Medication Delivery, which provides a range of intravenous
solutions and specialty products that are used in combination for
fluid replenishment, nutrition therapy, pain management,
antibiotic therapy and chemotherapy;
. BioScience, which develops biopharmaceuticals, biosurgery
products, vaccines and blood collection, processing and storage
products and technologies; and
. Renal, which develops products and provides services to treat
end-stage kidney disease.
Our three businesses enjoy leading positions in the medical products and
services fields.
FUSION MEDICAL TECHNOLOGIES, INC.
34175 Ardenwood Boulevard
Fremont, California 94555
(510) 818-4600
Fusion develops, manufactures and markets proprietary surgical hemostatic
sealant products. Hemostatic products are used to stop bleeding during surgical
procedures. Bleeding must be controlled to ensure surgical wounds are
effectively closed and to avoid serious or possibly life-threatening
complications, including blood loss, tissue damage, infection and excessive
scarring.
Fusion's current commercial product is FloSeal(R) Metrix Hemostatic
Sealant. FloSeal combines a collagen-derived gelatin with thrombin, a potent
clotting agent. Fusion believes the innovative physical structure of FloSeal
provides performance advantages over existing surgical hemostatic products.
Fusion's advantages include:
. fast and effective bleeding control;
. easy on-site preparation;
- 6 -
. ease of use;
. total absorption of FloSeal by the body within six to eight weeks;
and
. shortening of time to stop bleeding, potentially resulting in cost
savings to hospitals and doctors.
THE SPECIAL MEETING OF FUSION STOCKHOLDERS (SEE PAGE 18)
Date, time and place. The special meeting will be held on May 3, 2002 at
9:00 a.m., local time, at Fusion's headquarters located at 34175 Ardenwood
Boulevard, Fremont, CA 94555.
Matters to be considered at the special meeting. At the special meeting
and any adjournment or postponement of the special meeting, Fusion stockholders
will be asked to adopt and approve the merger agreement and the transactions
described in the merger agreement and to transact such other business as may be
properly brought before the special meeting.
Record date. Fusion's board of directors has fixed the close of business
on March 28, 2002 as the record date for determination of Fusion stockholders
entitled to notice of, and to vote at, the special meeting. As of the record
date, there were 14,386,894 shares of Fusion common stock outstanding.
Voting and revocability of proxies. Fusion stockholders should complete,
date and sign the accompanying proxy card and promptly return it in the
pre-addressed accompanying envelope. Brokers holding shares in "street name"
may vote the shares only if the stockholder provides instructions on how to
vote. Brokers will provide stockholders with directions on how to instruct the
broker to vote the shares. All properly executed proxies that Fusion receives
prior to the vote at the special meeting, and that are not revoked, will be
voted in accordance with the instructions indicated on the proxies. If no
direction is indicated on a properly executed proxy returned to Fusion, the
underlying shares will be voted FOR the merger.
If any other matters are properly presented for consideration at the
special meeting, or any adjournments or postponements of the special meeting,
the persons named in the enclosed form of proxy and voting thereunder will have
the discretion to vote on such matters in accordance with their judgment.
Fusion's board of directors currently does not intend to bring any other
business before the special meeting.
A stockholder may revoke its proxy at any time prior to use by delivering
to the corporate secretary of Fusion a signed notice of revocation or a
later-dated, signed proxy. In addition, a stockholder may revoke its proxy by
delivering to the chairman of the special meeting, on the day of the special
meeting, a signed notice of revocation or a later-dated, signed proxy. A
stockholder also may revoke such stockholder's proxy by attending the special
meeting and voting in person. Attendance at the special meeting does not in
itself constitute the revocation of a proxy.
Vote required. The adoption and approval of the merger agreement and the
transactions described in the merger agreement will require the affirmative
vote of the holders of a majority of the outstanding shares of Fusion common
stock.
As of the record date, Fusion's officers and directors and their
affiliates held approximately 22.9% of the shares eligible to vote at the
special meeting.
Voting Agreements. All of Fusion's executive officers (other than one
officer who has given notice of his intention to terminate his employment) and
directors as of the date of the merger agreement and their affiliates, who hold
an aggregate of approximately 23.2% of Fusion's outstanding common stock as of
the date of the merger agreement, have entered into voting agreements pursuant
to which each of these stockholders has agreed to vote in favor of the adoption
and approval of the merger agreement, the transactions described in the merger
agreement and certain other matters. In addition, under the voting agreements,
each of these stockholders has granted Baxter proxies to vote such
stockholders' shares of Fusion common stock with respect to the adoption and
approval of the merger agreement, the transactions described in the merger
agreement and certain other matters. The full text of the form of voting
agreement is included in this document as Annex B.
Solicitation of proxies and expenses. Fusion has retained the services of
Georgeson Shareholder Communications, Inc. to assist in the solicitation of
proxies from Fusion stockholders. Fusion expects to pay Georgeson approximately
$10,000, plus reasonable out-of-pocket costs and expenses, for these services.
In
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addition to solicitation by mail, the directors, officers and employees of
Fusion may solicit proxies from Fusion's stockholders by telephone, internet,
facsimile, other electronic means or in person. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial owners.
THE MERGER (SEE PAGE 20)
Structure of the Merger. This document relates to the proposed
acquisition of Fusion by Baxter pursuant to an Agreement and Plan of Merger and
Reorganization, dated as of February 26, 2002, by and among Baxter, HB2002
Corporation, a wholly-owned subsidiary of Baxter, and Fusion. If the merger is
completed, HB2002 will be merged with and into Fusion, as a result of which the
separate corporate existence of HB2002 shall cease and Fusion shall continue as
a wholly-owned subsidiary of Baxter.
Consideration. At the closing of the merger, Fusion stockholders will
receive, for each share of Fusion common stock they hold, the right to receive
a fraction of a share of Baxter common stock equal to $10.00, subject to
adjustments described below, divided by the average closing price of one share
of Baxter common stock for the ten consecutive trading days ending on and
including the third trading day prior to the special meeting of Fusion
stockholders. This fraction is referred to as the exchange ratio. The exchange
ratio may be adjusted in the event of certain inaccuracies in Fusion's
representation in the merger agreement regarding its capitalization, or in the
event that Fusion borrows money under new loan arrangements before the merger
closes. These adjustments, if any, may result in Fusion stockholders receiving
fewer Baxter shares than they otherwise would. Fusion stockholders will receive
a cash payment in lieu of any fractional shares of Baxter common stock to which
they would otherwise be entitled. Baxter and Fusion intend to issue a joint
press release announcing the exchange ratio's then-current value after the
close of business on the third trading day prior to the special meeting of
Fusion stockholders.
Based on the number of fully-diluted shares of Fusion common stock on
March 28, 2002 and assuming, for purposes of calculating the exchange ratio,
that the ten consecutive trading day average closing price of Baxter's common
stock is equal to its April 2, 2002 closing price, and that no adjustments are
made to the $10.00 per share price of Fusion common stock, Baxter would issue
approximately 3,080,473 shares in the merger, representing approximately .513%
of Baxter's outstanding common shares on March 28, 2002.
Options. Until the closing of the merger, all vested Fusion options will
continue to be exercisable in accordance with their terms. The merger agreement
provides that unvested Fusion stock options will become exercisable for a
period of time prior to the closing of the merger. Notice of this exercise
period will be sent to each option holder. The exercise of unvested options
will be contingent on the merger taking place, and the actual exercise of each
unvested option will not occur until immediately prior to the closing of the
merger. Fusion will adopt certain procedures that will allow for the conversion
of Fusion options into Fusion common stock without the payment of cash by the
option holder, which procedures will be described in the notice to be sent to
option holders. All Fusion options, whether or not vested, will terminate upon
the closing of the merger if not earlier exercised.
Employee Stock Purchase Plan. Upon the earlier to occur of:
. May 31, 2002 (the last day of the current offering and purchase
period under Fusion's Employee Stock Purchase Plan); and
. the last day of a regular payroll period of Fusion ending prior to
the closing of the merger,
all offering and purchase periods in progress under Fusion's Employee Stock
Purchase Plan will terminate and each participant's election to purchase Fusion
stock will be automatically exercised. Effective as of the date of the merger
agreement:
. no new offering or purchase periods may commence;
. existing participation levels in the Employee Stock Purchase Plan
have been frozen; and
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. Fusion is prohibited from accepting new participants.
Warrants. Upon the closing of the merger, Baxter will assume each
outstanding warrant to purchase Fusion common stock in accordance with each
warrant's terms. From and after the closing of the merger, warrants to purchase
Fusion common stock will be exercisable solely for Baxter common stock. The
number of Baxter shares subject to each warrant will equal the number of shares
of Fusion common stock for which the warrant was exercisable prior to the
closing of the merger multiplied by the exchange ratio, rounded down to the
nearest whole share. Cash will be paid for any fractional shares. The exercise
price of each warrant will equal the exercise price immediately prior to the
closing of the merger divided by the exchange ratio, rounded up to the nearest
whole cent. All restrictions on the exercise of any warrant immediately prior
to the closing will continue in full force and effect and, except as described
above, the term, exercisability and other provisions of each warrant will
remain unchanged.
Interim Financing. Baxter and Fusion intend, subject to the approval of
Fusion's existing lender, to enter into an agreement pursuant to which Baxter
will make available to Fusion a loan equal to the lesser of:
. $1,500,000; and
. the difference between $1,500,000 and the amount of any new
financing that Fusion obtains from its existing lender.
As discussed under "The Merger Agreement and Related
Agreements--Conversion of Shares" beginning on page 36 below, if Fusion borrows
money under new loan arrangements, it will impact the exchange ratio and have
the effect of reducing the consideration that would otherwise be payable to
Fusion stockholders.
Closing. Baxter and Fusion intend to close the merger as soon as
practicable after the adoption and approval of the merger by Fusion's
stockholders and after all other conditions to the merger have been satisfied
or waived. At present, Baxter and Fusion anticipate that the closing will occur
promptly following the special meeting of Fusion stockholders.
Recommendation of Fusion's Board of Directors. Fusion's board of
directors has unanimously determined that the merger agreement is advisable,
and that the terms of the merger agreement and the transactions described in
the merger agreement are fair to, and in the best interests of, Fusion
stockholders. Fusion's board of directors unanimously recommends that Fusion
stockholders adopt and approve the merger agreement and the transactions
described in the merger agreement.
Opinion of Fusion's Financial Advisor. Fusion requested that J.P. Morgan
Securities Inc. evaluate the fairness, from a financial point of view, of the
exchange ratio in the merger to the holders of Fusion common stock. On February
26, 2002, JPMorgan delivered its oral opinion, subsequently confirmed in
writing, to Fusion's board of directors to the effect that, as of such date and
based upon and subject to certain matters stated in its opinion, the exchange
ratio in the merger was fair, from a financial point of view, to the holders of
Fusion common stock.
The full text of the JPMorgan fairness opinion, which sets forth the
assumptions made, factors considered and limitations upon the review undertaken
by JPMorgan in rendering its opinion, is included in this document as Annex C.
Fusion stockholders are urged to read this opinion in its entirety. JPMorgan's
written opinion was addressed to Fusion's board of directors, was directed only
to the fairness, from a financial point of view, of the exchange ratio in the
merger to the holders of Fusion common stock and does not constitute a
recommendation to any Fusion stockholder as to how such stockholder should vote
on the merger or any other matter.
Approval by Baxter. Baxter, as the sole stockholder of HB2002
Corporation, and the boards of directors of Baxter and HB2002 have approved the
merger agreement and the transactions described in the merger agreement. No
other corporate approvals are required for Baxter to consummate the merger.
- 9 -
Termination of the Merger Agreement. Fusion and Baxter each have the
right to terminate the merger agreement under certain circumstances. In certain
cases, termination of the merger agreement will require payment of a
termination fee by Fusion to Baxter.
A COPY OF THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS DOCUMENT. YOU ARE
STRONGLY ENCOURAGED TO READ IT IN ITS ENTIRETY.
INTERESTS OF DIRECTORS AND OFFICERS OF FUSION IN THE MERGER (SEE PAGE 31)
In considering the recommendations of Fusion's board of directors, you
should be aware that certain directors of, and members of management of, Fusion
may have interests in the merger that differ from, or are in addition to, those
of Fusion stockholders generally, which may influence their decision to support
or recommend the merger. Fusion's board of directors knew about these interests
and considered them in approving the merger agreement and the transactions
described in the merger agreement.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 33)
The merger is intended and expected to constitute, or to be part of a
series of transactions that together constitute, a "reorganization" for U.S.
federal income tax purposes. If the merger constitutes, or is part of a series
of transactions that together constitute, a reorganization, Fusion stockholders
generally will not recognize any gain or loss for U.S. federal income tax
purposes on the exchange of their Fusion shares for shares of Baxter common
stock in the merger, except for any gain recognized in connection with any cash
received for a fractional Baxter share.
Baxter and Fusion will not be required to complete the merger unless they
receive legal opinions from their respective tax counsel to the effect that the
merger will constitute, or be a part of a series of transactions that together
constitute, a reorganization for United States federal income tax purposes.
You should read "The Merger--Material U.S. Federal Income Tax
Consequences" beginning on page 33 for a more complete discussion of the
federal income tax consequences of the merger. Tax matters can be complicated
and the tax consequences of the merger to you will depend on your particular
tax situation. You should consult your tax advisor to fully understand the tax
consequences of the merger to you.
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 35)
Baxter will account for the merger using the purchase method of
accounting, as defined by Statement of Financial Accounting Standards No. 141,
"Business Combinations". Accordingly, the aggregate purchase price will be
allocated to the net assets acquired based on estimates of their fair values at
the date of the acquisition. The excess of the purchase price over the fair
values of the tangible assets and identifiable intangible assets acquired and
liabilities assumed will be allocated to goodwill.
APPRAISAL RIGHTS
Neither Baxter nor Fusion stockholders will have appraisal rights with
respect to the merger.
THE EXCHANGE AGENT
EquiServe Trust Company, N.A. will act as the Exchange Agent in
connection with the merger.
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REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER (SEE PAGE 35)
The merger is subject to discretionary review by the Antitrust Division
of the United States Department of Justice and the Federal Trade Commission to
determine whether it is in compliance with applicable antitrust laws. At any
time before or after the completion of the merger, either the Antitrust
Division or the FTC could take any action under U.S. antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
completion of the merger or seeking the divestiture of substantial assets of
Baxter or Fusion. Private parties and state attorneys general also may bring
actions under U.S. antitrust laws depending on the circumstances. The
completion of the merger also is subject to the continued effectiveness of the
registration statement of which this document is a part, and compliance with
applicable laws of Delaware.
LISTING ON THE NEW YORK STOCK EXCHANGE OF BAXTER COMMON STOCK TO BE ISSUED IN
THE MERGER (SEE PAGE 35)
It is a condition to the closing of the merger that the shares of Baxter
common stock issuable in connection with the merger be listed on the New York
Stock Exchange prior to the closing of the merger.
COMPARATIVE PER SHARE DATA
The following summary presents selected comparative unaudited per share
data for Baxter and Fusion on a historical and equivalent per share basis. The
information listed below should be read in conjunction with the historical
financial data and statements of each of Fusion and Baxter, which are
incorporated herein by reference.
The per share data set forth below are presented for comparative purposes
only and are not necessarily indicative of the future combined financial
position, the results of operations or the actual results or combined financial
position of Fusion and Baxter that would have been achieved had the merger been
completed as of the date or at the beginning of the period indicated. Pro forma
amounts have been omitted because the effects of the merger on Baxter's
earnings from continuing operations and book value are not significant.
YEAR ENDED
FUSION DECEMBER 31, 2001
------ --------------
Per Share Amounts:
Loss from continuing operations ($1.02)
Cash dividends -/(1)/
Book value $0.70
YEAR ENDED
DECEMBER 31, 2001
--------------
BAXTER FUSION
------ BAXTER COMMON
COMMON STOCK
STOCK EQUIVALENT
------ ----------
Per Share Amounts:
Basic earnings from continuing operations $1.04 $0.18/(2)/
Diluted earnings from continuing operations $1.00 $0.17/(2)/
Cash dividends $0.582 $0.10/(2)/
Book value $6.27 $1.08/(2)/
-------------------------
(1) Fusion has never paid cash dividends on shares of its common stock.
(2) Baxter amounts multiplied by the implied exchange ratio of 0.172,
calculated by dividing $10.00, the price per share of Fusion common stock
set forth in the merger agreement, by $58.11, the average closing price
per share of Baxter common stock for the ten consecutive trading days
ending on March 28, 2002.
- 11 -
RECENT CLOSING PRICES
The following table sets forth the per share closing prices of Baxter
common stock ("BAX"), as reported on the New York Stock Exchange, and of Fusion
common stock ("FSON"), as reported on the Nasdaq National Market, on (i)
February 26, 2002, the last trading day preceding public announcement of the
merger, and (ii) April 2, 2002, the last trading day prior to the date of
printing of this document.
BAXTER FUSION
CLOSING PRICE AT: COMMON STOCK COMMON STOCK
----------------- ------------ ------------
February 26, 2002............ $54.50 $8.30
April 2, 2002................ $57.90 $9.74
Because the market price of Baxter common stock fluctuates, the number of
shares of Baxter common stock that Fusion stockholders will receive in the
merger may increase or decrease prior to the merger. Fusion stockholders are
urged to obtain current market quotations for Baxter common stock and Fusion
common stock. We cannot assure you as to the future prices or markets for
Baxter common stock or Fusion common stock.
DIVIDEND POLICY
Baxter. Baxter has an annual dividend payout schedule. For the year ended
December 31, 2001, Baxter paid a dividend of $0.582 per share.
Fusion. Fusion has never paid dividends on shares of Fusion common stock.
RISK FACTORS
In evaluating the merger and transactions contemplated in connection with
the merger, you should consider the risks discussed under the heading "Risk
Factors" beginning on page 15.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BAXTER INTERNATIONAL INC.
The following selected historical consolidated financial data should be
read in conjunction with Baxter's consolidated financial statements and related
notes which are incorporated by reference in this document. The consolidated
income statement information for each of the three years ended December 31,
2001, 2000 and 1999 and the consolidated balance sheet data as of December 31,
2001 and 2000, are derived from the consolidated financial statements of Baxter
which have been audited by PricewaterhouseCoopers LLP, independent accountants,
and are incorporated by reference in this document.
AS OF OR FOR THE YEAR ENDED
-------------------------------------
2001/1/ 2000/2,3/ 1999 1998/4/ 1997/5/
------- -------- ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
OPERATIONS
Net sales............................................ $ 7,663 $6,896 $6,380 $5,706 $5,259
Income from continuing operations before cumulative
effect of accounting change........................ 664 738 779 275 371
Depreciation and amortization........................ 441 405 372 344 318
Research and development expenses/6/................. 427 379 332 323 339
COMMON SHARE INFORMATION/7/
Average number of common shares outstanding/8/....... 590 585 579 567 555
Income from continuing operations before cumulative
effect of accounting change per share:
Basic............................................ $ 1.13 $ 1.26 $ 1.34 $ 0.49 $ 0.67
Diluted.......................................... 1.09 1.24 1.32 0.48 0.66
Cash dividends declared per common share............. 0.582 0.582 0.582 0.582 0.569
CAPITAL EMPLOYED
Capital expenditures................................. $ 787 $ 648 $ 631 $ 556 $ 454
Total assets......................................... 10,343 8,733 9,644 9,873 8,511
Long-term debt and lease obligations................. 2,486 1,726 2,601 3,096 2,635
--------
/1/ Income from continuing operations includes charges for in-process
research and development and acquisition-related costs of $280 million
and costs relating to Baxter's A, AF and AX series dialyzers of $189
million.
/2/ Certain balance sheet and other data are affected by the spin-off of
Edwards Lifesciences Corporation in 2000.
/3/ Income from continuing operations includes a charge for in-process
research and development and acquisition-related costs of $286 million.
/4/ Income from continuing operations includes charges for in-process
research and development, net litigation, and exit and other
reorganization costs of $116 million, $178 million and $122 million,
respectively.
/5/ Income from continuing operations includes a charge for in-process
research and development of $220 million.
/6/ Excludes charges for in-process research and development, as noted
above.
/7/ All share and per share data have been restated for Baxter's
two-for-one stock split, which was effective May 30, 2001.
/8/ Excludes common stock equivalents.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF FUSION MEDICAL TECHNOLOGIES,
INC.
The following selected historical consolidated financial data should be
read in conjunction with Fusion's consolidated financial statements and related
notes which are incorporated by reference in this document. The consolidated
income statement information for each of the three years ended December 31,
2001, 2000 and 1999 and the consolidated balance sheet data as of December 31,
2001 and 2000, are derived from the consolidated financial statements of
Fusion, which have been audited by PricewaterhouseCoopers LLP, independent
accountants, and are incorporated by reference in this document.
YEAR ENDED DECEMBER 31
-----------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Net sales $ 12,494 $ 4,949 $ 254 $ - $ 153
Cost of sales and manufacturing start-up costs 8,595 5,235 731 - 968
--------- --------- --------- --------- ---------
Gross profit (loss) 3,899 (286) (477) - (815)
--------- --------- --------- --------- ---------
Operating expenses:
Research and development 5,987 6,013 5,095 6,145 5,647
Sales and marketing 7,987 5,244 1,441 614 2,421
General and administrative 3,769 3,007 1,799 1,470 2,053
--------- --------- --------- --------- ---------
Total operating expenses 17,743 14,264 8,335 8,229 10,121
--------- --------- --------- --------- ---------
Loss from operations (13,844) (14,550) (8,812) (8,229) (10,936)
Interest income, net 173 836 487 542 984
--------- --------- --------- --------- ---------
Net loss ($ 13,671) ($ 13,714) ($ 8,325) ($ 7,687) ($ 9,952)
========= ========= ========= ========= =========
Basic and diluted net loss per share $ (1.02) $ (1.28) $ (0.96) $ (1.08) $ (1.41)
========= ========= ========= ========= =========
Shares used in computing basic and diluted net loss
per share 13,355 10,728 8,707 7,145 7,070
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Cash, cash equivalents and available-for-sale
securities $ 3,557 $ 8,157 $ 12,978 $ 7,164 $ 14,459
Working capital 3,661 8,261 11,550 6,242 11,850
Total assets 14,535 17,709 16,216 8,088 15,540
Long term debt, including current portion 752 1,031 204 321 43
Accumulated deficit (64,942) (51,271) (37,557) (29,232) (21,545)
Total stockholder's equity 9,874 14,821 14,786 6,827 14,224
- 14 -
RISK FACTORS
By voting in favor of the merger, Fusion stockholders will be choosing to
invest in Baxter common stock. In addition to the other information contained
in or incorporated by reference into this document, you should carefully
consider the following risk factors in deciding whether to vote for the merger.
If any of the following risks actually occur, the business and prospects of
Fusion or Baxter may be seriously harmed. In such case, the trading price of
Baxter common stock may decline, and you may lose all or part of your
investment.
THE MARKET VALUE OF BAXTER COMMON STOCK ON THE DAY THE MERGER IS COMPLETED MAY
VARY FROM THE AVERAGE CLOSING PRICE OF BAXTER COMMON STOCK USED TO CALCULATE
THE CONSIDERATION TO BE RECEIVED BY FUSION STOCKHOLDERS IN THE MERGER.
Under the merger agreement, each share of Fusion common stock will be
exchanged for a fraction of a share of Baxter common stock equal to $10.00,
subject to adjustments described in the next risk factor, divided by the
average closing price of one share of Baxter common stock for the ten
consecutive trading days ending on and including the third trading day prior to
the special meeting of Fusion stockholders. This means that if the market price
of Baxter common stock increases between the signing of the merger agreement
and the date that the exchange ratio is determined, Fusion stockholders will
receive fewer shares of Baxter common stock upon completion of the merger than
they would have received if the exchange ratio had been fixed prior to the
increases in Baxter's common stock price, and the value of the consideration
receivable by Fusion stockholders will not increase. Once the exchange ratio
for shares of Baxter common stock is determined, it will be a fixed value that
will not be adjusted for any increase or decrease in the market price of Baxter
common stock and the value of the Baxter common stock to be received by Fusion
stockholders in the merger will fluctuate with changes in the Baxter common
stock price. The market value of Baxter common stock on the day the merger is
completed may vary from the average closing price of Baxter common stock used
to calculate the merger consideration. The merger may not be completed
immediately following the special meeting of Fusion stockholders, if at all, if
all regulatory approvals have not yet been obtained or if other closing
conditions have not been satisfied or waived. As a result, the market value of
the shares of Baxter common stock you receive in the merger may be more or less
than the value attributed to your Fusion shares in calculating the merger
consideration.
THE AGREED UPON PRICE PER SHARE OF FUSION COMMON STOCK OF $10.00 IS SUBJECT TO
CHANGE IN CERTAIN INSTANCES.
The $10.00 price per share of Fusion common stock agreed upon by Baxter
and Fusion is based upon the capitalization of Fusion described in the merger
agreement. In the event that the actual capitalization differs from the
capitalization described in the merger agreement, the price per share of Fusion
common stock may be adjusted upwards or downwards, which could result in your
receiving fewer shares of Baxter common stock in the merger. Additionally, if
Fusion borrows money under new loan arrangements between the date of the merger
agreement and the closing date, the price per share of Fusion common stock will
be reduced, which will result in Fusion stockholders receiving fewer shares of
Baxter common stock in the merger. The mechanics of these adjustments are
described in greater detail under the heading "The Merger Agreement and Related
Agreements--Conversion of Shares" beginning on page 36 below.
THE PRICE OF BAXTER COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT FROM
THOSE AFFECTING THE PRICE OF FUSION COMMON STOCK.
Upon completion of the merger, holders of Fusion common stock will be
entitled to receive Baxter common stock. Baxter's business differs from that of
Fusion, and Baxter's results of operations, as well as the price of Baxter
common stock, may be affected by factors different from those affecting
Fusion's results of operations and the price of Fusion common stock. For a
discussion of Baxter's and Fusion's businesses, see Baxter's Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, and Fusion's Annual
Report on Form 10-K/A for the fiscal year ended December 31, 2001, each of
which are incorporated by reference in this document.
- 15 -
FUSION'S OFFICERS AND DIRECTORS HAVE INTERESTS THAT MAY INFLUENCE THEM TO
SUPPORT OR APPROVE THE MERGER.
In addition to owning Fusion common stock and options to purchase Fusion
common stock, the directors and officers of Fusion have interests in the merger
that are different from, or in addition to, yours which may influence their
decision to support or recommend the merger, including the following:
. Under the terms of their employment, certain officers of Fusion
are entitled to separation benefits if their employment with
Fusion is terminated for any reason other than cause;
. Fusion has executed indemnification agreements with certain
officers and directors;
. Baxter has agreed not to amend the indemnity provisions in
Fusion's restated certificate of incorporation or bylaws covering
present and former Fusion officers and directors against
liabilities arising out of such persons' services as officers or
directors. Baxter has agreed to maintain officers' and directors'
liability insurance to cover any such liabilities for six years
following the closing of the merger, provided that Baxter is not
required to pay more than 175% of the annual premium of Fusion's
current officers' and directors' liability policy; and
. All unvested Fusion options, including those held by Fusion's
officers and directors, will become exercisable in connection with
the merger.
BAXTER AND FUSION MAY NOT REALIZE ALL OF THE ANTICIPATED BENEFITS OF THE MERGER.
The success of the merger will depend, in part, on the ability of Baxter
to realize certain anticipated synergies and growth opportunities from
integrating the business of Fusion with the businesses of Baxter. We cannot
assure you that this integration will result in the realization of the full
anticipated benefits of the synergies and growth opportunities or that these
benefits will be achieved within the anticipated time frame or at all.
FUSION PURCHASES KEY RAW MATERIALS FROM SINGLE SUPPLIERS WITH WHOM FUSION DOES
NOT HAVE LONG TERM SUPPLY ARRANGEMENTS; THE MERGER COULD DISRUPT THE SUPPLY OF
THESE KEY RAW MATERIALS, WHICH COULD LEAD TO DELAY IN OR SUSPENSION OF FUSION'S
MANUFACTURE OF FLOSEAL.
Fusion currently purchases essential elements of FloSeal and
sterilization services from single suppliers. Fusion purchases bovine hides
from Spear Products and thrombin from King Pharmaceuticals, Inc. Fusion does
not have long-term supply arrangements with these suppliers. We cannot assure
you that these suppliers will not cancel or alter their arrangements with
Fusion because of the merger. If any of these suppliers increases the prices it
charges Fusion, Fusion's financial results may be adversely affected. In the
event that raw materials from any of Fusion's current single-source suppliers
become unavailable for any reason, Fusion will be required to identify
alternative suppliers and if Fusion is unable to identify alternative
suppliers, then Fusion may have to alter or suspend its manufacturing
activities. Identifying and utilizing additional or replacement suppliers for
any of the components in FloSeal may not be accomplished quickly, if at all,
and could involve significant additional costs. In addition, regulatory
approval of any new supplier of a critical component would be required if that
component was no longer available from the currently specified supplier and use
of components from new or replacement suppliers may require new product
regulatory submissions to the United States Food and Drug Administration. The
regulatory approval of a new product, a new product component or the
qualification of a new supplier could delay Fusion's sales and marketing of
FloSeal. Fusion's failure to obtain any of the components used to manufacture
FloSeal from alternative suppliers or any delay in the regulatory approval of a
new product or a new supplier could suspend the manufacture of FloSeal and
would harm Fusion's business.
FAILURE TO ADOPT AND APPROVE OR COMPLETE THE MERGER COULD NEGATIVELY IMPACT
FUSION'S COMMON STOCK PRICE AND FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, Fusion may be subject to a
number of material risks, including the following:
. Fusion may be unable to obtain financing, on acceptable terms or
at all, sufficient to fund continuing operations;
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. In certain circumstances, Fusion may be required to pay Baxter a
termination fee of $5,000,000;
. The price of Fusion's shares may decline to the extent that the
current market price of Fusion shares reflects a market assumption
that the merger will be completed;
. The costs related to the merger, such as legal, accounting and
financial advisor fees, must be paid even if the merger is not
completed;
. Fusion's stock price may decline because of uncertainty regarding
Fusion's ability to grow and gain market share as a stand-alone
company, rather than as a part of a larger entity;
. The diversion of Fusion's management's attention from Fusion's
day-to-day business may make retaining its market position
difficult; and
. Fusion will have to repay Baxter for any money Fusion borrows from
Baxter, and Fusion may not have sufficient funds to satisfy this
obligation.
In addition, current and prospective Fusion employees may experience
uncertainty about their future roles with Baxter until Baxter's strategies with
regard to Fusion are announced or executed. This may adversely affect Fusion's
ability to attract and retain key management, sales, marketing and technical
personnel. In addition, the announcement of the merger may adversely affect
Fusion's relationships with customers, distributors, suppliers and other
persons having business dealings with Fusion and may result in delays,
reductions or cancellations of customer orders. Impairment of these
relationships could reduce Fusion's revenues or increase its expenses, either
of which could harm Fusion's financial condition and operating results.
Further, if the merger is terminated and Fusion's board of directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a party willing to pay an equivalent or
more attractive price than the price to be paid in the merger. In addition,
while the merger agreement is in effect, Fusion is prohibited, subject to
certain exceptions, from soliciting, initiating or encouraging or entering into
certain extraordinary transactions, such as a merger, sale of assets or other
business combination, with any party other than Baxter.
In addition to the risks discussed above, Baxter and Fusion are subject
to their own specific risks, including risks relating to their respective
businesses, strategies, markets and legal and regulatory environments. For a
discussion of these risks, please see each of Baxter's and Fusion's reports
filed under the Exchange Act and incorporated by reference into this document
and the section entitled "Forward-Looking Statements" beginning on page 55
below.
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THE SPECIAL MEETING OF FUSION STOCKHOLDERS
PURPOSE OF THE SPECIAL MEETING
The purpose of the special meeting of Fusion stockholders is to consider
and vote upon the adoption and approval of the merger agreement and the
transactions described in the merger agreement. If the merger is completed,
Fusion will become a wholly-owned subsidiary of Baxter. Fusion's stockholders
also will consider and vote upon such other matters, if any, as may be properly
brought before the special meeting, including any motion submitted to a vote of
the stockholders to adjourn or postpone the special meeting to another time and
place for the purpose of soliciting additional proxies.
The board of directors of Fusion has unanimously approved the merger
agreement and unanimously recommends that you vote FOR the merger agreement and
the transactions described in the merger agreement. Certain members of the
board of directors of Fusion may be deemed to have interests in the merger that
are different from, or in addition to, those of other Fusion stockholders,
which may influence their decision to support or recommend the merger. See "The
Merger--Interests of Directors and Officers of Fusion in the Merger" beginning
on page 31 below.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of Fusion stockholders will be held on May 3, 2002 at
9:00 a.m., local time, at Fusion's headquarters located at 34175 Ardenwood
Boulevard, Fremont, CA 94555.
RECORD DATE; VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Fusion common stock at the close of business on
March 28, 2002, the record date, will be entitled to notice of, and to vote at,
the special meeting. On that date, there were 96 stockholders of record holding
an aggregate of 14,386,894 shares of Fusion common stock. Each holder of record
of shares of Fusion common stock on the record date will be entitled to one
vote for each share held on all matters to be voted upon at the special meeting.
SOLICITATION OF PROXIES; EXPENSES
The cost of the solicitation of proxies from holders of shares of Fusion
common stock and all related costs will be borne by Fusion. Fusion has retained
the services of Georgeson Shareholder Communications, Inc. to assist in the
solicitation of proxies from Fusion stockholders. Fusion expects to pay
Georgeson approximately $10,000, plus reasonable out-of-pocket costs and
expenses, for these services.
In addition, Fusion may reimburse brokerage firms and other persons
representing beneficial owners of Fusion common stock for their expenses in
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of
Fusion. No additional compensation will be paid to directors, officers or other
regular employees for such services.
QUORUM; VOTE REQUIRED
The presence, in person or by properly executed proxy, of the holders of
a majority of the issued and outstanding shares of Fusion common stock at the
special meeting is necessary to constitute a quorum. The adoption and approval
of the merger agreement and the transactions described in the merger agreement
will require the affirmative vote of the holders of a majority of the
outstanding shares of Fusion common stock. The votes cast at the special
meeting will be tabulated by an inspector of elections appointed by Fusion's
board of directors.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTES
If an executed proxy is returned and the stockholder has specifically
abstained from voting on the merger agreement and the merger, the shares
represented by such proxy will be considered present at the special meeting for
purposes of determining a quorum and will be counted as votes against the
adoption and approval of the merger agreement. Brokerage firms who hold shares
in street name for customers will not have the authority to vote shares of
Fusion's common stock with respect to the merger if they have not received
instructions from
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the beneficial owners of such shares. If a broker fails to vote shares of
Fusion's common stock because the broker has not received instructions from the
beneficial owner (a "broker non-vote"), such shares will be considered present
at the special meeting for purposes of determining a quorum and will be counted
as votes against the adoption and approval of the merger agreement.
VOTING AND REVOCABILITY OF PROXIES
All shares of Fusion's common stock that are represented at the special
meeting, either in person or by properly executed proxies received prior to or
at the special meeting and not duly and timely revoked, will be voted at the
special meeting in accordance with the instructions indicated on such proxies.
If no such instructions are indicated, such proxies will be voted FOR the
adoption and approval of the merger. Shares represented at the special meeting
by proxies FOR the merger agreement will be voted FOR any motion to adjourn or
postpone the special meeting to permit further solicitation of proxies.
If any other matters are properly presented for consideration at the
special meeting, or any adjournments or postponements of the special meeting,
the persons named in the enclosed form of proxy and voting thereunder will have
the discretion to vote on such matters in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by:
. duly executing and delivering a written notice of revocation to
Fusion's Corporate Secretary up to the last business day before
the special meeting, or to the chairman of the special meeting on
the day of the special meeting;
. duly executing a later-dated proxy relating to the same shares and
delivering it to Fusion's Corporate Secretary up to the last
business day before the special meeting, or to the chairman of the
special meeting on the day of the special meeting; or
. attending the special meeting and voting in person (although
attendance at the special meeting will not in and of itself
constitute revocation of a proxy).
Any written notice of revocation or subsequent proxy delivered to
Fusion's Corporate Secretary should be sent so as to be delivered to Fusion at
Fusion Medical Technologies, Inc., 34175 Ardenwood Boulevard, Fremont, CA
94555, Attention Corporate Secretary, at or before the taking of the vote at
the special meeting.
Fusion's stockholders should not send any certificates representing
shares of Fusion's common stock with the enclosed proxy card. If the merger is
consummated, a letter of transmittal will be mailed to each person who was a
holder of outstanding shares of Fusion's common stock immediately prior to the
consummation of the merger. Fusion's stockholders should send certificates
representing shares of Fusion's common stock to the exchange agent only after
they receive, and in accordance with the instructions contained in, the letter
of transmittal.
STOCK OWNERSHIP BY MANAGEMENT
Fusion's directors and executive officers and their respective affiliates
beneficially owned, as of the record date, an aggregate of 4,701,518 shares of
Fusion common stock, representing beneficial ownership of approximately 29.8%
of Fusion common stock on a fully diluted basis on such date.
VOTING AGREEMENTS
All of Fusion's executive officers (other than one officer who has given
notice of his intention to terminate his employment) and directors as of the
date of the merger agreement and their affiliates, who hold an aggregate of
approximately 23.2% of Fusion's outstanding common stock as of the date of the
merger agreement, have entered into voting agreements pursuant to which each of
these stockholders has agreed to vote in favor of the adoption and approval of
the merger agreement, the transactions described in the merger agreement and
certain other matters. In addition, under the voting agreements, each of these
stockholders has granted Baxter proxies to vote such stockholder's shares of
Fusion common stock with respect to the adoption and approval of the merger
agreement, the transactions described in the merger agreement and certain other
matters. The full text of the form of voting agreement is included in this
document as Annex B.
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THE MERGER
This section of the document describes the proposed merger. While we
believe that the description covers the material terms of the merger and the
related transactions, this summary may not contain all of the information that
is important to you. You should carefully read this entire document, including
the annexes, and the other documents we refer to for a more complete
understanding of the merger.
BACKGROUND OF THE MERGER
From time to time, Fusion has participated in discussions with other
companies about possible joint venture partnership, distribution, supply and
development arrangements, as well as other strategic transactions.
On January 3, 2001, Cary Reich, Ph.D., the Vice President of the Research
& Development Group of Fusion, telephoned Thomas Glanzman, the President of
Baxter's BioScience division, to express Fusion's interest in discussing the
use of Baxter's human thrombin as a second source raw material for the
manufacture of FloSeal.
On January 5, 2001, Lee Blumenfeld, M.D., the Director of Business
Development of Baxter BioScience, called Dr. Reich to follow up on Dr. Reich's
call to Mr. Glanzman.
On March 6, 2001, Fusion and Baxter entered into a non-disclosure
agreement providing for Baxter's disclosure of certain confidential information
to Fusion.
On March 15, 2001, Dr. Reich met with Dr. Blumenfeld, Howard Kelly, then
the U.S. Vice President Sales & Marketing of Baxter BioSurgery, Arlene Vidor,
the Vice President, U.S. Regulatory of Baxter BioScience, and Ray Leonard, the
Manager of Global Strategic Planning of Baxter BioSurgery in Deerfield,
Illinois to discuss the potential use of Baxter's human thrombin as a second
source raw material for the manufacture of FloSeal. During these discussions
the parties also discussed the possibility of Baxter BioScience serving as a
distributor of FloSeal in one or more markets.
On April 27, 2001, Fusion and Baxter entered into a second non-disclosure
agreement pursuant to which they agreed to exchange confidential information
regarding their respective businesses.
On May 15, 2001, representatives of Baxter met with representatives of
Fusion management at Fusion's offices in Glendale, California to review
background historical information on Fusion's strategy, products and financial
and operational performance.
On May 15, 2001, Dr. Reich met with Greg Bosch, the Vice
President/General Manager of Baxter's BioSurgery business unit, Dr. Blumenfeld
and Reiner Spaethe, M.D., the Vice President of Research and Development
Clinical/Medical Affairs, Baxter BioSurgery, in Deerfield, Illinois to discuss
a possible thrombin supply arrangement between Fusion and Baxter.
On May 16, 2001, the companies exchanged products for laboratory testing.
On June 19, 2001, Mr. Bosch, Dr. Blumenfeld, Philip Sawyer, the President
and CEO of Fusion, Larry Strauss, the Vice President of Finance and Chief
Financial Officer of Fusion, and Dr. Reich met at Fusion's offices in Fremont,
California to continue discussions regarding the potential use of Baxter's
human thrombin in FloSeal. At this meeting, representatives of Baxter
introduced the concept of pursuing a number of strategic alternatives,
including a possible business combination transaction with Fusion.
On June 21, 2001, Mr. Strauss telephoned a representative of Group
Outcome LLC, a financial advisor with which Fusion had previously worked, and
discussed Fusion's conversations with Baxter. The parties discussed the
possibility of Fusion's retaining Group Outcome to advise it in a possible
business combination transaction with Baxter.
On July 18, 2001, Drs. Reich and Blumenfeld and Messrs. Sawyer, Strauss
and Bosch met in San Francisco, California and continued the discussions of a
possible business combination transaction.
On August 17, 2001, Dr. Reich met in Glendale, California with Ms. Vidor
and Allison Mueller, Project Manager Regulatory Affairs, Baxter BioScience, to
discuss a regulatory and clinical approach for a human thrombin product.
- 20 -
On August 27, 2001, Messrs. Sawyer and Strauss and a representative of
Group Outcome participated in a conference call with Mr. Bosch and Dr.
Blumenfeld to discuss the process for proceeding with a possible business
combination transaction, including possible terms of such a transaction.
On September 6, 2001, Messrs. Strauss and Sawyer, Dr. Reich and a
representative of Group Outcome met in Glendale, California, with Mr. Bosch,
Dr. Blumenfeld and Ms. Vidor and discussed regulatory issues pertaining to
Fusion's products and continued discussions regarding a possible business
combination transaction.
