prem14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
þ Preliminary
Proxy Statement
o Confidential,
for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
o Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Under
Rule 14a-12
Cardiogenesis Corporation
(Name of Registrant as Specified in
its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11
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(1)
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Title of each class of securities to which transaction
applies:
Cardiogenesis Corporation common shares, no par value
(Common Shares)
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(2)
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Aggregate number of securities to which transaction applies:
52,425,784 Common Shares
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
The proposed maximum aggregate value of the transaction for
purposes of calculating the filing fee is $12,003,250.33. The
filing fee was based upon (A) 26,265,318 shares of our
common stock (including shares of unvested restricted stock)
owned by persons other than CryoLife, Inc. or CL Falcon, Inc.
and outstanding on
[ ],
2011, multiplied by $0.457 per share, plus (B) 2,142,440
options to acquire common stock with an exercise price below
$0.457 multiplied by $0.457 per share minus such exercise price
(which amount equals $434,199.88) (the Total
Consideration). The filing fee equals the product of
0.0001161 multiplied by the Total Consideration.
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(4)
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Proposed maximum aggregate value of transaction:
$12,437,450.21
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(5)
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Total fee paid:
$1,443.99
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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(1)
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Amount Previously Paid: $2,891.15
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(2)
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Form, Schedule or Registration proxy No: Schedule TO
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(3)
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Filing party: CryoLife, Inc. and CL Falcon, Inc.
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(4)
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Date Filed: April 5, 2011
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CARDIOGENESIS
CORPORATION
11 Musick
Irvine, CA 92618
(949) 420-1800
[ ],
2011
Dear Shareholders:
You are cordially invited to attend a special meeting of
shareholders (the Special Meeting) of
Cardiogenesis Corporation, a California corporation
(Cardiogenesis, we,
us or our) to be held on
[ ]
[ ],
2011 at
[ ],
Pacific Time, at Cardiogenesis principal offices, 11
Musick, Irvine, California 92618.
On March 28, 2011, we entered into an Agreement and Plan of
Merger with CryoLife, Inc. (CryoLife) and CL
Falcon, Inc. (Merger Sub), a wholly-owned
subsidiary of CryoLife (the Merger
Agreement). At the Special Meeting, we will ask you to
approve and adopt the Merger Agreement. The Merger is the second
and final step of the acquisition of Cardiogenesis by CryoLife.
The first step was a tender offer by Merger Sub for all of the
outstanding common shares of Cardiogenesis at a price of $0.457
per share, which was completed on [May
[ ]],
2011. The second, and final, step of CryoLifes acquisition
of us consists of the merger of Merger Sub with and into
Cardiogenesis pursuant to the Merger Agreement (the
Merger). As a result of the Merger,
Cardiogenesis will become a wholly-owned subsidiary of CryoLife.
If the Merger is completed, you will be entitled to receive
$0.457 in cash, without interest thereon and less any required
withholding taxes, for each share of Cardiogenesis common stock
you own.
Our board of directors unanimously approved the Merger Agreement
and the Merger and related transactions and unanimously
determined that the Merger is advisable and fair to, and in the
best interests of Cardiogenesis shareholders. Our board of
directors unanimously recommends that you vote FOR
the proposal to approve and adopt the Merger Agreement.
The Merger cannot be completed unless shareholders holding at
least a majority of the outstanding common shares on the record
date approve and adopt the Merger Agreement. Your vote is
very important. Whether or not you plan to attend the
Special Meeting, please complete, date, sign and return, as
promptly as possible, the enclosed proxy card in the
accompanying prepaid reply envelope. If you attend the Special
Meeting and vote in person, your vote by ballot will revoke any
proxy previously submitted. The failure to vote your shares
of our common stock will have the same effect as a vote
AGAINST approval of the proposal to adopt the Merger
Agreement.
If your shares of our common stock are held in street
name by your bank, brokerage firm or other nominee, your
bank, brokerage firm or other nominee will be unable to voter
your shares of our common stock without instructions from you.
You should instruct your bank, brokerage firm or other nominee
to vote your shares of our common stock in accordance with the
procedures provided by your bank, brokerage firm or other
nominee. The failure to instruct your bank, brokerage firm or
other nominee to vote your shares of our common stock
FOR approval of the proposal to adopt the Merger
Agreement will have the same effect as voting
AGAINST the proposal to adopt the Merger
Agreement.
The accompanying proxy statement provides you with detailed
information about the Special Meeting, the Merger Agreement and
the Merger. A copy of the Merger Agreement is attached as
Annex A to the proxy statement. We encourage you to
read the accompanying proxy statement in its entirety because it
explains the proposed Merger, the documents related to the
Merger and other related matters.
Whether or not you plan to attend the Special Meeting, please
take the time to submit a proxy by following the instructions on
your proxy card as soon as possible. If your shares of our
common stock are held in an account at a broker, dealer,
commercial bank, trust company or other nominee, you should
instruct your broker, dealer, commercial bank, trust company or
other nominee how to vote in accordance with the voting
instruction form furnished by your broker, dealer, commercial
bank, trust company or other nominee.
On behalf of our board of directors and management of
Cardiogenesis, we thank you for your support.
Best Regards,
Paul McCormick
Executive Chairman
This transaction has not been approved or disapproved by the
Securities and Exchange Commission or any state securities
commission. Neither the Securities and Exchange Commission nor
any state securities commission has passed upon the merits or
fairness of this transaction or upon the adequacy or accuracy of
the information contained in this proxy statement. Any
representation to the contrary is a criminal offense.
The accompanying proxy statement is dated
[ ],
2011 and is first being mailed to shareholders on or about
[ ],
2011.
CARDIOGENESIS
CORPORATION
11 Musick
Irvine, CA 92618
(949) 420-1800
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To Be Held [], 2011
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders
(the Special Meeting) of Cardiogenesis Corporation,
a California corporation, will be held on
[ ],
2011 at [ ] Pacific
Time at our principal executive offices, located at 11 Musick,
Irvine, California, 92618 for the following purposes:
(1) To approve and adopt the Agreement and Plan of Merger
(the Merger Agreement), dated as of
March 28, 2011, by and among Cardiogenesis Corporation, a
California corporation (Cardiogenesis,
we, us or
our), CryoLife, Inc., a Florida corporation
(CryoLife), and CL Falcon, Inc., a Florida
corporation and a wholly-owned subsidiary of CryoLife
(Merger Sub).
(2) To consider and vote on a proposal to adjourn the
Special Meeting, if necessary or appropriate, to do so.
(3) To transact any other business as may properly come
before the Special Meeting or any reconvened meeting after any
adjournment or postponement of the Special Meeting.
For more information about the Merger and the other transactions
contemplated by the Merger Agreement, please review the
accompanying proxy statement and the Merger Agreement attached
as Annex A.
Our board of directors has fixed the close of business of [May]
[4], 2011 as the record date for the determination of
shareholders entitled to notice of and to vote and this Special
Meeting and at any adjournment or postponement thereof. For ten
days prior to the Special Meeting, a complete list of
shareholders entitled to vote at the Special Meeting will be
available for examination by any shareholder, for any purpose
relating to the Special Meeting, during ordinary business hours
at our principal offices located at 11 Musick, Irvine,
California, 92618.
Please submit your proxy or voting instructions as soon as
possible to make sure that your shares are represented and voted
at the Special Meeting, whether or not you plan to attend the
Special Meeting. Whether you attend the Special Meeting or not,
you may revoke a proxy at any time before it is voted by filing
with our corporate secretary a duly executed revocation of
proxy, by properly submitting a proxy by mail with a later date
or by appearing at the Special Meeting and voting in person. You
may revoke a proxy by any of these methods, regardless of the
method used to deliver your previous proxy. Attendance at the
Special Meeting without voting will not itself revoke a proxy.
If your shares are held in an account at a broker, dealer,
commercial bank, trust company or other nominee, you must
contact your broker, dealer, commercial bank, trust company or
other nominee to revoke your proxy.
Cardiogenesis shareholders who do not vote in favor of approval
and adoption of the Merger Agreement will have the right to seek
appraisal and the fair value of their shares but only if they
perfect their dissenters rights by complying with the
required procedures under California law. See Approval of
the Merger Agreement Dissenters Rights
beginning on page 41 of the accompanying proxy statement.
After careful consideration, our board of directors has
unanimously determined that the Merger is advisable, fair to and
in the best interests of the shareholders of Cardiogenesis, and
approved the Merger Agreement, the Merger and other transaction
contemplated by the Merger Agreement. Accordingly,
Cardiogenesis board of directors recommends that you vote
FOR approval of the proposal to adopt the Merger
Agreement and FOR approval of the proposal to
adjourn
All shareholders are cordially invited to attend the Special
Meeting.
YOUR VOTE IS VERY IMPORTANT TO US WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING IN PERSON. SHAREHOLDERS ARE URGED TO VOTE
THEIR SHARES PROMPTLY BY MAIL AS INSTRUCTED ON THE ENCLOSED
PROXY CARD OR VOTING INSTRUCTION CARD. PROXIES FORWARDED BY
OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY
THEM.
By Order of Our Board of Directors,
Paul McCormick
Executive Chairman
Irvine, California
[ ] [ ],
2011
SUMMARY
VOTING INSTRUCTIONS
Ensure that your shares of Cardiogenesis common stock can be
voted at the Special Meeting by submitting your proxy or
contacting your broker, dealer, commercial bank, trust company
or other nominee.
If your shares of Cardiogenesis common stock are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee: check the voting
instruction card forwarded by your broker, dealer, commercial
bank, trust company or other nominee to see which voting options
are available or contact your broker, dealer, commercial bank,
trust company or other nominee in order to obtain directions as
to how to ensure that your shares of our common stock are voted
in favor of the proposals at the Special Meeting.
If your shares of Cardiogenesis common stock are
registered in your name: submit your proxy as soon as
possible by signing, dating and returning the enclosed proxy
card in the enclosed postage-paid envelope, so that your shares
of our common stock can be voted in favor of the proposals at
the Special Meeting.
For additional questions about the Merger, assistance in
submitting proxies or voting shares of Cardiogenesis common
stock, or to request additional copies of the proxy statement or
the enclosed proxy card, please contact William R. Abbott, our
Chief Financial Officer, at 11 Musick, Irvine, California,
92618, or via telephone at
(949) 420-1800.
TABLE OF
CONTENTS
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ii
CARDIOGENESIS
CORPORATION
11 Musick
Irvine, CA 92618
(949) 420-1800
PROXY
STATEMENT
This proxy statement contains information related to a Special
Meeting of shareholders of Cardiogenesis Corporation, a
California corporation, or Cardiogenesis, we, us or our, to be
held on
[ ],
2011, at
[ ],
Pacific Time, at Cardiogenesis principal executive
offices, 11 Musick, Irvine, CA 92618 and at any adjournments or
postponements thereof. We are furnishing this proxy statement to
shareholders of Cardiogenesis as part of the solicitation of
proxies by Cardiogenesis board of directors for use at the
Special Meeting. This proxy statement is dated
[ ],
2011 and is first being mailed to shareholders on or about
[ ],
2011.
SUMMARY
TERM SHEET
This summary highlights selected information in this proxy
statement and may not contain all the information about the
Merger that is important to you. We have included page
references in parentheses to direct you to more complete
descriptions of the topics presented in this summary term sheet.
You should carefully read this proxy statement in its entirety,
including the annexes and the other documents to which we have
referred you, for a more complete understanding of the matters
being considered at the Special Meeting.
Parties
to the Merger
Cardiogenesis
Corporation
11 Musick,
Irvine, CA 92618
(949) 420-1800
We are a California corporation and we develop and market
surgical products for the treatment of refractory angina in
patients with chronic cardiac ischemia caused by coronary artery
disease, or CAD, which remains a leading cause of death for
persons over the age of 65. Our products are used to create
transmural laser channels into the myocardium, commonly referred
to as transmyocardial revascularization, or TMR, which has
proven effective in reducing symptoms in patients with
refractory angina compared to optimal medical management. We are
also currently developing proprietary catheter-based systems for
the delivery of biologics, such as stem cells, as an adjunctive
therapy. Our PHOENIX Combination Delivery
Systemtm,
for which we have received an Investigational Device Exemption,
or IDE, is the first device developed for this purpose.
CryoLife,
Inc.
1655 Roberts Boulevard, NW
Kennesaw, GA 30144
Incorporated in Florida in 1984, CryoLife, Inc., which we refer
to as CryoLife, is a leader in the processing and distribution
of implantable living human tissues for use in cardiac and
vascular surgeries throughout the U.S. and Canada.
CryoLifes CryoValve
®
SG pulmonary heart valve, processed using CryoLifes
proprietary SynerGraft
®
technology, has FDA 510(k) clearance for the replacement of
diseased, damaged, malformed, or malfunctioning native or
prosthetic pulmonary valves. CryoLifes
CryoPatch®
SG pulmonary cardiac patch has FDA 510(k) clearance for the
repair or reconstruction of the right ventricular outflow tract
(RVOT), which is a surgery commonly performed in children with
congenital heart defects, such as Tetralogy of Fallot, Truncus
Arteriosus, and Pulmonary Atresia. CryoPatch SG is distributed
in three anatomic configurations: pulmonary hemi-artery,
pulmonary trunk, and pulmonary branch. CryoLifes
BioGlue®
Surgical Adhesive is FDA approved as an adjunct to
sutures and staples for use in adult patients in open surgical
repair of large vessels. BioGlue is also CE marked in the
European Community and approved in Canada and Australia for use
in soft tissue repair and was recently approved in Japan for use
in the repair of aortic dissections. CryoLifes
BioFoamtm
Surgical Matrix is CE marked in the European Community for use
as an adjunct in the sealing of abdominal parenchymal tissues
(liver and spleen) when cessation of bleeding by ligature or
other conventional methods is ineffective or impractical.
CryoLife also distributes
PerClot®,
an absorbable powder hemostat that has CE Mark designation
allowing commercial distribution into the European Community.
PerClot is also distributed in other countries outside of the
European Community.
CL
Falcon, Inc.
1655 Roberts Boulevard, NW
Kennesaw, GA 30144
CL Falcon, Inc., which we refer to as Merger Sub, is a Florida
corporation and a wholly-owned subsidiary of CryoLife that was
formed by CryoLife solely for the purpose of facilitating the
acquisition of Cardiogenesis. To date, Merger Sub has not
carried on any activities other than those related to its
formation and completing the transaction contemplated by the
Merger Agreement. Merger Sub currently owns
[ ] shares
of our common stock, representing approximately
[ ]%
of our outstanding shares of common stock. Upon consummation of
the proposed Merger, Merger Sub will merge with and into
Cardiogenesis and will cease to exist with Cardiogenesis
continuing as the surviving corporation and a wholly-owned
subsidiary of CryoLife.
Overview
of the Transaction
(page 14)
Cardiogenesis, CryoLife and Merger Sub entered into the Merger
Agreement on March 28, 2011. In the Merger Agreement,
CryoLife agreed to acquire Cardiogenesis through a two-step
process. The first step was a tender offer by Merger Sub for all
of the outstanding shares of our common stock at a price of
$0.457 per share, net to the seller in cash without interest
thereon and less any applicable withholding tax, which was
completed on [May [ ]], 2011 and resulted in
Merger Sub acquiring 49.9% of the outstanding shares of our
common stock. The second step is a merger of Merger Sub with and
into Cardiogenesis, with Cardiogenesis surviving as a
wholly-owned subsidiary of CryoLife. The following will occur in
connection with the Merger:
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each outstanding common share issued and outstanding immediately
prior to the effective time of the Merger (other than shares of
our common stock held by us, CryoLife, or Merger Sub, or by any
direct or indirect wholly-owned subsidiary of CryoLife, Merger
Sub or Cardiogenesis or held by shareholders who are entitled to
demand and properly demand and perfect appraisal of such shares
of our common stock pursuant to, and who comply in all material
respects with,
Sections 1300-1313
of the California General Corporation Law (which shall be
treated as described under Dissenters Rights
beginning on page 41)) will by virtue of the Merger, and
without action by the holder thereof, be canceled and converted
into the right to receive $0.457 per common share;
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all shares of our common stock so converted will, by virtue of
the Merger, be canceled, and each holder of a certificate
representing any shares of Cardiogenesis common stock will cease
to have any rights with respect thereto, except the right to
receive the $0.457 per share upon surrender of such certificate;
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all shares of our common stock held in the treasury of
Cardiogenesis or owned, directly or indirectly, by CryoLife
Merger Sub or any wholly-owned Subsidiary of Cardiogenesis
immediately prior to the effective time shall be canceled and
shall cease to exist, and no consideration shall be delivered in
exchange therefore; and
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each outstanding common share of Merger Sub will be converted
into one fully paid and non-assessable share of common stock, no
par value, of the surviving corporation.
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Following and as a result of the Merger:
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Cardiogenesis shareholders (other than CryoLife and its
affiliates) will no longer have any interest in, and no longer
be shareholders of, Cardiogenesis, and will not participate in
any future earnings or growth;
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our shares of common stock will no longer be quoted on the
OTCQB; and
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the registration of shares of our common stock under the
Securities Exchange Act of 1934, as amended, will be terminated.
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The
Special Meeting
(page 11)
The Special Meeting will be held on
[ ],
2011 at [ ] Pacific Time at
Cardiogenesis principal executive offices, 11 Musick,
Irvine, California 92618. At the Special Meeting, you will be
asked to, among other things, approve and adopt the Merger
Agreement. Please see the section of this proxy statement
captioned Questions and Answers About the Special Meeting
and the Merger beginning on page 7 for additional
information on the Special Meeting, including how to vote your
shares of our common stock.
Shareholders
Entitled to Vote
(page 11)
You may vote at the Special Meeting if you owned shares of our
common stock at the close of business on [May 4], 2011, the
record date for the Special Meeting. On that date, there were
[ ] shares
of our common stock outstanding and entitled to vote. Approval
and adoption of the Merger Agreement requires the affirmative
vote of the holders of at least a majority of the shares of our
common stock outstanding and entitled to vote at the Special
Meeting. Merger Sub owns [ ]% of
the shares of our common stock as a result of the tender offer
made pursuant to the Merger Agreement and will vote such shares
in favor of approving and adopting the Merger Agreement.
Vote
Required to Approve and Adopt the Merger Agreement
(page 12)
You may vote at the special meeting if you owned shares of our
common stock at the close of business on [May] [4], 2011, the
record date for the special meeting. On that date, there were
[ ] shares
of our common stock outstanding and entitled to vote. You may
cast one vote for each Cardiogenesis common share that you owned
on that date. Approval and adoption of the Merger Agreement
requires the affirmative vote of the holders of at least a
majority of the shares of our common stock outstanding and
entitled to vote at the special meeting. CryoLife, either
directly or indirectly through Merger Sub, owns
[ ]%
of the shares of our common stock as a result of the tender
offer made pursuant to the Merger Agreement and will vote such
shares in favor of approving and adopting the Merger Agreement.
These shares, together with shares held by the parties to the
Support Agreement constitute a majority of the shares of
Cardiogenesis common stock outstanding; as a result, we believe
that approval of the Merger by Cardiogenesis shareholders is
assured. See Support Agreement at page 59.
Payment
for Common Shares
(page 50)
Computershare Inc. has been appointed as the Paying Agent to
coordinate the payment of the Merger consideration to our
shareholders. The Paying Agent will send written instructions
for surrendering your Cardiogenesis common share certificates,
if your shares of our common stock are certificated, and
obtaining the Merger consideration after we have completed the
Merger. Do not return your stock certificates with your proxy
card and do not forward your stock certificates to the Paying
Agent prior to receipt of the written instructions. If you hold
uncertificated shares of our common stock (i.e., you hold your
shares in book entry form), you will receive your cash
consideration once you send in your letter of transmittal and
any other documents requested in the Paying Agents
instructions.
Our Share
Price
(page 64)
The shares of our common stock are currently quoted on the OTCQB
under the symbol CGCP.PK. On March 28, 2011,
the trading day prior to announcement of the signing of the
Merger Agreement, the last sale price
3
per common share was $0.32. The $0.457 per share to be paid for
each Cardiogenesis common share in the Merger represents a
premium of approximately 43% to the closing price on
March 28, 2011. On
[ ],
2011, the last trading day before the printing of this proxy
statement, the closing price per share was
$[ ].
Recommendation
of Our Board of Directors; Reasons for Recommending the Approval
and Adoption of the Merger Agreement
(page 20)
On March 22, 2011, our board of directors (all of whom were
unaffiliated with CryoLife at the time) unanimously determined
that the Merger Agreement and the transactions contemplated
thereby, including the tender offer and the Merger, are
advisable and in the best interests of and are fair to
Cardiogenesis and its shareholders and approved the Merger
Agreement and the transactions contemplated thereby, including
the tender offer and the Merger. Accordingly, our board of
directors recommends that our shareholders vote
FOR approval and adoption of the Merger
Agreement.
In adopting the Merger Agreement and making the determination to
recommend that the Merger Agreement be approved and adopted,
Cardiogenesis board of directors consulted with
Cardiogenesis management, as well as its financial and
legal advisors, and considered a number of factors that the
board members believed supported their decision. In particular,
Cardiogenesis board of directors reviewed the possible
alternatives to an acquisition by CryoLife and perceived risks
of those alternatives, the range of potential benefits to
shareholders of these alternatives and the timing and the
likelihood of accomplishing the goals of such alternatives, and
concluded that none of these alternatives were reasonably likely
to present superior opportunities for Cardiogenesis to create
greater value for shareholders, taking into account risks to the
successful completion of a transaction as well as business,
competitive, industry and market risks.
Background
of the Merger
(pages 14 and 20)
For a description of the events leading to the adoption of the
Merger Agreement by our board of directors, you should refer to
Approval of the Merger Agreement Background of
the Merger and Recommendation of Our Board of
Directors; Reasons for Recommending the Approval of the Merger
Agreement.
Opinion
of Our Financial Advisor
(page 24)
B. Riley, on March 22, 2011 as updated and confirmed in
writing on March 28, 2011, rendered its oral opinion to our
board of directors to the effect that, as of such dates, the
$0.457 per share to be received by Cardiogenesis shareholders
pursuant to the Merger Agreement was fair, from a financial
point of view, to such shareholders.
The full text of the written opinion of B. Riley is attached to
this proxy statement as Annex B. We encourage you to
read this opinion carefully in its entirety for a complete
description of the procedures followed, assumptions made,
matters considered, qualifications and limitations on review
undertaken and other matters considered by B. Riley in
preparing its opinion. The opinion is directed to our board of
directors and only addresses the fairness from a financial point
of view of the per share consideration to be received by
shareholders pursuant to the Merger and does not address any
other aspect or implication of the transactions or any other
agreement, arrangement or understanding entered into in
connection with the Merger Agreement, including, without
limitation, the support agreement, which we refer to as the
Support Agreement.
B. Riley acted as a financial advisor to Cardiogenesis in
connection with the tender offer and the Merger and will receive
an estimated fee of approximately $192,000 from Cardiogenesis,
of which approximately $146,000 is contingent upon the
consummation of the tender offer and the Merger. B. Riley also
received a fee of $100,000 for rendering its written opinion.
The written opinion fee was not contingent upon the consummation
of the tender offer and the Merger or the conclusions reached in
B. Rileys written opinion. Cardiogenesis has also agreed
to indemnify B. Riley against certain liabilities and reimburse
B. Riley for certain expenses in connection with its services.
The written opinion has been approved by the Fairness Opinion
Committee of B. Riley & Co., LLC. In the ordinary
course of its business, B. Riley and its affiliates may actively
trade securities of Cardiogenesis and CryoLife for its
4
own account or the account of its customers and, accordingly,
may at any time hold a long or short position in such
securities. B. Riley may also, in the future, provide investment
banking and financial advisory services to Cardiogenesis or
CryoLife or entities that are affiliated with Cardiogenesis or
CryoLife, for which B. Riley would expect to receive
compensation.
Financing
of the Tender Offer and the Merger
(page 33)
Consummation of the Merger and the other transactions
contemplated by the Merger Agreement are not conditioned upon
CryoLife or Merger Sub obtaining any financing. As of the date
of this proxy statement, CryoLife has sufficient funds to
complete the Merger.
Interests
of Cardiogenesis Directors and Executive Officers in the
Merger
(page 34)
Members of our board of directors and our executive officers may
have interests in the transactions contemplated by the Merger
Agreement that differ from, or are in addition to, those of our
other shareholders. For example:
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as of March 25, 2011, Cardiogenesis directors and
executive officers owned in the aggregate 911,561 shares of
our common stock (excluding shares of our common stock issuable
upon the exercise of options to purchase shares of our common
stock and unvested shares of restricted stock);
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as of March 25, 2011, Cardiogenesis directors and
executive officers held options to purchase
1,939,384 shares of our common stock in the aggregate, with
exercise prices ranging from $0.13 to $2.57 per share. At the
effective time of the Merger, each holder of an option will be
entitled to receive an amount equal to the excess, if any, of
$0.457, without interest, over the exercise price per share of
such option, less any required withholding taxes.
Cardiogenesis directors and executive officers will
receive an aggregate of approximately $289,599 as a result of
the option payments;
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as of March 25, 2011, Cardiogenesis executive
officers held 365,318 shares of restricted stock subject to
vesting. Pursuant to the terms of the Merger agreement, each
share of restricted stock held by Cardiogenesis executive
officers vested in full immediately prior to the date of the
successful completion of the tender offer, which we refer to as
the Acceptance Date. Thereafter, immediately prior to the
effective time of the Merger, such shares of our common stock
will convert into the right to receive $0.457 per share;
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if the Merger is consummated, our current officers may receive
severance payments up to the following amounts:
Mr. Lanigan, $241,875; Mr. McCormick, $37,272; and
Mr. Abbott, $215,000, as described in the section
Summary of Aggregate Proceeds that May be Received by
Cardiogenesis Directors and Executive Officers
beginning on page 41;
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our current and former directors and officers will continue to
be indemnified and will have the benefit of liability insurance
until six years after the effective time of the Merger;
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in connection with the execution of the Merger Agreement, our
directors and executive officers entered into the Support
Agreement, pursuant to which such directors and executive
officers agreed to tender their 911,561 shares of our
common stock and 365,318 shares of restricted stock, for a
total of 1,276,879 shares, into the tender offer at the
request of CryoLife and to vote such shares, if any remain, in
favor of the Merger;
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if the Merger is consummated, any shareholder derivative claims
that are currently pending or that could be brought against the
directors and officers of Cardiogenesis by current shareholders
would likely be extinguished;
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CryoLife has agreed to a two-year employment agreement with
Richard Lanigan. Certain of our other officers may receive
employment agreements from CryoLife for employment, on an
as-needed basis, after the consummation of the Merger; and
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On [May ], 2011, CryoLife exercised its rights
under the Merger Agreement to appoint its designees,
[ ],
[ ],
and
[ ],
to our board of directors.
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Conditions
to the Merger
(page 59)
We are working to complete the Merger as soon as possible. The
Merger is subject to the satisfaction of several conditions,
including the conditions described immediately below. As such,
we cannot predict the exact time of the Mergers completion.
The completion of the Merger depends on satisfaction of the
conditions below:
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the Merger Agreement must have been approved and adopted by the
affirmative vote of at least a majority of the votes entitled to
be cast by the holders of the outstanding shares of our common
stock; and
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no judgment, ruling, order, writ, injunction or decree issued by
a court of competent jurisdiction or any statute, law,
ordinance, rule or regulation or other legal restraint or
prohibition of any governmental authority shall be in effect
that would make the Merger illegal or otherwise prevent the
consummation thereof provided that the party seeking to assert
this condition shall have used those efforts required under the
Merger Agreement to resist, lift or resolve such judgment,
ruling, order, writ, injunction or decree, statute, law,
ordinance, rule or regulation or other legal restraint or
prohibition.
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Where legally permissible, a party may waive a condition to its
obligation to complete the Merger even though that condition has
not been satisfied, although the shareholder approval condition
cannot be waived. None of Cardiogenesis, CryoLife or Merger Sub,
however, has any intention to waive any condition as of the date
of this proxy statement.
Dissenters
Rights
(pages 42 and C-1)
If the Merger is consummated, persons who are then shareholders
will have certain rights under California law to dissent and
demand appraisal of, and payment in cash of the fair value of,
their shares of our common stock. Any shares of our common stock
held by a person who demands appraisal of such shares and who
complies with the applicable provisions of California law shall
not be converted into the right to receive Merger consideration.
Such dissenters rights, if the statutory procedures were
complied with, will lead to a judicial determination of the fair
value (excluding any element of value arising from the
accomplishment or expectation of the Merger) required to be paid
in cash to such dissenting shareholders for their shares of our
common stock. The value so determined could be more or less
than, or the same as, the purchase price per share pursuant to
the tender offer or the consideration per share to be paid in
the Merger.
You should read Approval of the Merger
Agreement Dissenters Rights beginning on
page 42 for a more complete discussion of the
dissenters rights in relation to the Merger as well as
Annex C which contains a full text of the applicable
California statutes.
6
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
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Q:
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What
matters will be voted on at the Special Meeting?
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A: |
You will be voting on the following:
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To consider and vote on a proposal to approve and adopt the
Merger Agreement. The Merger is the second and final step of the
acquisition of Cardiogenesis by CryoLife. The first step was a
tender offer by Merger Sub for all of the outstanding shares of
our common stock at a price of $0.457 per share, net to the
seller in cash without interest thereon and less any withholding
taxes, which was completed on
[ ],
2011 and resulted in Merger Sub acquiring 49.9% of our
outstanding common stock.
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To consider and vote on a proposal to adjourn the Special
Meeting, if necessary or appropriate, to do so.
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Q:
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As a
shareholder, what will I receive in the Merger?
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A: |
You will be entitled to receive $0.457 in cash, without interest
thereon and less any applicable withholding tax, for each
Cardiogenesis common share that you own immediately prior to the
effective time of the Merger as described in the Merger
Agreement. For example, if you own 100 shares of
Cardiogenesis common stock, you will receive $45.70 in cash in
exchange for your shares of common stock, without interest and
less any applicable withholding taxes. You will not own any
shares of the capital stock in the surviving corporation.
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Q:
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When and
where is the Special Meeting of our shareholders?
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A: |
The Special Meeting of shareholders will be held on
[ ],
2011, at [ ], Pacific Time, at
Cardiogenesis principal executive offices, 11 Musick,
Irvine, California 92618.
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Q:
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What vote
of our shareholders is required to approve and adopt the Merger
Agreement?
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A: |
For us to complete the Merger, shareholders holding at least a
majority of the shares of our common stock outstanding at the
close of business on the record date must vote
FOR the proposal to approve and adopt the
Merger Agreement. As a result of the tender offer, CryoLife
beneficially owns a total of approximately
[ ]% of the outstanding shares of
our common stock as a result of the tender offer made pursuant
to the Merger Agreement and will cause Merger Sub to vote all
such shares in favor of approving and adopting the Merger
Agreement. The shares held by CryoLife, together with the shares
subject to the Support Agreement, represent a majority of our
outstanding shares, so we believe that shareholder approval is
assured.
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Q:
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Who can
attend and vote at the Special Meeting?
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A: |
All shareholders of record as of the close of business on [May
4], 2011, the record date for the Special Meeting, are entitled
to receive notice of and to attend and vote at the Special
Meeting, or any postponement or adjournment thereof. If you wish
to attend the Special Meeting and your shares are held in an
account at a broker, dealer, commercial bank, trust company or
other nominee (i.e., in street name), you will need
to bring a copy of your voting instruction card or statement
reflecting your share ownership as of the record date.
Street name holders who wish to vote at the Special
Meeting will need to obtain a proxy from the broker, dealer,
commercial bank, trust company or other nominee that holds their
shares of our common stock. Seating will be limited at the
Special Meeting. Shareholders of record will be verified against
an official list available in the registration area at the
meeting. We reserve the right to deny admittance to anyone who
cannot adequately show proof of share ownership as of the record
date.
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Q:
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When will
the shareholders list be available for
examination?
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A: |
A complete list of the shareholders of record as of the record
date will be available for examination by shareholders of record
beginning on
[ ],
2011 at the Companys headquarters and will continue to be
available through and during the special meeting.
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Q:
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How does
our board of directors recommend that I vote?
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A: |
Our board of directors unanimously recommends that our
shareholders vote FOR the proposal to approve
and adopt the Merger Agreement.
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Q:
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Am I
entitled to exercise dissenters rights instead of
receiving the Merger consideration for my shares?
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A: |
Yes. Cardiogenesis shareholders who do not vote in favor of
approval and adoption of the Merger Agreement will have the
right to seek appraisal and the fair value of their shares if
the Merger closes but only if they perfect their
dissenters rights by complying with the required
procedures under California law. See Approval of the
Merger Agreement Dissenters Rights
beginning on page 41 of the accompanying proxy statement.
For the full text of
Sections 1300-1313
of the CGCL, please see Annex C hereto.
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Q:
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How do I
cast my vote if I am a holder of record?
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A: |
If you were a holder of record on [May 4], 2011, you may vote in
person at the Special Meeting or by submitting a proxy for the
Special Meeting. You can submit your proxy by completing,
signing, dating and returning the enclosed proxy card in the
accompanying pre-addressed, postage paid envelope.
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If you
properly transmit your proxy, but do not indicate how you want
to vote, your proxy will be voted FOR the approval
and adoption of the Merger Agreement.
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Q:
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How do I
cast my vote if my Cardiogenesis shares are held in street
name by my broker, dealer, commercial bank, trust company
or other nominee?
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A: |
If you hold your shares in street name, which means
your shares of our common stock are held of record on [May 4],
2011 by a broker, dealer, commercial bank, trust company or
other nominee, you must provide the record holder of your shares
of our common stock with instructions on how to vote your shares
of our common stock in accordance with the voting directions
provided by your broker, dealer, commercial bank, trust company
or other nominee. If you do not provide your broker, dealer,
commercial bank, trust company or other nominee with
instructions on how to vote your shares, your shares of our
common stock will not be voted, which will have the same effect
as voting AGAINST the approval and adoption of the
Merger Agreement. Please refer to the voting instruction
card used by your broker, dealer, commercial bank, trust company
or other nominee to see if you may submit voting instructions
using the Internet or telephone.
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Q:
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What will
happen if I abstain from voting or fail to vote on the proposal
to approve and adopt the Merger Agreement?
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A: |
If you abstain from voting, fail to cast your vote in person or
by proxy or fail to give voting instructions to your broker,
dealer, commercial bank, trust company or other nominee, it will
have the same effect as a vote AGAINST
approval and adoption of the Merger Agreement.
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Q:
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Can I
change my vote after I have delivered my proxy?
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A: |
Yes. If you are a record holder, you can change your vote at any
time before your proxy is voted at the Special Meeting by
properly delivering a later-dated proxy by mail or attending the
Special Meeting in person and voting. You also may revoke your
proxy by delivering a notice of revocation to
Cardiogenesis corporate secretary prior to the vote at the
Special Meeting. If your shares are held in street name, you
must contact your broker, dealer, commercial bank, trust company
or other nominee to revoke your proxy.
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Q:
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What
should I do if I receive more than one set of voting
materials?
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A. |
You may receive more than one set of voting materials, including
multiple copies of this proxy statement or multiple proxy or
voting instruction cards. For example, if you hold your shares
of our common stock in more than one brokerage account, you will
receive a separate voting instruction card for each brokerage
account in which you hold shares of our common stock. If you are
a holder of record and your shares of our common stock
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are registered in more than one name, you will receive more than
one proxy card. Please submit each proxy and voting
instruction card that you receive.
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Q:
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If I am a
holder of certificated Cardiogenesis common shares, should I
send in my share certificates now?
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A: |
No. Promptly after the Merger is completed, each holder of
record as of the time of the Merger will be sent a letter of
transmittal and written instructions for exchanging their share
certificates for the Merger consideration. These instructions
will tell you how and where to send in your certificates for
your cash consideration. You will receive your cash payment
after the Paying Agent receives your share certificates, your
letter of transmittal and any other documents requested in the
instructions. Please do not send certificates with your proxy.
Holders of uncertificated shares of our common stock (i.e.,
holders whose shares are held in book entry) will receive their
cash consideration after the paying agent receives their letter
of transmittal and any other documents requested in the Paying
Agents instructions.
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Q:
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When is
the Merger expected to be completed?
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A: |
We are working to complete the Merger as quickly as possible. We
cannot, however, predict the exact timing of the Merger. In
order to complete the Merger, we must obtain shareholder
approval and the other closing conditions under the Merger
Agreement must be satisfied or waived.
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Q:
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Who can
help answer my questions?
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A: |
If you have any questions about the Merger or how to submit your
proxy, or if you need additional copies of this proxy statement
or the enclosed proxy card, you should contact William R.
Abbott, our Chief Financial Officer, at 11 Musick, Irvine,
California, 92618, or via telephone at
(949) 420-1800.
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9
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in
this proxy statement, as well as information included in oral
statements or other written statements made or to be made by us,
contain statements that, in our opinion, may constitute
forward-looking statements that are not historical
facts.
Cardiogenesis has identified some of these forward-looking
statements with words like believe, may,
could, would, might,
possible, potential, will,
should, expect, intend,
plan, anticipate, estimate,
approximate outlook or
continue or the negative of these words, other terms
of similar meaning or the use of future dates. Forward-looking
statements in this proxy statement include without limitation
statements regarding the anticipated timing of filings and
approvals relating to the Merger; statements regarding the
expected timing of the completion of the Merger; statements
regarding the ability to complete the Merger considering the
various closing conditions; statements regarding expected tax
treatment for the Merger; any statements of expectation or
belief; and any statements of assumptions underlying any of the
foregoing. Investors and security holders are cautioned not to
place undue reliance on these forward-looking statements. Actual
results could differ materially from those currently anticipated
due to a number of risks and uncertainties. Risks and
uncertainties that could cause results to differ from
expectations include: uncertainties as to the timing of the
Merger; uncertainties as to how many of Cardiogenesis
shareholders will vote their shares of our common stock in favor
of the Merger; the risk that competing offers will be made; the
possibility that various closing conditions for the transactions
contemplated by the Merger Agreement may not be satisfied or
waived, including that a governmental entity may prohibit, delay
or refuse to grant approval for the consummation of such
transactions; the effects of disruption from the transactions
contemplated by the Merger Agreement making it more difficult to
maintain relationships with employees, customers, vendors and
other business partners; the risk that shareholder litigation in
connection with the Merger may result in significant costs of
defense, indemnification and liability or otherwise delay or
prevent the Merger; other business effects, including the
effects of industry, economic or political conditions outside of
Cardiogenesis control; transaction costs; actual or
contingent liabilities; and other risks and uncertainties
discussed in Cardiogenesis filings with the SEC, including
the Risk Factors sections of Cardiogenesis
most recent annual report on
Form 10-K
and subsequent quarterly reports on
Form 10-Q,
as well as the Risk Factors set forth in the Offer to Purchase
previously mailed to Cardiogenesis shareholders.
Copies of Cardiogenesis filings with the
U.S. Securities and Exchange Commission, or the SEC, may be
obtained at the Investors section of
Cardiogenesis website at
http://www.cardiogenesis.com
under the caption SEC Filings. Cardiogenesis does
not undertake any obligation to update any forward-looking
statements as a result of new information, future developments
or otherwise, except as expressly required by law. All
forward-looking statements in this proxy statement are qualified
in their entirety by this cautionary statement.
10
THE
CARDIOGNESIS SPECIAL MEETING
We are furnishing this proxy statement to Cardiogenesis
shareholders as part of the solicitation of proxies by the
Cardiogenesis board of directors for use at the Special
Meeting.
Date,
Time and Place
We will hold the Special Meeting on
[ ],
2011, at
[ ],
Pacific Time, at Cardiogenesis principal executive
offices, 11 Musick, Irvine, California 92618. Seating will be
limited to shareholders. Admission to the Special Meeting will
be on a first-come, first-served basis.
Purpose
of the Special Meeting
The Special Meeting is being held for the following purposes:
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to approve and adopt the Merger Agreement (see Approval of
the Merger Agreement beginning on page 14);
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to consider and vote on a proposal to adjourn the Special
Meeting, if necessary or appropriate to do so; and
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to transact any other business that is properly brought before
the Special Meeting or any reconvened meeting after any
adjournment or postponement of the Special Meeting.
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Recommendation
of Our Board of Directors
Cardiogenesis board of directors unanimously recommends
that our shareholders vote FOR the approval
and adoption of the Merger Agreement, and, if necessary,
FOR an adjournment of the Special Meeting.
Record
Date; Shareholders Entitled to Vote; Quorum
Only holders of record of shares of our common stock at the
close of business on [May 4], 2011, the record date, are
entitled to notice of and to vote at the Special Meeting. On the
record date,
[ ] shares
of our common stock were issued and outstanding and held by
[ ]
holders of record. Holders of record of shares of our common
stock on the record date are entitled to one vote per common
share at the Special Meeting on each proposal. For ten days
prior to the Special Meeting, a complete list of shareholders
entitled to vote at the Special Meeting will be available for
examination by any shareholder, for any purpose relating to the
Special Meeting, during ordinary business hours at our principal
offices located at 11 Musick, Irvine, California 92618.
A quorum is necessary to hold a valid Special Meeting. A quorum
will be present at the Special Meeting if the holders of a
majority of shares of our common stock outstanding and entitled
to vote on the record date are present, in person or by proxy.
Voting
Procedures
Voting
by Proxy or in Person at the Special Meeting
Holders of record can ensure that their shares of our common
stock are voted at the Special Meeting by completing, signing,
dating and delivering the enclosed proxy card in the enclosed
postage-paid envelope. Submitting by this method will not affect
your right to attend the Special Meeting and to vote in person.
If you plan to attend the Special Meeting and wish to vote in
person, you will be given a ballot at the Special Meeting.
Please note, however, that if your shares of our common stock
are held in street name by a broker, dealer,
commercial bank, trust company or other nominee and you wish to
vote at the Special Meeting, you must bring to the Special
Meeting a proxy from the record holder of the shares of our
common stock authorizing you to vote at the Special Meeting.
Abstentions
When an eligible voter attends the Special Meeting but decides
not to vote, his or her decision not to vote is called an
abstention. Properly executed proxy cards that are
marked abstain or withhold authority on
any
11
proposal will be treated as abstentions for that proposal.
Abstention shares will have the same effect as votes AGAINST
a proposal if the minimum vote required for approval of the
proposal is a majority of (i) the shares present and
entitled to vote, or (ii) all shares outstanding and
entitled to vote.
Broker
Non-Votes
Broker non-votes occur when shares held by a broker for a
beneficial owner are not voted with respect to a particular
proposal because (i) the broker does not receive voting
instructions from the beneficial owner, and (ii) the broker
lacks discretionary authority to vote the shares. Broker
non-votes will not be treated as shares present and entitled to
vote for purposes of any matter requiring the affirmative vote
of a majority or other proportion of the shares present and
entitled to vote (even though the same shares may be considered
present for quorum purposes and may be entitled to vote on other
matters). Thus, a broker non-vote will have the same effect as a
vote AGAINST a proposal the passage of which requires an
affirmative vote of the holders of a majority of the outstanding
shares entitled to vote on such proposal. The inspector of
elections appointed for the Special Meeting will determine
whether a quorum is present, and will tabulate affirmative and
negative votes, abstentions and broker non-votes.
Vote
Required
Approval
of the Merger Agreement
The approval and adoption of the Merger Agreement by our
shareholders requires the affirmative vote of the holders of at
least a majority of the shares of our common stock present in
person or represented by proxy and entitled to vote at the
Special Meeting as of the record date, either in person or by
proxy. Merger Sub already owns
[ ]%
of the shares of our common stock as a result of the tender
offer made pursuant to the Merger Agreement and will vote such
shares for the approval and adoption of the Merger Agreement.
The shares held by CryoLife, together with the shares subject to
the Support Agreement, represent a majority of our outstanding
shares, so we believe that shareholder approval is assured.
Abstentions and broker non-votes will have the same effect as a
vote AGAINST the proposal to adopt the Merger Agreement.
Approval
of the Adjournment of the Special Meeting
If necessary, the approval of an adjournment to the Special
Meeting requires the affirmative vote of the holders of at least
a majority of the shares of our common stock outstanding and
entitled to vote at the Special Meeting as of the record date,
either in person or by proxy. Merger Sub already owns
[ ]%
of the shares of our common stock as a result of the tender
offer made pursuant to the Merger Agreement and will vote such
shares for an approval of the adjournment of the Special
Meeting. The shares held by CryoLife, together with the shares
subject to the Support Agreement, represent a majority of our
outstanding shares, so we believe that shareholder approval is
assured. Abstentions will have the same effect as a vote
AGAINST the proposal to approve any adjournment. Broker
non-votes will not be relevant to the outcome.
Revocation
of Proxies
Submitting a proxy on the enclosed form does not preclude a
shareholder from voting in person at the Special Meeting. A
shareholder of record may revoke a proxy at any time before it
is voted by filing with our corporate secretary a duly executed
revocation of proxy, by properly submitting a proxy by mail with
a later date or by appearing at the Special Meeting and voting
in person. A shareholder of record may revoke a proxy by any of
these methods, regardless of the method used to deliver the
shareholders previous proxy. Attendance at the Special
Meeting without voting will not itself revoke a proxy. If the
shares of our common stock you own are held in street name, you
must contact your broker, dealer, commercial bank, trust company
or other nominee to revoke your proxy.
Solicitation
of Proxies
[CryoLife and Merger Sub have retained [PROXY SOLICITOR] to
assist in the solicitation of proxies for the Special Meeting
for a fee of
$[ ],
plus reimbursement of reasonable
out-of-pocket
expenses.] Cardiogenesis directors, officers and employees
may also solicit proxies by personal interview, mail,
e-mail,
telephone,
12
facsimile or other means of communication. These persons will
not be paid additional remuneration for their efforts.
Cardiogenesis will also request brokers and other fiduciaries to
forward proxy solicitation material to the beneficial owners of
shares of Cardiogenesis common stock that the brokers and
fiduciaries hold of record. Upon request, Cardiogenesis will
reimburse them for their reasonable
out-of-pocket
expenses. The expense of the solicitation of proxies will be
borne by Cardiogenesis.
Assistance
If you need assistance in completing your proxy card or have
questions regarding the Special Meeting, please contact William
R. Abbott, our Chief Financial Officer, at
(949) 420-1800
or at 11 Musick, Irvine, California, 92618.
13
APPROVAL
OF THE MERGER AGREEMENT
The following is a description of the material aspects of the
Merger. While we believe that the following description covers
the material terms of the Merger, the description may not
contain all of the information that is important to you. We
encourage you to read carefully this entire document, including
the Merger Agreement attached to this proxy statement as
Annex A, for a more complete understanding of the
Merger. The following description is subject to, and is
qualified in its entirety by reference to, the Merger
Agreement.
Overview
of the Transaction
Cardiogenesis, CryoLife and Merger Sub entered into the Merger
Agreement on March 28, 2011. In the Merger Agreement,
CryoLife agreed to acquire Cardiogenesis through a two-step
process. The first step was a tender offer by Merger Sub for all
of the outstanding shares of our common stock at a price of
$0.457 per share, net to the seller in cash without interest
thereon and less any applicable withholding tax, which was
completed on
[ ]
[ ],
2011, resulting in Merger Sub acquiring 49.9% of our outstanding
common stock. The second step is a Merger of Merger Sub with and
into Cardiogenesis, with Cardiogenesis surviving as a
wholly-owned subsidiary of CryoLife. The following will occur in
connection with the Merger:
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each outstanding common share issued and outstanding immediately
prior to the effective time of the Merger (other than shares of
our common stock held by us, CryoLife or Merger Sub, or by any
direct or indirect wholly-owned subsidiary of CryoLife, Merger
Sub or Cardiogenesis or held by shareholders who are entitled to
demand and properly demand and perfect appraisal of such shares
of our common stock pursuant to, and who comply in all material
respects with,
Sections 1300-1313
of the California General Corporation Law (which shall be
treated as described under Dissenters Rights
beginning on page 42)) will by virtue of the Merger, and
without action by the holder thereof, be canceled and converted
into the right to receive $0.457 per common share;
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all shares of our common stock so converted will, by virtue of
the Merger be canceled, and each holder of a certificate
representing any shares of Cardiogenesis common stock shall
cease to have any rights with respect thereto, except the right
to receive the $0.457 per share upon surrender of such
certificate;
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all shares of our common stock held in the treasury of
Cardiogenesis or owned, directly or indirectly, by CryoLife,
Merger Sub or any wholly-owned subsidiary of Cardiogenesis
immediately prior to the effective time of the Merger shall be
canceled and shall cease to exist, and no consideration shall be
delivered in exchange therefore; and
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each outstanding common share of Merger Sub will be converted
into one fully paid and nonassessable share of common stock, no
par value, of the surviving corporation.
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Following and as a result of the Merger:
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Cardiogenesis shareholders (other than CryoLife and its
affiliates) will no longer have any interest in, and no longer
be shareholders of, Cardiogenesis, and will not participate in
any of our future earnings or growth;
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our shares of common stock will no longer be quoted on the
OTCQB; and
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the registration of the shares of our common stock under the
Securities Exchange Act of 1934, as amended, will be terminated.
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Management
and Board of Directors of the Surviving Corporation
The directors and officers of Merger Sub immediately prior to
the effective time will be the initial directors and officers of
the surviving corporation.
Background
of the Merger
The following chronology summarizes the key meetings,
conversations and events that led to the signing of the Merger
Agreement. This chronology covers only key events leading up to
the Merger Agreement and does not
14
purport to catalogue every communication between representatives
of Cardiogenesis, CryoLife, Merger Sub and other parties.
As part of the ongoing evaluation of Cardiogenesis
business, Cardiogenesis board and our senior management
regularly review and assess opportunities to achieve long-term
strategic goals and to maximize shareholder value, including
potential opportunities for business combinations, acquisitions,
dispositions, internal restructurings and other strategic
alternatives. In July 2009, Cardiogenesis board discussed
potential strategies capable of supporting Cardiogenesis
future prospects while maximizing shareholder value. The
strategies included (i) identifying privately-held
companies with synergistic technologies with Cardiogenesis
products with which a merger would provide a partial liquidity
event for the shareholders of the private company while
Cardiogenesis could acquire a pathway to regain a listing on a
national exchange, (ii) a merger of equals with a candidate
focused on regenerative medicine in which Cardiogenesis would
represent the combined companys cardiovascular
application, (iii) a sale of Cardiogenesis, and (iv) a
financing transaction to provide Cardiogenesis with adequate
resources to fund its research and development initiatives,
increase product sales and to regain a listing on a national
exchange. Although our board of directors did not determine that
Cardiogenesis was for sale at such time, our board authorized
Paul McCormick, Cardiogenesis Executive Chairman, to
proceed with contacting those potential candidates who met the
criteria described above.
Based on his extensive industry experience, Mr. McCormick
identified the companies that would possibly satisfy the
criteria discussed with our board of directors. In addition,
Mr. McCormick had several informal discussions with
representatives of investment banks that had experience in the
medical device industry regarding alternative strategies,
including the possibility of raising equity or debt capital
under current market conditions, and identities of companies
that might be interested in a strategic transaction with
Cardiogenesis. Cardiogenesis did not engage a financial advisor
at that time. Between July 2009 and July 2010,
Mr. McCormick participated in multiple discussions with 23
strategic and financial parties to ascertain their potential
interest in a transaction with Cardiogenesis. This resulted in
Cardiogenesis presenting a summary of its publicly available
information to 14 parties and entering into non-disclosure
agreements with three parties, including CryoLife, to further
discuss a potential transaction.
On October 6, 2009, Cardiogenesis entered into the 2009 NDA
and the management of CryoLife attended a meeting with
Cardiogenesis senior management to gain better
understanding of Cardiogenesis business. Attending for
CryoLife were Steven G. Anderson, Chief Executive Officer, D.
Ashley Lee, Chief Operating Officer and Chief Financial Officer,
Gerald B. Seery, Senior Vice President of Sales and Marketing,
Scott B. Capps, Vice President of Clinical Research, Timothy M.
Neja, Vice President of Laboratory Operations and William F.
Northrup III, MD, Vice President of Physician Relations and
Education, and for Cardiogenesis were Messrs. McCormick and
Lanigan.
On October 16, 2009, Mr. Lee called Mr. McCormick
to provide feedback on the October 14, 2009 meeting.
Mr. Lee indicated that while CryoLife had interest in a
transaction with Cardiogenesis, it had other opportunities that
were of a higher priority at that time to CryoLife.
Of the 23 strategic and financial parties approached between
July 2009 and July 2010, one candidate other than CryoLife
expressed preliminary interest in discussing a potential
transaction with Cardiogenesis. Company A expressed an interest
in exploring a potential merger transaction with Cardiogenesis.
During the summer and fall of 2010, Mr. McCormick had
several in-person meetings and engaged in intermittent
discussions with, and provided requested information to,
representatives of Company A.
On August 12, 2010, Mr. Lee contacted
Mr. McCormick to express CryoLifes renewed interest
in evaluating a potential acquisition of Cardiogenesis, and
requested additional information about Cardiogenesis
business. On August 24, 2010, Cardiogenesis senior
management met with representatives of Company A to discuss the
scope and process of conducting due diligence. In addition,
Cardiogenesis was presented with information about Company
As current business and technology and the potential
strategic advantages of a transaction between Cardiogenesis and
Company A. Senior management of Company A provided
Mr. McCormick with an outline of the process they believed
would be required to complete a transaction with Cardiogenesis
in a timely manner.
15
On September 13, 2010, at a regularly scheduled meeting of
our board of directors, Mr. McCormick updated our board of
directors on discussions with Company A. A representative of
K&L Gates LLP, which we refer to as K&L Gates,
Cardiogenesis outside counsel, counseled our board of
directors on its fiduciary duties in connection with a potential
strategic transaction and outlined the process our board of
directors should implement to properly evaluate a potential
offer, including the retention of a financial advisor. In order
to be in a better position to properly evaluate a potential
transaction, our board of directors instructed
Cardiogenesis senior management to interview and retain an
investment bank to act as Cardiogenesis financial advisor.
In mid-September 2010, Mr. McCormick began discussions with
representatives of Company A regarding the terms of a
non-binding letter of intent which would set forth the general
business terms of a proposed strategic transaction.
Mr. McCormick continued to negotiate the terms of a
potential transaction with Company A through October. Company
As verbal proposals involved a merger of equals
transaction, but no formal offer was presented to Cardiogenesis.
Mr. McCormick continued to interview investment banks as
possible financial advisors.
On September 15, 2010, Mr. Lee held a telephone
conference with Mr. McCormick to continue gathering
information regarding Cardiogenesis business as CryoLife
evaluated the potential acquisition of Cardiogenesis.
On September 29, 2010, Cardiogenesis entered into the 2010
NDA.
On October 1, 2010, Messrs. Anderson, Lee, Capps,
Seery and David Fronk, Vice President, Regulatory Affairs and
Quality Assurance, of CryoLife and Messrs. McCormick and
Lanigan of Cardiogenesis held a telephone conference to continue
CryoLifes evaluation of the potential acquisition and to
gain more insight into Cardiogenesis business.
On October 6 and 7, 2010, members of CryoLifes management,
with the assistance of Cardiogenesis management,
participated in customer calls to discuss Cardiogenesis
products.
On October 13, 2010, Mr. Lee had a telephone
conference with Mr. McCormick to continue discussions about
Cardiogenesis financial and operating performance and
gather further information to aid in the evaluation of
Cardiogenesis business. Mr. McCormick notified
Mr. Lee that he was in discussions with Company A and
expected to receive a draft letter of intent shortly that would
include an exclusivity provision in the event CryoLife was
interested in making a formal proposal.
On October 20, 2010, representatives of Piper
Jaffray & Co., which we refer to as Piper Jaffray,
financial advisor to CryoLife, sent a letter, on behalf of
CryoLife, to Mr. McCormick which set forth the terms of a
proposed strategic transaction. This indication of interest
expressed CryoLifes preliminary interest in exploring a
potential transaction involving Cardiogenesis at a range of
between $0.36 and $0.40 per Share; was non-binding in nature and
could be withdrawn or modified by CryoLife at any time, and was
subject to due diligence conducted by CryoLife.
Mr. McCormick discussed the indication of interest with a
representative of K&L Gates. Mr. McCormick also had
separate informal discussions with members of our board of
directors regarding the indication of interest.
On October 22, 2010, Mr. Lee received a call from
Mr. McCormick indicating that he did not think the proposal
represented fair value based on revenues in comparable deals and
did not believe the tender offer would be of interest to our
board of directors. Mr. Lee indicated to Mr. McCormick
that a portion of the consideration could be paid in
CryoLifes stock, which CryoLife believed was undervalued.
Mr. Lee suggested that senior management of CryoLife meet
with our board of directors to provide more detail regarding
CryoLifes business. Our board of directors agreed to a
meeting with CryoLifes senior management and
CryoLifes financial advisor, Piper Jaffray.
Our board of directors decided not to contact other potential
purchasers at that time, since CryoLifes proposal was only
preliminary, the range of consideration in the proposal to move
forward with a transaction and our board of directors had not
otherwise determined that Cardiogenesis was for sale. Our board
of directors was also concerned with the potential risks of
contacting other parties at that time, including market
communication risk and risks of disruption to its relationships
with its stakeholders. However, Mr. McCormick continued to
have discussions with representatives of Company A regarding a
potential transaction.
Cardiogenesis entered into an engagement letter with B.
Riley & Co., which we refer to as B. Riley, dated
November 7, 2010, to act as Cardiogenesis financial
advisor in connection with evaluating potential transactions.
Our board of directors selected B. Riley based on its experience
and reputation with respect to business combination
16
transactions, as well as its familiarity with
Cardiogenesis business, products and pipeline. B. Riley
had not been engaged to provide financial advisory services to
Cardiogenesis in at least the prior three years. Following our
board of directors decision to engage B. Riley, neither
Cardiogenesis nor CryoLife held discussions with B. Riley
regarding possible future engagements of B. Riley following this
engagement by our board of directors. B. Riley immediately
assisted Cardiogenesis in reviewing the indication of interest
received from CryoLife and the status of the negotiations with
Company A. In order to efficiently manage the process of
reviewing potential proposals from third parties, our board of
directors authorized Cardiogenesis senior management to
review, analyze, and negotiate proposals from third parties, but
no definitive steps relating to any such proposal could be made
without the approval of our board of directors.
On November 9, 2010, CryoLifes senior management met
in-person with our board of directors at the offices of K&L
Gates to discuss the transaction proposed by the indication of
interest and to provide information regarding CryoLifes
current business and technology. Representatives from Piper
Jaffray, B. Riley and K&L Gates were present at the
meeting. Following the departure of CryoLifes senior
management, representatives of B. Riley provided our board of
directors a valuation overview of Cardiogenesis and metrics to
consider when evaluating the alternatives presented by CryoLife
and Company A. Our board of directors requested B. Riley to
provide a more detailed valuation analysis of Cardiogenesis for
our board of directors to consider. Our board of directors also
engaged in extensive discussion regarding the benefits and risks
of receiving stock consideration from either CryoLife or Company
A.
On November 12, 2010, representatives of B. Riley contacted
representatives of Piper Jaffray to indicate that Cardiogenesis
may be interested in discussing a possible transaction with
CryoLife, but would need review a financial analysis of
Cardiogenesis by B. Riley to better understand CryoLifes
offer.
On November 18, 2010, at a regular meeting of our board of
directors, B. Riley made a presentation that analyzed the
results and effect of a potential transaction with either
CryoLife or Company A. B. Riley also presented to our board of
directors information regarding Cardiogenesis current
valuation. A representative from K&L Gates also attended
the meeting. After considering, among other things, B.
Rileys analysis, our board of directors concluded that,
while the proposed price range in CryoLifes preliminary
offer was insufficient, there was a potential opportunity to
generate higher value through engaging in negotiations with
CryoLife. Following this meeting, our board of directors
instructed B. Riley to propose a counter-offer to
CryoLifes previous indication of interest including the
issuance of CryoLifes stock as part of the consideration,
increasing the value of the total consideration to $0.50 per
Share and requesting a go-shop period to allow
Cardiogenesis to solicit competing bids after announcement of a
transaction.
Between November 18, 2010 and late November,
Mr. McCormick continued to negotiate with each of CryoLife
and Company A. In late November, 2010, representatives of B.
Riley approached 18 strategic partners, many of whom had already
been previously contacted by Mr. McCormick, in order to
gauge their interest in a potential transaction with
Cardiogenesis. However, other than Company A, there was no
additional interest in a potential transaction from any of the
parties contacted. Company A sent a draft proposal to
Cardiogenesis regarding a merger of equals transaction. However,
our board of directors believed that a transaction with Company
A was not desirable due to the impending delisting of Company A
from its national securities exchange, Company As
uncertain capital resources and the integration risks of the
combined company.
On November 26, 2010, representatives of B. Riley contacted
representatives of Piper Jaffray to indicate that Cardiogenesis
was interested in a potential transaction with CryoLife, but
that the terms of the indication of interest would be
insufficient. Representatives of B. Riley indicated
Cardiogenesis may be interested in a transaction in which the
consideration would be all stock and the consideration for each
Share would be valued at $0.50.
On November 29, 2010, Cardiogenesis received a letter of
intent from Piper Jaffray on behalf of CryoLife. Among other
terms revised by CryoLife, the letter of intent proposed merger
consideration consisting of both cash and stock consideration.
CryoLifes letter of intent also increased the
consideration for each Share to $0.50, required a
$1 million termination fee, did not allow our board of
directors to have a go-shop period to solicit higher
bids for a transaction, and required both parties to enter into
a thirty-day
exclusivity period whereby Cardiogenesis would be required to
break off discussions with all other parties to allow for due
diligence and the negotiation of a definitive Merger Agreement.
17
On December 3, 2010, our board of directors held a special
meeting to discuss the letter of intent from CryoLife.
Representatives from K&L Gates and B. Riley also
participated in the meeting. K&L Gates reviewed the legal
terms of the letter of intent as well as discussed with our
board of directors their fiduciary duties owed to
Cardiogenesis shareholders under applicable state law when
considering the proposed transaction. B. Riley then reviewed
with our board of directors the discussions to date with
CryoLife and the terms of the letter of intent. B. Riley
then presented an update regarding the status of discussions
with Company A. Our board of directors then extensively
discussed, among other things, the prospects for Cardiogenesis
remaining as an independent company, and whether a possible sale
of Cardiogenesis would maximize value for Cardiogenesis
shareholders. B. Riley was instructed to communicate to Piper
Jaffray that our board of directors requested a
45-day
go-shop provision.
On December 4, 2010, Mr. Lee notified
Mr. McCormick that CryoLife was willing to agree to a
20 day go-shop provision, but the break up fee after the
20 day go-shop expired would increase to $1.5 million.
CryoLife provided a letter of intent reflecting those additional
terms.
On December 6, 2010, at a special meeting, our board of
directors continued its review and discussion of CryoLifes
letter of intent. Our board of directors considered the positive
and negative factors and risks in connection with the proposed
transaction, as discussed in the section entitled
Recommendation of Our Board of Directors; Reasons for
Recommending the Approval of the Merger Agreement
beginning on page 20. K&L Gates reviewed our board of
directors fiduciary duties owed to Cardiogenesis
shareholders under applicable state law. Following such review
and discussion, our board of directors authorized
Mr. McCormick to execute the revised letter of intent and
move forward with finalizing due diligence and preparing a
definitive Merger Agreement. Cardiogenesis subsequently informed
Company A that, as a result of the 30 day exclusivity
period contained in the letter of intent, it was prohibited from
engaging in further discussions with Company A due to
contractual requirements.
On December 14, 2010, CryoLife commenced its confirmatory
due diligence review of Cardiogenesis, including access to
Cardiogenesis online data room.
In December 2010, CryoLife continued its due diligence efforts.
On December 22, 2010, Cardiogenesis received a first draft
of the Merger Agreement from Arnall Golden Gregory, LLP, which
we refer to as AGG, CryoLifes outside counsel. K&L
Gates immediately began to negotiate the Merger Agreement with
AGG.
Several due diligence meetings between members of the management
teams of Cardiogenesis and CryoLife were held from October 2010
through March 2011. These meetings covered numerous business,
regulatory, legal and financial topics. The due diligence
process also included telephonic due diligence discussions
between Cardiogenesis and CryoLifes respective
management and outside financial, legal and accounting advisors,
and in-person due diligence review sessions,
on-site due
diligence visits to Cardiogenesis facilities and access to
Cardiogenesis on-line data room containing financial,
operational, regulatory, intellectual property, human resource,
legal and other information concerning Cardiogenesis.
On January 4, 2011, Piper Jaffray informed B. Riley that,
based upon the results of CryoLifes due diligence,
CryoLife desired to revise the terms of its letter of intent.
CryoLife now proposed, on a non-binding basis, an offer of
either $0.50 per Share in all-cash consideration, or $0.45 per
Share in an unspecified combination of cash and common stock of
CryoLife. Cardiogenesis rejected such offer, which resulted in
CryoLife submitting a new letter of intent on January 5,
2011 of either $0.50 per Share in all-cash consideration, or
$0.47 per Share in 60% cash and 40% in common stock of CryoLife.
Our board of directors continued to discuss and review the
revised proposal with the assistance of K&L Gates and B.
Riley. On January 10, 2011, our board of directors
unanimously agreed to accept the all-cash consideration offer of
$0.50 per Share.
CryoLife continued its due diligence efforts through January and
February 2011. During March 2011, CryoLife informed
Cardiogenesis that, based on the completion of its final
diligence review, it was willing to pay $0.45 per Share in the
transaction. On March 4, 2011, our board of directors met
to review the open issues identified from the diligence review
and the revised offer. Mr. McCormick and B. Riley continued
negotiating with CryoLife throughout March while K&L Gates
and AGG continued their negotiation of the terms of the Merger
Agreement.
18
On March 21, 2011, CryoLife responded to the negotiation
efforts with a final, all-cash offer of $0.457 per share,
subject to our board of directors approval. On
March 22, 2011, our board of directors met to consider the
proposed transaction at the price of $0.457 per share.
Representatives of K&L Gates and B. Riley also attended the
meeting. Representatives of B. Riley reviewed with our board of
directors its financial analysis of the proposed transaction.
Representatives of K&L Gates reviewed with our board of
directors the current status and terms of the proposed Merger
Agreement including the mechanics of the
Top-Up
Option, CryoLife and Cardiogenesis respective termination
rights, CryoLifes match rights, the Support Agreement, and
the two-tier termination fee, as well as the fiduciary duties of
directors in connection with their consideration of the
transaction. Our board of directors discussed positive and
negative factors relating to the proposed transaction, including
the terms of the
Top-Up
Option, as well as the prospects of Cardiogenesis if it remained
independent, including potential challenges, the timing and
likelihood of accomplishing performance goals associated with
success as an independent company, and the shareholders
ability to gain or lose from Cardiogenesis future
prospects as an independent company versus their ability to
receive cash for their shares of our common stock in the
proposed transaction. Representatives of B. Riley made a
financial presentation and rendered to our board of directors
its oral opinion on March 22, 2011 and confirmed by
delivery of a written opinion, dated the same day, which opinion
was subsequently updated on March 28, 2011 and confirmed by
delivery of a written opinion, dated March 28, 2011, to the
effect that the $0.457 per Share in cash to be paid to the
holders of the shares of our common stock pursuant to the Merger
Agreement was fair, from a financial point of view, to such
holders as discussed in the section entitled Opinion of
Our Financial Advisor beginning on page 24. B.
Rileys written opinion, dated March 22, 2011 is
attached hereto as Annex B and is incorporated by
reference herein.
Between March 21, 2011 and March 28, 2011,
representatives of K&L Gates and AGG finalized the Merger
Agreement and the other definitive transaction agreements.
Our board of directors considered whether Cardiogenesis should
spend additional time negotiating with CryoLife in an attempt to
gain improved transaction terms and whether Cardiogenesis should
seek negotiations with other potential acquirers, but believed
that CryoLife would be unlikely to improve its price or other
transaction terms and would be unlikely to keep its offer open
while Cardiogenesis sought to solicit other parties, and that
any delay would jeopardize the possibility of closing a
transaction. In addition, as our board of directors had
previously determined in the negotiations leading up to
execution of the letter of intent, any attempt to solicit other
potential acquirers would likely result in CryoLife withdrawing
its proposal, and our board of directors believed that there may
be no likely strategic acquirer of Cardiogenesis at this time
who would offer a higher price than CryoLife. Our board of
directors also considered that, if there were any other
potential acquirers that would offer a higher price, the
termination provisions in both the Merger Agreement and Support
Agreement would enable such a superior transaction to be
successfully pursued. Our board of directors believed that any
continuation or expansion of the negotiation process at this
time would provide a further distraction to Cardiogenesis
senior management from running the business and would risk the
confidentiality of the process as more parties potentially
became involved over a longer period of time, which could result
in disruption to Cardiogenesis relationships with
employees, customers, vendors, distributors and others and
require early disclosure of negotiations in the marketplace,
which in turn could jeopardize Cardiogenesis bargaining
position in any such negotiations.
After consideration of all of the factors discussed at this
meeting and prior meetings, and the advice of its legal and
financial advisors, our board of directors considered whether to
accept CryoLifes offer and enter into the Merger Agreement
at this time or to remain an independent company.
Cardiogenesis senior management and Cardiogenesis
financial and legal advisors answered questions from the members
of our board of directors. B. Riley rendered an oral
opinion to our board of directors, which was updated and
confirmed in writing on March 28, 2011, to the effect that,
based upon and subject to the matters described in the opinion,
the consideration to be received by Cardiogenesis
shareholders in the tender offer and related Merger was fair
from a financial point of view. Following further discussion,
our board of directors voted unanimously to approve and adopt
the Merger Agreement with CryoLife and recommend that
Cardiogenesis shareholders accept the tender offer.
On March 28, 2011, subsequent to the close of trading on
the OTCQB and NYSE, CryoLife, Merger Sub and Cardiogenesis
executed the Merger Agreement. Concurrently,
Messrs. McCormick, Lanigan and Abbott and
Cardiogenesis directors who together held approximately
2.7% of the outstanding shares of our common stock
19
entered into the Support Agreement, by which they agreed to
tender all of their shares of our common stock into the tender
offer and/or
vote them in favor of the Merger, subject to the terms and
conditions set forth in such agreement.
On March 29, 2011, before the opening of trading on the
OTCQB and NYSE, Cardiogenesis and CryoLife issued a joint press
release announcing the execution of the Merger Agreement.
Also beginning on March 29, 2011, the day following the
execution of the Merger Agreement, at the direction of our board
of directors and under the supervision of Cardiogenesis
senior management, representatives of B. Riley began the
process of contacting parties to determine whether they might be
interested in pursuing a transaction that would be superior to
the proposed transaction with CryoLife.
On April 5, 2011, CryoLife and Merger Sub commenced the
tender offer, which has an initial expiration date of
May 2, 2011.
[As of April 18, 2011, none of the parties contacted during
the go-shop process, on behalf of Cardiogenesis and at the
direction of our board of directors, had submitted an
acquisition proposal for Cardiogenesis, and there can be no
assurance that such efforts will result in an alternative
transaction being proposed or in a definitive agreement for such
a transaction being entered into. We do not intend to announce
further developments with respect to the solicitation process
until our board of directors has made a decision regarding an
alternative proposal, if any.] On
[ ],
2011, Merger Sub accepted for payment approximately
[ ] million
shares of our common stock that were validly tendered into, and
not withdrawn from the tender.
On [May ], 2011, CryoLife
exercised its rights under the Merger Agreement to appoint its
designees,
[ ],
[ ],
and
[ ],
to our board of directors.
On
[ ],
2011, the subsequent offering period expired. Merger Sub
acquired an additional
[ ] shares
of our common stock that were validly tendered during the
subsequent offering period.
The portions of the history of the transaction set forth above
that relate solely to CryoLife are based on statements made by
CryoLife in the Offer to Purchase and Schedule TO, and have
not been independently verified by Cardiogenesis.
Recommendation
of Our Board of Directors; Reasons for Recommending the Approval
of the Merger Agreement
Our
Board of Directors Recommendation
At a special meeting of our board of directors convened on
March 22, 2011, our board of directors (all of whom were
unaffiliated with CryoLife or Merger Sub at that time)
unanimously adopted and declared advisable the Merger Agreement,
the tender offer and the Merger and unanimously determined that
the Merger is in the best interests of Cardiogenesis and its
shareholders. Accordingly, our board of directors recommends
that our shareholders vote FOR approval and
adoption of the Merger Agreement.
Reasons
for the Recommendation of Cardiogenesis Board
In evaluating the Merger Agreement and the other transactions
contemplated thereby, including the tender offer and the Merger,
our board of directors consulted with Cardiogenesis senior
management and legal counsel and financial advisor, and
considered a number of positive and negative factors in
recommending that all shareholders vote for the approval and
adoption of the Merger Agreement:
Cardiogenesis
Operating and Financial Condition; Prospects of
Cardiogenesis
Our board of directors considered the current and historical
financial condition, results of operations, and business of
Cardiogenesis, as well as Cardiogenesis financial plan and
prospects, if it were to remain an independent company. Our
board of directors evaluated Cardiogenesis financial plan,
including the execution risks and uncertainties, and the
potential impact on the trading price of the shares of our
common stock (which is not feasible to quantify in a definitive
manner), if Cardiogenesis were to execute or fail to execute
upon its financial plan. In particular, our board of directors
considered the probability that Cardiogenesis would have to
obtain
20
additional debt or equity financing to complete its clinical
trials for its PHOENIX Combination Delivery System and the
potential difficulty in obtaining any financing. Our board of
directors also considered the difficulty in expanding the market
for transmyocardial revascularization with Cardiogenesis
limited resources, and the fact that Cardiogenesis would need to
seek additional capital resources to operate and grow its
existing business as an independent company.
Available
Alternatives; Results of Discussions with Third
Parties
Our board of directors considered the possible alternatives to
the acquisition by CryoLife and perceived risks of those
alternatives, the range of potential benefits to shareholders of
these alternatives and the timing and the likelihood of
accomplishing the goals of such alternatives, as well as our
board of directors assessment that none of these
alternatives were reasonably likely to present superior
opportunities for Cardiogenesis to create greater value for
shareholders, taking into account risks to the successful
completion of a transaction as well as regulatory, business,
competitive, industry and market risks. Our board of directors
also considered the results of the process that it had
conducted, with the assistance of Cardiogenesis management
and its financial and legal advisors, to evaluate strategic
alternatives and the results of discussions with third parties
regarding business combination and change of control
transactions. Our board of directors considered the risk of
CryoLife terminating its bid for Cardiogenesis. Our board of
directors considered the indication of interest in a merger
transaction expressed by Company A, including the investigation
and diligence Company A had completed and the execution and
business risks of any transaction with Company A.
Financial
Market Conditions; Historical Trading Prices
Our board of directors considered the current regional, national
and international economic climate and the conditions of the
financial markets. Specifically, our board of directors
considered the fact that our shares of our common stock were not
quoted on a national securities exchange and there was limited
trading volume, which they believed made achieving a successful
financing transaction more difficult. Our board of directors
considered historical market prices, volatility and trading
information with respect to our shares of our common stock,
including the fact that the tender offer represented a premium
of approximately 52.3% over the closing price per share of our
common stock on March 21, 2011, the last full trading day
prior to the date of the meeting of our board of directors to
consider and approve the Merger Agreement.
Opinion
of the Cardiogenesis Financial Advisor
Our board of directors considered the written opinion of B.
Riley delivered on March 22, 2010 and updated and confirmed
in writing on March 28, 2011, to our board of directors as
to the fairness, from a financial point of view and as of such
date, of the tender offer price to be paid to shareholders
pursuant to the Merger Agreement, as more fully described in the
section entitled Opinion of Our Financial Advisor
beginning on page 24.
Cash
Consideration; Certainty of Value
Our board of directors considered the form of consideration to
be paid to the shareholders in the tender offer and the Merger
and the certainty of the value of cash consideration compared to
stock or other forms of consideration, as well as the fact that
CryoLifes proposal was not subject to obtaining any
outside financing. Our board of directors considered the
business reputation of CryoLife and its management and the
substantial financial resources of CryoLife and, by extension,
Merger Sub, which our board of directors believed supported the
conclusion that a transaction with CryoLife and Merger Sub could
be completed relatively quickly and in an orderly manner.
Terms of
the Merger Agreement
Our board of directors considered provisions of the Merger
Agreement, including the respective representations and
warranties (as qualified by information in confidential
disclosure schedules provided by Cardiogenesis in connection
with the signing of the Merger Agreement, which modify, qualify
and create exceptions to the representations and warranties and
allocate risk between Cardiogenesis, CryoLife, and Merger Sub,
rather than
21
establishing matters of fact, and, accordingly, may not
constitute the actual state of facts about Cardiogenesis,
CryoLife, or Merger Sub) and covenants and termination rights of
the parties and termination fees payable by Cardiogenesis,
including without limitation:
(1) Cash Tender Offer. The tender offer and the
Merger provided for a prompt cash tender offer for all shares of
our common stock to be followed by a Merger for the same
consideration, thereby enabling shareholders, in an expeditious
time frame, to obtain the benefits of the transaction in
exchange for their shares of our common stock.
(2) No Financing Condition. CryoLifes
obligations under the Merger Agreement are not subject to any
financing condition, CryoLifes representations in the
Merger Agreement that it has and will have sufficient funds
available to it to consummate the tender offer and the Merger
and CryoLifes financial strength.
(3) Go Shop Provisions. The provisions in the Merger
Agreement that provided Cardiogenesis, for a period of twenty
days from the execution of the Merger Agreement, which we refer
to as the Go-Shop Period, the ability to initiate, solicit and
encourage alternative acquisition proposals from third parties
and to provide non-public information and to and engage in
discussion or negotiations with third parties with respect to
alternative acquisition proposals.
(4) Ability to Respond to Certain Unsolicited Takeover
Proposals. The provisions in the Merger Agreement that
provided for the ability of our board of directors, after the
expiration of the Go-Shop Period, which we refer to as the
No-Shop Period Start Date, in furtherance of the exercise of its
fiduciary duties under California law, to engage in negotiations
or discussions with any third party that had made a bona fide,
written takeover proposal that our board of directors believed
in good faith was reasonably likely to lead to a Superior
Proposal (as defined in Section 6.2(h)(iv) of the Merger
Agreement) and to furnish to such third party non-public
information relating to Cardiogenesis pursuant to a
confidentiality agreement that contained confidentiality
provisions that were no less favorable to Cardiogenesis than
those contained in the confidentiality agreement entered into
with CryoLife.
(5) Change of Recommendation; Fiduciary Termination
Right. In the event Cardiogenesis receives a takeover
proposal that constitutes a Superior Proposal, our board of
directors has the right, prior to the acceptance of the shares
of our common stock in the tender offer by Merger Sub, to fail
to make, withdraw or modify in a manner adverse to CryoLife its
approval or recommendation to its shareholders of the tender
offer or declaration of advisability of the Merger Agreement,
the tender offer, or the Merger. However, our board of directors
could not make such an adverse recommendation change in response
to a takeover proposal received from a third party unless
Cardiogenesis gave CryoLife five business days after delivery of
such notice to propose revisions to the terms of the Merger
Agreement (or make another proposal) and if CryoLife proposed to
revise the terms of the Merger Agreement or make another
proposal, Cardiogenesis, during such period, negotiated in good
faith with CryoLife with respect to such proposed revisions or
other proposal (with any material changes to an acquisition
proposal requiring a new notice and a new one business day
period for negotiations). Our board of directors had the ability
to terminate the Merger Agreement to accept a Superior Proposal
if (i) our board of directors determined in good faith,
after consultation with outside legal counsel, that the failure
to take such action was inconsistent with its fiduciary duties,
(ii) Cardiogenesis complied with requirements set forth in
the prior sentence and (iii) Cardiogenesis paid CryoLife
the applicable termination fees of $1 million or
$1.5 million.
(6) Conditions to Consummation of the Tender Offer and
the Merger; Likelihood of Closing. The reasonable likelihood
of the consummation of the transactions contemplated by the
Merger Agreement and the fact that Merger Subs and
CryoLifes obligations to purchase shares of our common
stock in the tender offer and to close the Merger are subject to
limited conditions.
(7) Top-Up
Option. Our board of directors considered that CryoLife had
been granted a
top-up
option to purchase from Cardiogenesis, under certain
circumstances following consummation of the tender offer, at a
price per Share equal to $0.457, up to a number of additional
shares of our common stock sufficient to cause Merger Sub to own
one share of our common stock more than 90% of the shares of our
common stock then
22
outstanding (calculated on a fully-diluted basis), and that this
could permit Merger Sub to consummate the Merger more quickly as
a short form merger under California law.
Failure
to Close; Public Announcement
Our board of directors considered the possibility that the
transactions contemplated by the Merger Agreement may not be
consummated, and the effect of a public announcement of the
Merger Agreement, including effects on Cardiogenesis
sales, operating results, stock price and employee retention.
Termination
Fee
The Merger Agreement provides for a two tiered termination fee.
If the termination fee becomes payable as a result of
Cardiogenesis terminating the Merger Agreement in order to enter
into a definitive acquisition agreement with respect to a
Superior Proposal that is entered into prior to the No-Shop
Period Start Date, the amount of the termination fee will be
$1 million. If the termination fee becomes payable in other
circumstances, the amount of the termination fee will be
$1.5 million. Our board of directors considered that these
provisions in the Merger Agreement could have had the effect of
deterring third parties who might have been interested in
exploring an acquisition of Cardiogenesis but was of the view
that the payment of the termination fee was comparable to
termination fees in transactions of a similar size, was
reasonable and would not likely deter competing bids. In
addition, our board of directors recognized that the provisions
in the Merger Agreement relating to termination fees and
non-solicitation of acquisition proposals were insisted upon by
CryoLife as a condition to entering into the Merger Agreement
and that the termination fee would not likely be required to be
paid unless Cardiogenesis entered into, or intended to enter
into, a definitive agreement with respect to a Superior Proposal.
Support
Agreement
Our board of directors considered the fact that CryoLife
required each executive officer and all members of our board of
directors, who together owned approximately 2.7% of the
outstanding shares of our common stock as of March 25,
2011, to enter into the Support Agreement, pursuant to which
such persons were required to (i) tender in the tender
offer, and not withdraw, 100% of the shares of our common stock
owned by them, if so requested by CryoLife, (ii) vote 100%
of the shares of our common stock owned by them in favor of the
adoption of the Merger Agreement and to approve the Merger in
the event shareholder approval is required to consummate the
Merger pursuant to Section 1201 of the CGCL and against any
competing transactions, (iii) appoint CryoLife as a proxy
to vote 100% of the shares of our common stock owned by them in
connection with the Merger Agreement, and (iv) not
otherwise transfer the share of our common stock. Our board of
directors further considered that the Support Agreement and the
obligations of such shareholders thereunder would terminate in
the event the Merger Agreement was terminated. Our board of
directors also considered whether the terms of the Support
Agreement could limit our board of directors ability to
consider, recommend or accept a competing bid and create a
barrier to potential competing offers and concluded that it did
not because the Support Agreement terminated upon termination of
the Merger Agreement, including a termination arising in
connection with Cardiogenesis acceptance of a Superior
Proposal.
The foregoing discussion of information and factors considered
and given weight by our board of directors is not intended to be
exhaustive, but is believed to include all of the material
factors considered by our board of directors. In view of the
variety of factors considered in connection with its evaluation
of the tender offer and the Merger, our 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. In addition,
individual members of our board of directors may have given
different weights to different factors.
Our board of directors determined that the factors described
above under Cardiogenesis Operating and Financial
Condition; Prospects of Cardiogenesis,
Available Alternatives; Results of Discussions with
Third Parties, Financial Market Conditions;
Historical Trading Prices, Opinion of
Cardiogenesis Financial Advisor, Cash
Consideration; Certainty of Value, and Terms
of the Merger Agreement are reasons in support of our
board of directors decision to recommend that all
shareholders accept the tender offer and tender their shares of
our common stock pursuant to the tender offer and vote to
approve and adopt the Merger Agreement. Our board of
23
directors considered the other factors described above as
neutral or negative and concluded that the reasons for
recommending that all shareholders accept the tender offer and
tender their shares of our common stock pursuant to the tender
offer and vote to approve and adopt the Merger Agreement
outweighed the neutral and negative factors. In arriving at
their respective recommendations, our directors were aware of
the interests of Cardiogenesis executive officers and
directors as described in more detail throughout this proxy
statement.