Between late September and October 2001, representatives of Fusion and
Baxter, including Messrs. Bosch, Sawyer and Strauss and Drs. Reich and
Blumenfeld, continued discussions regarding a possible business combination
transaction.
In October 2001, Fusion decided to contact third parties to determine
their level of interest in pursuing a possible strategic transaction with
Fusion. From late October 2001 through January 14, 2002, several discussions
took place among representatives of Fusion, a representative of Group Outcome
and several third parties. A representative of Group Outcome initiated
conversations with four other potential transaction partners, and Fusion
entered into non-disclosure agreements with two of these companies. However,
neither of these companies proposed a bid comparable to that being discussed
with Baxter.
On November 9, 2001, Fusion and Group Outcome executed an engagement
letter under which Group Outcome would provide financial advisory services in
connection with a possible business combination transaction.
On November 16, 2001, Group Outcome provided Baxter with guidelines for
submitting a bid to enter into a business combination transaction with Fusion.
On November 28, 2001, Baxter transmitted to Fusion, care of Group
Outcome, a preliminary, non-binding indication of interest for a business
combination transaction with Fusion, along with a due diligence request list.
On November 29, 2001, Mr. Bosch and a representative of Group Outcome
discussed Baxter's preliminary, non-binding indication of interest.
On November 30, 2001, Fusion's board of directors held a meeting to
discuss the results of Fusion's discussions with potential transaction partners
and concluded that a possible business combination transaction with Baxter was
the best alternative. Fusion's board of directors authorized management to
continue discussions with Baxter.
Also on November 30, 2001, Group Outcome transmitted to Baxter Fusion's
proposed form of merger agreement prepared by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, outside legal counsel to Fusion.
On December 7, 2001, Baxter returned to Fusion a revised draft of the
merger agreement.
On December 10, 2001, Baxter requested that Fusion enter into an
exclusivity agreement and transmitted the proposed agreement to Fusion.
On December 11-12, 2001, representatives from Baxter conducted a due
diligence review of Fusion at the offices of Wilson Sonsini Goodrich & Rosati
in Palo Alto, California. Due diligence efforts continued through the signing
of the merger agreement, and included meetings between representatives of
Baxter and Fusion management in Palo Alto and Fremont, California.
On December 14, 2001, Fusion's board of directors held a regularly
scheduled meeting, which included discussions with respect to the potential
business combination transaction with Baxter.
On January 11, 2002, Fusion's board of directors held a meeting to
consider Baxter's request for exclusivity and to consider the likelihood of an
alternative offer resulting from Fusion's discussions with potential partners.
After this discussion, Fusion's board of directors authorized Fusion's
management to enter into a three-week exclusivity agreement with Baxter. During
the exclusivity period, Fusion agreed not to negotiate with, solicit interest
from or provide information to any party other than Baxter with respect to a
possible business combination involving Fusion.
On January 14, 2002, Fusion and Baxter signed an agreement under which
Fusion would negotiate exclusively with Baxter for a period expiring February
11, 2002. Also on January 14, 2002, Baxter and Fusion
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signed an amendment to the April 27, 2001 mutual non-disclosure agreement to
extend it to the discussions involving the possible business combination
transaction between Fusion and Baxter.
From January 14, 2002 through February 5, 2002, negotiations on the terms
of the merger agreement and related agreements continued among Baxter, Fusion
and their respective legal counsel and financial advisors.
On February 5, 2002, a representative of Group Outcome received an oral
inquiry from a third party regarding the third party's interest in a potential
business combination with Fusion. As required by the exclusivity agreement,
Fusion notified Baxter of the receipt of this proposal.
On February 8, 2002, Baxter notified Fusion that if Fusion did not extend
the exclusivity agreement upon its expiration on February 11, 2002, Baxter
would discontinue its discussions with Fusion regarding a potential business
combination transaction.
On February 8 and 11, 2002, Fusion's board of directors held telephonic
meetings to discuss the oral inquiry received from the third party and whether
to renew the exclusivity agreement with Baxter. At these meetings, Fusion's
board of directors considered the relatively advanced stage of the discussions
with Baxter, the extent of the due diligence conducted by Baxter, the
likelihood of entering into a definitive acquisition agreement with Baxter on
acceptable terms and Baxter's history of successfully completing acquisition
transactions, and also considered the preliminary nature of the inquiry
received from the third party. After deliberations, Fusion's board of directors
determined that if Baxter were able to tell Fusion that Baxter's executive
management team would recommend taking the business combination transaction
with Fusion to Baxter's board of directors for approval, Fusion would extend
the exclusivity agreement through February 26, 2002 and would not respond to
the inquiry received from the third party.
On February 11, 2002, Baxter notified Fusion that its executive
management team had recommended taking the transaction to Baxter's board of
directors for approval, and Fusion executed an extension to the exclusivity
agreement through February 26, 2002.
Between February 11 and February 26, 2002, Baxter and Fusion and their
respective legal counsel negotiated the terms of the merger agreement and
related agreements by teleconference. These negotiations covered all aspects of
the transaction, including the representations and warranties to be made by the
parties, the restrictions on the conduct of Fusion's business, the conditions
to the completion of the proposed merger, the provisions regarding termination,
including Fusion's right to terminate the merger agreement to accept a superior
proposal under certain circumstances, the details of the non-solicitation
provisions, the amount, triggers and payment of the termination fees, the
possibility and terms of Baxter providing interim financing to Fusion, the
treatment of options under the merger agreement and the terms of a voting
agreement.
On February 18, 2002, Fusion retained J.P. Morgan Securities Inc. to
serve as a financial advisor and, if necessary, deliver its opinion as to the
fairness of the transaction to Fusion's board of directors.
On February 25, 2002, Fusion's board of directors held a special
telephonic meeting at which Mr. Sawyer and representatives of Wilson Sonsini
Goodrich & Rosati and Group Outcome reviewed the status of the negotiations and
discussions with Baxter and its representatives. In addition, representatives
of Wilson Sonsini Goodrich & Rosati reviewed with Fusion's board of directors
the main legal principles applicable to the proposed merger (including Fusion's
board of directors' fiduciary duties and authority in considering the merger).
Representatives of Wilson Sonsini Goodrich & Rosati also reviewed in detail the
principle terms of the proposed merger agreement and voting agreement and
summarized the remaining open issues and deal points. JPMorgan delivered a
presentation regarding the pricing terms of the proposed transaction and
informed the board of directors that it would be in a position to deliver a
fairness opinion when requested by the board of directors. Fusion's board of
directors reviewed and discussed the principal issues in the proposed
transaction, including the proposed exchange ratio, closing conditions,
termination rights, termination fees, financing arrangements and the voting
agreements.
- 22 -
On February 26, 2002, Fusion's board of directors held a special
telephonic meeting to review the revised drafts of the merger agreement and
related agreements. Representatives of Group Outcome, JPMorgan and Wilson
Sonsini Goodrich & Rosati also participated. Representatives of Wilson Sonsini
Goodrich & Rosati reviewed the outcome of further negotiations and responded to
questions by Fusion's board of directors. JPMorgan reviewed the financial terms
of the proposed transaction and delivered its oral opinion, subsequently
confirmed in writing, to Fusion's board of directors that, based upon and
subject to various considerations, as of February 26, 2002, the exchange ratio
pursuant to the merger agreement was fair, from a financial point of view, to
the holders of Fusion common stock. For a more detailed discussion of
JPMorgan's analysis and opinion, you should review the section entitled "The
Merger--Opinion of Fusion's Financial Advisor" beginning on page 26 below and
the text of JPMorgan's opinion attached to this document as Annex C. After
further deliberation, Fusion's board of directors, by the unanimous vote of all
directors present and voting at the meeting:
. determined that the merger agreement and the transactions
contemplated thereby, including the merger, are consistent with
and in furtherance of the long-term business strategy of Fusion
and are advisable and are fair to and in the best interest of
Fusion stockholders,
. approved the merger agreement and the transactions described in
the merger agreement, including the merger and the voting
agreement,
. resolved to call a special meeting of Fusion stockholders to adopt
and approve the merger agreement and to approve the merger;
. resolved to recommend that Fusion stockholders vote in favor of
the adoption and approval of the merger agreement and approval of
the merger; and
. authorized Mr. Sawyer and Mr. Strauss to execute, on behalf of
Fusion, the merger agreement and such other documents that certain
of Fusion's officers find necessary or advisable in their sole
discretion, together with any changes, deletions, additions and
alterations that such officers approve consistent with the
resolutions of Fusion's board of directors.
On February 26, 2002, at a regularly scheduled meeting, Baxter's board of
directors reviewed the significant terms of the proposed merger and authorized
Baxter's management to proceed with the execution of a definitive agreement.
On the evening of February 26, 2002, Fusion and Baxter entered into the
merger agreement. Also on February 26, 2002, all of Fusion's executive officers
(other than one officer who has given notice of his intention to terminate his
employment) and directors as of the date of the merger agreement and their
affiliates entered into voting agreements with Baxter, pursuant to which they
agreed to vote their Fusion shares in favor of the adoption and approval of the
merger agreement and approval of the merger.
After the parties signed the merger agreement, Fusion and Baxter issued a
joint press release on the morning of February 27, 2002 announcing the
transaction.
RECOMMENDATION OF FUSION'S BOARD OF DIRECTORS
After careful consideration of the terms and conditions of the merger,
Fusion's board of directors has unanimously determined that the merger
agreement is advisable, and that the terms of the merger agreement and the
transactions described in the merger agreement are fair to, and in the best
interests of, Fusion and its stockholders, and unanimously recommends that
Fusion stockholders adopt and approve the merger agreement and the transactions
described in the merger agreement.
FUSION'S REASONS FOR THE MERGER
The decision of Fusion's board of directors to recommend the merger is
based upon a number of potential benefits of the merger that Fusion's board of
directors believes will contribute to the success of the combined company
compared to Fusion continuing to operate as an independent business, including
the following:
. the judgment of Fusion's board of directors that the two companies
have significantly complementary strengths and products;
. the potential that Baxter's:
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. larger market capitalization;
. broad suite of products and services,
. manufacturing, distribution and marketing and sales
capabilities, and
. historical revenue growth,
will provide Fusion's products with additional resources to grow
and gain market share more rapidly than Fusion could grow these
products as an independent company in the rapidly evolving medical
device industry characterized by the entrance of an increasing
number of large, well capitalized and well known competitors;
. the judgment of Fusion's board of directors that the medical
device industry has experienced consolidation as participants have
sought to broaden product lines, gain market share, increase
market penetration and effectively sell products to hospitals and
managed care organizations, which favors companies offering large
and cost-effective product portfolios over companies with more
limited product offerings;
. that the exchange ratio was at a significant premium over the
price of Fusion common stock prevailing in the market during
various time periods, and the further opportunity for Fusion
stockholders to participate in the future growth in value of the
combined company as stockholders of Baxter following the merger;
. the fixed value of the exchange ratio and the resulting benefit
that the value of the consideration to be received by Fusion
stockholders will not be reduced due to a decrease in the value of
Baxter's common stock prior to the date the exchange ratio is
determined;
. the greater liquidity afforded Fusion stockholders upon exchange
of their shares of Fusion common stock for shares of Baxter common
stock, whose shares trade at significantly higher dollar and share
volumes than shares of Fusion common stock; and
. the merger is expected to qualify as a tax-free reorganization for
U.S. federal income tax purposes.
In identifying these benefits and evaluating the merger, Fusion's board
of directors reviewed a number of factors and sources of information, including
the following:
. the terms of the merger agreement and related agreements, by
themselves and in comparison to the terms of other transactions,
and the intensive negotiations between Baxter and Fusion,
including their negotiations relating to the details of the
conditions to the parties' obligations to complete the merger, the
details of the restrictions on Fusion's ability to pursue
alternative transactions and the scope of Fusion's ability to
avoid these restrictions to comply with the fiduciary obligations
of its board of directors, including Fusion's right to terminate
the merger agreement under certain circumstances to accept a
superior proposal, the parties' other termination rights, the
termination fee that Fusion may be required to pay Baxter in
certain circumstances, and the voting agreements;
. the current and historical information concerning Fusion and
Baxter and their respective businesses, financial performance,
condition, operations, technology, management and industry
position, and information and evaluations regarding the two
companies' strengths, weaknesses and prospects, both before and
after giving effect to the merger;
. the oral and written presentations of Fusion's financial advisor,
JPMorgan, and JPMorgan's opinion (which is attached to this
document as Annex C) to the effect that, based upon and subject to
various considerations, as of February 26, 2002, the exchange
ratio pursuant to the merger agreement was fair, from a financial
point of view, to holders of Fusion common stock;
- 24 -
. the current financial market conditions and historical market
prices, volatility and trading information for Fusion common stock
and Baxter common stock, and various factors that might affect the
market value of Fusion common stock in the future;
. the premium represented by the exchange ratio and the premiums
paid in other recent transactions that could be viewed as
comparable, and the negotiations between Fusion and Baxter
relating to the exchange ratio; and
. the alternatives available to Fusion and the history of contacts
by Fusion and Group Outcome, one of Fusion's financial advisors,
with other parties concerning their possible interest in a
business combination or other strategic transaction with Fusion.
Fusion's board of directors also identified and considered a number of
risks and uncertainties in its deliberations concerning the merger, including
the following:
. the risk that the potential benefits sought in the merger may not
be fully realized, if at all;
. the possibility that the merger may not be consummated and the
potential negative effect of the public announcement of the merger
on Fusion's relationships with customers, distributors, suppliers,
and other persons having business dealings with Fusion; possible
delays, reductions, or cancellations of customer orders; and the
reduction in revenues or increased expenses that will be caused by
the impairment of these relationships;
. the risk that despite the efforts of the combined company, key
technical, marketing and management personnel might not choose to
remain employed by the combined company;
. the risk of market confusion and hesitation and potential delay or
reduction in orders of Fusion products;
. the fact that pursuant to the merger agreement, Fusion is required
to obtain Baxter's consent before it can take a variety of actions
between the signing and the closing of the merger;
. the difficulty of integrating the businesses of Fusion and
Baxter's BioScience unit, and the possible adverse effect that
could result from the need to focus significant time and effort on
completing the merger and integrating the businesses;
. the fact that the exchange ratio will fluctuate based on the
market value of Baxter common stock, and that if the market price
of the Baxter common stock increases between the signing of the
merger agreement and the date that the exchange ratio is
determined, Fusion stockholders will receive fewer shares of
Baxter common stock upon completion of the merger than they would
have received if the exchange ratio had been fixed prior to the
increases in Baxter's common stock price, and the value of the
consideration receivable by Fusion stockholders will not increase;
and
. various other risks described under the section entitled "Risk
Factors" beginning on page 15 of this document.
Fusion's board of directors concluded, however, that many of these risks
could be managed or mitigated by Fusion or by the combined company or were
unlikely to have a material impact on the merger or the combined company, and
that, overall, the risks, uncertainties, restrictions and potentially negative
factors associated with the merger were outweighed by the potential benefits of
the merger.
The foregoing discussion of information and factors considered and given
weight by Fusion's board of directors is not intended to be exhaustive. In view
of the variety of factors considered in connection with its evaluation of the
merger, Fusion's 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 determinations and recommendations.
FOR THE REASONS DISCUSSED ABOVE, FUSION'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED IN THE
MERGER AGREEMENT AND HAS DETERMINED THAT THE MERGER AGREEMENT IS ADVISABLE, AND
THAT THE TERMS OF THE MERGER AGREEMENT AND TRANSACTIONS DESCRIBED IN THE MERGER
AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, FUSION STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT FUSION STOCKHOLDERS VOTE TO ADOPT AND APPROVE THE
MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED IN THE MERGER AGREEMENT.
- 25 -
OPINION OF FUSION'S FINANCIAL ADVISOR
J.P. Morgan Securities, Inc. acted as Fusion's financial advisor in
connection with the merger. Fusion requested JPMorgan, in its role as a
financial advisor, to evaluate the fairness, from a financial point of view, of
the exchange ratio in the merger to the holders of Fusion common stock. On
February 26, 2002, JPMorgan delivered its oral opinion, subsequently confirmed
in writing, to Fusion's board of directors to the effect that, as of such date
and based upon and subject to certain matters stated therein, the exchange
ratio in the merger was fair, from a financial point of view, to the holders of
Fusion common stock.
The full text of the JPMorgan fairness opinion, which sets forth the
assumptions made, factors considered and limitations upon the review undertaken
by JPMorgan in rendering its opinion, is included in this document as Annex C.
JPMorgan's written opinion was addressed to Fusion's board of directors, was
directed only to the fairness, from a financial point of view, of the exchange
ratio in the merger to the holders of Fusion common stock and does not
constitute a recommendation to any Fusion stockholder as to how such
stockholder should vote on the merger or any other matter. The following
summary of the material provisions of the JPMorgan fairness opinion is
qualified by reference to the opinion. Fusion stockholders are urged to read
this opinion in its entirety.
In arriving at its opinion, JPMorgan, among other things:
. reviewed the drafts dated February 26, 2002 of the merger
agreement and the form of voting agreement;
. reviewed certain publicly available business and financial
information concerning Fusion and Baxter and the industries in
which they operate;
. compared the proposed financial terms of the merger with the
publicly available financial terms of certain transactions
involving companies JPMorgan deemed relevant and the consideration
received for such companies;
. compared the financial and operating performance of Fusion and
Baxter with publicly available information concerning certain
other companies JPMorgan deemed relevant;
. reviewed the current and historical market prices of Fusion common
stock and Baxter common stock and certain publicly traded
securities of such other companies;
. reviewed certain internal financial analyses and forecasts
prepared by the management of Fusion relating to its businesses;
and
. performed such other financial studies and analyses and considered
such other information as JPMorgan deemed appropriate for the
purposes of its opinion.
In rendering its opinion, JPMorgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information that
was publicly available or that was furnished to it by Fusion and Baxter or
otherwise reviewed by it, and JPMorgan did not assume any responsibility or
liability therefor. JPMorgan did not conduct any valuation or appraisal of any
assets or liabilities, nor were any valuations or appraisals provided to it. In
relying on financial analyses and forecasts provided to it, JPMorgan assumed
that they were reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to the expected
future results of operations and financial condition of Fusion to which such
analyses or forecasts relate. In addition, JPMorgan assumed that the merger
will qualify as a tax-free reorganization for United States federal income tax
purposes, and that the merger and the other transactions described in the
merger agreement will be completed as described in the merger agreement without
waiver or modification of any material terms thereof. JPMorgan further assumed
that all material governmental, regulatory or other consents and approvals
necessary for the completion of the merger will be obtained without any adverse
effect on Fusion or Baxter or on the contemplated benefits of the merger.
- 26 -
The forecasts furnished to JPMorgan for Fusion were prepared by the
management of Fusion. Fusion does not publicly disclose internal management
forecasts of the type provided to JPMorgan in connection with JPMorgan's
analysis of the exchange ratio in the merger, and such forecasts were not
prepared with a view toward public disclosure. These forecasts were based on
numerous variables and assumptions that are inherently uncertain and may be
beyond the control of Fusion's management, including, without limitation,
factors related to general economic and competitive conditions and prevailing
interest rates. Accordingly, actual results could vary significantly from those
set forth in such forecasts.
JPMorgan's opinion was necessarily based on economic, market and other
conditions as in effect on, and the information made available to JPMorgan as
of, the date of its opinion. Subsequent developments may affect the opinion,
and JPMorgan does not have any obligation to update, revise or reaffirm such
opinion. JPMorgan's opinion was limited to the fairness, from a financial point
of view, to the holders of Fusion common stock of the exchange ratio in the
merger, and JPMorgan expressed no opinion as to the underlying decision of
Fusion to engage in the merger. JPMorgan expressed no opinion as to the price
at which Fusion common stock or Baxter common stock will trade at any future
time.
JPMorgan's opinion noted that JPMorgan:
. was not requested to and did not provide advice concerning the
structure, the specific exchange ratio, or any other aspects of
the merger, or to provide services other than the delivery of its
opinion;
. was not authorized to and did not solicit any expressions of
interest from any other parties with respect to the sale of all or
any part of Fusion or any other alternative transaction;
. did not participate in negotiations with respect to the terms of
the merger and related transactions;
. assumed that the agreed terms of the merger are the most
beneficial terms from Fusion's perspective that could under the
circumstances be negotiated among the parties to such a
transaction; and
. expressed no opinion whether any alternative transaction might
produce consideration for Fusion's stockholders in an amount in
excess of that contemplated in the merger.
In accordance with customary investment banking practice, JPMorgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of certain of the financial analyses presented to
Fusion's board of directors at its meetings on February 25, 2002 and February
26, 2002, which analyses were also among those considered by JPMorgan in
connection with delivering its opinion. Some of the analyses include
information presented in a tabular format. To understand fully the financial
analyses used by JPMorgan, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete description of the
financial analyses. This summary does not purport to be a complete description
of the analyses underlying the opinion of JPMorgan.
Public Companies Analysis. Using publicly available information, JPMorgan
compared certain financial and operating information and ratios for Fusion with
corresponding financial and operating information and ratios for the following
medical products companies:
. BioSphere Medical, Inc.;
. Cohesion Technologies, Inc.;
. Closure Medical Corporation;
. CryoLife, Inc.;
. Genzyme Biosurgery Division (Genzyme Corporation);
. Haemacure Corporation;
. Kensey Nash Corporation;
- 27 -
. Organogenesis Inc.; and
. Vascular Solutions, Inc.
The following table reflects the results of the analysis:
RANGE MEAN MEDIAN FUSION
-----------------------------------------------------------------------------------------
Ratio of enterprise value* to calendar 2001 sales 1.4x-14.4x 6.5x 5.7x 10.0x
Ratio of enterprise value* to calendar 2002 projected sales 1.7x-11.0x 4.8x 3.5x 4.8x
-----------------------------------------------------------------------------------------
* Market value, plus debt and minority interests, minus cash
Using publicly available information, JPMorgan also compared certain
financial and operating information and ratios for Baxter with corresponding
financial and operating information and ratios for the following
large-capitalization medical products companies:
. Becton, Dickinson and Company;
. Boston Scientific Corporation;
. C.R. Bard, Inc.;
. Guidant Corporation;
. Medtronic, Inc.;
. Smith & Nephew plc; and
. St. Jude Medical, Inc.
The following table reflects the results of the analysis:
RANGE MEAN MEDIAN BAXTER
-----------------------------------------------------------------------------------------------
Ratio of enterprise value to calendar 2001 sales 2.2x-9.6x 4.8x 4.0x 4.8x
Ratio of enterprise value to calendar 2001 EBITDA* 9.9x-25.4x 16.2x 15.1x 19.2x
Ratio of market price to calendar 2001 earnings 18.7x-39.2x 28.4x 29.2x 34.0x
Ratio of market price to projected calendar 2002 earnings 16.7x-34.0x 24.6x 24.8x 27.5x
Ratio of market price to projected calendar 2002 earnings
divided by projected long term earnings per share growth rate 1.4x-2.3x 1.8x 1.7x 1.8x
-----------------------------------------------------------------------------------------------
* Earnings before interest, taxes, depreciation and amortization
Based upon the reference ranges derived from the public companies
analysis for Fusion and Baxter, JPMorgan calculated an implied exchange ratio
by comparing the implied per share equity values of Fusion common stock and
Baxter common stock. The analysis yielded the following implied exchange ratios
(rounded to the nearest thousandth), in each case compared to the implied
exchange ratio of 0.180, calculated by dividing $10.00, the price per share of
Fusion common stock set forth in the merger agreement, by $55.48, the February
22, 2002 closing price for Baxter common stock:
IMPLIED
COMPARISON EXCHANGE RATIO
-------------------------------------------------------------------------------------
Highest estimated valuation of Fusion common stock to lowest estimated
valuation of Baxter common stock 0.296x
Lowest estimated valuation of Fusion common stock to highest estimated
valuation of Baxter common stock 0.024x
-------------------------------------------------------------------------------------
- 28 -
Precedent Transactions Analysis. JPMorgan reviewed certain publicly
available information regarding selected business combinations in the
biotechnology industry announced since May 1995. These transactions and the
month in which each transaction was announced were as follows:
. Genzyme Biosurgery Division (Genzyme Corporation) / Focal, Inc.
(April 2001)
. Genzyme Biosurgery Division (Genzyme Corporation) / Biomatrix,
Inc. (March 2000)
. Inamed Corporation / Collagen Aesthetics, Inc. (August 1999)
. Abbott Laboratories / Perclose, Inc. (February 1999)
. St. Jude Medical, Inc. / Angioseal (Tyco International Ltd.)
(February 1999)
. C.R. Bard, Inc. / Impra, Inc. (August 1996)
. Boston Scientific Corporation / Meadox Medicals, Inc. (September
1995)
. C.R. Bard, Inc. / MedChem Products, Inc. (May 1995)
The following table reflects the results of the analysis. Fusion ratios
are based on the $10.00 per share offer:
RANGE MEAN MEDIAN FUSION
---------------------------------------------------------------------------------------------
Ratio of enterprise value to last-twelve-months sales 1.5x -11.4x 4.8x 3.6x 12.4x
Ratio of enterprise value to one-calendar-year-forward sales 1.3x - 9.3x 4.2x 2.4x 6.0x
Ratio of enterprise value to two-calendar-year-forward sales 0.8x - 6.9x 3.7x 3.6x 3.7x
Ratio of enterprise value to last-twelve-months EBITDA 7.1x - 60.8x 25.6x 20.7x NM
---------------------------------------------------------------------------------------------
Based upon the precedent transactions for Fusion and the public companies
analysis for Baxter set forth above, JPMorgan calculated an implied exchange
ratio by comparing the implied per share equity values of Fusion common stock
and Baxter common stock. The analysis yielded the following implied exchange
ratios (rounded to the nearest thousandth), in each case compared to the
implied exchange ratio of 0.180, calculated by dividing $10.00, the price per
share of Fusion common stock set forth in the merger agreement, by $55.48, the
February 22, 2002 closing price for Baxter common stock:
IMPLIED
COMPARISON EXCHANGE RATIO
-------------------------------------------------------------------------------------
Highest estimated valuation of Fusion common stock to lowest estimated
valuation of Baxter common stock 0.156x
Lowest estimated valuation of Fusion common stock to highest estimated
valuation of Baxter common stock 0.036x
-------------------------------------------------------------------------------------
Relative Discounted Cash Flow Analysis. JPMorgan performed discounted
cash flow analyses for each of Fusion and Baxter using:
. three separate cases of financial forecasts for Fusion provided by
Fusion management for years 2002 through 2006; and
. publicly available financial forecasts for Baxter for years 2002
through 2006 published by Wall Street equity research analysts.
JPMorgan calculated a discounted cash flow analysis for Fusion assuming
discount rates ranging from 30% to 40%, and terminal multiples of EBITDA in the
year 2006 ranging from 10.0x to 15.0x, and for Baxter assuming discount rates
ranging from 8.0% to 12.0%, and terminal multiples of EBITDA in the year 2006
ranging from 14.0x to 20.0x. Based upon the estimated valuation ranges of
Fusion and Baxter, JPMorgan calculated an implied exchange ratio. The analysis
yielded the following implied exchange ratios (rounded to the nearest
thousandth), in each case compared to the implied exchange ratio of 0.180,
calculated by dividing $10.00,
- 29 -
the price per share of Fusion common stock set forth in the merger agreement,
by $55.48, the February 22, 2002 closing price for Baxter common stock:
FUSION MANAGEMENT CASES TO BAXTER IMPLIED
WALL STREET CASE COMPARISON EXCHANGE RATIO
-------------------------------------------------------------------------------------
Highest estimated valuation of Fusion common stock to lowest estimated
valuation of Baxter common stock 0.417x
Lowest estimated valuation of Fusion common stock to highest estimated
valuation of Baxter common stock 0.097x
-------------------------------------------------------------------------------------
JPMorgan also performed discounted cash flow analyses for each of Fusion
and Baxter using financial forecasts for each of Fusion and Baxter from
publicly available data and research analyst estimates. Using the same discount
rates and terminal multiples described above, JPMorgan calculated an implied
exchange ratio. The analysis yielded the following implied exchange ratios
(rounded to the nearest thousandth), in each case compared to the implied
exchange ratio of 0.180, calculated by dividing $10.00, the price per share of
Fusion common stock set forth in the merger agreement, by $55.48, the February
22, 2002 closing price for Baxter common stock:
FUSION WALL STREET CASE TO BAXTER
WALL STREET CASE COMPARISON IMPLIED EXCHANGE RATIO
---------------------------------------------------------------------------------------------
Highest estimated valuation of Fusion common stock to lowest estimated
valuation of Baxter common stock 0.194x
Lowest estimated valuation of Fusion common stock to highest estimated
valuation of Baxter common stock 0.112x
---------------------------------------------------------------------------------------------
Historical Exchange Ratio Analysis. JPMorgan reviewed the per share daily
closing market price movements of Fusion common stock and Baxter common stock
for the one-year period ending February 22, 2002, and calculated the historical
exchange ratios during this period implied by dividing the daily closing prices
per share of Fusion common stock by those of Baxter common stock and the
average of those historical trading ratios for the one-day, one-month,
three-month, six-month and twelve-month periods ending February 22, 2002. The
analysis resulted in the following average trading ratios for the periods
indicated (rounded to the nearest hundredth), in each case compared to the
implied exchange ratio of 0.180, calculated by dividing $10.00, the price per
share of Fusion common stock set forth in the merger agreement, by $55.48, the
February 22, 2002 closing price for Baxter common stock:
AVERAGE EXCHANGE PREMIUM TO AVERAGE
PERIOD RATIO HIGH LOW EXCHANGE RATIO
-------------------------------------------------------------------
February 22, 2002 0.148x 0.148x 0.148x 22%
1-month 0.140x 0.148x 0.127x 29%
3-month 0.118x 0.148x 0.093x 52%
6-month 0.109x 0.148x 0.067x 66%
12-month 0.117x 0.171x 0.059x 54%
-------------------------------------------------------------------
Contribution Analysis. JPMorgan estimated the contribution of each of
Fusion and Baxter to the pro forma combined company with respect to revenue,
gross profit, EBITDA, and earnings for fiscal years 2001, 2002 and 2003 using
financial forecasts for both Fusion and Baxter from publicly available data and
research analyst estimates. The analysis showed that Fusion would contribute
approximately the following percentages of estimated revenues, gross profit,
EBITDA and earnings in 2001, 2002 and 2003:
REVENUES GROSS PROFIT EBITDA EARNINGS
-------------------------------------------
2001 0.16% 0.12% (0.64%) (0.40%)
2002 0.30% 0.39% (0.07%) (0.23%)
2003 0.43% 0.59% 0.40% 0.36%
-------------------------------------------
- 30 -
Based upon the contribution analysis set forth above, JPMorgan calculated
an implied exchange ratio. The analysis yielded the following implied exchange
ratios (rounded to the nearest thousandth), in each case compared to the
implied exchange ratio of 0.180, calculated by dividing $10.00, the price per
share of Fusion common stock set forth in the merger agreement, by $55.48, the
February 22, 2002 closing price for Baxter common stock:
IMPLIED EXCHANGE RATIO
--------------------------------------- ----------------------
Highest exchange ratio implied by the
contribution analysis 0.234x
Lowest exchange ratio implied by the
contribution analysis 0.054x
--------------------------------------- ----------------------
The summary set forth above does not purport to be a complete description
of the analyses or data presented by JPMorgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. JPMorgan believes that the summary set forth
above and its analyses must be considered as a whole and that selecting
portions thereof, without considering all of its analyses, could create an
incomplete view of the processes underlying its analyses and opinion. JPMorgan
based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and
industry-specific factors. The other principal assumptions upon which JPMorgan
based its analyses are set forth above under the description of each such
analysis. JPMorgan's analyses are not necessarily indicative of actual values
or actual future results that might be achieved, which values may be higher or
lower than those indicated. Moreover, JPMorgan's analyses are not and do not
purport to be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold.
None of the public companies used in the public companies analysis
described above is identical to Fusion or Baxter, and none of the precedent
transactions used in the precedent transactions analysis described above is
identical to the merger. Accordingly, an analysis of publicly traded comparable
companies and transactions is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or company to which they
are being compared.
As a part of its investment banking business, JPMorgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. JPMorgan was selected to advise Fusion with respect to the
merger and deliver an opinion to Fusion's board of directors with respect to
the exchange ratio in the merger on the basis of such experience and its
familiarity with Fusion.
For services rendered in connection with the merger and the delivery of
its opinion, Fusion has agreed to pay JPMorgan a customary fee. JPMorgan will
receive an additional customary fee upon the closing of the merger. In
addition, Fusion has agreed to reimburse JPMorgan for its expenses incurred in
connection with its services, including the fees and disbursements of counsel,
and will indemnify JPMorgan against certain liabilities, including liabilities
arising under the federal securities laws.
JPMorgan and its affiliates have provided, from time to time in the past,
investment banking and commercial banking services to Baxter, for which
JPMorgan received customary compensation, and JPMorgan is an agent bank and
lender under certain of Baxter's principal credit facilities.
In the ordinary course of their respective businesses, JPMorgan and its
affiliates may actively trade the debt and equity securities of Fusion or
Baxter for their own accounts or for the accounts of customers and,
accordingly, JPMorgan and its affiliates may at any time hold long or short
positions in such securities.
INTERESTS OF DIRECTORS AND OFFICERS OF FUSION IN THE MERGER
In considering the recommendation of Fusion's board of directors with
respect to the adoption and approval of the merger agreement and approval of
the merger, Fusion stockholders should be aware that certain members of
Fusion's management and board of directors may have interests in the merger
that are different from, or in addition to, the interests of Fusion
stockholders generally, which may influence their decision to support or
recommend the merger. Fusion's board of directors was aware of these interests
and considered the following matters, among others, in approving the merger
agreement and the merger.
- 31 -
As of the date of the merger agreement, Fusion's officers and directors
(and their respective affiliates) collectively beneficially owned an aggregate
of 3,291,488 shares of Fusion common stock, excluding unexercised options to
purchase Fusion common stock. As of the date of the merger agreement, Fusion's
officers and directors owned options to purchase 1,617,978 shares of Fusion
common stock at exercise prices ranging from $0.41 to $14.94, with a weighted
average exercise price of $6.87. Of these options, options to purchase 448,200
shares have exercise prices above $10.00 and will terminate if not exercised
prior to the closing of the merger. In addition, all invested options will
become exercisable in connection with the merger. Until the closing of the
merger, all vested options will continue to be exercisable in accordance with
their terms.
Fusion officers and employee directors who hold less than five percent of
Fusion's outstanding common stock who are participants in the current offering
and purchase period under Fusion's Employee Stock Purchase Plan, will be
entitled to purchase shares of Fusion common stock at the end of this period at
a price that is lower than the price per share being offered in the merger. In
addition, under the terms of their employment, certain officers of Fusion are
entitled to separation benefits that include the payment of three months'
salary if their employment with Fusion is terminated for any reason other than
cause.
The merger agreement provides that all rights to indemnification for
present and former officers and directors of Fusion will survive the merger and
continue in full force and effect for a period of six years from the date of
the completion of the merger. Baxter also has agreed to maintain insurance for
Fusion's directors and officers that is no less favorable than Fusion's current
directors' and officers' liability insurance for actions or omissions occurring
on or prior to the date of the completion of the merger for a period of not
less than six years after the completion of the merger, provided that Baxter is
not required to pay more than 175% of the annual premium of Fusion's current
officers' and directors' liability policy.
As a result of these interests, these directors and officers of Fusion
could be more likely to recommend that Fusion stockholders vote to adopt and
approve the merger agreement and the transactions described in the merger
agreement than if they did not hold these interests. Fusion stockholders should
consider whether these interests have influenced these directors and officers
to support or recommend the merger.
RESTRICTIONS ON SALE OF SHARES BY AFFILIATES OF BAXTER AND FUSION
The shares of Baxter common stock to be issued in connection with the
merger will be registered under the Securities Act of 1933, as amended, and
generally will be freely transferable under the Securities Act, except for
shares of Baxter common stock issued to any person who is deemed to be an
affiliate of either Baxter or Fusion at the time of the special meeting of
Fusion stockholders. Persons who may be deemed to be affiliates include
individuals or entities that control, are controlled by, or are under common
control of either Baxter or Fusion and may include some of the officers,
directors, or principal stockholders of Baxter or Fusion. Affiliates may not
sell their shares of Baxter common stock acquired in connection with the merger
except under:
. an effective registration statement under the Securities Act
covering the resale of those shares;
. an exemption under paragraph (d) of Rule 145 under the Securities
Act; or
. another applicable exemption under the Securities Act.
Baxter's registration statement on Form S-4, of which this document forms
a part, does not cover the resale of shares of Baxter common stock to be
received by affiliates in the merger.
BAXTER'S REASONS FOR THE MERGER
Baxter desires to expand its portfolio of biotherapeutic solutions for
surgery and tissue repair, building on its strategic position in fibrin-based
technologies and leveraging its existing specialty surgical sales and marketing
channel. Baxter believes that the acquisition of Fusion brings a strategic and
complementary technology platform and expertise in collagen/gelatin, expertise
in medical device manufacturing and quality systems, and an experienced direct
sales force to enhance Baxter's existing U.S. operations. Although there can be
no assurances that these anticipated benefits will materialize, Baxter expects
that the acquisition of Fusion will enable Baxter to offer surgeons an array of
solutions to seal tissue and control hemostatis, including brisk arterial
bleeding, for a wide range of surgeries, which Baxter, in turn, expects will
improve the potential of Baxter's biosurgery business for sales growth and
profitability.
- 32 -
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
General. The following discussion describes the material U.S. federal
income tax consequences to a U.S. holder of Fusion common stock with respect to
the exchange of Fusion common stock for Baxter common stock pursuant to the
merger. This discussion only applies to you if you are a U.S. holder of Fusion
common stock.
For purposes of this discussion, a U.S. holder means:
. a citizen or resident of the United States;
. a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its
political subdivisions;
. a trust, if a U.S. court is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the
trust; or
. an estate that is subject to U.S. federal income tax on its income
regardless of its source.
This discussion is based upon the Internal Revenue Code of 1986, as
amended, Treasury regulations, administrative rulings and judicial decisions
currently in effect, all of which are subject to change, possibly with
retroactive effect. The discussion assumes that you hold your Fusion common
stock and will hold your Baxter common stock as a capital asset within the
meaning of Section 1221 of the Internal Revenue Code. Further, the discussion
does not address all aspects of U.S. federal income taxation that may be
relevant to you in light of your personal investment circumstances or to you if
you are subject to special treatment under the U.S. federal income tax laws,
including rules applicable to:
. insurance companies;
. tax-exempt organizations;
. dealers in securities or foreign currency;
. banks, trusts or financial institutions;
. persons that hold their Fusion common stock as part of a straddle,
a hedge against currency risk or a constructive sale or conversion
transaction;
. persons that have a functional currency other than the U.S. dollar;
. investors in pass-through entities;
. persons who acquired their Fusion common stock through the
exercise of options or otherwise as compensation or through a
tax-qualified retirement plan;
. foreign persons;
. persons that are subject to the alternative minimum tax provisions
of the Internal Revenue Code; or
. holders of options to purchase Fusion common stock granted under
any Fusion benefit plan.
If a U.S. holder is a partner in a U.S. partnership or other U.S. entity
treated as a partnership for U.S. federal income tax purposes that holds Fusion
shares, this discussion will generally apply to the U.S. holder. Foreign
partners in U.S. partnerships or any partner in a foreign partnership should
consult their tax advisors.
In addition, the following discussion does not address:
. the tax consequences of any transaction in which the shares of
Fusion common stock are acquired or shares of Baxter are disposed
of,
. the tax consequences of the merger under foreign, state or local
tax laws, or
. the tax consequences of the assumption by Baxter of Fusion common
stock options or the tax consequences of the receipt of rights to
acquire Baxter stock.
ACCORDINGLY, YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO YOU OF THE MERGER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
- 33 -
Material U.S. Federal Income Tax Consequences.
The merger has been structured to qualify as part of a transaction that
constitutes a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. Assuming the merger does so qualify, or if the merger is
treated standing alone as constituting a reorganization, the following
summarizes the material federal income tax consequences of the merger to Fusion
stockholders under the law in effect as of the date hereof.
. You will not recognize any gain or loss solely upon your receipt
of Baxter common stock in exchange for your Fusion common stock in
the merger, except to the extent you receive cash in lieu of a
fractional share of Baxter common stock.
. The aggregate tax basis of the Baxter common stock that you
receive in the merger will be the same as the aggregate tax basis
of the Fusion common stock you surrendered in exchange for Baxter
common stock reduced by any tax basis attributable to any
fractional share you are deemed to have disposed of.
. The holding period of the Baxter common stock that you receive in
the merger will include the period for which you held the Fusion
common stock surrendered in exchange for Baxter common stock, if
you held the surrendered Fusion common stock as a capital asset at
the time of the merger.
. Cash payments that you receive in lieu of a fractional share will
be treated as if the fractional share of Baxter common stock had
been issued in the merger and then redeemed by Baxter. If you
receive cash in lieu of a fractional share, you should recognize
gain or loss upon payment measured by any difference between the
amount of cash you receive and your basis in the fractional share.
Tax Opinions.
Baxter has indicated that it intends to cause Fusion to merge with and
into a wholly-owned first-tier subsidiary of Baxter following the merger (the
follow-on merger). It is the opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel to Fusion, and of Dechert, counsel to Baxter,
that the merger, together with the follow-on merger, will constitute a
reorganization for United States federal income tax purposes within the meaning
of Section 368(a) of the Internal Revenue Code if the mergers are treated as a
single integrated transaction. It is further the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation and of Dechert that if the
follow-on merger is not consummated or is not treated as part of an integrated
transaction with the merger, the merger will, standing alone, constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. These opinions of counsel are based on certain facts, representations by
Fusion and Baxter and assumptions set forth in such opinions. Such facts,
representations or assumptions, if incorrect in certain material respects,
could jeopardize the conclusions reached in the opinions. Neither Fusion nor
Baxter is currently aware of any facts or circumstances which would cause any
such representations or assumptions to be made to counsel to be untrue or
incorrect in any material respect. An opinion of counsel is not binding on the
Internal Revenue Service or the courts, and the Internal Revenue Service could
assert, or a court could adopt, a contrary provision. Any change in currently
applicable law, which may or may not be retroactive, or failure of any factual
representations or assumptions to be true, correct and complete in all material
respects, could affect the ability of tax counsel to deliver tax opinions or
the continuing validity of such tax opinions after delivery.