Opinion
of Our Financial Advisor
Pursuant to an engagement letter dated November 7, 2010,
Cardiogenesis retained B. Riley to deliver its opinion, which we
refer to as the Opinion, as to the fairness, from a financial
point of view, of the consideration to be received by the
holders of the shares of our common stock in the tender offer
and the Merger, which we sometimes refer to together as the
Transaction. At a meeting of our board of directors on
March 22, 2011, B. Riley delivered its oral Opinion to our
board of directors which was confirmed in a written Opinion,
dated the same day, (subsequently such Opinion was updated as of
March 28, 2011 and confirmed in a written opinion dated
March 28, 2011) that based upon and subject to the
assumptions, procedures, considerations and limitations set
forth in the written opinion and based upon such other factors
as B. Riley considered relevant, that the consideration (as
defined below) to be paid in connection with the tender offer
and the Merger is fair, from a financial point of view, to the
holders of the shares of our common stock as of the date of the
Opinion.
The full text of the written Opinion of B. Riley, dated
March 22, 2011, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by B. Riley in
rendering its opinion, is attached as Annex B to this Proxy
Statement and is incorporated by reference herein. The Opinion
addresses only the fairness, from a financial point of view as
of the date of the Opinion, of the consideration to be paid
pursuant to the Merger Agreement to the holders of the shares of
our common stock. B. Rileys Opinion was directed solely to
our board of directors in connection with its consideration of
the Transaction and was not intended to be, and does not
constitute, a recommendation to any shareholder as to how such
holders should act, vote or tender their shares of our common
stock in regards to the Transaction.
In connection with rendering the Opinion described above and
performing its financial analyses, B. Riley, among other things
performed the following:
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Reviewed and analyzed certain historical and projected financial
information for Cardiogenesis;
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Interviewed Cardiogenesis management and discussed
Cardiogenesis operations, financial conditions, future
prospects and business plans;
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Reviewed Cardiogenesis audited financial statements for
the three fiscal years ended December 31, 2009, and the
unaudited financial results for the fiscal year ended
December 31, 2010;
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Reviewed CryoLifes audited financial statements for the
four fiscal tears ended December 31, 2010;
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Reviewed certain internal financial statements and forecasts
prepared by Cardiogenesis management and also reviewed
other financial and operating data concerning Cardiogenesis,
which we refer to as the Projections. With respect to the
Projections, upon advice of Cardiogenesis, B. Riley assumed that
such projections were reasonably prepared on a basis reflecting
the best currently available estimates and judgments of
Cardiogenesis management as to the future financial
performance of Cardiogenesis;
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Reviewed the final Merger Agreement, dated March 28, 2011;
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Reviewed certain publicly available financial data, stock market
performance data and trading multiples of companies which it
deemed general comparable to Cardiogenesis;
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Performed a discounted cash flow analysis based on future
projected cash flows for Cardiogenesis prepared by management;
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Performed a series of commonly used and widely accepted analyses
relating to determining a fair value for the transactions of the
type and profile of the present transaction;
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24
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Reviewed the current and historical reported prices and trading
activity of the shares;
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Reviewed historical ratios, valuation multiples and other
financial data for the shares of our common stock and compared
them to certain publicly traded companies which B. Riley deemed
generally comparable to Cardiogenesis;
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Reviewed the financial terms, to the extent publicly available,
of certain comparable merger and acquisition transactions that
B. Riley deemed relevant; and
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Reviewed the premiums paid with respect to selected recent
acquisitions of publicly traded companies of similar size to
Cardiogenesis.
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In addition, B. Riley conducted such other financial studies,
analyses and investigations and evaluated such other information
as it deemed necessary in arriving at its opinion.
The following is a summary of the material financial analyses
performed by B. Riley in connection with the preparation of its
Opinion, which was reviewed with, and verbally delivered to, our
board of directors at a meeting held on March 22, 2011 and
confirmed in a written opinion, dated the same day, and which
was updated on March 28, 2011 and confirmed in a written
opinion dated March 28, 2011. The preparation of analyses
and a fairness opinion is a complex analytic process involving
numerous determinations as to the most appropriate and relevant
methods of financial analysis and the application of those
methods to the particular circumstances. Therefore, this summary
does not purport to be a complete description of all of the
analyses performed by B. Riley.
This summary includes financial information and tables, which
must be read and considered as a whole with other information
discussed or presented in order to fully understand the
financial analyses presented by B. Riley. The tables alone do
not constitute a complete summary of the financial position of
Cardiogenesis or of the analyses performed. The order in which
these analyses are presented below, and the results of those
analyses, should not be taken as any indication of the relative
importance or weight given to these analyses by B. Riley or our
board of directors. Except as otherwise noted, the following
quantitative information, to the extent that it is based on
market data, as it existed on or before March 28, 2011,
does not necessarily reflect current market conditions.
Transaction
Overview
In performing its analysis, B. Riley noted that
Cardiogenesis shareholders would receive a cash
consideration of approximately $21.7 million, at a price
per share of $0.457. For purposes of its analyses, B. Riley
calculated (i) Cardiogenesis equity value implied by
the Transaction to be approximately $21.7 million, based on
approximately 47,588,457 shares of our common stock and
common stock equivalents outstanding, consisting of options,
warrants, and shares of restricted stock, calculated using the
treasury stock method and the tender offer price, and
(ii) Cardiogenesis enterprise value, or EV (for the
purposes of this analysis, implied EV equates to implied equity
value, plus debt, less cash) to be approximately
$20.5 million.
Analysis
of Cardiogenesis
Historical
Trading Analysis.
B. Riley reviewed the historical closing prices and trading
volumes for the shares of our common stock for the last three
years, in order to provide background information on the prices
at which the shares of our common stock have historically
traded. The following table summarizes these historical closing
prices relative to the implied value of the tender offer price
for the shares of our common stock.
From January 1, 2008 to March 28, 2011,
Cardiogenesis closing stock price has been reported within
a range of $0.11 to $0.42.
25
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Price Per Share
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Offer Price implied value
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$
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0.4570
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Closing price on March 28, 2011
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$
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0.32
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1-month
volume weighted average price prior to March 28, 2011
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$
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0.294
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3-month
volume weighted average price prior to March 28, 2011
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$
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0.281
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6-month
volume weighted average price prior to March 28, 2011
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$
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0.266
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1-year
volume weighted average price prior to March 28, 2011
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$
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0.272
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3-year high
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$
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0.40
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3-year low
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$
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0.11
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Selected
Public Companies Analysis.
B. Riley reviewed selected historical financial data of
Cardiogenesis and estimated financial data prepared by
Cardiogenesis management as its internal forecast for
calendar year 2011 and compared them to corresponding financial
data, where applicable, for public companies in the medical
device industry with a primary focus on vascular and cardiology
surgical products, as is the case for Cardiogenesis.
Additionally, B. Riley selected public companies with a similar
industry segment focus and financial profile. B. Riley selected
companies based on information obtained from SEC filings, public
company disclosures, press releases, industry and popular press
reports, databases, professional judgment and other sources and
by applying the following general criteria:
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companies with last twelve months, or LTM, revenue of greater
than $5 million and less than $500 million;
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companies with EVs greater than $5 million and less than
$1 billion; and
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companies with positive revenue growth for projected 2011.
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Based on these criteria, B. Riley identified and analyzed the
following selected companies:
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Merit Medical Systems, Inc.
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AngioDynamics, Inc.
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Vascular Solutions Inc.
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AtriCure, Inc.
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CryoLife, Inc.
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The Spectranetics Corporation
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LeMaitre Vascular
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Cardica, Inc.
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For the selected public companies analysis, B. Riley compared:
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Valuation multiples derived from the tender offer prices
enterprise value and Cardiogenesis corresponding LTM and
projected 2011 revenue; and
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Valuation multiples for the selected public companies derived
from enterprise values on March 28, 2011 and corresponding
LTM and projected 2011 revenue.
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Due to Cardiogenesis negative EBITDA (calculated
throughout as earnings before interest, taxes, depreciation and
amortization and stock-based compensation) for the LTM and
projected calendar 2011, B. Riley could not analyze comparable
EV / EBITDA valuation multiples.
26
Selected
Vascular and Cardiology Public Companies.
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Selected Public Companies
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Cardiogenesis(1)
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High Quartile(2)
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Adjusted Mean(3)
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Median
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Low Quartile(2)
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EV to LTM revenue(4)(5)
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1.8
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x
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2.3
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x
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1.8
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x
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1.8
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x
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1.2
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x
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EV to projected 2011 revenue(6)
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1.4
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x
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1.9
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x
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1.5
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x
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1.5
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x
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1.0
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x
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(1) |
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Based on the tender offer price to be received. |
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(2) |
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High and low observations represent the upper (75th percentile)
and lower (25th percentile) quartiles of the range, respectively. |
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(3) |
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Adjusted mean excludes high and low observations. |
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(4) |
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Enterprise Value (EV) = equity market capitalization plus
interest bearing debt less cash. |
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(5) |
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Revenues for Cardiogenesis LTM reflect calendar year
ending December 31, 2010. |
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Projected calendar 2011 revenue for Cardiogenesis was based on
the estimates of Cardiogenesis management. Projected
calendar 2011 revenue for the selected public companies was
based on Wall Street research or consensus estimates. |
The selected public companies analysis showed that, based on the
estimates and assumptions used in the analysis, the implied
valuation multiples of Cardiogenesis were within or above the
range of valuation multiples of the selected public companies
when comparing the ratio of EV to LTM revenue and projected 2011
revenue.
No company utilized in the selected public companies analysis is
identical to Cardiogenesis. B. Riley did not weigh the results
of any selected public company more than the others, due to the
fact that the target companies have different business, size or
growth and profitability characteristics than Cardiogenesis.
In evaluating and selecting the public companies, B. Riley made
judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and
other matters.
Selected
M&A Transaction Analysis
B. Riley reviewed merger and acquisition transactions
involving target companies in the medical device industry with a
primary focus on vascular and cardiology products that it deemed
comparable to Cardiogenesis. B. Riley selected the merger
and acquisition transactions in order to provide a comparison of
targets with a similar industry focus and financial profile. B.
Riley selected these transactions based on information obtained
by searching SEC filings, public company disclosures, press
releases, industry and popular press reports, databases,
professional judgment and other sources and by applying the
following criteria:
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transactions involving target companies in the medical device
industry with a primary focus on vascular and cardiology
products;
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transactions that were announced since January 1, 2009;
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targets with LTM revenue of greater than $5 million and
less than $250 million; and
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targets with transaction EVs greater than $5 million and
less than $250 million.
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27
Based on the foregoing, the following transactions were selected:
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Target
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Acquiror
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Angiotech Vascular Graft Business
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LeMaitre Vascular
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Biotel
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CardioNet
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PLC Medical TMR Unit
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Novadaq Technologies
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Cardiac Science
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Opto Circuits
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Initios Medical
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Bracco Imaging
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Gish Biomedical
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Sorin
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CardioPolymers
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Lonestar Heart
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LightLab Imaging
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St. Jude Medical
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FlowCardia
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CR Bard
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Sorin Group Angel and ActivAT Assets
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Cytomedix
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Sawtooth Labs
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Avinger
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Unomedical
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Paul Hartmann
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CHF Solutions
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Gambro
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Anthem Cardiac Management Unit
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Sorin
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Brivant Limited
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Lake Region Medical
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CardioDynamics Intl
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SonoSite
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Starion Instruments Corporation
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Microline Surgical, Inc.
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Evaheart Medical
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Asahi Kasei Corporation
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Datascope EVH Unit
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Sorin
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FlowMedica
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AngioDynamics
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B. Riley calculated the ratio of EV to historical LTM
revenue, as available, for each transaction. B. Riley then
compared the results of these calculations with similar
calculations for Cardiogenesis based on the implied value of the
tender offer price.
Due to Cardiogenesis negative EBITDA in calendar 2010 and
projected calendar 2011, B. Riley did not consider it meaningful
to analyze comparable EV / EBITDA valuation multiples.
Selected
Vascular and Cardiology M&A Transactions.
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Selected M&A Transaction
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Cardiogenesis(1)
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High(2)
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Adjusted Mean(3)
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Median
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Low(2)
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EV to LTM revenue(4)
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1.8
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x
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1.1
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x
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0.8
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x
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0.8
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x
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0.5x
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(1) |
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Based on the tender offer price. |
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(2) |
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High and low observations represent the upper (75th percentile)
and lower (25th percentile) quartiles of the range, respectively. |
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(3) |
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Adjusted mean excludes high and low observations. |
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(4) |
|
Revenues for Cardiogenesis LTM reflect calendar year
ending December 31, 2010. |
The selected vascular and cardiology transactions analysis
showed that, based on the estimates and assumptions used in the
analysis, the implied valuation multiples of Cardiogenesis based
on the tender offer price were within or above the range of
valuation multiples of the selected transactions when comparing
the ratio of EV to historical LTM revenue.
A selected M&A transactions analysis generates an implied
value of a company based on publicly available financial terms
of selected change of control transactions involving companies
that share certain characteristics with the company being
valued. However, no company or transaction utilized in the
selected M&A transactions analysis is identical to
Cardiogenesis or the tender offer and the Merger, respectively.
28
B. Riley did not weigh the results of any selected
transactions more than the others, due to the fact that the
target companies have different business, size or growth and
profitability characteristics than Cardiogenesis.
Premiums
Paid Analysis
B. Riley reviewed publicly available information for
selected completed or pending M&A transactions to determine
the premiums paid in the transactions over recent trading prices
of the target companies prior to announcement of the
transaction. B. Riley selected these transactions from various
database services and proprietary market information, the
Securities Data Corporation database, if B. Riley determined the
target was a public medical device company based upon SIC codes
and professional judgment, and applied, among others, the
following criteria:
|
|
|
|
|
M&A transactions featuring the acquisition of a medical
device company;
|
|
|
|
M&A transactions announced between January 1, 2005 and
January 1, 2011;
|
|
|
|
M&A transactions between a public company target and an
acquirer seeking to purchase over 85% of shares;
|
|
|
|
For M&A transactions with multiple bids, premiums were
calculated using the final bid;
|
|
|
|
Enterprise value greater than $20 million and less than
$1 billion; and
|
|
|
|
No negative premiums for
1-day,
1-week and
1-month
premiums.
|
The table below shows a comparison of premiums paid in these
transactions to the premium that would be paid to
Cardiogenesis shareholders based on the tender offer price.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Premiums Paid
|
|
|
Cardiogenesis(1)
|
|
High
|
|
Mean
|
|
Median
|
|
Low
|
|
Premium 1 day prior(2)
|
|
|
43
|
%
|
|
|
272
|
%
|
|
|
55
|
%
|
|
|
35
|
%
|
|
|
4
|
%
|
Premium 1 week prior(3)
|
|
|
53
|
%
|
|
|
322
|
%
|
|
|
60
|
%
|
|
|
38
|
%
|
|
|
5
|
%
|
Premium 1 month prior(4)
|
|
|
63
|
%
|
|
|
308
|
%
|
|
|
62
|
%
|
|
|
41
|
%
|
|
|
11
|
%
|
|
|
|
(1) |
|
Based on the tender offer price to be received. |
|
(2) |
|
Based on closing price per share of $0.32 on March 28, 2011. |
|
(3) |
|
Based on closing price per share of $0.30 on March 21, 2011. |
|
(4) |
|
Based on closing price per share of $0.28 on February 28,
2011. |
This premiums paid analysis showed that, based on the estimates
and assumptions used in the analysis, the premiums paid over the
market prices at the reference dates for the shares implied by
the tender offer price are within the range of premiums paid in
the selected M&A transactions.
Discounted
Cash Flow Analysis
Using a discounted cash flows analysis, B. Riley calculated an
estimated range of theoretical values for Cardiogenesis based on
the net present value of (i) projected free cash flows from
January 1, 2011 to December 31, 2015, discounted back
to January 1, 2011, based on management projections, and
(ii) a terminal value at calendar year end 2015 based upon
a terminal growth rate, discounted back to January 1, 2011.
The discounted cash flows were calculated using a single set of
projections, updated for calendar 2010 results, as provided by
Cardiogenesis management. The free cash flows for each
year were calculated from the management projections as: EBIT
less taxes (39.5% through 2015), plus depreciation and
amortization, plus stock-based compensation, less capital
expenditures, less the change in net working capital.
B. Riley calculated the range of net present values for
each period from 2011 through 2015 based on discount rates
ranging from 21.9% to 26.8%. The discount rate range reflects
90% and 110% of the weighted average cost of capital, or WACC,
for Cardiogenesis, determined using a WACC analysis performed by
B. Riley. B. Riley calculated the cost of equity used in the
weighted average cost of capital analysis by summing a risk-free
rate, a beta adjusted equity risk premium, and a size premium
based on the implied equity value of Cardiogenesis. B. Riley
29
calculated terminal values using a terminal growth rate ranging
from 8% to 12% applied to projected calendar year 2015 net
free cash flow, and discounted back to January 1, 2011. The
terminal growth rate range of 8% to 12% was based on
managements estimate of 10%. This analysis resulted in
implied per share values of the shares of our common stock
ranging from a low of $0.20 per share of our common stock to a
high of $0.42 per share of our common stock. B. Riley observed
that the tender offer price was within the range of values
derived from this analysis.
Miscellaneous
The summary set forth above does not contain a complete
description of the analyses performed by B. Riley, but does
summarize the material analyses performed by B. Riley in
rendering its Opinion. The preparation of a fairness opinion is
a complex process and is not necessarily susceptible to partial
analysis or summary description. B. Riley believes that its
analyses and the summary set forth above must be considered as a
whole and that selecting portions of its analyses or of the
summary, without considering the analyses as a whole or all of
the factors included in its analyses, would create an incomplete
view of the processes underlying the analyses set forth in the
Opinion. In arriving at its Opinion, B. Riley considered the
results of all of its analyses and did not attribute any
particular weight to any factor or analysis. Instead, B. Riley
made its determination as to fairness on the basis of its
experience and financial judgment after considering the results
of all of its analyses. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate
that this analysis was given greater weight than any other
analysis. In addition, the ranges of valuations resulting from
any particular analysis described above should not be taken to
be B. Rileys view of the actual value of the shares of our
common stock.
None of the selected companies or transactions used in the
analyses above is directly comparable to Cardiogenesis or the
tender offer and the Merger and the other transactions
contemplated by the Merger Agreement. Accordingly, an analysis
of the results of the comparisons is not purely mathematical;
rather, it involves complex considerations and judgments
concerning differences in historical and projected financial and
operating characteristics of the selected companies and target
companies in the selected transactions and other factors that
could affect the public trading value or transaction value of
the companies involved.
B. Riley performed its analyses solely for purposes of
providing its Opinion to our board of directors. In performing
its analyses, B. Riley made numerous assumptions with respect to
industry performance, general business and economic conditions
and other matters. Certain of the analyses performed by B. Riley
are based upon forecasts of future results furnished to B. Riley
by Cardiogenesis management, which are not necessarily
indicative of actual future results and may be significantly
more or less favorable than actual future results. These
forecasts are inherently subject to uncertainty because, among
other things, they are based upon numerous factors or events
beyond the control of the parties or their respective advisors.
B. Riley does not assume responsibility if future results are
materially different from forecasted results.
B. Rileys Opinion was one of many factors taken into
consideration by our board of directors in making the
determination to approve the Merger Agreement and recommend that
Cardiogenesis shareholders tender their shares of our
common stock in connection with the tender offer. The above
summary does not purport to be a complete description of the
analyses performed by B. Riley in connection with the opinion
and is qualified in its entirety by reference to the written
opinion of B. Riley attached as Annex B hereto.
B. Riley relied upon and assumed, without assuming
liability or responsibility for independent verification, the
accuracy and completeness of all information that was publicly
available or was furnished, or otherwise made available, to B.
Riley or discussed with or reviewed by B. Riley. For the purpose
of B. Rileys Opinion, B. Riley assumed that with respect
to financial forecasts, estimates and other forward-looking
information reviewed by B. Riley, that such information was
reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments of the management of
Cardiogenesis as to the expected future results of operations
and financial condition of Cardiogenesis to which such financial
forecasts, estimates and other forward-looking information
relate. B. Riley expressed no opinion as to any such financial
forecasts, estimates or forward-looking information or the
assumptions on which they were based.
B. Riley undertook no independent analysis of any pending
or threatened litigation, regulatory action, possible unasserted
claims or other contingent liabilities, to which Cardiogenesis
was a party or may be subject, and made no
30
assumption concerning, and therefore did not consider, the
possible assertion of claims, outcomes or damages arising out of
any such matters.
B. Rileys Opinion was necessarily based upon the
information available to it and facts and circumstances as they
existed at the time it rendered its Opinion and were subject to
evaluation on the date of its opinion. Events occurring after
the date of its Opinion could materially affect the assumptions
used in preparing its opinion. B. Riley expresses no opinion as
to the price at which the shares of our common stock may trade
following announcement of the Merger or at any future time. B.
Riley did not undertake to reaffirm or revise its Opinion or
otherwise comment upon any events occurring after the date of
its Opinion and does not have any obligation to update, revise
or reaffirm its Opinion.
B. Rileys opinion addressed solely the fairness, from
a financial point of view, to holders of the shares of our
common stock of the tender offer price, as set forth in the
Merger Agreement, to be paid by Merger Sub and did not address
any other terms or agreement relating to the tender offer,
Merger or any other terms of the Merger Agreement. B. Riley was
not requested to opine as to, and its opinion does not address,
the underlying business decision to proceed with the tender
offer or effect the Merger.
Information
About B. Riley
As a part of its investment banking business, B. Riley
and/or its
predecessor has been regularly engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, underwritings, secondary distributions of listed
and unlisted securities, private placements, and valuations for
corporate and other purposes since 1984. Our board of directors
selected B. Riley to be its financial advisor and render its
fairness opinion in connection with the transactions
contemplated by the Merger Agreement on the basis of such
experience and its familiarity with Cardiogenesis.
B. Riley acted as a financial advisor to Cardiogenesis in
connection with the tender offer and the Merger and will receive
an estimated fee of approximately $192,000 from Cardiogenesis,
of which approximately $146,000 is contingent upon the
consummation of the tender offer and the Merger. B. Riley also
received a fee of $100,000 for rendering its Opinion. The
Opinion fee was not contingent upon the consummation of the
tender offer and the Merger or the conclusions reached in B.
Rileys Opinion. Cardiogenesis has also agreed to indemnify
B. Riley against certain liabilities and reimburse B. Riley for
certain expenses in connection with its services. The Opinion
has been approved by the Fairness Opinion Committee of B.
Riley & Co., LLC. In the ordinary course of its
business, B. Riley and its affiliates may actively trade
securities of Cardiogenesis and CryoLife for its own account or
the account of its customers and, accordingly, may at any time
hold a long or short position in such securities. B. Riley
may also, in the future, provide investment banking and
financial advisory services to Cardiogenesis or CryoLife or
entities that are affiliated with Cardiogenesis or CryoLife, for
which B. Riley would expect to receive compensation.
Consistent with applicable legal and regulatory requirements, B.
Riley has adopted policies and procedures to establish and
maintain the independence of B. Rileys research Department
and Personnel. As a result, B. Rileys research analysts
may hold opinions, make statements or investment recommendations
and/or
publish research reports with respect to Cardiogenesis and the
Merger and other participants in the Merger (including CryoLife)
that differ from the opinions of B. Rileys investment
banking personnel.
Prospective
Financial Information
Cardiogenesis does not as a matter of course make public
projections as to future performance, earnings or other results
beyond the current fiscal year due to the unpredictability of
the underlying assumptions and estimates. However, as described
under the heading Opinion of Our Financial Advisor
beginning on page 24, Cardiogenesis provided to B. Riley
for use in connection with the rendering of its Opinion to our
board of directors and performing its related financial
analysis, Cardiogenesis managements internal
non-public four-year financial forecasts regarding
Cardiogenesis anticipated future operations, which we
refer to as the Projections. Cardiogenesis management also
provided the Projections to our board of directors and to
CryoLife in connection with its due diligence review. CryoLife
has informed Cardiogenesis that it did not rely on these
Projections in any material respect in its analysis of the
transaction.
31
The Projections were prepared by, and are the responsibility of,
Cardiogenesis management. The Projections were not
prepared with a view toward public disclosure, and, accordingly,
they do not necessarily comply with published guidelines of the
SEC, the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of
financial forecasts, or generally accepted accounting
principles. Windes & McClaughry Accountancy
Corporation, Cardiogenesis independent registered public
accounting firm, has not audited, reviewed, compiled or
performed any procedures with respect to the Projections and
does not express an opinion or any form of assurance related
thereto. Cardiogenesis has included below a summary of the
Projections to give its shareholders access to certain
non-public information because such information was considered
by B. Riley for purposes of rendering its opinion and was also
provided to our board of directors and CryoLife. The summary of
the Projections below is not being included in this proxy
statement to influence a Cardiogenesis shareholders
decision whether to vote for or against the Merger and the
Merger Agreement.
The Projections, while presented with numerical specificity,
necessarily were based on numerous variables and assumptions
that are inherently uncertain and many of which are beyond the
control of Cardiogenesis management. Because the
Projections cover multiple years, by their nature, they become
subject to greater uncertainty with each successive year. The
assumptions upon which the Projections were based necessarily
involve judgments with respect to, among other things, future
economic, competitive and regulatory conditions and financial
market conditions, all of which are difficult or impossible to
predict accurately and many of which are beyond
Cardiogenesis control. The Projections also reflect
assumptions as to certain business decisions that are subject to
change.
Important factors that may affect actual results and result in
the Projections not being achieved include, but are not limited
to, the following: any inability by Cardiogenesis to sustain
profitable operations or obtain additional financing on
favorable terms if and when needed; any failure to obtain
required regulatory approvals; failure of the medical community
to expand its acceptance of transmyocardial revascularization
procedures; possible adverse governmental rulings or
regulations, including any FDA regulations or rulings;
Cardiogenesis ability to comply with international and
domestic regulatory requirements; the impact of healthcare
policy laws, regulations and reforms upon Cardiogenesis
industry; possible adverse Medicare or other third-party
reimbursement policies or adverse changes in those policies; any
inability by Cardiogenesis to ship product on a timely basis;
Cardiogenesis ability to manage its growth; the effects of
recent disruptions in global credit and equity markets and other
adverse economic developments that could adversely affect the
market for our products or our ability to raise needed
financing; actions by our competitors; and Cardiogenesis
ability to protect its intellectual property. Other factors that
could cause Cardiogenesis actual results to differ
materially are discussed in the Risk Factors section
of Cardiogenesis Annual Report on
Form 10-K
for the year ended December 31, 2010 and
Cardiogenesis other filings with the SEC. Cardiogenesis
disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the date
of this statement. In addition, the Projections may be affected
by Cardiogenesis ability to achieve strategic goals,
objectives and targets over the applicable period. This
information constitutes forward-looking statements
and actual results may differ materially and adversely from
them. See Cautionary Statement Regarding Forward-Looking
Information on page 10.
Accordingly, there can be no assurance that the Projections will
be realized, and actual results may vary materially from those
shown. The inclusion of the Projections in this proxy statement
should not be regarded as an indication that Cardiogenesis or
any of its affiliates, advisors or representatives considered or
consider the Projections to be predictive of actual future
events, and the Projections should not be relied upon as such.
Neither Cardiogenesis nor any of its affiliates, advisors,
officers, directors or representatives can give any assurance
that actual results will not differ from the Projections, and
none of them undertakes any obligation to update or otherwise
revise or reconcile the Projections to reflect circumstances
existing after the date the Projections were generated or to
reflect the occurrence of future events even in the event that
any or all of the assumptions underlying the Projections are
shown to be in error, but Cardiogenesis will amend the
Projections provided in this proxy statement and promptly
disseminate revised information in the event that the existing
disclosure materially changes. Neither Cardiogenesis nor any of
its affiliates, advisors, officers, directors or representatives
has made or makes any representation to any Cardiogenesis
shareholder or other person regarding the ultimate performance
of Cardiogenesis compared to the information contained in the
Projections or that the Projections will be achieved.
Cardiogenesis has made no representation to CryoLife or Merger
Sub, in the Merger Agreement or otherwise, concerning the
Projections.
32
In light of the foregoing factors and the uncertainties inherent
in the Projections, Cardiogenesis shareholders are
cautioned not to place undue, if any, reliance on the
Projections.
The following is a description of the Projections provided to B.
Riley, our board of directors, and CryoLife:
Projected
Financial Information
(dollar amounts are in thousands; all amounts are
approximate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Revenue
|
|
$
|
14,431
|
|
|
$
|
16,031
|
|
|
$
|
17,794
|
|
|
$
|
20,108
|
|
Gross Profit
|
|
$
|
12,251
|
|
|
$
|
13,659
|
|
|
$
|
15,240
|
|
|
$
|
17,284
|
|
Gross Margin
|
|
|
84.9
|
%
|
|
|
85.2
|
%
|
|
|
85.6
|
%
|
|
|
86.0
|
%
|
Operating Expenses
|
|
$
|
13,577
|
|
|
$
|
14,233
|
|
|
$
|
12,796
|
|
|
$
|
12,323
|
|
Net Income
|
|
$
|
(1,355
|
)
|
|
$
|
(603
|
)
|
|
$
|
2,415
|
|
|
$
|
4,932
|
|
Adjusted EBITDA(1)
|
|
$
|
(828
|
)
|
|
$
|
(178
|
)
|
|
$
|
2,951
|
|
|
$
|
5,468
|
|
|
|
|
(1) |
|
Defined as net income before interest income, interest expense,
provision for income tax, depreciation, amortization and
expenses associated with stock based compensation. |
The Projections include non-GAAP financial measures, including
Adjusted EBITDA. Adjusted EBITDA means earnings before interest
income, interest expense, provision for taxes, depreciation and
amortization and expenses associated with stock-based
compensation. Cardiogenesis believes that Adjusted EBITDA
provides important information about the operating trends of
Cardiogenesis. Cardiogenesis uses Adjusted EBITDA to evaluate
performance of its business operations. These non-GAAP measures
are not in accordance with, or an alternative for, measures
prepared in accordance with GAAP and may be different from
similarly titled measures used by other companies. Adjusted
EBITDA is not based on any comprehensive set of accounting rules
or principles. Non-GAAP measures have limitations in that they
do not reflect all of the amounts associated with
Cardiogenesis results of operations as determined in
accordance with GAAP. These measures should only be used to
evaluate Cardiogenesis results of operations in
conjunction with the corresponding GAAP measures.
Set forth below is a reconciliation of Adjusted EBITDA to the
most comparable GAAP financial measure based on the Projections,
Net Income. This reconciliation was not provided to CryoLife in
connection with its due diligence review or to B. Riley.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Reconciliation
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Net Income
|
|
$
|
(1,355
|
)
|
|
$
|
(603
|
)
|
|
$
|
2,415
|
|
|
$
|
4,932
|
|
Plus Income Tax
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
25
|
|
Plus Depreciation Expense
|
|
$
|
280
|
|
|
$
|
170
|
|
|
$
|
281
|
|
|
$
|
281
|
|
Plus Stock Based Compensation
|
|
$
|
218
|
|
|
$
|
226
|
|
|
$
|
226
|
|
|
$
|
226
|
|
Plus Interest Expense, net
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Adjusted EBITDA
|
|
$
|
(828
|
)
|
|
$
|
(178
|
)
|
|
$
|
2,951
|
|
|
$
|
5,468
|
|
Financing
of the Tender Offer and Merger
CryoLife will provide Merger Sub with sufficient funds to pay
for all shares of our common stock to be acquired in the Merger.
The total amount of funds necessary to pay all Merger
consideration and customary fees and expenses in connection with
the Merger Agreement and the transactions contemplated therein,
including the tender offer, is estimated to be approximately
$24.9 million, which will be used to pay shareholders of
Cardiogenesis and holders of Cardiogenesis other
equity-based interests. CryoLife has advised us that it expects
to provide funds for these payments to Merger Sub, either as a
capital contribution or as an intercompany loan. CryoLife will
obtain such funds from cash on hand. CryoLife and Merger Sub do
not have any alternative financing plans or arrangements. The
consummation of the Merger is not conditioned upon any financing
arrangements.
33
Interests
of Cardiogenesis Directors and Executive Officers in the
Merger
In considering the recommendation of our board of directors to
vote for the proposal to approve and adopt the Merger Agreement,
shareholders should be aware that Cardiogenesis executive
officers and directors have agreements or arrangements that may
provide them with interests that may differ from, or be in
addition to, those of shareholders generally. Our board of
directors was aware of these interests and considered them,
among other matters, in determining the recommendation set forth
in this proxy statement.
Consideration
Payable Pursuant to the Merger
As of March 25, 2011, Cardiogenesis directors and
executive officers (and affiliates and affiliated investment
entities) owned in the aggregate 911,561 shares of our
common stock (excluding shares of our common stock issuable upon
the exercise of options to purchase Common Stock and the vesting
of restricted stock). The beneficial ownership of each director
and executive officer as of March 25, 2011 is further
described in this proxy statement under the heading
Securities Ownership of Certain Beneficial Owners and
Management beginning on page 61.
Effect
of the Merger Agreement on Options and Restricted
Stock
Options
As of March 25, 2011, Cardiogenesis directors and
executive officers held options to purchase
2,077,634 shares of our common stock in the aggregate, with
exercise prices ranging from $0.13 to $2.57 per share. The
Merger Agreement provides that any outstanding option to acquire
shares of our common stock, whether vested or unvested, shall
vest and become fully exercisable immediately prior to the
effective time of the Merger in accordance with the terms and
conditions of the applicable stock plan under which such option
was granted and the applicable stock option agreement for such
option. At the effective time of the Merger, each holder of an
option will be entitled to receive an amount equal to the
excess, if any, of the Merger consideration, without interest,
over the exercise price per share of such option, less any
required withholding taxes. If the exercise price per share of
any option equals or exceeds $0.457, such amount shall be zero.
34
The table below sets forth information regarding the options
held by Cardiogenesis directors and executive officers as
of March 25, 2011 with an exercise price per share less
than $0.457.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
Option
|
|
|
|
|
|
|
Underlying
|
|
Exercise
|
|
Aggregate
|
|
|
|
|
Cardiogenesis Stock
|
|
Price
|
|
Proceeds
|
|
Total
|
Name
|
|
Options (#)
|
|
($)
|
|
($)
|
|
($)
|
|
Paul McCormick
|
|
|
22,500
|
|
|
|
0.33
|
|
|
|
2,857.50
|
|
|
|
23,660
|
|
|
|
|
7,500
|
|
|
|
0.29
|
|
|
|
1,252.50
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0.22
|
|
|
|
11,850
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0.38
|
|
|
|
7,700
|
|
|
|
|
|
William Abbott
|
|
|
100,000
|
|
|
|
0.49
|
|
|
|
|
|
|
|
72,925
|
|
|
|
|
100,000
|
|
|
|
0.30
|
|
|
|
15,700
|
|
|
|
|
|
|
|
|
175,000
|
|
|
|
0.13
|
|
|
|
57,225
|
|
|
|
|
|
Richard Lanigan
|
|
|
11,806
|
|
|
|
2.57
|
|
|
|
|
|
|
|
123,539.35
|
|
|
|
|
13,194
|
|
|
|
2.57
|
|
|
|
|
|
|
|
|
|
|
|
|
13,890
|
|
|
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
21,336
|
|
|
|
4.50
|
|
|
|
|
|
|
|
|
|
|
|
|
22,917
|
|
|
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
14,583
|
|
|
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
11,110
|
|
|
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
74,332
|
|
|
|
0.32
|
|
|
|
10,183.48
|
|
|
|
|
|
|
|
|
58,802
|
|
|
|
0.32
|
|
|
|
8,055.87
|
|
|
|
|
|
|
|
|
83,333
|
|
|
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
16,667
|
|
|
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
1.03
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
0.30
|
|
|
|
23,550
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
0.13
|
|
|
|
81,750
|
|
|
|
|
|
Raymond Cohen
|
|
|
22,500
|
|
|
|
0.18
|
|
|
|
6,232.5
|
|
|
|
10,082.50
|
|
|
|
|
50,000
|
|
|
|
0.38
|
|
|
|
3,850
|
|
|
|
|
|
Marvin Slepian
|
|
|
22,500
|
|
|
|
0.80
|
|
|
|
|
|
|
|
18,505
|
|
|
|
|
7,500
|
|
|
|
0.59
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
0.59
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
0.25
|
|
|
|
1,552.50
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
0.29
|
|
|
|
1,252.50
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0.22
|
|
|
|
11,850
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0.38
|
|
|
|
3,850
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0.59
|
|
|
|
|
|
|
|
|
|
Gregory Waller
|
|
|
22,500
|
|
|
|
0.30
|
|
|
|
3,532.50
|
|
|
|
20,485
|
|
|
|
|
7,500
|
|
|
|
0.29
|
|
|
|
1,252.50
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0.22
|
|
|
|
11,850
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0.38
|
|
|
|
3,850
|
|
|
|
|
|
Ann Sabahat
|
|
|
22,500
|
|
|
|
0.28
|
|
|
|
3982.5
|
|
|
|
19,682.50
|
|
|
|
|
50,000
|
|
|
|
0.22
|
|
|
|
11,850
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0.38
|
|
|
|
3,850
|
|
|
|
|
|
35
Restricted
Stock
As of March 25, 2011, Cardiogenesis executive
officers and directors held, in the aggregate,
365,318 shares of restricted stock. Each share of
restricted stock outstanding immediately prior to the purchase
of the shares of our common stock pursuant to the tender offer,
which we refer to as the Acceptance Time, will fully vest
immediately prior to the Acceptance Time pursuant to the terms
of the Merger Agreement. Thereafter, immediately prior to the
effective time of the Merger, such shares will convert into the
right to receive the Merger consideration.
The table below sets forth information regarding the shares of
restricted stock held by Cardiogenesis directors and
executive officers as of March 25, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Restricted Shares
|
|
Proceeds
|
Name
|
|
(#)
|
|
($)
|
|
Paul McCormick
|
|
|
250,000
|
|
|
|
114,250.00
|
|
William Abbott
|
|
|
51,539
|
|
|
|
23,567.03
|
|
Richard Lanigan
|
|
|
63,779
|
|
|
|
29,147.00
|
|
Raymond Cohen
|
|
|
|
|
|
|
|
|
Marvin Slepian
|
|
|
|
|
|
|
|
|
Gregory Waller
|
|
|
|
|
|
|
|
|
Ann Sabahat
|
|
|
|
|
|
|
|
|
Employment
Agreements between Cardiogenesis and its Executive
Officers
Employment
Agreement with Mr. McCormick
On June 24, 2009, our board of directors appointed Paul
McCormick, a member of our board of directors, to serve as the
Executive Chairman of our board of directors and principal
executive officer of Cardiogenesis effective July 1, 2009,
pursuant to an employment agreement. Under the terms of the
employment agreement, Mr. McCormick is entitled to an
annual base salary of $250,000, provided that he devotes at
least 75% of his time to his duties and responsibilities as
Executive Chairman under the employment agreement. On
May 17, 2010, Mr. McCormicks employment
agreement was amended to reduce his base salary to $200,000.
Mr. McCormick is entitled to receive certain benefits which
will include, at a minimum, medical insurance for
Mr. McCormick and his spouse, as well as no less than three
weeks paid vacation per year. In addition, Mr. McCormick
will also be reimbursed for all reasonable expenses incurred by
him in respect of his services to us. The employment agreement
has an initial term of one year, which term will be
automatically renewed for successive additional one year
periods, unless terminated upon 30 days written notice by
either Mr. McCormick or us.
In the event of a termination for cause, as defined
below, or in the event of a resignation without good
reason, as defined below (other than in connection with a
change of control or corporate
transaction, as such terms are defined below),
Mr. McCormick is only entitled to receive any accrued but
unpaid base salary and benefits through the date of termination.
In the event of a termination by us without cause or
by Mr. McCormick with good reason, or in the
event of a termination by us in connection with a change
of control or a corporate transaction,
Mr. McCormick is entitled to receive (i) the remainder
of his then current base salary for the remainder of the then
current term and (ii) any payments for unused vacation and
reimbursement expenses, which are due, accrued or payable at the
date of Mr. McCormicks termination.
Under Mr. McCormicks employment agreement, the
following terms have the following meanings:
Cause means:
|
|
|
|
|
willful misconduct by Mr. McCormick causing material harm
to us or repeated failure by him to follow the reasonable
directives of our board of directors (or a designated committee
thereof), but only if, in either case, Mr. McCormick shall
not have discontinued such misconduct or failure within thirty
(30) days after receiving written notice from us describing
the misconduct or failure and stating that we will consider the
continuation of such misconduct or failure as cause for
termination of the agreement;
|
36
|
|
|
|
|
any material act or omission by Mr. McCormick involving
gross negligence in the performance of his duties to, or
material deviation from any of the policies or directives of
Cardiogenesis, other than a deviation taken in good faith by
Mr. McCormick for our benefit;
|
|
|
|
any illegal act by Mr. McCormick which materially and
adversely affects the business of Cardiogenesis, provided that
we may suspend Mr. McCormick with pay while any allegation
of such illegal act is investigated; or
|
|
|
|
any felony committed by Mr. McCormick, as evidenced by
conviction thereof, provided that we may suspend
Mr. McCormick with pay while any allegation of such
felonious act is investigated.
|
Good Reason means:
|
|
|
|
|
without Mr. McCormicks prior written consent, a
reduction in his then current base salary;
|
|
|
|
without Mr. McCormicks prior written consent, the
assignment to him of duties substantially and materially
inconsistent with the position and nature of his employment as
set forth in the employment agreement; or
|
|
|
|
without Mr. McCormicks prior written consent, a
relocation of his place of employment outside of Orange County,
California.
|
Change of Control means a change in ownership or
control of Cardiogenesis effected through the acquisition,
directly or indirectly, by any person or related group of
persons (other than Cardiogenesis or a person that directly or
indirectly controls, is controlled by, or is under common
control with, Cardiogenesis), of beneficial ownership (within
the meaning of
Rule 13d-3
of the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of our
outstanding securities pursuant to a tender or exchange offer
made directly to our shareholders which our board of directors
does not recommend such shareholders to accept.
Corporate Transaction means either of the following
shareholder-approved transactions to which we are a party:
|
|
|
|
|
Merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of our
outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately
prior to such transaction; or
|
|
|
|
the sale, transfer or other disposition of all or substantially
all of our assets in complete liquidation or our dissolution.
|
The employment agreement also provides that all outstanding
options will accelerate and become exercisable in full and all
rights of repurchase with respect to restricted stock (if any)
shall terminate in the event of a change of control or a
corporate transaction. Mr. McCormicks employment
agreement replaces the consulting agreement he previously
entered into with us, which was simultaneously terminated.
Also on June 24, 2009, in connection with
Mr. McCormicks appointment to Executive Chairman, the
board of directors granted him 300,000 shares of restricted
stock under our Stock Option Plan. The restrictions on
Mr. McCormicks shares of restricted stock will lapse
in equal installments upon the first and second anniversaries of
the date of grant.
Employment
Agreement with Mr. Lanigan
On July 30, 2007, we entered into a written employment
agreement with Mr. Lanigan. On June 24, 2009, we
entered into an amendment to that employment agreement, pursuant
to which we and Mr. Lanigan agreed to: (i) change his
position from President to Executive Vice President, Marketing,
and (ii) change his annual base salary to $225,000, which
represented a decrease of $22,500 per year.
Pursuant to the terms of Mr. Lanigans employment
agreement, as amended, we agreed to set his annual discretionary
target bonus at 30% of his base salary (both of which reflected
his base salary and target bonus then in effect). In addition,
the agreement provided that Mr. Lanigans benefits
were to remain unchanged and include, at a minimum, medical
insurance (including prescription drug benefits) for
Mr. Lanigan and his spouse, as well as no
37
less than three weeks of paid vacation per year. On
January 7, 2010, our board of directors set
Mr. Lanigans maximum discretionary target bonus for
fiscal year 2010 to 30% of his base salary, or $67,500.
Our employment agreement with Mr. Lanigan also provides for
certain payments following the termination of his employment
with us. In the event we terminate Mr. Lanigans
employment with us for Cause, or in the event of a
resignation without Good Reason (other than in
connection with a Change of Control or Corporate Transaction, as
described above), we are obligated to pay Mr. Lanigan only
his accrued but unpaid base salary and benefits through the date
of termination. In the event we terminate his employment without
Cause or Mr. Lanigan terminates his employment
with us for Good Reason, we are obligated to pay
Mr. Lanigan the following:
|
|
|
|
|
accrued but unpaid salary and benefits through the date of
termination;
|
|
|
|
a severance payment in an amount equal to six months of his
then-current base salary;
|
|
|
|
a prorated payment equal to the target bonus amount for which he
would be eligible for the year in which such resignation or
termination occurred, and
|
|
|
|
continuation of certain insurance benefits for six months.
|
In addition, to the extent not already vested, all options to
purchase shares of our common stock and restricted stock shall
vest by six additional months.
In the event we terminate Mr. Lanigans employment in
connection with a Change of Control or a
Corporate Transaction or Mr. Lanigan terminates
his employment with us following a Change in Control or
Corporate Transaction under certain circumstances, we are
obligated to pay Mr. Lanigan the following:
|
|
|
|
|
accrued but unpaid salary and benefits through the date of
termination;
|
|
|
|
a severance payment in an amount equal to 12 months of his
then-current base salary;
|
|
|
|
payment equal to the target bonus amount for which he would be
eligible for the year in which such resignation or termination
occurred; and
|
|
|
|
continuation of certain insurance benefits for 12 months.
|
In addition, to the extent not already vested, all options to
purchase shares of our common stock and restricted stock shall
vest in full.
The definitions of Cause, Good Reason,
Change of Control and Corporate
Transaction are substantially the same as those summarized
above under the section entitled Employment Agreement with
Mr. McCormick.
Employment
Agreement with Mr. Abbott
On July 30, 2007, we entered into an employment agreement
with Mr. Abbott. The terms of our employment agreement with
Mr. Abbott are substantially the same as the terms of our
agreement with Mr. Lanigan, discussed above, provided,
however, that the initial base salary to be paid to
Mr. Abbott upon execution of his agreement with us was
$200,000 per year.
Arrangements
between Executive Officers and CryoLife or Merger
Sub
Management
Retention Agreements
CryoLife has agreed to employ Mr. Abbott after the Merger
for a transition period. Mr. Abbott is expected to be
employed until September 30, 2011 pursuant to his current
employment agreement, and will remain eligible to receive the
severance benefits described above.
CryoLife has agreed to employ Mr. Lanigan after the Merger
under an employment agreement with an initial term of two years.
During his employment in 2011, Mr. Lanigan will be paid an
annual salary of $225,000, and will receive a commission of
1.25% of sales of Cardiogenesis products during 2011 after the
closing of the Merger. He will also receive the 2011 bonus under
his Cardiogenesis employment agreement, pro-rated for the
portion of the
38
year from January 1 until the day of the closing of the Merger.
He will also receive a relocation allowance to move to Atlanta,
and the customary benefits received by CryoLifes officers
related to that relocation. The relocation package will be
CryoLifes standard executive relocation policy but there
will be allowance for up to 150 days of temporary living
expenses. Upon closing of the Merger, he will also receive
10,000 shares of CryoLifes restricted stock which
will vest on the third anniversary of the grant date, and 25,000
CryoLife stock options which will vest one-third per year
beginning on the first anniversary of the agreement, all
pursuant to CryoLifes standard forms of grant agreement.
Mr. Lanigans employment agreement will provide for
severance payments of one year salary plus bonus if
Mr. Lanigan is terminated without cause or if
Mr. Lanigan terminates the agreement for good reason which
includes an assignment of duties materially inconsistent with
his position, authority, duties or responsibilities or any
action by CryoLife which results in a material diminution in his
position, authority, duties or responsibilities. In order to
obtain this employment package, Mr. Lanigan will be
required to waive the severance benefits described above. The
terms of Mr. Lanigans employment are subject to
approval by CryoLifes compensation committee and the
execution of a definitive agreement.
Support
Agreement
Concurrently with the execution of the Merger Agreement,
Messrs. McCormick, Lanigan, Abbott and the members of our
board of directors entered into a Support Agreement with
CryoLife, pursuant to which they have agreed to tender, at the
request of CryoLife, an aggregate of 1,276,859 shares of
our common stock, which represent approximately 2.7% of the
outstanding shares of our common stock as of April 5, 2011.
The Support Agreement also requires such shareholders to take
certain other actions in connection with the Merger Agreement,
including voting in favor of matters contemplated by the Merger
Agreement if a meeting of Cardiogenesis shareholders is
called:
|
|
|
|
|
in favor of the Merger, the execution and delivery by
Cardiogenesis of the Merger Agreement, the adoption and approval
of the Merger Agreement and the terms thereof and each of the
other matters necessary for consummation of the Merger and the
other transactions contemplated by the Merger Agreement (whether
or not recommended by our board of directors);
|
|
|
|
against any acquisition proposal, any recapitalization,
reorganization, liquidation, dissolution, amalgamation, merger,
sale of assets or other business combination between
Cardiogenesis and any other person (other than the Merger), any
other action that could reasonably be expected to impede,
interfere with, delay, postpone or adversely affect the Merger
or any of the transactions contemplated by the Merger Agreement
or the Support Agreement or any transaction that results in a
breach in any material respect of any covenant, representation
or warranty or other obligation or agreement of Cardiogenesis or
any of its subsidiaries under the Merger Agreement, and any
change in the present capitalization or dividend policy of
Cardiogenesis or any amendment or other change to
Cardiogenesis articles of incorporation or bylaws, except
if approved by CryoLife; and
|
|
|
|
prior to the termination date and at any time after the
acceptance date, in favor of all necessary and desirable actions
to cause the election (and maintenance) of the CryoLife
designees to our board of directors pursuant to the terms of the
Merger Agreement (and, unless requested by CryoLife, against the
removal of any of the CryoLife designees from our board of
directors).
|
The Support Agreement will terminate upon the earliest to occur
of the following: (i) the Effective Time, (ii) written
notice of termination of the Support Agreement to the parties
thereto, (iii) August 31, 2011, (iv) the
termination of the Merger Agreement by its terms, (v) the
date CryoLife or Merger Sub terminates, withdraws, or abandons
the tender offer (without making a new tender offer),
(vi) the date on which the tender offer or a new offer is
revised (except in the context of CryoLifes matching
right) to (A) reduce the cash consideration payable
in the tender offer, (B) change the form of consideration
payable, (C) reduce the number of shares of our common
stock to be purchased by Merger Sub, (D) waive or amend the
minimum condition or certain other conditions to the
consummation of the tender offer, (E) add to the conditions
to the consummation of the tender offer, (F) extend the
expiration date beyond August 31, 2011, or
(G) otherwise amend, modify, or supplement any conditions
to the consummation of the tender offer or any term of the
tender offer set forth in the Merger Agreement in a manner
39
adverse to the holders of shares of our common stock, or
(vii) the date on which a third party acquires more than
50% of Cardiogenesis outstanding voting securities on a
fully diluted basis.
Indemnification
of Directors and Officers
Cardiogenesis is organized under the laws of the State of
California. Section 204(10) of the CGCL permits a
corporation to include in its charter documents, and in
agreements between the corporation and its directors and
officers, provisions expanding the scope of indemnification
beyond that specifically provided by current law.
Cardiogenesis articles of incorporation provides for the
indemnification of Cardiogenesis directors to the fullest
extent permissible under the CGCL. Consequently, no director
will be personally liable to Cardiogenesis or its shareholders
for monetary damages for any breach of fiduciary duties as a
director, except liability for:
|
|
|
|
|
any act or omission not in good faith or which involves
intentional misconduct or a knowing and culpable violation of
law;
|
|
|
|
acts or omissions that a director believes to be contrary to the
best interests of the corporation r its shareholders or that
involve the absence of good faith on the part of the director;
|
|
|
|
any transaction from which a director derived and improper
personal benefit;
|
|
|
|
acts or omissions that show a reckless disregard for the
directors duty to the corporation or its shareholders in
circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a
directors duties, of a risk of serious injury to the
corporation or its shareholders;
|
|
|
|
acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the directors
duty to the corporation or its shareholders; or
|
|
|
|
distributions, loans and guaranties under Section 316 of
the CGCL.
|
In addition, Cardiogenesis bylaws provide that
Cardiogenesis is required to indemnify its directors, officers,
employees and agents, in each case to the fullest extent
permitted by the CGCL. Cardiogenesis bylaws also provide
that Cardiogenesis shall advance expenses incurred by a
director, officer, employee or certain agents in advance of the
final disposition of any action or proceeding, and permit
Cardiogenesis to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out
of his or her actions in that capacity regardless of whether
Cardiogenesis would otherwise be permitted to indemnify him or
her under the provisions of the CGCL.
Cardiogenesis has entered into agreements to indemnify its
directors, officers and other employees as determined by our
board of directors. These agreements generally provide for
indemnification for related expenses including, among other
things, attorneys fees, judgments, fines and settlement
amounts incurred by any of these individuals in any action or
proceeding. Cardiogenesis also maintains directors and
officers liability insurance that insures its directors
and officers against certain losses and insures Cardiogenesis
with respect to its obligations to indemnify its directors and
officers.
The Merger Agreement provides that CryoLife and the surviving
corporation will honor and fulfill in all respects the
indemnification obligations of Cardiogenesis, including the
advancement of expenses incurred in the defense of any action or
suit, incurred prior to the effective time of the Merger.
Furthermore, until the sixth anniversary of the effective time
of the Merger, CryoLife will maintain in effect directors
and officers liability insurance with benefits and
coverage levels that are no less favorable than
Cardiogenesis existing policies in respect of acts or
omissions occurring at or prior to the effective time of the
Merger, provided that in satisfying such obligations, CryoLife
and Cardiogenesis will not be obligated to pay annual premiums
in excess of 150% of the amount paid by Cardiogenesis for
coverage for its last full fiscal year. If the annual premiums
of such insurance coverage exceed such amount, CryoLife and the
surviving corporation will obtain a policy with the greatest
coverage available for a cost not exceeding the 150% amount.
40
Summary
of Aggregate Proceeds that May be Received by
Cardiogenesis Directors and Executive
Officers
The table below sets forth information regarding the aggregate
proceeds that may be received by each of Cardiogenesis
directors and executive officers in connection with the tender
offer and the Merger. Such amounts are described in further
detail above under Consideration Payable Pursuant to
the Merger, Effect of the Merger Agreement on
Options and Restricted Stock, Arrangements
Between Executive Officers and CryoLife or Merger Sub,
and Employment Agreements between Cardiogenesis and its
Executive Officers. The table below sets forth, as of
March 28, 2011, the day Cardiogenesis entered into the
Merger Agreement, the amounts payable to each of
Cardiogenesis executive officers and each member of our
board of directors if each such person (1) tendered all of
the shares of our common stock that each person own for the
tender offer price (assuming no exercise of outstanding
options), (2) received remuneration for the cash-out of
options at the time of the Merger, and (3) in the case of
our executive officers, were terminated without cause in
connection with the Merger.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
Accelerated vesting of
|
|
|
|
Value of
|
|
|
|
|
Unrestricted Shares
|
|
restricted stock
|
|
|
|
shares
|
|
|
|
|
Owned
|
|
Number of
|
|
Value of
|
|
|
|
subject to
|
|
|
|
|
|
|
Number
|
|
|
|
shares of
|
|
shares of
|
|
Number
|
|
Options
|
|
|
|
|
Severance
|
|
of
|
|
|
|
restricted
|
|
restricted
|
|
of in-the-
|
|
(less
|
|
|
|
|
Payments
|
|
Shares
|
|
Value of
|
|
stock
|
|
stock
|
|
money
|
|
exercise
|
|
|
Executive Officer
|
|
(1)
|
|
Owned
|
|
shares
|
|
owned
|
|
tendered
|
|
Options
|
|
price)
|
|
Total
|
|
Richard P. Lanigan
|
|
$
|
241,875
|
(2)
|
|
|
199,580
|
(4)
|
|
$
|
91,208
|
|
|
|
32,315
|
|
|
$
|
14,768
|
|
|
|
533,134
|
|
|
$
|
123,539
|
|
|
$
|
471,390
|
|
Paul J. McCormick
|
|
$
|
37,272
|
|
|
|
728,926
|
(3)
|
|
$
|
333,119
|
|
|
|
250,000
|
|
|
$
|
114,250
|
|
|
|
180,000
|
|
|
$
|
23,660
|
|
|
$
|
508,301
|
|
William R. Abbott
|
|
$
|
215,000
|
|
|
|
39,884
|
|
|
$
|
18,227
|
|
|
|
26,154
|
|
|
$
|
11,952
|
|
|
|
275,000
|
|
|
$
|
72,925
|
|
|
$
|
325,104
|
|
Raymond W. Cohen
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
72,500
|
|
|
$
|
10,802.50
|
|
|
$
|
10,802.50
|
|
Ann T. Sabahat
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
122,500
|
|
|
$
|
19,682.50
|
|
|
$
|
19,682.50
|
|
Marvin J. Slepian
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
115,000
|
|
|
$
|
18,505
|
|
|
$
|
18,505
|
|
Gregory D. Waller
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
130,000
|
|
|
$
|
20,485
|
|
|
$
|
20,485
|
|
|
|
|
(1) |
|
Reflects the estimated value as of March 28, 2011, of
severance payments due upon termination to which each Executive
Officer may be entitled under the terms of his applicable
Employment Agreement. |
|
(2) |
|
Assumes that Mr. Lanigan will not enter into the proposed
employment agreement with CryoLife described above which would
require Mr. Lanigan to waive his right to severance
payments. |
|
(3) |
|
All of Mr. McCormicks shares were acquired in
open-market transactions. |
|
(4) |
|
83,765 of Mr. Lanigans shares were acquired in
open-market transactions. |
Dividends
Pursuant to the Merger Agreement, we are prohibited from
declaring any dividends following execution of the Merger
Agreement on March 28, 2011.
Determination
of the Merger Consideration
The Merger consideration was determined through
arms-length negotiations between Cardiogenesis and
CryoLife.
Regulatory
Matters
In connection with the Merger, we are required to make certain
filings with, and comply with certain laws of, various federal
and state governmental agencies, including the following:
|
|
|
|
|
filing the certificate of Merger with the Secretary of State of
the State of California in accordance with the CGCL after the
approval and adoption of the Merger Agreement by our
shareholders; and
|
|
|
|
complying with U.S. federal securities laws.
|
41
Person/Assets,
Retained, Employed, Compensated Or Used
B. Riley
Pursuant to an engagement letter dated November 7, 2010,
Cardiogenesis retained B. Riley to deliver its opinion, which is
referred to as the Opinion, as to the fairness, from a financial
point of view, of the consideration to be received by the
holders of the shares of our common stock in the tender offer
and the Merger, which are sometimes referred together as the
Transaction. At a meeting of our board of directors on
March 22, 2011, B. Riley delivered its oral opinion to our
board of directors which was confirmed in a written opinion,
dated the same day, subsequently such opinion was updated as of
March 28, 2011 and confirmed in a written opinion dated
March 28, 2011, that based upon and subject to the
assumptions, procedures, considerations and limitations set
forth in the written opinion and based upon such other factors
as B. Riley considered relevant, that the consideration (as
defined below) to be paid in connection with the tender offer
and the Merger is fair, from a financial point of view, to the
holders of the shares of our common stock as of the date of the
Opinion.
Dissenters
Rights
The following is a summary of Chapter 13 of the California
General Corporation Law, which we refer to as the CGCL, which
sets forth the procedures for our shareholders to dissent from
the Merger and to demand statutory dissenters rights under
the CGCL. Shares of our common stock held by shareholders who
have perfected their dissenters rights in accordance with
Chapter 13 of the CGCL and have not withdrawn their demands
or otherwise lost their rights are referred to in this summary
as dissenting shares. This summary does not purport to be a
complete statement of the provisions of California law relating
to the rights of our shareholders to an appraisal of the value
of their shares and is qualified in its entirety by reference to
Chapter 13 of the CGCL, the full text of which is attached
as Annex C hereto. Please note, failure to follow
the procedures required by the CGCL could result in the loss of
dissenters rights.
Under Sections 181 and 1201 of the CGCL, the Merger
constitutes a reorganization. Chapter 13 of the
CGCL provides dissenters rights for shareholders
dissenting from reorganizations in certain circumstances. While
there are generally no dissenters rights in connection
with securities listed on national securities exchanges,
Cardiogenesis common stock is quoted on the OTCQB, which
is not a national securities exchange, and therefore, our
shareholders will be entitled to dissent from the Merger and
seek appraisal for their shares of Cardiogenesis common stock if
they follow the procedures required by the CGCL.
For a Cardiogenesis shareholder to exercise dissenters
rights as to any shares of Cardiogenesis common stock in
connection with the Merger, the shareholder must not vote in
favor of the Merger and must make a written demand to
Cardiogenesis that it purchase the shares at their fair market
value. Thus, if a shareholder wishes to dissent, any proxy card
submitted must be marked to be either voted
AGAINST or ABSTAIN. If the
shareholder returns the proxy card without voting instructions,
while his or her shares will have the same effect as a vote
AGAINST approval and adoption of the Merger
Agreement, the return of a proxy card without voting
instructions will cause the shareholder to lose his or her
dissenters rights. A shareholder who returns the proxy
card with voting instructions FOR the
approval and adoption of the Merger Agreement will cause the
shareholder to lose his or her dissenters rights.
The shareholders written demand must:
|
|
|
|
|
be made by the record holder of the shares; thus, a beneficial
owner of our stock that is registered in the record ownership of
another person (such as a broker or nominee) should instruct the
record holder to follow the procedures for perfecting
dissenters rights if the beneficial owner wants to dissent
with respect to any or all of those shares;
|
|
|
|
be mailed or otherwise directed to Cardiogenesis Corporation,
attention Corporate Secretary, 11 Musick, Irvine, CA, 92618;
|
|
|
|
be received not later than 30 days after notice of the
approval of the Merger is mailed to shareholders who did not
vote in favor of the Merger (as described below);
|
42
|
|
|
|
|
specify the shareholders name and mailing address and the
number and class of shares held of record that the shareholder
demands that we purchase;
|
|
|
|
state that the shareholder is demanding purchase of the shares
and payment of their fair market value (Chapter 13 of the
CGCL states that the fair market value, for this purpose, is
determined as of the day before the announcement of
the proposed Merger, which in this case was March 28,
2011); and
|
|
|
|
state the price that the shareholder claims to be the fair
market value of the shares (this statement will constitute an
offer by the shareholder to sell the shares to us at that price).
|
In addition, within 30 days after notice of the approval of
the Merger is mailed to shareholders, the shareholder must also
submit to us or our transfer agent, for endorsement as
dissenting shares, the stock certificates representing the
Cardiogenesis shares as to which the shareholder is exercising
dissenters rights. A holder of dissenting shares may not
withdraw a demand for payment unless we consent to the
withdrawal.
Simply failing to vote for or against, or voting against, the
proposed Merger will not be sufficient to constitute the demand
described above.
If the Merger is approved by our shareholders, we will have
10 days after the approval to send to those shareholders
who did not vote in favor of the Merger and who could
potentially exercise dissenters rights in accordance with
the CGCL, a written notice of such approval accompanied by:
|
|
|
|
|
a copy of Chapter 13 of the CGCL;
|
|
|
|
a statement of the price we determine to represent the fair
market value of the dissenting shares (this statement will
constitute an offer by us to purchase any dissenting shares at
the stated amount if the Merger closes and unless the shares
lose their status as dissenting shares); and
|
|
|
|
a brief description of the procedures to be followed if a
shareholder desires to exercise dissenters rights.
|
If Cardiogenesis and a dissenting shareholder agree that the
shares are dissenting shares and agree on the price of the
shares, the dissenting shareholder is entitled to receive the
agreed-upon
price with interest from the date of such agreement. The
applicable interest rate will be the rate then set by law for
the accrual of interest on judgments for money. Payment for the
dissenting shares must be made within 30 days after the
later of the date of that agreement or the date on which all
statutory and contractual conditions to the Merger are
satisfied. Payments are also conditioned on the surrender to us
of the certificates representing the dissenting shares.
If we deny that shares are dissenting shares or the shareholder
fails to agree with us as to the fair market value of the
shares, then, within six months after the notice of approval is
mailed, any shareholder demanding purchase of such shares as
dissenting shares or any interested corporation may file a
complaint in the superior court in the proper California county
requesting a determination as to whether the shares are
dissenting shares or as to the fair market value of the
holders shares, or both, or may intervene in any action
pending on such a complaint. If the complaint is not filed or
intervention in a pending action is not made within the
specified six-month period, the dissenters rights are
lost. The court will first determine any issues as to the status
of the dissenting shares. If the fair market value of the
dissenting shares is at issue, the court will determine, or will
appoint one or more impartial appraisers to determine, such fair
market value.
If the court appoints an appraiser or appraisers, they will
proceed to determine the fair market value per share. Within the
time fixed by the court, the appraisers, or a majority of the
appraisers, will make and file a report in the office of the
clerk of the court. Thereafter, on the motion of any party, the
report is submitted to the court and considered on such evidence
as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
If the single appraiser or a majority of the appraisers fails to
make and file a report within 10 days after the date of
their appointment or within such further time as the court
allows, or if the court does not confirm the report, the court
will determine the fair market value of the dissenting shares.
Subject to Section 1306 of Chapter 13 of the CGCL,
judgment is rendered against the corporation for payment of an
amount equal to the fair market value of each dissenting share
multiplied by the number of dissenting shares that any
dissenting shareholder who is a party,
43
or who has intervened, is entitled to require the corporation to
purchase, with interest at the legal rate from the date on which
the judgment is entered.
The costs of the action, including reasonable compensation to
the appraisers to be fixed by the court, is assessed or
apportioned as the court considers equitable. However, if the
price determined by the court is more than the price offered by
the corporation, the corporation pays the costs (including, in
the discretion of the court, attorneys fees, fees of
expert witnesses and interest at the legal rate on judgments
from the date the shareholder made the demand and submitted
shares for endorsement if the price determined by the court is
more than 125% of the price offered by the corporation).
Except as expressly limited by Chapter 13, holders of
dissenting shares continue to have all of the rights and
privileges incident to their shares until the fair market value
of their shares is agreed upon or determined.
Dissenting shares lose their status as dissenting shares, and
dissenting shareholders cease to be entitled to require
Cardiogenesis to purchase their shares, if:
|
|
|
|
|
the Merger is abandoned;
|
|
|
|
the shares are transferred before they are submitted to
Cardiogenesis for the required endorsement;
|
|
|
|
the dissenting shareholder and Cardiogenesis do not agree on the
status of the shares as dissenting shares or do not agree on the
purchase price, but neither Cardiogenesis nor the shareholder
files a complaint or intervenes in a pending action within six
months after we mail a notice that our shareholders have
approved the Merger; or
|
|
|
|
with our consent, the holder delivers to us a written withdrawal
of such holders demand for purchase of the shares.
|
To the extent that the provisions of Chapter 5 of the CGCL
(which places conditions on the power of a California
corporation to make distributions to its shareholders) prevent
the payment to any holders of dissenting shares of the fair
market value of the dissenting shares, the dissenting
shareholders will become creditors of the corporation for the
amount that they otherwise would have received in the repurchase
of their dissenting shares, plus interest at the legal rate on
judgments until the date of payment, but subordinate to all
other creditors of the corporation in any liquidation
proceeding, with the debt to be payable when permissible under
the provisions of Chapter 5 of the CGCL.
For U.S. federal income tax purposes, shareholders who
receive cash for their shares of our stock pursuant to the
exercise of dissenters rights will generally recognize
taxable gain or loss. Each holder should consult its own tax
advisor as to the particular tax consequences of the exercise of
dissenters rights to such holder.
CHAPTER 13 OF THE CGCL PROVIDES THAT THE VALUE OF OUR
COMMON STOCK FOR PURPOSES OF THE EXERCISE OF DISSENTERS
RIGHTS IS THE FAIR MARKET VALUE ON THE DAY PRIOR TO
ANNOUNCEMENT OF THE TRANSACTION. AS A RESULT, THE BOARD INTENDS
TO FIX THE VALUE FOR PURPOSES OF ANY SHAREHOLDER EXERCISING
DISSENTERS RIGHTS AT $0.32 PER SHARE, THE PRICE OF OUR
COMMON STOCK ON MARCH 28, 2011, AND AN AMOUNT SUBSTANTIALLY LESS
THAN THE MERGER CONSIDERATION.
Material
United States Federal Income Tax Consequences
The following is a summary of certain material U.S. federal
income tax consequences to holders of shares of our common stock
upon the exchange of such shares for cash pursuant to the
Merger. This summary does not purport to be a comprehensive
description of all of the tax consequences that may be relevant
to a decision to dispose of shares of our common stock in the
Merger, including tax considerations that arise from rules of
general application to all taxpayers or to certain classes of
investors or that are generally assumed to be known by
investors. This summary is based on the Internal Revenue Code of
1986, as amended, which we refer to as the Code, Treasury
regulations, administrative rulings and court decisions, all as
in effect as of the date hereof and all of which are subject to
differing interpretations
and/or
change at any time (possibly with retroactive effect). In
addition, this summary is not a complete description of all the
tax consequences of the Merger and, in particular, may not
address
44
U.S. federal income tax considerations to holders of shares
of our common stock subject to special treatment under
U.S. federal income tax law (including, for example,
financial institutions, dealers in securities or currencies,
traders that mark to market, holders who hold their shares of
our common stock as part of a hedge, straddle or conversion
transaction, insurance companies, tax-exempt entities and
holders who obtained their shares of our common stock by
exercising options or warrants). In addition, this summary does
not discuss any consequences to holders of options or warrants
to purchase shares of our common stock or any aspect of state,
local or foreign tax law that may be applicable to any holder of
shares of our common stock, or any U.S. federal tax
considerations other than U.S. federal income tax
considerations. This summary assumes that holders own shares of
our common stock as capital assets. No ruling from the Internal
Revenue Service and no tax opinion of counsel has been or will
be sought with respect to any of the tax matters discussed
herein.
We urge holders of shares of our common stock to consult
their own tax advisors with respect to the specific tax
consequences to them in connection with the Merger in light of
their own particular circumstances, including the tax
consequences under state, local, foreign and other tax laws.
U.S.
Holders
Except as otherwise set forth below, the following discussion is
limited to the U.S. federal income tax consequences
relevant to a beneficial owner of shares of our common stock
that is a citizen or resident of the United States, a domestic
corporation (or any other entity or arrangement treated as a
domestic corporation for U.S. federal income tax purposes),
any estate (the income of which is subject to U.S., federal
income taxation regardless of its source), and any trust if
(i) a court within the United States is able to exercise
primary supervision over the administration of the trust, and
(ii) one or more U.S. persons have the authority to
control all substantial decisions of the trust, which we refer
to as a U.S. Holder.
If a partnership (including any entity or arrangement treated as
a partnership for U.S. federal income tax purposes) holds
shares of our common stock, the tax treatment of a holder that
is a partner in the partnership generally will depend upon the
status of the partner and the activities of the partnership.
Such holders should consult their own tax advisors regarding the
tax consequences of exchanging the shares of our common stock
pursuant to the tender offer or pursuant to the Merger.
Payments
with Respect to Shares of Our Common Stock
The exchange of shares of our common stock for cash pursuant to
the Merger will be a taxable transaction for U.S. federal
income tax purposes, and a U.S. Holder who receives cash
for shares of our common stock pursuant to the Merger will
recognize gain or loss, if any, equal to the difference between
the amount of cash received and the holders adjusted tax
basis in the shares of our common stock gain or loss must be
determined separately for each block of shares (i.e., shares
acquired at the same cost in a single transaction) exchanged for
cash in the merger. Such gain or loss will be capital gain or
loss, and will be long-term capital gain or loss if such
U.S. Holders holding period for the shares of our
common stock is more than one year at the time of the exchange
of such holders shares of our common stock for cash.
Long-term capital gains recognized by an individual holder
generally are subject to tax at a lower rate than short-term
capital gains or ordinary income. There are limitations on the
deductibility of capital losses.
Backup
Withholding Tax and Information Reporting
Payments made with respect to shares of our common stock
exchanged for cash in the Merger will be subject to information
reporting and potential U.S. federal backup withholding tax
(currently at a rate of 28 percent). To avoid such backup
withholding, a U.S. holder should provide the exchange
agent or other applicable person a properly completed
Form W-9
(or appropriate substitute form), signed under penalties of
perjury, including such holders current Taxpayer
Identification Number, or TIN, and other
certifications.
Certain U.S. holders are exempt from these backup
withholding and reporting requirements. Exempt holders who are
not subject to backup withholding should indicate their exempt
status on a
Form W-9
by entering their correct TIN, marking the appropriate box and
signing and dating the
W-9 in the
space provided.
45
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules will be allowed as a
refund or a credit against a United States holders United
States federal income tax liability provided the required
information is timely furnished to the IRS.
Non-U.S.
Holders
The following is a summary of certain U.S. federal income
tax consequences that will apply to you if you are a
Non-U.S. Holder
of shares of our common stock. The term
Non-U.S. Holder
means a beneficial owner, other than a partnership, of shares of
our common stock that is not a U.S. Holder.
Non-U.S. Holders
should consult their own tax advisors to determine the specific
U.S. federal, state, local and foreign tax consequences
that may be relevant to them.
Payments
with Respect to Shares of Our Common Stock
Payments made to a
Non-U.S. Holder
with respect to shares of our common stock exchanged for cash
pursuant to the Merger generally will be exempt from
U.S. federal income tax, unless:
|
|
|
|
(a)
|
the gain on shares of our common stock, if any, is effectively
connected with the conduct by the
Non-U.S. Holder
of a trade or business in the United States (and, if certain
income tax treaties apply, is attributable to the
Non-U.S. Holders
permanent establishment or fixed base in the United States) (in
which event (i) the
Non-U.S. Holder
will be subject to U.S. federal income tax as described
under U.S. Holders, but such
Non-U.S. Holder
should provide a
Form W-8ECI
instead of a
Form W-9,
and (ii) if the
Non-U.S. Holder
is a corporation, it may be subject to branch profits tax on
such gain at a 30 percent rate (or such lower rate as may
be specified under an applicable income tax treaty));
|
|
|
|
|
(b)
|
the
Non-U.S. Holder
is an individual who was present in the United States for
183 days or more in the taxable year and certain other
conditions are met (in such event the
Non-U.S. Holder
will be subject to tax at a flat rate of 30 percent (or
such lower rate as may be specified under an applicable income
tax treaty) on the gain from the exchange of the shares of our
common stock net of applicable U.S. losses from sales or
exchanges of other capital assets recognized during the year); or
|
|
|
|
|
(c)
|
the
Non-U.S. Holder
is an individual subject to tax pursuant to U.S. tax rules
applicable to certain expatriates.
|
Backup
Withholding Tax and Information Reporting
In general, if you are a
Non-U.S. Holder
you will not be subject to backup withholding and information
reporting with respect to a payment made with respect to shares
of our common stock exchanged for cash in the Merger if you have
provided the Depositary with an IRS
Form W-8BEN
(or a
Form W-8ECI
if your gain is effectively connected with the conduct of a
U.S. trade or business). If shares are held through a
foreign partnership or other flow-through entity, certain
documentation requirements also apply to the partnership or
other flow-through entity.
Deregistration
of Cardiogenesis Shares of Common Stock
If the Merger is completed, shares of our common stock will be
no longer be quoted on the OTCQB and will be deregistered under
the Securities Exchange Act of 1934, as amended, and the shares
of our common stock will no longer be publicly traded.
Litigation
Relating to the Merger
On April 7, 2011, two plaintiffs filed purported class
actions against Cardiogenesis, its directors, and CryoLife and
Merger Sub, in connection with the proposed Offer and Merger.
These suits were filed in California Superior Court for Orange
County and allege that the defendants breached
and/or aided
and abetted the breach of their fiduciary duties to
Cardiogenesis by seeking to sell Cardiogenesis through an
allegedly unfair process and for an unfair price and on unfair
terms. The suits seek various equitable relief that would delay
or enjoin the Merger based
46
on allegations regarding the process by which offers or
potential offers were evaluated by Cardiogenesis, as well as
fees and expenses of the plaintiffs attorneys and experts.
|
|
|
|
|
|
|
Court
|
|
Filing Date
|
|
Case Name
|
|
Case Number
|
|
Superior Court of California, County of Orange
|
|
April 7, 2011
|
|
Patrick J. Grace vs. Paul McCormick
|
|
30-2011-00464472-CU-SL-CXC
|
Superior Court of California, County of Orange
|
|
April 7, 2011
|
|
Marion William Habiak vs. Cardiogenesis Corporation
|
|
30-2011-00464844-CU-SL-CXC
|
Cardiogenesis believes the allegations in the lawsuits are
without merit, and intends to defend the actions vigorously. The
absence of an injunction or court order preventing the
consummation of the transaction is a condition to
CryoLifes obligation to complete the Merger pursuant to
the Merger Agreement.
47
THE
MERGER AGREEMENT
This section describes the material terms of the Merger
Agreement. The description in this section and elsewhere in this
proxy statement is qualified in its entirety by reference to the
complete text of the Merger Agreement, a copy of which is
attached as Annex A and is incorporated by reference
into this proxy statement. This summary does not purport to be
complete and may not contain all of the information about the
Merger Agreement that is important to you. We encourage you to
read the Merger Agreement carefully and in its entirety. This
section is not intended to provide you with any factual
information about us. Such information can be found elsewhere in
this proxy statement and in the public filings we make with the
SEC, as described in the section entitled, Where You Can
Find More Information, beginning on page 65.
Explanatory
Note Regarding the Merger Agreement
The Merger Agreement is included to provide you with information
regarding its terms. Factual disclosures about Cardiogenesis
contained in this proxy statement or in Cardiogenesis
public reports filed with the SEC may supplement, update or
modify the factual disclosures about Cardiogenesis contained in
the Merger Agreement. The representations, warranties and
covenants made in the Merger Agreement by Cardiogenesis,
CryoLife and Merger Sub were qualified and subject to important
limitations agreed to by Cardiogenesis, CryoLife and Merger Sub
in connection with negotiating the terms of the Merger
Agreement. In particular, in your review of the representations
and warranties contained in the Merger Agreement and described
in this summary, it is important to bear in mind that the
representations and warranties were negotiated with the
principal purposes of establishing the circumstances in which a
party to the Merger Agreement may have the right not to
consummate the merger if the representations and warranties of
the other party prove to be untrue due to a change in
circumstance or otherwise, and allocating risk between the
parties to the Merger Agreement, rather than establishing
matters as facts. The representations and warranties may also be
subject to a contractual standard of materiality different from
those generally applicable to shareholders and reports and
documents filed with the SEC and in some cases were qualified by
the matters contained in the disclosure schedule that
Cardiogenesis delivered in connection with the Merger Agreement,
which disclosures were not reflected in the Merger Agreement.
Moreover, information concerning the subject matter of the
representations and warranties, which do not purport to be
accurate as of the date of this proxy statement, may have
changed since the date of the Merger Agreement and subsequent
developments or new information qualifying a representation or
warranty may have been included in this proxy statement.
Effects
of the Merger; Directors and Officers; Certificate of
Incorporation; Bylaws
The Merger Agreement provides for the merger of Merger Sub with
and into Cardiogenesis upon the terms, and subject to the
conditions, set forth in the Merger Agreement. As the surviving
corporation, Cardiogenesis will continue to exist following the
merger.
The board of directors of the surviving corporation will, from
and after the effective time of the Merger, consist of the
directors of Merger Sub until their successors have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the certificate of
incorporation and bylaws of the surviving corporation. The
officers of Cardiogenesis immediately prior to the effective
time of the Merger will, from and after the effective time of
the Merger, be the officers of the surviving corporation until
their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal
in accordance with the certificate of incorporation and bylaws
of the surviving corporation.
The articles of incorporation of the surviving corporation will
be in the form of the certificate of incorporation attached as
an exhibit to the Merger Agreement, until amended in accordance
with its terms or by applicable law. The by-laws of Merger Sub
as in effect immediately prior to the effective time of the
Merger will be the by-laws of the surviving corporation, until
amended in accordance with its terms or by applicable law.
Following the completion of the Merger, Cardiogenesis
common stock will no longer be quoted on the OTCQB and will be
deregistered under the Exchange Act and to cease to be publicly
traded.
48
Terms of
the Merger Agreement
The following is a summary of certain provisions of the Merger
Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the full text of the
Merger Agreement, a copy of which is attached hereto as
Annex A, which is incorporated herein by reference.
Copies of the Merger Agreement, and any other filings that we
make with the SEC with respect to the tender offer or the
merger, may be obtained in the manner set forth in Where
You Can Find More Information beginning on page 65.
Shareholders and other interested parties should read the Merger
Agreement for a more complete description of the provisions
summarized below.
The Tender Offer. On April 5, 2011,
Merger Sub commenced the tender offer for all of the outstanding
shares of our common stock at a price of $0.457 per share, net
to the seller in cash without interest thereon and less any
required withholding taxes. As a result of the tender offer,
Merger Sub acquired a total
of shares,
or 49.9% of the outstanding Cardiogenesis shares.
Recommendation. Cardiogenesis has represented
in the Merger Agreement that our board of directors has, at a
meeting duly called and held, duly adopted resolutions for which
all directors present voted in favor of (i) determining
that the terms of the Merger Agreement, the tender offer, the
Merger and the other transactions contemplated thereby are fair
to and in the best interests of Cardiogenesis
shareholders, (ii) approved and declared advisable the
Merger Agreement and the transactions contemplated thereby,
including the tender offer and the Merger, (iii) directed
that the Merger Agreement be submitted to Cardiogenesis
shareholders for adoption and approval (unless the Merger is
consummated in accordance with the provisions of
Californias short-form merger statute and
(iv) resolved to recommend that Cardiogenesis
shareholders accept the tender offer, tender their shares of our
common stock pursuant to the tender offer and vote in favor of
the adoption and approval of the Merger Agreement and the
transactions contemplated thereby, including the tender offer
and the Merger (if required by applicable law). We refer to the
recommendation in clause (iv) above as the Recommendation.
The Merger; Closing; Effective Time. The
Merger Agreement provides that, after satisfaction or waiver of
certain conditions, Merger Sub will be merged with and into
Cardiogenesis and Cardiogenesis will be the surviving
corporation. The closing date of the Merger will occur on a date
to be specified by the parties to the Merger Agreement, which
shall be no later than the second business day after
satisfaction or waiver of all of the conditions to the Merger
(other than any such conditions which by their nature cannot be
satisfied until the closing) set forth in the Merger Agreement
(or such other date as the parties to the Merger Agreement may
agree), which conditions are described below in Conditions
to the Merger beginning on page 59. The Merger will
be completed and become effective when the certificates of
merger are filed with the Secretary of State of Florida and the
Secretary of State of California.
Charter, Bylaws, Directors, and Officers. At
the effective time of the Merger, the articles of incorporation
of Cardiogenesis will be amended to conform to Exhibit C of
the Merger Agreement. Also at the effective time of the Merger,
the bylaws of Cardiogenesis will be amended to read as the
bylaws of Merger Sub as in effect immediately prior to the
effective time of the Merger, except that such bylaws will be
amended to reflect that the name of the surviving corporation
will be Cardiogenesis Corporation. The directors of
Merger Sub immediately prior to the effective time of the Merger
will be the initial directors of the surviving corporation and
the officers of Cardiogenesis immediately prior to the effective
time of the Merger will be the initial officers of the surviving
corporation.
Appointment of Directors. [On
[May ], 2011, CryoLife
exercised its rights under the Merger Agreement to appoint its
designees,
[ ],
[ ],
and
[ ],
to our board of directors.]
Conversion of Shares of Our Common Stock. Each
common share issued and outstanding immediately prior to the
effective time of the Merger (other than shares of our common
stock held by us, CryoLife, or Merger Sub, or by any direct or
indirect wholly-owned subsidiary of CryoLife, Merger Sub or
Cardiogenesis, in each case immediately prior to the effective
time of the Merger and any shares of our common stock that are
issued and outstanding immediately prior to the effective time
of the Merger and held by a Cardiogenesis shareholder who is
entitled to demand and properly demands appraisal of such shares
of common stock pursuant to, and who complies in all material
respects with,
Sections 1300-1313
of the CGCL, which is attached hereto as Annex C,
will, by virtue of the Merger and without any action on the part
of CryoLife, Merger Sub, Cardiogenesis or the holder, be
cancelled
49
and converted at the effective time of the Merger into the right
to receive the Merger consideration, without interest thereon
and less any required withholding tax. At the effective time of
the Merger, each common share of Cardiogenesis owned by
CryoLife, Merger Sub or any wholly-owned subsidiary of CryoLife
or Cardiogenesis and shares of our common stock held by
Cardiogenesis in treasury will be cancelled, and no payment or
distribution will be made with respect to such shares of our
common stock. At the effective time of the Merger, each share of
Merger Sub common stock issued and outstanding immediately prior
to the effective time of the Merger will, by virtue of the
Merger and without any action on the part of the holder thereof,
be converted into one share of common stock of the surviving
corporation.