The opinions of Dechert and Wilson Sonsini Goodrich & Rosati,
Professional Corporation and this discussion are based on currently existing
provisions of the Internal Revenue Code, existing and proposed Treasury
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any change, which may or may not be
retroactive, could alter the tax consequences to you as described above. A
successful Internal Revenue Service challenge to the reorganization status of
the merger would result in you recognizing taxable gain or loss with respect to
each share of Fusion common stock surrendered equal to the difference between
(A) the fair market value, as of the closing day of the merger, of the Baxter
common stock and any other consideration you receive in exchange for your
shares of Fusion common stock, and (B) your basis in your shares of Fusion
common stock. In this event, your aggregate basis in the Baxter common stock
received would equal its fair market value as of the closing date of the
merger, and your holding period for Baxter common stock would begin the day
after the merger.
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Backup Withholding With Respect to Cash Paid Instead of Fractional Shares
of Baxter Common Stock.
Certain non-corporate U.S. holders of Fusion common stock may be subject
to backup withholding (the current rate is 30%) on cash payments received
instead of fractional shares of Baxter common stock. Backup withholding will
not apply to you, however, if you furnish a correct taxpayer identification
number, and make appropriate certifications, as provided on the substitute Form
W-9 or successor form included in the letter of transmittal to be delivered to
you following the date of the merger, provide a certification of foreign status
on an appropriate Form W-8 or successor form or are otherwise exempt from
backup withholding.
Reporting Requirements.
As a U.S. holder of Fusion common stock who receives Baxter common stock
as a result of the merger, you will be required to retain records related to
the merger and file with your federal income tax return a statement setting
forth facts relating to the merger.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the
HSR Act, and the related rules, the merger may not be completed until Baxter
and Fusion notify and furnish information to the Federal Trade Commission and
the Antitrust Division of the United States Department of Justice and specified
waiting period requirements have been satisfied. In connection with the merger,
Baxter and Fusion filed with the FTC and the Antitrust Division, on March 5,
2002 and March 6, 2002, respectively, the required notification and report
forms under the HSR Act. The applicable waiting period under the HSR Act
relating to the merger is scheduled to expire on April 5, 2002, unless the FTC
or the Antitrust Division grants the parties' request for earlier termination
of the waiting period or requests further information regarding the merger.
At any time before or after the completion of the merger, either the FTC
or the Antitrust Division could take any action under U.S. antitrust laws as it
deems necessary or desirable in the public interest, including seeking to
enjoin the completion of the merger or seeking the divestiture of substantial
assets of Baxter or Fusion. Baxter is not required to undertake, or to
authorize Fusion to undertake, any such divestitures, even though failing to do
so could prevent the merger from receiving antitrust regulatory approval which,
in turn, could cause the merger not to close. Private parties and state
attorneys general also may bring actions under U.S. antitrust laws depending on
the circumstances. Although we believe that the merger is legal under U.S.
antitrust laws, a challenge to the merger on antitrust grounds may be made and,
if a challenge is made, it may be successful.
ACCOUNTING TREATMENT OF THE MERGER
Baxter will account for the merger using the purchase method of
accounting, as defined by Statement of Financial Accounting Standards No. 141,
"Business Combinations". Accordingly, the aggregate purchase price will be
allocated to the net assets acquired based on estimates of their fair values at
the date of the acquisition. The excess of the purchase price over the fair
values of the tangible assets and identifiable intangible assets acquired and
liabilities assumed will be allocated to goodwill.
APPRAISAL RIGHTS
Neither Baxter's nor Fusion's stockholders are entitled to appraisal
rights in connection with the merger.
LISTING ON THE NEW YORK STOCK EXCHANGE OF BAXTER COMMON STOCK TO BE ISSUED IN
THE MERGER
Baxter has agreed to use commercially reasonable efforts to cause the
shares of Baxter common stock to be issued in the merger to be listed for
trading on the New York Stock Exchange prior to the closing of the merger.
DELISTING AND DEREGISTRATION OF FUSION COMMON STOCK AFTER THE MERGER
After the closing of the merger, Fusion common stock will be delisted
from the Nasdaq National Market and will be deregistered under the Securities
Exchange Act of 1934, as amended.
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THE MERGER AGREEMENT AND RELATED AGREEMENTS
This section of the document describes certain aspects of the merger
agreement. The following description of the merger agreement may not contain
all of the information about it that is important to you and is qualified in
its entirety by reference to the complete text of the merger agreement. We
encourage you to refer to the merger agreement itself, which we attach as Annex
A and incorporate in this summary by reference, and the other annexes to this
document.
EFFECTIVE TIME OF THE MERGER
The merger agreement provides that, upon the terms and subject to the
conditions of the merger agreement, HB2002 Corporation shall be merged with and
into Fusion and the separate corporate existence of HB2002 shall cease, and
Fusion shall be the surviving corporation and all of its rights, privileges,
powers, immunities, purposes and franchises shall continue unaffected by the
merger.
The merger shall become effective when a certificate of merger is duly
filed with the Secretary of State of the State of Delaware or at such later
time as the parties shall have designated in the certificate of merger. Such
filing shall be made on the date and time at which the closing of the merger
occurs.
The merger agreement also provides that at the effective time of the
merger:
. the certificate of incorporation of HB2002 as in effect
immediately prior to the closing of the merger shall be the
certificate of incorporation of the surviving corporation, except
that the certificate of incorporation shall be amended at the
closing of the merger to change the name of the surviving
corporation to Fusion Medical Technologies, Inc.;
. the bylaws of HB2002 as in effect immediately prior to the closing
of the merger shall be the bylaws of the surviving corporation;
. the directors of HB2002 immediately prior to the closing of the
merger shall be the directors of the surviving corporation; and
. the officers of Fusion immediately prior to the closing of the
merger shall be the officers of the surviving corporation.
CONVERSION OF SHARES
As of the closing of the merger, each share of Fusion common stock issued
and outstanding immediately prior to the closing, other than shares of Fusion
common stock held by Fusion as treasury stock or held by Baxter or HB2002,
together with the attached rights, shall be converted into the right to receive
a fraction of a share (calculated and rounded to the nearest ten-thousandth of
one share) of Baxter common stock, together with the attached rights. This
fraction, known as the exchange ratio, equals $10.00, subject to adjustments
described below, divided by the average closing sale price of one share of
Baxter common stock for the ten consecutive trading days ending on and
including the third trading day prior to the date of the meeting of Fusion
stockholders. All such shares, when so converted, will no longer be
outstanding, and will automatically be cancelled and retired and will cease to
exist and each holder will cease to have any rights with respect thereto,
except the right to receive:
. the shares of Baxter common stock into which the shares have been
converted;
. any dividend and other distributions entitled to be received under
the merger agreement; and
. any cash, without interest, to be paid in lieu of any fractional
shares of Baxter common stock.
For purposes of the merger, Fusion common stock has been valued at $10.00
per share. If, based on a consistent valuation methodology, the aggregate
dollar value of Fusion's actual capitalization as of the closing date differs
by more than 0.1% from the aggregate dollar value of Fusion's capitalization
described in the merger agreement (other than as a result of the exercise or
conversion of any options, warrants, securities or other agreements referred to
in the merger agreement), the value of Fusion common stock will be adjusted
accordingly. In the event that an adjustment is required, the new value of
Fusion common stock will be determined by
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multiplying $10.00 by a fraction, the numerator of which is Fusion's
capitalization as described in the merger agreement and the denominator of
which is the actual capitalization as of the closing date, rounded to the
nearest 0.01% of one cent. Any adjustment to the valuation of Fusion common
stock described in this paragraph will affect the exchange ratio at which
Fusion common stock converts into Baxter common stock. To the extent there are
more outstanding Fusion shares, options, warrants and other rights to acquire
Fusion common stock than described in the merger agreement, the per share value
of Fusion common stock will be reduced from $10.00, resulting in Fusion
stockholders receiving fewer shares of Baxter common stock. To the extent there
are fewer outstanding Fusion shares, options, warrants and other rights to
acquire Fusion common stock than described in the merger agreement, the per
share value of Fusion common stock will be increased from $10.00, resulting in
Fusion stockholders receiving more shares of Baxter common stock.
In addition to the adjustment to the value of Fusion common stock
described above, if any, to the extent that Fusion borrows money under new loan
arrangements between the date of the merger agreement and the closing date, the
value of Fusion common stock for purposes of the exchange ratio will be
reduced. In the event that an adjustment is required, the new value of Fusion
common stock will be determined by multiplying $10.00 (as adjusted in
accordance with the preceding paragraph, if applicable) by a fraction, the
numerator of which is Fusion's actual capitalization as of the closing date and
the denominator of which is the sum of Fusion's actual capitalization as of the
closing date plus the dollar value (determined as described below) of such
borrowings, rounded to the nearest 0.01% of one cent. For purposes of
calculating any adjustment to the value of Fusion common stock in connection
with the exchange ratio, the dollar value of indebtedness incurred by Fusion
between the date of the merger agreement and the closing date will equal the
sum of:
. 100% of the first $500,000 of additional debt financing obtained
by Fusion from Fusion's existing lender, Baxter or any other party;
. 50% of the next $500,000 of additional debt financing obtained by
Fusion, provided that Baxter or a party other than Fusion's
existing lender is the lender; and
. 100% of any additional debt financing obtained by Fusion in excess
of $1,000,000 from Fusion's existing lender, Baxter or any other
party.
Any adjustment to the valuation of Fusion common stock described in this
paragraph will reduce the exchange ratio at which Fusion common stock converts
into Baxter common stock and will reduce the number of shares of Baxter common
stock received by Fusion stockholders. Baxter and Fusion intend to issue a
joint press release announcing the exchange ratio's then-current value after
the close of business on the third trading day prior to the special meeting of
Fusion stockholders.
TREATMENT OF FUSION STOCK OPTIONS, STOCK PURCHASE PLAN AND WARRANTS
Options. Until the closing of the merger, all vested Fusion options will
continue to be exercisable in accordance with their terms. The merger agreement
provides that unvested Fusion stock options will become exercisable for a
period of time prior to the closing of the merger. Notice of this exercise
period will be sent to each option holder. The exercise of unvested options
will be contingent on the merger taking place, and the actual exercise of each
unvested option will not occur until immediately prior to the closing of the
merger. Fusion will adopt certain procedures that will allow for the conversion
of Fusion options into Fusion common stock without the payment of cash by the
option holder, which procedures will be described in the notice sent to option
holders. All Fusion options, whether or not vested, will terminate upon the
closing of the merger if not earlier exercised.
Employee Stock Purchase Plan. Upon the earlier to occur of:
. May 31, 2002 (the last day of the current offering and purchase
period under Fusion's Employee Stock Purchase Plan); and
. the last day of a regular payroll period of Fusion ending prior to
the closing of the merger,
all offering and purchase periods in progress under Fusion's Employee Stock
Purchase Plan will terminate and each participant's election to purchase Fusion
stock will be automatically exercised. Effective as of the date of the merger
agreement:
. no new offering or purchase periods will commence;
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. existing participation levels in the Employee Stock Purchase Plan
have been frozen; and
. Fusion is prohibited from accepting new participants.
Warrants. Upon the closing of the merger, Baxter will assume each
outstanding warrant to purchase Fusion common stock in accordance with each
such warrant's terms. From and after the closing of the merger, warrants to
purchase Fusion common stock will be exercisable solely for Baxter common
stock. The number of Baxter shares subject to each warrant will equal the
number of shares of Fusion common stock for which the warrant was exercisable
prior to the closing of the merger multiplied by the exchange ratio, rounded
down to the nearest whole share. Cash will be paid for any fractional shares.
The exercise price of each warrant will equal the exercise price immediately
prior to the closing divided by the exchange ratio, rounded up to the nearest
whole cent. All restrictions on the exercise of any warrant immediately prior
to the closing will continue in full force and effect and, except as described
above, the term, exercisability and other provisions of each warrant will
remain unchanged.
EXCHANGE OF CERTIFICATES REPRESENTING SHARES
At the closing of the merger, Baxter is required to deposit with
EquiServe Trust Company, N.A. as exchange agent or such other exchange agent
selected by Baxter and reasonably satisfactory to Fusion an exchange fund
consisting of certificates representing the shares of Baxter common stock to be
exchanged for the shares of Fusion common stock and cash to pay for fractional
shares and any dividends or distributions that Fusion stockholders may be
entitled to receive under the merger agreement.
As of or promptly after the closing of the merger, the exchange agent
will mail to Fusion stockholders a letter of transmittal and instructions for
surrendering their Fusion stock certificates in exchange for stock certificates
representing shares of Baxter common stock. FUSION STOCKHOLDERS SHOULD NOT
SURRENDER THEIR FUSION STOCK CERTIFICATES UNTIL THEY HAVE RECEIVED THE LETTER
OF TRANSMITTAL FROM THE EXCHANGE AGENT.
DIVIDENDS
The Merger Agreement provides that no dividends or other distributions
with respect to shares of Baxter common stock constituting part of the merger
consideration will be paid to the holder of any unsurrendered certificates
until the certificates are surrendered. No interest will accrue or be paid on
any such dividends or distributions.
NO FRACTIONAL SHARES
No fractional shares of Baxter common stock will be issued in connection
with the merger. In lieu of a fraction of a share of Baxter common stock,
Fusion stockholders will receive an amount of cash equal to the product of such
fraction multiplied by the Baxter stock price, calculated as described above.
UNCLAIMED AMOUNTS
Any portion of the exchange fund which remains unclaimed by the former
Fusion stockholders six months after the completion of the merger will be
delivered by the exchange agent to Baxter. Any former Fusion stockholders who
have not complied with the exchange provisions of the merger agreement must
thereafter look only to Baxter for their claim for shares of Baxter common
stock, and payment of any cash, without interest, to be paid in lieu of
fractional shares and unpaid dividends and distributions with respect to shares
of Baxter common stock to which the holders may be entitled. None of Baxter,
HB2002, Fusion or the exchange agent will be liable to any person in respect of
any shares of Baxter common stock held in the exchange fund, and any cash,
dividends and other distributions payable in respect thereto, delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws. The merger consideration to which a Fusion stockholder would otherwise be
entitled will become the property of Baxter to the extent certificates
representing Fusion common stock have not been surrendered before the earlier
to occur of:
. second anniversary of the closing of the merger, and
. the date of which the merger consideration would escheat to or
become the property of any governmental entity under applicable
law.
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LOST CERTIFICATES
If any certificate representing shares of Fusion common stock is lost,
stolen or destroyed, the exchange agent will issue to the owner of the lost,
stolen or destroyed certificate the consideration for the shares represented by
the certificate as set forth above, provided that the owner executes an
affidavit claiming that the certificate is lost, stolen or destroyed. In
addition, the surviving corporation may require posting by the owner of a bond,
in a reasonable amount the surviving corporation may direct, as indemnity
against any claim that may be made against the surviving corporation with
respect to the lost, stolen or destroyed certificate.
INTERIM FINANCING
Baxter and Fusion intend, subject to the approval of Fusion's existing
lender, to enter into an agreement pursuant to which Baxter will make available
to Fusion a loan equal to the lesser of:
. $1,500,000; and
. the difference between $1,500,000 and the amount of any additional
financing from its existing lender.
If Fusion draws on Baxter's commitment, then during any month, Fusion may
only borrow a pro rata portion of Baxter's total commitment, based on the
number of months between the date of the draw and August 26, 2002. The amount
that Fusion may borrow each month is further limited to an amount equal to the
difference between Fusion's actual cash position and its targeted cash position
for the previous month.
Any loan by Baxter will be on terms that include the following:
. Baxter's loan will be on terms substantially similar to those set
forth in Fusion's existing loan agreement with its existing
lender, except that Baxter's lien will be subordinate to the lien
of Fusion's existing lender and Baxter's loan will not be subject
to financial covenants;
. if the merger agreement is terminated, any amounts loaned by
Baxter must be repaid between within 90 days following
termination, provided that the repayment period may be reduced to
five days if the termination of the merger agreement results from
an alternate acquisition proposal; and
. if Fusion's existing lender declares all of Fusion's obligations
to be due and payable under Fusion's existing loan agreement with
its existing lender, amounts loaned by Baxter will become
immediately due and payable.
Baxter's obligation to loan funds to Fusion during any month will be
subject to various conditions, including the following:
. in the previous month, Fusion must have experienced a shortfall
between its actual cash position and its targeted cash position;
. the amount of funds available to Fusion under its loan agreement
with its existing lender, plus Fusion's cash and cash equivalents,
minus the aggregate amount of checks written by Fusion that have
not cleared and obligations that the Company reasonably expects to
pay in the next 30 days and that are or will become due and
payable during such period, is less than $500,000;
. the merger agreement shall not have been terminated in accordance
with its terms;
. no event of default shall have occurred and be continuing under
Fusion's loan agreement with its existing lender; and
. Fusion's existing lender shall not have accelerated Fusion's
obligations under the existing loan agreement.
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If Fusion determines that it requires additional financing beyond that
contemplated above, Fusion must first seek Baxter's consent. Baxter's consent
may not be unreasonably withheld or delayed. Baxter will have a right of first
refusal with respect to any such additional financing that Fusion proposes to
obtain from a third party.
As discussed under "The Merger Agreement and Related
Agreements--Conversion of Shares" beginning on page 36 above, if Fusion borrows
money under new loan arrangements, these borrowings will impact the exchange
ratio and have the effect of reducing the consideration that would otherwise be
payable to Fusion stockholders.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties of
Fusion, Baxter and HB2002 relating to, among other things, certain aspects of
the respective businesses and financial statements of the parties and Fusion's
amendment of its rights plan to make it inapplicable to the proposed merger.
The representations and warranties expire at the closing of the merger.
ORDINARY COURSE CONDUCT
Fusion. Fusion has agreed that, from the signing of the merger agreement
through the completion of the merger, Fusion and its subsidiaries generally
will conduct their business in the ordinary course consistent with past
practice and will use commercially reasonable efforts to preserve intact their
present business organizations and their relationships with customers and
suppliers and other persons with whom they have significant business dealings,
to keep available the services of their present officers and employees, to
maintain and keep their properties and assets in good repair and condition, to
maintain supplies and inventories in quantities consistent with their customary
business practices and to keep in full force and effect insurance policies
comparable in amount and scope of coverage as they currently maintain.
In addition to the agreements regarding their conduct of business
generally, Fusion and each of its subsidiaries may not, except as otherwise
expressly contemplated in the merger agreement or pursuant to the prior written
consent of Baxter:
. declare or pay dividends or other distributions;
. sell or issue shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock,
other than upon exercise of options and pursuant to the employee
stock purchase plan in accordance with the merger agreement;
. except in accordance with agreements currently in effect and
previously disclosed to Baxter, accelerate any right to convert,
exchange or exercise securities for shares of its capital stock;
. incur additional indebtedness, other than in the ordinary course
of business or pursuant to existing credit arrangements or as
otherwise described in the merger agreement;
. issue or sell debt securities, warrants or other rights to acquire
debt securities of Fusion or its subsidiaries;
. guarantee any indebtedness for borrowed money or debt securities
of another person or enter into any arrangement or agreement to
maintain any financial statement condition of another person;
. make any loans, advances or investments in any other person, other
than investment grade securities and government obligations in the
ordinary course of business consistent with past practice;
. amend its certificate of incorporation, bylaws or other
organizational documents;
. acquire any business, corporation, partnership or other business
organization or acquire any material amount of assets of any other
person, other than inventories and supplies in the ordinary course
of business;
- 40 -
. dispose of, or grant any lien with respect to, any of its
properties or assets material to its business other than
dispositions of excess or obsolete assets and sales of inventories
in the ordinary course of business;
. except as contemplated by Fusion's current capital budget, make
any capital expenditures in excess of $100,000 individually, or
$200,000 in the aggregate;
. increase the compensation of, pay any bonus to, or provide any
other material employee benefit to, directors, officers or
employees other than in the ordinary course of business consistent
with past practice;
. enter into or modify any employment or severance contracts with
any present or former directors, officers or employees other than
employment and consulting agreements entered into or amended in
the ordinary course of business for employees or consultants,
provided that the agreements or modifications will not provide for
the payment of any severance or termination pay as a result of the
merger agreement or consummation of the transactions described in
the merger agreement;
. adopt or substantially modify, except as may be required by
applicable law, any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing,
deferred compensation, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, or any collective bargaining
agreement in respect of its directors, officers or employees;
. grant any severance, retention or termination pay to employees,
other than that previously disclosed to Baxter, or enter into any
severance agreement with employees;
. except in accordance with agreements already in effect and
previously disclosed to Baxter, take any action to accelerate any
rights or benefits, or make any determinations not in the ordinary
course of business consistent with past practice, under any
collective bargaining agreement or benefit plan;
. make any material change in its accounting methods, principles or
practices in effect as of the date of the merger agreement, except
as required by changes in GAAP;
. redeem, purchase or otherwise acquire shares of its capital stock
or any securities convertible into or exchangeable for shares of
its capital stock, other than the exercise of options and other
exceptions as provided for in the merger agreement;
. effect any reorganization or recapitalization;
. split, combine or reclassify its capital stock or issue or
authorize the issuance of securities in respect of its capital
stock, other than in connection with lost, stolen or destroyed
certificates;
. enter into, materially amend or terminate any material contract,
except in the ordinary course of business;
. pay or discharge any claims or liabilities, other than in the
ordinary course of business consistent with past practice or
reserved against on Fusion's consolidated financial statements;
. settle any material litigation requiring payment of more than
$100,000;
. make any material tax election except consistent with past
practice, change any material method of accounting for tax
purposes, settle any material tax liability or materially change
any of its methods of reporting income and deductions for United
States federal income tax purposes, except as required by law;
. take any action that would cause any of Fusion's conditions to
closing to not be satisfied; and
. agree in writing or otherwise to do any of the foregoing.
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Baxter. Baxter has agreed that, during the period before completion of
the merger, Baxter and its subsidiaries will not take any action that would
cause any of Baxter's conditions to closing to not be satisfied.
NEW YORK STOCK EXCHANGE LISTING
It is a condition to the closing of the merger that shares of Baxter
common stock issuable in connection with the merger be listed on the New York
Stock Exchange prior to the closing of the merger.
NO SOLICITATION
Until the closing of the merger or the termination of the merger
agreement, the merger agreement provides that neither Fusion nor any of its
directors, officers, employees, affiliates, accountants, consultants, legal
counsel, agents or other representatives will, directly or indirectly, do any
of the following:
. solicit, initiate or encourage any alternate acquisition proposal,
which is a proposal, other than Baxter's, with respect to any of
the following:
. any merger, consolidation, share exchange, recapitalization,
liquidation, dissolution, business combination or other
similar transaction involving Fusion;
. any sale, lease, transfer, encumbrance or other disposition
of 20% or more of Fusion's assets or any business that
contributed 20% or more of Fusion's net sales, net income or
company assets in a single transaction or series or
transactions;
. any tender offer, exchange offer or similar transaction
that, if completed, would result in one party owning more
than 20% of the outstanding shares of any class of Fusion
securities, or would result in any party who owns more than
20% of the outstanding shares of any class of Fusion
securities as of the date of the merger increasing his or
her ownership by more than five percent; or
. any acquisition of 20% or more of the outstanding shares of
Fusion capital stock;
. participate or engage in discussions or negotiations with, or
disclose any non-public information to, any person with respect to
any actual or potential alternate acquisition proposal, regardless
of whether the proposal is initiated, planned or solicited by
Fusion or by such person;
. take any other action intended to facilitate any inquiries
relating to an alternate acquisition proposal, the making of any
such alternate acquisition proposal or the inducement of any
person or party to making any alternate acquisition proposal;
. agree to endorse, approve or recommend any alternate acquisition
proposal;
. enter into any letter of intent or similar document or agreement
relating to any alternate acquisition proposal or a transaction
related to an alternate acquisition proposal; or
. take any other action, or authorize its directors, officers,
employees, affiliates, accountants, consultants, legal counsel,
agents or other representatives to take any other action, intended
to facilitate, encourage or assist any effort by any person or
party other than Baxter to seek or do any of the things listed
above.
However, prior to the adoption and approval of the merger agreement by Fusion
stockholders, Fusion and its board of directors are permitted to disclose
information relating to Fusion or to make it available in response to an
unsolicited request, and they are permitted to participate or engage in
discussions or negotiations relating to an unsolicited alternate acquisition
proposal that is, or could reasonably be expected to lead to, an acquisition
proposal involving the acquisition of all of the outstanding shares of Fusion
common stock or substantially all of Fusion's assets that Fusion's board of
directors determines to be more favorable to Fusion or to Fusion stockholders
than the transactions set forth in the merger agreement with Baxter. However,
such actions are permitted only if, and only to the extent that, Fusion's board
of directors concludes in good faith, after considering applicable law and the
advice of outside legal counsel, that the failure to take such action would be
reasonably likely to result in a breach of the legal fiduciary duties of
Fusion's board of directors to Fusion
- 42 -
stockholders, and only if, prior to taking such action, Fusion notifies Baxter
of such action and Fusion receives from the person or party involved in the
alternate acquisition proposal signed confidentiality and standstill agreements
that are at least as restrictive as the similar agreements between Fusion and
Baxter.
In the merger agreement, Fusion also agreed that neither its board of
directors nor any committee of the board of directors would do any of the
following:
. fail to make, withdraw or change, or publicly propose to withdraw
or change, its approval or recommendation of the merger agreement;
. approve or recommend, or publicly propose to approve or recommend,
an alternate acquisition proposal from a party other than Baxter;
. take any action to render the provisions of any anti-takeover law
or regulation inapplicable to any person or Party other than
Baxter or HB2002 or to any alternate acquisition proposal; or
. cause Fusion to accept any alternate acquisition proposal or enter
into any letter of intent or other agreement relating to an
alternate acquisition proposal.
However, prior to the adoption and approval of the merger agreement by Fusion
stockholders, Fusion and its board of directors are permitted to take any of
the actions listed in this paragraph if, and only to the extent that, (a)
Fusion's board of directors determines that the alternate acquisition proposal
is more favorable to Fusion or to Fusion stockholders than the transactions set
forth in the merger agreement with Baxter, (b) Fusion's board of directors
concludes in good faith, after considering applicable law and the advice of
outside legal counsel, that the failure to take such action would be reasonably
likely to result in a breach of the legal fiduciary duties of Fusion's board of
directors to Fusion stockholders, (c) Fusion is not in breach of the
non-solicitation provisions in the merger agreement and abides by the
termination provisions of the merger agreement, and (d) prior to or
simultaneously with the taking of such action, Fusion pays to Baxter $5.0
million.
Fusion agreed in the merger agreement to advise Baxter orally and in
writing within 48 hours of its receipt of any alternate acquisition proposal or
any inquiry or request for information with respect to Fusion and to keep
Baxter reasonably informed of the status and details of any such alternate
acquisition proposal, inquiry or request. Fusion also agreed not to release any
third party from or to waive any provision of any standstill agreement to which
Fusion is a party.
Notwithstanding the restrictions listed above, the merger agreement does
not prohibit Fusion from taking and disclosing to its stockholders a position
with respect to a tender offer or exchange offer pursuant to federal securities
laws or from making any disclosure to Fusion's stockholders required by
applicable law. In addition, at any time after May 27, 2002, upon delivery of
written notice to Baxter, Fusion may solicit, initiate and encourage, or
participate or engage in, discussions or negotiations solely relating to any
person or party providing equity and/or debt financing to Fusion in an amount
not exceeding $10 million, provided that (a) such person or party does not
conduct operations in competitive industries, (b) Fusion reasonably believes
that such person or party will provide the financing for passive investment
purposes only, (c) Fusion does not enter into any agreement relating to any
proposed equity issuance relating to such financing without Baxter's consent,
and (d) prior to participating or engaging in such discussions or negotiations,
Fusion enters into a confidentiality agreement with such person or party and
Fusion so notifies Baxter.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE
The merger agreement provides that all rights to indemnification and all
limitations on liability existing in favor of present and former officers,
directors, employees and agents of Fusion as provided in the current
certificate of incorporation or bylaws of Fusion or any agreement between any
such person and Fusion or any of its subsidiaries or as in effect as of the
date of the merger agreement will survive the merger. Fusion will cause all
such rights to continue in full force and effect for six years from the closing
of the merger. Baxter has agreed to maintain officers' and directors' liability
insurance to cover any such liabilities for six years following the closing of
the merger, provided that Baxter is not required to pay more than 175% of the
annual premium of Fusion's current officers' and directors' liability policy.
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EMPLOYEE BENEFITS
In accordance with the merger agreement, Baxter will, or will cause the
surviving corporation to, offer to employees of Fusion who continue to be
employed by Fusion with salary, health and welfare benefits and savings plan
participation opportunities that are substantially similar, as a whole, to the
benefits provided to Baxter employees performing similar functions. Each such
employee of Fusion will receive full credit for his or her time of service to
Fusion for purposes of vacation accrual under Baxter's vacation policy, and all
such employees will be given the opportunity to participate in Baxter's
incentive investment plan. The merger agreement provides that Baxter will cause
the surviving corporation to honor and to perform Fusion's obligations under
Fusion's retention bonus plan.
CONSENTS AND APPROVALS
The merger agreement provides that Fusion, Baxter and HB2002 will
cooperate with each other and use their respective commercially reasonable
efforts in connection with the preparation of this document, in determining
whether any government filings or third party consents are required in
connection with the completion of the merger, and in seeking such approvals or
any necessary waivers, making any such required filings or providing the
necessary information to complete such filings on a timely basis. Each of
Fusion, Baxter and HB2002 will furnish to the other parties the reasonable
assistance and necessary information in connection with all such filings,
consents and approvals. Fusion and Baxter will use commercially reasonable
efforts to resolve any objections asserted against the merger and to overcome
any restriction of the merger under any antitrust law or regulation. However,
Baxter is not required to undertake, or to authorize Fusion to undertake, any
such divestitures, even though failing to do so could prevent the merger from
receiving antitrust regulatory approval which, in turn, could cause the merger
not to close. Each of Fusion and Baxter will inform the other of material
communications received from any governmental or regulatory authority regarding
any of the transactions contemplated in the merger agreement. Fusion and its
board of directors will take all action reasonably necessary to ensure that no
state takeover or similar law, rule or regulation is or becomes applicable to
the merger or to minimize the effect of any such law, rule or regulation on the
transactions contemplated in the merger agreement.
CONDITIONS TO THE MERGER
Each of Baxter's, HB2002's and Fusion's obligations to complete the
merger are subject to the satisfaction or waiver of specified conditions before
completion of the merger, including the following:
. the adoption and approval of the merger agreement by the holders
of a majority of the outstanding shares of Fusion common stock;
. the declaration of effectiveness of the registration statement of
which this document forms a part by the Securities and Exchange
Commission, and the absence of any stop order or threatened
proceedings seeking a stop order;
. the absence of any law, order or injunction by any governmental
entity making the merger illegal or otherwise prohibiting
completion of the merger;
. the expiration or termination of any applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended;
. the receipt of all material foreign antitrust or other regulatory
approvals required to be obtained prior to the merger; and
. the approval for listing on the New York Stock Exchange of the
shares of Baxter common stock to be issued in the merger, subject
to official notice of issuance.
Fusion's obligation to complete the merger is subject to the satisfaction
or waiver of the following additional conditions before completion of the
merger:
. Baxter and HB2002 each must have performed in all material
respects its respective agreements and covenants required to be
performed by it prior to the merger;
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. The representations and warranties of Baxter and HB2002 must be
true and correct in all material respects as of the date of the
merger agreement and as of the date of completion of the merger,
except:
. as otherwise provided in the merger agreement; and
. for any failure of such representations and warranties to be
true and correct that, individually or in the aggregate,
would not reasonably be expected to have a material adverse
effect on Baxter;
. Fusion must have received certificates signed by a senior
executive officer of Baxter, dated the date of the merger, to the
effect that, to such officer's knowledge, the conditions required
to be satisfied by Baxter and HB2002 have been satisfied or waived;
. Fusion must have received an opinion from either Wilson Sonsini
Goodrich & Rosati, Professional Corporation, its tax counsel, or
from Dechert, to the effect that the merger will constitute a
reorganization for United States federal income tax purposes
within the meaning of Section 368(a) of the Internal Revenue Code;
and
. no Baxter material adverse effect shall have occurred and be
continuing.
The obligations of Baxter and HB2002 to complete the merger are subject
to the satisfaction or waiver of the following additional conditions before
completion of the merger:
. Fusion must have performed in all material respects its agreements
and covenants required to be performed by it prior to the merger;
. Fusion's representations and warranties must be true and correct
in all respects as of the date of the merger agreement and as of
the date of completion of the merger, except:
. as otherwise provided in the merger agreement; and
. for any failure of such representations and warranties to be
true and correct that, individually or in the aggregate,
would not reasonably be expected to have a material adverse
effect on Fusion;
. Baxter must have received a certificate signed by the chief
executive officer of Fusion, dated the date of the merger, to the
effect that, to such officer's knowledge, the conditions required
to be satisfied by Fusion have been satisfied or waived;
. Baxter must have received an opinion from either Dechert, its tax
counsel, or from Wilson Sonsini Goodrich & Rosati, Professional
Corporation, to the effect that the merger will constitute a
reorganization for United States federal income tax purposes
within the meaning of Section 368(a) of the Internal Revenue Code;
and
. no Fusion material adverse effect shall have occurred and be
continuing.
TERMINATION, AMENDMENT AND WAIVER
The merger agreement may be terminated at any time before completion of
the merger, whether before or after stockholder approval has been obtained, as
summarized below:
. by mutual written consent authorized by the board of directors of
Fusion, HB2002 and Baxter;
. by either Fusion or Baxter, if the merger is not completed on or
before August 26, 2002, or such other date to which Fusion and
Baxter agree, except that this right to terminate the merger
agreement will not be available to any party whose failure to
perform or observe its covenants or agreements under the merger
agreement has been the cause of or resulted in the failure of the
merger to be completed by August 26, 2002;
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. by either Fusion or Baxter, if there is any applicable law or
regulation that makes completion of the merger illegal or there is
a final and nonappealable judgment, or order prohibiting Baxter,
HB2002 or Fusion from completing the merger;
. by either Fusion or Baxter, if at the special meeting of Fusion
stockholders, Fusion stockholders do not vote to adopt and approve
the merger agreement;
. by Baxter or Fusion, if the other party breaches in any material
respect any covenant, agreement, representation or warranty
contained in the merger agreement and the breach would entitle the
non-breaching party not to complete the merger and, if the breach
is curable, the breach has not been cured by the earlier of (i) 20
days after notice is given to the party committing the breach or
(ii) the closing of the merger;
. by Baxter, if:
. Fusion's board of directors withdraws, or fails to make, its
recommendation of the merger agreement and the transactions
described in the merger agreement to Fusion stockholders or
changes its recommendation in a manner adverse to Baxter or
HB2002;
. Fusion's board of directors recommends to Fusion's
stockholders any proposal (other than Baxter's) for the
acquisition of Fusion, or publicly announces an intention to
do so;
. a tender offer or exchange offer for 50% or more of the
outstanding shares of Fusion common stock is announced or
commenced and, either (i) Fusion's board of directors
recommends acceptance of the tender offer or exchange offer
by its stockholders or (ii) within ten business days of the
commencement, Fusion's board of directors fails to recommend
against acceptance of the tender offer or exchange offer by
its stockholders;
. Fusion's board of directors fails to publicly reaffirm its
recommendation to its stockholders of the merger agreement
and the transactions described in the merger agreement
within ten business days after Baxter requests in writing
that the recommendation be reaffirmed after it is publicly
announced or Fusion otherwise discovers that a person or
affiliated group has acquired beneficial ownership of more
than 20% of the outstanding shares of Fusion common stock,
other than Baxter, HB2002 or any group of which any of them
is a member and other than passive stockholders as described
in the merger agreement; or
. Fusion breaches in any material respect the nonsolicitation
restrictions in the merger agreement; or
. by Fusion, for the purpose of accepting a superior proposal for
the acquisition of Fusion; provided that Fusion has satisfied all
of the conditions contained in the merger agreement with respect
to terminating the merger agreement due to a superior proposal.
In addition, the parties may amend or waive any provision of the merger
agreement by action taken or authorized by their respective boards of
directors, at any time before the completion of the merger, provided that after
the merger agreement is adopted by Fusion stockholders, no amendment will be
made except as allowed under applicable law. All amendments to the merger
agreement must be in writing and signed by each party. All waivers to the
merger agreement must be in writing and signed by the party against whom the
waiver is to be effective.
FEES AND EXPENSES
All costs and expenses incurred in connection with the merger agreement
and the consummation of the transactions described in it are to be paid by the
party incurring the expenses except as set forth below:
. Fusion and Baxter will share equally all fees and expenses (other
than attorneys' and accountants' fees and expenses) incurred:
. in relation to the printing and filing of proxy statement
materials and this prospectus; and
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. for premerger notification and report forms under the HSR
Act.
. If the merger agreement is validly terminated by Fusion because
Fusion accepted a superior proposal for the acquisition of Fusion,
then, concurrently with such termination, Fusion shall pay to
Baxter a termination fee of $5.0 million.
. If the merger agreement is validly terminated by Baxter because
(a) Fusion's board of directors has withdrawn, modified or changed
its approval or recommendation of the merger or the merger
agreement or has recommended or announced its intention to
recommend an alternate acquisition proposal, or (b) a tender or
exchange offer for 50% or more of the outstanding shares of Fusion
common stock is announced or commenced and Fusion's board of
directors either recommends such offer or fails to recommend
against it within ten business days, or (c) Fusion's board of
directors fails to reaffirm its recommendations with regard to the
merger within ten business days after Baxter requests that it do
so following the acquisition by a person or group of more than 20%
of the outstanding shares of Fusion common stock, or (d) Fusion
has breached the non-solicitation provisions of the merger
agreement in any material respect, then, within five business days
of such termination, Fusion shall pay to Baxter a termination fee
of $5.0 million.
. If the merger agreement is validly terminated:
. by Fusion or by Baxter because the merger is not completed
by August 26, 2002 or another date agreed upon by Fusion and
Baxter or if the merger agreement is not adopted by Fusion
stockholders at the stockholder meeting called for that
purpose; or
. by Baxter if there has been an intentional or willful breach
of the merger agreement by Fusion that is intended to or has
the effect of facilitating an alternate acquisition proposal
by a party other than Baxter,
and if Fusion has received an alternate acquisition proposal that
has not expired or been revoked prior to the termination of the
merger agreement and, within nine months after the termination of
the merger agreement, any alternate acquisition proposal is
consummated or documented in a definitive agreement that is
subsequently consummated, then, within five business days of the
consummation of the alternate transaction, Fusion must pay to
Baxter $5.0 million.
VOTING AGREEMENTS AND PROXIES
In connection with the merger agreement, Baxter and HB2002 entered into
voting agreements and irrevocable proxies with all of Fusion's executive
officers (other than one officer who has given notice of his intention to
terminate his employment) and directors as of the date of the merger agreement
and their affiliates. Pursuant to these voting agreements and irrevocable
proxies, each person or entity agreed:
. to vote all of the shares of capital stock of Fusion beneficially
owned by him or it at every meeting of Fusion stockholders until
the expiration date called to consider and vote to adopt and
approve the merger, the merger agreement, the transactions
described in the merger agreement, an acquisition proposal or any
action or proposal opposing, or competing with, the merger and the
transactions described in the merger agreement:
. in favor of approval of the merger, the adoption and
approval of the merger agreement, the other actions
described in the merger agreement and the proxy and any
action required to further each of them;
. against approval of any acquisition proposal;
. against approval of any proposal made in opposition to or in
competition with completion of the merger and the
transactions described in the merger agreement; and
. against any other action that is intended or could reasonably be
expected to impede, interfere with, postpone, discourage or
adversely affect the merger or any of the transactions described
in the merger agreement.
The voting agreements terminate upon the earlier of the termination of
the merger agreement or the closing of the merger.
The full text of the form of voting agreement is included in this
document as Annex B.
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COMPARISON OF STOCKHOLDERS' RIGHTS
This section of the document describes certain differences between the
rights of holders of Baxter common stock and Fusion common stock. While we
believe that the description covers the material differences between the two,
this summary may not contain all of the information that is important to you
and does not purport to be a complete statement of the rights of the holders of
the common stock of Baxter or Fusion. You should carefully read this entire
document, including the annexes, and the other documents we refer to for a more
complete understanding of the differences between being a stockholder of Fusion
and being a stockholder of Baxter.
GENERAL
Fusion is incorporated under the laws of the State of Delaware and,
accordingly, the rights of Fusion stockholders are governed by Delaware law and
Fusion's restated certificate of incorporation and bylaws. Baxter also is
incorporated under the laws of the State of Delaware and is governed by
Delaware law and Baxter's restated certificate of incorporation and bylaws.
After completion of the merger, Fusion stockholders will become stockholders of
Baxter and their rights will continue to be governed by the laws of the State
of Delaware. Accordingly, the distinctions set forth below arise solely from
the respective certificates of incorporation and bylaws of Baxter and Fusion.
CLASSES OF COMMON STOCK OF BAXTER AND FUSION
Baxter and Fusion each have one class of common stock issued and
outstanding. In accordance with Delaware law, the holders of Baxter common
stock and the holders of Fusion common stock are entitled to one vote for each
share held.
CLASSIFIED BOARD OF DIRECTORS
Delaware law provides that a corporation's board of directors may be
divided into various classes with staggered terms of office. Baxter's board of
directors and Fusion's board of directors are both divided into three classes,
as nearly equal in size as possible, with each class of each board being
elected annually for a three-year term and serving until the directors'
successors are elected and qualified.