Payment for Shares of Our Common Stock in the
Merger. CryoLife will deposit with Computershare
Inc., as Paying Agent for the Merger, for the benefit of the
holders of shares of our common stock, sufficient funds to pay
the aggregate Merger consideration in an payment fund. After the
Merger is completed, you will have the right to receive $0.457
per common share, but you will no longer have any rights as a
Cardiogenesis shareholder. You will receive the Merger
consideration in exchange for your shares of our common stock in
accordance with the instructions that will be contained in the
letter of transmittal that will be sent to you shortly after
completion of the Merger. If your shares of our common stock are
held in street name by your broker, dealer,
commercial bank, trust company or other nominee, you will
receive instructions from your broker, dealer, commercial bank,
trust company or other nominee as to how to surrender your
street name shares of our common stock and receive
cash for those shares. If your shares of our common stock are
held in book-entry form, you will receive instructions from the
paying agent as to how to surrender your book-entry
shares and receive cash for those shares.
Any portion of the payment fund (including the proceeds of any
investments thereof) that remains unclaimed for one year after
the effective time of the Merger will be delivered to CryoLife.
Holders of shares outstanding before the effective time of the
Merger will thereafter be entitled to look only to CryoLife for
payment of any claims for Merger consideration to which they may
be entitled (after giving effect to any required withholding
tax). None of the surviving corporation, CryoLife, the Paying
Agent or any other person will be liable to any person in
respect of any Merger consideration delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar laws.
Transfer of Shares of Our Common Stock. After
the effective time of the Merger, there will be no transfers on
our share transfer books of shares of our common stock
outstanding immediately prior to the effective time of the
Merger. If, after the effective time of the Merger, any
certificate for our shares of our common stock is presented to
the surviving corporation, CryoLife or the Paying Agent for
transfer, it will be cancelled and exchanged for the per share
Merger consideration, multiplied by the number of shares
represented by the certificate.
Representations
and Warranties
The Merger Agreement contains representations and warranties of
Cardiogenesis, CryoLife and Merger Sub, to each other, as to,
among other things:
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the corporate organization, existence and power of each party
and its subsidiaries;
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the authority of each party to enter into the Merger Agreement
and make it valid and binding;
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no contravention by the execution, delivery and performance of
the Merger Agreement of:
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the organizational documents of each party and its subsidiaries,
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applicable law, or
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specified agreements, instruments and obligations;
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required governmental approvals; and
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compliance with law.
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The Merger Agreement contains additional representations and
warranties of Cardiogenesis to CryoLife as to, among other
things:
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the capitalization of Cardiogenesis;
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the conduct of its business in the ordinary course;
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the completeness and accuracy of Cardiogenesis filings
with the SEC and financial statements;
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the absence of material undisclosed liabilities;
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the absence of changes in its business;
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legal proceedings;
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compliance of Cardiogenesis products with FDA marketing
and other requirements;
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employee benefit plans and related matters;
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certain labor matters;
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environmental liabilities;
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tax matters;
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material contracts;
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the shareholder vote that may be required to approve the Merger;
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insurance policies;
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tangible and real properties;
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intellectual property;
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product and service warranties;
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accounts receivable and inventories;
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anti-takeover laws, regulations, or rights plans;
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related party transactions; and
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fees payable to and the opinion of the financial advisor to
Cardiogenesis.
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The Merger Agreement contains additional representations and
warranties of CryoLife to Cardiogenesis as to, among other
things:
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CryoLifes ownership of the common stock of Merger Sub;
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the availability of funds to complete the transaction;
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the completeness and accuracy of all disclosure documents and
information supplied for inclusion in any disclosure documents
by each party in connection with the transaction;
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the required vote or consent of CryoLife, as sole shareholder of
Merger Sub, to approve the Merger Agreement and the transactions
contemplated thereby; and
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fees of the financial advisor of CryoLife.
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The representations and warranties given in the Merger Agreement
will not survive the Merger. The assertions embodied in the
representations and warranties are qualified by information in
confidential disclosure schedules that Cardiogenesis has
provided to CryoLife in connection with signing the Merger
Agreement. While neither CryoLife nor Cardiogenesis believes
that the disclosure schedules contain information that the
securities laws require to be publicly disclosed, the disclosure
schedules do contain information that modifies, qualifies and
creates exceptions to the representations and warranties of the
parties.
These representations, warranties and covenants were made only
for the purpose of the Merger Agreement and solely for the
benefit of the parties to the Merger Agreement as of specific
dates, and may be subject to important limitations and
qualifications (including exceptions thereto set forth in a
disclosure letter or CryoLifes or Cardiogenesis
public filings with the SEC) agreed to by the contracting
parties and may not be complete.
51
Furthermore, these representations, warranties and covenants may
have been made for the purposes of allocating contractual risk
between the parties to the Merger Agreement instead of
establishing these matters as facts, and may or may not have
been accurate as of any specific date and do not purport to be
accurate as of the date of this offer to purchase. Accordingly,
Cardiogenesis shareholders should not rely upon the descriptions
of representations, warranties and covenants contained in this
offer to purchase or the actual representations, warranties and
covenants contained in the Merger Agreement as statements of
factual information.
Treatment
of Equity Awards
The Merger Agreement provides that the Cardiogenesis board of
directors shall take such action so that, at the effective time
of the Merger, and without any action on the part of any holder
of any outstanding option, whether vested or unvested,
exercisable or unexercisable, each option that is outstanding
and unexercised immediately prior thereto shall be cancelled and
each holder of an option will be entitled to receive an amount
equal to the excess, if any, of the Merger consideration,
without interest, over the exercise price per common share of
such option, less any required withholding taxes. If the
exercise price per share of any option equals or exceeds the
Merger consideration, such amount shall be zero.
The Merger Agreement further provides that the Cardiogenesis
board or directors shall take such action so that, at the
Acceptance Date, each share of restricted stock that is
outstanding under any Stock Plan immediately prior to the
effective time of the Merger, whether or not then vested or
earned, shall without any action on the part of the holder
thereof, immediately prior to the Acceptance Date shall fully
vest and shall thereafter be eligible to be converted into the
right to receive the Merger consideration.
Go-Shop,
Solicitation, Alternative Transactions
The Merger Agreement provided that, for a period of 20 days
after the signing of the Merger Agreement, Cardiogenesis could
initiate, solicit and encourage, whether publicly or otherwise,
alternative acquisition proposals, and enter into, engage in,
and maintain discussions or negotiations with respect to
acquisition proposals (or inquiries, proposals or offers or
other efforts or attempts that may reasonably be expected to
lead to an acquisition proposal) or otherwise cooperate with or
assist or participate in, or facilitate any such inquiries,
proposals, offers, efforts, attempts, discussions or
negotiations. This is referred to as a go shop
period, and it ended on April 18, 2011 (the No Shop
Period Start Date). [As of such date, none of the parties
contacted during the go-shop process, on behalf of Cardiogenesis
and at the direction of our board of directors, had submitted an
acquisition proposal for Cardiogenesis, and there can be no
assurance that such efforts will result in an alternative
transaction being proposed or in a definitive agreement for such
a transaction being entered into. We do not intend to announce
further developments with respect to the solicitation process
until our board of directors has made a decision regarding an
alternative proposal, if any.] After the No Shop Period Start
Date, the Merger Agreement has a no-shop provision
which prohibits Cardiogenesis from soliciting any additional
offers or proposals, subject to limited exceptions described
below.
Under the terms of the no-shop provision of the Merger
Agreement, subject to certain exceptions described below,
Cardiogenesis has agreed that it will not, and that it will not
permit or authorize any of its subsidiaries or any director,
officer, employee, investment banker, financial advisor,
attorney, accountant or other advisor, agent or representative
(collectively, the representatives) to, directly or
indirectly:
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solicit, initiate or knowingly facilitate or encourage any
inquiries regarding, or the making of, any proposal or offer
that constitutes an acquisition proposal;
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engage in, continue or otherwise participate in any discussions
or negotiations regarding, or furnish to any other person any
non-public information in connection with or for the purpose of
encouraging or facilitating, an acquisition proposal; or
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enter into any letter of intent, agreement or agreement in
principle with respect to an acquisition proposal.
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In addition, Cardiogenesis has agreed that it will cease and
terminate, and that it will direct each of its subsidiaries and
the representatives of Cardiogenesis and its subsidiaries to
immediately cease and cause to be
52
terminated, all existing discussions or negotiations with any
person previously conducted with respect to any acquisition
proposal.
Notwithstanding the foregoing, if at any time on or after the
No-Shop Period Start Date and prior to obtaining the approval of
the Cardiogenesis shareholders of the Merger, Cardiogenesis or
any of its representatives receives a written acquisition
proposal that was made or renewed on or after the No-Shop Period
Start Date and did not result from any breach of
Cardiogenesis obligations under the Merger Agreement,
(i) Cardiogenesis and its representatives may contact the
person(s) making the acquisition proposal to clarify its terms
and conditions and (ii) if the Board of Directors of
Cardiogenesis determines in good faith, after consultation with
independent financial advisors and outside legal counsel, that
the acquisition proposal constitutes or could reasonably be
expected to lead to a superior proposal, then Cardiogenesis and
its representatives may do the following:
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furnish information (including non-public information) with
respect to Cardiogenesis to the person(s) making the acquisition
proposal, provided such person(s) have signed a confidentiality
agreement and that Cardiogenesis shall promptly provide to
CryoLife any material non-public information that is provided to
such person(s) that was not previously provided to
CryoLife; and
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engage in or otherwise participate in discussions or
negotiations with person(s) making an acquisition proposal.
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From and after the No-Shop Period Start Date, Cardiogenesis will
provide to CryoLife within 48 hours a written summary of
the material terms of any acquisition proposal (including any
financing commitments relating thereto).
Following the No-Shop Period Start Date, Cardiogenesis will keep
CryoLife reasonably informed of any material developments,
discussions or negotiations regarding any acquisition proposal
on a prompt basis and upon the request of CryoLife shall apprise
CryoLife of the status of each acquisition proposal.
Cardiogenesis agrees that it and its subsidiaries will not enter
into any confidentiality agreement with any person after
March 28, 2011 that prohibits Cardiogenesis from providing
any information to CryoLife.
Except as expressly permitted by the Merger Agreement, the Board
of Directors of Cardiogenesis will not:
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make an adverse recommendation change, which means
the following:
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fail to recommend to its shareholders that they approve the
Merger Agreement (the Board Recommendation) or fail
to include the Board Recommendation in the
Schedule 14D-9,
the proxy statement or related filings;
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change, qualify, withhold, withdraw or modify, or publicly
propose to change, qualify, withhold, withdraw or modify, in a
manner adverse to CryoLife, the Board Recommendation;
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take any formal action or make any recommendation or public
statement in connection with a tender offer or exchange offer
(other than the Offer) other than a recommendation against such
offer or a customary stop, look and listen
communication pursuant to applicable securities laws; or
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adopt, approve or recommend, or publicly propose to approve or
recommend to the shareholders an acquisition proposal.
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authorize, cause or permit Cardiogenesis or any of its
subsidiaries to enter into any letter of intent, agreement or
agreement in principle with respect to any acquisition proposal
(each, a Company Acquisition Agreement); or
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terminate the Merger Agreement in order to concurrently enter
into a Company Acquisition Agreement.
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Notwithstanding anything to the contrary set forth in the Merger
Agreement, prior to the time the Cardiogenesis shareholders
approve the Merger Agreement, but not after, the Board of
Directors of Cardiogenesis may:
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make an Adverse Recommendation Change, enter into a Company
Acquisition Agreement with respect to an acquisition proposal
not solicited in violation of the Merger Agreement or terminate
the Merger Agreement in order to concurrently enter into a
Company Acquisition Agreement if the Board of Directors
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of Cardiogenesis has determined in good faith, after
consultation with its financial advisor and outside legal
counsel, that failure to take such action could be inconsistent
with the directors fiduciary duties under applicable law
and the acquisition proposal constitutes a superior proposal, so
long as:
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Cardiogenesis has given CryoLife at least five business
days prior written notice of its intention to take such
action (which notice shall include unredacted copies of the
superior proposal and related transaction and financing
documents and a written summary of the material terms of any
superior proposal);
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Cardiogenesis has negotiated with CryoLife during such notice
period, to the extent CryoLife wishes to negotiate, to enable
CryoLife to propose revisions to the terms of the Merger
Agreement such that it would cause such superior proposal to no
longer constitute a superior proposal;
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following the end of such notice period, the Board of Directors
of Cardiogenesis shall have considered in good faith any
proposed revisions to the Merger Agreement proposed in writing
by CryoLife in a manner that would form a binding contract if
accepted by Cardiogenesis, and shall have determined that the
superior proposal would continue to constitute a superior
proposal if such revisions were to be given effect;
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in the event of any material change to the material terms of
such superior proposal, Cardiogenesis shall, in each case, have
delivered to CryoLife an additional notice consistent with that
described above and the notice period shall have recommenced,
except that the notice period shall be at least one business day;
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Cardiogenesis has complied in all material respects with its
obligations in the non-solicitation sections of the Merger
Agreement; and
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any termination of the Merger Agreement in connection with the
foregoing is in accordance with the termination provisions of
the Merger Agreement, and Cardiogenesis pays CryoLife the
applicable Termination Fee (described below) prior to or
concurrently with such termination; or
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change, qualify, withhold, withdraw or modify, or publicly
propose to change, qualify, withhold, withdraw or modify, in a
manner adverse to CryoLife, its recommendation that the
Cardiogenesis shareholders approve the Merger Agreement if it
has determined in good faith, after consultation with
Cardiogenesis financial advisor and outside legal counsel,
that failure to take such action could be inconsistent with the
directors fiduciary duties under applicable law (other
than in response to a superior proposal, which is described
above) and prior to taking such action:
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the Board of Directors of Cardiogenesis has given CryoLife at
least five business days prior written notice of its
intention to take such action and a description of the reasons
for taking such action,
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Cardiogenesis has negotiated, and has caused its representatives
to negotiate, in good faith with CryoLife during such notice
period, to the extent CryoLife wishes to negotiate, to enable
CryoLife to revise the terms of the Merger Agreement in a manner
that would obviate the need for taking such action, and
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following the end of such notice period, the Board of Directors
of Cardiogenesis shall have considered in good faith any
revisions to the Merger Agreement proposed in writing by
CryoLife in a manner that would form a binding contract if
accepted by Cardiogenesis, and shall have determined in good
faith, after consultation with Cardiogenesis financial
advisor and outside legal counsel, that failure to change its
recommendation could be inconsistent with the directors
fiduciary duties under applicable law.
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Nothing in the Merger Agreement prohibits Cardiogenesis from
taking and disclosing to the Cardiogenesis shareholders a
position contemplated by
Rule 14e-2(a),
Rule 14d-9
or Item 1012(a) of
Regulation M-A
promulgated under the Exchange Act or making any disclosure to
the Cardiogenesis shareholders that is required by applicable
law.
54
As used in this proxy statement:
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acquisition proposal means any inquiry, proposal or
offer from any person or entity or group (other than CryoLife
and its subsidiaries) relating to, in a single transaction or
series of related transactions, any of the following:
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acquisition of assets of Cardiogenesis equal to 20% or more of
Cardiogenesis consolidated assets or to which 20% or more
of Cardiogenesis revenues or earnings on a consolidated
basis are attributable,
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acquisition of 20% or more of the outstanding shares of
Cardiogenesis common stock,
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tender offer or exchange offer that if consummated would result
in any person or entity beneficially owning 20% or more of the
outstanding shares of Cardiogenesis common stock,
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merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving Cardiogenesis, or
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any combination of the foregoing types of transactions if the
sum of the percentage of consolidated assets, consolidated
revenues or earnings and Cardiogenesis common stock involved is
20% or more; in each case, other than the Offer and the Merger.
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superior proposal means any bona fide written
acquisition proposal that the Board of Directors of
Cardiogenesis has determined, after consultation with
Cardiogenesis outside legal counsel and financial advisor,
in its good faith judgment is reasonably likely to be
consummated in accordance with its terms, taking into account
all legal, regulatory and financial aspects (including certainty
of closing) of the proposal and the person or entity making the
proposal, and if consummated, would result in a transaction more
favorable to the shareholders of Cardiogenesis (solely in their
capacity as such) from a financial point of view than the
transaction contemplated by the Merger Agreement (including any
revisions to the terms of the Merger Agreement proposed by
CryoLife in response to such proposal or otherwise); provided
that for purposes of the definition of superior
proposal the references to 20% in the
definition of acquisition proposal shall be deemed to be
references to 50%.
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Termination;
Termination Fee
Following the Acceptance Date, no party to the Merger Agreement
may terminate the Merger Agreement. CryoLife only is required to
consummate the Merger if the shareholders of Cardiogenesis
approve the Merger and no temporary restraining orders,
preliminary or permanent injunctions or other judgments, orders
or decrees have been issued by any court of competent
jurisdiction or other legal restraint or prohibition shall be in
effect, and no law has been enacted, entered, promulgated,
enforced or deemed applicable by any governmental entity that,
in any case, prohibits or makes illegal the consummation of the
Merger. In addition, Cardiogenesis must have obtained, or
CryoLife has otherwise waived the requirement to obtain, all
required consents from third parties.
Termination
Fees and Expenses
Following the Acceptance Date, if CryoLife is unable to
consummate the Merger, then no party to the Merger Agreement is
required to pay a termination fee or any expense to any other
party to the Merger Agreement.
Subject to certain exceptions, all fees and expenses incurred in
connection with the Merger Agreement, the tender offer, the
Merger, and the other transactions contemplated by the Merger
Agreement will be paid by the party incurring such fees or
expenses, whether or not the tender offer or the Merger is
consummated, except that the expenses incurred in connection
with the filing, printing and mailing of the Offer to Purchase
and other documents related to the tender offer, the
Schedule 14D-9
and the proxy statement, and all filing and other fees paid to
the SEC, in each case in connection with the Merger (other than
attorneys fees, accountants fees and related
expenses), will be borne by CryoLife. Any fees and expenses
incurred in connection with the Merger Agreement, the tender
offer, the Merger and the other transactions contemplated by the
Merger Agreement incurred by a Cardiogenesis shareholder (such
as fees and expenses of separate counsel to such shareholder)
will be borne by such shareholder.
55
Conduct
of Business
Cardiogenesis has agreed, unless CryoLifes prior written
consent is obtained or expressly contemplated by the Merger
Agreement, that from the date of the Merger Agreement until the
effective date of the Merger or the date on which CryoLife
appoints a majority of our board of directors, if earlier, it
will, and it will cause each of its subsidiaries to do the
following:
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conduct its business in the ordinary course consistent with past
practice;
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use commercially reasonable efforts to preserve intact its
present business organization;
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use commercially reasonable efforts to keep available the
services of its present officers, employees and consultants;
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use commercially reasonable efforts to preserve its goodwill and
its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with
it; and
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use commercially reasonable efforts to maintain its assets,
rights and properties in good repair and condition, normal wear
and tear excepted.
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Except as expressly contemplated by the Merger Agreement or as
required by law, Cardiogenesis has further agreed that without
the prior written consent of CryoLife, it and each of its
subsidiaries will not, among other things:
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amend their respective organizational documents;
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declare, set aside or pay any dividends, except for dividends
payable by a Cardiogenesis subsidiary to its parent;
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purchase, redeem or otherwise acquire equity interests of
Cardiogenesis or its subsidiaries or any options, warrants, or
rights to acquire any such shares or other equity interests;
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split, combine, or reclassify any of its equity interests or
issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
equity interests;
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issue any shares of its capital stock or any rights, warrants or
options to acquire shares of its capital stock or other equity
interests, subject to certain exceptions, other than the
issuance of shares upon the exercise of options outstanding on
March 28, 2011 in accordance with their terms as in effect
on such date;
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acquire any equity interest in, any division or business of, or
a substantial portion of the assets of, any other person;
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dispose of or encumber material assets, other than in the
ordinary course of business consistent with past practice;
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adopt a plan of complete or partial liquidation, dissolution,
restructuring, capitalization or other reorganization;
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incur any indebtedness, issue or sell any debt securities, make
any loans, advances or capital contributions to or investments
in any other person, or become responsible for the obligations
of any other person, with certain exceptions, enter into any
keep well or other agreement to maintain any
financial statement condition of another person other than
Cardiogenesis or a subsidiary of Cardiogenesis, or amend any
contract to effect any such transactions;
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incur or commit to incur any capital expenditure or
authorization or commitment with respect thereto that
individually is in excess of $10,000, or in the aggregate are in
excess of $20,000, except as provided in the Merger Agreement;
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settle, pay, satisfy or discharge any claim other than in the
ordinary course of business consistent with past practice,
cancel any material indebtedness or waive any right of material
value;
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enter into any material contract, or amend or modify any
material contract, except in the ordinary course of business
consistent with past practice;
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56
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commence any action, suit, or other proceeding or compromise,
settle or agree to settle any material action, suit, or other
proceeding, including any action, suit, or other proceeding
relating to the Merger Agreement or the transactions
contemplated thereby;
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change its financial or tax accounting methods, except as
required by changes in GAAP or by applicable law, or revalue any
of its assets;
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settle any material liability for taxes, amend any material tax
return, enter into any material contract with or request any
material ruling from any governmental entity relating to taxes,
change any material tax election, take any material position on
a tax return inconsistent with a position taken on a tax return
previously filed, take any other action to materially impair any
tax asset reflected in Cardiogenesis SEC filings filed
most recently prior to the date thereof, extend or waive any
statute of limitations with respect to taxes, or surrender any
claim for a material refund of taxes;
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change its fiscal or tax year;
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grant any director, officer, employee or independent contractor
any increase in compensation, bonus or other benefits, except in
the ordinary course of business consistent with past practice in
the compensation of employees that are not officers, grant any
director, officer, employee or independent contractor any
severance, change in control or termination pay, pay any benefit
or grant or amend any award except as required to comply with
any contracts in effect as of the date of the Merger Agreement;
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enter into any collective bargaining agreement or other labor
union contract, take any action to accelerate the vesting or
payment of any compensation or benefit under any plan or other
contract, adopt any new employee benefit plan or arrangement or
amend, modify or terminate any existing plan, in each case for
the benefit of any director, officer, employee or independent
contractor, other than as required by applicable law or in the
ordinary course of business consistent with past practice;
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fail to keep in force insurance policies or replacement or
revised provisions regarding insurance coverage with respect to
the assets, operations and activities of Cardiogenesis and its
subsidiaries substantially equivalent to those currently in
effect;
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renew or enter into any non-compete, exclusivity,
non-solicitation or similar agreement that would restrict or
limit, in any material respect, the operations of Cardiogenesis
or any of its subsidiaries;
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waive any material benefits of, or agree to modify in any
adverse respect, or fail to enforce, or consent to any matter
with respect to which its consent is required under, any
confidentiality, standstill or similar agreement to which
Cardiogenesis or any of its subsidiaries is a party;
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enter into any new line of business outside of its existing
business;
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enter into any new lease or amend the terms of any existing
lease of real property that would require payments over the
remaining term of such lease in excess of $10,000;
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knowingly violate or knowingly fail to perform any obligation or
duty imposed upon it by any applicable material federal, state
or local law, rule, regulation, guideline or ordinance;
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create or form any subsidiary or make any other investment in
another person;
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modify the standard warranty terms for products sold by
Cardiogenesis or amend or modify any product warranties in
effect as of the date hereof in any manner that is adverse to
Cardiogenesis;
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allow any of Cardiogenesis or its subsidiaries trade
secrets or other confidential information relating to
Cardiogenesis or its subsidiaries existing products
or products currently under development to be disclosed, or
allow any of Cardiogenesis or its subsidiaries
intellectual property rights relating to Cardiogenesis or
its subsidiaries existing products or products currently
under development to be abandoned, or otherwise to lapse or
become unavailable to Cardiogenesis or its subsidiaries on the
same terms and conditions as such rights were available to
Cardiogenesis and its subsidiaries as of the date of the Merger
Agreement;
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57
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enter into any distribution agreements not terminable by
Cardiogenesis or its subsidiaries on 60 days notice without
penalty, enter into any commitment to any person to enter into
any license, distributorship, or sales agreement that by its
terms would purport to relate to any of the products of CryoLife
or its affiliates or sell, license or otherwise dispose of any
intellectual property other than sales of its products and other
non-exclusive licenses that are in the ordinary course of
business and consistent with past practices, enter into any
sales agency agreements or grant most favored nation
pricing to any person;
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enter into, amend or terminate any contract, agreement,
commitment or arrangement with any affiliated person;
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fail to make in a timely manner any filings with the SEC
required under the Securities Act or the Exchange Act or the
rules and regulations promulgated thereunder (except as
permitted by
Rule 12b-25); or
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knowingly take any action (or omit to take any action) if such
action (or omission) could reasonably be expected to result in
certain conditions to the tender offer or Merger not being
satisfied.
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Cardiogenesis has agreed that it shall use commercially
reasonable efforts to:
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maintain its material assets and properties in the ordinary
course of business in the manner historically maintained,
reasonable wear and tear, damage by fire and other casualty
excepted;
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promptly repair, restore or replace all material assets and
properties in the ordinary course of business consistent with
past practice;
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upon any damage, destruction or loss to any of its material
assets or properties, apply any and all insurance proceeds, if
any, received with respect thereto to the prompt repair,
replacement and restoration thereof as reasonably necessary for
the operation of Cardiogenesis business;
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comply in all material respects with all applicable laws;
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take all actions necessary to be in compliance in all material
respects with all material contracts and to maintain the
effectiveness of all its permits;
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notify CryoLife in writing (within two business days) of the
commencement of any action, suit, claim or investigation by or
against Cardiogenesis, provided that this obligation is not
modified by the use of Cardiogenesis commercially
reasonable efforts;
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if CryoLife gives Cardiogenesis written notice not less than 10
business days prior to the closing date of the Merger, take all
necessary corporate action to terminate Cardiogenesis
401(k) plan effective as of the date immediately prior to the
closing date of the Merger, but contingent on the closing of the
Merger;
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provide CryoLife evidence that Cardiogenesis has satisfied its
obligations with respect to the options in accordance with the
Merger Agreement; and
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pay accounts payable and pursue collection of its accounts
receivable in the ordinary course of business, consistent with
past practices.
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Filings
and Other Actions
The Merger Agreement provides that, subject to its terms and
conditions, each of Cardiogenesis, Merger Sub and CryoLife will
use its reasonable best 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 tender offer, the Merger and the
other transactions contemplated by the Merger Agreement,
including (i) obtaining all consents, approvals,
authorizations and actions or nonactions required for or in
connection with the consummation by the parties of the tender
offer, the Merger and the other transactions, (ii) the
taking of all steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, a
governmental authority, (iii) the obtaining of all
necessary consents from third parties, (iv) contesting and
resisting of any action, including any administrative or
judicial action, and seeking to have vacated, lifted, reversed
or overturned, any judgment (whether temporary, preliminary or
permanent) that restricts, prevents or prohibits the
consummation of the tender
58
offer, the Merger or the other transactions and (v) the
execution and delivery of any additional instruments necessary
to consummate the transactions and to fully carry out the
purposes of the Merger Agreement.
Directors
[Pursuant to the Merger Agreement, and following the Acceptance
Date, CryoLife has designated the following individuals as
directors on our board of
directors: , , .
The Merger Agreement requires that until the effective time of
the Merger, our board of directors maintain at least three
independent directors.]
Indemnification
and Insurance of Our Directors and Officers
In the Merger Agreement, CryoLife and Merger Sub have agreed
that the articles of incorporation and bylaws of the surviving
corporation in the Merger will contain provisions no less
favorable with respect to indemnification and exculpation from
liabilities of the present and former directors, officers and
employees of Cardiogenesis than those in effect as of the date
of the Merger Agreement.
The Merger Agreement further provides that Cardiogenesis shall
maintain its officers and directors liability
insurance policies, in effect on the date of the Merger
Agreement, but only to the extent related to actions or
omissions prior to the effective time of the Merger.
Cardiogenesis may cause coverage to be extended by obtaining a
six-year tail policy on terms and conditions no less
advantageous than Cardiogenesis current insurance to
satisfy this obligation. Under the terms of the Merger
Agreement, such insurance coverage is required to be maintained
only to the extent that the coverage can be maintained at an
aggregate cost of not greater than 150 percent of the
current annual premium for Cardiogenesis directors
and officers liability insurance policies.
Conditions
to the Merger
The obligations of the parties to complete the Merger are
subject to the satisfaction or waiver of the following mutual
conditions:
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the valid tender of at least a majority of then issued and
outstanding shares of our common stock (and not withdrawn from)
prior to the expiration date of the tender offer made by Merger
Sub, we refer to this threshold as the minimum condition;
provided that if more than 50%, but less than 90% of the
outstanding shares of our common stock are tendered, Merger Sub
has the option to reduce the minimum condition to 49.9%;
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the Merger Agreement must have been approved and adopted by the
affirmative vote of at least a majority of the votes entitled to
be cast by the holders of the outstanding shares of our common
stock;
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no judgment, ruling, order, writ, injunction or decree issued by
a court of competent jurisdiction or any statute, law,
ordinance, rule or regulation or other legal restraint or
prohibition of any governmental authority shall be in effect
that would make the Merger illegal or otherwise prevent the
consummation thereof provided that the party seeking to assert
this condition shall have used those efforts required under the
Merger Agreement to resist, lift or resolve such judgment,
ruling, order, writ, injunction or decree, statute, law,
ordinance, rule or regulation or other legal restraint or
prohibition; and
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no temporary restraining order, preliminary or permanent
injunction or other judgment or order issued by any court or
agency of competent jurisdiction or other law, rule, legal
restraint or prohibition is in effect preventing, restraining or
rendering illegal the consummation of the Merger.
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Modification
or Amendment
The Merger Agreement may be amended by the parties, by an
instrument in writing signed on behalf of each of the parties,
at any time (subject, in the case of Cardiogenesis, to an
amendment requiring the approval of the Independent Directors
(as defined in the Merger Agreement)) before or after approval
of the Merger Agreement and the transactions by
Cardiogenesis board of directors, but after adoption of
the Merger Agreement by Cardiogenesis
59
shareholders, no amendment may be made for which the CGCL
requires the further approval of Cardiogenesis shareholders
without such further approval.
Support
Agreement
In order to induce CryoLife to enter into the Merger Agreement,
Paul McCormick, the Executive Chairman of Cardiogenesis, Richard
P. Lanigan, the Executive Vice President, Marketing of
Cardiogenesis, and William R. Abbott, the Senior Vice President,
Chief Financial Officer, Secretary and Treasurer of
Cardiogenesis, and each member of our board of directors
(holding an aggregate of approximately 2.7% of the outstanding
shares of Cardiogenesis common stock as of April 5,
2011) entered into the Support Agreement with CryoLife.
Pursuant to the Support Agreement, such persons have agreed, in
their capacity as shareholders, to tender into the tender offer,
but only if requested in writing by CryoLife, prior to the
termination date of the Support Agreement and except as
otherwise described below, their shares of Cardiogenesis common
stock (including any shares obtained upon any exercise of
options). As of the Acceptance Date, CryoLife has not requested
that such persons tender their shares of our common stock
(including shares obtained upon exercise of options) and none of
such persons has tendered their shares of our common stock
(including shares obtained upon exercise of options).
Also pursuant to the Support Agreement, such persons have
agreed, in their capacity as shareholders, to vote such shares
at any meeting of the shareholders of Cardiogenesis or in
connection with any written consent of the shareholders of
Cardiogenesis (including the Special Meeting):
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in favor of the Merger, the execution and delivery by
Cardiogenesis of the Merger Agreement, the adoption and approval
of the Merger Agreement and the terms thereof and each of the
other matters necessary for consummation of the Merger and the
other transactions contemplated by the Merger Agreement (whether
or not recommended by our board of directors); and
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against any acquisition proposal, any recapitalization,
reorganization, liquidation, dissolution, amalgamation, merger,
sale of assets or other business combination between
Cardiogenesis and any other person (other than the Merger), any
other action that could reasonably be expected to impede,
interfere with, delay, postpone or adversely affect the Merger
or any of the transactions contemplated by the Merger Agreement
or the Support Agreement or any transaction that results in a
breach in any material respect of any covenant, representation
or warranty or other obligation or agreement of Cardiogenesis or
any of its subsidiaries under the Merger Agreement, and any
change in the present capitalization or dividend policy of
Cardiogenesis or any amendment or other change to
Cardiogenesis articles of incorporation or bylaws, except
if approved by CryoLife.
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Each shareholder who is party to the Support Agreement also
agreed that prior to the termination date of the Support
Agreement such shareholder will not:
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take any action or fail to take any action, or cause
Cardiogenesis or any other representative of Cardiogenesis to
take any action or fail to take any action, that would
constitute, or be reasonably likely to result in, a breach of
Cardiogenesis covenants and agreements under the
non-solicitation provisions of the Merger Agreement; or
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(i) tender into any tender or exchange offer (other than
the tender offer), (ii) sell (constructively or otherwise),
transfer, pledge, hypothecate, grant, encumber, assign or
otherwise dispose of, or enter into any contract, option,
agreement or other arrangement or understanding with respect to
the transfer of any of such shareholders shares of
Cardiogenesis stock or beneficial ownership or voting power
thereof or therein (including by operation of law),
(iii) grant any proxies or powers of attorney, deposit any
shares of Cardiogenesis stock into a voting trust or enter into
a voting agreement with respect to any shares of Cardiogenesis
stock or (iv) knowingly take any action that would make any
representation or warranty of such shareholder contained in the
Support Agreement untrue or incorrect, in any material respect,
or have the effect of preventing or disabling such shareholder
from performing its obligations thereunder.
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The Support Agreement requires each signing shareholder, within
five business days of the commencement of the tender offer, to
deliver to the exchange agent properly completed letters of
election and transmittal, stock
60
certificates for any Cardiogenesis shares held in certificated
form, and any other documents required to be delivered pursuant
to the terms of the tender offer, and to instruct the broker who
holds any such shares to promptly tender the shares pursuant to
the tender offer.
The Support Agreement will terminate automatically upon the
earliest to occur of the following: (i) the effective time
of the Merger, (ii) written notice of termination of the
Support Agreement is delivered by CryoLife to the shareholders,
(iii) August 31, 2011, (iv) the termination of
the Merger Agreement in accordance with its terms, (v) the
date CryoLife or Merger Sub terminates, withdraws, or abandons
the tender offer, (vi) the date on which the tender offer
is revised (except in the context of CryoLifes
matching right) for (A) a reduction of the cash
consideration in the Merger, (B) subject to the terms of
the Merger Agreement, a change in the form of consideration
payable in the tender offer, (C) subject to the terms of
the Merger Agreement, a reduction in the number of shares to be
purchased by Merger Sub in the tender offer, (D) subject to
the terms of the Merger Agreement, a waiver or amendment of the
Minimum Condition, (E) any addition to the conditions to
the tender offer or imposition of any other conditions to the
tender offer, (F) the extension of the expiration date of
the tender offer, except as required or allowed by the Merger
Agreement, (G) other amendment, modification, or addition
of a supplemental condition to the tender offer or any term of
the tender offer in a manner adverse to the holders of the
shares of Cardiogenesis common stock, or, or (vii) the date
on which a third party acquires more than 50% of
Cardiogenesis outstanding voting securities on a fully
diluted basis.
61
SECURITIES
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information known to us regarding the
beneficial ownership of our common stock as of [May 4], 2011,
the Record Date, by each of the following:
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each person known to us to be the beneficial owner of more than
5% of our outstanding common stock;
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each named executive officer;
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each of our directors; and
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all executive officers and directors as a group.
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Shares of Common Stock
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|
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Beneficially Owned(1)
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Percentage
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Name and Address of Beneficial Owner(2)
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Number
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Ownership(3)
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5% Shareholders:
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CryoLife, Inc.(4)
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[ ]
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[ ]
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Perkins Capital Management, Inc.(5)
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11,325,000
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24.3
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%
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Non-Employee Directors:
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Raymond W. Cohen(6)
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65,000
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*
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Ann T. Sabahat(7)
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122,500
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*
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Marvin J. Slepian, M.D.(8)
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252,500
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*
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Gregory D. Waller(9)
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130,000
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*
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Named Executive Officers:
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Paul J. McCormick(10)
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1,158,926
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2.5
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%
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Richard P. Lanigan(11)
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1,090,029
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2.3
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%
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William R. Abbott(12)
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397,288
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*
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All directors and executive officers as a group
(7 persons)(12)
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3,216,243
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6.6
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%
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* |
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Less than 1%. |
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(1) |
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Except as otherwise indicated and subject to applicable
community property and similar laws, the table assumes that each
named owner has the sole voting and investment power with
respect to such owners shares (other than shares subject
to options). Shares of our common stock subject to options
currently exercisable or exercisable within 60 days of
March 25, 2011 are deemed outstanding for purposes of
computing the beneficial ownership by the person holding such
options, but are not deemed outstanding for purposes of
computing the percentage beneficially owned by any other person. |
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(2) |
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Unless otherwise indicated, the principal address of each of the
shareholders above is Cardiogenesis Corporation, 11 Musick,
Irvine, California, 92618. |
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(3) |
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Percentage ownership is based on 46,638,421 shares of our
common stock outstanding as of March 25, 2011. |
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(4) |
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This figure represents the shares beneficially owned by
CryoLife, including
[ ] shares
owned by Merger Sub in connection with the tender offer. The
business address of CryoLife is 1655 Roberts Boulevard, NW,
Kennesaw, Georgia 30144. |
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(5) |
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The number of shares of our common stock beneficially owned or
of record has been determined solely from information reported
on a Schedule 13G/A filed with the SEC on February 9,
2011. The business address of Perkins Capital Management, Inc.
is 730 East Lake Street, Wayzata, Minnesota, 55391. |
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(6) |
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Consists of shares of our common stock subject to stock options
that are exercisable within 60 days of March 25, 2011. |
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(7) |
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Consists of shares of our common stock subject to stock options
that are exercisable within 60 days of March 25, 2011. |
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(8) |
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Consists of shares of our common stock subject to stock options
that are exercisable within 60 days of March 25, 2011. |
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(9) |
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Consists of shares of our common stock subject to stock options
that are exercisable within 60 days of March 25, 2011. |
62
|
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(10) |
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Includes 180,000 shares of our common stock subject to
stock options that are exercisable within 60 days of
March 25, 2011. |
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(11) |
|
Includes 858,134 shares of our common stock subject to
stock options that are exercisable within 60 days of
March 25, 2011. |
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(12) |
|
Includes 331,250 shares of our common stock subject to
stock options that are exercisable within 60 days of
March 25, 2011. |
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(13) |
|
Represents shares of our common stock beneficially owned by all
directors, named executive officers, and our other executive
officers as of March 25, 2011, as a group. Includes
1,939,384 shares of our common stock subject to options
that are exercisable within 60 days of March 25, 2011. |
63
MARKET
PRICE OF CARDIOGENESIS COMMON SHARES
Shares of our common stock are currently quoted on the OTCQB
under the symbol CGCP.PK. The following table sets
forth the high and low sales prices per common share quoted on
the OTCQB for the periods indicated.
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Price Range of
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Common Stock
|
2009
|
|
High
|
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Low
|
|
First Quarter
|
|
$
|
0.34
|
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$
|
0.08
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Second Quarter
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|
$
|
0.24
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|
|
$
|
0.16
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Third Quarter
|
|
$
|
0.22
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|
|
$
|
0.15
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Fourth Quarter
|
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$
|
0.25
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|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
0.38
|
|
|
$
|
0.19
|
|
Second Quarter
|
|
$
|
0.41
|
|
|
$
|
0.21
|
|
Third Quarter
|
|
$
|
0.38
|
|
|
$
|
0.20
|
|
Fourth quarter
|
|
$
|
0.28
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
0.45
|
|
|
$
|
0.24
|
|
Dividends
Cardiogenesis has never paid
dividends. Pursuant to the Merger Agreement, we
are prohibited from declaring any dividends following execution
of the Merger Agreement on March 28, 2011. Accordingly,
we do not expect to declare or pay any dividends prior to the
Merger.
On March 28, 2011, the last full trading day prior to the
public announcement of the terms of the tender offer and the
Merger, the reported closing sales price per common share on the
OTCQB was $0.32 per share. The $0.457 per share to be paid for
each Cardiogenesis common share in the Merger represents a
premium of approximately 42.8% to the closing price on
March 28, 2011. You are encouraged to obtain current market
quotations for the shares of our common stock in connection with
voting your shares.
As of [May 4], 2011, there were approximately
[ ]
record holders of shares of our common stock.
64
OTHER
MATTERS
As of the date of this proxy statement, our board of directors
knows of no other matters which may be presented for
consideration at the Special Meeting. However, if any other
matter is presented properly for consideration and action at the
Special Meeting or any adjournment or postponement thereof, it
is intended that the proxies will be voted with respect thereto
in accordance with the best judgment and in the discretion of
the proxy holders.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy this
information at the SECs public reference room,
Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet website, located at
www.sec.gov, that contains reports, proxy statements and other
information regarding companies and individuals that file
electronically with the SEC.
Statements contained in this proxy statement, or in any document
incorporated by reference in this proxy statement regarding the
contents of any contract or other document, are not necessarily
complete and each such statement is qualified in its entirety by
reference to that contract or other document filed as an exhibit
with the SEC. The SEC allows us to incorporate by
reference into this proxy statement documents we file with
the SEC. This means that we can disclose important information
to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this
proxy statement, and later information that we file with the SEC
will update and supersede that information. We incorporate by
reference the documents listed below and any documents filed by
us pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this proxy statement and before
the date of the Special Meeting.
|
|
|
|
|
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 (filed with the
SEC on March 21, 2011);
|
|
|
|
Form 10-K/A
(filed with the SEC on
[ ],
2011); and
|
|
|
|
Current Report on
Form 8-K
(filed with the SEC on March 29, 2011).
|
Notwithstanding the foregoing, information furnished under
Items 2.02 and 7.01 of any Current Report on
Form 8-K,
including the related exhibits, is not incorporated by reference
into this proxy statement.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of proxy statements
and any of the documents incorporated by reference in this
document or other information concerning us, without charge, by
written or telephonic request directed to Investor Relations
Department, Cardiogenesis Corporation, 11 Musick, Irvine,
California 92618, telephone number
(949) 420-1800
or from the SEC through the SEC website at the address provided
above. Documents incorporated by reference are available without
charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference into those
documents.
You should rely only on the information contained in this
proxy statement. We have not authorized anyone to provide you
with information that is different from what is contained in
this proxy statement. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are
in a jurisdiction where the solicitation of proxies is unlawful,
or if you are a person to whom it is unlawful to direct these
types of activities, then the offer presented in this proxy
statement does not extend to you. You should not assume that the
information contained in this proxy statement is accurate as of
any date other than the date of this proxy statement, unless the
information specifically indicates that another date applies.
The mailing of this proxy statement to our shareholders does not
create any implication to the contrary.
65
Annex A
AGREEMENT
AND PLAN OF MERGER
among
CRYOLIFE, INC.,
CL
FALCON, INC.
and
CARDIOGENESIS CORPORATION
Dated as of March 28, 2011
A-1
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I THE OFFER
|
|
|
A-10
|
|
Section 1.1 The Offer
|
|
|
A-10
|
|
Section 1.2 Offer Documents
|
|
|
A-11
|
|
Section 1.3 Company Actions
|
|
|
A-12
|
|
Section 1.4 Directors
|
|
|
A-13
|
|
Section 1.5 The
Top-Up Option
|
|
|
A-14
|
|
Section 1.6 Short Form Merger
|
|
|
A-15
|
|
ARTICLE II THE MERGER
|
|
|
A-15
|
|
Section 2.1 The Merger
|
|
|
A-15
|
|
Section 2.2 Closing
|
|
|
A-15
|
|
Section 2.3 Effective Time
|
|
|
A-16
|
|
Section 2.4 Effects of the Merger
|
|
|
A-16
|
|
Section 2.5 Articles of Incorporation; Bylaws
|
|
|
A-16
|
|
Section 2.6 Directors
|
|
|
A-16
|
|
Section 2.7 Officers
|
|
|
A-16
|
|
ARTICLE III EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
|
|
|
A-16
|
|
Section 3.1 Conversion of Capital Stock
|
|
|
A-16
|
|
Section 3.2 Treatment of Warrants, Options and Other
Equity-Based Awards
|
|
|
A-17
|
|
Section 3.3 Exchange and Payment
|
|
|
A-18
|
|
Section 3.4 Withholding Rights
|
|
|
A-19
|
|
Section 3.5 Dissenting Shares
|
|
|
A-19
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
|
|
A-19
|
|
Section 4.1 Organization, Standing and Power
|
|
|
A-20
|
|
Section 4.2 Capital Stock
|
|
|
A-21
|
|
Section 4.3 Subsidiaries
|
|
|
A-22
|
|
Section 4.4 Authority
|
|
|
A-22
|
|
Section 4.5 No Conflict; Consents and Approvals
|
|
|
A-23
|
|
Section 4.6 SEC Reports; Financial Statements
|
|
|
A-23
|
|
Section 4.7 No Undisclosed Liabilities
|
|
|
A-25
|
|
Section 4.8 Certain Information
|
|
|
A-25
|
|
Section 4.9 Absence of Certain Changes or Events
|
|
|
A-25
|
|
Section 4.10 Litigation
|
|
|
A-25
|
|
Section 4.11 Compliance with Laws and Permits
|
|
|
A-26
|
|
Section 4.12 Benefit Plans
|
|
|
A-28
|
|
Section 4.13 Labor and Employment Matters
|
|
|
A-29
|
|
Section 4.14 Environmental Matters
|
|
|
A-30
|
|
Section 4.15 Taxes
|
|
|
A-31
|
|
Section 4.16 Contracts
|
|
|
A-33
|
|
Section 4.17 Insurance
|
|
|
A-34
|
|
Section 4.18 Properties
|
|
|
A-34
|
|
Section 4.19 Intellectual Property
|
|
|
A-35
|
|
Section 4.20 Products
|
|
|
A-37
|
|
A-2
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
Section 4.21 Accounts Receivable
|
|
|
A-37
|
|
Section 4.22 Inventories
|
|
|
A-38
|
|
Section 4.23 State Takeover Statutes
|
|
|
A-38
|
|
Section 4.24 No Rights Plan
|
|
|
A-38
|
|
Section 4.25 Related Party Transactions
|
|
|
A-38
|
|
Section 4.26 Brokers
|
|
|
A-38
|
|
Section 4.27 Opinion of Financial Advisor
|
|
|
A-38
|
|
Section 4.28 Exclusivity of Representations and Warranties
|
|
|
A-38
|
|
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
|
|
|
A-39
|
|
Section 5.1 Organization, Standing and Power
|
|
|
A-39
|
|
Section 5.2 Authority
|
|
|
A-39
|
|
Section 5.3 No Conflict; Consents and Approvals
|
|
|
A-39
|
|
Section 5.4 Certain Information
|
|
|
A-40
|
|
Section 5.5 Merger Sub
|
|
|
A-40
|
|
Section 5.6 Financing
|
|
|
A-40
|
|
Section 5.7 Vote/Approval Required
|
|
|
A-40
|
|
Section 5.8 Ownership of Shares
|
|
|
A-41
|
|
Section 5.9 Brokers
|
|
|
A-41
|
|
Section 5.10 Exclusivity of Representations and Warranties
|
|
|
A-41
|
|
ARTICLE VI COVENANTS
|
|
|
A-41
|
|
Section 6.1 Conduct of Business
|
|
|
A-41
|
|
Section 6.2 No Solicitation
|
|
|
A-45
|
|
Section 6.3 Preparation of Proxy Statement;
Stockholders Meeting
|
|
|
A-48
|
|
Section 6.4 Access to Information; Confidentiality
|
|
|
A-49
|
|
Section 6.5 Reasonable Best Efforts
|
|
|
A-50
|
|
Section 6.6 Takeover Laws
|
|
|
A-50
|
|
Section 6.7 Notification of Certain Matters
|
|
|
A-51
|
|
Section 6.8 Indemnification, Exculpation and Insurance
|
|
|
A-51
|
|
Section 6.9 Public Announcements
|
|
|
A-52
|
|
Section 6.10 Section 16 Matters
|
|
|
A-53
|
|
Section 6.11 Exchange Act Delisting
|
|
|
A-53
|
|
Section 6.12
Rule 14d-10
Matters
|
|
|
A-53
|
|
Section 6.13 Further Assurances
|
|
|
A-53
|
|
ARTICLE VII CONDITIONS PRECEDENT
|
|
|
A-53
|
|
Section 7.1 Conditions to Each Partys Obligation to
Effect the Merger
|
|
|
A-53
|
|
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
|
|
|
A-54
|
|
Section 8.1 Termination
|
|
|
A-54
|
|
Section 8.2 Effect of Termination
|
|
|
A-55
|
|
Section 8.3 Fees and Expenses
|
|
|
A-55
|
|
Section 8.4 Amendment or Supplement
|
|
|
A-56
|
|
Section 8.5 Extension of Time; Waiver
|
|
|
A-56
|
|
Section 8.6 Effect of Termination on Offer
|
|
|
A-57
|
|
ARTICLE IX GENERAL PROVISIONS
|
|
|
A-57
|
|
Section 9.1 Nonsurvival of Representations and Warranties
|
|
|
A-57
|
|
A-3
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
Section 9.2 Notices
|
|
|
A-57
|
|
Section 9.3 Certain Definitions
|
|
|
A-58
|
|
Section 9.4 Interpretation
|
|
|
A-59
|
|
Section 9.5 Entire Agreement
|
|
|
A-59
|
|
Section 9.6 No Third Party Beneficiaries
|
|
|
A-59
|
|
Section 9.7 Governing Law
|
|
|
A-59
|
|
Section 9.8 Submission to Jurisdiction
|
|
|
A-59
|
|
Section 9.9 Assignment; Successors
|
|
|
A-60
|
|
Section 9.10 Enforcement
|
|
|
A-60
|
|
Section 9.11 Currency
|
|
|
A-60
|
|
Section 9.12 Severability
|
|
|
A-60
|
|
Section 9.13 Waiver of Jury Trial
|
|
|
A-60
|
|
Section 9.14 Counterparts
|
|
|
A-60
|
|
Section 9.15 Facsimile Signature
|
|
|
A-60
|
|
Section 9.16 No Presumption Against Drafting Party
|
|
|
A-60
|
|
Section 9.17 Performance Guaranty
|
|
|
A-61
|
|
Exhibit A
|
|
Form of Support Agreement
|
|
|
|
|
Exhibit B
|
|
Conditions to the Offer
|
|
|
|
|
Exhibit C
|
|
Articles of Incorporation
|
|
|
|
|
Exhibit D
|
|
Bylaws
|
|
|
|
|
A-4
INDEX OF
DEFINED TERMS
|
|
|
Definition
|
|
Location
|
|
401(k) Plan
|
|
6.1(a)(ii)(G)
|
510(k)s
|
|
4.11(c)
|
Acceptance Date
|
|
1.1(e)
|
Acceptable Confidentiality Agreement
|
|
6.2(h)(i)
|
Acquisition Proposal
|
|
6.2(h)(ii)
|
Action
|
|
4.10
|
Adverse Recommendation Change
|
|
6.2(e)
|
Affiliate
|
|
9.3(a)
|
Affiliate Transaction
|
|
4.25
|
Agreement
|
|
Preamble
|
Arrangements
|
|
6.12
|
Board Observer
|
|
1.4(b)
|
Book-Entry Shares
|
|
3.3(b)
|
Business Day
|
|
9.3(b)
|
California Secretary of State
|
|
2.3
|
Certificate of Merger
|
|
2.3
|
Certificates
|
|
3.3(b)
|
CGCL
|
|
1.5(g)
|
Change of Recommendation
|
|
6.2(f)
|
Closing
|
|
2.2
|
Closing Date
|
|
2.2
|
Code
|
|
3.4
|
Company
|
|
Preamble
|
Company Acquisition Agreement
|
|
6.2(e)
|
Company Benefit Agreement
|
|
9.3(c)
|
Company Board
|
|
Recitals
|
Company Board Recommendation
|
|
6.2(e)
|
Company Bylaws
|
|
4.1(b)
|
Company Charter
|
|
4.1(b)
|
Company Copyright
|
|
4.19(b)
|
Company Disclosure Letter
|
|
Article IV
|
Company IP
|
|
4.19(b)
|
Company Marks
|
|
4.19(b)
|
Company Patents
|
|
4.19(b)
|
Company Plans
|
|
4.12(a)
|
Company Preferred Stock
|
|
4.2(a)
|
Company SEC Documents
|
|
4.6(a)
|
Company Stock Awards
|
|
4.2(c)
|
Company Stock Option
|
|
3.2(b)
|
Company Stock Plans
|
|
3.2(b)
|
Company Stockholder Approval
|
|
4.4(a)
|
Company Stockholders Meeting
|
|
6.3(b)
|
Compensation Committee
|
|
6.12
|
A-5
|
|
|
Definition
|
|
Location
|
|
Confidentiality Agreement
|
|
6.4
|
Conflict Minerals
|
|
4.14(j)
|
Contract
|
|
4.5(a)
|
Control
|
|
9.3(d)
|
Copyrights
|
|
4.19(a)
|
Covered Securityholders
|
|
6.12
|
Dissenting Shares
|
|
3.5
|
Effective Time
|
|
2.3
|
Employment Compensation Agreement
|
|
6.12
|
Environmental Law
|
|
4.14(a)
|
Environmental Permit
|
|
4.14(a)
|
ERISA
|
|
4.12(a)
|
ERISA Affiliate
|
|
4.12(c)
|
ERISA Affiliate Plan
|
|
4.12(c)
|
ESPP
|
|
3.2(e)
|
Exchange Act
|
|
1.1(a)
|
Exchange Fund
|
|
3.3(a)
|
Excluded Party
|
|
6.2(h)(iii)
|
Expiration Date
|
|
1.1(c)
|
FDA
|
|
4.11(b)
|
FDA Laws
|
|
4.11(b)
|
Financial Advisor
|
|
4.26
|
Florida Act
|
|
2.1
|
Florida Certificate of Merger
|
|
2.3
|
Florida Secretary of State
|
|
2.3
|
Foreign Drug Laws
|
|
4.11(b)
|
GAAP
|
|
4.6(b)
|
Governmental Entity
|
|
4.5(b)
|
Hazardous Substances
|
|
4.14(a)
|
Indebtedness
|
|
6.1(a)(i)(G)
|
Independent Directors
|
|
1.4(d)
|
Initial Expiration Date
|
|
1.1(c)
|
Intellectual Property
|
|
4.19(a)
|
IRS
|
|
4.12(a)
|
Knowledge
|
|
9.3(e)
|
Law
|
|
4.5(a)
|
Leased Real Property
|
|
4.18(b)
|
Liability
|
|
9.3(f)
|
Liens
|
|
4.2(b)
|
Marks
|
|
4.19(a)
|
Material
|
|
9.3(g)
|
Material Adverse Effect
|
|
4.1(a)
|
Material Contracts
|
|
4.16(a)
|
Merger
|
|
Recitals
|
A-6
|
|
|
Definition
|
|
Location
|
|
Merger Agreement
|
|
Exhibit B
|
Merger Consideration
|
|
3.1(a)
|
Merger Sub
|
|
Preamble
|
Minimum Condition
|
|
Exhibit B
|
No-Shop Period Start Date
|
|
6.2(b)
|
NYSE
|
|
1.1(c)(ii)
|
OFAC
|
|
4.11(f)
|
Offer
|
|
Recitals
|
Offer Conditions
|
|
1.1(b)
|
Offer Consideration
|
|
1.1(a)
|
Offer Documents
|
|
1.2
|
Outside Date
|
|
1.1(c)(i)(B)
|
Owned Real Property
|
|
4.18(b)
|
Parent
|
|
Preamble
|
Parent Material Adverse Effect
|
|
5.1
|
Patents
|
|
4.19(a)
|
Paying Agent
|
|
3.3(a)
|
PBGC
|
|
4.12(c)
|
Permits
|
|
4.11(a)
|
Permitted Liens
|
|
4.18(a)
|
Person
|
|
9.3(h)
|
PMAs
|
|
4.11(c)
|
Proper Delivery
|
|
3.3(b)
|
Proxy Statement
|
|
4.8
|
Reduced Purchase Amount
|
|
1.1(d)(ii)
|
Related Party
|
|
4.25
|
Representatives
|
|
6.2(a)
|
Restricted Stock
|
|
3.2(c)
|
Rights Plan
|
|
4.24
|
Sarbanes-Oxley Act
|
|
4.6(a)
|
Schedule 14D-9
|
|
1.3(b)
|
Schedule TO
|
|
1.2
|
Securities Act
|
|
1.5(e)
|
SEC
|
|
1.1(c)(ii)
|
Shares
|
|
Recitals
|
Short-Form Merger Threshold
|
|
1.1(d)
|
SSA
|
|
4.11(a)
|
Stockholders
|
|
9.3(i)
|
Subsidiary
|
|
9.3(j)
|
Superior Proposal
|
|
6.2(h)(iv)
|
Support Agreement
|
|
Recitals
|
Surviving Corporation
|
|
2.1
|
Takeover Laws
|
|
4.23
|
Tax
|
|
9.3(k)
|
A-7
|
|
|
Definition
|
|
Location
|
|
Tax Proceedings
|
|
4.15(e)
|
Tax Return
|
|
9.3(l)
|
Termination Fee
|
|
8.3(b)(iii)
|
Top-Up
Consideration
|
|
1.5(b)
|
Top-Up Option
|
|
1.5(a)
|
Top-Up Shares
|
|
1.5(a)
|
Trade Secrets
|
|
4.19(a)
|
VEBA
|
|
4.12(e)(iii)
|
Warrant
|
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3.2(a)
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Warrant Holder
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3.2(a)
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Worker Safety Laws
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4.13(e)
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A-8
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this
Agreement), dated as of March 28, 2011,
among CryoLife, Inc., a Florida corporation
(Parent), CL Falcon, Inc., a Florida
corporation and a wholly owned Subsidiary of Parent
(Merger Sub), and Cardiogenesis Corporation,
a California corporation (the Company).
RECITALS
WHEREAS, it is proposed that Merger Sub shall commence an offer
(the Offer) to purchase all of the
outstanding shares of common stock, no par value per share, of
the Company (the Shares) for the
consideration and on the terms and subject to the conditions set
forth herein;
WHEREAS, each Share accepted by Merger Sub in accordance with
the terms of the Offer will be exchanged for the Offer
Consideration, subject to and in accordance with the provisions
set forth herein;
WHEREAS, the parties intend that, following the consummation of
the Offer, Merger Sub shall be merged with and into the Company,
with the Company being the surviving corporation in such merger,
on the terms and subject to the conditions set forth herein (the
Merger), and each Share that is issued and
outstanding immediately prior to the Effective Time (other than
each such Share that is owned by Parent, Merger Sub or any of
their respective wholly owned Subsidiaries immediately prior to
the Effective Time and each Share that is held in the treasury
of the Company or owned by the Company or any of its wholly
owned Subsidiaries immediately prior to the Effective Time and
any Dissenting Shares) will be canceled and converted into the
right to receive the Merger Consideration, subject to and in
accordance with the provisions set forth herein;
WHEREAS, the Boards of Directors of Parent and Merger Sub have
each (i) unanimously approved this Agreement,
(ii) approved the execution, delivery and performance of
this Agreement and (iii) declared it advisable for Parent
and Merger Sub, respectively, to enter into this Agreement;
WHEREAS, the Board of Directors of the Company (the
Company Board) has (i) determined that
it is in the best interests of the Company and its Stockholders,
and declared it advisable, to enter into this Agreement,
(ii) approved the execution, delivery and performance by
the Company of this Agreement and the consummation of the
transactions contemplated hereby, including the Offer and the
Merger and (iii) resolved and agreed, subject to the terms
and conditions set forth herein, to recommend that the
Stockholders accept the Offer, tender their Shares pursuant to
the Offer, approve the Merger and adopt this Agreement (if
required by applicable Law);
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parents
willingness to enter into this Agreement, each of the members of
the Company Board and the executive officers of the Company are
entering into an agreement in the form of Exhibit A
hereto (the Support Agreement) pursuant to
which each such Person has agreed, subject to the terms and
conditions set forth therein and herein, among other things, to
tender the Shares held by such Person in the Offer, at
Parents direction, and to vote in favor of, or sign a
written consent of the Stockholders approving, the
Merger; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with the Offer and the Merger and also to prescribe
certain conditions to the Offer and the Merger as specified
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, Parent, Merger
Sub and the Company hereby agree as follows:
A-9
ARTICLE I
THE OFFER
Section 1.1 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Article VIII, as
promptly as reasonably practicable, and in any event no later
than the 10th calendar day after the date hereof, Merger
Sub shall, and Parent shall cause Merger Sub to, commence
(within the meaning of
Rule 14d-2
under the Securities Exchange Act of 1934, as amended (including
the rules and regulations promulgated thereunder, the
Exchange Act)) the Offer. In the Offer, each
Share accepted by Merger Sub in accordance with the terms and
subject to the conditions of the Offer shall be exchanged for
the right to receive $0.457 in cash, without interest (such
amount for each Share, the Offer
Consideration), subject to the other provisions of
this Section 1.1.
(b) The obligations of Merger Sub, and of Parent to cause
Merger Sub, to accept for payment and pay for any Shares
tendered pursuant to the Offer shall be subject only to
(i) the satisfaction of the Minimum Condition, as defined
on Exhibit B hereto and (ii) the satisfaction
or waiver by Merger Sub of the other conditions set forth in
Exhibit B (such conditions, together with the
Minimum Condition, the Offer Conditions) and
the terms and conditions hereof. Parent and Merger Sub expressly
reserve the right, in their sole discretion, to waive any Offer
Condition or to modify the terms or conditions of the Offer
consistent with the terms of this Agreement, except that,
without the prior written consent of the Company, neither Parent
nor Merger Sub shall, except pursuant to
Section 6.2(e), (A) reduce the Offer
Consideration, (B) change the form of consideration payable
in the Offer, (C) except as otherwise set forth in
Section 1.1(d)(ii), reduce the number of Shares to
be purchased by Merger Sub in the Offer, (D) except as
otherwise set forth in Section 1.1(d)(ii), waive or
amend the Minimum Condition, (E) add to the Offer
Conditions or impose any other conditions to the Offer,
(F) extend the expiration of the Offer except as required
or permitted by Sections 1.1(c) or (d),
(G) otherwise amend, modify or supplement any Offer
Condition or any term of the Offer set forth in this Agreement
in a manner adverse to the holders of Shares or (H) abandon
or terminate the Offer, except as provided in
Article VIII hereof. Notwithstanding the foregoing,
Parent may amend the Offer without violation of the foregoing
limitations and without the prior written consent of the Company
in connection with its match right set forth in
Section 6.2(e) in order to cause the Offer to comply
with its requirements thereunder, provided that such
match
right-to-adjust
shall not apply to Section 1.1(b)(D) and shall apply
to Section 1.1(b)(G) only to the extent that the
revised Offer, taken as a whole (as opposed to any individual
term), has not been revised in a manner adverse to the holders
of Shares.
(c) The Offer shall expire on the date that is twenty
(20) Business Days (calculated as set forth in
Rule 14d-1(g)(3)
promulgated under the Exchange Act) after the commencement of
the Offer (the Initial Expiration Date),
except as may otherwise be required by applicable Law;
provided, however, that Merger Sub shall, and
Parent shall cause it to (in each case unless Parent or the
Company has terminated this Agreement pursuant to
Article VIII), extend the Offer (i) if at the
Initial Expiration Date or any subsequent scheduled expiration
date of the Offer (together with the Initial Expiration Date,
the Expiration Date) any of the Offer
Conditions shall not have been satisfied or waived, for one or
more successive periods of up to ten (10) Business Days per
extension (or any longer period as may be reasonably requested
by Parent and approved in advance in writing by the Company)
until the earlier to occur of (A) the date such Offer
Conditions are satisfied or waived or (B) August 31,
2011 (the Outside Date), or (ii) for any
period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the
SEC) or the staff thereof or the rules of the
New York Stock Exchange (the NYSE) or any
applicable Law.
(d) Notwithstanding anything to the contrary set forth in
Section 1.1(c), if, at any Expiration Date, all of
the Offer Conditions (including the Minimum Condition) shall
have been satisfied or have been waived, but the number of
Shares validly tendered in the Offer and not properly withdrawn
is less than that number of Shares which, when added to the
number of Shares that may be issued pursuant to the
Top-Up
Option in compliance with Section 1.5, would
represent at least one (1) Share more than ninety percent
(90%) of the Shares then outstanding (on a fully diluted basis,
including such Shares issued upon exercise of the
Top-Up
Option) (the Short-Form Merger
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Threshold), then in such case Merger Sub may, in
its sole and absolute discretion, without the consent of the
Company:
(i) extend the Offer for one (1) or more successive
periods as determined by Merger Sub of up to ten
(10) Business Days each (or any longer period as may be
requested by Merger Sub and approved in advance by the Company)
until the Outside Date in order to permit additional Shares to
be tendered into the Offer such that the Short-Form Merger
Threshold may be attained; provided, however, that
notwithstanding any other provision of this Agreement, in the
event Merger Sub elects to extend the Offer pursuant to and in
accordance with this Section 1.1(d)(i), then each of
Parent and Merger Sub shall be deemed to have irrevocably waived
all of the Offer Conditions (other than the Offer Condition
contemplated by clause (b)(iv)(A) of Exhibit B,
which shall remain in full force and effect) and its right to
terminate this Agreement pursuant to
Section 8.1(c)(i) (as it relates to the Offer
Condition contemplated by clause (b)(iv) of
Exhibit B, but not as it relates to the Offer
Condition contemplated by clause (b)(iv)(A) of
Exhibit B) or Section 8.1(c)(iii), (it
being acknowledged and agreed that, (A) notwithstanding
such irrevocable waiver, without the prior written consent of
the Company, neither Parent nor Merger Sub shall be permitted to
accept for payment (or pay for) any Shares that are tendered in
the Offer unless the Minimum Condition is satisfied at such
time, (B) during any extension of the Offer pursuant to
this Section 1.1(d)(i), the Company shall not
exercise any remedies against Parent or Merger Sub for failure
to accept for payment (or pay for) any Shares that are tendered
in the Offer, and (C) if for any reason other than a
failure of the Offer Conditions contemplated by clause
(b)(iv)(A) of Exhibit B, Merger Sub does not accept
for payment (and pay for) all Shares validly tendered in the
Offer and not properly withdrawn at the expiration of such
successive period(s), then Parent and Merger Sub shall be deemed
to be in breach of this Agreement); or
(ii) (A) amend the Offer and the Offer Documents (but
only to the extent required by applicable Law) to reduce the
Minimum Condition to such number of Shares (the Reduced
Purchase Amount) such that following the purchase of
Shares in the Offer, Parent and its wholly owned subsidiaries,
including Merger Sub, would own forty-nine and nine-tenths
percent (49.9%) of the Shares then outstanding and
(B) purchase, on a pro rata basis based on the Shares
actually deposited in the Offer by each holder of any such
Shares, Shares representing the Reduced Purchase Amount in the
Offer; provided, however, that notwithstanding any
other provision of this Agreement, in the event Merger Sub
purchases a number of Shares equal to the Reduced Purchase
Amount pursuant to and in accordance with this
Section 1.1(d)(ii), then, without the prior written
consent of Parent and Merger Sub, at all times prior to the
termination of this Agreement, the Company shall take no action
whatsoever (including the redemption of any Shares) that would
have the effect of increasing the percentage of direct or
indirect ownership of Shares by Parent and its controlled
Affiliates, including Merger Sub, in excess of forty-nine and
nine-tenths percent (49.9%).
(e) Subject to the terms of the Offer and this Agreement
and the satisfaction or waiver by Merger Sub of all of the Offer
Conditions, Merger Sub will irrevocably accept for payment and
pay for all Shares validly tendered and not validly withdrawn
pursuant to the Offer as soon as practicable after the
expiration date thereof (as the same may be extended or required
to be extended, in each case in accordance with the terms of
Section 1.1) (the date on which the first of such
Shares are accepted for payment under the Offer, the
Acceptance Date).
(f) Parent shall cause to be provided to Merger Sub all of
the funds necessary to purchase any Shares that Merger Sub
becomes obligated to purchase pursuant to the Offer, and shall
cause Merger Sub to perform, on a timely basis, all of Merger
Subs obligations under this Agreement with respect to
consummation of the Offer and the Merger and payment or issuance
of consideration contemplated by this Agreement in respect
thereof.
Section 1.2 Offer Documents. On the date of
commencement of the Offer, Parent and Merger Sub shall file with
the SEC a Tender Offer Statement on Schedule TO
(Schedule TO) with respect to the Offer,
which shall contain an offer to purchase and a related letter of
transmittal and other ancillary documents (such Schedule TO
and the documents included therein pursuant to which the Offer
will be made, together with any supplements or amendments
thereto, the Offer Documents). The Company
shall promptly furnish to Parent and Merger Sub all information
concerning the Company required by the Exchange Act to be set
forth in the Offer Documents. Each of Parent, Merger Sub and the
Company shall promptly correct any information supplied by it
for inclusion or incorporation by reference in the Offer
Documents if and to the extent that such information shall have
become false
A-11
or misleading in any material respect, and each of Parent and
Merger Sub shall take all steps necessary to amend or supplement
the Offer Documents and to cause the Offer Documents as so
amended or supplemented to be filed with the SEC and
disseminated to the Stockholders, in each case as and to the
extent required by applicable Laws. Parent and Merger Sub shall
promptly notify the Company upon the receipt of any comments
from the SEC, or any request from the SEC for amendments or
supplements, to the Offer Documents, and shall provide the
Company with copies of all correspondence between them and their
Representatives, on the one hand, and the SEC, on the other
hand, and shall use its reasonable best efforts to give the
Company the opportunity to participate in any substantive
telephonic communications with the staff of the SEC related
thereto. Prior to the filing of the Offer Documents (including
any amendment or supplement thereto) with the SEC or
dissemination thereof to the shareholders of the Company, or
responding to any comments of the SEC with respect to the Offer
Documents, Parent and Merger Sub shall provide the Company a
reasonable opportunity to review and comment on such Offer
Documents or response (including the proposed final version
thereof), and Parent and Merger Sub shall give reasonable
consideration to any such comments.
Section 1.3 Company Actions.
(a) The Company hereby consents to the Offer and to the
inclusion in the Offer Documents of the recommendation of the
Company Board described in Section 4.4(b) (as long
as no Adverse Recommendation Change has occurred prior to the
filing of such Offer Document and provided that in the event of
an Adverse Recommendation Change, Parent and Merger Sub shall
file such amendment to the Offer Documents as may be necessary
so that any of such Offer Documents would not include any
misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading).
(b) As promptly as reasonably practicable on the date of
filing by Parent and Merger Sub of the Offer Documents, the
Company shall file with the SEC and mail to the Stockholders a
Solicitation/Recommendation Statement on
Schedule 14D-9
(such
Schedule 14D-9,
together with any amendments or supplements thereto, the
Schedule 14D-9)
containing, subject to the Company Boards right to make an
Adverse Recommendation Change in accordance with
Section 6.2(e), the recommendation of the Company
Board described in Section 4.4(b), and shall cause
the
Schedule 14D-9
to be disseminated to the Stockholders (concurrently with and in
the same mailing envelope as the Offer Documents) as required by
Rule 14d-9
under the Exchange Act. Each of the Company, Parent and Merger
Sub agrees promptly to correct any information provided by it
for use in the
Schedule 14D-9
if and to the extent that such information shall have become
false or misleading in any material respect, and the Company
further agrees to take all steps necessary to cause the
Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated
to the Stockholders, in each case, as and to the extent required
by applicable federal securities Laws. As long as no Adverse
Recommendation Change has occurred in accordance with
Section 6.2(e) prior to the filing of such
Schedule 14D-9
or the applicable amendment thereto, Parent, Merger Sub and
their counsel shall be given a reasonable opportunity to review
and comment on such
Schedule 14D-9
and any such amendments thereto prior to the filing thereof with
the SEC and the Company shall give due consideration to all
reasonable additions, deletions or changes suggested thereto by
Parent, Merger Sub and their counsel. In addition, the Company
agrees to provide Parent, Merger Sub and their counsel any
comments, whether written or oral, that the Company or its
counsel may receive from the SEC or its staff with respect to
the
Schedule 14D-9
promptly after the receipt of such comments, and any written or
oral responses thereto. Parent, Merger Sub and their counsel
shall be given a reasonable opportunity to review and comment
upon such responses and the Company shall give due consideration
to all reasonable additions, deletions or changes suggested
thereto by Parent, Merger Sub and their counsel.
(c) In connection with the Offer, the Company shall cause
its transfer agent promptly to furnish Parent and Merger Sub
with mailing labels, security position listings, any
non-objecting beneficial owner lists and any available listings
or computer files containing the names and addresses of the
record holders of Shares as of the most recent practicable date
and shall furnish Parent and Merger Sub with such additional
available information (including, but not limited to, periodic
updates of such information) and such other assistance as
Parent, Merger Sub or their agents may reasonably request in
communicating the Offer to the record and beneficial holders of
Shares. Except for such steps as are necessary to disseminate
the Offer Documents and any other documents necessary to
consummate the Offer and the Merger, Parent and Merger Sub shall
hold in confidence, subject to the terms of the Confidentiality
Agreement except as further limited herein, the information
contained in any such labels, listings
A-12
and files, shall use such information only in connection with
the Offer and the Merger and if this Agreement shall be
terminated shall promptly deliver to the Company or order the
destruction of the original and all copies of such information.
Section 1.4 Directors.
(a) Subject to compliance with applicable Law and the
Company Charter and Company Bylaws, promptly upon the payment by
Merger Sub for Shares pursuant to the consummation of the Offer,
and from time to time thereafter, Parent shall be entitled to
designate such number of directors, rounded up to the next whole
number, on the Company Board as is equal to the product of the
total number of directors on the Company Board (including the
directors elected pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially
owned by Parent or its Affiliates at such time (including Shares
so accepted for payment) bears to the total number of Shares
then outstanding on a fully-diluted basis. In furtherance
thereof, promptly upon the payment by Merger Sub for Shares
pursuant to the Offer the Company shall, upon request of Parent,
promptly take all actions necessary to cause Parents
designees to be so elected or appointed, including, without
limitation, increasing the size of its Board of Directors
and/or
seeking the resignations of one or more incumbent directors. At
such time, the Company shall, upon request of Parent, also
promptly take all actions necessary to cause individuals
designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company Board
of (i) each committee of the Company Board, (ii) each
board of directors (or similar body) of each Subsidiary of the
Company and (iii) each committee (or similar body) of each
such board.
(b) Subject to compliance with applicable Law and the
Company Charter and Company Bylaws, promptly upon the payment by
Merger Sub for Shares pursuant to the consummation of the Offer,
and from time to time thereafter, Parent shall be entitled to
designate up to two individuals (each, a Board
Observer) to attend all meetings of the Company Board
and all committees thereof (whether in person, telephonic or
other). Each Board Observer will be provided, concurrently with
the members of the Company Board and in the same manner, all
notices, information and materials provided to the Company Board.
(c) The Companys obligations to appoint Parents
designees to the Company Board pursuant to
Section 1.4(a) shall be subject to
Section 14(f) of the Exchange Act and
Rule 14f-1
thereunder. Subject to applicable Law, the Company shall
promptly take all actions required pursuant to
Section 14(f) and
Rule 14f-1
in order to fulfill its obligations under this
Section 1.4, including mailing to the Stockholders
together with the
Schedule 14D-9
the information required under Section 14(f) and
Rule 14f-1
as is necessary to enable Parents designees to be elected
or appointed to the Company Board. Parent shall supply to the
Company any information with respect to itself and its officers,
directors and Affiliates to the extent required by
Section 14(f) and
Rule 14f-1.
The provisions of this Section 1.4 are in addition
to and shall not limit any rights that Parent, Merger Sub or any
of their Affiliates may have as a holder or beneficial owner of
Shares as a matter of applicable Law with respect to the
election of directors or otherwise.
(d) In the event that Parents designees are elected
or appointed to the Company Board pursuant to this
Section 1.4 then, until the Effective Time, the
Company shall use commercially reasonable efforts to cause the
Company Board to maintain at least three directors who are
members of the Company Board on the date of this Agreement and
who are independent for purposes of
Rule 10A-3
under the Exchange Act (the Independent
Directors); provided, however, that if
the number of Independent Directors is reduced below three for
any reason, the remaining Independent Director(s) shall be
entitled to nominate an individual or individuals to fill such
vacancy who shall be deemed to be Independent Directors for
purposes of this Agreement or, if no Independent Directors then
remain, the other directors shall designate three individuals to
fill such vacancies who are independent for purposes of
Rule 10A-3
under the Exchange Act, and such individuals shall be deemed to
be Independent Directors for purposes of this Agreement. The
Company and the Company Board shall promptly take all action as
may be necessary to comply with their obligations under this
Section 1.4(d). Notwithstanding anything
in this Agreement to the contrary, from and after the time, if
any, that Parents designees pursuant to this
Section 1.4 constitute a majority of the Company
Board and prior to the Effective Time, subject to the terms
hereof, any amendment or termination of this Agreement by the
Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or
Merger Sub or waiver of any of the Companys rights
hereunder, will require the concurrence of a majority of the
Independent Directors (or in the case where there are two or
fewer
A-13
Independent Directors, the concurrence of one Independent
Director) if such amendment, termination, extension or waiver
would reasonably be expected to have an adverse effect on any
holders of Shares other than Parent or Merger Sub. The
Independent Directors shall have the authority to retain outside
legal counsel (which may include current outside legal counsel
of the Company) at the reasonable expense of the Company for the
purpose of fulfilling their obligations under this Agreement and
shall have the authority, after the Acceptance Date, to
institute any action on behalf of the Company to enforce the
performance of the Agreement in accordance with its terms.
Section 1.5 The
Top-Up
Option.
(a) The Company hereby grants to Merger Sub an irrevocable
option (the
Top-Up
Option), exercisable upon the terms and conditions of
this Section 1.5, to purchase that number of
newly-issued Shares (the
Top-Up
Shares) equal to the lowest number of Shares that,
when added to the number of Shares held by Parent and Merger Sub
at the time of such exercise, shall constitute one share more
than ninety (90%) of the total Shares then outstanding
(determined on a fully diluted basis if Merger Sub so elects and
assuming the issuance of the
Top-Up
Shares, but excluding from Merger Subs ownership, but not
from outstanding Shares, Shares tendered pursuant to guaranteed
delivery procedures that have not yet been delivered in
settlement or satisfaction of such guarantee).
(b) The
Top-Up
Option shall be exercisable once in whole and not in part on or
prior to the 10th Business Day after Merger Subs
acceptance for payment of Shares pursuant to the Offer,
provided that the number of Shares beneficially owned by
Parent or Merger Sub immediately prior to the time of exercise
of the
Top-Up
Option constitutes at least eighty three and one-half percent
(83.5%) of the Shares then outstanding (excluding from Merger
Subs ownership, but not from outstanding Shares, Shares
tendered pursuant to guaranteed delivery procedures that have
not yet been delivered in settlement or satisfaction of such
guarantee) and that Merger Sub shall own, immediately after such
exercise and the issuance of
Top-Up
Shares pursuant thereto, one share more than ninety percent
(90%) of the Shares then outstanding (excluding from Merger
Subs ownership, but not from outstanding Shares, Shares
tendered pursuant to guaranteed delivery procedures that have
not yet been delivered in settlement or satisfaction of such
guarantee); provided, further, that in no event
shall the
Top-Up
Option be exercisable (x) for a number of Shares in excess
of the number of authorized but unissued Shares (including as
authorized and unissued Shares, for purposes of this
Section 1.5, any Shares held in the treasury of the
Company or subject to unexercised warrants or Company Stock
Options) or (y) if any provision of applicable Law or
judgment, injunction, order or decree shall prohibit the
exercise of the
Top-Up
Option or the delivery of the
Top-Up
Shares. Except as otherwise provided in
Section 1.5(c), the aggregate amount payable to the
Company for the
Top-Up
Shares shall be equal to the product of the number of
Top-Up
Shares and the Offer Consideration (the
Top-Up
Consideration). The
Top-Up
Option shall terminate upon the earlier to occur of (i) the
Effective Time and (ii) the termination of this Agreement
in accordance with its terms.
(c) The
Top-Up
Consideration may be paid (x) in cash or (y) by
issuance of a promissory note (which shall be treated as payment
to the extent of the principal amount thereof) with full
recourse to Parent, or a combination of the foregoing, at Merger
Subs election; provided that the par value of any Shares
issued pursuant to the
Top-Up
Option shall be paid in cash. Any such promissory note shall
(A) bear interest at the rate per annum equal to the prime
rate as reported in The Wall Street Journal on the date
of execution and delivery of such promissory note,
(B) shall mature on the first anniversary of the date of
execution and delivery of such promissory note, (C) may be
prepaid without premium or penalty and (D) shall provide
that the unpaid principal amount and accrued interest under the
promissory note shall immediately become due and payable in the
event that (x) Merger Sub fails to make any payment of
interest on the promissory note as provided therein and such
failure continues for a period of thirty (30) days or
(y) Merger Sub files or has filed against it any petition
under any bankruptcy or insolvency law or makes a general
assignment for the benefit of creditors.
(d) In the event Merger Sub exercises the
Top-Up
Option, Merger Sub shall so notify the Company in writing, and
shall set forth in such notice (i) the number of Shares
that will be owned by Parent and Merger Sub immediately
preceding the purchase of the
Top-Up
Shares, (ii) the place and time for the closing of the
purchase of the
Top-Up
Shares (which, subject to applicable Law and any required
regulatory approvals, shall be effected as promptly as
practicable and not more than two (2) Business Days after
date such notice is delivered to the Company), (iii) the
number of
Top-Up
Shares to be purchased and (iv) the manner in which Merger
Sub intends to pay the applicable exercise price. Such notice
shall also include an undertaking signed by Parent and Merger
Sub that, as promptly as
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practicable following such exercise of the
Top-Up
Option and the delivery by the Company of the
Top-Up
Shares, Merger Sub shall, and Parent shall cause Merger Sub to,
consummate the Merger in accordance with the terms hereof (in
the case of the Merger, subject to Article VII). At
the closing of the purchase of the
Top-Up
Shares, Parent or Merger Sub shall cause to be delivered to the
Company the consideration required to be delivered in exchange
for such shares, and the Company shall cause to be issued to
Parent or Merger Sub a certificate representing such shares,
which certificate shall include any legends required by
applicable securities Laws.
(e) Parent and Merger Sub understand that the offer and
sale of the
Top-Up
Shares will not be registered under the Securities Act of 1933,
as amended (the Securities Act) and will be
issued in reliance upon an exemption thereunder for transactions
not involving a public offering. Each of Parent and Merger Sub
represents and warrants that Merger Sub will be, upon the
purchase of the
Top-Up
Shares, an accredited investor, as defined in
Rule 501 of Regulation D under the Securities Act.
Each of Parent and Merger Sub represents, warrants and agrees
that the
Top-Up
Option is being, and the
Top-Up
Shares will be, acquired by Merger Sub for the purpose of
investment and not with a view to or for resale in connection
with any distribution thereof within the meaning of the
Securities Act.
(f) Parent and the Company shall use their respective
commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, and assist and
cooperate with each other in doing, all things necessary or
desirable to procure from any Governmental Entity any necessary
waiver or other exemption from applicable Law in order to issue
the Top-Up
Shares without obtaining the approval of the Stockholders.
(g) The parties agree that any dilutive impact on the value
of the Shares as a result of the existence or exercise of the
Top-Up
Option or the issuance of the
Top-Up
Shares, and any effect of the promissory note referred to in
Section 1.5(c) above, will not be taken into account
in any determination of the fair value of any Dissenting Shares
pursuant to Chapter 13 of the California General
Corporation Law (the CGCL) as contemplated by
Section 3.5.
(h) Except to the extent prohibited by applicable Law,
Parent may cause the Company to deliver cash paid upon exercise
of the
Top-Up
Option to the Paying Agent as part of the Exchange Fund in
satisfaction of the obligations of Parent and Merger Sub under
Section 3.3(a) to deliver a corresponding amount of
cash, and such amounts shall be included in the Merger
Consideration.