NUMBER OF DIRECTORS
Baxter's board of directors may consist of not fewer than twelve nor more
than twenty directors. The number of directors within this range may be
determined by the board of directors but the minimum or maximum number of
directors on Baxter's board may be changed only by a vote of at least
two-thirds of the outstanding shares of the capital stock of Baxter entitled to
vote generally in the election of directors. In the event that Baxter has
failed to pay a dividend to Baxter's series B junior participating preferred
stock for six consecutive quarterly dividend periods, the holders of all series
of Baxter's preferred stock, voting as a single class and excluding the holders
of common stock, may elect two additional directors to the board to serve
through the end of the term during which the delinquent dividend payments are
made. No person who is older than 72 is eligible for reelection or appointment
to the board.
Fusion's board of directors consists of seven directors. The number of
directors on Fusion's board may be increased or decreased by an amendment to
Fusion's bylaws, which may be made in accordance with the procedures described
below under the heading "--Removal of Directors" beginning below on this page
and under the heading "--Filling Vacancies on the Board of Directors" on page
49 below.
REMOVAL OF DIRECTORS
Under Delaware law, a director of a corporation with a classified board
of directors, such as Baxter's, may be removed only for cause by a majority of
the shares entitled to vote unless the certificate of incorporation provides
otherwise.
Baxter's restated certificate of incorporation does not provide for any
other means of removal of directors; however, it does provide that any director
elected solely by the holders of preferred stock as a result of delinquent
dividend payments may be removed only by the vote of the holders of a majority
of the preferred stock of the corporation then outstanding.
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Fusion's restated certificate of incorporation provides that its
directors may be removed from office only for cause and only by the affirmative
vote of not less than two-thirds of the holders of shares of capital stock
entitled to vote generally in the election of directors at a regular or special
stockholder meeting. Notice of the proposed director removal must have been
contained in the notice of the stockholder meeting.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Any newly created directorships in Baxter's board of directors resulting
from any increase in the number of authorized directors may be filled by a
majority of the directors then in office. In the case of any other vacancy, a
directorship may be filled by a majority of the directors then in office, even
if less than a quorum, or by a sole remaining director. In the case of a new
directorship resulting from an increase in the number of directors, the new
director will serve the same term as the other members of his board class. A
director elected to fill any other vacancy will have the same remaining term as
that of his or her predecessor.
A vacancy on Fusion's board of directors resulting from the removal or
resignation of a director may be filled by a majority vote of the directors
then in office. In the case of any other vacancy, including a newly created
directorship resulting from an increase in the authorized number of directors
elected by all of the stockholders having the right to vote generally in the
election of directors, such vacancy may be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director.
ABILITY TO CALL SPECIAL MEETINGS
Special meetings of the stockholders of Baxter may be called only by the
chairman of the board, the chief executive officer or the corporate secretary,
and must be called by such person upon a written request by a majority of the
board of directors or by resolution of the directors.
Special meetings of Fusion stockholders may be called at any time but
only by the board of directors, the chairman of the board or the president. If
at any time Fusion has no directors in office, then any officer or stockholder
may call a special meeting of stockholders.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND NOMINATIONS
Under the Baxter bylaws, proposals of business to be transacted or
nominations of persons for election to the board of directors may be made at a
meeting of stockholders by or at the discretion of the board of directors or by
any stockholder entitled to vote. In the case of an annual meeting, the
secretary of Baxter must receive written notice of the stockholder proposal or
nomination not less than sixty days nor more than ninety days prior to the
anniversary date of the immediately preceding annual meeting of stockholders.
If, however, the annual meeting is called for a date that is not within thirty
days before or after the annual meeting anniversary date, the secretary must
receive notice from the stockholder not later than the close of business on the
tenth day following either the day notification of the annual meeting date was
mailed or the day public disclosure of the annual meeting date was made,
whichever occurs first. In the case of a special meeting of stockholders called
for the purpose of electing directors, the secretary of Baxter must receive
notice not later than the close of business on the tenth day following the day
on which notification of the date of the special meeting was mailed or the day
public disclosure of the date of the special meeting was made, whichever occurs
first.
In the case of a Baxter stockholder proposal of business to be transacted
at a stockholder meeting, the stockholder notice must state, among other things:
. a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at
the annual meeting;
. the name and record address of the stockholder proposing the
business;
. the class or series and number of shares of Baxter stock owned
beneficially or of record by the stockholder;
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. a description of all the arrangements or understandings between
the stockholder and any other person (including their names) in
connection with the proposal and any material interest of the
stockholder in the business being proposed; and
. a representation that the stockholder intends to appear in person
or by proxy at the annual meeting to bring the proposed business
before the meeting.
In the case of a Baxter stockholder's director nomination, the
stockholder notice must state, among other things:
. the name, age, business address, residence addresses and principal
occupation or employment of any person whom the stockholder
proposes to nominate for election or re-election as a director;
. the class or series and number of shares of the corporation
beneficially owned by such nominee;
. written consent of the nominee to being named as a nominee and
serving as a director if elected;
. the name and address of the stockholder giving the notice, as they
appear on the books of the corporation;
. the class or series and number of shares of the corporation owned
beneficially or of record by the stockholder;
. a description of any arrangements or understandings between the
stockholder giving notice and the nominee and any other person or
persons (including their names) in connection with the nomination;
and
. a representation that the stockholder intends to appear in person
or by proxy at the annual or special meeting to bring the proposed
nomination before the meeting.
Nominations for directors of Baxter may be made by any stockholder of the
corporation who is a stockholder of record on the date notice of the proposal
is given to the corporation and on the record date for determination of
stockholders entitled to vote at the stockholder meeting.
Similarly, the Fusion bylaws provide that proposals of business to be
transacted or nominations of persons for election to the board of directors may
be made at an annual meeting of stockholders by or at the discretion of the
board of directors or by any stockholder entitled to vote. Fusion's corporate
secretary must receive written notice of the stockholder proposal or nomination
not less than twenty days nor more than sixty days prior to the date of the
meeting. If, however, less than thirty days notice or prior public disclosure
of the date of the meeting is given or made to stockholders, the secretary must
receive notice from the stockholder not later than the close of business on the
tenth day following the day notice of the meeting date was mailed or the day of
public disclosure of the meeting date.
In the case of a Fusion stockholder proposal of business to be transacted
at an annual meeting, the stockholder notice must state, among other things:
. a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at
the annual meeting;
. the name and record address of the stockholder proposing the
business;
. the class and number of shares of Fusion stock beneficially owned
by the stockholder; and
. any material interest of the stockholder in the proposed business.
In the case of a Fusion stockholder's director nomination, the
stockholder notice must state, among other things:
. the name, age, business address, residence address and principal
occupation or employment of any person whom the stockholder
proposes to nominate for election or re-election as a director;
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. the class and number of shares of the corporation beneficially
owned by such nominee;
. written consent of the nominee to being named as a nominee and
serving as a director if elected;
. the name and address of the stockholder giving the notice, as they
appear on the books of the corporation;
. the class and number of shares of the corporation beneficially
owned by the stockholder; and
. a description of any arrangements or understandings between the
stockholder giving notice and the nominee and any other person or
persons (naming such person or persons) relating to the nomination.
AMENDMENT OF CERTIFICATES OF INCORPORATION
Under Delaware law, a certificate of incorporation may be amended by
approval of the board of directors of the corporation and the affirmative vote
of the holders of a majority of the outstanding shares entitled to vote for the
amendment, unless a higher vote is required by the corporation's certificate of
incorporation.
Baxter's restated certificate of incorporation provides that the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of capital stock entitled to vote is required to amend or repeal any
provision of Baxter's restated certificate of incorporation that deals with (a)
the classification of the board of directors and terms of directors, or (b) the
rights of holders of classes or series of preferred stock to elect
non-classified directors at annual or special meetings of the stockholders.
Baxter's restated certificate of incorporation also provides that the
provisions relating to the rights, preferences, powers or privileges of holders
of Baxter's series B junior participating preferred stock cannot be amended in
a way that would adversely affect such rights, preferences, powers or
privileges without the affirmative vote of at least a majority of these holders.
The Fusion restated certificate of incorporation provides that the
affirmative vote of the holders of not less than two-thirds of the then
outstanding shares of capital stock entitled to vote is required to amend or
repeal any provisions of Fusion's restated certificate of incorporation that
deal with (a) amendments to the bylaws of the corporation, (b) the number or
removal of directors or filling any vacancy on the board of directors, (c) the
classification of the board of directors, (d) the requirement that actions be
taken at stockholder meetings rather than by written consent, or (e) amendments
to the certificate of incorporation.
AMENDMENT OF BYLAWS
Under Delaware law, stockholders entitled to vote have the power to
adopt, amend or repeal bylaws. In addition, a corporation may, in its
certificate of incorporation, confer this power upon the board of directors.
The stockholders always have the power to adopt, amend or repeal bylaws, even
though the board may also be delegated this power.
The Baxter bylaws may be altered or amended by the affirmative vote of
(a) the holders of a majority of the common stock issued and outstanding, or
(b) a majority of the directors present at any meeting, provided the substance
of the proposed amendment was stated in the notice of the meeting.
Fusion's bylaws may be amended or repealed by Fusion's board of
directors, subject to the right of the stockholders entitled to vote to amend
or repeal such bylaws made by the board of directors, and provided that the
affirmative vote of not less than two-thirds of the then outstanding shares of
capital stock entitled to vote is required to amend sections of the bylaws
dealing with (a) special meetings, (b) advance notice of stockholder nominees,
or (c) advance notice of stockholder business.
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RIGHTS PLANS
On November 17, 1998 the board of directors of Baxter declared a dividend
distribution of one right for each outstanding share of Baxter common stock. On
February 27, 2001, the board of directors of Baxter declared a two-for-one
stock split in the form of a 100% stock distribution to holders of Baxter
common stock. As a result of the stock split, the Baxter rights plan was
adjusted as of May 30, 2001 so that each share of Baxter common stock is now
accompanied by one-half of one right. Each full right entitles the holder to
purchase from Baxter one one-hundredth of a share of series B junior
participating preferred stock at a price of $275 per one one-hundredth of a
share, subject to adjustment. Initially, the rights are attached to all
certificates representing Baxter common stock and no separate rights
certificates have been issued. The rights will separate from the Baxter common
stock upon the earlier of:
. ten business days following the public announcement that a person
or group has acquired or obtained the right to acquire beneficial
ownership of 15% or more of the outstanding shares of Baxter
common stock; or
. ten business days following the commencement of a tender or an
exchange offer that would result in a person or group owning 15%
or more of the outstanding shares of Baxter common stock;
unless the person or group has offered to acquire all of the outstanding shares
of Baxter common stock and the independent directors of Baxter have determined
that such offer is in the best interests of Baxter and its stockholders. The
rights are not exercisable until one of the two events listed above has
occurred and will expire on March 23, 2009.
Upon the happening of one of the events listed above, each right (other
than rights held by the acquiring person) will be exercisable for Baxter common
stock having a value equal to two times the exercise price of the right. If
Baxter is acquired or sells 50% or more of its assets, then each right will be
exercisable for common stock in the surviving or transferee corporation having
a value equal to two times the exercise price of the right.
At any time up to ten days after the happening of one of the events
listed above, Baxter may redeem the rights at a price of $.01 per right.
Similarly, on October 10, 1997 the board of directors of Fusion declared
a dividend distribution of one right for each outstanding share of Fusion
common stock. Each right entitles the holder to purchase from Fusion one
one-thousandth of a share of series A participating preferred stock at a price
of $30 per one one-thousandth of a share, subject to adjustment. Initially, the
rights are attached to all certificates representing Fusion common stock and no
separate rights certificates have been issued. The rights will separate from
the Fusion common stock upon the earlier of:
. ten days following the public announcement that a person or group
has acquired beneficial ownership of 15% or more (or, in the case
of the State of Wisconsin Investment Board or Alloy Ventures, 20%
or more) of the outstanding shares of Fusion common stock; or
. ten days following the public announcement of the commencement of
a tender or an exchange offer that would result in a person or
group owning 15% or more (or, in the case of the State of
Wisconsin Investment Board or Alloy Ventures, 20% or more) of the
outstanding shares of Fusion common stock.
The rights are not exercisable until one of the events listed above has
occurred and will expire on October 10, 2007.
Upon the happening of one of the two events listed above, each right
(other than rights held by the acquiring person) will be exercisable for Fusion
common stock having a value equal to two times the exercise price of the right.
If Fusion is acquired or sells 50% or more of its assets, then each right will
be exercisable for common stock in the surviving or transferee corporation
having a value equal to two times the exercise price of the right.
- 52 -
At any time up to ten days after the happening of one of the events
listed above, Fusion may redeem the rights at a price of $.01 per right.
Pursuant to a resolution of Fusion's board of directors Fusion's rights
plan was amended on February 26, 2002 to render the rights inapplicable to the
merger.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law permits a corporation to indemnify officers and directors
for actions taken 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 action that they had no reasonable cause to believe was
unlawful.
The Baxter restated certificate of incorporation provides that, to the
fullest extent permitted under Delaware law, a director or officer of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Baxter will
indemnify and advance expenses to each person who serves as an officer or
director of Baxter or one of its subsidiaries and each person who serves or may
have served at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust or other
enterprise from any liability incurred as a result of such service to the
fullest extent permitted by Delaware law. A director or officer will not be
indemnified for actions taken by the director or officer against the
corporation or as a derivative action by or in the right of the corporation.
The indemnification rights conferred by Baxter are not exclusive of any other
right to which persons seeking indemnification may be entitled under any
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office.
Fusion's restated certificate of incorporation provides that, to the
fullest extent permitted under Delaware law, a director of the corporation
shall not be liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. Fusion will indemnify and advance
expenses to each person who serves as a director, officer, employee or agent of
the corporation and each person who serves or may have served at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture trust or other enterprise from any
liability actually and reasonably incurred as a result of such service if that
person acted in good faith and in a manner he or she reasonably believed to be
in (or not opposed to) the best interests of the corporation. In the case of
any criminal proceeding, such person must have had no reasonable cause to
believe his or her action(s) to be unlawful. The indemnification rights
conferred by Fusion are not exclusive of any other right to which any person
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
Baxter and Fusion may each purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of that
corporation, or who was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
or her, whether or not Baxter or Fusion, as the case may be, would have the
power to indemnify such person against such liability under such corporation's
restated certificate of incorporation or under Delaware law.
- 53 -
FUSION MEDICAL TECHNOLOGIES, INC.--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Fusion common
stock as of March 28, 2002 for the following: (i) each person or entity who is
known by Fusion to own beneficially more than 5% of the outstanding shares of
Fusion common stock; (ii) each of Fusion's directors; (iii) each of the
officers named in the Summary Compensation Table set forth in Fusion's most
recent Form 10-K/A; and (iv) all current directors and named executive officers
of Fusion as a group.
TOTAL SHARES STOCK OPTIONS AND WARRANTS PERCENT BENEFICIALLY
NAME AND ADDRESS BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (2) OWNED (3)
---------------- ---------------------- -------------------------- --------------------
Alloy Ventures 2000, LLC (4)............. 2,592,392 544,611 17.4%
480 Cowper Street
Palo Alto, CA 94301
Kern Capital Management LLC.............. 1,101,625 0 7.7%
Robert E. Kern Jr. & David G. Kern
114 West 47th Street
New York, New York 10036
Douglas E. Kelly, M.D (5)................ 2,617,819 544,611 17.5%
Philip M. Sawyer (6)..................... 1,110,625 186,666 7.6%
Gordon W. Russell........................ 253,946 40,951 1.8%
Cary J. Reich, Ph.D...................... 218,799 204,492 1.5%
Joseph F. Rondinone, Ph.D (7). .......... 162,528 136,506 1.1%
Scott A. Huie............................ 159,560 146,873 1.1%
Olav B. Bergheim......................... 49,236 32,666 *
J. Michael Egan.......................... 27,266 27,266 *
Ronald A. Elenbaas....................... 2,533 2,333 *
Michael L. Eagle......................... 2,453 1,833 *
Dan S. Ellis............................. 96,753 85,833 *
--------- --------- ----
All directors and executive officers as a
group (11 persons)..................... 4,701,518 1,410,030 29.8%
* Less than 1%.
(1) Includes options and warrants to purchase shares of Fusion common stock
that are exercisable within 60 days of March 28, 2002, as set forth in
the Stock Options and Warrants column above.
(2) Represents shares of Fusion common stock subject to stock options or
warrants that are exercisable within 60 days of March 28, 2002.
(3) Applicable percentage of beneficial ownership is based on 14,386,894
shares of Fusion common stock outstanding as of March 28, 2002 and
calculated pursuant to Rule 13d-3(d) of the Exchange Act.
(4) Includes 1,486,457 shares of Fusion common stock and warrants exercisable
into 371,614 shares of Fusion common stock directly owned by Alloy
Ventures 2000, L.P., 306,489 shares of Fusion common stock and warrants
exercisable into 76,622 shares of Fusion common stock directly owned by
Alloy Investors 2000, L.P., 178,648 shares of Fusion common stock and
warrants exercisable into 44,662 shares of Fusion common stock directly
owned by Alloy Corporate 2000, L.P. and 76,187 shares of Fusion common
stock and warrants exercisable into 19,047 shares of Fusion common stock
directly owned by Alloy Partners 2000, L.P. Alloy Ventures 2000, LLC, the
general partner of Alloy Ventures 2000, Alloy Investors 2000, Alloy
Corporate 2000 and Alloy Partners 2000, may be deemed to have shared
voting power to vote these shares and Craig Taylor, Douglas E. Kelly,
John F. Shoch and Tony Di Bona, the managing members of Alloy Ventures
2000, LLC, may be deemed to have shared power to vote these shares. Also
includes options to purchase 32,666 shares of Fusion common stock
directly owned by Douglas E. Kelly.
(5) Includes 25,427 shares of Fusion common stock owned directly and
2,592,392 shares of Fusion common stock beneficially owned by Alloy
Ventures 2000, LLC. Mr. Kelly is a managing member of Alloy Ventures
2000, LLC, and may be deemed to have shared power to vote these shares.
(6) Includes 295,749 shares of Fusion common stock held by Mr. Sawyer,
options to purchase 186,666 shares of Fusion common stock beneficially
owned by Mr. Sawyer and 628,210 shares of Fusion common stock held by
Interface Biomedical Laboratories Corporation, of which Mr. Sawyer is a
shareholder.
(7) Mr. Rondinone has resigned his employment at Fusion effective March 29,
2002.
- 54 -
STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Exchange Act, Fusion stockholders may present
proper proposals for inclusion in Fusion's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting such
proposals to Fusion in a timely manner. In order to be so included for the 2002
annual meeting, stockholder proposals must have been received by Fusion no
later than January 3, 2002, and must have otherwise complied with the
requirements of Rule 14a-8. Under Fusion's bylaws, in order to be considered
for possible action by stockholders at the 2002 annual meeting, stockholder
proposals must be submitted to Fusion's Corporate Secretary not less than
twenty nor more than sixty days in advance of Fusion's 2002 annual meeting. In
addition, stockholder proposals must meet other applicable criteria set forth
in Fusion's bylaws in order to be considered at the 2002 annual meeting.
Fusion's board of directors will review any stockholder proposals that are
filed as required and will determine whether such proposals meet applicable
criteria for consideration at the 2002 annual meeting. If the merger closes
prior to the date of the annual meeting of Fusion stockholders, the annual
meeting of Fusion stockholders will be cancelled.
LEGAL MATTERS
The validity of the shares of Baxter common stock offered by this
document will be passed upon for Baxter by Thomas J. Sabatino, Jr., Senior Vice
President and General Counsel of Baxter. Mr. Sabatino is a full-time employee
of Baxter and, as of March 28, 2002, beneficially owned 120,883 shares of
Baxter common stock and had options to acquire an additional 403,140 shares of
Baxter common stock. Dechert, Philadelphia, Pennsylvania, is outside counsel to
Baxter. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, is outside counsel to Fusion. It is a condition to the completion
of the merger that Fusion receive an opinion from Wilson Sonsini Goodrich &
Rosati, Professional Corporation, and that Baxter receive an opinion from
Dechert to the effect that, among other things, the merger will constitute a
reorganization for federal income tax purposes.
EXPERTS
The consolidated financial statements incorporated in this document by
reference to Baxter International Inc.'s Annual Report on Form 10-K for the
year ended December 31, 2001 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements incorporated in this document by
reference to the Fusion Medical Technologies, Inc. Annual Report on Form 10-K/A
for the year ended December 31, 2001 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference into this
document contain forward-looking statements within the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995 with respect to
Baxter's and Fusion's financial condition, results of operations and business
and the expected impact of the merger on Baxter's financial performance. Words
such as "anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates" and similar expressions indicate forward-looking statements. These
statements are based on current expectations and involve numerous risks and
uncertainties. These forward-looking statements are not guarantees of future
performance and are subject to factors that could cause actual
- 55 -
results to differ materially from the results contemplated by the
forward-looking statements. Some of these risks and uncertainties are factors
that affect all businesses, while some are specific to Baxter or Fusion, as the
case may be, and the health care arenas in which they operate. These factors
include, but are not limited to, interest rates; technological advances in the
medical field; economic conditions; demand and market acceptance risks for new
and existing products, technologies and health care services; the impact of
competitive products and pricing; manufacturing capacity; new plant start-ups;
global regulatory, trade and tax policies; regulatory, legal or other
developments relating to Baxter's Series A, AF and AX dialyzers; continued
price competition; product development risks, including technological
difficulties; ability to enforce patents; actions of regulatory bodies and
other governmental authorities; reimbursement policies of government agencies;
commercialization factors; results of product testing; and other factors
described in each of Baxter's and Fusion's reports filed under the Exchange Act
and incorporated by reference into this document. In evaluating the merger, you
should carefully consider the discussion of risks and uncertainties in the
section entitled "Risk Factors" beginning on page 15. Neither Baxter nor Fusion
undertakes any obligation to update any forward-looking statements.
WHERE YOU CAN FIND MORE INFORMATION
Baxter and Fusion file annual, quarterly and current reports, proxy
statements and other information with the SEC. Copies of these reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at Judiciary Plaza, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549.
Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a web site that contains reports, proxy statements and other
information regarding Baxter and Fusion. The address of the SEC web site is
www.sec.gov.
Baxter has filed a registration statement with the SEC to register the
Baxter common stock to be issued to Fusion stockholders in the merger. This
document is a part of that registration statement and constitutes a prospectus
of Baxter in addition to being a proxy statement of Fusion for use at its
special meeting.
Stockholders can obtain any of the documents incorporated by reference in
this document through Baxter and Fusion or the SEC. Documents incorporated by
reference in this document are available from Baxter and Fusion without charge,
excluding all exhibits. Stockholders may obtain documents incorporated by
reference in this document by requesting them orally or in writing to the
following:
Baxter International Inc. Fusion Medical Technologies, Inc.
Investor Relations Investor Relations
One Baxter Parkway 34175 Ardenwood Boulevard
Deerfield, IL 60015 Fremont, CA 94555
(847) 948-4551 (510) 818-4600
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY APRIL 26, 2002 IN
ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
WE HAVE AUTHORIZED NO ONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ABOUT THE PROPOSED MERGER THAT DIFFERS FROM OR ADDS TO THE
INFORMATION CONTAINED IN THIS DOCUMENT, OR IN THE DOCUMENTS BAXTER OR FUSION
HAS PUBLICLY FILED WITH THE SEC. THEREFORE, IF ANYONE SHOULD GIVE YOU ANY
DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
- 56 -
IF YOU LIVE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE
OR SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY
THIS DOCUMENT, OR TO ASK FOR PROXIES, OR, IF YOU ARE A PERSON TO WHOM IT IS
UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY THIS DOCUMENT
DOES NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
- 57 -
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this document, and later information filed with the
SEC will update and supersede this information. This document incorporates by
reference the documents set forth below that Baxter and Fusion have previously
filed with the SEC. The documents contain important information about Baxter
and Fusion and their finances.
We incorporate by reference Baxter's:
BAXTER SEC FILINGS (COMMISSION FILE NO. 1-4448): PERIOD:
Annual Report on Form 10-K Fiscal year ended December 31, 2001
Registration Statement on Form 8-A (description of Dated March 21, 1989
Baxter's common stock)
Definitive Proxy Statement for Baxter's 2002 Annual Dated March 22, 2002
Meeting of Stockholders
We also incorporate by reference Fusion's:
FUSION SEC FILINGS (COMMISSION FILE NO. 000-28460): PERIOD:
Annual Report on Form 10-K/A Fiscal year ended December 31, 2001
Form 8-K Filed on March 1, 2002 (as amended on
Fusion's Form 8-K/A filed on March 7,
2002)
Form 8-A (description of Fusion's preferred stock) Filed on November 5, 1997 (as amended
in Fusion's Form 8-K filed on April 8,
1999 and as further amended by
Fusion's Form 8-A/A filed on April 11,
2001, and as further amended by
Fusion's Form 8-A/A filed on March 12,
2002)
Form 8-A (description of Fusion's common stock) Filed on April 25, 1996 (as amended by
Fusion's Form 8-A/A filed on June 6,
1996) (description of Fusion's common
stock is incorporated by reference to the
"Capitalization" and "Description of
Capital Stock" sections of Fusion's Form
SB-2 (Registration No. 333-3970-LA))
In addition, all of Baxter's and Fusion's filings with the SEC after the
date of this document under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act shall be deemed to be incorporated by reference until the merger becomes
effective.
Any statement contained in this document or in a document incorporated or
deemed to be incorporated by reference in this document shall be deemed to be
modified or superseded for purposes of this document to the extent that a
statement contained in this or in any other later filed document which also is
or is deemed to be incorporated by reference modifies or supersedes the
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this document.
- 58 -
ANNEX A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
FUSION MEDICAL TECHNOLOGIES, INC.,
BAXTER INTERNATIONAL INC.
AND
HB2002 CORPORATION
DATED AS OF FEBRUARY 26, 2002
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER................................................ A-1
SECTIOn 1.1. The Merger........................................ A-1
SECTION 1.2. Effect On Common Stock............................ A-2
SECTION 1.3. Exchange Of Certificates.......................... A-2
SECTION 1.4. Transfer Taxes; Withholding....................... A-5
SECTION 1.5. Stock Options; Stock Purchase Plan; Warrants...... A-5
SECTION 1.6. No Further Ownership Rights in Common Stock....... A-6
SECTION 1.7. Lost Certificates................................. A-6
SECTION 1.8. Merger Closing.................................... A-6
SECTION 1.9. Tax Consequences.................................. A-6
ARTICLE II THE SURVIVING CORPORATION................................ A-6
SECTION 2.1. Certificate Of Incorporation...................... A-6
SECTION 2.2. Bylaws............................................ A-7
SECTION 2.3. Officers And Directors............................ A-7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........... A-7
SECTION 3.1. Corporate Existence And Power..................... A-7
SECTION 3.2. Corporate Authorization........................... A-8
SECTION 3.3. Consents And Approvals; No Violations............. A-8
SECTION 3.4. Capitalization.................................... A-9
SECTION 3.5. Subsidiaries...................................... A-10
SECTION 3.6. SEC Documents..................................... A-10
SECTION 3.7. Financial Statements.............................. A-11
SECTION 3.8. Absence Of Undisclosed Liabilities................ A-11
SECTION 3.9. Registration Statement; Proxy Statement/Prospectus A-11
SECTION 3.10. Absence Of Material Adverse Changes, Etc.......... A-12
SECTION 3.11. Taxes............................................. A-13
SECTION 3.12. Employee Benefit Plans............................ A-13
SECTION 3.13. Litigation; Compliance With Laws.................. A-17
SECTION 3.14. Labor Matters..................................... A-18
SECTION 3.15. Certain Contracts And Arrangements................ A-18
SECTION 3.16. Environmental Matters............................. A-19
SECTION 3.17. Intellectual Property............................. A-21
SECTION 3.18. Board Recommendation.............................. A-22
SECTION 3.19. Tax Treatment..................................... A-22
SECTION 3.20. Financial Advisors' Fees.......................... A-22
SECTION 3.21. Anti-takeover Provisions; Rights Plan............. A-22
SECTION 3.22. Insurance......................................... A-22
SECTION 3.23. Section 162(m) of the Code........................ A-23
SECTION 3.24. Opinion of Company Financial Advisor.............. A-23
SECTION 3.25. Affiliate Transactions............................ A-23
SECTION 3.26. Relationship with Customers and Suppliers......... A-23
SECTION 3.27. FDA Matters....................................... A-23
SECTION 3.28. Title to Property................................. A-24
SECTION 3.29. Affiliates........................................ A-25
SECTION 3.30. Absence of Questionable Payments.................. A-25
A-i
TABLE OF CONTENTS
PAGE
----
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................... A-25
SECTION 4.1. Corporate Existence And Power............................................ A-25
SECTION 4.2. Corporate Authorization.................................................. A-26
SECTION 4.3. Consents And Approvals; No Violations.................................... A-26
SECTION 4.4. Capitalization........................................................... A-27
SECTION 4.5. SEC Documents............................................................ A-27
SECTION 4.6. Financial Statements..................................................... A-27
SECTION 4.7. Registration Statement; Proxy Statement/Prospectus....................... A-28
SECTION 4.8. Share Ownership.......................................................... A-28
SECTION 4.9. Merger Sub's Operations.................................................. A-28
SECTION 4.10. Tax Treatment............................................................ A-28
SECTION 4.11. Finders' Fees............................................................ A-28
ARTICLE V PRECLOSING AND OTHER COVENANTS OF THE PARTIES.................................... A-28
SECTION 5.1. Conduct Of The Business Of The Company................................... A-28
SECTION 5.2. Conduct of the Business of Parent........................................ A-31
SECTION 5.3. Proxy Statement/Prospectus; Registration Statement; Stockholders' Meeting A-31
SECTION 5.4. Access to Information; Confidentiality Agreement......................... A-32
SECTION 5.5. No Solicitation.......................................................... A-32
SECTION 5.6. Director and Officer Liability........................................... A-34
SECTION 5.7. Commercially Reasonable Efforts.......................................... A-35
SECTION 5.8. Certain Filings.......................................................... A-35
SECTION 5.9. Public Announcements..................................................... A-36
SECTION 5.10. Further Assurances....................................................... A-36
SECTION 5.11. Employee Matters......................................................... A-36
SECTION 5.12. Tax-Free Reorganization Treatment........................................ A-37
SECTION 5.13. Blue Sky Permits......................................................... A-37
SECTION 5.14. Listing.................................................................. A-37
SECTION 5.15. Certain Notifications.................................................... A-37
SECTION 5.16. No Redemption of Rights Plan............................................. A-37
SECTION 5.17. Requests for Destination................................................. A-38
SECTION 5.18. Rule 145 Affiliates...................................................... A-38
ARTICLE VI CONDITIONS TO THE MERGER........................................................ A-38
SECTION 6.1. Conditions To Each Party's Obligations................................... A-38
SECTION 6.2. Conditions To The Company's Obligation To Consummate The Merger.......... A-38
SECTION 6.3. Conditions To Parent's And Merger Sub's Obligations To Consummate The
Merger................................................................. A-39
ARTICLE VII TERMINATION.................................................................... A-39
SECTION 7.1. Termination.............................................................. A-39
SECTION 7.2. Effect of Termination.................................................... A-41
SECTION 7.3. Fees..................................................................... A-41
SECTION 7.4. Interim Financing........................................................ A-41
ARTICLE VIII MISCELLANEOUS................................................................. A-42
SECTION 8.1. Notices.................................................................. A-42
SECTION 8.2. Survival Of Representations And Warranties............................... A-42
A-ii
TABLE OF CONTENTS
PAGE
----
SECTION 8.3. Interpretation.......................................... A-43
SECTION 8.4. Amendments, Modification And Waiver..................... A-43
SECTION 8.5. Successors And Assigns.................................. A-43
SECTION 8.6. Specific Performance.................................... A-43
SECTION 8.7. Governing Law........................................... A-43
SECTION 8.8. Severability............................................ A-44
SECTION 8.9. Third Party Beneficiaries............................... A-44
SECTION 8.10. Entire Agreement........................................ A-44
SECTION 8.11. Counterparts; Effectiveness............................. A-44
A-iii
TABLE OF DEFINED TERMS
TERM SECTION
1993 Plan....................................................... 1.5(a)
2001 Financial Statements....................................... 3.7
Acquisition Agreement........................................... 5.5(b)
Acquisition Proposal............................................ 5.5(a)
Additional Financing............................................ 7.4
Additional SVB Funds............................................ 7.4
Affected Employee............................................... 5.11(a)
Affiliate Letter................................................ 5.18
Agreement....................................................... Introduction
Antitrust Law................................................... 5.8(f)
Base Amount..................................................... 1.3(h)(i)
Benefit Arrangements............................................ (h)(i)(1)
Benefit Plan.................................................... 3.12(b)
Benefit Plans................................................... 3.12(a)
Certain Stockholders............................................ Recitals
Certificate Of Merger........................................... 1.1(b)
Certificates.................................................... 1.3(b)
Cleanup......................................................... 3.16(a)(i)
Closing......................................................... 1.8
Closing Capitalization.......................................... 1.3(g)(i)
Closing Date.................................................... 1.8
Code............................................................ Recitals
Commitments to change Benefit Arrangements or Remuneration Plans 3.12(n)(i)(3)
Common Stock.................................................... Recitals
Company......................................................... Introduction
Company Disclosure Schedule..................................... Introduction
Company Financial Advisor....................................... 3.20
Company Group................................................... 3.11(a)
Company Material Adverse Effect................................. 3.1
Company Option Plans............................................ 1.5(a)
Company Products................................................ 3.27(a)
Company SEC Documents........................................... 3.6
Company Securities.............................................. 3.4(a)
Company Stockholders' Meeting................................... 3.9
Company Warrant................................................. 1.5(c)
Confidentiality Agreement....................................... 5.4(b)
Contract........................................................ 3.15(a)
Convertible Securities.......................................... 1.3(g)(i)
DGCL............................................................ Recitals
Director Plan................................................... 1.5(a)
Effective Time.................................................. 1.1(b)
Environmental Audits............................................ 3.16(f)
Environmental Claim............................................. 3.16(a)(ii)
Environmental Laws.............................................. 3.16(a)(iii)
Equipment....................................................... 3.28(c)
ERISA Affiliate................................................. 3.12(a)
ESPP............................................................ 1.5(b)
A-i
ESPP Date........................................................ 1.5(b)
Exchange Act..................................................... 3.3(b)
Exchange Agent................................................... 1.3(a)
Exchange Fund.................................................... 1.3(a)
Exchange Ratio................................................... 1.2(c)
Exercise Period.................................................. 1.5(a)
FDA.............................................................. 3.27(a)
Foreign Authorities.............................................. 3.27(a)
Form S-4......................................................... 3.9
GAAP............................................................. 3.7
Governmental Entity.............................................. 3.3(b)
Group Outcome.................................................... 3.20
Hazardous Materials.............................................. 3.16(a)(iv)
HSR Act.......................................................... 3.3(b)
Indemnitees...................................................... 5.6(b)
Intellectual Property............................................ 3.17(e)
Interim Financing................................................ 7.4
IRS.............................................................. 3.12(a)
Leased Real Property............................................. 3.28(a)
Licenses......................................................... 3.1
Lien............................................................. 3.5(b)
Material Business................................................ 5.5(a)
Material Contract................................................ 3.15(a)
Merger........................................................... 1.1(a)
Merger Consolidation............................................. 1.3(b)
Merger Sub....................................................... Introduction
Notice........................................................... 1.5(a)
NYSE............................................................. 1.2(c)
Option Holder.................................................... 1.5(a)
Options.......................................................... 1.5(a)
Parent........................................................... Introduction
Parent Loan...................................................... 7.4
Parent Material Adverse Effect................................... 4.1
Parent Preferred Stock........................................... 4.4
Parent SEC Documents............................................. 4.5
Parent Series A Preferred Stock.................................. 4.4
Parent Shares.................................................... Recitals
Parent Stock Price............................................... 1.2(c)
Pension Plan..................................................... 3.12(c)
Permits.......................................................... 3.13(b)
Permitted Liens.................................................. 3.28(b)
Person........................................................... 1.3(a)
plan of reorganization........................................... 1.9
Preferred Stock.................................................. 3.4(a)
Proxy Statement/Prospectus....................................... 3.9
Release.......................................................... 3.16(a)(v)
Remuneration Plans............................................... 3.12(n)(i)(2)
Representatives.................................................. 5.4(a)
Represented Capitalization....................................... 1.3(g)(i)
Rights Plan...................................................... 3.21(b)
SEC.............................................................. 3.6
A-ii
Secretary Of State..................................................... 1.1(b)
Securities Act......................................................... 3.3(b)
Share Price............................................................ 1.2(c)
Subsidiary............................................................. 3.5(a)
Superior Proposal...................................................... 5.5(a)
Surviving Corporation.................................................. 1.1(a)
Tax Return............................................................. 3.11(b)
Taxes.................................................................. 3.11(b)
Termination Fee........................................................ 7.3(a)
Voting Agreement....................................................... Recitals
Voting Company Debt.................................................... 3.4(b)
WARN................................................................... 3.12(m)
WARN Act............................................................... 5.11(c)
A-iii
AGREEMENT AND PLAN OF MERGER, dated as of February 26, 2002 (this
"Agreement"), by and among Fusion Medical Technologies, Inc., a Delaware
corporation (the "Company"), Baxter International Inc., a Delaware corporation
("Parent") and HB2002 Corporation, a Delaware corporation and a direct
wholly-owned subsidiary of Parent ("Merger Sub").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company, and Parent as sole stockholder of Merger Sub, have each approved, and
the Board of Directors of the Company has determined that it is fair to,
advisable and in the best interests of, the Company and the stockholders of the
Company to enter into, this Agreement and the merger of Merger Sub with and
into the Company, upon the terms and subject to the conditions set forth
herein, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), whereby each issued and outstanding share of common
stock, par value $0.001 per share (the "Common Stock"), of the Company (other
than shares of Common Stock owned, directly or indirectly, by Parent or by
Merger Sub immediately prior to the Effective Time), together with the attached
Rights, will, upon the terms and subject to the conditions and limitations set
forth herein, be converted into shares of common stock, par value $1.00 per
share, of Parent (the "Parent Shares"), together with the attached rights
pursuant to the Rights Agreement, dated as of December 12, 1998, between Parent
and EquiServe Trust Company, N.A. (successor to First Chicago Trust Company of
New York), as Rights Agent, as amended, in accordance with the provisions of
Article I of this Agreement; and
WHEREAS, for federal income tax purposes, the Merger is intended to
qualify as a reorganization under the provisions of Section 368 of the United
States Internal Revenue Code of 1986, as amended (the "Code").
WHEREAS, simultaneously with the execution and delivery of this Agreement
and in order to induce Parent and Merger Sub to enter into this Agreement, the
executive officers, Directors and certain other principal stockholders of the
Company (the "Certain Stockholders") have executed and delivered to Parent an
agreement (the "Voting Agreement") pursuant to which the Certain Stockholders
have agreed to take specified actions in furtherance of the transactions
contemplated by this Agreement, including voting their shares of Common Stock
in favor of approval of this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger
(a) Upon the terms and subject to the conditions of this Agreement, and
in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged
(the "Merger") with and into the Company, whereupon the separate existence of
Merger Sub shall cease, and the Company shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation") and
shall continue to be governed by the laws of the State of Delaware and shall
continue under the name "Fusion Medical Technologies, Inc."
(b) Concurrently with the Closing, the Company, Parent and Merger Sub
shall cause a certificate of merger (the "Certificate Of Merger") with respect
to the Merger to be executed and filed with the Secretary of State of the State
of Delaware (the "Secretary Of State") as provided in the DGCL and shall make
all other filings or recordings required by the DGCL in connection with the
Merger. The Merger shall become effective on the date and time at which the
Certificate of Merger has been duly filed with the Secretary of State or at
such other date and time as is agreed between the parties and specified in the
Certificate of Merger, and such date and time is hereinafter referred to as the
"Effective Time."
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(c) From and after the Effective Time, the Merger shall have the effects
set forth in the DGCL, except as otherwise provided herein. Subject to the
foregoing, from and after the Effective Time, the Surviving Corporation shall
possess all rights, privileges, immunities, powers and franchises and be
subject to all of the obligations, restrictions, disabilities, liabilities,
debts and duties of the Company and Merger Sub.
SECTION 1.2. Effect On Common Stock. At the Effective Time:
(a) Cancellation Of Shares Of Common Stock. Each
share of Common Stock held by the Company as treasury stock and
each share of Common Stock owned by Parent or Merger Sub
immediately prior to the Effective Time shall automatically be
cancelled and retired and cease to exist, and no consideration or
payment shall be delivered therefor or in respect thereto. All
shares of Common Stock to be converted into Parent Shares pursuant
to this Section 1.2 shall, by virtue of the Merger and without any
action on the part of the holders thereof, cease to be
outstanding, be cancelled and retired and cease to exist; and each
holder of a certificate (representing prior to the Effective Time
any such shares of Common Stock) shall thereafter cease to have
any rights with respect to such shares of Common Stock, except the
right to receive (i) the Parent Shares into which such shares of
Common Stock have been converted, (ii) any dividend and other
distributions in accordance with Section 1.3(c) hereof and (iii)
any cash, without interest, to be paid in lieu of any fraction of
a Parent Share in accordance with Section 1.3(d) hereof.
(b) Capital Stock Of Merger Sub. Each share of
common stock of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of
Common Stock, par value $0.001 per share, of the Surviving
Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding
shares of capital stock of the Surviving Corporation.
(c) Conversion Of Shares Of Common Stock. Subject to
the other provisions of Article I, each share of Common Stock
issued and outstanding immediately prior to the Effective Time
(other than shares of Common Stock referred to in the first
sentence of Section 1.2(a) hereof), together with the attached
Rights, shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding and shall
be cancelled and extinguished and automatically converted into the
right to receive the fraction (the "Exchange Ratio") of a Parent
Share (calculated and rounded to the nearest ten-thousandth of one
share) equal to $10.00 (the "Share Price") divided by the Parent
Stock Price (as defined below). The "Parent Stock Price" shall be
an amount equal to the average closing sale price of one Parent
Share, as reported on the New York Stock Exchange, Inc. ("NYSE")
Composite Transactions Tape for the ten (10) consecutive trading
days ending on and including the third (3rd) trading day prior to
the date of the Company Stockholders' Meeting.
SECTION 1.3. Exchange Of Certificates.
(a) Prior to the mailing of the Proxy Statement EquiServe Trust, N.A. or
such other bank, trust company, Person or Persons as shall be designated by
Parent and reasonably acceptable to the Company shall act as the exchange agent
for the delivery of the Parent Shares in exchange for shares of Common Stock
(the "Exchange Agent") in connection with the Merger. At or promptly following
the Effective Time, Parent shall deposit, or cause to be deposited, with the
Exchange Agent the certificates representing Parent Shares, for the benefit of
the holders of shares of Common Stock which are converted into Parent Shares
pursuant to Section 1.2(c) hereof (together with cash as required to (i) pay
any dividends or distributions with respect thereto in accordance with Section
1.3(c) hereof and (ii) make payments in lieu of fractional Parent Shares,
pursuant to Section 1.3(d) hereof, being hereinafter referred to as the
"Exchange Fund"). For purposes of this Agreement, "Person" means any natural
person, firm, individual, corporation, limited liability company, partnership,
association, joint venture, company, business trust, trust or any other entity
or organization, whether incorporated or unincorporated, including a government
or political subdivision or any agency or instrumentality thereof.
(b) As of or promptly following the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail (and to make available for
collection by hand) to each holder of record of a certificate or
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certificates, which immediately prior to the Effective Time represented
outstanding shares of Common Stock (the "Certificates"), (i) a letter of
transmittal (which 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 which shall be in the form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for a certificate or certificates representing that number of whole Parent
Shares, if any, into which the number of shares of Common Stock previously
represented by such Certificate shall have been converted pursuant to this
Agreement (which instructions shall provide that at the election of the
surrendering holder, Certificates may be surrendered, and the Parent Shares in
exchange therefor collected, by hand delivery). Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with a letter of transmittal
duly completed and validly executed in accordance with the instructions
thereto, and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor the number of Parent Shares for each share of Common Stock
formerly represented by such Certificate (the "Merger Consolidation"), to be
mailed (or made available for collection by hand if so elected by the
surrendering holder) within three business days of receipt thereof (but in no
case prior to the Effective Time), and the Certificate so surrendered shall be
forthwith cancelled. The Exchange Agent shall accept such Certificates upon
compliance with such reasonable and customary terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof. No interest
shall be paid or accrued for the benefit of holders of the Certificates on the
cash payable pursuant to Sections 1.3(c) and (d) below upon the surrender of
the Certificates.
(c) No dividends or other distributions with respect to Parent Shares
with a record date on or after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the Parent Shares represented
thereby by reason of the conversion of shares of Common Stock pursuant to
Sections 1.2(c) hereof and no cash payment in lieu of fractional Parent Shares
shall be paid to any such holder pursuant to Section 1.3(d) hereof until such
Certificate is surrendered in accordance with this Article I. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid, without interest, to the Person in whose name the Parent Shares
representing such securities are registered (i) at the time of such surrender,
the amount of any cash payable in lieu of fractional Parent Shares to which
such holder is entitled pursuant to Section 1.3(d) hereof and the proportionate
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to Parent Shares, and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the
proportionate amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such Parent Shares.
(d) Notwithstanding any other provision of this Agreement, no fraction of
a Parent Share will be issued and no dividend or other distribution, stock
split or interest with respect to Parent Shares shall relate to any fractional
Parent Share, and such fractional interest shall not entitle the owner thereof
to vote or to any rights as a security holder of the Parent Shares. In lieu of
any such fractional security, each holder of shares of Common Stock otherwise
entitled to a fraction of a Parent Share (after aggregating all fractional
Parent Shares that otherwise would be received by such holder) will be entitled
to receive in accordance with the provisions of this Section 1.3 from the
Exchange Agent a cash payment (rounded to the nearest whole cent), without
interest, equal to the product of: (i) such fraction, multiplied by (ii) the
Parent Stock Price.
(e) Any portion of the Exchange Fund which remains undistributed to the
holders of the Certificates for six (6) months after the Effective Time shall
be delivered to Parent, upon demand, and any holders of shares of Common Stock
prior to the Merger who have not theretofore complied with this Article I shall
thereafter look for payment of their claim, as general creditors thereof, only
to Parent (subject to Section 1.3(f) hereof) for their claim for Parent Shares,
any cash without interest, to be paid, in lieu of any fractional Parent Shares
and any dividends or other distributions with respect to Parent Shares to which
such holders may be entitled.
(f) None of Parent, Merger Sub, Company or the Exchange Agent shall be
liable to any Person in respect of any Parent Shares held in the Exchange Fund
(and any cash, dividends and other distributions payable
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in respect thereof) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to two years after the Effective Time (or immediately
prior to such earlier date on which (i) any Parent Shares, (ii) any cash in
lieu of fractional Parent Shares or (iii) any dividends or distributions with
respect to Parent Shares in respect of such Certificate would otherwise escheat
to or become the property of any Governmental Entity), any such Parent Shares,
cash, dividends or distributions in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of Parent, free and
clear of all claims or interest of any Person previously entitled thereto.
(g) (i) The parties understand and agree that the Share Price has been
calculated based upon the accuracy of the representations and warranties set
forth in Section 3.4 and that, in the event the capitalization of the Company
as of the Closing Date is different than the capitalization of the Company as
set forth in Section 3.4 (other than as a result of the exercise or conversion
in accordance with their terms or the terms of this Agreement of any options,
warrants, securities or other agreements specicifically set forth in Section
3.4, including the ESPP), and that as a result of such difference the aggregate
dollar value (as determined below) of the outstanding shares of Common Stock,
Options, warrants and other securities exercisable or convertible into shares
of Common Stock (such Options, warrants and other securities being collectively
referred to as "Convertible Securities"), as of the Closing Date ((i) without
giving effect to the exercise or conversion of any Convertible Securities or
the issuance of any shares of Common Stock pursuant to the ESPP as set forth in
Section 3.4, and (ii) including as a result of any stock split, stock dividend,
including any dividend or distribution of securities convertible into shares of
Common Stock, recapitalization, or other like change occurring after the date
of this Agreement) (the "Closing Capitalization") differs by an amount that is
greater than one-tenth of one percent (0.1%) of the aggregate dollar value (as
determined below) of the shares of Common Stock and Convertible Securities
calculated based on the capitalization of the Company as specifically set forth
in Section 3.4 (the "Represented Capitalization"), the Share Price shall be
adjusted (up or down, as applicable) by multiplying it by a fraction, the
numerator of which is the Represented Capitalization and the denominator of
which is the Closing Capitalization. Any adjustment to the Share Price shall be
rounded to the nearest ten thousandth (1/10,000) of one cent.
(ii) For purposes of calculating the aggregate dollar value of each of
the Closing Capitalization and the Represented Calculation, each share of
Common Stock shall equal the Share Price (except that, for purposes of
calculating the Closing Capitalization, each Convertible Security exercised or
converted prior to Closing shall be calculated as a Convertible Security as if
it had not been so exercised or converted, and the shares of Common Stock
issued pursuant to the ESPP in accordance with its terms and as set forth in
Section 3.4 shall be calculated as if they had not been issued) and each
Convertible Security shall be calculated on the basis of the difference between
(x) the exercise or conversion price of such Convertible Security (if less than
the Share Price) and (y) the Share Price; and disregarding any Convertible
Security with an exercise or conversion price of equal to or more than the
Share Price.
(h) In the event that the Company shall obtain Interim Financing pursuant
to Section 7.4 hereof, and after giving effect to the adjustment of the Share
Price pursuant to Section 1.3(g) above, if any, the Share Price shall be
adjusted by multiplying it by a fraction, the numerator of which is the Closing
Capitalization and the denominator of which is the sum of the Closing
Capitalization and the Loan Adjustment Amount. Any adjustment to the Share
Price shall be rounded to nearest ten thousandth (1/10,000) of one cent. The
Loan Adjustment Amount shall be equal to the sum of:
(i) one hundred percent (100%) of any Interim
Financing up to $500,000 (the "Base Amount") ;
(ii) fifty percent (50%) of any Interim Financing
provided pursuant to a Parent Loan or an Additional Financing (but
excluding any Additional SVB Funds) above the Base Amount and up
to one million dollars ($1,000,000); and
(iii) one hundred percent (100%) of any Interim
Financing in excess of one million dollars ($1,000,000).
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SECTION 1.4. Transfer Taxes; Withholding. If any certificate for a
Parent Share is to be issued to, or cash is to be remitted to, a Person (other
than the Person in whose name the Certificate surrendered in exchange therefor
is registered), it shall be a condition of such exchange that the Certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the Person requesting such exchange shall pay to the Exchange
Agent any transfer or other Taxes required by reason of the issuance of the
Parent Shares (or cash in lieu of fractional Parent Shares) to a Person other
than the registered holder of the Certificate so surrendered, or shall
establish to the satisfaction of the Exchange Agent that such Tax either has
been paid or is not applicable. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the Parent Shares (or cash in lieu of fractional
Parent Shares) otherwise payable pursuant to this Agreement to any holder of
shares of Common Stock such amounts as Parent or the Exchange Agent are
required to deduct and withhold under the Code, or any provision of state,
local or foreign Tax law, with respect to the making of such payment. To the
extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of shares of Common Stock in respect of whom such
deduction and withholding was made by Parent or the Exchange Agent.
SECTION 1.5. Stock Options; Stock Purchase Plan; Warrants.
(a) Stock Options. Prior to the Effective Time, the Board of Directors
of the Company (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary to provide that
each employee, consultant or director of the Company (each, an "Option Holder")
who has been granted an option to acquire shares of Common Stock ("Options")
under the Huckleberry 1993 Stock Option Plan (the "1993 Plan") or the
Huckleberry Director Option Plan (the "Director Plan," and together with the
1993 Plan, the "Company Option Plans") which is outstanding at such time shall
receive notice (the "Notice"), in accordance with the provisions of the Company
Option Plans, that such Option, whether or not then exercisable, vested or
unvested, is exercisable for a period beginning on the date of Notice and
ending on a date specified in the Notice, which shall be no later than the
Effective Time (the "Exercise Period"). The duration of the Exercise Period
shall be determined in accordance with the provisions of the Company Option
Plan under which the Option was granted, the exercisability of any such Option
shall be contingent upon the occurrence of the Merger (except in the case of an
Option which is already exercisable without regard to the accelerated
exercisability provided by the Notice) and the actual exercise of each such
Option shall not occur until immediately prior to the Effective Time. The Board
of Directors of the Company (or committee) shall also adopt procedures pursuant
to which each Option Holder may give notice to the Company during the Exercise
Period of his or her intent to exercise any such Option, including allowing for
cashless exercise by the Option Holders whereby Options would be converted to
Common Stock without payment of cash. At the Effective Time, all Exercise
Periods shall expire and all Options shall be terminated. Notwithstanding
anything herein to the contrary, (i) the Company shall submit the form of all
Notices to be sent to each Option Holder to Parent and Merger Sub at least
three (3) business days prior to being sent to any such Option Holder for the
prior written approval of Parent and Merger Sub of such Notice (such approval
not to be unreasonably withheld), and (ii) all Notices shall be delivered to
each Option Holder in such a manner as to confirm and provide evidence of
receipt of such Notice by each Option Holder.
(b) Employee Stock Purchase Plan. As of the earlier to occur of (i) May
31, 2002 and (ii) the last day of a regular payroll period of the Company
ending prior to the Closing Date (the "ESPP Date"), all offering and purchase
periods under way under the Company's 1996 Employee Stock Purchase Plan (the
"ESPP") shall be terminated and each participant's ESPP option shall be
exercised automatically on such ESPP Date. As of the date of this Agreement, no
new offering or purchase periods shall be commenced under the ESPP. The Company
shall take all necessary action, including providing all required notices to
participants, to ensure that the rights of participants in the ESPP with
respect to any such offering or purchase periods shall be determined by
treating the ESPP Date as the last day of such offering and purchase periods.
The Company shall freeze, effective as of the date of this Agreement, existing
participation levels of each participant under the ESPP and accept no new
participants.
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(c) Warrants. At the Effective Time, Parent shall assume each warrant to
purchase Common Stock then outstanding as set forth on Section 3.4(b) of the
Company Disclosure Schedule (each, a "Company Warrant") in accordance with the
terms (as in effect as of the date hereof) of such Company Warrants. From and
after the Effective Time, (a) each Company Warrant assumed by Parent may be
exercised solely for Parent Shares, (b) the number of Parent Shares subject to
each Company Warrant shall be equal to the number of shares of Common Stock
subject to such Company Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounding down to the nearest whole share
(with cash, less the applicable exercise price, being payable for any fraction
of a share), (c) the per share exercise price under each such Company Warrant
shall be equal to the per share exercise price under such Company Warrant
divided by the Exchange Ratio, rounding up to the nearest whole cent and (d)
any restriction on the exercise of any Company Warrant shall continue in full
force and effect and the term, exercisability and other provisions of such
Company Warrant shall otherwise remain unchanged. The Company shall take all
action that may be necessary (under the Company Warrants and otherwise) to
effectuate the provisions of this Section 1.5(c) and to ensure that, from and
after the Effective Time, holders of Company Warrants have no rights with
respect thereto other than those specifically provided herein.
SECTION 1.6. No Further Ownership Rights in Common Stock. All Parent
Shares issued in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 1.3(d) hereof) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Common
Stock, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Common Stock which were outstanding
immediately prior to the Effective Time. If, at any time following the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article I.
SECTION 1.7. Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the execution of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation or the Exchange Agent may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Parent Shares to which the holder thereof
is entitled pursuant to this Article I.
SECTION 1.8. Merger Closing. Subject to the satisfaction or waiver of
the conditions set forth in Article VI hereof, the closing of the Merger (the
"Closing") will take place at 10:00 a.m., Philadelphia time, on a date to be
specified by the parties hereto, and no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VI
hereof, at the offices of Parent at One Baxter Parkway, Deerfield, IL 60015
unless another time, date or place is agreed to in writing by the parties
hereto (such date, the "Closing Date").
SECTION 1.9. Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section 368
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 Income Tax Regulations. The parties (i)
acknowledge that, following the Merger, Parent intends to cause the Surviving
Corporation to merge with and into a wholly-owned first-tier subsidiary of
Parent (the "Follow-On Merger"), and (ii) intend that the Merger and such
Follow-On Merger shall be viewed an integrated transaction qualifying as a
reorganization for federal income tax purposes within the meaning of Section
368 of the Code.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. Certificate Of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Company shall be amended and restated in
its entirety to be the same in substance as the Certificate of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time, and such
Certificate of
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Incorporation of the Company, as so amended and restated, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
Certificate of Incorporation of the Surviving Corporation shall be amended so
that the name of the Surviving Corporation shall be "Fusion Medical
Technologies, Inc."
SECTION 2.2. Bylaws. The bylaws of Merger Sub in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until thereafter amended
in accordance with applicable law, the certificate of incorporation of such
entity and the bylaws of such entity.
Section 2.3. Officers And Directors.
(a) From and after the Effective Time, the officers of the Surviving
Corporation at the Effective Time shall be the officers of the Company, until
the earlier of their resignation or removal or until their respective
successors are duly appointed in accordance with applicable law and the
certificate of incorporation and bylaws of such entity.
(b) The Board of Directors of the Surviving Corporation effective as of, and
immediately following, the Effective Time shall consist of the directors of
Merger Sub immediately prior to the Effective Time, until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed and qualified in accordance with applicable law and the certificate
of incorporation and bylaws of such entity.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
such exceptions as are specifically disclosed in writing in the disclosure
schedule supplied by the Company to Parent. The disclosure schedule shall
provide an exception to or otherwise qualify the representations or warranties
of Company specifically referred to in such disclosure and such other
representations and warranties to the extent such disclosure shall reasonably
appear to be applicable to such other representations or warranties (the
"Company Disclosure Schedule") as follows:
SECTION 3.1. Corporate Existence And Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents, franchises, permits and approvals (collectively,
"Licenses") required to carry on its business as now conducted except for
failures to have any such License which would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
The Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property owned,
leased or operated by it or the nature of its activities makes such
qualification necessary, except in such jurisdictions where failures to be so
qualified would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect. As used herein, the term
"Company Material Adverse Effect" means any change, effect, event, occurrence,
state of facts or development that, individually or in the aggregate, is
materially adverse to the business, condition (financial or otherwise), assets
(including intangible assets), properties or results of operations of the
Company and its Subsidiaries, taking the Company and its Subsidiaries together
as a whole; provided, however, that none of the following shall be deemed in
and of themselves, either alone or in combination, to constitute, and none of
the following in and of themselves shall be taken into account in determining
whether there has been or will be, a Company Material Adverse Effect: (a) any
change in the market price or trading volume of the Company's stock after the
date hereof, in and of itself; (b) any failure by the Company to meet internal
projections or forecasts or published revenue or earnings predictions for any
period ending (or for which revenues or earnings are released) on or after
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the date of this Agreement, provided, however, that the reasons for any such
failure may be taken into account in determining whether there has been or will
be a Company Material Adverse Effect; (c) any adverse change, effect, event,
occurrence, state of facts or development to the extent attributable to the
announcement or pendency of the Merger (including any cancellations of or
delays in customer orders, any reduction in sales, any disruption in supplier,
distributor, partner or similar relationships or any loss of employees); (d)
any adverse change, effect, event, occurrence, state of facts or development
attributable to conditions generally affecting (i) the industries in which the
Company participates, including actions by the FDA or Foreign Authorities, (ii)
the U.S. economy as a whole or (iii) foreign economies in any locations where
the Company or any of its Subsidiaries has material operations or sales, which
changes, effects, events, occurrences, state of facts or developments in the
case of (i), (ii) or (iii) of this sentence do not disproportionately affect
the Company in any material respect; (e) any adverse change, effect, event,
occurrence, state of facts or development attributable to the product risks
disclosed on the inserts enclosed with the Company's products as of the date of
this Agreement; or (f) any adverse change, effect, event, occurrence, state of
facts or development attributable to any action by the FDA or Foreign
Authorities (i) to reclassify thrombin-containing devices as biologicals, or
(ii) to the extent resulting from or related to the filing of the letter
pursuant to Section 5.17.
SECTION 3.2. Corporate Authorization.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, subject to approval of the Company's
stockholders as set forth in Section 3.2(b) hereof and as contemplated by
Section 5.3 hereof, to perform its obligations hereunder. The execution and
delivery of this Agreement by the Company, the performance by the Company of
its obligations hereunder and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized, and
this Agreement has been approved, by the Board of Directors of the Company and
no other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement, except the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock. This Agreement has been duly executed and delivered by the
Company and constitutes, assuming due authorization, execution and delivery of
this Agreement by Parent and Merger Sub, a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law).
(b) Under applicable law, the current Certificate of Incorporation and
bylaws of the Company and the rules of The Nasdaq Stock Market, the affirmative
vote of the holders of a majority of the shares of Common Stock outstanding on
the record date, established by the Board of Directors of the Company in
accordance with the bylaws of the Company, applicable law and this Agreement,
is the only vote of any class or series of capital stock of the Company or its
Subsidiaries required to approve and adopt this Agreement.
SECTION 3.3. Consents And Approvals; No Violations.
(a) Except as set forth in Section 3.3 of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the performance by the
Company of its obligations hereunder, nor the consummation by the Company of
the transactions contemplated hereby will (i) conflict with or violate any
provision of the current Certificate of Incorporation or the bylaws (or other
governing or organizational documents) of the Company or any of its
Subsidiaries, as the case may be; (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or
obligation to repurchase, repay, redeem or acquire or any similar right or
obligation or loss of a benefit, or result in the creation of any Lien upon any
properties or assets of the Company) under any of the terms, conditions or
provisions of any loan or credit agreement, note, mortgage, letter of credit,
other evidence of indebtedness, guarantee, license, lease or agreement or
similar instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their assets may be
bound or (iii) assuming that the filings, registrations, notifications,
authorizations, consents and approvals referred to in Section 3.3(b) below have
been obtained or made, as the case may be, violate any order,
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injunction, decree, statute, rule or regulation of any Governmental Entity to
which the Company or any of its Subsidiaries is subject, excluding from the
foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights
or violations that would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect and would not reasonably be
expected to have a material adverse effect on the ability of the Company to
perform its obligations hereunder.
(b) No filing or registration with, notification to, or authorization,
consent, order or approval of, any government or any agency, court, tribunal,
commission, board, bureau, department, political subdivision or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state, local, multinational (including the European
Community), provincial, municipal, domestic or foreign (each, a "Governmental
Entity") is required in connection with the execution and delivery of this
Agreement by the Company or the performance by the Company of its obligations
hereunder, except (i) the filing of the Certificate of Merger in accordance
with the DGCL and filings to maintain the good standing of the Surviving
Corporation; (ii) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), or any applicable foreign antitrust
laws or laws intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade; (iii) compliance
with any applicable requirements of the Securities Act of 1933, as amended, and
the rules and regulations thereunder (the "Securities Act") and the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"); (iv) compliance with any applicable requirements of state blue
sky laws and (v) such other consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect and would not have a
material adverse effect on the ability of the Company to perform its
obligations hereunder.
SECTION 3.4. Capitalization.
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, par value
$0.001 per share, of the Company (the "Preferred Stock"). As of the date of
this Agreement, there are 14,225,074 shares of Common Stock issued and
outstanding and no shares of Preferred Stock issued and outstanding. All shares
of capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable and were not issued in violation of any
preemptive rights. All shares of Common Stock to be issued after the date
hereof pursuant to the Option Plans and the ESPP will be duly authorized and
validly issued and be fully paid and nonassessable and will not be issued in
violation of any preemptive rights. As of the date of this Agreement, there are
outstanding Options to purchase 3,025,905 shares of Common Stock and 69,750
shares of Common Stock are available for future issuance pursuant to the ESPP.
As of the date of this Agreement, (i) the aggregate payroll deduction amount
for the ESPP for the Current Offering Period (as such term is defined in the
ESPP) is $79,080 (ii) the purchase price on the first day of the current
Offering Period (as such term is defined in the ESPP) under the ESPP is $4.675
per share of Common Stock, and (iii) the payroll deduction per payroll period
under the ESPP will not exceed $14,190. Section 3.4(a) of the Company
Disclosure Schedule sets forth the exercise prices and number of shares of
Common Stock issuable under outstanding Company Warrants and options under the
1993 Plan and the Director Plan. Except as set forth in this Section 3.4 or in
Section 3.4(b) of the Company Disclosure Schedule, there are outstanding (i) no
shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or any Subsidiary of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company
and (iii) no options or other rights to acquire from the Company, and no
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Company Securities"). There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire, or provide preemptive or registration rights with respect
to, any Company Securities. No Subsidiary of the Company owns any capital stock
or other voting securities of the Company.
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(b) There are no bonds, debentures, notes or other indebtedness of the
Company or any of its Subsidiaries having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of the Company may vote ("Voting Company Debt"). Except
as set forth in Section 3.4(a) or (b) of the Company Disclosure Schedule, there
are no outstanding securities, options, warrants, calls, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party or by which it is
bound obligating the Company to issue, deliver or sell or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of the Company or obligating the Company to issue, grant, extend or
enter into any such security, option, warrant, call, right, unit, commitment,
agreement, arrangement or undertaking. There are not any outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire, or providing preemptive or registration rights with respect to, any
shares of, or any outstanding options, warrants or rights of any kind to
acquire any shares of, or any outstanding securities that are convertible into
or exchangeable for any shares of, capital stock of the Company. Neither the
Company nor any of its Subsidiaries has outstanding any loans to any Person in
respect of the purchase of securities issued by the Company.
(c) There are no voting trusts, proxies or other agreements, commitments or
understandings of any character to which the Company is a party or by which the
Company is bound with respect to the voting of any shares of capital stock of
the Company or with respect to the registration of the offering, sale or
delivery of any shares of capital stock of the Company.
SECTION 3.5. Subsidiaries.
(a) Each Subsidiary of the Company (i) is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, (ii) has all corporate powers and all material Licenses required
to carry on its business as now conducted and (iii) except as disclosed in
Section 3.5 of the Company Disclosure Schedule is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary (to the extent the applicable jurisdiction
recognizes concepts of qualification and good standing), except for failures of
this representation and warranty to be true which would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse
Effect. For purposes of this Agreement, "Subsidiary" means with respect to any
Person, any corporation or other legal entity of which such Person owns,
directly or indirectly, more than fifty percent (50%) of the outstanding stock
or other equity interests, the holders of which are entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity. Each Subsidiary of the Company and its respective
jurisdictions of incorporation are identified in Section 3.5 of the Company
Disclosure Schedule.
(b) All of the outstanding shares of capital stock of each Subsidiary of the
Company are duly authorized, validly issued, fully paid and nonassessable, and
such shares are owned by the Company or by a Subsidiary of the Company (other
than, if necessary, shares constituting directors' qualifying shares or similar
shares and shares required to be owned by citizens of such Subsidiary's
jurisdiction of organization) free and clear of any Liens or limitations on
voting rights. There are no subscriptions, options, warrants, calls, rights,
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance rights or other agreements or
commitments of any character relating to the issuance, transfer, sale,
delivery, voting or redemption (including any rights of conversion or exchange
under any outstanding security or other instrument) for any of the capital
stock or other equity interests of any of such Subsidiaries. There are no
agreements requiring the Company or any of its Subsidiaries to make
contributions to the capital of, or lend or advance funds to, any Subsidiaries
of the Company. For purposes of this Agreement, "Lien" means, with respect to
any asset, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
SECTION 3.6. SEC Documents. The Company has filed all required reports,
proxy statements, registration statements, forms and other documents (the
"Company SEC Documents") required to be filed with the U.S. Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act and the Exchange
Act and the
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rules and regulations promulgated thereunder. As of their respective dates, and
giving effect to any amendments thereto, (a) the Company SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the applicable rules and regulations
promulgated thereunder and (b) none of the Company SEC Documents contained any
untrue statement of a material fact or omitted 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. No "material contract" (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC) filed as an exhibit to the Company's Form 10-K
for the year ended December 31, 2000 has been amended or modified, except for
such amendments or modifications which have been filed as an exhibit to a
subsequently dated Company SEC Document or are not required to be filed with
the SEC or as otherwise described in Section 3.6 of the Company Disclosure
Schedule.
SECTION 3.7. Financial Statements. The financial statements of the Company
(including, in each case, any notes and schedules thereto) included or
incorporated by reference in the Company SEC Documents filed with the SEC since
December 31, 2000 and the audited year end financial statements (including
balance sheet, income statement and statement of cash flows) for the Company as
of and for the annual period ended December 31, 2001 set forth on Section 3.7
of the Company Disclosure Schedule (the "2001 Financial Statements") (a) were
prepared from the books and records of the Company and its Subsidiaries, (b)
comply as to form in all material respects with all applicable accounting
requirements and the rules and regulations of the SEC with respect thereto, (c)
have been prepared in accordance with United States generally accepted
accounting principles ("GAAP"), applied on a consistent basis (except in the
case of unaudited statements, as permitted by Form 10-Q as filed with the SEC
under the Exchange Act) during the periods involved and (d) fairly present, in
all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments which
were not and are not expected to be, individually or in the aggregate, material
in amount). No subsidiary of the Company is required to file periodic reports
with the SEC under the Exchange Act.
SECTION 3.8. Absence Of Undisclosed Liabilities. Except as set forth in the
Company SEC Documents, the 2001 Financial Statements or Section 3.8 of the
Company Disclosure Schedule, and except for liabilities and obligations
incurred in the ordinary course of business since the date of the most recent
consolidated balance sheet included in the 2001 Financial Statements, neither
the Company nor any of its Subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise and whether or
not required to be reflected or reserved against in a consolidated balance
sheet of the Company prepared in accordance with GAAP), including, to the
Company's knowledge, (i) liabilities that have been asserted with respect to
any products of the Company or any of its Subsidiaries that are based on a
theory of strict product liability, negligence or other tort theories or (ii)
liabilities of the Company or any of its Subsidiaries that have been asserted
for the breach of any express or implied product warranty or any other similar
claim with respect to any product manufactured or sold by the Company or any of
its Subsidiaries (other than any claim based on standard warranty obligations
made by the Company or any of its Subsidiaries in the ordinary course of
business to purchasers of the Company's or its Subsidiaries' products), except
for those that would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.9. Registration Statement; Proxy Statement/Prospectus. None of
the information supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of the Parent
Shares in or as a result of the Merger (including amendments thereto) (the
"Form S-4") will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading; and (ii) the proxy statement/prospectus to be filed with
the SEC by the Company pursuant to Section 5.3 hereof (the "Proxy
Statement/Prospectus") will, at the date mailed to the stockholders of the
Company, at the time of the stockholders meeting of the Company in connection
with the transactions contemplated hereby (the "Company Stockholders' Meeting")
or as of the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
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in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement/Prospectus will comply
as to form in all material respects with the provisions of the Exchange Act and
the rules and regulations promulgated by the SEC thereunder. Notwithstanding
the foregoing, the Company makes no representation or warranty with respect to
any information supplied by Parent or Merger Sub which is contained in any of
the foregoing documents.
SECTION 3.10. Absence Of Material Adverse Changes, Etc. Except as set forth
in the Company SEC Documents or in the 2001 Financial Statements, since
December 31, 2001, there has not been a Company Material Adverse Effect, and to
the Company's knowledge, there has been no event, change effect or development,
individually or in the aggregate, that has had, or would reasonably be expected
to have a Company Material Adverse Effect or a material adverse effect on the
ability of the Company to perform its obligations hereunder. Without limiting
the foregoing, except as disclosed in the Company SEC Documents, the 2001
Financial Statements or Section 3.10 of the Company Disclosure Schedule, or as
contemplated by this Agreement, since December 31, 2001 the Company and its
Subsidiaries have conducted their business in the ordinary course of business
and there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or
any repurchase, redemption or other acquisition by the Company or any
Subsidiary (other than any wholly-owned Subsidiary) of the Company of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, the Company or of any Company Securities;
(b) any amendment of any provision of the Certificate of Incorporation or
bylaws of, or of any material term of any outstanding security issued by,
the Company or any Subsidiary of the Company;
(c) any incurrence, assumption or guarantee by the Company or any
Subsidiary of the Company of any indebtedness for borrowed money other than
borrowings under existing short term credit facilities in the ordinary
course of business;
(d) any change in any method of accounting or accounting practice by the
Company or any Subsidiary of the Company, except for any such change
required by reason of a change in GAAP;
(e) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary of the Company, (ii)
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or any Subsidiary of the Company entered into, (iii)
increase in benefits payable under any existing severance or termination pay
policies or employment agreements or (iv) increase in compensation, bonus or
other benefits payable to directors, officers or employees of the Company or
any Subsidiary of the Company, in each case other than in the ordinary
course of business;
(f) issuance of Company Securities other than pursuant to Options
outstanding as of December 31, 2001 and the issuance of Options after such
date in the ordinary course of business (and the issuance of Company
Securities pursuant thereto) and pursuant to the ESPP;
(g) acquisition or disposition of assets material to the Company and its
Subsidiaries, except for sales of inventory in the ordinary course of
business consistent with past practice, or any acquisition or disposition of
capital stock of any third party (other than acquisitions or dispositions of
non-controlling equity interests of third parties in the ordinary course of
business) or any merger or consolidation with any third party, by the
Company or any of its Subsidiaries;
(h) any split, combination or reclassification of the Company's capital
stock or of any other equity interests in the Company, or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of, or in substitution for, shares of its capital stock or of any other
equity interests in the Company;
(i) any damage, destruction or loss, whether or not covered by insurance,
that, individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect;
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(j) entry by the Company into any joint venture, partnership or similar
agreement with any Person other than a wholly-owned Subsidiary;
(k) release or extinguishment of any material claims or rights against
any Person; or
(l) any authorization of, or commitment or agreement to take any of, the
foregoing actions except as otherwise permitted by this Agreement.
SECTION 3.11. Taxes.
(a) Except as set forth in Section 3.11 of the Company Disclosure Schedule,
(1) all Federal, state, local and foreign Tax Returns required to be
filed by or on behalf of the Company, each of its Subsidiaries, and each
affiliated, combined, consolidated or unitary group of which the Company or
any of its Subsidiaries is a member (a "Company Group") have been timely
filed, and all returns filed are complete and accurate except to the extent
any failure to file or any inaccuracies in filed returns would not,
individually or in the aggregate, have had, or reasonably be expected to
have, a Company Material Adverse Effect;
(2) all Taxes due and owing by the Company, any Subsidiary of the Company
or any Company Group have been paid, or adequately reserved for in
accordance with GAAP, except to the extent any failure to pay or reserve
would not, individually or in the aggregate, have had, or reasonably be
expected to have, a Company Material Adverse Effect;
(3) there is no presently pending and, to the knowledge of the Company,
contemplated or scheduled audit examination, deficiency, refund litigation,
proposed adjustment or matter in controversy which would, individually or in
the aggregate, have had, or reasonably be expected to have, a Company
Material Adverse Effect with respect to any Taxes due and owing by the
Company, any Subsidiary of the Company or any Company Group;
(4) the Company and each Subsidiary of the Company has not filed any
waiver of the statute of limitations applicable to the assessment or
collection of any Tax which would, individually or in the aggregate, have
had, or reasonably be expected to have, a Company Material Adverse Effect;
(5) all assessments for Taxes due and owing by the Company, any
Subsidiary of the Company or any Company Group with respect to completed and
settled examinations or concluded litigation have been paid;
(6) neither the Company nor any Subsidiary of the Company is a party to
any tax indemnity agreement, tax sharing agreement or other agreement under
which the Company or any Subsidiary of the Company could become liable to
another Person as a result of the imposition of a Tax upon any Person, or
the assessment or collection of such a Tax; and
(7) the Company and each of its Subsidiaries has complied in all material
respects with all rules and regulations relating to the withholding of Taxes.
(b) For purposes of this Agreement, (i) "Taxes" means all taxes, levies or
other like assessments, charges or fees (including estimated taxes, charges and
fees), including income, corporation, advance corporation, gross receipts,
transfer, excise, property, sales, use, value-added, license, payroll,
withholding, social security and franchise or other governmental taxes or
charges, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof, and such term shall include any
interest, penalties or additions to tax attributable to such taxes and (ii)
"Tax Return" means any report, return, statement or other written information
required to be supplied to a taxing authority in connection with Taxes.
SECTION 3.12. Employee Benefit Plans.
(a) Section 3.12(a) of the Company Disclosure Schedule sets forth a complete
list of all material "employee benefit plans" (as defined in Section 3(3) of
ERISA including any "multiemployer pension plans" as defined in Section 3(37)
of ERISA), employment contracts, bonus, pension, profit sharing, deferred
compensation,
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incentive compensation, excess benefit, stock, stock option, severance,
termination pay, change in control or other employee benefit plans, programs or
arrangements, including those providing medical, dental, vision, disability,
life insurance (including any policy under which an employee of the Company or
any of its Subsidiaries is named as insured, and as to which the Company or any
of its Subsidiaries makes premium payments, whether or not the Company or any
of its Subsidiaries is the owner, beneficiary or both, of such policy) and
vacation benefits (other than those required to be maintained by law), whether
written or unwritten, qualified or unqualified, funded or unfunded, foreign or
domestic, currently maintained or contributed to, or required to be maintained
or contributed to, by the Company, any Subsidiary or any ERISA Affiliate for
the benefit of any current or former employees, officers or directors of the
Company or any of its Subsidiaries or with respect to which the Company or any
of its Subsidiaries has any liability (collectively, the "Benefit Plans"). As
applicable with respect to each Benefit Plan, the Company has made available to
Parent, true and complete copies of (i) each Benefit Plan, including all
amendments thereto, and in the case of an unwritten Benefit Plan, a written
description thereof, (ii) all trust documents, investment management contracts,
custodial agreements and insurance contracts relating thereto, (iii) the
current summary plan description and each summary of material modifications
thereto, (iv) the three most recent annual reports (Form 5500 and all schedules
thereto) filed with the Internal Revenue Service ("IRS"), (v) the most recent
IRS determination letter and each currently pending application to the IRS for
a determination letter, (vi) the three most recent summary annual reports,
financial statements and trustee reports, and (vii) all records, notices and
filings concerning IRS or Department of Labor audits or investigations,
"prohibited transactions" within the meaning of Section 406 of ERISA or Section
4975 of the Code and "reportable events" within the meaning of Section 4043 of
ERISA. Neither the Company nor any ERISA Affiliate has ever maintained,
contributed to or ever had any liability (whether direct, indirect, contingent
or otherwise) with respect to any plan which is or has been subject to Title IV
of ERISA (including any "multiemployer pension plans" as defined in Section
3(37) of ERISA. "ERISA Affiliate" means (A) any corporation which at any time
on or before the Closing Date is or was a member of the same controlled group
of corporations (with the meaning of Section 414(b) of the Code) as the
Company; (B) any partnership, trade or business (whether incorporated or not
incorporated) which at any time on or before the Closing Date is or was under
common control (within the meaning of Section 414(c) of the Code) with the
Company; and (C) any entity which at any time on or before the Closing Date is
or was a member of the same affiliated service group (within the meaning of
Section 414(m) of the Code) as either the Company, any corporation described in
clause (A) or any partnership, trade or business described in clause (B) of
this paragraph.
(b) No event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances in connection with which the Company and
any of its Subsidiaries or any ERISA Affiliate could be subject to any
liability under the terms of any Benefit Plan, under ERISA, or, with respect to
any Benefit Plan, under the Code or any other applicable law, rule or
regulation, domestic or foreign, other than any condition or set of
circumstances that, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries or any ERISA Affiliate has incurred or
would reasonably be expected to incur any liability in respect of any employee
benefit plan maintained by an ERISA Affiliate but not included within the term
"Benefit Plan" or by any Person other than the Company, its Subsidiaries or any
ERISA Affiliate.
(c) The Benefit Plans which are "employee pension benefit plans" within the
meaning of Section 3(2) of ERISA are intended to meet the qualification
requirements of Section 401(a) of the Code (each a "Pension Plan") and the
related trusts are intended to meet the requirements for such qualification,
and the Company has no knowledge of any events or circumstances that would
compromise such qualified status. All Pension Plans have received determination
letters (or have remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such letter) from the
IRS to the effect that such Pension Plans are qualified and the related trusts
are exempt from federal income taxes and no determination letter with respect
to any Pension Plan has been revoked nor, to the knowledge of the Company is
there any reason for such revocation, nor has any Pension Plan been amended, or
failed to be amended, since the date of its most recent determination letter in
any respect which would adversely affect its qualification.
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(d) Section 3.12(d) of the Company Disclosure Schedule lists: (i) the amount
of any unfunded deferred compensation and (ii) the present value of any
obligation to provide medical, or to the knowledge of the Company, life
insurance benefits to any retiree determined in accordance with Statement of
Financial Accounting Standard No. 106. For the purposes of this Section 3.12(d)
unfunded liabilities and projected costs have been determined using actuarial
methods and assumptions that are, individually and in the aggregate, reasonable.
(e) No prohibited transaction (which shall mean any transaction prohibited
by Section 406 of ERISA and not exempt under Section 408 of ERISA) nor any
fiduciary breach has occurred with respect to any Benefit Plan which would
result in the imposition, directly or indirectly, of any penalty or excise tax
under Section 4975 of the Code or Section 502(i) or Section 502(l) of ERISA
that would, individually or in the aggregate, have, or reasonably be expected
to have, a Company Material Adverse Effect.
(f) Except as set forth on Section 3.12(f) of the Company Disclosure
Schedule or as set forth in Section 1.5 of this Agreement, the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated herein will not (i) require the Company, any of its Subsidiaries
or any ERISA Affiliate to pay greater compensation or make a larger
contribution to, or pay greater benefits or accelerate payment or vesting of a
benefit under, any Benefit Plan or any other program, agreement, policy or
arrangement or (ii) create or give rise to any additional vested rights or
service credits under any Benefit Plan or any other program, agreement, policy
or arrangement.
(g) Except as set forth in Section 3.12(g) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries or any ERISA
Affiliate is a party to or is bound by any severance agreement, program or
policy.
(h) Except as set forth in Section 3.12(h) of the Company Disclosure
Schedule, no Benefit Plan provides benefits, including medical benefits, beyond
termination of employment or retirement other than (A) coverage mandated by law
or (B) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code. Neither the Company nor any of its Subsidiaries or
any ERISA Affiliate is contractually or otherwise obligated (whether or not in
writing) to provide any person with life, medical, dental or disability
benefits for any period of time beyond retirement or termination of employment,
other than as required by the provisions of Sections 601 through 733 of ERISA
and Sections 4980B, 9801 and 9833 of the Code.
(i) With respect to any Benefit Plan that is an employee welfare benefit
plan (as defined in Section 3(1) of ERISA), (i) no such Benefit Plan is funded
through a "welfare benefit fund," as such term is defined in Section 419(e) of
the Code, (ii) each such Benefit Plan that is a "group health plan," as such
term is defined in Section 5000(b)(l) of the Code, complies in all material
respects with the applicable requirements of Sections 601 through 733 of ERISA
and Sections 4980B(f), 9801 and 9833 of the Code, and (iii) each such Benefit
Plan (including any such Plan covering retirees or other former employees) may
be amended or terminated without material liability to the Company, any of its
Subsidiaries or any ERISA Affiliate on or at any time after the Effective Time.
(j) Except as set forth on Section 3.12(j) of the Company Disclosure
Schedule, there are no material pension, welfare, bonus, stock purchase, stock
ownership, stock option, deferred compensation, incentive, severance,
termination or other compensation plan or arrangement, or other material
employee fringe benefit plan presently maintained by, or contributed to by the
Company, any of its Subsidiaries or any ERISA Affiliate for the benefit of any
employee of the Company, any of its Subsidiaries or any ERISA Affiliate,
including any such plan required to be maintained or contributed to by the law
of the relevant jurisdiction, maintained outside the jurisdiction of the United
States.