Section 1.6 Short Form Merger. If, after the
consummation of the Offer and any exercise of the
Top-Up
Option, the number of Shares beneficially owned by Parent,
Merger Sub and Parents other Subsidiaries collectively
represent at least ninety percent (90%) of the then outstanding
Shares, Parent shall cause Merger Sub to, and Parent and
Parents other Subsidiaries shall transfer any Shares they
own to Merger Sub to enable Merger Sub to, and the Company shall
execute and deliver such documents and instruments and take such
other actions as Parent or Merger Sub may request, in order to
cause the Merger to be completed as promptly as reasonably
practicable as provided in Section 1110 of the CGCL, and
otherwise as provided in Article II below.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject
to the conditions set forth in this Agreement and in accordance
with the CGCL and the Florida Business Corporation Act (the
Florida Act), at the Effective Time,
Merger Sub shall be merged with and into the Company. Following
the Merger, the separate corporate existence of Merger Sub shall
cease, and the Company shall continue as the surviving
corporation in the Merger (the Surviving
Corporation).
Section 2.2 Closing. The closing of the Merger (the
Closing) shall take place at 10:00 a.m.,
Eastern time, on the second (2nd) Business Day following the
satisfaction or, to the extent permitted by applicable Law,
waiver of the conditions set forth in Article VII
(other than those conditions that by their terms are to be
satisfied at the Closing, but subject to the satisfaction or, to
the extent permitted by applicable Law, waiver of those
conditions), at the offices of Arnall Golden Gregory LLP at 171
17th Street NW, Suite 2100, Atlanta, Georgia 30363, unless
another date, time or place is agreed to in writing by Parent
and the Company. The date on which the Closing occurs is
referred to in this Agreement as the Closing
Date.
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Section 2.3 Effective Time. Upon the terms and
subject to the provisions of this Agreement, as soon as
practicable on the Closing Date, the parties shall file
(a) a certificate of merger with the Secretary of State of
the State of Florida (the Florida Secretary of
State) executed in accordance with the relevant
provisions of the Florida Act (the Florida
Certificate of Merger), (b) a certificate of
merger with the Secretary of State of the State of California
(the California Secretary of State) executed
in accordance with the relevant provisions of the CGCL ((a) and
(b), collectively, the Certificates of Merger
and each individually, a Certificate of
Merger) and (c) as soon as practicable on or
after the Closing Date, shall make any and all other filings or
recordings required under the Florida Act and the CGCL. The
Merger shall become effective at such time as specified in the
Certificates of Merger (the time the Merger becomes effective
being the Effective Time).
Section 2.4 Effects of the Merger. The Merger shall
have the effects set forth in this Agreement and in the relevant
provisions of the Florida Act and the CGCL. Without limiting the
generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
Section 2.5 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the articles of incorporation of
the Company shall be amended and restated in substantially the
form set forth in Exhibit C and, as so amended,
shall be the articles of incorporation of the Surviving
Corporation until thereafter amended in accordance with its
terms and as provided by applicable Law.
(b) At the Effective Time, the bylaws of the Company shall
be amended and restated in substantially the form set forth in
Exhibit D, and, as so amended, shall be the bylaws
of the Surviving Corporation until thereafter amended in
accordance with their terms and as provided by applicable Law.
Section 2.6 Directors. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors
of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are
duly elected and qualified.
Section 2.7 Officers. The officers of Merger Sub
immediately prior to the Effective Time shall be the officers of
the Surviving Corporation until the earlier of their resignation
or removal or until their respective successors are duly elected
and qualified.
ARTICLE III
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1 Conversion of Capital Stock. At the
Effective Time, by virtue of the Merger and without any action
on the part of the Company, Parent, Merger Sub or the holders of
any shares of capital stock of the Company, Parent or Merger Sub:
(a) Each Share issued and outstanding immediately prior to
the Effective Time (other than Shares to be canceled in
accordance with Section 3.1(b) and any Dissenting
Shares) shall thereupon be converted automatically into and
shall thereafter represent the right to receive $0.457 in cash,
without interest (the Merger Consideration).
As of the Effective Time, all such Shares shall no longer be
outstanding and shall automatically be cancelled and shall cease
to exist, and shall thereafter only represent the right to
receive the Merger Consideration to be issued or paid in
accordance with Section 3.3, without interest.
(b) Each Share held in the treasury of the Company or
owned, directly or indirectly, by Parent, Merger Sub or any
wholly owned Subsidiary of the Company immediately prior to the
Effective Time shall automatically be canceled and shall cease
to exist, and no consideration shall be delivered in exchange
therefor.
(c) Each share of common stock, par value $0.01 per share,
of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly
issued, fully paid and non-assessable share of common stock, no
par value per share, of the Surviving Corporation.
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(d) If at any time during the period between the date of
this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of the Company, or
securities convertible into or exchangeable into or exercisable
for shares of such capital stock, shall occur as a result of any
reclassification, recapitalization, stock split (including a
reverse stock split) or subdivision or combination, exchange or
readjustment of shares, or any stock dividend or stock
distribution with a record date during such period (excluding,
in each case, normal quarterly cash dividends), merger or other
similar transaction, the Merger Consideration shall be equitably
adjusted, without duplication, to reflect such change;
provided, that nothing in this Section 3.1(d)
shall be construed to permit the Company to take any action with
respect to its securities that is prohibited by the terms of
this Agreement.
Section 3.2 Treatment of Warrants, Options and Other
Equity-Based Awards.
(a) Following the date hereof, (i) the Company shall
provide written notice of the pending Merger to the holder (the
Warrant Holder) of that certain Common Stock
Purchase Warrant dated October 26, 2004 (the
Warrant), in accordance with the terms
thereof, and (ii) as soon as reasonably practicable
following the Effective Time, provided that the Warrant Holder
has not earlier exercised the Warrant in full, Parent shall
issue a replacement warrant to the Warrant Holder providing
identical terms to the Warrant except that such replacement
warrant shall be exercisable into the amount of Merger
Consideration to which the Warrant Holder would have been
entitled if the Warrant Holder had exercised the Warrant
immediately prior to the consummation of the Merger.
(b) At the Effective Time, each option (each, a
Company Stock Option) to purchase Shares
granted under the Cardiogenesis Corporation Director Stock
Option Plan
and/or the
Cardiogenesis Corporation Stock Option Plan (collectively, the
Company Stock Plans), whether vested or
unvested, that is outstanding immediately prior to the Effective
Time shall be cancelled and, in exchange therefor, the Surviving
Corporation shall pay to each former holder of any such
cancelled Company Stock Option as soon as practicable following
the Effective Time by a special payroll payment an amount in
cash (without interest, and subject to deduction for any
required withholding Tax) equal to the product of (i) the
excess of the Merger Consideration over the exercise price per
Share under such Company Stock Option and (ii) the number
of Shares subject to such Company Stock Option; provided,
that if the exercise price per Share of any such Company Stock
Option is equal to or greater than the Merger Consideration,
such Company Stock Option shall be canceled without any cash
payment being made in respect thereof; provided further
that Parent may, in its sole discretion, cause the Paying
Agent, on behalf of the Surviving Corporation, to make the
payments described in this Section 3.2(b) rather
than the Surviving Corporation. The Company shall, prior to the
Acceptance Date, take all requisite action necessary to amend
the Company Stock Plans to permit the cancellation and exchange
of the Company Stock Options contemplated by this
Section 3.2(b).
(c) Each share of restricted stock acquired pursuant to a
stock purchase right under the Cardiogenesis Corporation Stock
Option Plan (Restricted Stock) that is not
fully vested and that is outstanding immediately prior to the
Acceptance Date shall automatically become fully vested
immediately prior to the Acceptance Date, but subject to the
occurrence of the Acceptance Date, pursuant to the terms of the
Restricted Stock Purchase Agreement evidencing such Restricted
Stock without any action on the part of the Company, Parent,
Merger Sub or the holders of any such share of Restricted Stock.
The Company shall, prior to the Acceptance Date, take all
requisite action, if any, necessary to accelerate the vesting of
all outstanding Restricted Stock as contemplated by the
preceding sentence.
(d) The Company shall take all actions necessary to ensure
that, as of the Effective Time, (i) the Company Stock Plans
shall terminate and (ii) no holder of a Company Stock
Option or any participant in any Company Stock Plan or any other
employee incentive or benefit plan, program or arrangement or
any non-employee director plan maintained by the Company shall
have any rights to acquire, or other rights in respect of, the
capital stock of the Company, the Surviving Corporation or any
of their Subsidiaries, except the right to receive the payment
contemplated by Section 3.2(b) upon exercise thereof.
(e) With respect to the 1996 Employee Stock Purchase Plan
of Cardiogenesis Corporation, as amended (as so amended, the
ESPP), the Company shall not commence any new
Offering Periods (as defined in the ESPP) under the ESPP on or
after the date of this Agreement.
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Section 3.3 Exchange and Payment.
(a) Prior to the Effective Time, Parent and Merger Sub
shall enter into an agreement with a bank or trust company
designated by Parent and reasonably acceptable to the Company
(the Paying Agent). On the day of (and
immediately following) the Effective Time, Parent or Merger Sub
shall deposit (or cause to be deposited) with the Paying Agent,
in trust for the benefit of holders of Shares, an amount of cash
sufficient to deliver to holders of Shares the Merger
Consideration to which they are entitled pursuant to
Section 3.1. Any cash deposited with the Paying
Agent shall hereinafter be referred to as the Exchange
Fund. The Exchange Fund shall not be used for any
purpose other than to fund payments due pursuant to
Section 3.1(a), except as provided in this
Agreement. Parent shall pay all fees and expenses of the Paying
Agent.
(b) As soon as reasonably practicable after the Effective
Time, but in any event no later than the third
(3rd)
Business Day thereafter, the Surviving Corporation shall cause
the Paying Agent to mail to each holder of record of an
outstanding certificate or outstanding certificates
(Certificates) and to each holder of
uncertificated Shares represented by book entry
(Book-Entry Shares) that immediately prior to
the Effective Time represented outstanding Shares that were
converted into the right to receive the Merger Consideration
with respect thereto pursuant to Section 3.1(a),
(i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates held by such Person shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and
which letter shall be in customary form and contain such other
provisions as Parent or the Paying Agent may reasonably specify)
and (ii) instructions for use in effecting the surrender of
such Certificates or Book-Entry Shares in exchange for the
Merger Consideration payable with respect thereto pursuant to
Section 3.1(a). Upon surrender of a
Certificate to the Paying Agent, together with such letter of
transmittal (or, in the case of a Book-Entry Share, upon
delivery of such letter of transmittal), duly completed and
validly executed in accordance with the instructions thereto,
and such other documents as the Paying Agent may reasonably
require (a Proper Delivery), the holder of
such Certificate or Book-Entry Share shall be entitled to
receive in exchange therefor the Merger Consideration that such
holder is entitled to receive pursuant to
Section 3.1(a) in respect of the Shares represented
by such Certificate or Book-Entry Share and the Certificate so
surrendered shall forthwith be canceled. No interest will be
paid or accrued on any Merger Consideration payable in respect
of Certificates or Book-Entry Shares. Payment of Merger
Consideration shall be made as promptly as practicable after the
date of Proper Delivery of the applicable Certificate or
Book-Entry Share.
(c) If payment of the Merger Consideration is to be made to
a Person other than the Person in whose name the surrendered
Certificate or Book-Entry Share is registered, it shall be a
condition of payment that such Certificate so surrendered shall
be properly endorsed or shall be otherwise in proper form for
transfer or such Book-Entry Share shall be properly transferred
and that the Person requesting such payment shall have paid any
transfer and other Taxes required by reason of the payment of
the Merger Consideration to a Person other than the registered
holder of the Certificate or Book-Entry Share surrendered or
shall have established to the satisfaction of Parent that such
tax either has been paid or is not applicable.
(d) Until surrendered as contemplated by this
Section 3.3, each Certificate or Book-Entry Share
shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration
payable in respect of Shares theretofore represented by such
Certificate or Book-Entry Shares, as applicable, pursuant to
Section 3.1(a), without any interest thereon.
(e) All Merger Consideration delivered upon the surrender
for exchange of Certificates or Book-Entry Shares in accordance
with the terms of this Article III shall be deemed
to have been paid in full satisfaction of all rights pertaining
to the Shares formerly represented by such Certificates or
Book-Entry Shares. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no
further registration of transfers on the stock transfer books of
the Surviving Corporation of the Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for transfer or transfer is sought for
Book-Entry Shares, such Certificates or Book-Entry Shares shall
be canceled and exchanged as provided in this
Article III, subject to applicable Law in the case
of Dissenting Shares.
(f) The Paying Agent shall invest any cash included in the
Exchange Fund as directed by Parent, on a daily basis. Any
interest or other income resulting from such investments shall
be paid to Parent, upon demand.
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(g) Any portion of the Exchange Fund (and any interest or
other income earned thereon) that remains undistributed to the
holders of Certificates or Book-Entry Shares one (1) year
after the Effective Time shall be delivered to Parent, upon
demand, and any holders of Certificates or Book-Entry Shares who
have not theretofore complied with this Article III
shall thereafter look only to the Surviving Corporation (subject
to abandoned property, escheat or other similar Laws), as
general creditors thereof, for payment of the Merger
Consideration with respect to Shares formerly represented by
such Certificate or Book-Entry Share, without interest.
(h) None of Parent, the Surviving Corporation, the Paying
Agent or any other Person shall be liable to any Person in
respect of cash from the Exchange Fund properly delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar Law.
(i) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit, in form and
substance required by the Paying Agent (or, if no such affidavit
is required by the Paying Agent, in form and substance
reasonably acceptable to Parent), of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and,
if required by Parent or the Paying Agent, the posting by such
Person of a bond in such amount as Parent or the Paying Agent
may determine is reasonably necessary as indemnity against any
claim that may be made against it or the Surviving Corporation
with respect to such Certificate, the Paying Agent will deliver
in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration payable in respect thereof pursuant to this
Agreement.
(j) Any portion of the Merger Consideration made available
to the Paying Agent pursuant to Section 3.3(a) to
pay for Shares for which appraisal rights have been perfected as
described in Section 3.5 shall be returned to
Parent, upon demand.
Section 3.4 Withholding Rights. Parent, Merger Sub,
the Surviving Corporation and the Paying Agent shall be entitled
to deduct and withhold from the consideration otherwise payable
to any holder of Shares, Company Stock Options or otherwise
pursuant to this Agreement such amounts as Parent, the Surviving
Corporation or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the
Code), or any provision of state, local
or foreign tax Law. To the extent that amounts are so withheld
and paid over to the appropriate taxing authority by Parent, the
Surviving Corporation or the Paying Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having
been paid to the Person in respect of which such deduction and
withholding was made.
Section 3.5 Dissenting Shares. Notwithstanding
anything in this Agreement to the contrary, Shares issued and
outstanding immediately prior to the Effective Time that are
held by any holder who has not voted in favor of the Merger and
who is entitled to demand and properly demands appraisal of such
Shares pursuant to Section 1300 of the CGCL
(Dissenting Shares) shall not be converted
into the right to receive the Merger Consideration, unless and
until such holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holders right to
appraisal under the CGCL. Dissenting Shares shall be treated in
accordance with Chapter 13 of the CGCL. If any such holder
fails to perfect or withdraws or loses any such right to
appraisal, each such Share of such holder shall thereupon be
converted into and become exchangeable only for the right to
receive, as of the later of the Effective Time and the time that
such right to appraisal has been irrevocably lost, withdrawn or
expired, the Merger Consideration in accordance with
Section 3.1(a). The Company shall serve
prompt notice to Parent of any demands for appraisal of any
Shares, attempted withdrawals of such notices or demands and any
other instruments received by the Company relating to rights to
appraisal, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The
Company shall not, without the prior written consent of Parent,
make any payment with respect to, settle or offer to settle, or
approve any withdrawal of any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding section or subsection
of the disclosure letter delivered by the Company to Parent
prior to the execution of this Agreement (the Company
Disclosure Letter) (it being agreed that disclosure of
any information in a particular section or subsection of the
Company Disclosure Letter shall be deemed disclosure with
respect to any other section or subsection of this Agreement to
which the relevance of such
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information is readily apparent on its face or where
specifically cross-referenced), each representation and warranty
in this Article IV is not qualified in any way
whatsoever, and is made and given with the intention of inducing
Parent and Merger Sub to enter into this Agreement. Subject to
the foregoing, the Company represents and warrants to Parent and
Merger Sub as follows:
Section 4.1 Organization, Standing and Power.
(a) Each of the Company and its Subsidiaries (i) is an
entity duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its organization,
(ii) has all requisite corporate or similar power and
authority to own, lease and operate its properties and to carry
on its business as now being conducted and (iii) is duly
qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except in the case of
clause (iii), where the failure to be so qualified or licensed
or in good standing, individually or in the aggregate, has not
had and would not reasonably be expected to have a Material
Adverse Effect. For purposes of this Agreement,
Material Adverse Effect means (x) any
event, change, circumstance, occurrence, effect or state of
facts that (A) is or would reasonably be expected to be
materially adverse to the business, assets, liabilities,
condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole, or
(B) materially impairs the ability of the Company to
comply, or prevents the Company from complying, with its
material obligations with respect to the consummation of the
Offer or the Merger or would reasonably be expected to do so;
provided, however, that, Material Adverse Effect
shall not include any event, change, circumstance, occurrence,
effect or state of facts to the extent expressly set forth in
the Company Disclosure Letter or arising out of or attributable
to any of the following, either alone or in combination
(1) generally affecting the industry in which the Company
operates, or the economy or the financial or securities markets
in the United States, including effects on such industry,
economy or markets resulting from any regulatory or political
conditions or developments in general, (2) any outbreak or
escalation of hostilities or declared or undeclared acts of war
or terrorism, weather, natural disasters or other force majeure
events, (3) reflecting or resulting from changes in any Law
or GAAP or interpretations thereof, (4) the announcement of
the execution of this Agreement or the pendency of the Offer or
the Merger or any other transactions contemplated by this
Agreement, (5) any actions taken, or failure to take
action, to which Parent or Merger Sub has expressly consented or
requested, (6) compliance with the terms of, or the taking
of any action required by, this Agreement, or the failure to
take any action prohibited by this Agreement, (7) any
stockholder litigation arising directly out of allegations of a
breach of fiduciary duty relating to this Agreement (but
excluding any such litigation arising out of or relating to any
agreement with or between Stockholders other than the Support
Agreement), (8) any failure by the Company or its
Subsidiaries to meet any internal or external budgets,
projections, forecasts or predictions of financial performance,
or (9) a change in the market price or trading volume of
the Shares, in and of itself; provided, that, with
respect to clauses (1), (2) and (3), the impact of such
event, change, circumstances, occurrence, effect or state of
facts is not disproportionately adverse (relative to other
industry participants of comparable size to the Company) to the
Company and its Subsidiaries, taken as a whole, and
provided, further, that with respect to
clauses (8) and (9), the facts and circumstances giving
rise to or contributing to such change may be taken into account
in determining whether there has been a Material Adverse Effect;
or (y) any violation, or series of violations, before or
after the date hereof by the Company or any of its Subsidiaries
(or any violation, or series of violations, for which the
Company or any of its Subsidiaries could be liable) of any FDA
Law , Foreign Drug Law, or Law covered by
Sections 4.11(d) through 4.11(g) for which
the remedy, or remedies in the case of a series of violations,
when aggregated together, would reasonably be expected to have a
material adverse effect on the business of Parent or its
Subsidiaries (only to the extent such effect results solely from
the Companys violation(s), and not including any portion
of such effect resulting from any act or omission of Parent or
its Subsidiaries), that has not been disclosed in the Company
Disclosure Letter prior to the date hereof.
(b) The Company has previously delivered or made available
to Parent true and complete copies of the Companys
articles of incorporation (the Company
Charter) and bylaws (the Company
Bylaws), in each case as amended to the date of this
Agreement, and each as so delivered is in full force and effect.
The Company is not in violation of any provision of the Company
Charter or Company Bylaws. The Company has made available to
Parent true and complete copies of the minutes of all meetings
of the Stockholders, the Company Board and each committee of the
Company Board held since January 1, 2007, except that any
minutes of meetings related to other bidders in connection with
any potential sale of the Company or any of its material assets
or otherwise related to
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deliberations by the Company Board with respect to the
consideration of strategic alternatives during the twelve
(12) months prior to the date hereof shall be provided in
redacted form to exclude only such financially sensitive
information as is directly related to such other bidders or
deliberations, as applicable.
Section 4.2 Capital Stock.
(a) The authorized capital stock of the Company consists of
75,000,000 Shares and 5,000,000 shares of preferred
stock, no par value per share (the Company Preferred
Stock). As of the close of business on March 25,
2011, (i) 46,638,421 Shares (excluding treasury
shares) were issued and outstanding, (ii) no Shares were
held by the Company in its treasury, (iii) no shares of
Company Preferred Stock were issued and outstanding and no
shares of Company Preferred Stock were held by the Company in
its treasury, (iv) 7,041,775 Shares were reserved for
issuance pursuant to Company Stock Plans (of which
3,146,940 Shares were subject to outstanding Company Stock
Options, (v) 2,640,000 Shares were reserved for
issuance pursuant to the Warrant and (vi) 423 shares
were subject to purchase pursuant to the ESPP. There is no
Offering Period under the ESPP ongoing as of the date of this
Agreement. All the outstanding shares of capital stock of the
Company are, and all shares reserved for issuance as noted in
clauses (iv) and (v) above will be, when issued in
accordance with the terms thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to any
preemptive rights. Neither the Company nor any of its
Subsidiaries has outstanding any bonds, debentures, notes or
other obligations having the right to vote (or convertible into,
or exchangeable or exercisable for, securities having the right
to vote) with the stockholders of the Company or such Subsidiary
on any matter. Except for the
Top-Up
Option, except as set forth above in this
Section 4.2(a) and except for changes since
March 25, 2011 resulting from the exercise of Company Stock
Options described in Section 4.2(c) or as expressly
permitted by Section 6.1, there are no outstanding
(A) shares of capital stock or other voting securities or
equity interests of the Company, (B) securities of the
Company or any of its Subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock of the
Company or other voting securities or equity interests of the
Company or any of its Subsidiaries, (C) stock appreciation
rights, phantom stock rights, performance units,
interests in or rights to the ownership or earnings of the
Company or any of its Subsidiaries or other equity equivalent or
equity-based award or right, (D) subscriptions, options,
warrants, calls, commitments, Contracts or other rights to
acquire from the Company or any of its Subsidiaries, or
obligations of the Company or any of its Subsidiaries to issue,
any shares of capital stock of the Company or any of its
Subsidiaries, voting securities, equity interests or securities
convertible into or exchangeable or exercisable for capital
stock or other voting securities or equity interests of the
Company or any of its Subsidiaries or rights or interests
described in clause (C), or (E) obligations of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any such securities or to issue, grant, deliver or sell,
or cause to be issued, granted, delivered or sold, any such
securities.
(b) No shares of capital stock of the Company are owned by
any Subsidiary of the Company. All the outstanding shares of
capital stock or other voting securities or equity interests of
each Subsidiary of the Company have been duly authorized and
validly issued, are fully paid, nonassessable and not subject to
any preemptive rights. All of the shares of capital stock or
other voting securities or equity interests of each such
Subsidiary are owned, directly or indirectly, by the Company,
free and clear of all pledges, claims, liens, charges, options,
rights of first refusal, encumbrances and security interests of
any kind or nature whatsoever (including any limitation on
voting, sale, transfer or other disposition or exercise of any
other attribute of ownership) (collectively,
Liens). There are no stockholder agreements,
voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries is a party or on file with
the Company with respect to the holding, voting, registration,
redemption, repurchase or disposition of, or that restricts the
transfer of, any capital stock or other equity interest of the
Company or any of its Subsidiaries (except for the withholding
of shares in connection with Taxes payable in respect of the
exercise of Company Stock Options and the issuance of Shares in
connection with the vesting of restricted stock units,
performance stock units, restricted stock unit rights or other
awards granted under the Company Plans).
(c) Section 4.2(c) of the Company Disclosure
Letter sets forth a true and complete list of all holders, as of
March 25, 2011, of outstanding Company Stock Options or
other rights to purchase or receive Shares or similar rights
granted under the Company Stock Plans or otherwise
(collectively, Company Stock Awards),
indicating as applicable, with respect to each Company Stock
Award then outstanding, the type of award granted, the number of
Shares subject to such Company Stock Award, the name of the plan
under which such Company Stock Award was granted, the date of
grant, exercise or purchase price, vesting schedule, payment
schedule (if different from the
A-21
vesting schedule) and expiration thereof, and whether (and to
what extent) the vesting of such Company Stock Award will be
accelerated or otherwise adjusted in any way or any other terms
will be triggered or otherwise adjusted in any way by the
consummation of the transactions contemplated by this Agreement
or by the termination of employment or engagement or change in
position of any holder thereof following or in connection with
the Merger. Each Company Stock Option intended to qualify as an
incentive stock option under Section 422 of the
Code so qualifies and the exercise price of each other Company
Stock Option is no less than the fair market value of a Share as
determined on the date of grant of such Company Stock Option,
and no Company Stock Option is subject to Section 409A of
the Code. No Company Stock Options that are outstanding have
been granted other than pursuant to the Company Stock Plans. The
Company has made available to Parent true and complete copies of
all Company Stock Plans and the forms of all stock option
agreements evidencing outstanding Company Stock Options.
Section 4.3 Subsidiaries. Section 4.3 of
the Company Disclosure Letter sets forth a true and complete
list of each Subsidiary of the Company, including its
jurisdiction of incorporation or formation. Except for the
capital stock of, or other equity or voting interests in, its
Subsidiaries, and except as set forth in Section 4.3
of the Company Disclosure Letter, the Company does not own,
directly or indirectly, any equity, membership interest,
partnership interest, joint venture interest, or other equity or
voting interest in, or any interest convertible into,
exercisable or exchangeable for any of the foregoing, nor is it
under any current or prospective obligation to form or
participate in, provide funds to, make any loan, capital
contribution, guarantee, credit enhancement or other investment
in, or assume any liability or obligation of, any Person.
Section 4.4 Authority.
(a) The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company are
necessary to approve this Agreement or to consummate the
transactions contemplated hereby, subject, in the case of the
consummation of the Merger and if required by applicable Law, to
the adoption and approval of this Agreement by the holders of at
least a majority in combined voting power of the outstanding
Shares (the Company Stockholder Approval).
This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, constitutes a valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms (except to the extent that
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar Laws affecting
the enforcement of creditors rights generally or by
general principles of equity, and further limited by laws
relating to the availability of specific performance, injunctive
relief or other equitable remedies).
(b) The Company Board, at a meeting duly called and held,
duly adopted resolutions for which all directors present voted
in favor of (i) determining that the terms of this
Agreement, the Offer, the Merger and the other transactions
contemplated hereby are fair to and in the best interests of the
Stockholders, (ii) approving and declaring advisable this
Agreement and the transactions contemplated hereby, including
the Offer and the Merger, (iii) directing that this
Agreement be submitted to the stockholders of the Company for
adoption and approval (unless the Merger is consummated in
accordance with Section 1110 of the CGCL as contemplated by
Section 6.3(c)) and (iv) resolving to recommend
that the Stockholders accept the Offer, tender their Shares
pursuant to the Offer and vote in favor of the adoption and
approval of this Agreement and the transactions contemplated
hereby, including the Offer and the Merger (if required by
applicable Law), which resolutions have not been subsequently
rescinded, modified or withdrawn in any way, except as may be
permitted by Section 6.2. The Company is
providing to Parent concurrently herewith true and complete
copies of the resolutions described herein.
(c) In the event that Section 1110 of the CGCL is
inapplicable and unavailable to effectuate the Merger, the
Company Stockholder Approval is the only vote of the holders of
any class or series of the Companys capital stock or other
securities required in connection with the consummation of the
Merger. No vote of the holders of any other class or series of
the Companys capital stock or other securities is required
in connection with the consummation of any of the transactions
contemplated hereby to be consummated by the Company other than
the Merger.
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Section 4.5 No Conflict; Consents and Approvals.
(a) The execution, delivery and performance of this
Agreement by the Company does not, and (assuming that all
consents, approvals, authorizations and other actions described
in Section 4.5 of the Company Disclosure Letter have
been obtained and all filings and obligations described in
Section 4.5 of the Company Disclosure Letter have
been made and any waiting periods thereunder have terminated or
expired) the consummation of the Offer and the Merger and
compliance by the Company with the provisions hereof will not,
conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time, or both)
under, or give rise to a right of, or result in, termination,
cancellation, modification or acceleration of any obligation or
to the loss of a benefit under, or result in the creation of any
Lien in or upon any of the properties, assets or rights of the
Company or any of its Subsidiaries under, or give rise to any
increased, additional, accelerated or guaranteed rights or
entitlements under, or require any consent, waiver or approval
of any Person pursuant to, any provision of (i) the Company
Charter or Company Bylaws, or the certificate of incorporation
or bylaws (or similar organizational documents) of any
Subsidiary of the Company, (ii) any bond, debenture, note,
mortgage, indenture, guarantee, license, lease, purchase or sale
order or other contract, agreement or other obligation binding
on the Company and its Subsidiaries or any of their respective
assets, whether oral or written (each, including all amendments
thereto, a Contract) to which the Company or
any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries or any of their respective properties or
assets may be bound or (iii) subject to the governmental
filings and other matters referred to in
Section 4.5(b), any federal, state, local or foreign
law (including common law, FDA Laws, and Foreign Drug Laws),
statute, ordinance, rule, code, regulation, order, judgment,
injunction, decree or other legally enforceable requirement
(Law) applicable to the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries
or any of their respective properties or assets may be bound,
except in the case of clauses (ii) and (iii), as,
individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect.
(b) No consent, approval, order or authorization of, or
registration, declaration, filing with or notice to, any
federal, state, local or foreign government or subdivision
thereof or any other governmental, administrative, judicial,
arbitral, legislative, executive, regulatory or self-regulatory
authority, instrumentality, agency, commission or body (each, a
Governmental Entity) is required by or with
respect to the Company or any of its Subsidiaries in connection
with the execution, delivery and performance of this Agreement
by the Company or the consummation by the Company of the Offer
and the Merger or compliance with the provisions hereof, except
for (i) such filings and reports as may be required
pursuant to the applicable requirements of the Securities Act,
the Exchange Act and any other applicable state or federal
securities, takeover and blue sky laws,
(ii) the filing of the Certificates of Merger with the
Florida Secretary of State, as required by the Florida Act, and
the California Secretary of State, as required by the CGCL,
respectively, and (iii) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or
notices the failure of which to be obtained or made,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
Section 4.6 SEC Reports; Financial Statements.
(a) The Company has filed with or furnished to the SEC on a
timely basis true and complete copies of all forms, reports,
schedules, statements and other documents filed or required to
be filed or furnished by the Company with the SEC since
January 1, 2008 (all such documents, together with all
exhibits and schedules thereto and all information incorporated
therein by reference, the Company SEC
Documents). As of their respective filing dates (or,
if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), the Company SEC
Documents complied in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the
Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley
Act), as in effect on the date such forms, reports and
documents were filed, as the case may be, including, in each
case, the rules and regulations promulgated thereunder, and none
of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a 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.
(b) The financial statements (including the related notes
thereto) included (or incorporated by reference) in the Company
SEC Documents (i) have been prepared in all material
respects in accordance with generally accepted accounting
principles (GAAP) (except as may be indicated
in the notes thereto and, in the case of unaudited statements,
as permitted by the rules and regulations of the SEC applicable
to Quarterly Reports on
Form 10-Q)
A-23
applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto),
(ii) comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto and
(iii) fairly present in all material respects the
consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and their respective
consolidated results of operations and cash flows for the
periods then ended (except as may be indicated in the notes
thereto and subject, in the case of unaudited statements, to
normal and recurring year-end audit adjustments that were not,
or are not expected to be, material in amount), all in
accordance with GAAP and the applicable rules and regulations
promulgated by the SEC. Since December 31, 2010, except as
disclosed in the Company SEC Reports filed prior to the date
hereof, the Company has not made any change in the accounting
practices or policies applied in the preparation of its
financial statements, except as required by GAAP, SEC rule or
policy or applicable Law. The books and records of the Company
and its Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP (to the extent
applicable) and any other applicable legal and accounting
requirements and reflect only actual transactions.
(c) The Company has established and maintains a system of
internal control over financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) that provides reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP and includes policies and procedures that:
(i) provide for the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of the Companys financial statements
in accordance with GAAP, and that receipts and expenditures of
the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Companys assets that could have a material effect
on its financial statements.
(d) The Company has established and maintains disclosure
controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act). Such disclosure controls and procedures
are designed to ensure that information relating to the Company,
including its consolidated Subsidiaries, required to be
disclosed in the Companys periodic and current reports
under the Exchange Act, is made known to the Companys
chief executive officer and its chief financial officer by
others within those entities to allow timely decisions regarding
required disclosures as required under the Exchange Act. The
chief executive officer and chief financial officer of the
Company have evaluated the effectiveness of the Companys
disclosure controls and procedures and, to the extent required
by applicable Law, presented in any applicable Company SEC
Document that is a report on
Form 10-K
or
Form 10-Q,
or any amendment thereto, its conclusions about the
effectiveness of the disclosure controls and procedures as of
the end of the period covered by such report or amendment based
on such evaluation.
(e) Since January 1, 2007, (i) neither the
Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any director, officer, employee, auditor, accountant or
representative of the Company or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any
complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any of
its Subsidiaries or their respective internal accounting
controls, including any complaint, allegation, assertion or
claim that the Company or any of its Subsidiaries has engaged in
questionable accounting or auditing practices, and (ii) no
attorney representing the Company or any of its Subsidiaries,
whether or not employed by the Company or any of its
Subsidiaries, has reported evidence of a violation of securities
Laws, breach of fiduciary duty or similar violation by the
Company or any of its Subsidiaries or any of their respective
officers, directors, employees or agents to the Company Board or
any committee thereof or to any director or officer of the
Company or any of its Subsidiaries.
(f) As of the date of this Agreement, there are no
outstanding or unresolved comments in the comment letters
received from the SEC staff with respect to the Company SEC
Documents. To the knowledge of the Company, none of the Company
SEC Documents is subject to ongoing review or outstanding SEC
comment or investigation. The Company has made available to
Parent true, correct and complete copies of all written
correspondence between the SEC, on the one hand, and the Company
and any of its Subsidiaries, on the other hand, occurring since
January 1, 2007.
(g) Except as set forth in Section 4.6(g) of
the Company Disclosure Letter and except as disclosed in the
Company SEC Documents, neither the Company nor any of its
Subsidiaries is a party to, or has any commitment to
A-24
become a party to, any joint venture, off balance sheet
partnership or any similar Contract (including any Contract or
arrangement relating to any transaction or relationship between
or among the Company and any of its Subsidiaries, on the one
hand, and any unconsolidated Affiliate, including any structured
finance, special purpose or limited purpose entity or Person, on
the other hand), or any off balance sheet
arrangements (as defined in Item 303(a) of
Regulation S-K
under the Exchange Act) that, individually or in the aggregate,
exceeds $10,000.
(h) No Subsidiary of the Company is subject to the
reporting requirements of Sections 13 or 15(d) of the
Exchange Act.
Section 4.7 No Undisclosed Liabilities. Except to
the extent disclosed in the Company SEC Documents filed after
the date of the Companys annual report on
Form 10-K
for the fiscal year ended December 31, 2010 and before the
date hereof, neither the Company nor any of its Subsidiaries has
any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, known or unknown, whether
due, or to become due that are required to be recorded or
reflected on a balance sheet under GAAP, except for
(i) liabilities and obligations under this Agreement or in
connection with the transactions contemplated hereby and
(ii) liabilities and obligations incurred in the ordinary
course of business consistent with past practice.
Section 4.8 Certain Information. Neither the
Schedule 14D-9
nor the Proxy Statement will, at the respective times they are
first filed with the SEC, amended or supplemented or first
published, sent or given to the Stockholders and, in the case of
the Proxy Statement, at the time of the Company
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not
misleading. The
Schedule 14D-9
and the Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act. None of the
information supplied or to be supplied by or on behalf of the
Company specifically for inclusion or incorporation by reference
in any of the Offer Documents will, at the respective times they
are first filed with the SEC, amended or supplemented or first
published, sent or given to the Stockholders, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they are made, not misleading. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to
statements included or incorporated by reference in the
Schedule 14D-9
or the Proxy Statement based on information supplied by or on
behalf of Parent or Merger Sub specifically for inclusion or
incorporation by reference therein. For purposes of this
Agreement, the letter to the Stockholders, notice of meeting,
proxy statement and form of proxy and any other soliciting
material, or the information statement, as the case may be, to
be distributed to the Stockholders in connection with the Merger
(including any amendments or supplements) and any schedules
required to be filed with the SEC in connection therewith are
collectively referred to as the Proxy
Statement.
Section 4.9 Absence of Certain Changes or Events.
Except as and to the extent disclosed in the Company SEC
Documents filed after the date of the Companys annual
report on
Form 10-K
for the fiscal year ended December 31, 2010 and before the
date hereof, since December 31, 2010 and through the date
of this Agreement and as set forth in Section 4.9 of
the Company Disclosure Letter: (a) the Company and its
Subsidiaries have conducted their businesses only in the
ordinary course consistent with past practice; (b) there
has not been any change, event or development or prospective
change, event or development that, individually or in the
aggregate, has had or would reasonably be expected to have a
Material Adverse Effect; (c) neither the Company nor any of
its Subsidiaries has suffered any loss, damage, destruction or
other casualty affecting any of its material properties or
material assets, whether or not covered by insurance; and
(d) none of the Company or any of its Subsidiaries has
taken any action since January 1, 2011 that, if taken after
the date of this Agreement, would constitute a breach of any of
the covenants set forth in Section 6.1.
Section 4.10 Litigation. There is no action, suit,
claim, arbitration, investigation, inquiry, grievance or other
proceeding (each, an Action) (or basis
therefor) pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries, any of their respective properties or assets and
there is no filed litigation against any present or former
officer, director or employee of the Company or any of its
Subsidiaries in such individuals capacity as such. Neither
the Company nor any of its Subsidiaries nor any of their
respective properties or assets is subject to any outstanding
judgment, order, injunction, rule or decree of any Governmental
A-25
Entity. There is no Action pending or, to the knowledge of the
Company, threatened seeking to prevent, hinder, modify, delay or
challenge the transactions contemplated by this Agreement.
Section 4.11 Compliance with Laws and Permits.
(a) The Company and each of its Subsidiaries have in effect
all material permits, licenses, variances, exemptions,
authorizations, operating certificates, franchises, orders and
approvals of all Governmental Entities (collectively,
Permits) necessary for them to own, lease or
operate their properties and assets and to carry on their
businesses and operations as now conducted, and no suspension,
cancellation or other lapse of any such Permit is pending by or
at the behest of any Governmental Entity, or to the
Companys knowledge, threatened. All of such Permits shall
remain in full force and effect after the Offer and the Merger.
Since January 1, 2007, neither the Company nor any of its
Subsidiaries has been in violation of (i) any Permits or
(ii) except as has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect, any applicable Law not explicitly covered in
Section 4.11(b) through 4.11(g), including
any consumer protection, equal opportunity, customs, patient
confidentiality, health care industry regulation and third-party
reimbursement laws including under any federal or state health
care program, including but not limited to any Federal Health
Care Program as defined in Section 1128B(f) of the
U.S. Federal Social Security Act (together with all
regulations promulgated thereunder, the SSA),
and any similar Laws of any other jurisdiction. Since
January 1, 2007, none of the Company or any of its
Subsidiaries has received a notice or other written
communication alleging or relating to a possible violation of
any Law applicable to their businesses, operations, properties
or assets or from a Governmental Entity seeking to investigate
any such possible violation. The Company is not subject to any
continuing liabilities, obligations or other consequences of any
nature relating to any noncompliance by the Company with any
Laws which occurred prior to January 1, 2007.
(b) Neither the Company nor any of its Subsidiaries is
subject to any consent decree from any Governmental Entity.
Neither the Company nor any of its Subsidiaries has received any
warning letter from the U.S Food and Drug Administration
(FDA) or equivalent action from any
comparable
non-U.S. Governmental
Entity since January 1, 2007. Neither the Company nor any
of its Subsidiaries has received any communication from any
regulatory agency or been notified since January 1, 2007
that any product approval is withdrawn or modified or that such
an action is under consideration. Without limiting the
foregoing, the Company and each of its Subsidiaries is in
compliance, in all material respects, with all current
applicable statutes, rules, regulations, guidelines, policies or
orders administered or issued by the FDA (FDA
Laws) or comparable foreign Governmental Entity
(Foreign Drug Laws) including the FDAs
Quality System Regulation, 21 C.F.R. Part 820. The
Company does not have knowledge of any facts which furnish any
reasonable basis for any
Form FDA-483
observations or regulatory or warning letters from the FDA,
Section 305 notices, or other similar communications from
the FDA or comparable foreign entity. Since January 1,
2007, there have been no recalls, detentions, withdrawals,
seizures, or termination or suspension of manufacturing
requested or threatened relating to the Companys or its
Subsidiaries products, and no field notifications, field
corrections or alerts.
(c) The Companys and its Subsidiaries products,
where required, are being marketed in all material respects
under valid pre market notifications under Section 510(k)
of the Federal Food, Drug and Cosmetic Act, 21 U.S.C.
§ 360(k), and 21 C.F.R. Part 807, Subpart E
(510(k)s) or pre-market approval
applications approved by the FDA in accordance with
21 U.S.C. § 360(e) and 21 C.F.R.
Part 814 (PMAs). All 510(k)s
and PMAs for the Companys and its Subsidiaries
products are exclusively owned by the Company or one of its
Subsidiaries, and to the knowledge of the Company, the FDA is
not considering limiting, suspending, or revoking any such
510(k)s or PMAs or changing the marketing
classification or labeling of any such products. To the
Companys knowledge, there is no false information or
significant omission in any product application or
product-related submission to the FDA or comparable foreign
Governmental Entity. The Company and its Subsidiaries have
obtained all necessary regulatory approvals from any foreign
regulatory agencies related to the products distributed and sold
by the Company, and the Company has not received any notice that
any Governmental Entity seeks any additional conditions on the
distribution or sale of products in a jurisdiction covered by a
regulatory approval. To the Companys knowledge, any third
party that is a manufacturer, contractor, or agent for the
Company or its Subsidiaries is in compliance with all Permits
and regulatory approvals from the FDA or comparable Governmental
Entity insofar as they pertain to the manufacture of product
components or products for the Company or its Subsidiaries.