(k) No lawsuit, investigation, claim (other than a routine claim for
benefits) or complaint by any person or government agency have been filed or is
pending or threatened and no facts or contemplated events exist that can
reasonably be expected to give rise to any such lawsuit, investigation, claim
(other than a routine claim for benefits) or complaint, with respect to a
Benefit Plan.
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(l) Except as set forth on Section 3.12(l) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is delinquent as to
contributions or payments to or in respect of any Benefit Plan as to which it
is obligated to make a contribution, and all contributions due and owing to any
Benefit Plan have been made.
(m) The Company and its Subsidiaries have not incurred any liability under,
and have complied in all respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder ("WARN") and do not
reasonably expect to incur any such liability as a result of actions taken or
not taken prior to the Effective Time. Section 3.12(m) of the Company
Disclosure Schedule lists (i) all the employees terminated or laid off by the
Company and its Subsidiaries during the ninety (90) days prior to the date
hereof and (ii) all the employees of the Company or any Subsidiary of the
Company who have experienced a reduction in hours of work of more than fifty
percent (50%) (other than voluntary reductions in hours per week) during any
month during the ninety (90) days prior to the date hereof and describes all
notices given by the Company and its Subsidiaries in connection with WARN.
(n) Non-U.S. Benefit Plans.
(i) Section 3.12(n) of the Company Disclosure Schedule contains a true
and complete list of all:
(1) Non-U.S. Benefit Arrangements into which the Company or its
Subsidiaries have entered (other than the benefit arrangements required
by national or state law), including all benefit arrangements required
on an industry wide basis as well as legally required benefit
arrangements which were implemented to avoid affiliation to a national
or industry wide plan. For purposes of the foregoing, "Benefit
Arrangements" means all arrangements, whether written or verbally
agreed, on a group or individual basis, whether funded or not, which
grant a retirement, death, hospitalization, medical, dental, disability
or long service recognition benefit to any employee, former employee, or
director.
(2) Non-U.S. Remuneration Plans into which the Company or its
subsidiaries have entered. For purposes of the foregoing, "Remuneration
Plans" includes, but is not limited to, base salary, bonuses, incentive
remuneration programs, vacation pay, profit sharing plans, termination
indemnities and any form of plans maintained by the Company or its
Subsidiaries which provide stock, phantom stock, or stock appreciation
rights or deferred remuneration programs which are applicable to
Non-U.S. employees.
(3) Plans and commitments, whether legally binding or not, to create
any additional plan or modify or change any existing Benefit Arrangement
or Remuneration Plan, that would affect any plan beneficiary (such
formal plans and commitments will collectively be referred to as the
"Commitments to change Benefit Arrangements or Remuneration Plans").
(ii) The Company has made available to Parent (a) true and complete
copies of all material documents and material relating to the Benefit
Arrangements and Remuneration Plans or the Commitments to change Benefit
Arrangements or Remuneration Plans, all amendments to the Benefit
Arrangements and Remuneration Plans, and any foundation or other funding
arrangement, (b) a copy of the most recent summary plan description and all
material employee communication relating to each such Benefit Arrangement or
Remuneration Plan or Commitment to change Benefit Arrangement or
Remuneration Plans and (c) copies of the three most recent annual reports
prepared for each such Benefit Arrangement or Remuneration Plan or
Commitment to change Benefit Arrangement or Remuneration Plans.
(iii) Except as specifically set forth in Section 3.12(n) of the Company
Disclosure Schedule, all the Benefit Arrangements which are intended, to the
extent allowable, to obtain tax exemption on contributions, benefits and/or
invested assets under the appropriate legislation, to the Company's
knowledge, meet, and since their inception have met, the requirements for
such tax exemption under the appropriate legislation. Since their inception,
these plans have been exempt from taxation to the extent allowable by the
appropriate
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legislation. To the Company's knowledge, the tax exemption of the Benefit
Arrangements is not the subject of examination or pending cancellation. Each
Benefit Arrangement has been operated in all material respects in accordance
with its provisions and in compliance with the statutes, rules and
regulations governing each such Benefit Arrangement, including rules and
regulations promulgated by the appropriate government departments and other
statutorily empowered bodies. To the knowledge of the Company, no event has
occurred that could subject any party to the imposition of any penalty.
There has been no failure to act on the part of the Company, a Benefit
Arrangement, a fiduciary or a mandated custodian of any Benefit Arrangement
that could subject any party to the imposition of a penalty. For purposes of
this paragraph, (a) "any party" means the Company, Parent, a Benefit
Arrangement, a fiduciary or a mandated custodian of a Benefit Arrangement,
(b) "any penalty" means any material tax, penalty or other liability,
whether by way of indemnity or otherwise.
(iv) Each Benefit Arrangement has been maintained in compliance with the
minimum funding standards of the appropriate legislation. No such Benefit
Arrangement has incurred any funding deficiency as defined by the
appropriate legislation, whether or not waived. The Company has not sought
nor received a waiver of funding requirements with respect to any Benefit
Arrangement. With respect to each Benefit Arrangement, the benefits to be
provided under such plan which have accrued in accordance with applicable
legislation on or prior to Closing Date have been paid and/or properly
reflected on the books and records and other financial reports of the
Company. With respect to each Benefit Arrangement and Remuneration Plan, the
benefits to be provided under such Plans have been accrued in accordance
with GAAP, and that lack of materiality has not been used as a reason to
omit accruals. Other than as contemplated under Section 1.5 of this
Agreement, the execution of, and performance of the transactions
contemplated by this Agreement, will not constitute an event under any
Benefit Arrangement or Remuneration Plan that will or may result in any
payment, acceleration, vesting or increase in benefits with respect to any
Plan beneficiary.
(o) In addition to, and not in limitation of, the more specific
representations set forth in the preceding provisions of this Section 3.12, to
the knowledge of the Company each Benefit Plan has been maintained and
administered by the Company, each of its Subsidiaries and their respective
agents in material compliance with ERISA and all applicable laws.
SECTION 3.13. Litigation; Compliance With Laws.
(a) Except as set forth in the Company SEC Documents or in Section 3.13(a)
of the Company Disclosure Schedule, there is no action, claim, suit or
proceeding (including arbitration proceedings) instituted, pending, or to the
knowledge of the Company threatened against, the Company or any of its
Subsidiaries or any of their respective properties, assets, interest or rights
or for which the Company or any of its Subsidiaries is obligated to indemnify a
third party before any court or arbitrator or any Governmental Entity which
would reasonably be expected to have a Company Material Adverse Effect. There
is no judgment, decree, injunction, rule or order of any court or arbitrator or
any Governmental Entity outstanding against the Company or any of its
Subsidiaries, which, individually or in the aggregate, has had or would
reasonably be expected to have, a Company Material Adverse Effect. To the
knowledge of the Company, as of the date of this Agreement, there are no actual
or threatened actions, suits or proceedings which present a claim to restrain
or prohibit the transactions contemplated herein or to impose any material
liability in connection therewith as to which there is a reasonable probability
of an unfavorable outcome and which, if such an unfavorable outcome was
rendered, would, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect or a material adverse effect on the
ability of the Company to consummate the transactions contemplated hereby.
(b) The Company and its Subsidiaries are in compliance with all applicable
laws, statutes, ordinances, rules and regulations of any Governmental Authority
applicable to their respective businesses and operations, except for such
violations, if any, which, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 3.13(b) of the Company Disclosure Schedule, all governmental
approvals, permits and licenses (collectively, "Permits") required to conduct
the business of the
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Company and its Subsidiaries have been obtained, are in full force and effect
and are being complied with except for such violations and failures to have
Permits in full force and effect, if any, which, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.14. Labor Matters. As of the date of this Agreement (i) there is
no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries; (ii) to the knowledge of the Company, no union organizing
campaign with respect to the Company's or any of its Subsidiaries employees is
underway; (iii) there is no unfair labor practice, charge or complaint against
the Company or any of its Subsidiaries pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board or any similar
state or foreign agency; (iv) there is no written grievance pending relating to
any collective bargaining agreement or other grievance procedure and there has
been no claim therefor asserted in writing against the Company or any of its
Subsidiaries; (v) to the knowledge of the Company, no charges with respect to
or relating to the Company or any of its Subsidiaries are pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; (vi) there are no collective
bargaining agreements with any union covering employees of the Company or any
of its Subsidiaries; (vii) the Company and all of its Subsidiaries are in
compliance with applicable federal, state, local or foreign laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including any such laws relating to unfair labor practices,
except where failure to do so would not reasonably be expected to have a
Material Adverse Effect; (viii) there is no claim, charge, action or
investigation pending, or, to the Company's knowledge, threatened before any
court or administrative agency alleging a violation by the Company or any of
its Subsidiaries of any law, regulation, or ordinance relating to conditions or
terms of employment, including the Fair Labor Standards Act, the Occupational
Safety and Health Act, the Age Discrimination Act, the Americans with
Disability Act, the Family Medical Leave Act, Title VII of the Civil Rights
Act, or any similar state or municipal law or ordinance; and (ix) to the
Company's knowledge, no federal, state or local agency responsible for the
enforcement of labor or employment laws, immigration laws or occupational
health and safety laws intends to conduct or is currently conducting an
investigation with respect to the Company or its Subsidiaries, except for such
exceptions to the foregoing clauses (i) through (ix) which, individually or in
the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.15. Certain Contracts And Arrangements.
(a) Other than Contracts that are terminable by the Company or any of its
Subsidiaries upon thirty (30) days' or less notice and other than Benefit
Plans, Section 3.15 of the Company Disclosure Schedule sets forth all oral and
written contracts, agreements, arrangements, guarantees, licenses, leases and
executory commitments binding on the Company or its Subsidiaries or their
respective assets and properties or pursuant to which the Company or any
Subsidiary has rights against any Person, (each a "Contract"), that are
material to the business of the Company and its Subsidiaries, taken as a whole
(each, a "Material Contract"), including:
(i) joint venture and partnership agreements,
(ii) Contracts containing covenants purporting to limit the freedom of
the Company or any of its Subsidiaries to compete in any line of business in
any geographic area or to hire any individual or group of individuals,
(iii) Contracts relating to any outstanding commitment for capital
expenditures in excess of $100,000,
(iv) indentures, mortgages, promissory notes, loan agreements or
guarantees of borrowed money in excess of $100,000 in the aggregate, letters
of credit or other agreements or instruments of the Company or any of its
Subsidiaries or commitments for the borrowing or the lending by the Company
or any of its Subsidiaries of amounts in excess of $100,000 in the aggregate
or providing for the creation of any charge, security interest, encumbrance
or lien upon any of the assets of the Company or any of its Subsidiaries
with an aggregate value in excess of $100,000, except for such obligations
to vendors and suppliers incurred in the ordinary course of business, all of
which are reflected in the accounting records of the Company,
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(v) Contracts associated with off-balance sheet financing in excess of
$100,000 in the aggregate, including arrangements for the sale of
receivables,
(vi) any material license, sublicense or other Contract pertaining to
intellectual property used by the Company or any of its Subsidiaries in the
conduct of their respective businesses, and by which the Company or any of
its Subsidiaries licenses or otherwise authorizes a third party to use any
intellectual property,
(vii) except as disclosed in the 2001 Financial Statements, stock
purchase agreements, asset purchase agreements or other acquisition or
divestiture agreements where the consideration in any individual transaction
exceeds $100,000 since January 1, 1999,
(viii) Contracts which contain minimum purchase conditions in excess of
$100,000 with respect to inventory purchases for resale, and $100,000 in the
case of everything else, or requirements or other terms that restrict or
limit the purchasing or distribution relationships of the Company of any of
its Subsidiaries (including after consummation of any of the transactions
contemplated hereby), the Parent or any of its affiliates, or any customer,
licensee or lessee thereof,
(ix) Contracts providing for "earn-outs" or other contingent payments by
the Company or any of its Subsidiaries involving more than $100,000 per
contract over the terms of all such Contracts,
(x) Contracts for directors and officers liability insurance or pursuant
to which the Company or any of its Subsidiaries has an obligation to
indemnify any present or former officer or director,
(xi) Contracts the absence or termination of which would reasonably be
expected to have a Company Material Adverse Effect, or
(xii) Contracts that provide for the payment or receipt of $100,000 or
more per annum.
All such Material Contracts are valid and binding obligations of the Company
or any such Subsidiary and, to the knowledge of the Company, the valid and
binding obligation of each other party thereto except such Contracts which if
not so valid and binding would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries is in violation of or is
in default under any Material Contract, nor, to the knowledge of the Company,
is any other party in violation or in default under any such Material Contract.
There has not occurred any event that, with the lapse of time or giving of
notice or both, would constitute such a default or permit the termination of,
any such Material Contract, except for such violations or defaults which,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.16. Environmental Matters.
(a) (i) "Cleanup" means all actions required to: (A) cleanup, remove, treat
or remediate Hazardous Materials in the indoor or outdoor environment; (B)
prevent the Release of Hazardous Materials so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (C) perform pre-remedial studies and investigations and
post-remedial monitoring and care; or (D) respond to any government requests
for information or documents in any way relating to cleanup, removal, treatment
or remediation or potential cleanup, removal, treatment or remediation of
Hazardous Materials in the indoor or outdoor environment.
(ii) "Environmental Claim" means any claim, action, cause of action,
investigation, demand or written notice by any Person alleging potential
liability (including potential liability for investigatory costs, Cleanup
costs, governmental response costs, natural resources damages, property
damages, personal injuries, fines or penalties) arising out of, based on or
resulting from (A) the presence, use, possession, generation, treatment,
storage, transportation, handling and labeling or Release of or exposure to
any Hazardous Materials at or from any location, whether or not owned or
operated by the Company or any of its Subsidiaries or (B) circumstances
forming the basis of any violation of any Environmental Law.
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(iii) "Environmental Laws" means all federal, state, local and foreign
laws, rules, regulations, ordinances, orders, decrees and common law
relating to pollution or protection of the environment or human or employee
health or safety, including laws relating to Releases or threatened Releases
of Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, transport, exposure to or handling of
Hazardous Materials.
(iv) "Hazardous Materials" means all hazardous or toxic substances,
materials or wastes, pollutants or contaminants, defined as such by, or
regulated as such under, any Environmental Law, including petroleum,
petroleum products, PCB's, asbestos or radioactive materials.
(v) "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration (or
known threat thereof) into the environment (including ambient air, surface
water, groundwater and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater or property.
(b) Except as set forth in Section 3.16 (b) of the Company Disclosure
Schedule, the Company and its Subsidiaries have complied with and are in
compliance with all applicable Environmental Laws (which compliance includes
the possession by the Company and its Subsidiaries of all Permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof), except where failures to be
in compliance would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Since inception, neither
the Company nor any of its Subsidiaries has received any Environmental Claim
against the Company or any of its Subsidiaries (or any of their respective
assets or properties) from a Governmental Entity or any other Person or have
entered into or agreed to any consent decree, order or agreement under any
Environmental Law, except where such Environmental Claim or consent decree,
order or agreement would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(c) There is no Environmental Claim pending or to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries (or any of
their respective assets or properties) or against any Person whose liability
for any Environmental Claim the Company or any of its Subsidiaries has or may
have retained or assumed either contractually or by operation of law that
would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(d) Except as set forth in Section 3.16(d) of the Company Disclosure
Schedule, there are no present or past actions, activities, circumstances,
conditions, events or incidents, including the Release or presence of any
Hazardous Material by or on behalf of the Company or any of its Subsidiaries or
to the knowledge of the Company by or on behalf of any other Person that could
form the basis of any Environmental Claim against the Company or any of its
Subsidiaries (or any of their respective assets or properties) or against any
Person whose liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law that would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(e) The Company agrees to cooperate with Parent to effect the retention of
any permits or other governmental authorizations under Environmental Laws that
will be required to permit the Company to conduct the business as conducted by
the Company and its Subsidiaries immediately prior to the Closing Date.
(f) The Company has provided Parent copies of all environmental inspections,
investigations, studies, and its tests, reviews or other analysis conducted in
relation to the Company and its Subsidiaries and any property now or formerly
owned, operated or leased by the Company or its Subsidiaries or their
respective predecessor or the operation of their respective business
(collectively, "Environmental Audits") in the possession or control of the
Company or any of its Subsidiaries and all such Environmental Audits are listed
in Section 3.16 of the Company Disclosure Schedule.
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(g) The Company and its Subsidiaries have accrued or otherwise provided, in
accordance with GAAP, for all damages, liabilities, penalties or costs that
they may incur in connection with any claim pending or known to be threatened
against them, or any requirement that is or may be applicable to them, under
any Environmental Laws, and such accrual or other provision is reflected in the
Company's most recent Company SEC Documents.
(h) Without limiting the scope of any of the foregoing representations,
neither the Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any other Person, has received any Environmental Claim against the
Company or any of its Subsidiaries (or any of their respective assets or
properties) in connection with the presence of Hazardous Substances on, or the
migration of Hazardous Substances to or from, the Property located at 1615
Plymouth Street, Mountain View, Santa Clara County, California, alleging
potential liability of the Company or any of its Subsidiaries.
SECTION 3.17. Intellectual Property.
(a) To the Company's knowledge, the Company and its Subsidiaries own or have
the right to use all material Intellectual Property reasonably necessary for
the Company and its Subsidiaries to conduct their business as it is currently
conducted.
(b) Except as set forth in Section 3.17(b) of the Company Disclosure
Schedule, to the knowledge of the Company: (i) all of the registrations,
filings and patents relating to material Intellectual Property owned by the
Company and its Subsidiaries are subsisting and unexpired, free of all liens or
encumbrances, and have not been abandoned; (ii) the Company does not infringe
the intellectual property rights of any third party in any respect that would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect; (iii) no judgment, decree, injunction, rule or order
has been rendered by Governmental Entity which would limit, cancel or question
the validity of, or the Company's or its Subsidiaries' rights in and to, any
Intellectual Property owned by the Company in any respect that would reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect; and (iv) the Company has not received notice of any pending or
threatened suit, action or adversarial proceeding that seeks to limit, cancel
or question the validity of, or the Company's or its Subsidiaries' rights in
and to, any Intellectual Property, which would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) Listed in Section 3.17(c) of the Company Disclosure Schedule are (i) all
of the registrations, filings, and patents owned by the Company and its
Subsidiaries, whether pending or in effect, together with a listing of status
and all liens or encumbrances related to such registrations, filings or
patents; (ii) an identification of all written notices received by the Company
and its Subsidiaries reciting that the Company or any of its Subsidiaries
infringes or may infringe or needs to investigate whether it infringes the
intellectual property rights of any third party; (iii) all written notices of
any pending or threatened suits, actions or adversarial proceedings that seek
to limit or cancel the Company's or any of its Subsidiaries' rights in and to
any Intellectual Property; (iv) all material agreements under which the Company
or any of its Subsidiaries have the right to utilize Intellectual Property of a
third party; and (v) all material agreements under which any third party has
the right to utilize the Intellectual Property of the Company or any of its
Subsidiaries.
(d) Neither the Company nor its Subsidiaries, nor to the Company's
knowledge, any other party, is in breach of or default under any material
agreement under which the Company or any of its Subsidiaries has the right to
utilize Intellectual Property of a third party. Except as set forth in Section
3.17(d) of the Company Disclosure Schedule, there is no pending or, to the
Company's knowledge, threatened, claim being asserted against either the
Company or any of its Subsidiaries in any administrative or judicial proceeding
or by any Person with respect to the ownership, validity or enforceability of
any material license necessary for the operation of the Company's or its
Subsidiaries' businesses as currently conducted.
(e) For purposes of this Agreement "Intellectual Property" shall mean all
rights, privileges and priorities provided under U.S., state and foreign law
relating to intellectual property, including all (x) (1) proprietary
inventions, discoveries, processes, formulae, designs, methods, techniques,
procedures, concepts, developments,
A-21
technology, new and useful improvements thereof and proprietary know-how
relating thereto, whether or not patented or eligible for patent protection;
(2) copyrights and copyrightable works, including computer applications,
programs, software, databases and related items; (3) trademarks, service marks,
trade names, and trade dress, the goodwill of any business symbolized thereby,
and all common-law rights relating thereto; (4) trade secrets and other
confidential information; (y) all registrations, applications and recordings
for any of the foregoing and (z) licenses or other similar agreements granting
to the Company or any of its Subsidiaries the rights to use any of the
foregoing.
SECTION 3.18. Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held on February 26, 2002, has approved this
Agreement and (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, taken together are fair to and in
the best interests of the stockholders of the Company and declared the Merger
to be advisable; (ii) approved this Agreement; and (iii) resolved to recommend
that the stockholders of the Company approve and adopt this Agreement and the
Merger and directed that such matters be submitted to the Company's
stockholders at the Company's Stockholder Meeting.
SECTION 3.19. Tax Treatment. Neither the Company nor any of its affiliates
has taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization under the provisions of Section 368(a) of the Code.
SECTION 3.20. Financial Advisors' Fees. Except for Group Outcome LLC
("Group Outcome") and J.P. Morgan Securities Inc. (the "Company Financial
Advisor"), whose fees will be paid by the Company, there is no investment
banker, broker, finder or other intermediary which has been retained by, or is
authorized to act on behalf of, the Company or any of its Subsidiaries that
would be entitled to any fee or commission from the Company, any of its
Subsidiaries, Parent or any of Parent's affiliates upon consummation of the
transactions contemplated by this Agreement. The Company has previously
delivered to Parent a true, correct and complete copy of its agreements with
Group Outcome and the Company Financial Advisor.
SECTION 3.21. Anti-takeover Provisions; Rights Plan.
(a) The Company has taken all action necessary to render the provisions of
Section 203 of the DGCL inapplicable to Parent, Merger Sub and their respective
affiliates, and to the Merger and this Agreement. The Board of Directors of the
Company has approved the Merger and this Agreement and the other transactions
contemplated hereby. No other "fair price," "moratorium," "control share
acquisition," "business combination," or other state takeover statute or
similar statute or regulation applies or purports to apply to the Company, the
Merger, this Agreement, or any of the other transactions contemplated in this
Agreement, or to Parent or Merger Sub in connection therewith.
(b) The Company has approved all amendments, if any, necessary or
appropriate so that the Preferred Shares Rights Agreement, dated as of October
10, 1997, between the Company and EquiServe Trust Company, N.A., as most
recently amended on April 11, 2001 (the "Rights Plan"), is inapplicable to the
transactions contemplated by this Agreement. The execution of this Agreement
and the consummation of the transactions contemplated hereby or thereby, do not
and will not (i) result in Parent or Merger Sub being an "Acquiring Person" (as
such term is defined in the Rights Plan), (ii) result in the ability of any
Person to exercise any rights under the Rights Plan, (iii) enable or require
the "Rights" (as such term is defined in the Rights Plan) to separate from the
shares of Preferred Stock to which they are attached or to be triggered or
become exercisable, or (iv) otherwise result in the occurrence of a
"Distribution Date" or "Share Acquisition Date" (as such terms are defined in
the Rights Plan).
SECTION 3.22. Insurance. The Company and its Subsidiaries each currently
maintains insurance in amounts reasonably sufficient to insure against the
risks usually insured against by companies of similar size operating similar
businesses at similar stages of development. As of the date of this Agreement,
all such policies are in full force and effect and all premiums due and payable
thereon have been paid. Neither the Company nor
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any of its Subsidiaries has received any written notice of a premium increase
or cancellation with respect to any of its insurance policies or bonds, and
within the last three (3) years, neither the Company nor any of its
Subsidiaries has been refused any insurance coverage sought or applied for.
SECTION 3.23. Section 162(m) of the Code. Except as set forth in Section
3.23 of the Company Disclosure Schedule, any amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement or the Plan of Merger by any
employee, officer or director of either of the Company or any Company
Subsidiary who is a "disqualified individual" (as is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment, severance or
termination agreement, other compensation arrangement or Benefit Plan would not
be characterized as an "excess parachute payment" (as is defined in Section
280G(b)(1) of the Code). Except as set forth in Section 3.23 of the Company
Disclosure Schedule, there are no payments that the Company or any of its
Subsidiaries, or the Surviving Corporation is or would be required to make to
any of the Company's or its Subsidiaries' current or former employees or to any
third party which payment is contingent upon a change of control of the Company
or any of its Subsidiaries or payable as a result of the transactions
contemplated herein, including the termination of any of the Company's or any
of its Subsidiaries' employees after the Effective Time. The disallowance of a
deduction under Section 162(m) of the Code for employee remuneration will not
apply to any amount paid or payable by the Company or any of its Subsidiaries
under any commitment, program, arrangement or understanding.
SECTION 3.24. Opinion of Company Financial Advisor. The Company has
received the opinion of the Company Financial Advisor, dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is fair to
the Company's stockholders from a financial point of view, a signed copy of
which opinion has been delivered to the Parent, and such opinion has not been
amended, modified or revoked in a manner adverse to the Parent. The Company has
been authorized by the Company Financial Advisor to permit the inclusion of
such fairness opinion (and, subject to prior review and consent by such Company
Financial Advisor, and reference thereto) in the Proxy Statement/Prospectus.
SECTION 3.25. Affiliate Transactions. Except as set forth in the SEC
Documents or in Section 3.25 of the Company Disclosure Schedule (which includes
names of parties, amounts involved and brief descriptions) there are no
transactions, agreements, arrangements or understandings (or series thereof),
between the Company or any of its Subsidiaries and any of its or their
directors or officers (excluding any dealing exclusively among the Company and
its Subsidiaries) currently existing or effected or entered into since January
1, 1999 involving amounts in excess of $100,000 in any individual case.
SECTION 3.26. Relationship with Customers and Suppliers. Except as set
forth in Section 3.26 of the Company Disclosure Schedule, as of the date of
this Agreement, no (i) current customer of the Company or any of its
Subsidiaries accounting for more than five percent (5%) of the Company's
consolidated net sales for the year ending December 31, 2001 or (ii) current
supplier to the Company or any of its Subsidiaries of items material to the
Company's business, which items cannot be replaced at comparable cost and the
loss of which would, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect, has notified the Company that it
will terminate or materially and adversely modify its business relationship
with the Company, or, to the knowledge of the Company, has threatened to do so.
SECTION 3.27. FDA Matters.
(a) Except as set forth on Section 3.27(a) of the Company Disclosure
Schedule, the Company and its Subsidiaries are in compliance in all material
respects with all applicable statutes, rules and regulations of U.S. Food and
Drug Administration or similar federal, state or local governmental authority
(the "FDA") and the German Health Authority or other foreign governmental
authority ("Foreign Authorities") with respect to the manufacture, collection,
sale, labeling, storing, testing, distribution, or marketing of the Company's
products (including, without limitation, the Company's surgical sealant
products) being manufactured, distributed or developed by the Company and its
Subsidiaries (the "Company Products"). The Company and its Subsidiaries adhere
in all material respects to all applicable regulations (including "Quality
System" regulations) in the
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manufacture of the Company's products and, as applicable, "Good Clinical
Practices," "Informed Consent" and all applicable requirements relating to the
protection of human subjects for its clinical trials as required by the FDA and
any applicable corresponding requirements of the Foreign Authorities. The
Company and its Subsidiaries have all requisite FDA and Foreign Authorities
permits, approvals, registrations, licenses or the like to conduct Company's
and its Subsidiaries' business as it is currently conducted. The Company and
its Subsidiaries have previously delivered or made available to Parent an index
of all applications, approvals, registrations or licenses obtained by the
Company or its Subsidiaries from Foreign Authorities or the FDA or required in
connection with the conduct of the Company's or its Subsidiaries' businesses as
they are currently conducted and has made all such information available to
Parent. The Company and its Subsidiaries are in compliance with all applicable
registration and listing requirements set forth in the U.S. Food, Drug &
Cosmetic Act, 21 U.S.C. 360 and 21 C.F.R. Part 807 and all similar applicable
laws, except for noncompliance which, individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect.
(b) The Company has made available to Parent all written communications and
oral communications reduced to written form between the Company or any of its
Subsidiaries and the FDA or Foreign Authorities dated January 1, 1998 through
the date hereof. The Company shall promptly deliver or make available to Parent
copies of all written communications and information and records regarding all
oral communications reduced to written form, between the Company or its
Subsidiaries and the FDA or Foreign Authorities from the date hereof through
the Effective Time, but in no event shall such delivery take place later than
one day prior to the Effective Time. Except as described in Section 3.27(b) of
the Company Disclosure Schedule, the Company and its Subsidiaries are not in
receipt of notice of, and not subject to, any adverse inspection, finding of
deficiency, finding of non-compliance, compelled or voluntary recall,
investigation, penalty for corrective or remedial action or other compliance or
enforcement action, in each case relating to any Company Products or to the
facilities in which the Company Products are manufactured, collected or
handled, by the FDA or Foreign Authorities. Except as set forth on Section
3.27(b) of the Company Disclosure Schedule, there are no pending or, to the
knowledge of the Company, threatened actions, proceedings or complaints by the
FDA or Foreign Authorities which would prohibit or impede the conduct of the
Company's or its Subsidiaries' businesses as they are currently conducted.
(c) To the knowledge of the Company, the Company and its Subsidiaries have
not made any false statements on, or omissions from, the applications,
approvals, reports and other submissions to the FDA or Foreign Authorities in
or from any other records and documentation prepared or maintained to comply
with the requirements of the FDA or Foreign Authorities relating to Company
Products that would, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
(d) The Company or any of its Subsidiaries have not received any
notification, written or oral, that remains unresolved, from Foreign
Authorities, the FDA or other authorities indicating that any Company Product
is misbranded or adulterated as defined in the U.S. Food, Drug & Cosmetic Act,
21 U.S.C. 321, et seq., as amended, and the rules and regulations promulgated
thereunder.
(e) No Company Product has been recalled, suspended or discontinued as a
result of any action by the FDA or any Foreign Authority by the Company or any
of its Subsidiaries or, to the knowledge of the Company, any licensee,
distributor or marketer of any Company Product, in the United States or outside
of the United States since January 1, 1999.
(f) Neither the Company, the Company's Subsidiaries, nor to the knowledge of
the Company any officer, key employee or agent of the Company has been
convicted of any crime or engaged in any conduct that would reasonably be
expected to result in (i) debarment under 21 U.S.C. Section 335a or any similar
state law or regulation or (ii) exclusion under 42 U.S.C. Section 1320a-7 or
any similar state law or regulation.
SECTION 3.28. Title to Property.
(a) All leases or other occupancy agreements for the material real property
leased or otherwise occupied by the Company ("Leased Real Property") afford
Company peaceful and undisturbed possession of the Leased Real
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Property. All leases for the Leased Real Property are in good standing, valid
and effective in accordance with their respective terms, and there is not,
under any of such leases or other occupancy agreements, any existing material
default or event of default by the Company or any Subsidiaries or, to the
knowledge of the Company, by any other party thereto (or any event which with
notice or lapse of time, or both, would, individually or in the aggregate,
constitute a material default by the Company or any Subsidiaries or, to the
knowledge of the Company, by any other party thereto).
(b) Except as set forth in Section 3.28(b) of the Company Disclosure
Schedule, to its knowledge, the Company is not in violation of any zoning,
building, safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of the Leased Real Property
except where such violation would not, individually or in the aggregate,
reasonably be expected to give rise to a Company Material Adverse Effect, and
the Company has not received any notice of such violation. The Company has good
title to all of its assets (including real property) used in its business or as
shown on the Financial Statements, free and clear of all Liens, (other than for
Permitted Liens), other than such assets as were sold in the ordinary course of
the Company's business since December 31, 2001 or which are subject to
capitalized leases. "Permitted Liens" means any lien, mortgage, encumbrance or
restriction against the Company's or any Subsidiary's leasehold or ownership
interest in any property, which is for taxes not yet due and payable or has
arisen in the ordinary course of business, consistent with past practice, and
which does not materially interfere with the use, as currently utilized, of the
properties subject thereto or affected thereby or otherwise materially impair
the business operations being conducted thereon.
(c) Except as set forth in Section Section 3.28(c) of the Company Disclosure
Schedule, the material machinery and equipment (the "Equipment") owned or
leased by the Company is (i) suitable for the uses to which it is currently
employed and (ii) in good operating condition (except for ordinary wear and
tear).
(d) The Company and its Subsidiaries do not own any real property.
SECTION 3.29. Affiliates. Section 3.29 of the Company Disclosure Schedule
sets forth the name of each Person who is, in the Company's reasonable judgment
after consultation with counsel, an "affiliate" (as such term is defined in
Rule 405 of the regulations promulgated under the Securities Act) of the
Company as of the date of this Agreement.
SECTION 3.30. Absence of Questionable Payments. To the Company's knowledge,
neither the Company nor any of its Subsidiaries nor any current director,
officer, agent, employee or other Person acting on behalf of the Company or any
of its Subsidiaries, has used any corporate funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating
to political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Exchange Act. To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any current director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries, has accepted or
received any unlawful contributions, payments, gifts, or expenditures. To the
Company's knowledge, the Company is in compliance in all material respects with
the provisions of Section 13(b) of the Exchange Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to the
Company, as follows:
SECTION 4.1. Corporate Existence And Power. Each of Parent and Merger
Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has all
corporate power, as the case may be, and all Licenses required to carry on
its business as now conducted except for failures to have any such License
which would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect. Each of Parent and Merger Sub is duly
qualified to do
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business and is in good standing in each jurisdiction where the character of
the property owned, leased or operated by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where
failures to be so qualified would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect. As used
herein, the term "Parent Material Adverse Effect" means any change, effect,
event, occurrence, state of facts or development that, individually or in
the aggregate, is materially adverse to the business condition (financial or
otherwise), assets (including intangible assets), properties or results of
operations of Parent and its Subsidiaries, taking Parent and its
Subsidiaries together as a whole, provided, however, that none of the
following shall be deemed in and of themselves, either alone or in
combination, to constitute, and none of the following in and of themselves
shall be taken into account in determining whether there has been or will
be, a Parent Material Adverse Effect: (a) any change in the market price or
trading volume of Parent's stock after the date hereof, in and of itself;
(b) any failure by Parent to meet internal projections or forecasts or
published revenue or earnings predictions for any period ending (or for
which revenues or earnings are released) on or after the date of this
Agreement, provided, however, that the reasons for any such failure may be
taken into account in determining whether there has been or will be a Parent
Material Adverse Effect; (c) any adverse change, effect, event, occurrence,
state of facts or development to the extent attributable to the announcement
or pendency of the Merger; or (d) any adverse change, effect, event,
occurrence, state of facts or development attributable to conditions
generally affecting (i) the industries in which Parent participates, (ii)
the U.S. economy as a whole or (iii) foreign economies in any locations
where Parent or any of its Subsidiaries has material operations or sales,
which changes, effects, events, occurrences, state of facts or developments
in the case of (i), (ii) or (iii) of this sentence do not disproportionately
affect Parent in any material respect.
SECTION 4.2. Corporate Authorization. Each of Parent and Merger Sub has
the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by Parent and Merger Sub, the performance by
Parent and Merger Sub of their obligations hereunder and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
and validly authorized by the Boards of Directors of Parent and Merger Sub,
by Parent as the sole stockholder of Merger Sub, and this Agreement has been
approved by the Board of Directors of Merger Sub, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize
the execution, delivery and performance of this Agreement. This Agreement
has been duly executed and delivered by each of Parent and Merger Sub and
constitutes, assuming due authorization, execution and delivery of this
Agreement by the Company, a valid and binding obligation of each of Parent
and Merger Sub, enforceable against each of them in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
SECTION 4.3. Consents And Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor the performance
by each of Parent and Merger Sub of its obligations hereunder, nor the
consummation by Parent and Merger Sub of the transactions contemplated hereby,
will (i) conflict with or violate any provision of the certificate of
incorporation or bylaws (or other governing or organizational documents) of
Parent or Merger Sub, as the case may be, or (ii) result in a violation or
breach of, constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration
or obligation to repurchase, repay, redeem or acquire or any similar right or
obligation, or loss of a benefit or result in the creation of any Lien upon any
properties or assets of Parent or Merger Sub) under any of the terms,
conditions or provisions of any loan or credit agreement, note, mortgage,
letter of credit, other evidence of indebtedness, guarantee, license, lease or
agreement or similar instrument or obligation to which any of Parent or Merger
Sub is a party or by which any of them or any of the respective assets used or
held for use by any of them may be bound or (iii) assuming that the filings,
registrations, notifications, authorizations, consents and approvals referred
to in Section 4.3(b) below have been obtained or made, as the case may be,
violate any order, injunction, decree, statute, rule or regulation of any
Governmental Entity to which either Parent or Merger Sub is subject, excluding
from the foregoing clauses
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(ii) and (iii) such requirements, defaults, breaches, rights or violations that
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect and would not reasonably be expected to have a
material adverse effect on the ability of either Parent or Merger Sub to
consummate the transactions contemplated hereby.
(b) No filing or registration with, notification to, or authorization,
consent, order or approval of, any Governmental Entity is required in
connection with the execution and delivery of this Agreement by each of Parent
and Merger Sub or the performance by any of them of their respective
obligations hereunder, except (i) the filing of the Certificate of Merger in
accordance with the DGCL and filings to maintain the good standing of the
Surviving Corporation; (ii) compliance with any applicable requirements of the
HSR Act or any applicable foreign antitrust, laws or laws intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade and any filings and consents which may be required by any
foreign environmental, health or safety laws or regulations pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement; (iii) compliance with any
applicable requirements of the Securities Act and the Exchange Act; (iv)
compliance with any applicable requirements of state blue sky or takeover laws
and (v) such other consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect and would not have a material adverse
effect on the ability of either Parent or Merger Sub to perform their
respective obligations hereunder.
SECTION 4.4. Capitalization. As of February 22, 2002, the authorized
capital stock of Parent consisted of 100,000,000,000 Parent Shares and
100,000,000 shares of preference stock, no par value per share, of Parent (the
"Parent Preferred Stock"), including 3,500,000 shares of Series B Junior
Participating Stock, no par value per share (the "Parent Series B Preferred
Stock"). As of February 22, 2002, there were (i) 608,817,449 Parent Shares
issued and outstanding, (ii) no shares of Parent Series B Preferred Stock
issued and outstanding, (iii) no other shares of Parent Preferred Stock issued
and outstanding, (iv) 9,337,133 Parent Shares held in the treasury of Parent,
and (v) approximately 64,699,023 Parent Shares were reserved for future
issuance pursuant to outstanding options to purchase 64,699,023 Parent Shares.
The authorized capital stock of Merger Sub consists of 100 shares of common
stock, par value $.01 per share, of which 100 shares are outstanding, all of
which are owned by Parent. All Parent Shares to be issued at the Effective Time
shall be, when issued, duly authorized and validly issued and fully paid and
non-assessable and free of preemptive rights with respect thereto.
SECTION 4.5. SEC Documents. Parent has filed all required reports, proxy
statements, registration statements, forms and other documents (the "Parent SEC
Documents") required to be filed with the SEC since January 1, 2000 pursuant to
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder. As of their respective dates, and giving effect to any
amendments thereto, (a) the Parent SEC documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the applicable rules and regulations promulgated
thereunder and (b) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted 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.
SECTION 4.6. Financial Statements. The financial statements of Parent
(including, in each case, any notes and schedules thereto) included in the
Parent SEC Documents (a) were prepared from the books and records of Parent and
its Subsidiaries, (b) comply as to form in all material respects with all
applicable accounting requirements and the rules and regulations of the SEC
with respect thereto, (c) have been prepared in accordance with GAAP, applied
on a consistent basis (except in the case of unaudited statements, as permitted
by Form 10-Q as filed with the SEC under the Exchange Act) during the periods
involved and (d) fairly present, in all material respects, the consolidated
financial position of Parent and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments which were not and are not expected to be,
individually or in the aggregate, material in amount).
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SECTION 4.7. Registration Statement; Proxy Statement/Prospectus. None of
the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time the Form S-4
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; and (ii) the Proxy
Statement/Prospectus will, at the date mailed to the stockholders of Company,
at the time of the Company Stockholders' Meeting and as of the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Assuming the accuracy of the representation set forth in Section
3.29 hereof, the Form S-4 will comply as to form in all material respects with
the provisions of the Securities Act and the rules and regulations promulgated
by the SEC thereunder. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
SECTION 4.8. Share Ownership. Neither Parent nor Merger Sub beneficially
owns any shares of Common Stock.
SECTION 4.9. Merger Sub's Operations. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not (i)
engaged in any business activities, (ii) conducted any operations other than in
connection with the transactions contemplated hereby or (iii) incurred any
liabilities other than in connection with the transactions contemplated hereby.
SECTION 4.10. Tax Treatment. Neither Parent nor any of its affiliates has
taken any action or knows of any fact, agreement, plan or other circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization under the provisions of Section 368(a) of the Code.
SECTION 4.11. Finders' Fees. Except for Banc of America Securities LLC,
whose fees will be paid by Parent, there is no investment banker, broker,
finder or other intermediary that might be entitled to any fee or commission in
connection with or upon consummation of the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Merger Sub.
ARTICLE V
PRECLOSING AND OTHER COVENANTS OF THE PARTIES
SECTION 5.1. Conduct Of The Business Of The Company.
(a) Except with the prior written consent of Parent or except as set forth
in Section 5.1 of the Company Disclosure Schedule or as otherwise expressly
contemplated or permitted by this Agreement, from the date hereof until the
Closing Date, the Company shall, and shall cause its Subsidiaries to, conduct
their businesses in the ordinary course consistent with past practice and shall
use their commercially reasonable efforts to (i) preserve intact their business
organizations and their relationships with their respective customers and
suppliers and other Persons having significant business dealings with them and
to keep available the services of their present officers and employees; (ii)
maintain and keep their properties and assets in as good repair and condition
as at present, ordinary wear and tear excepted, and maintain supplies and
inventories in quantities consistent with their customary business practice;
and (iii) keep in full force and effect insurance policies comparable in amount
and scope of coverage to that currently maintained. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date, the
Company will not (and will not permit any of its Subsidiaries to) take any
action or knowingly omit to take any action that would make any of its
representations and warranties contained herein false to an extent that would
cause the condition set forth in Section 6.3(b) not to be satisfied.
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(b) The Company shall not, and shall not permit any of its Subsidiaries to,
except with the prior written consent of Parent or except as set forth in
Section 5.1 of the Company Disclosure Schedule or as otherwise expressly
contemplated or permitted by this Agreement, including Section 7.4:
(i) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock;
(ii) offer, sell, issue or grant, or authorize the sale, issuance or
grant of, any shares of capital stock of or other equity interests in, or
any securities convertible into or exchangeable or exercisable for (or,
except in accordance with the terms of agreements in effect on the date of
this Agreement and disclosed on the Company Disclosure Schedule, accelerate
any right to convert or exchange or exercise securities for) any shares of
capital stock of or other equity interest in, or any options, warrants or
rights of any kind to acquire any shares of capital stock of or other equity
interests in, or other voting securities of, the Company or any of its
Subsidiaries, or any "phantom" stock, "phantom" stock rights, SARs or
stock-based performance units, other than issuances of shares of Common
Stock upon the exercise of the Options outstanding at the date of this
Agreement or pursuant to the ESPP, in each case, in accordance with the
terms thereof (as in effect on the date of this Agreement).
(iii) (A) incur any additional indebtedness or other obligation for
borrowed money other than borrowings pursuant to existing lines of credit or
lease lines (or replacement lines of credit and lease lines or other
financing arrangements of amounts equal to or lesser than the Company's
lines of credit and lease lines as of December 31, 2001) and other
obligations incurred in the ordinary course of business, (B) issue or sell
any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any
indebtedness for borrowed money or debt securities of another Person (other
than guarantees of any such indebtedness permitted to be incurred by a
Subsidiary pursuant to this Agreement), enter into any "keep well" or other
agreement to maintain any financial statement condition of another Person or
enter into any arrangement having the economic effect of any of the
foregoing, or (C) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to or in the Company or any of
its Subsidiaries (other than investment grade commercial paper and
government obligations in the ordinary course of business consistent with
past practice);
(iv) adopt, or propose that its stockholders adopt, any amendments to its
articles or certificate of incorporation or bylaws or other organizational
documents;
(v) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a material portion of the assets of, or
in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire any material amount of assets of any other Person (other than the
purchase of inventories and supplies from suppliers or vendors in the
ordinary course of business);
(vi) liquidate, sell or lease or otherwise dispose of, or except as
otherwise permitted by this Agreement, grant any Lien with respect to, any
properties or assets of the Company or any of its Subsidiaries that are,
individually or in the aggregate, material to the business of the Company
and its Subsidiaries, taken as a whole, except for dispositions of excess or
obsolete assets and sales of inventories in the ordinary course of business;
(vii) except as contemplated by the Company's current capital budget or
to replace or repair any damaged equipment, properties or other assets, make
any capital expenditures in excess of $100,000 individually, or $200,000 in
the aggregate;
(viii) (A) increase the rate of compensation of, pay or agree to pay any
bonus to, or provide any other material employee benefit to, any of its
directors, officers or employees other than in the ordinary course of
business in a manner consistent with past practice; (B) enter into or modify
any employment or severance contracts with any of its present or former
directors, officers or employees other than employment and consulting
agreements entered into or amended in the ordinary course of business for
employees or consultants of the Company or any of its Subsidiaries; provided
that any such agreements or modifications
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shall not provide for the payment of any severance or termination pay as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby; (C) establish, adopt, enter into or
substantially modify (except as may be required by applicable law) any
pension, retirement, stock option, stock purchase, stock appreciation right,
savings, profit sharing, deferred compensation, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement,
or any trust agreement related thereto, or any collective bargaining
agreement in respect of any of its directors, officers or other employees;
(D) grant any severance, retention or termination pay (other than as
disclosed in Section 3.12 of the Company Disclosure Schedule) to, or enter
into any severance agreement with, any employee; or (E), except in
accordance with the terms of agreements in effect on the date of this
Agreement and disclosed on the Company Disclosure Schedule, take any action
to accelerate any rights or benefits, or make any determinations not in the
ordinary course of business consistent with past practice, under any
collective bargaining agreement or Benefit Plan of the Company or any of its
Subsidiaries;
(ix) effect any material change in its accounting methods, principles or
practices in effect as of the date of this Agreement, except as required by
changes in GAAP;
(x) redeem, purchase or otherwise acquire, or offer or propose to redeem,
purchase or otherwise acquire any outstanding shares of capital stock of, or
other equity interests in, or any securities that are convertible into or
exchangeable for any shares of capital stock of, or other equity interests
in, or any outstanding options, warrants or rights of any kind to acquire
any shares of capital stock of, or other equity interests in, the Company or
any of its Subsidiaries (other than (A) any such acquisition by the Company
or any of its Subsidiaries directly from any other Subsidiary in exchange
for capital contributions or loans to such Subsidiary, (B) any purchase,
forfeiture or retirement of shares of Common Stock or the Options occurring
pursuant to the terms (as in effect on the date of this Agreement) of any
existing contract or agreement or any existing Benefit Plan of the Company
or any of its Subsidiaries, in a manner otherwise consistent with the terms
of this Agreement; or (C) the exercise of Options as provided for in Section
1.5(a) hereof.
(xi) effect any reorganization or recapitalization; or split, combine or
reclassify any of the capital stock of, or other equity interests in, the
Company or any of its Subsidiaries or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of
such capital stock or such equity interests other than in connection with
lost, stolen or destroyed certificates, provided, however, the Company shall
require an affidavit and indemnity of that fact by the Person claiming such
certificate to be lost, stolen or destroyed and, if reasonable, given the
circumstances, the posting by such Person of a bond, in reasonable amount as
determined by the Company, as indemnity against any claim that may be made
against the Company with respect to such certificate.
(xii) enter into, materially amend or terminate any Material Contract
described in Section 3.15, except in the ordinary course of business;
(xiii) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against in
the most recent consolidated financial statements (or the notes thereto) of
the Company included in the Company SEC Documents or incurred since the date
of such financial statements in the ordinary course of business consistent
with past practice;
(xiv) settle the terms of any material litigation affecting the Company
or any of its Subsidiaries requiring the payment by the Company or any
Subsidiary of an amount in excess of $100,000;
(xv) make any material Tax election except in a manner consistent with
past practice, change any material method of accounting for Tax purposes,
settle or compromise any material Tax liability or materially change any of
its methods of reporting income and deductions for United States federal
income tax purposes from those methods employed in the preparation of its
United States federal income Tax Returns for the year ended December 31,
2000, except as required by law;
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(xvi) take any action that would cause any condition set forth in Article
VI not to be satisfied; and
(xvii) agree in writing or otherwise to do any of the foregoing.
SECTION 5.2. Conduct of the Business of Parent. From the date hereof until
the Closing Date, Parent will not (and will not permit any of its Subsidiaries
to take any action that would cause any condition set forth in Article VI not
to be satisfied.
SECTION 5.3. Proxy Statement/Prospectus; Registration Statement;
Stockholders' Meeting.
(a) As promptly as practicable after the execution of this Agreement, Parent
and the Company shall jointly prepare and shall file with the SEC a document or
documents that will constitute the Proxy Statement/Prospectus. Each of the
parties hereto shall use commercially reasonable efforts to cause the Form S-4
to become effective as promptly as practicable after the date hereof, and,
prior to the effective date of the Form S-4, the parties hereto shall take all
action required under any applicable Federal and state securities laws in
connection with the issuance of the Parent Shares pursuant to the Merger.
Parent or the Company, as the case may be, shall furnish all information
concerning Parent or the Company as the other party may reasonably request in
connection with such actions and the preparation of the Form S-4 and the Proxy
Statement/Prospectus. As promptly as practicable after the effective date of
the Form S-4, Parent and the Company shall cause the Proxy Statement/Prospectus
to be mailed to the stockholders of the Company. Each of the parties hereto
shall cause the Proxy Statement/Prospectus to comply as to form and substance
as to such party in all material respects with the applicable requirements of
(i) the Exchange Act, (ii) the Securities Act, and (iii) the rules and
regulations of the Nasdaq Stock Market and NYSE.
(b) The Proxy Statement/Prospectus shall include (i) the approval of this
Agreement and the Merger and the recommendation of the Board of Directors of
the Company to the Company's stockholders that they vote in favor of adoption
of this Agreement, subject to the right of the Board of Directors of the
Company to withdraw its recommendation and recommend a Superior Proposal
determined to be such in compliance with Section 5.5 of this Agreement, and
(ii) the opinion of the Company Financial Advisor referred to in Section 3.24.
(c) No amendment or supplement to the Proxy Statement/Prospectus or the Form
S-4 shall be made without the approval of Parent and the Company, which
approval shall not be unreasonably withheld or delayed. Each of the parties
hereto shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement
or amendment has been filed, of the issuance of any stop order, of the
suspension of the qualification of the Parent Shares issuable in connection
with the Merger for offering or sale in any jurisdiction, or of any request by
the SEC for amendment of the Proxy Statement/Prospectus or the Form S-4 or
comments thereon and responses thereto or requests by the SEC for additional
information.
(d) The Company shall call and hold the Company Stockholders' Meeting as
promptly as practicable after the date hereof for the purpose of voting upon
the approval and adoption of this Agreement pursuant to the Proxy
Statement/Prospectus, and the Company shall hold the Company Stockholders'
Meeting as soon as practicable after the date on which the Form S-4 becomes
effective. Nothing herein shall prevent the Company from adjourning or
postponing the Company Stockholders' Meeting if there are insufficient shares
of Common Stock necessary to conduct business at the Company Stockholders'
Meeting. Unless the Company's Board of Directors has withdrawn its
recommendation of this Agreement and the Merger in compliance with Section 5.5,
the Company shall use its commercially reasonable efforts to solicit from its
stockholders proxies in favor of the approval and adoption of this Agreement
pursuant to the Proxy Statement/Prospectus and shall take all other action
necessary or advisable to secure the vote or consent of stockholders required
by the Delaware Law or applicable stock exchange requirements to obtain such
approval and adoption. The Company shall take all other action necessary or
advisable to promptly and expeditiously secure any vote or consent of
stockholders required by applicable law and the Company's Current Certificate
of Incorporation and bylaws to effect the Merger.
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SECTION 5.4. Access to Information; Confidentiality Agreement.
(a) Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which the Company or any of its Subsidiaries is a
party or pursuant to applicable law or the regulations or requirements of any
stock exchange or other regulatory organization with whose rules a party hereto
is required to comply, from the date of this Agreement to the Effective Time,
the Company shall (and shall cause its Subsidiaries to) (i) provide to Parent
(and its officers, directors, employees, affiliates, accountants, consultants,
legal counsel, agents and other representatives (collectively,
"Representatives")) access at reasonable times during normal business hours
upon prior written notice to its and its Subsidiaries' officers, employees,
agents, properties, offices and other facilities and to the books and records
thereof, and (ii) furnish promptly such information concerning its and its
Subsidiaries' business, properties, contracts, assets, liabilities and
personnel as Parent or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 5.4 shall affect or be deemed
to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
confidentiality agreement between Parent and the Company made as of April 27,
2001 and amended by the Amendment to Mutual Confidentiality Agreement, dated
January 14, 2002 (the "Confidentiality Agreement") with respect to the
information disclosed pursuant to this Section 5.4.
SECTION 5.5. No Solicitation.
(a) From the date hereof until the Effective Time or, if earlier, the
termination of this Agreement, the Company shall not (whether directly or
indirectly through its Representatives), and the Company shall use its
reasonable best efforts to cause its Representatives not to, directly or
indirectly, (i) solicit, initiate or encourage any Acquisition Proposal, (ii)
participate or engage in discussions or negotiations with, or disclose any
non-public information relating to the Company or its Subsidiaries or afford
access to the properties, books or records of the Company or its Subsidiaries
(A) to any Person that has made an Acquisition Proposal or has advised the
Company that it is or may be interested in making an Acquisition Proposal or
(B) to any Person, with the intent or purpose, directly or indirectly, of
soliciting, initiating or encouraging an Acquisition Proposal, (iii) take any
other action intended to facilitate or assist any inquiries with respect to or
the making or submission of any Acquisition Proposal or to induce any Person or
group to make or submit any Acquisition Proposal, (iv) agree to endorse,
approve, or recommend any Acquisition Proposal, (v) enter into any letter of
intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal or transaction
contemplated thereby (other than a confidentiality agreement as permitted
hereby), or (vi) take any other action intended to assist, facilitate or
encourage any effort or attempt by any other Person or group to do or seek any
of the foregoing or authorize or permit any of its officers, directors or
employees or any of its Subsidiaries, affiliates or Representatives to take any
such action; provided that, nothing contained in this Agreement shall prohibit
the Company or the Board of Directors of the Company from, prior to the
approval and adoption of this Agreement by the requisite vote of the
stockholders of the Company, disclosing information or affording access with
respect to the Company and its Subsidiaries in response to an unsolicited
request therefor, or participating or engaging in discussions or negotiations,
in each such case regarding an unsolicited Acquisition Proposal that
constitutes, or that may reasonably be expected to lead to, a Superior
Proposal, if, and only to the extent that (1) the Board of Directors of the
Company shall have concluded in good faith, after considering applicable law
and the advice of outside legal counsel knowledgeable in such applicable law
(who may be the Company's regularly engaged outside legal counsel) that the
failure to take such action would be reasonably likely to result in a breach of
its fiduciary duties to the Company's stockholders under applicable law and
(2) prior to taking such action the Company (x) delivers to Parent the notice
required pursuant to Section 5.5(c) stating that it is taking such action, and
(y) receives from such Person or group an executed confidentiality agreement
that is not less restrictive as to such Person or entity than the
Confidentiality Agreement and that contains standstill restrictions which are
not less restrictive as to such Person or entity than those contained in the
letter agreement, dated as of January 14, 2002, by and between the Company and
Baxter Healthcare Corporation, as amended.
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As used herein, "Acquisition Proposal" means any offer or proposal regarding
any of the following (other than the transactions contemplated by this
Agreement) involving the Company: (i) any merger, consolidation, share
exchange, recapitalization, liquidation, dissolution, business combination or
other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of twenty percent (20%) or more of the assets of
the Company and its Subsidiaries, taken as a whole, or of any Material Business
or of any Subsidiary or Subsidiaries of the Company responsible for a Material
Business, in a single transaction or series of related transactions; (iii) any
tender offer (including a self tender offer), exchange offer or other
transaction that, if consummated, would result in any Person or group
beneficially owning more than twenty percent (20%) of the outstanding shares of
any class of equity securities of the Company (or in the case of a Person or
group which beneficially owns more than twenty percent (20%) of the outstanding
shares of any class of equity securities of the Company as of the date hereof,
would result in such Person or group increasing the percentage or number of
shares of such class beneficially owned by such Person or group by more than
five percent (5%) of the outstanding shares of such class); or (iv) any
acquisition of twenty percent (20%) or more of the outstanding shares of
capital stock of the Company.
As used herein, a "Superior Proposal" means an Acquisition Proposal
involving the acquisition of all of the shares of Common Stock then outstanding
or all or substantially all of the assets of the Company and its Subsidiaries
which the Board of Directors of the Company determines in good faith (after
having received the advice of a financial advisor of nationally recognized
reputation) to be more favorable to the Company and the holders of Common Stock
(taking into account all financial and strategic considerations, including
relevant legal, financial, regulatory and other aspects of such proposal and
the third party making such proposal and the conditions and prospects for
completion of such proposal) than the transactions contemplated herein taken as
a whole (taking into account any changes to the terms of this Agreement that
have been proposed by Parent in response to such proposal).
As used herein, "Material Business" means any business (or the assets needed
to carry out such business) that contributed or represented twenty percent
(20%) or more of the net sales, the net income or the assets (including equity
securities) of the Company and its Subsidiaries taken as a whole.
(b) Except as permitted by this Section 5.5, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw, amend,
change, modify or fail to make, or publicly propose to withdraw, amend, change,
modify or fail to make, its approval or recommendation of this Agreement, (ii)
approve or recommend, or publicly propose to approve or recommend, any
Acquisition Proposal, (iii) take any action to render the provisions of any
anti-takeover statute, rule or regulation inapplicable to any Person or group
(other than Parent, Merger Sub or their affiliates) or to any Acquisition
Proposal, or (iv) cause the Company to accept any Acquisition Proposal and/or
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") related to any
Acquisition Proposal. Notwithstanding the foregoing sentence, prior to the
adoption of this Agreement by the requisite vote of the stockholders of the
Company, the Board of Directors of the Company may take any of such actions if,
and only to the extent that (A) such Acquisition Proposal constitutes a
Superior Proposal, (B) the Board of Directors of the Company shall have
concluded in good faith, after considering applicable law and the advice of
outside legal counsel knowledgeable in such applicable law (who may be the
Company's regularly engaged outside legal counsel) that the failure to take
such action would be reasonably likely to result in a breach of its fiduciary
duties to the Company's stockholders under applicable law, and (C) in the case
of any action set forth in clause (iv) above, the Company shall, prior to or
simultaneously with the taking of such action, (x) have paid or pay to Parent
or its designee the Termination Fee referred to in Section 7.3, and (y) have
complied with its obligations under Section 7.1(g) and (D) the Company is not
in breach of this Section 5.5.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) above, the Company shall promptly (and in any event, within 48
hours) advise Parent orally and in writing of the executive officers of the
Company receiving any Acquisition Proposal, or any inquiry or request for
information with respect to, or which could reasonably be expected to lead to
the Company receiving or otherwise becoming aware of any
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Acquisition Proposal, the material terms and conditions of such Acquisition
Proposal, inquiry or request, and the identity of the Person making any such
Acquisition Proposal, inquiry or request and the Company's response or
responses thereto. The Company will keep Parent reasonably fully informed of
the status and details (including material amendments or modifications) of any
such Acquisition Proposal, inquiry or request. The Company will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing (other than Parent or Merger Sub or any of their affiliates or
Representatives).
(d) Nothing contained in this Agreement shall prohibit the Company or the
Board of Directors of the Company from taking and disclosing to its
stockholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 or Rule 14e-2(a) promulgated under the Exchange
Act or from making any disclosure to the Company's stockholders required by
applicable law. Notwithstanding the foregoing sentence, neither the Board of
Directors of the Company nor any committee thereof shall withdraw or modify, or
propose to withdraw or modify, the approval or recommendation of the Board of
Directors of the Company of the Merger unless and until the Company and the
Board of Directors of the Company have complied with this Section 5.5.
(e) The Company agrees not to release any third party from, or waive any
provision of, any standstill agreement to which the Company is a party.
(f) Notwithstanding anything set forth in this Section 5.5 to the contrary,
the Company may, at any time after the date that is ninety (90) days after the
date hereof, upon delivery of written notice to Parent, solicit, initiate and
encourage, or participate or engage in discussions or negotiations solely
regarding, or provide non-public information or afford access in connection
therewith, any Person providing equity and/or debt financing to the Company not
to exceed ten million dollars ($10,000,000) in the aggregate; provided: (i)
that such Person does not conduct operations in the biotechnology, biosurgery,
medical device, pharmaceutical or related industries (or is not "controlled" by
any such entity, as such term is defined in Rule 405 of the regulations
promulgated under the Securities Act); (ii) the Company reasonably believes
that such Person will be providing such financing for passive investment
purposes and not with a view of effecting any transaction that could constitute
an Acquisition Proposal; (iii) the Company shall not enter into any contract,
agreement or arrangement in respect of any such proposed equity issuance; and
(iv) prior to engaging in any such discussions or negotiations, or providing
any such non-public information or affording any such access, the Company shall
have entered into a confidentiality agreement with such Person or Persons that
(A) includes a representation from such Person that it is providing such
financing for passive investment purposes and not with a view of effecting an
Acquisition Proposal, and (B) contains terms that are not materially less
favorable to the Company than those contained in the Confidentiality Agreement;
provided, further, that the Company shall notify Parent upon entering into any
confidentiality agreement described in clause (iv).
SECTION 5.6. Director and Officer Liability.
(a) Parent and the Company agree that all rights to indemnification and all
limitations on liability existing in favor of any Indemnitee as provided in the
current Certificate of Incorporation or bylaws of the Company or any agreement
between an Indemnitee and the Company or a Subsidiary of the Company as in
effect as of the date hereof, and as set forth on Section 3.15 to the Company
Disclosure Schedule, shall survive the Merger and continue in full force and
effect in accordance with its terms.
(b) For six years after the Effective Time, Parent shall or shall cause the
Surviving Corporation to indemnify and hold harmless the individuals who on or
prior to the Effective Time were officers, directors, employees or agents of
the Company and any of its Subsidiaries (the "Indemnitees") to the same extent
as set forth in Section 5.6(a) above. In the event any claim in respect of
which indemnification is available pursuant to the foregoing provisions is
asserted or made within such six-year period, all rights to indemnification
shall continue until such claim is disposed of or all judgments, orders,
decrees or other rulings in connection with such claim are fully satisfied.
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(c) For six years after the Effective Time, the Surviving Corporation shall
provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Person
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and amount no less favorable than
those of such policy in effect on the date hereof; provided, however, that in
no event will the Parent or the Surviving Corporation be required to expend an
annual premium for such coverage in excess of one hundred and seventy five
percent (175%) of the annual premium currently paid by the Company.
(d) The obligations of Parent and the Surviving Corporation under this
Section 5.6 shall not be terminated or modified in such a manner as to
adversely affect any Indemnitee to whom this Section 5.6 applies without the
consent of such affected Indemnitee (it being expressly agreed that the
Indemnitees to whom this Section 5.6 applies shall be third party beneficiaries
of this Section 5.6) unless such modification or termination is required by law.
SECTION 5.7. Commercially Reasonable Efforts. Upon the terms and subject to
the conditions of this Agreement, each party hereto shall use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement.
SECTION 5.8. Certain Filings.
(a) The Company and Parent shall cooperate with one another (i) in
connection with the preparation of the Proxy Statement/Prospectus and the Form
S-4, (ii) in determining whether any action by or in respect of, or filing
with, any Governmental Entity is required, or any actions, consents, approvals
or waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this
Agreement and (iii) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with the Proxy Statement/Prospectus and the Form S-4 and seeking
timely to obtain any such actions, consents, approvals or waivers. Without
limiting the provisions of this Section 5.8, each party hereto shall file with
the Department of Justice and the Federal Trade Commission a Pre-Merger
Notification and Report Form pursuant to the HSR Act in respect of the
transactions contemplated hereby within ten (10) days after the date of this
Agreement, and each party will use its commercially reasonable efforts to take
or cause to be taken all actions necessary, including to promptly and fully
comply with any requests for information from regulatory Governmental Entities,
to obtain any clearance, waiver, approval or authorization relating to the HSR
Act that is necessary to enable the parties to consummate the transactions
contemplated by this Agreement. Without limiting the provisions of this Section
5.8, each party hereto shall use its commercially reasonable efforts to
promptly make the filings required to be made by it with all foreign
Governmental Entities in any jurisdiction in which the parties believe it is
necessary or advisable.
(b) The Company and Parent shall each use its commercially reasonable
efforts to resolve such objections, if any, as may be asserted with respect to
the Merger or any other transaction contemplated by this Agreement under any
Antitrust Law. If any administrative, judicial or legislative action or
proceeding is instituted (or threatened to be instituted) challenging the
Merger or any other transaction contemplated by this Agreement as violative of
any Antitrust Law, the Company and Parent shall each cooperate to contest and
resist any such action or proceeding, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the Merger or any other transaction contemplated by
this Agreement, including by pursuing all reasonable avenues of administrative
and judicial appeal. Notwithstanding anything to the contrary in this
Agreement, none of Parent, any of its Subsidiaries or the Surviving
Corporation, shall be required (and the Company shall not, without the prior
written consent of Parent, agree, but shall, if so directed by Parent, agree)
to hold separate or divest any of their respective assets, businesses or
operations (or any material part, portion or category thereof) or enter into
any consent decree or licensing or other arrangement with respect to any of
their assets, businesses or operations (or any material part, portion or
category thereof).
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(c) Each of the Company and Parent shall promptly inform the other party of
any material communication received by such party from the Federal Trade
Commission, the Antitrust Division of the Department of Justice or any other
governmental or regulatory authority regarding any of the transactions
contemplated hereby.
(d) The Company shall give and make all required notices to the appropriate
Persons with respect to the consents and approvals set forth in Section 3.3 of
the Company Disclosure Schedule, except where such notices are required by the
appropriate Persons to be given by Parent or Merger Sub. Subject to the other
terms of this Agreement, each of the Company, Parent and Merger Sub shall
cooperate and use their respective commercially reasonable efforts to make all
filings, to obtain all actions or nonactions, waivers, Permits and orders of
Governmental Entities as shall be necessary to consummate the transactions
contemplated hereby and to take all reasonable steps as shall be necessary to
obtain any approvals or waivers as shall be required from, or to avoid any
actions or proceedings by, any Governmental Entity. Each of the parties hereto
will furnish to the other parties such necessary information and reasonable
assistance as such other parties may reasonably request in connection with the
foregoing.
(e) The Company and its Board of Directors (i) shall take all action
necessary to ensure that Section 203 of the DGCL does not become applicable to
the Merger, this Agreement and the transactions contemplated hereby and (ii)
shall take all action reasonably necessary to ensure that no other state
takeover statute or similar statute, rule or regulation is or becomes
applicable to the Merger, this Agreement, and the transactions contemplated
hereby. If any state takeover statute or similar statute, rule or regulation
becomes applicable to the Merger, this Agreement, or any other transactions
contemplated hereby, the Company and its Board of Directors shall take all
action reasonably necessary to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions, including the transactions contemplated by this Agreement.
(f) "Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, and all other federal, state and foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate competition or actions
having the purpose or effect of monopolization or restraint of trade.
SECTION 5.9. Public Announcements. Neither the Company, Parent nor any of
their respective affiliates shall issue or cause the publication of any press
release or other public announcement with respect to the Merger, this Agreement
or the other transactions contemplated hereby without the prior consultation
with the other party, provided, however, that nothing herein shall prohibit any
party, following notification to the other party, from making any disclosure,
as may be required by law or by any listing agreement with, or the policies of,
a national securities exchange.
SECTION 5.10. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Merger Sub, any other actions to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the Surviving Corporation,
as a result of, or in connection with, the Merger.
SECTION 5.11. Employee Matters.
(a) Parent shall, or shall cause the Company to, give individuals who are
employed by the Company or any of its Subsidiaries as of the Effective Time and
who remain employees of the Company or such Subsidiary following the Effective
Time (each such employee, an "Affected Employee") full credit for such Affected
Employees' service with the Company for purposes of vacation accrual under
Parent's vacation policy to the extent each such Affected Employee has been
credited with service under the Company's vacation policy
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immediately prior to the Effective Time. Parent shall offer Affected Employees
the opportunity to elect to participate in Parent's Incentive Investment Plan
as soon as administratively feasible following the date on which such Affected
Employees are transferred to Parent's payroll.
(b) Following the Effective Time, Parent shall provide (or shall cause the
Company to provide) benefits to the Affected Employees that are substantially
similar (including salary, health and welfare benefits and 401(k) plan
participation), taken as a whole, to the benefits currently provided to
employees of Parent performing functions similar to those to be performed by
such Affected Employees after the Effective Time.
(c) The Surviving Corporation shall not, and shall not permit any of its
Subsidiaries to, at any time prior to 90 days following the date of the
Closing, without complying fully with the notice and other requirements of the
Worker Adjustment Retraining and Notification Act of 1988 (the "WARN Act"),
effectuate (a) a "plant closing" as defined in the WARN Act affecting any
single site of employment or one or more facilities or operating units within
any single site of employment of the Surviving Corporation or any of its
Subsidiaries; or (b) a "mass layoff" as defined in the WARN Act affecting any
single site of employment of the Surviving Corporation or any of its
Subsidiaries; or any similar action under applicable state, local or foreign
law requiring notice to employees in the event of a plant closing or layoff.
(d) Parent agrees to cause the Surviving Corporation to honor and perform
the Company's obligations under the Retention Bonus Plan referred to in Section
5.1 of the Company Disclosure Schedule in accordance with its terms as in
effect on the date hereof.
SECTION 5.12. Tax-Free Reorganization Treatment. Each of Parent and the
Company shall take all reasonable actions necessary to cause the Merger to
qualify as a reorganization under the provisions of Section 368(a) of the Code
and to obtain the opinions of counsel referred to in Sections 6.2(d) and 6.3(d)
hereof, and neither party will take any action inconsistent therewith.
SECTION 5.13. Blue Sky Permits. Parent shall use its commercially
reasonable efforts to obtain, prior to the effective date of the Form S-4, all
necessary state securities laws or "blue sky" permits and approvals required to
carry out the transactions contemplated by this Agreement and the Merger, and
will pay all expenses incident thereto.
SECTION 5.14. Listing. Parent shall use its commercially reasonable efforts
to cause the Parent Shares to be issued in the Merger, including, if
applicable, upon the exercise of Options, to be listed on the applicable
exchange or market, subject to notice of official issuance thereof, prior to
the Closing Date.
SECTION 5.15. Certain Notifications. Between the date hereof and the
Effective Time, each party shall promptly notify the other parties hereto in
writing after becoming aware of the occurrence or nonoccurrence of any event,
the occurrence or nonoccurrence of which has resulted in, or could reasonably
be expected to result in, any of the conditions specified in Article VI not
being satisfied. The delivery of any notice pursuant to this Section 5.15 shall
not cure any breach of any representation or warranty of the party giving such
notice contained in this Agreement or otherwise limit or affect the remedies
available hereunder.
SECTION 5.16. No Redemption of Rights Plan. Subject to Section 5.5, between
the date of this Agreement and the earlier of the Effective Time and the
termination of this Agreement, the Company shall not (a) redeem, amend or waive
any provisions of the Rights Plan (other than as set forth in Section 3.21
solely in connection with the transactions contemplated by this Agreement, but
not with respect to any Acquisition Proposal), except to the extent the Board
of Directors of the Company shall have concluded in good faith, after
considering applicable law and the advice of outside legal counsel
knowledgeable in such applicable law (who may be the Company's regularly
engaged outside legal counsel) that the failure to take such action would be
reasonably likely to result in a breach of its fiduciary duties to the
Company's stockholders under applicable law, or (b) implement or adopt any so
called "poison pill," shareholder rights plan or other similar plan. Within
five (5) business days of the date hereof, the Company shall amend the Rights
Plan as required under Section 3.21(b).
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SECTION 5.17. Request for Designation. Within fifteen (15) days of the date
hereof, the Company shall file with the FDA a letter substantially in the form
attached to Section 5.17 of the Company Disclosure Schedule, with such changes
as shall be mutually agreed on by Parent and the Company.
SECTION 5.18. Rule 145 Affiliates. The Company shall use commercially
reasonable efforts to cause (i) each Person identified on Section 3.29 of the
Company Disclosure Schedule and (ii) each Person who, to the knowledge of the
Company, may be deemed to have become an affiliate (as such term is used under
Rule 145 of the Securities Act) of the Company after the date of this Agreement
and prior to the Effective Time, to deliver, to Parent, at least fifteen (15)
days prior to the Effective Time, an affiliate letter in the form attached
hereto as Exhibit A to this Agreement (the "Affiliate Letter"). Notwithstanding
the foregoing, Parent shall be entitled to place legends as specified in the
Affiliate Letter on the certificates evidencing any of the Parent Shares to be
received by any Person identified on Section 3.29 of the Company Disclosure
Schedule, and to issue appropriate stop transfer instructions to the transfer
agent for such Parent Shares, consistent with the terms of the Affiliate Letter.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1. Conditions To Each Party's Obligations. The respective
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or, to the extent permitted by applicable law, the
waiver on or prior to the Effective Time of each of the following conditions:
(a) This Agreement shall have been adopted by the requisite vote of the
stockholders of the Company in accordance with applicable law;
(b) The SEC shall have declared the Form S-4 effective. No stop order
suspending the effectiveness of the Form S-4 shall have been issued and no
proceeding for such purpose shall have been initiated or threatened in
writing by the SEC.
(c) No Governmental Entity shall have enacted, issued, promulgated or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger. All waiting periods, if any, under
the HSR Act relating to the transactions contemplated hereby shall have
expired or terminated early and all material foreign antitrust or other
regulatory approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been
obtained.
(d) The Parent Shares issuable in accordance with the Merger shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
SECTION 6.2. Conditions To The Company's Obligation To Consummate The
Merger. The obligation of the Company to consummate the Merger shall be
further subject to the satisfaction or, to the extent permitted by applicable
law, the waiver on or prior to the Effective Time of each of the following
conditions:
(a) Parent and Merger Sub shall each have performed in all material
respects its respective agreements and covenants contained in or
contemplated by this Agreement that are required to be performed by it at or
prior to the Effective Time pursuant to the terms hereof;
(b) The representations and warranties of Parent and Merger Sub contained
in Article IV hereof shall be true and correct in all respects as of the
date of this Agreement and as of the Effective Time (or, to the extent such
representations and warranties expressly speak as of an earlier date, they
shall be true in all respects as of such earlier date), except (i) as
otherwise expressly contemplated by this Agreement and (ii) for such
failures to be true and correct which, individually or in the aggregate,
would not reasonably be expected to have a Parent Material Adverse Effect
(without for this purpose giving effect to qualifications or limitations as
to materiality or the absence of a Material Adverse Effect contained in such
representations and warranties);
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(c) The Company shall have received certificates signed by any senior
executive of Parent, dated the Closing Date, to the effect that, to such
officer's knowledge, the conditions set forth in Sections 6.2(a) and 6.2(b)
hereof have been satisfied or waived;
(d) The Company shall have received an opinion of Wilson Sonsini Goodrich
& Rosati, Professional Corporation, its tax counsel, in form and substance
reasonably satisfactory to it, dated the Closing Date, to the effect that
the Merger will constitute a reorganization for United States federal income
tax purposes within the meaning of Section 368(a) of the Code provided,
however, that if Wilson Sonsini Goodrich & Rosati, Professional Corporation
does not render such opinion, this condition shall nonetheless be deemed to
be satisfied with respect to the Company if Dechert renders such opinion to
the Company. The Company agrees to make such reasonable representations as
may be requested by tax counsel in connection with the opinions referred to
above; and
(e) No Parent Material Adverse Effect shall have occurred and be
continuing.
SECTION 6.3. Conditions To Parent's And Merger Sub's Obligations To
Consummate The Merger. The obligations of Parent and Merger Sub to effect the
Merger shall be further subject to the satisfaction, or to the extent permitted
by applicable law, the waiver on or prior to the Effective Time of each of the
following conditions:
(a) The Company shall have performed in all material respects each of its
agreements and covenants contained in or contemplated by this Agreement that
are required to be performed by it at or prior to the Effective Time
pursuant to the terms hereof;
(b) The representations and warranties of the Company contained in
Article III hereof shall be true and correct in all respects as of the date
of this Agreement and as of the Effective Time (or, to the extent such
representations and warranties expressly speak as of an earlier date, they
shall be true in all respects as of such earlier date), except (i) as
otherwise expressly contemplated by this Agreement and (ii) for such
failures to be true and correct which, individually or in the aggregate,
would not reasonably be expected to have a Company Material Adverse Effect
(without for this purpose giving effect to qualifications or limitations as
to materiality or the absence of a Company Material Adverse Effect contained
in such representations and warranties;
(c) Parent shall have received a certificate signed by the chief
executive officer of the Company, dated the Closing Date, to the effect
that, to such officer's knowledge, the conditions set forth in Sections
6.3(a) and 6.3(b) hereof have been satisfied or waived;
(d) Parent shall have received an opinion of Dechert, its tax counsel, in
form and substance reasonable satisfactory to it, dated the Closing Date, to
the effect that the Merger will constitute a reorganization for United
States federal income tax purposes within the meaning of Section 368(a) of
the Code; provided, however, that if Dechert does not render such opinion,
this condition shall nonetheless be deemed to be satisfied with respect to
Parent and Merger Sub if Wilson Sonsini Goodrich & Rosati, Professional
Corporation renders such opinion to Parent. Parent agrees to make such
reasonable representations as may be requested by tax counsel in connection
with the opinions referred to above;
(e) No Company Material Adverse Effect shall have occurred and be
continuing.
ARTICLE VII
TERMINATION
SECTION 7.1. Termination. Notwithstanding anything herein to the contrary,
this Agreement may be terminated and the transactions contemplated by this
Agreement may be abandoned at any time prior to the Closing Date, whether
before or after the Company has obtained stockholder approval:
(a) by the mutual consent of the Company, Merger Sub and Parent in a
writing duly authorized by the Board of Directors of each party;
(b) by either the Company or Parent, if the Closing has not been
consummated by August 26, 2002, or such other date, if any, as the Company
and Parent shall agree upon, unless the failure of the Closing to occur by
such date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its covenants or agreements set forth herein;
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(c) by either the Company or Parent, if there shall be any applicable law
or regulation that makes consummation of the transactions contemplated by
this Agreement illegal or if any judgment, injunction, order or decree
enjoining Parent, Merger Sub or the Company from consummating the
transactions contemplated by this Agreement is entered and such judgment,
injunction, order or decree shall have become final and nonappealable;
(d) by either the Company or Parent, if the adoption of this Agreement by
the stockholders of the Company shall not have been obtained at a duly held
meeting of stockholders of the Company called for that purpose or any
adjournment thereof;
(e) by Parent if the Company has, or by the Company, if Parent or Merger
Sub has, in any material respect, breached (i) any covenant or agreement
contained herein or (ii) any representation or warranty contained herein,
and in either case if (x) to the extent such breach is capable of being
cured, such breach has not been cured by the earlier of twenty (20) days
after the date on which written notice of such breach is given to the party
committing such breach or the Effective Time and (y) such breach would
entitle the non-breaching party not to consummate the transactions
contemplated hereby under Article VI hereof;
(f) by Parent, if (i) the Board of Directors of the Company (or any
committee thereof) shall have withdrawn, amended, changed, modified in a
manner adverse to Parent or Merger Sub, or failed to make, the
recommendations of the Board of Directors of the Company referred to in
Section 3.18, (ii) the Board of Directors of the Company (or any committee
thereof) shall have recommended to the stockholders of the Company any
Acquisition Proposal or shall have publicly announced an intention to do so,
(iii) a tender offer or exchange offer for fifty percent (50%) or more of
the outstanding shares of Common Stock is announced or commenced and, either
(A) the Board of Directors of the Company (or any committee thereof)
recommends acceptance of such tender offer or exchange offer by its
stockholders or (B) within ten (10) business days of such commencement, the
Board of Directors of the Company (or any committee thereof) shall have
failed to recommend against acceptance of such tender offer or exchange
offer by its stockholders, (iv) the Board of Directors of the Company shall
have failed to publicly reaffirm the recommendations of the Board of
Directors of the Company referred to in Section 3.18 within ten (10)
business days after Parent requests in writing that such recommendations be
reaffirmed at any time following the date on which it is publicly announced
or the Company otherwise discovers that any person or group (which includes
a "person" or "group" as such terms are defined in Section 13(d)(3) of the
Exchange Act), including by filing a Schedule 13D under the Exchange Act,
other than Parent, Merger Sub or any of their affiliates, or any group of
which any of them is a member and other than passive stockholders reporting
their holdings on Schedule 13G, shall have acquired beneficial ownership of
more than twenty percent (20%) of the outstanding shares of Common Stock, or
(v) the Company shall have breached the provisions of Section 5.5 of this
Agreement in any material respect; or
(g) by the Company, for the purpose of accepting a Superior Proposal;
provided, that such termination under this Section 7.1(g) shall not be
effective unless (i) the Company and its Board of Directors shall have
complied with all their obligations under Section 5.5(b) and the Company
shall have paid the Termination Fee pursuant to Section 7.3; (ii) the
Company provides the Parent with at least three (3) business days' prior
written notice prior to terminating this Agreement, which notice shall be
accompanied by (x) a copy of the proposed acquisition agreement with respect
to the Superior Proposal that the Company proposes to accept, and (y) the
Company's written certification that it has made the determinations with
respect to such Superior Proposal set forth in clauses (A) and (B) of the
proviso in Section 5.5(b), and the irrevocable representation that the
Company will, in the absence of any other superior Acquisition Proposal,
execute such Acquisition Agreement unless Parent modifies this Agreement
such that the Company's Board of Directors reasonably believes in good faith
after consultation with its independent legal counsel and financial advisors
that the Merger (as so modified) is at least as favorable as such Superior
Proposal.
The party desiring to terminate this Agreement shall give written notice of
such termination to the other party.
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SECTION 7.2. Effect of Termination. Except for any willful breach of this
Agreement by any party hereto (which willful breach and liability therefor
shall not be affected by the termination of this Agreement or the payment of
any Termination Fee), if this Agreement is terminated pursuant to Section 7.1
hereof, then this Agreement shall become void and of no effect with no
liability on the part of any party hereto; provided, however, that
notwithstanding such termination the agreements contained in Sections 5.4(b),
7.2, 7.3 and 8.7 hereof shall survive the termination hereof.
SECTION 7.3. Fees.
(a) In the event of a termination of this Agreement by the Company pursuant
to Section 7.1(g) hereof, the Company shall pay to Parent an amount equal to
five million dollars ($5,000,000) (the "Termination Fee"), prior to or
simultaneously with such termination (by check or wire transfer of same day
funds).
(b) In the event of a termination of this Agreement by Parent pursuant to
Section 7.1(f) hereof, then the Company shall pay to Parent the Termination
Fee, within five (5) business days after such termination (by check or wire
transfer of same day funds).
(c) In the event of termination of this Agreement pursuant to Section 7.1(b)
or Section 7.1(d) hereof, or a termination of this Agreement by Parent pursuant
to clause (i) of Section 7.1(e) hereof in the event of an intentional or
willful breach of this Agreement by the Company, where such breach is intended
to facilitate, assist or otherwise benefit, or such breach has the effect,
directly or indirectly, of facilitating or assisting or otherwise benefiting,
an Acquisition Proposal or the Person making such Acquisition Proposal, and if
(i) the Company shall have received an Acquisition Proposal from any person or
group which shall not have expired or been revoked prior to such termination of
this Agreement and (B) within nine (9) months after such termination an
Acquisition Proposal is consummated or the Company enters into a definitive
agreement providing for an Acquisition Proposal (whether or not involving such
Person or group) which is subsequently consummated, then the Company shall pay
to Parent the Termination Fee within five (5) business days after consummation
of such transaction (by check or wire transfer of same day funds).
(d) Except as provided otherwise in this Section 7.3, all costs 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; provided, however, that Parent and the Company shall
share equally all fees and expenses, other than attorneys' and accountants fees
and expenses, incurred (i) in relation to the printing and filing of the Proxy
Statement/Prospectus (including any preliminary materials related thereto) and
the Form S-4 (including financial statements and exhibits) and any amendments
or supplements thereto or (ii) for the premerger notification and report forms
under the HSR Act.
SECTION 7.4. Interim Financing. The parties hereby agree that with respect
to any additional financing the Company may require prior to the Closing,
Parent shall allow for and, under certain circumstances provide, financing
pursuant to the terms and conditions set forth in Section 7.4 of the Company
Disclosure Schedule (such additional financing, if provided by Parent, being
referred to as the "Parent Loan," if provided by the Company's existing lender,
being referred to as the "Additional SVB Funds," and if provided by any other
party, being referred to as the "Additional Financing," and shall collectively
be referred to herein as the "Interim Financing"). Promptly after execution of
this Agreement, the parties shall negotiate in good faith and use their
commercially reasonable efforts to enter into definitive agreements with
respect to the Parent Loan within thirty (30) days of the date hereof on the
principal terms and conditions set forth on Section 7.4 of the Company
Disclosure Schedule.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given upon (a) personal
delivery, (b) transmitter's confirmation of a receipt of a facsimile
transmission, (c) confirmed delivery by a standard overnight carrier or when
delivered by hand or (d) when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by notice given hereunder):
If to the Company, to:
Fusion Medical Technologies, Inc.
34175 Ardenwood Boulevard
Fremont, CA 94555
Fax: (510) 818-4700
Attention: Phil Sawyer, President and CEO
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Fax: (650) 493-6811
Attention: David J. Saul, Esq.
and:
Wilson Sonsini Goodrich & Rosati
One Market
Suite 3300
San Francisco, California 94105
Fax: (415) 947-2099
Attention: Michael S. Dorf, Esq.
If to Parent or Merger Sub, to:
Baxter International Inc.
One Baxter Parkway
Deerfield, IL 60015
Fax: (847) 948-2750
Attention: General Counsel
with a copy to:
Dechert
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Fax: (215) 994-2222
Attention: James J. Lawless, Jr., Esq.
SECTION 8.2. Survival Of Representations And Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time. All
other covenants and agreements contained herein which by their terms are to be
performed in whole or in part, or
A-42
which prohibit actions, subsequent to the Effective Time, shall survive the
Merger in accordance with their terms. Notwithstanding the foregoing, no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive the Parent, Merger Sub or the Company (or any
director, officer or controlling Person thereof) of any defense in law or
equity which otherwise would be available against the claims of any Person,
including any shareholder or former shareholder of either the Parent or the
Company, the aforesaid representations, warranties and covenants being material
inducements to the consummation by the Parent, Merger Sub and the Company of
the transactions contemplated herein.
SECTION 8.3. Interpretation. References herein to the "knowledge of the
Company" shall mean the actual knowledge of the executive officers of the
Company, provided that such Persons shall have duly inquired of those officers,
managers or Representatives of the Company who are responsible for or would
reasonably be expected to have actual knowledge of the matters represented.
Whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without
limitation." The phrase "made available" when used in this Agreement shall mean
that the information referred to has been made available if requested by the
party to whom such information is to be made available. As used in this
Agreement, the term "affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under the Exchange Act.
The article and Section headings contained in this Agreement are solely for
the purpose of reference, are not part of the agreement of the parties hereto
and shall not in any way affect the meaning or interpretation of this
Agreement. Any matter disclosed pursuant to the Company Disclosure Schedule or
the Parent Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
SECTION 8.4. Amendments, Modification And Waiver.
(a) Except as may otherwise be provided herein, any provision of this
Agreement may be amended, modified or waived by the parties hereto, by action
taken by or duly authorized by their respective Board of Directors, prior to
the Closing Date if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company and Parent or, in the case
of a waiver, by the party against whom the waiver is to be effective; provided
that after the adoption of this Agreement by the stockholders of the Company,
no such amendment shall be made except as allowed under applicable law.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.5. Successors And Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that neither the Company nor Parent
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other parties hereto.
SECTION 8.6. Specific Performance. The parties acknowledge and agree that
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy, including Section 7.3
hereof, and accordingly the parties agree that, in addition to any other
remedies, each shall be entitled to enforce the terms of this Agreement by a
decree of specific performance without the necessity of proving the inadequacy
of money damages as a remedy.
SECTION 8.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof) as to all matters, including matters of validity,
construction, effect, performance and remedies.
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SECTION 8.8. Severability. 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 herein are not affected in any
manner materially adverse to any party hereto. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner.
SECTION 8.9. Third Party Beneficiaries. This Agreement is solely for the
benefit of the Company and its successors and permitted assigns, with respect
to the obligations of Parent and Merger Sub under this Agreement, and for the
benefit of Parent and Merger Sub, and their respective successors and permitted
assigns, with respect to the obligations of the Company under this Agreement,
and this Agreement shall not, except to the extent necessary to enforce the
provisions of Article I and Section 5.6 hereof be deemed to confer upon or give
to any other third party any remedy, claim, liability, reimbursement, cause of
action or other right.
SECTION 8.10. Entire Agreement. This Agreement, including any exhibits or
schedules hereto and the Confidentiality Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and supersedes all other prior agreements or understandings, both written and
oral, between the parties or any of them with respect to the subject matter
hereof.
SECTION 8.11. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
BAXTER INTERNATIONAL INC.
/S/ VICTOR W. SCHMITT
By: ________________________________________
Victor W. Schmitt
Name: ______________________________________
Authorized Officer
Title: _____________________________________
HB2002 CORPORATION
/S/ VICTOR W. SCHMITT
By: ________________________________________
Victor W. Schmitt
Name: ______________________________________
Vice President
Title: _____________________________________
FUSION MEDICAL TECHNOLOGIES, INC.
/S/ PHILIP M. SAWYER
By: ________________________________________
Philip M. Sawyer
Name: ______________________________________
President and CEO
Title: _____________________________________
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ANNEX B
--------
FUSION MEDICAL TECHNOLOGIES, INC. FORM OF VOTING AGREEMENT
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made and entered into as of
February 26, 2002 by and between Baxter International Inc., a Delaware
corporation ("Parent"), HB2002 Corporation, a Delaware corporation and a direct
wholly-owned subsidiary of Parent ("Merger Sub") and the undersigned
stockholder and/or option holder (the "Stockholder") of Fusion Medical
Technologies, Inc., a Delaware corporation (the "Company").
RECITALS:
A. Parent, the Company and Merger Sub are concurrently herewith entering
into an Agreement and Plan of Merger dated as of the date hereof, as may be
amended from time to time (the "Merger Agreement"), which provides for the
merger of Merger Sub with and into the Company (the "Merger"), whereby each
issued and outstanding share of common stock, par value $0.001 per share
("Company Common Stock") of the Company will be converted into the right to
receive shares of common stock, par value $1.00 per share, of Parent (the
"Parent Shares"), as set forth in the Merger Agreement.
B. The Stockholder is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
meaning shall apply for all purposes of this Agreement) of such number of
shares of the outstanding capital stock of the Company, and such number of
shares of capital stock of the Company issuable upon the exercise of
outstanding options and warrants, set forth opposite the Stockholder's name on
the signature page of this Agreement.
C. As a condition to its willingness to enter into the Merger Agreement,
Parent and Merger Sub have required that the Stockholder enter into this
Agreement.
D. In consideration of the execution of the Merger Agreement by Parent and
Merger Sub, the Stockholder (solely in his or her capacity as such, but not in
any other capacity, including as director or officer of the Company) has
agreed, among other things, to vote the Shares (as defined below) so as to
facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
hereby agree as follows:
1. Certain Definitions. Capitalized terms used but not defined herein
shall have the respective meanings ascribed thereto in the Merger Agreement.
For all purposes of and under this Agreement, the following terms shall have
the following respective meanings:
(a) "Expiration Date" shall mean the earlier to occur of (i) such
date and time as the Merger Agreement shall have been validly terminated
pursuant to its terms, or (ii) such date and time as the Merger shall
become effective in accordance with the terms and conditions set forth
in the Merger Agreement.
(b) "Person" shall mean any natural person, firm, individual,
corporation, limited liability company, general or limited partnership,
association, joint venture, company, business trust, trust or any other
entity or organization, whether incorporated or unincorporated,
including a government or political subdivision or any agency or
instrumentality thereof.
(c) "Proxy" shall have the meaning set forth in Section 4 hereof.
(d) "Shares" shall mean: (i) all securities of the Company (including
all shares of Company Common Stock and all options, warrants and other
rights to acquire shares of Company Common Stock) beneficially owned by
the Stockholder as of the date of this Agreement, and (ii) all
additional securities of the Company (including all additional shares of
Company Common Stock and all additional options, warrants and other
rights to acquire shares of Company Common Stock) of which the
Stockholder acquires beneficial ownership during the period commencing
with the execution and delivery of this Agreement until the Expiration
Date.
B-1
(e) Transfer. A Person shall be deemed to have effected a "Transfer"
of a security if such person directly or indirectly (i) sells, pledges,
assigns, encumbers, grants an option with respect to, transfers, tenders
into any tender of exchange offer or otherwise disposes of such security
or any interest therein, or (ii) enters into an agreement or commitment
providing for the sale of, pledge of, assignment of, encumbrance of,
grant of an option with respect to, transfer of, tendering into any
tender or exchange offer of or disposition of such security or any
interest therein.
2. Transfer of Shares.
(a) Transferee of Shares to be Bound by this Agreement. Except as
contemplated by this Agreement, the Stockholder hereby agrees that, at
all times during the period commencing with the execution and delivery
of this Agreement until the Expiration Date, the Stockholder shall not
cause or permit any Transfer of any of the Shares to be effected, or
discuss, negotiate or make any offer regarding any Transfer of any of
the Shares, unless each Person to which any such Shares, or any interest
therein, is or may be Transferred shall have (i) executed a counterpart
of this Agreement and a proxy in the form attached hereto as Exhibit A
(with such modifications as Parent may reasonably request), and (ii)
agreed in writing to hold such Shares, or such interest therein, subject
to all of the terms and conditions set forth in this Agreement.
(b) Transfer of Voting Rights. The Stockholder hereby agrees that, at
all times commencing with the execution and delivery of this Agreement
until the Expiration Date, the Stockholder shall not deposit, or permit
the deposit of, any Shares in a voting trust, grant any proxy in respect
of the Shares, or enter into any stockholder agreement, voting
agreement, power of attorney or similar arrangement or commitment in
contravention of the obligations of the Stockholder under this Agreement
with respect to any of the Shares.
(c) Additional Shares. While this Agreement is in effect, the
Stockholder will promptly notify Parent of the number of any new Shares
acquired directly or beneficially by the Stockholder, if any, after the
date hereof.
3. Agreement to Vote Shares. Until the Expiration Date, at every meeting
of stockholders of the Company however called with respect to any of the
following, and at every adjournment or postponement thereof, and on every
action or approval by written consent of stockholders of the Company with
respect to any of the following, the Stockholder shall vote, to the extent
not voted by the person(s) appointed under the Proxy, the Shares:
(a) in favor of approval of the Merger and the adoption and approval
of the Merger Agreement, and in favor of each of the other actions
contemplated by the Merger Agreement and the Proxy and any action
required in furtherance thereof;
(b) against approval of any Acquisition Proposal;
(c) against approval of any proposal made in opposition to, or in
competition with, consummation of the Merger and the transactions
contemplated by the Merger Agreement; and
(d) against any of the following actions (other than those actions
that relate to the Merger and the transactions contemplated by the
Merger Agreement): (A) any merger, consolidation, business combination,
sale of assets, reorganization or recapitalization of the Company or any
subsidiary of the Company with any party, (B) any sale, lease or
transfer of any material part of the assets of the Company or any
subsidiary of the Company, (C) any reorganization, recapitalization,
dissolution, liquidation or winding up of the Company or any subsidiary
of the Company, (D) any change in the present capitalization of the
Company or any subsidiary of the Company, or the corporate structure of
the Company or any subsidiary of the Company, or the Company's or any
subsidiaries' articles or certificate of incorporation or bylaws, (E)
any change in a majority of the persons who constitute the board of
directors of the Company or any of its subsidiaries as of the date
hereof (other than to fill vacancies), or (F) other action that is
intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the Merger or any of the
other transactions contemplated by the Merger Agreement.
B-2
Prior to the Expiration Date, the Stockholder shall not enter into any
agreement or understanding with any person to vote or give instructions in
any manner inconsistent with the terms of this Section 3.
4. Irrevocable Proxy. Concurrently with the execution of this Agreement,
the Stockholder agrees to deliver to Parent and Merger Sub the proxy in the
form attached hereto as Exhibit A (the "Proxy"), which shall be irrevocable
to the fullest extent permissible by applicable law, with respect to the
Shares.
5. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent and Merger Sub that, as of the date
hereof and at all times until the Expiration Date:
(a) The Stockholder is (and will be, unless Transferred pursuant to
Section 2(a) hereof) the beneficial owner of, and has (and will have,
unless Transferred pursuant to Section 2(a) hereof) good title to, all
of the Shares, free and clear of any mortgage, pledge, hypothecation,
security interest, charge, encumbrance, title retention agreement,
voting trust agreement, option, lien or similar restriction or
limitation, including any restriction on the right to vote, sell or
otherwise dispose of the Shares (each, a "Lien"), except for Liens that
would not, individually or in the aggregate, reasonably be expected to
materially or adversely affect Parent's ability to exercise its rights
hereunder and that would not, individually or in the aggregate,
reasonably be expected to prevent or materially impair or delay the
performance by the Stockholder of its obligations hereunder.
(b) The Shares set forth opposite his or its name on signature page
constitute all of the Shares beneficially owned by the Stockholder.
(c) Except for the Shares, the Stockholder does not, other than as
disclosed on the signature page hereto, beneficially own or have any
option, warrant or other right to acquire any securities of the Company
that are or may by their terms become entitled to vote or any securities
that are convertible or exchangeable into or exercisable for any
securities of the Company that are or may by their terms become entitled
to vote, nor is such Stockholder subject to any binding contract,
commitment, arrangement or restriction, other than this Agreement, that
provides for the Stockholder to vote or acquire any securities of the
Company. The Stockholder holds exclusive power to vote the Shares and
has not granted a proxy to any other person to vote the Shares, subject
to the limitations set forth in and except as contemplated by this
Agreement.
(d) The Stockholder has full legal capacity, power and authority (as
applicable) to execute and deliver this Agreement and to perform his or
its obligations hereunder and such execution delivery and performance
have been authorized by the Stockholder, and no other proceedings or
actions by the Stockholder are necessary therefor.
(e) This Agreement has been duly executed and delivered by the
Stockholder and, assuming this Agreement constitutes a valid and binding
agreement of Parent, is a valid and binding obligation of the
Stockholder enforceable against the Stockholder in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
(f) Neither the execution and delivery of this Agreement nor the
performance by the Stockholder of his or its obligations hereunder will
conflict with, result in a violation or breach of, or result in the
creation of any Lien on any Shares under, (i) any contract, commitment,
agreement or restriction of any kind to which the Stockholder is a party
or by which the Stockholder is bound or (ii) any injunction, judgment,
writ, decree, order or ruling applicable to the Stockholder; except, in
each case, for conflicts, violations, breaches or Liens that would not
individually or in the aggregate be reasonably expected to prevent or
materially impair or delay the performance by the Stockholder of its
obligations hereunder.
(g) The Stockholder understands and acknowledges that Parent is
entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon the Stockholder's execution, delivery and
performance of this Agreement.
B-3
6. Representations and Warranties of Parent. Parent and Merger Sub
represent and warrant to the Stockholder, as of the date hereof and as of
the Closing, as follows:
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction
of incorporation, has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement.
(b) This Agreement has been duly executed and delivered by Parent and
Merger Sub and, assuming this Agreement constitutes a valid and binding
agreement of the Stockholder, is a valid and binding obligation of each
of Parent and Merger Sub, enforceable against Parent and Merger Sub in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(c) Neither the execution and delivery of this Agreement nor the
performance by each of Parent and Merger Sub of its obligations
hereunder will conflict with, result in a violation or breach of, or
constitute a default (or an event that, with notice or lapse of time or
both, would result in a default) or give rise to any right of
termination, amendment, cancellation, or acceleration under, (i) its
certificate of incorporation or bylaws, (ii) any contract, commitment,
agreement, or restriction of any kind to which Parent or Merger Sub is a
party or by which Parent or Merger Sub is bound or (iii) any injunction,
judgment, writ, decree, order or ruling applicable to Parent or Merger
Sub; except in the case of clauses (ii) and (iii) for conflicts,
violations, breaches or defaults that would not individually or in the
aggregate be reasonably expected to prevent or materially impair or
delay the performance by each of Parent and Merger Sub of its
obligations hereunder.
7. Legending of Shares. If so requested by Parent or Merger Sub, the
Stockholder hereby agrees that the Shares shall bear the legend set forth
below. Subject to the terms of Section 2 hereof, the Stockholder hereby
agrees that the Stockholder shall not Transfer the Shares without first
having the aforementioned legend affixed to the certificates representing
the Shares.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN VOTING AGREEMENT, DATED AS OF
FEBRUARY 26, 2002, BY AND AMONG BAXTER INTERNATIONAL INC., HB2002 CORPORATION
AND STOCKHOLDER AND TO AN IRREVOCABLE PROXY. ANY TRANSFER OF SUCH SECURITIES IN
VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO
EFFECT WHATSOEVER."
To the extent such Shares are not in certificate form, the Stockholder
agrees to take all reasonable steps to place with the Company's transfer agent
a stop transfer order on such Shares.
8. No Solicitation. The Stockholder acknowledges that the Company is
subject to the non-solicitation prohibitions set forth in Section 5.5 of the
Merger Agreement and that the Stockholder has read and understands the terms
thereof.
9. Termination. This Agreement shall terminate and be of no further force
or effect as of the Expiration Date.
10. No Inconsistent Agreements. The Stockholder shall not enter into any
agreement or understanding with any person or entity the effect of which
would be inconsistent or violative of the provisions of this Agreement. The
Stockholder agrees that the Stockholder shall not take any other action that
would in any way destroy, materially diminish or impair the voting power or
economic rights or other rights attributable to the Stockholder's Shares or
materially restrict, limit or interfere with the performance of the
Stockholder's obligations hereunder or the transactions contemplated hereby
or which would otherwise materially diminish the benefits of this Agreement
to Parent and Merger Sub.
B-4
11. Publicity. The Stockholder (solely in his or her capacity as such,
but not in any other capacity, including as director or officer of the
Company) shall not issue any press release or otherwise make any public
statements with respect to this Agreement or the Merger Agreement or the
other transactions contemplated hereby or thereby without the consent of
Parent and Merger Sub except as may be required by law or applicable stock
exchange or NASDAQ rules.
12. Miscellaneous.
(a) All representations, warranties and covenants contained herein
shall terminate upon the Expiration Date. The representations and
warranties provided by the Stockholder herein are not in derogation or
limitation of the representations and warranties given by the
Stockholder or any letters of transmittal or similar documents executed
and delivered by the Stockholder pursuant to the Merger.
(b) Waiver. No waiver by any party hereto of any condition or any
breach of any term or provision set forth in this Agreement shall be
effective unless in writing and signed by each party hereto. The waiver
of a condition or any breach of any term or provision of this Agreement
shall not operate as or be construed to be a waiver of any other
previous or subsequent breach of any term or provision of this Agreement.
(c) Severability. In the event that any term, provision, covenant or
restriction set forth in this Agreement, or the application of any such
term, provision, covenant or restriction to any person, entity or set of
circumstances, shall be determined by a court of competent jurisdiction
to be invalid, unlawful, void or unenforceable to any extent, the
remainder of the terms, provisions, covenants and restrictions set forth
in this Agreement, and the application of such terms, provisions,
covenants and restrictions to persons, entities or circumstances other
than those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall remain in full force and effect, shall not be
impaired, invalidated or otherwise affected and shall continue to be
valid and enforceable to the fullest extent permitted by applicable law.
(d) Binding Effect; Assignment. This Agreement and all of the terms
and provisions hereof shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and permitted
assigns, but, except as otherwise specifically provided herein, neither
this Agreement nor any of the rights, interests or obligations of the
Stockholder may be assigned to any other Person without the prior
written consent of Parent.
(e) Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written
agreement executed by each of the parties hereto.
(f) Specific Performance; Injunctive Relief. Each of the parties
hereto hereby acknowledges that (i) the representations, warranties,
covenants and restrictions set forth in this Agreement are necessary,
fundamental and required for the protection of Parent and Merger Sub and
to preserve for Parent and Merger Sub the benefits of the Merger; (ii)
such covenants relate to matters which are of a special, unique, and
extraordinary character that gives each such representation, warranty,
covenant and restriction a special, unique, and extraordinary value; and
(iii) a breach of any such representation, warranty, covenant or
restriction, or any other term or provision of this Agreement, will
result in irreparable harm and damages to Parent and Merger Sub which
cannot be adequately compensated by a monetary award. Accordingly,
Parent, Merger Sub and the Stockholder hereby expressly agree that in
addition to all other remedies available at law or in equity, Parent and
Merger Sub shall be entitled to the immediate remedy of specific
performance, a temporary and/or permanent restraining order, preliminary
injunction, or such other form of injunctive or equitable relief as may
be used by any court of competent jurisdiction to restrain or enjoin any
of the parties hereto from breaching any representations, warranties,
covenants or restrictions set forth in this Agreement, or to
specifically enforce the terms and provisions hereof.
B-5
(g) Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the internal laws of the
State of Delaware without giving effect to any choice or conflict of law
provision, rule or principle (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
(h) Entire Agreement. This Agreement and the Proxy and the other
understanding of Parent, Merger Sub and the Stockholder with respect to
the subject matter hereof and thereof, and supersede all prior
discussions, agreements and understandings between Parent, Merger Sub
and the Stockholder, both oral and written, with respect to the subject
matter hereof and thereof.
(i) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained
in a written instrument and shall be deemed given if delivered
personally, telecopied, sent by nationally-recognized overnight courier
or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the respective parties at the following address (or
at such other address for a party as shall be specified by like notice):
If to Parent or
Baxter International Inc.
Merger Sub:
One Baxter Parkway
Deerfield, Illinois 60015-4633
Attention: General Counsel
Telephone No.: (847) 948-2000
Telecopy No.: (847) 948-2450
with a copy to:
Dechert
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: James J. Lawless, Jr., Esq.
Telephone No.: (215) 994-4000
Telecopy No.: (215) 994-2222
If to the Stockholder: To the address for notice set forth on the signature
page hereof.
with a copy to:
Fusion Medical Technologies, Inc.
34175 Ardenwood Boulevard
Fremont, California 94555
Attention: Larry J. Strauss
Telephone No.: (510) 818-4600
Telecopy No.: (510) 818-4700
and to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: David J. Saul, Esq.
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
and to:
Wilson Sonsini Goodrich & Rosati
One Market, Suite 3300
San Francisco, CA 94114
Attention: Michael S. Dorf, Esq.
Telephone No.: (415) 947-2000
Telecopy No.: (415) 947-2099
(j) Further Assurances. The Stockholder (solely in his or her
capacity as such, but not in any other capacity, including as director
or officer of the Company) shall execute and deliver any additional
B-6
certificate, instruments and other documents, and take any additional
actions, as Parent may deem necessary or desirable, in the reasonable
opinion of Parent, to carry out and effectuate the purpose and intent of
this Agreement. The rights and obligations of Stockholder contained
herein are separate from and shall not affect, any rights and
obligations, including any applicable fiduciary duties, that Stockholder
may have under applicable law in such Stockholder's capacity as an
officer or director of the Company. Any such rights and obligations,
including any applicable fiduciary duties, that Stockholder may have
under applicable law in any such other capacity shall not affect the
rights and obligations of Stockholder contained herein.
(k) Headings. The section headings set forth in this Agreement are
for convenience of reference only and shall not affect the construction
or interpretation of this Agreement in any manner.
(l) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
B-7
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the date first written above.
BAXTER INTERNATIONAL STOCKHOLDER:
INC.
By: ___________________ By: _________________________________________
SIGNATURE OF
AUTHORIZED SIGNATORY SIGNATURE
Name: ___________________ Name: _________________________________________
Title: ___________________ Title: _________________________________________
Address: _________________________________________
HB2002 CORPORATION Telephone: _________________________________________
By: ___________________ Facsimile No.: _________________________________________
SIGNATURE OF
AUTHORIZED SIGNATORY
Name: ___________________ Shares beneficially owned:
Title: ___________________ shares of Company Common Stock
---------------
shares of Company Common Stock
---------------
issuable upon the exercise of outstanding
options, warrants or other rights
*****VOTING AGREEMENT*****
B-8
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of Fusion Medical Technologies, Inc., a Delaware
corporation (the "Company"), hereby irrevocably (to the fullest extent
permitted by law) appoints the directors on the Board of Directors of Baxter
International Inc., a Delaware corporation ("Parent"), and HB2002 Corporation,
a Delaware corporation and a direct wholly-owned subsidiary of Parent ("Merger
Sub"), and each of them, as the sole and exclusive attorneys and proxies of the
undersigned, with full power of substitution and resubstitution, to vote and
exercise all voting and related rights (to the full extent that the undersigned
is entitled to do so) with respect to all of the shares of capital stock of the
Company that now are or hereafter may be beneficially owned by the undersigned,
and any and all other shares or securities of the Company issued or issuable in
respect thereof on or after the date hereof (collectively, the "Shares") in
accordance with the terms of this Proxy.
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Voting
Agreement of even date herewith by and between Parent and the undersigned
stockholder (the "Voting Agreement"), and is granted in consideration of Parent
and Merger Sub entering into that certain Agreement and Plan of Merger (the
"Merger Agreement"), by and among Parent, Merger Sub, and the Company, which
provides for the merger of Merger Sub with and into the Company in accordance
with its terms (the "Merger").
Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Merger Agreement.
The Shares beneficially owned by the undersigned stockholder of the Company
as of the date of this Proxy are listed on the final page of this Proxy. Upon
the execution of this Proxy by the undersigned, any and all prior proxies given
by the undersigned with respect to any Shares are hereby revoked and the
undersigned hereby agrees not to grant any subsequent proxies with respect to
the Shares until after the Expiration Date (as defined in the Voting Agreement).
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the
Expiration Date, to act as the undersigned's attorney and proxy to vote the
Shares, and to exercise all voting, consent and similar rights of the
undersigned with respect to the Shares (including, without limitation, the
power to execute and deliver written consents) at every meeting of stockholders
of the Company however called with respect to any of the following, and at
every adjournment or postponement thereof, and on every action or approval by
written consent of stockholders of the Company:
(i) in favor of approval of the Merger and the adoption and approval of
the Merger Agreement and approval of the terms thereof, and in favor of each
of the other actions contemplated by the Merger Agreement and the Proxy and
any action required in furtherance thereof;
(ii) against approval of any Acquisition Proposal;
(iii) against approval of any proposal made in opposition to, or in
competition with, consummation of the Merger and the transactions
contemplated by the Merger Agreement; and
(iv) against any of the following actions (other than those actions that
relate to the Merger and the transactions contemplated by the Merger
Agreement): (A) any merger, consolidation, business combination, sale of
assets, reorganization or recapitalization of the Company or any subsidiary
of the Company with any party, (B) any sale, lease or transfer of any
material part of the assets of the Company or any subsidiary of the Company,
(C) any reorganization, recapitalization, dissolution, liquidation or
winding up of the Company or any subsidiary of the Company, (D) any change
in the present capitalization of the Company or any subsidiary of the
Company, or the corporate structure of the Company or any subsidiary of the
Company, or the Company's or any subsidiaries' articles or certificate of
incorporation or bylaws, (E) any
B-9
change in a majority of the persons who constitute the board of directors of
the Company or any of its subsidiaries as of the date hereof (other than to
fill vacancies), or (F) any other action that is intended, or could
reasonably be expected to, impede, interfere with, delay, postpone,
discourage or adversely affect the Merger or any of the other transactions
contemplated by the Merger Agreement.
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned stockholder may vote the
Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
[Remainder of Page Intentionally Left Blank]
B-10
This Proxy is irrevocable (to the fullest extent permitted by law). This
Proxy shall terminate, and be of no further force and effect, automatically
upon the Expiration Date.
Date: February 26, 2002
Signature of Stockholder: _________
Print Name of Stockholder: _______
Shares beneficially owned:
________ shares of the Company Common
Stock
________ shares of the Company Common
Stock issuable upon the
exercise of outstanding
options, warrants or other
rights
*****VOTING AGREEMENT*****
B-11
ANNEX C
--------
OPINION OF FUSION MEDICAL TECHNOLOGIES, INC.'S FINANCIAL ADVISOR--J.P. MORGAN
SECURITIES INC.
February 26, 2002
The Board of Directors
Fusion Medical Technologies, Inc.
34175 Ardenwood Boulevard
Fremont, CA 94555
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $0.001 per share (including the
associated rights to purchase preferred shares, the "Company Common Stock"), of
Fusion Medical Technologies, Inc. (the "Company") of the Exchange Ratio (as
defined below) in the proposed merger (the "Merger") of the Company with a
wholly-owned subsidiary ("Merger Sub") of Baxter International Inc. (the
"Merger Partner"). Pursuant to the Agreement and Plan of Merger and
Reorganization (the "Agreement"), among the Company, the Merger Partner and
Merger Sub, the Company will become a wholly-owned subsidiary of the Merger
Partner, and each outstanding share of Company Common Stock, other than shares
of Company Common Stock held in treasury or owned by Merger Partner or Merger
Sub, will be converted into the right to receive the fraction (the "Exchange
Ratio") of a share of the Merger Partner's common stock, par value $1.00 per
share (including the associated rights issued pursuant to the Rights Plan (as
defined in the Agreement), (the "Merger Partner Common Stock"), equal to (a)
$10.00 divided by (b) the average closing sale price of the Merger Partner
Common Stock, as reported on the New York Stock Exchange, Inc. Composite
Transactions Tape for the 10 consecutive trading days ending on and including
the third trading day prior to the date of the meeting of the Company's
stockholders in connection with the Merger.
In arriving at our opinion, we have (i) reviewed drafts dated February 26,
2002 of the Agreement and the form of Voting Agreement between the Merger
Partner and the executive officers, directors and certain principal
stockholders of the Company (the "Voting Agreement"); (ii) reviewed certain
publicly available business and financial information concerning the Company
and the Merger Partner and the industries in which they operate; (iii) compared
the proposed financial terms of the Merger with the publicly available
financial terms of certain transactions involving companies we deemed relevant
and the consideration received for such companies; (iv) compared the financial
and operating performance of the Company and the Merger Partner with publicly
available information concerning certain other companies we deemed relevant;
(v) reviewed the current and historical market prices of the Company Common
Stock and the Merger Partner Common Stock (including the historical implied
exchange ratio) and certain publicly traded securities of such other companies;
(vi) reviewed certain internal financial analyses and forecasts prepared by the
management of the Company relating to its businesses; and (vii) performed such
other financial studies and analyses and considered such other information as
we deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to us by the Company and the Merger Partner
or otherwise reviewed by us, and we have not assumed any responsibility or
liability therefor. We have not conducted any valuation or appraisal of any
assets or liabilities, nor have any such valuations or appraisals been provided
to us. In relying on financial analyses and forecasts provided to us, we have
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management as to the
expected future results of operations and financial condition of the Company to
which such analyses or forecasts relate. We have also assumed that the Merger
will qualify as a tax-free reorganization for United States federal income tax
purposes, and that the Merger and the other transactions contemplated by the
Agreement will be consummated as described in the Agreement without waiver or
modification of any material terms thereof. We have also assumed that the
definitive Agreement will not differ in any material respects from the draft
thereof furnished to us. We have further assumed that all material
governmental, regulatory or other consents and approvals necessary for the
consummation of the Merger will be obtained without any adverse effect on the
Company or the Merger Partner or on the contemplated benefits of the Merger.
C-1
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion
and that we do not have any obligation to update, revise, or reaffirm this
opinion. Our opinion is limited to the fairness, from a financial point of
view, to the holders of the Company Common Stock of the Exchange Ratio in the
proposed Merger and we express no opinion as to the underlying decision by the
Company to engage in the Merger. We are expressing no opinion herein as to the
price at which the Company Common Stock or the Merger Partner Common Stock will
trade at any future time.
In addition, we were not requested to and did not provide advice concerning
the structure, the specific Exchange Ratio, or any other aspects of the Merger,
or to provide services other than the delivery of this opinion. We were not
authorized to and did not solicit any expressions of interest from any other
parties with respect to the sale of all or any part of the Company or any other
alternative transaction. We did not participate in negotiations with respect to
the terms of the Merger and related transactions. Consequently, we have assumed
that such terms are the most beneficial terms from the Company's perspective
that could under the circumstances be negotiated among the parties to such
transactions, and no opinion is expressed whether any alternative transaction
might produce consideration for the Company's shareholders in an amount in
excess of that contemplated in the Merger.
We will receive a fee from the Company for the delivery of this opinion. We
will receive an additional fee if the proposed Merger is consummated. Please be
advised that we and our affiliates have provided, from time to time in the
past, investment banking and commercial banking services to the Merger Partner,
for which we received customary compensation, and are an agent bank and lender
under certain of the Merger Partner's principal credit facilities. In the
ordinary course of our businesses, we and our affiliates may actively trade the
debt and equity securities of the Company or the Merger Partner for our own
account or for the accounts of customers and, accordingly, we may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange Ratio in the proposed Merger is fair, from a
financial point of view, to the holders of the Company Common Stock.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any shareholder of the Company
as to how such shareholder should vote with respect to the Merger or any other
matter. This opinion may not be disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose whatsoever except with our
prior written approval. This opinion may be reproduced in full in any proxy,
registration or information statement mailed to shareholders of the Company but
may not otherwise be disclosed publicly in any manner without our prior written
approval.
Very truly yours,
/s/ J.P. Morgan Securities Inc.
J.P. Morgan Securities Inc.
C-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The restated certificate of incorporation of Baxter International Inc.
(hereinafter referred to as the Registrant) provides that, except to the extent
prohibited by Delaware law, the Registrant's directors shall not be personally
liable to the Registrant or its stockholders for monetary damages for any
breach of fiduciary duty as directors of the Registrant. Under Delaware law,
the directors have a fiduciary duty to the Registrant which is eliminated by
this provision of the restated certificate of incorporation and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to the Registrant, for acts or omissions which are
found by a court of competent jurisdiction to be not in good faith or involving
intentional misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by Delaware
law. This provision also does not affect the directors' responsibilities under
any other laws, such as the federal securities laws or state or federal
environmental laws. The Registrant has obtained liability insurance for its
officers and directors.
Delaware law empowers a corporation to indemnify its directors and
officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this
provision shall not eliminate or limit the liability of the 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) arising under
Delaware law, or (iv) for any transaction from which the director derived an
improper personal benefit. Delaware law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's restated certificate of incorporation or bylaws, any agreement, a
vote of stockholders or otherwise. The Registrant's restated certificate of
incorporation eliminates the personal liability of directors to the fullest
extent permitted by Delaware law and provides that the Registrant shall fully
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 of investigative) by reason of the fact that
such person is or was a director or officer of the Registrant, or is or was
serving at the request of the Registrant as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
Under the merger agreement, the Registrant has agreed to, for a period of
six years, indemnify and hold harmless present and former directors, officers,
employees and agents of Fusion for all acts or omissions occurring prior to the
closing of the merger, to the same extent these persons are indemnified and
held harmless in Fusion's restated certificate of incorporation, bylaws and
indemnity agreements of Fusion as in effect on the date of the merger
agreement. Further, the Registrant has agreed to maintain officers' and
directors' liability insurance to cover any such liabilities for six years
following the closing of the merger, provided that the Registrant is not
required to pay more than 175% of the annual premium of Fusion's current
officers' and directors' liability policy.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Agreement and Plan of Merger and Reorganization by and among Baxter International Inc., HB2002
Corporation and Fusion Medical Technologies, Inc. dated as of February 26, 2002 (attached as
Annex A to the document contained in this registration statement).
4.1 Restated Certificate of Incorporation, as amended including Certificate of Designation of Series B
Junior Participating Preferred Stock and Certificate of Elimination of Series A Junior Participating
Preferred Stock, filed as exhibit 3.1 to the Registrant's quarterly report on Form 10-Q for the quarter
ended March 31, 2001 (file no. 1-4448).
4.2 Provisions of the Amended and Restated By-laws of the Registrant defining the rights of the holders
of Common Stock of the Registrant, filed as exhibit 3.3 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2000 (file no. 1-4448).
4.3 Rights Agreement dated as of December 9, 1998 between the Registrant and First Chicago Trust
Company of New York, filed as exhibit 1 to the Registrant's Registration Statement on Form 8-A
dated February 23, 1999 (file no. 1-4448).
5.1* Opinion of Thomas J. Sabatino, Jr., Senior Vice President and General Counsel of the Registrant.
8.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
8.2 Opinion of Dechert.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Thomas J. Sabatino, Jr. (included in Exhibit 5.1).
23.4* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.5* Consent of Dechert.
24.1* Powers of Attorney.
99.1* Consent of J.P. Morgan Securities Inc.
99.2 Form of Fusion Medical Technologies, Inc. Proxy Card.
* Previously filed.
II-2
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) (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. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective
Registration Statement;
(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:
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
-----------------
immediately above do not apply if the registration statement
is on Form S-3, Form S-8 or Form F-3 and the information
required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference 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.
(b) 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 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
(c) (1) That prior to any public reoffering of the securities
registered hereunder through 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), such re-offering prospectus will contain the
information called for by the applicable registration form
with respect to re-offerings by persons who may be deemed
underwriters, in addition to the information called for by
the other items of the applicable form.
II-3
(2) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the
Securities Act of 1933 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.
(d) 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 foregoing
provisions, 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 Act and will be
governed by the final adjudication of such issue.
(e) 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 this form, 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.
(f) 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 became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Amendment No. 1 to the Registrant's Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Deerfield, State of Illinois on April 3, 2002.
BAXTER INTERNATIONAL INC.
/s/ Thomas J. Sabatino, Jr.
_____________________________________
THOMAS J. SABATINO, JR.
Senior Vice President and General Counsel
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registrant's Registration Statement on Form S-4 has been
signed by the following persons on behalf of the Registrant and in the
capacities indicated on April 3, 2002.
SIGNATURE TITLE
--------- -----
/s/ Harry M. Jansen Kraemer, Chairman of the Board of
Jr. Directors, Chief Executive
----------------------------- Officer (principal executive
HARRY M. JANSEN KRAEMER, JR. officer)
/s/ Brian P. Anderson Senior Vice President and
----------------------------- Chief Financial Officer
BRIAN P. ANDERSON (principal financial
officer and accounting
officer)
/s/ Walter E. Boomer* Director
-----------------------------
WALTER E. BOOMER
/s/ Pei-yuan Chia* Director
-----------------------------
PEI-YUAN CHIA
/s/ John W. Colloton* Director
-----------------------------
JOHN W. COLLOTON
/s/ Susan Crown* Director
-----------------------------
SUSAN CROWN
/s/ Brian D. Finn* Director
-----------------------------
BRIAN D. FINN
/s/ Gail D. Fosler* Director
-----------------------------
GAIL D. FOSLER
/s/ Martha R. Ingram* Director
-----------------------------
MARTHA R. INGRAM
/s/ Joseph B. Martin, M.D., Director
Ph.D.*
-----------------------------
JOSEPH B. MARTIN, M.D., PH.D.
/s/ Thomas T. Stallkamp* Director
-----------------------------------
THOMAS T. STALLKAMP
/s/ Monroe E. Trout, M.D.* Director
-----------------------------------
MONROE E. TROUT, M.D.
/s/ Fred L. Turner* Director
-----------------------------------
FRED L. TURNER
*By: /s/ Thomas J. Sabatino, Jr.
-----------------------------------
NAME: THOMAS J. SABATINO, JR.
ATTORNEY-IN-FACT
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Agreement and Plan of Merger and Reorganization by and among Baxter International Inc., HB2002
Corporation and Fusion Medical Technologies, Inc. dated as of February 26, 2002 (attached as
Annex A to the document contained in this registration statement).
4.1 Restated Certificate of Incorporation, as amended including Certificate of Designation of Series B
Junior Participating Preferred Stock and Certificate of Elimination of Series A Junior Participating
Preferred Stock, filed as exhibit 3.1 to the Registrant's quarterly report on form 10-Q for the quarter
ended March 31, 2001 (file no. 1-4448).
4.2 Provisions of the Amended and Restated By-laws of the Registrant defining the rights of the holders
of Common Stock of the Registrant, filed as exhibit 3.3 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2000 (file no. 1-4448).
4.3 Rights Agreement dated as of December 9, 1998 between the Registrant and First Chicago Trust
Company of New York, filed as exhibit 1 to the Registrant's Registration Statement on Form 8-A
dated February 23, 1999 (file no. 1-4448).
5.1* Opinion of Thomas J. Sabatino, Jr., Senior Vice President and General Counsel of the Registrant.
8.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
8.2 Opinion of Dechert.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Thomas J. Sabatino, Jr. (included in Exhibit 5.1).
23.4* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.5* Consent of Dechert
24.1* Powers of Attorney.
99.1* Consent of J.P. Morgan Securities Inc.
99.2 Form of Fusion Medical Technologies, Inc. Proxy Card.
* Previously filed.