A-26
(d) Neither the Company nor any Subsidiary, nor the
officers, directors, managing employees or agents (as those
terms are defined in 42 C.F.R. § 1001.1001) of
the Company or any Subsidiary: (i) have engaged in any
activities which are material violations of, or are cause for
civil penalties or mandatory or permissive exclusion under, any
federal or state health care Law or any
non-U.S. Law
of comparable scope, including but not limited to any Federal
Health Care Program under Sections 1128, 1128A, 1128B,
1128C, or 1877 of SSA, the federal TRICARE statute
(10 U.S.C. § 1071 et seq.), the False
Claims Act of 1863 (31 U.S.C. § 3729 et
seq.), the False Statements Accountability Act
(18 U.S.C. § 1001), the Program Fraud Civil
Remedies Act of 1986 (31 U.S.C. § 3801 et
seq.), 18 U.S.C. § 287, the anti-fraud and
related provisions of the Health Insurance Portability and
Accountability Act of 1996 (e.g., 18 U.S.C.
§§ 1035 and 1347), or related federal, state or
local statutes, or any
non-U.S. Law
of comparable scope, including knowingly and willfully offering,
paying, soliciting or receiving any remuneration (interpreted
broadly to include anything of value), directly or indirectly,
overtly or covertly, in cash or in kind in return for, or to
induce, the purchase, lease, or order, or the arranging for or
recommending of the purchase, lease or order, of any item or
service for which payment may be made in whole or in part under
any such program; (ii) have had a civil monetary penalty
assessed against them under Section 1128A of SSA;
(iii) have been excluded from participation or debarred
under any federal or state health care program (including any
Federal Health Care Program), or any comparable
non-U.S. program;
(iv) have been convicted (as defined in 42 C.F.R.
§ 1001.2) of any of the categories of offenses
described in Sections 1128(a) or 1128(b)(1), (b)(2), or
(b)(3) of SSA or any
non-U.S. Law
of comparable scope; or (v) have failed to comply in any
material respect with any state Law regarding disclosure of
physician payments (commonly known as Sunshine Laws, which, for
illustration purposes only, but without limiting the scope of
this provision, are similar in subject matter to
Section 1128G of the SSA).
(e) Neither the Company nor any of its Subsidiaries (nor,
to the knowledge of the Company, any of their respective
directors, executives, representatives, agents or employees)
(i) has used or is using any corporate funds for any
illegal contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) has used or
is using any corporate funds for any direct or indirect unlawful
payments to any foreign or domestic governmental officials or
employees, (iii) has violated or is violating any provision
of the Foreign Corrupt Practices Act of 1977, (iv) has
established or maintained, or is maintaining, any unlawful fund
of corporate monies or other properties or (v) has made any
bribe, unlawful rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
(f) The Company and each of its Subsidiaries have conducted
their export transactions in accordance in all material respects
with applicable provisions of U.S. export Laws (including
the International Traffic in Arms Regulations, the Export
Administration Regulations and the regulations administered by
the Department of Treasury, Office of Foreign Assets Control
(OFAC)), and other export Laws of the
countries where it conducts business, and neither the Company
nor any of its Subsidiaries has received any notices of
noncompliance, complaints or warnings with respect to its
compliance with export Laws. Without limiting the foregoing:
(i) the Company and each of its Subsidiaries have obtained
all material export licenses and other approvals required for
their exports of products and technologies from the
U.S. and other countries where it conducts business;
(ii) the Company and each of its Subsidiaries are in
compliance in all material respects with the terms of such
applicable export licenses or other approvals;
(iii) there are no pending or, to the knowledge of the
Company, threatened claims against the Company or any of its
Subsidiaries with respect to such export licenses or other
approvals; and
(iv) the Company and its Subsidiaries have in place
adequate controls and systems to ensure compliance in all
material respects with applicable Laws pertaining to import and
export control in each of the jurisdictions in which the Company
and its Subsidiaries currently does or in the past has done
business, either directly or indirectly.
(g) Neither the Company nor any of its Subsidiaries,
employees or management appears on the Specially Designated
Nationals and Blocked Persons List published by OFAC, or is
otherwise a person with which any U.S. person is prohibited
from dealing under the laws of the United States. Neither the
Company nor any of its
A-27
Subsidiaries does business or conducts any transactions with the
governments of, or persons within, any country under economic
sanctions administered and enforced by OFAC.
Section 4.12 Benefit Plans.
(a) The Company has provided to Parent a true and complete
list of each employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (ERISA)),
and all stock purchase, stock option, severance, employment,
change-in-control,
fringe benefit, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or
other arrangements, whether or not subject to ERISA (including
any funding mechanism therefor now in effect or required in the
future as a result of the transactions contemplated by this
Agreement or otherwise), whether formal or informal, written,
legally binding or not, that is currently in effect, was
maintained since December 31, 2004 or which has been
approved before the date hereof but is not yet effective, for
the benefit of (i) directors or employees of the Company or
any other persons performing services for the Company,
(ii) former directors or employees of the Company or any
other persons formerly performing services for the Company, or
(iii) beneficiaries of anyone described in (i) or
(ii). All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the
Company Plans. With respect to each
Company Plan, the Company has furnished or made available to
Parent a current, accurate and complete copy thereof and, to the
extent applicable: (i) any related trust agreement or other
funding instrument, (ii) the most recent determination
letter of the Internal Revenue Service (the
IRS), if applicable, (iii) any summary
plan description with each summary of material modifications
thereto, if any, employee handbooks and other written
communications (or a description of any oral communications) by
the Company or its Subsidiaries to their employees concerning
the extent of the benefits provided under a Company Plan and
(iv) for the three (3) most recent years
(A) Forms 5500, 941 and 1041 and attached schedules,
(B) audited financial statements, and (C) actuarial
valuation reports.
(b) Each Company Plan intended to be qualified under
Section 401(a) of the Code has received a favorable
determination, advisory
and/or
opinion letter, as applicable, from the IRS that it is so
qualified and, to the knowledge of the Company, nothing has
occurred since the date of such letter that would reasonably be
expected to cause the loss of such qualified status of such
Company Plan or cause the imposition of any penalty or Tax
liability.
(c) The Company is not liable for, and the Company will not
be liable for, any liability of any ERISA
Affiliate (hereby defined to include any trade or
business, whether or not incorporated, other than the Company,
which has employees who are or have been at any date of
determination occurring within the preceding six (6) years,
treated pursuant to Section 4001(a)(14) of ERISA
and/or
Section 414 of the Code as employees of a single employer
which includes the Company) including predecessors thereof) with
regard to any Company Plan maintained, sponsored or contributed
to by an ERISA Affiliate (if a like definition of Company Plan
were applicable to the ERISA Affiliate in the same manner as it
applies to the Company) (each such Company Plan for an ERISA
Affiliate being an ERISA Affiliate Plan),
including, without limitation: (i) withdrawal liability
arising under Title IV, Subtitle E, Part 1 of ERISA;
(ii) liabilities to the Pension Benefit Guaranty
Corporation (PBGC); (iii) liabilities
under Section 412 of the Code or Section 302(a)(2) of
ERISA; (iv) liabilities resulting from the failure on the
part of the Company, any ERISA Affiliate, each Company Plan or
each Company Plan sponsor or
administrator (within the meaning of
Section 3(16) of ERISA) to comply in all respects with the
applicable requirements of Section 4980B of the Code and
Section 601 et seq. of ERISA; or
(v) liabilities resulting from an ERISA Affiliate
Plans failure to satisfy the reporting and disclosure
requirements of ERISA and the Code.
(d) Neither the Company nor any ERISA Affiliate has ever
maintained or contributed to a multiemployer plan (as defined in
Section 3(37) of ERISA).
(e) With respect to the Company Plans, except as disclosed
in the Company SEC Documents or in Section 4.12 of
the Company Disclosure Letter:
(i) each Company Plan has been established and administered
in accordance with its terms and in material compliance with the
applicable provisions of ERISA and the Code, and no reportable
event, as defined in Section 4043 of ERISA, no prohibited
transaction, as described in Section 406 of ERISA or
Section 4975 of the Code, or accumulated funding
deficiency, as defined in Section 302 of ERISA and 412 of
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the Code, has occurred with respect to any Company Plan, and all
contributions required to be made under the terms of any Company
Plan have been timely made;
(ii) to the knowledge of the Company, there is no Action
(including any investigation, audit or other administrative
proceeding) by the Department of Labor, the PBGC, the IRS or any
other Governmental Entity or by any plan participant or
beneficiary pending, threatened in writing, or relating to the
Company Plans, any fiduciaries thereof with respect to their
duties to the Company Plans or the assets of any of the trusts
under any of the Company Plans (other than routine claims for
benefits) nor, to the knowledge of the Company, are there facts
or circumstances that exist that could reasonably give rise to
any such Actions; and
(iii) if a Company Plan purports to be a voluntary
employees beneficiary association
(VEBA), a request for a determination letter
for the VEBA has been submitted to and approved by the IRS that
the VEBA is exempt from federal income tax under
Section 501(c)(9) of the Code, and nothing has occurred or
is expected to occur that caused or could cause the loss of such
qualification or exemption or the imposition of any tax,
interest or penalty with respect thereto.
(f) Neither the Company nor any ERISA Affiliate has any
obligation to contribute to or provide benefits pursuant to, and
has no other liability of any kind with respect to, (i) a
multiple employer welfare arrangement (MEWA) (within
the meaning of Section 3(40) of ERISA), or (ii) a
plan maintained by more than one employer (within
the meaning of Section 413(c) of the Code).
(g) None of the Company Plans provide for payment of a
benefit, the increase of a benefit amount, the payment of a
contingent benefit or the acceleration of the payment or vesting
of a benefit determined or occasioned, in whole or in part, by
reason of the execution of this Agreement or the consummation of
the transactions contemplated hereby. No amount or benefit that
could be received by any disqualified individual (as
defined in Treasury
Regulation Section 1.280G-1)
with respect to the Company or any Subsidiary in connection with
the transactions contemplated by this Agreement (alone or in
combination with any other event, and whether pursuant to a
Company Plan or otherwise) could be characterized as an
excess parachute payment (as defined in
Section 280G(b)(1) of the Code).
(h) No Company Plan provides for post-employment welfare
benefits except to the extent required by Section 4980B of
the Code or applicable state Law.
(i) Each Company Plan that is subject to Section 409A
of the Code has complied in form and operation with the
requirements of Section 409A of the Code. No individual is
entitled to any
gross-up,
make-whole or other additional payment from the Company or any
of its Subsidiaries in respect of any Tax (including federal,
state, local or foreign income, excise or other Taxes (including
Taxes imposed under Section 409A and 4999 of the Code)) or
interest or penalty related thereto.
(j) Each Company Plan that is subject to
Section 1862(b)(1) of the SSA has been operated in
compliance with the secondary payor requirements of
Section 1862 thereof.
Section 4.13 Labor and Employment Matters.
(a) The Company and its Subsidiaries are and have been in
compliance with all applicable Laws relating to labor and
employment, including those relating to wages, hours, collective
bargaining, unemployment compensation, workers
compensation, equal employment opportunity, age and disability
discrimination, immigration control, employee classification,
information privacy and security, payment and withholding of
taxes and continuation coverage with respect to group health
plans. As of the date of this Agreement there is not pending or,
to the knowledge of the Company, threatened, any labor dispute,
work stoppage, labor strike or lockout against the Company or
any of its Subsidiaries by employees.
(b) No employee of the Company or any of its Subsidiaries
is covered by an effective or pending collective bargaining
agreement or similar labor agreement. To the knowledge of the
Company, there has not been any activity on behalf of any labor
organization or employee group to organize any such employees.
There are no (i) unfair labor practice charges or
complaints against the Company or any of its Subsidiaries
pending before the National Labor Relations Board or any other
labor relations tribunal or authority and to the knowledge of
the Company no such representations, claims or petitions are
threatened, (ii) representation claims or petitions pending
before the
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National Labor Relations Board or any other labor relations
tribunal or authority or (iii) grievances or pending
arbitration proceedings against the Company or any of its
Subsidiaries that arose out of or under any collective
bargaining agreement.
(c) Except for such incorrect classifications as would not
reasonably be expected to result in a liability of more than
$20,000 in the aggregate, all individuals who are performing
consulting or other services for the Company or any Subsidiary
of the Company are or were correctly classified by the Company
as either independent contractors or
employees as the case may be. All employees of the
Company and any Subsidiary of the Company have been correctly
classified as exempt or non-exempt under
the Fair Labor Standards Act.
(d) Prior to the date hereof, the Company has delivered to
Parent a true, correct and complete list of the name of each
officer, employee and independent contractor of the Company and
each Subsidiary thereof as of March 25, 2011, together with
such persons position or function, annual base salary or
wages and any incentives or bonus arrangement with respect to
such person.
(e) The properties, assets and operations of the Company
and its Subsidiaries have been in compliance in all material
respects with all applicable federal, state, local and foreign
laws, rules and regulations, orders, decrees, judgments, permits
and licenses relating to public and worker health and safety
(collectively, Worker Safety Laws). With
respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or
operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices,
incidents, actions or plans of the Company or any of its
Subsidiaries that may interfere with or prevent compliance or
continued compliance with applicable Worker Safety Laws.
Section 4.14 Environmental Matters.
(a) For purposes of this Agreement, the following terms
shall have the following meanings: (i) Hazardous
Substances means (A) petroleum and petroleum
products, by-products or breakdown products, radioactive
materials, asbestos-containing materials and polychlorinated
biphenyls, and (B) any other chemicals, materials or
substances regulated as toxic or hazardous or as a pollutant,
contaminant or waste under any applicable Environmental Law;
(ii) Environmental Law means any
applicable Law relating to pollution or protection of the
environment, human health or safety or the use, handling,
transportation, treatment, storage, disposal, release or
discharge of Hazardous Substances; and
(iii) Environmental Permit means any
permit, approval, identification number, license or other
authorization required under any applicable Environmental Law.
(b) The Company and its Subsidiaries are and have been in
compliance in all material respects with all applicable
Environmental Laws, have obtained all Environmental Permits and
are in compliance in all material respects with their
requirements, and have resolved all past non-compliance with
Environmental Laws and Environmental Permits without any
pending, on-going or future obligation, cost or liability.
(c) Neither the Company nor any of its Subsidiaries has
(i) placed, held, located, released, transported or
disposed of any Hazardous Substances on, under, from or at any
of their respective properties or any other properties other
than in compliance with applicable Law, (ii) any knowledge
of the presence of any Hazardous Substances on, under, emanating
from, or at any of their respective properties or any other
property but arising from the Companys or any of its
Subsidiaries current or former properties or operations
other than in compliance with applicable Law, or (iii) any
knowledge, nor has it received any written notice (A) of
any violation of or liability under any Environmental Laws,
(B) of the institution or pendency of any suit, action,
claim, proceeding or investigation by any Governmental Entity or
any third party in connection with any such violation or
liability, (C) requiring the investigation of, response to
or remediation of Hazardous Substances at or arising from any of
the Companys or any of its Subsidiaries current or
former properties or operations or any other properties,
(D) alleging noncompliance by the Company or any of its
Subsidiaries with the terms of any Environmental Permit in any
manner reasonably likely to require significant expenditures or
to result in liability, or (E) demanding payment for
response to or remediation of Hazardous Substances at or arising
from any of the Companys or any of its Subsidiaries
current or former properties or operations or any other
properties, except in each case as has not had and would not
reasonably be expected to have a Material Adverse Effect.
(d) No Environmental Law imposes any obligation upon the
Company or any of its Subsidiaries arising out of or as a
condition to any transaction contemplated by this Agreement,
including any requirement to modify or to
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transfer any permit or license, any requirement to file any
notice or other submission with any Governmental Entity, the
placement of any notice, acknowledgment or covenant in any land
records, or the modification of or provision of notice under any
agreement, consent order or consent decree.
(e) There are no environmental assessments or audit reports
or other similar studies or analyses in the possession or
control of the Company or any of its Subsidiaries relating to
any real property currently or formerly owned, leased or
occupied by the Company or any of its Subsidiaries that have not
been made available to Parent and which disclose a condition
that has had or would reasonably be expected to have a Material
Adverse Effect.
(f) Neither the Company nor any of its Subsidiaries has
exposed any employee or third party to any Hazardous Substances
or condition that has subjected or may subject the Company to
liability under any Environmental Law, except as has not had and
would not reasonably be expected to have a Material Adverse
Effect.
(g) No underground storage tanks, asbestos-containing
material, or polychlorinated biphenyls have ever been located on
property or properties presently or formerly owned or operated
by the Company or any of its Subsidiaries, except as has not had
and would not reasonably be expected to have a Material Adverse
Effect.
(h) Neither the Company nor any of its Subsidiaries has
agreed to assume, undertake or provide indemnification for any
material liability of any other person under any Environmental
Law, including any obligation for corrective or remedial action.
(i) Neither the Company nor any of its Subsidiaries has
received written notice that it is required to make any material
capital or other expenditures to comply with any Environmental
Law nor is there, to the Companys knowledge, any
reasonable basis on which any Governmental Entity could take
action that would require such material capital or other
expenditures.
(j) No Conflict Minerals are necessary to the functionality
or production of or are used in the production of any product
manufactured or contracted to be manufactured by the Company
during the last three (3) years, or currently proposed to
be manufactured by the Company or on its behalf in the future.
For purposes hereof, Conflict Minerals means:
(i) columbite-tantalite (coltan), cassiterite, gold,
wolframite, or their derivatives, which originate in the
Democratic Republic of the Congo or a country that shares an
internationally recognized border with the Democratic Republic
of the Congo; or (ii) any other mineral or its derivatives
determined by the Secretary of State of the United States to be
financing conflict in the Democratic Republic of the Congo or a
country that shares an internationally recognized border with
the Democratic Republic of the Congo.
Section 4.15 Taxes.
(a) The Company and each of its Subsidiaries have prepared
and timely filed all material Tax Returns required to be filed
and all Tax Returns filed by the Company and its Subsidiaries
are true, correct and complete in all material respects. For
purposes of this Section 4.15, references to the
Company
and/or its
Subsidiaries include predecessors to the Company and its
Subsidiaries. The Company has made available to Parent copies of
all federal income and other material Tax Returns filed by the
Company and its Subsidiaries since January 1, 2007.
(b) All material Taxes due and owing by the Company and
each of its Subsidiaries (whether or not shown on any Tax
Returns) have timely been paid, or have been timely withheld and
remitted (if applicable), to the appropriate Governmental
Entity, except for those Taxes being contested in good faith and
or which adequate reserves have been established in the Company
financial statements.
(c) All material Taxes that have accrued but are not yet
payable have been reserved for in accordance with GAAP
(including FIN 48, Accounting for Uncertainty in Income
Taxes) in the Companys financial statements included in
the Company SEC Documents, or have been incurred in the ordinary
course of business since the date of the Company SEC Documents
filed most recently in amounts consistent with prior periods.
(d) Neither the Company nor any of its Subsidiaries has
executed any waiver of any statute of limitations on or extended
the period for the assessment or collection of any Tax that is
still in effect.
(e) Neither the Company nor any of its Subsidiaries has
received notice of any proposed or threatened Tax proceeding,
examination, investigation, audit or administrative or judicial
proceeding (collectively, the Tax
A-31
Proceedings) against, or with respect to any Taxes
of, the Company or any of its Subsidiaries, and no such Tax
Proceedings are currently pending.
(f) As of the date hereof, neither the Company nor any of
its Subsidiaries is a party to any closing agreement pursuant to
Section 7121 of the Code or any predecessor provision
thereof, or any similar provision of state, local, or foreign
Law that would reasonably be expected to have a Material Adverse
Affect following the Merger.
(g) Each of the Company and its Subsidiaries has disclosed
on its Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code or any
similar provision of state, local, or foreign Law.
(h) No claim has been made by any Governmental Entity in a
jurisdiction where either the Company or any of its Subsidiaries
has not filed Tax Returns indicating that the Company or such
Subsidiary is or may be subject to any taxation by such
jurisdiction.
(i) Neither the Company nor any of its Subsidiaries has
agreed or is required to make any adjustments pursuant to
Section 481(a) of the Code for any taxable period (or
portion thereof) ending after the Closing Date or any similar
provision of state, local or foreign Law by reason of a change
in accounting method made for any taxable period (or portion
thereof) ending on or prior to the Closing Date, nor is any
application pending with any Governmental Entity requesting
permission for any change in accounting method.
(j) Other than in the ordinary course of business,
consistent with past practice, neither the Company nor any of
its Subsidiaries will be required to include any material item
of income in, or exclude any material item of deduction from,
U.S. taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any
transaction that occurred prior to the Merger, including
(i) any installment sale or open transaction disposition
made on or prior to the Closing Date, (ii) any prepaid
amount received on or prior to the Closing Date, or
(iii) any election made or contemplated to be made on any
Tax Return.
(k) There are no material Liens on the assets of the
Company or any of its Subsidiaries relating to or attributable
to Taxes, other than Permitted Liens.
(l) The Company is not a United States real property
holding corporation within the meaning of
Section 897(c)(2) of the Code, nor has it been a
United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(i)
of the Code.
(m) There are no material deferred intercompany
transactions within the meaning of Treasury
Regulation Section 1.1502-13(b)(1)
with respect to which the Company or any of its Subsidiaries
would be required to include any item of income or gain in, or
exclude any item of deduction or loss from, taxable income for
any taxable period (or portion thereof) ending on or after the
Closing Date. There are no material excess loss
accounts within the meaning of Treasury
Regulation Section 1.1502-19(a)(2)
with respect to any Subsidiaries of the Companies. There are no
material items of income that will be required to be recognized
by the Company or any of its Subsidiaries as a result of the
Merger.
(n) Neither the Company nor any of its Subsidiaries
(i) is a party to a Contract (other than a Contract entered
into in the ordinary course of business with vendors, customers
and lessors) that provides for Tax indemnity or Tax sharing, or
for the payment of any portion of a Tax (or pay any amount
calculated with reference to any portion of a Tax) of any other
Person, or (ii) has any Liability for Taxes of any Person
(other than the Company or any of its Subsidiaries) under
Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law), as a
transferee or successor. Neither the Company nor any of its
Subsidiaries has been a member of a combined, consolidated,
unitary or similar group for Tax purposes, other than any such
group of which the Company was at all times the common parent
corporation.
(o) Neither the Company nor any of its Subsidiaries has
constituted either a distributing corporation or a
controlled corporation in a distribution of stock
intended to qualify for tax-free treatment under
Section 355 of the Code (x) in the two (2) years
prior to the date of this Agreement or (y) in a
distribution which would otherwise constitute part of a
plan or series of related transactions
(within the meaning of Section 355(e) of the Code and
regulations thereunder) in conjunction with the Merger.
A-32
(p) Neither the Company nor any of its Subsidiaries has
participated (i) in a transaction that is the same as or
substantially similar to one of the types of transactions that
the IRS has determined to be a tax avoidance transaction and
identified by notice, regulation, or other form of published
guidance as a listed transaction, as set forth in Treasury
Regulation Section 1.6011-4(b)(1)
or, (ii) to the knowledge of the Company, in a reportable
transaction (other than a listed transaction), as set forth in
Treasury
Regulation Section 1.6011-4(b).
(q) Neither the Company nor any of its Subsidiaries has
requested or received a formal ruling or entered into an
agreement with the IRS or any other taxing authority that would
be reasonably likely to have a Material Adverse Affect after the
Closing Date.
(r) The Company and its Subsidiaries are and have been in
compliance in all material respects with the applicable transfer
pricing laws and regulations, including the execution and
maintenance of contemporaneous documentation substantiating
transfer pricing practices of the Company and its Subsidiaries.
(s) No Subsidiary of the Company is a controlled
foreign corporation as defined in the Code. Neither the
Company nor any of its Subsidiaries owns an interest in any
entity treated as a passive foreign investment
company as defined in the Code.
Section 4.16 Contracts.
(a) Section 4.16(a) of the Company Disclosure
Letter lists all of the Material Contracts to which the Company
or any of its Subsidiaries is a party or by which any of their
respective properties or assets is bound. All copies of Material
Contracts made available to Parent are true and complete copies
of such Contracts. Material Contracts means
any of the following contracts, agreements or arrangements
(other than purchase or sales orders entered into in the
ordinary course), whether written or oral, currently in effect
and binding:
(i) any Contract that would be required to be filed by the
Company as a material contract pursuant to
Item 601(b)(10) of
Regulation S-K
under the Securities Act or disclosed by the Company on a
Current Report on
Form 8-K;
(ii) any Contract that limits the ability of the Company or
any of its Subsidiaries (or, following the consummation of the
transactions contemplated by this Agreement, would limit the
ability of Parent or any of its Subsidiaries, including the
Surviving Corporation) to compete in any line of business or
with any Person or in any geographic area, or that restricts the
right of the Company and its Subsidiaries (or, following the
consummation of the transactions contemplated by this Agreement,
would limit the ability of Parent or any of its Subsidiaries,
including the Surviving Corporation) to sell to or purchase from
any Person or to hire any Person, or that grants the other party
or any third Person most favored nation status or
any similar type of favored discount rights;
(iii) any Contract with respect to the formation, creation,
operation, management or control of a joint venture,
partnership, limited liability or other similar agreement or
arrangement;
(iv) any Contract relating to Indebtedness;
(v) any Contract involving the acquisition or disposition,
directly or indirectly (by merger or otherwise), of assets or
capital stock or other equity interests for aggregate
consideration (in one or a series of transactions) under such
Contract of $20,000 or more (other than acquisitions or
dispositions of inventory in the ordinary course of business
consistent with past practice);
(vi) any Contract that by its terms calls for aggregate
payment or receipt by the Company and its Subsidiaries under
such Contract of more than $20,000 over the remaining term of
such Contract;
(vii) any Contract pursuant to which the Company or any of
its Subsidiaries has continuing indemnification (other than
product warranties or real estate lease indemnities in the
ordinary course of business consistent with past practice),
guarantee, earn-out or other contingent payment
obligations, in each case that could result in payments in
excess of $20,000;
(viii) any Contract that is a license agreement that is
material to the business of the Company and its Subsidiaries,
taken as a whole, pursuant to which the Company or any of its
Subsidiaries grants or is granted a
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license under any Intellectual Property, other than license
agreements for
off-the-shelf
software that is generally commercially available and is
licensed in object code form solely for internal use purposes;
(ix) any Contract that provides for any material
confidentiality, standstill or similar obligations on the
Company or its Subsidiaries, except for such Contracts entered
into in the ordinary course of business consistent with past
practice;
(x) any Contract that obligates the Company or any of its
Subsidiaries to make any capital commitment, loan or expenditure
in an amount in excess of $20,000;
(xi) any Contract between the Company or any of its
Subsidiaries, on the one hand, and any Affiliate thereof other
than any Subsidiary of the Company of more than $20,000;
(xii) any Contract with brokers, franchisees, distributors
or dealers;
(xiii) any agreements with group purchasing organizations
(GPOs) or integrated delivery networks (IDNs);
(xiv) any agreement with the Veterans Administration or
Federal Supply Administration; or
(xv) any Contract with any Governmental Entity that
involves amounts in excess of $20,000.
Section 4.16(a) of the Company Disclosure Letter
identifies any Material Contract that requires consent to or
otherwise contains a provision relating to a change of
control, or that would or would reasonably be expected to
prevent, delay or impair the consummation of the transactions
contemplated by this Agreement.
(b) (i) Each Material Contract is valid and binding on
the Company and any of its Subsidiaries to the extent such
Subsidiary is a party thereto, as applicable, and to the
knowledge of the Company, each other party thereto, and is in
full force and effect and enforceable in accordance with its
terms (except to the extent that enforceability may be limited
by applicable bankruptcy, insolvency, moratorium, reorganization
or similar Laws affecting the enforcement of creditors
rights generally or by general principles of equity, and further
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies); and
(ii) there is no default under any Material Contract by the
Company or any of its Subsidiaries or, to the knowledge of the
Company, any other party thereto, and no event or condition has
occurred that constitutes, or, after notice or lapse of time or
both, would constitute, a default on the part of the Company or
any of its Subsidiaries or, to the knowledge of the Company, any
other party thereto under any such Material Contract, nor has
the Company or any of its Subsidiaries received any notice of
any such default, event or condition. The Company has made
available to Parent true and complete copies of all Material
Contracts, including any amendments thereto.
Section 4.17 Insurance. Section 4.17 of
the Company Disclosure Letter sets forth, as of the date hereof,
a true and complete list of all insurance policies issued in
favor of the Company or any of its Subsidiaries, or pursuant to
which the Company or any of its Subsidiaries is a named insured
or otherwise a beneficiary, as well as any historic
occurrence-based policies still in force. With respect to each
such insurance policy, (a) such policy is, to the knowledge
of the Company, in full force and effect and all premiums due
thereon have been paid, and (b) neither the Company nor any
of its Subsidiaries is in breach or default, or has taken any
action or failed to take any action which (with or without
notice or lapse of time, or both) would constitute such a breach
or default, or would permit cancellation or termination of, any
such policy. No notice of cancellation or termination has been
received with respect to any such policy.
Section 4.18 Properties.
(a) The Company or one of its Subsidiaries has good and
valid title to, or in the case of leased property and leased
tangible assets, a valid leasehold interest in, all of its
assets constituting personal property (excluding, for purposes
of this sentence, assets held under leases), free and clear of
all Liens other than (i) statutory ad valorem and real
estate and other Liens for current taxes and assessments not yet
past due or the amount or validity of which is being contested
in good faith by appropriate proceedings,
(ii) mechanics, workmens, repairmens,
landlords, warehousemens, carriers or similar
Liens arising in the ordinary course of business of the Company
or such Subsidiary consistent with past practice
(iii) encumbrances on real property in the nature of zoning
restrictions, easements, rights of way, encroachments,
restrictive covenants, and other similar rights or restrictions
that were not
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incurred in connection with the borrowing of money or the
obtaining of advances or credit and that do not, individually or
in the aggregate, impair present business operations at such
properties, (iv) existing Liens disclosed in the
Companys consolidated balance sheet as at
December 31, 2010 (or the notes thereto) included in the
Company SEC Documents; and (v) any such matters of record,
Liens and other imperfections of title that do not, individually
or in the aggregate, impair the continued ownership, use and
operation of the assets to which they relate in the business of
the Company and its Subsidiaries as currently conducted
(Permitted Liens).
(b) Section 4.18(b) of the Company Disclosure
Letter sets forth a true and complete list of all real property
owned by the Company or any of its Subsidiaries (Owned
Real Property) and all property leased for the benefit
of the Company or any of its Subsidiaries (Leased Real
Property). Each of the Company and its Subsidiaries
has (i) good and marketable title in fee simple to all
Owned Real Property and (ii) good leasehold title to all
Leased Real Property, in each case, free and clear of all Liens
except Permitted Liens. No parcel of Owned Real Property or
Leased Real Property is subject to any governmental decree or
order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the knowledge of the Company,
has any such condemnation, expropriation or taking been
proposed. All leases of Leased Real Property and all amendments
and modifications thereto are in full force and effect, and
there exists no default under any such lease by the Company, any
of its Subsidiaries or any other party thereto, nor any event
which, with notice or lapse of time or both, would constitute a
default thereunder by the Company, any of its Subsidiaries or
any other party thereto, except as, individually or in the
aggregate, has not had and would not reasonably be expected to
have a Material Adverse Effect. Assuming all consents, approvals
and authorizations listed in Section 4.5 of the
Company Disclosure Letter relating to any Leased Real Property
have been obtained, all leases of Leased Real Property shall
remain valid and binding in accordance with their terms
following the Effective Time.
(c) There are no contractual or legal restrictions that
preclude or materially restrict the ability to use any Owned
Real Property or, to the knowledge of the Company, Leased Real
Property by the Company or any of its Subsidiaries for the
current or contemplated use of such real property. To the
knowledge of the Company, there are no material latent defects
or material adverse physical conditions affecting the Owned Real
Property or Leased Real Property. All plants, warehouses,
distribution centers, structures and other buildings on the
Owned Real Property or Leased Real Property are adequately
maintained in all material respects and are in good operating
condition and repair for the requirements of the business of the
Company and its Subsidiaries as currently conducted.
(d) Each of the Company and its Subsidiaries has complied
with the terms of all leases to which it is a party, and all
such leases are in full force and effect, except for any such
noncompliance or failure to be in full force and effect that,
individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect. Each
of the Company and its Subsidiaries enjoys peaceful and
undisturbed possession under all such leases, except for any
such failure to do so that, individually or in the aggregate,
has not had and would not reasonably be expected to have a
Material Adverse Effect.
This Section 4.18 does not relate to intellectual
property, which is the subject of Section 4.19.
Section 4.19 Intellectual Property.
(a) As used herein, the term Intellectual
Property means all intellectual property rights
arising under the laws of the United States or any other
jurisdiction, including the following: (i) trade names,
trademarks and service marks (registered and unregistered),
domain names, trade dress and similar rights and applications to
register any of the foregoing (collectively,
Marks); (ii) patents and patent
applications and rights in respect of utility models or
industrial designs and invention disclosures (collectively,
Patents); (iii) copyrights, materials
subject to copyright protection, and registrations and
applications therefor (collectively,
Copyrights); and (iv) know-how,
inventions, discoveries, methods, processes, technical data,
specifications, research and development information,
technology, data bases and other proprietary or confidential
information, including customer lists, in each case that derives
economic value (actual or potential) from not being generally
known to other persons who can obtain economic value from its
disclosure, but excluding any Copyrights or Patents that cover
or protect any of the foregoing (collectively, Trade
Secrets).
(b) Section 4.19(b)(1) of the Company
Disclosure Letter sets forth an accurate and complete list of
all Marks owned by or licensed to the Company or any of its
Subsidiaries, which list indicates any registered Marks that are
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licensed to the Company or its Subsidiaries but which are not
being used in the current conduct of the Companys or its
Subsidiaries businesses (collectively, Company
Marks), Section 4.19(b)(2) of the Company
Disclosure Letter sets forth an accurate and complete list of
all Patents owned by or licensed to the Company or any of its
Subsidiaries, which list indicates any registered Patents that
are licensed to the Company or its Subsidiaries but which are
not being used in the current conduct of the Companys or
its Subsidiaries businesses (collectively,
Company Patents) and
Section 4.19(b)(3) of the Company Disclosure Letter
sets forth an accurate and complete list of all registered
Copyrights owned by or exclusively licensed to the Company or
any of its Subsidiaries, which list indicates any registered
Copyrights that are licensed to the Company or its Subsidiaries
but which are not being used in the current conduct of the
Companys or its Subsidiaries businesses
(collectively, Company Copyrights and,
together with the Company Marks and the Company Patents,
Company IP). No Company IP owned by the
Company or any of its Subsidiaries or, to knowledge of the
Company, exclusively licensed to the Company or any of its
Subsidiaries has been or is now involved in any interference,
reissue, reexamination, opposition, nullity or cancellation
proceeding and, to the knowledge of the Company, no such action
is or has been threatened with respect to any of the Company IP.
The Company IP owned by the Company or any of its Subsidiaries
or, to knowledge of the Company, exclusively licensed to the
Company or any of its Subsidiaries is subsisting. To the
knowledge of the Company, the Company IP (excluding any pending
applications included in the Company IP) is valid and
enforceable and, except as set forth on
Section 4.19(b)(4) of the Company Disclosure Letter,
no written or, to the knowledge of the Company, oral notice or
claim challenging the validity or enforceability or alleging the
misuse of any of the Company IP has been received by the Company
or any of its Subsidiaries. To the knowledge of the Company,
neither the Company nor any of its Subsidiaries has taken any
action or failed to take any action that would reasonably be
expected to result in the abandonment, cancellation, forfeiture,
relinquishment, invalidation or unenforceability of any of the
Company IP, and all filing, examination, issuance, post
registration and maintenance fees, annuities and the like that
have come due and are required to maintain, preserve or renew
any of the Company IP owned by the Company or any of its
Subsidiaries or, to knowledge of the Company, exclusively
licensed to the Company or any of its Subsidiaries have been
timely paid. Except as set forth on
Section 4.19(b)(5) of the Company Disclosure Letter,
with respect to the Company IP owned by the Company or any of
its Subsidiaries, and to the knowledge of the Company with
respect to the Company IP exclusively licensed to the Company or
any of its Subsidiaries, there are no filings, payments or other
actions that were required to have been or are required to be
made or taken by March 25, 2011, including the payment of
any registration, maintenance or renewal fees or the filing of
any responses to office actions, documents, applications or
certificates, for the purposes of complying with legal
requirements to obtain, maintain, preserve or renew any Company
IP.
(c) The Company and its Subsidiaries have taken
commercially reasonable steps to protect their rights in the
Intellectual Property owned by the Company or its Subsidiaries
and maintain the confidentiality of all of the Trade Secrets of
the Company or its Subsidiaries. All current or former
employees, consultants and contractors who have participated in
the creation of any Intellectual Property that is used by or
that is intended to be used by the Company or its Subsidiaries
have entered into proprietary information, confidentiality and
assignment agreements (which have previously been provided to
Parent).
(d) The Company or its Subsidiaries own, or possess
adequate licenses or other valid rights to use, all of the
Intellectual Property that is necessary for the conduct of the
Companys and its Subsidiaries businesses. None of
the Intellectual Property owned by or, to the knowledge of the
Company, licensed to, the Company or its Subsidiaries is subject
to any outstanding order, judgment, or stipulation restricting
the use or exploitation thereof by the Company or its
Subsidiaries.
(e) The execution, delivery and performance by the Company
of this Agreement, and the consummation of the transactions
contemplated hereby, will not result in the loss or impairment
of, or give rise to any right of any third party to terminate or
re-price or otherwise modify any of the Companys or any of
its Subsidiaries rights or obligations under any Material
Contract as defined in Section 4.16(a)(viii) of
this Agreement. The rights licensed under each agreement
granting to the Company or any of its Subsidiaries, as the case
may be, any material right or license under or with respect to
any Intellectual Property owned by a third party shall be
exercisable by the Surviving Corporation or such Subsidiary,
respectively, on and immediately after the Closing to the same
extent as by the Company or such Subsidiary prior to the
Closing. Neither the Company nor any of its Subsidiaries has
granted to any third party any rights under any Intellectual
Property owned by the Company or its Subsidiaries. All
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milestones and other conditions set forth in any license
agreements under which Intellectual Property is licensed to the
Company or any of its Subsidiaries that are required to be
satisfied in order for the Company or such Subsidiary to retain
any rights granted under such agreements have been timely
satisfied and all such exclusive or non-exclusive rights remain
in full force and effect.
(f) The Company or one or more of its Subsidiaries owns
exclusively all right, title and interest to the Company IP
(other than Company IP licensed to the Company or any of its
Subsidiaries) and all other Intellectual Property purportedly
owned by the Company or any of its Subsidiaries, free and clear
of all Liens other than Permitted Liens, and neither the Company
nor any of its Subsidiaries has received any written or, to the
knowledge of the Company, oral notice or claim challenging the
Companys or such Subsidiarys ownership of any of
such Intellectual Property. To the knowledge of the Company, no
loss, impairment or expiration of any Intellectual Property
rights used in the Companys and the Subsidiaries
business as currently conducted is pending or threatened.
(g) To the knowledge of the Company, the conduct of the
Companys and the Subsidiaries business as currently
conducted, including the use or other exploitation of the
Intellectual Property owned by the Company or any of its
Subsidiaries, has not infringed, misappropriated, diluted or
violated, and does not infringe, misappropriate, dilute or
violate any Intellectual Property of any third party or
constitute unfair competition or unfair trade practices under
the laws of any jurisdiction, and neither the Company nor any of
its Subsidiaries has received any written or, to the knowledge
of the Company, oral notice or claim asserting or suggesting
that any such infringement, misappropriation, violation,
dilution, unfair competition or unfair trade practice has
occurred, nor, to the knowledge of the Company, is there any
reasonable basis therefor. To the knowledge of the Company,
(i) no third party is misappropriating or infringing any
Intellectual Property owned by or exclusively licensed to the
Company or its Subsidiaries and (ii) no current or former
employee or consultant of the Company nor any third party has
made any unauthorized disclosure of any Trade Secrets of the
Company or its Subsidiaries.
(h) To the knowledge of the Company, at no time during the
conception of or reduction to practice of any Intellectual
Property owned by the Company or any of its Subsidiaries was any
developer, inventor or other contributor to such Intellectual
Property operating under any grants from any Governmental Entity
or private source, performing research sponsored by any
Governmental Entity or private source or subject to any
employment agreement or invention assignment or nondisclosure
agreement or other obligation with any third party, in each case
that would impair or limit the Companys or any of its
Subsidiaries rights in such Intellectual Property. To the
knowledge of the Company, there exist no inventions by current
or former employees or consultants of the Company or any of its
Subsidiaries made or otherwise conceived prior to their
beginning employment or consultation with the Company or such
Subsidiary that have been or are intended to be incorporated
into any of the Companys Intellectual Property or
products, other than any such inventions that have been validly
and irrevocably assigned or licensed to the Company by written
agreement.
(i) To the knowledge of the Company, there has been no
prior use of any Company Mark adopted by the Company or any of
its Subsidiaries by any third party that would confer upon such
third party superior rights in such Company Mark.
Section 4.20 Products. Since January 1, 2007,
neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company any distributor of the Company or any
of its Subsidiaries, has received a claim for or based upon
breach of product or service warranty or guaranty or similar
claim, strict liability in tort, negligent design of product,
negligent provision of services or any other allegation of
liability, including or arising from the materials, design,
testing, manufacture, packaging, labeling (including
instructions for use), or sale of its products or from the
provision of services, in each case that would not result in
material liability to the Company and its Subsidiaries in excess
of the warranty reserve reflected on the Companys balance
sheet as of December 31, 2010.
Section 4.21 Accounts Receivable. All of the
accounts and notes receivable of the Company and its
Subsidiaries set forth on the books and records of the Company
and its Subsidiaries (net of the applicable reserves reflected
on the books and records of the Company and its Subsidiaries and
in the Companys financial statements) (i) represent
sales actually made or transactions actually effected in the
ordinary course of business for goods or services delivered or
rendered to unaffiliated customers in bona fide arms
length transactions, and (ii) constitute valid claims.
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Section 4.22 Inventories. To the knowledge of the
Company, all inventories of the Company and its Subsidiaries
consist of items of merchantable quality and quantity usable or
saleable (free of any material defect or deficiency) in the
ordinary course of business, are saleable at the price
customarily charged by the Company and its Subsidiaries
therefor, conform to the specifications established therefor,
and have been manufactured in accordance with applicable
regulatory requirements. The quantities of all inventories,
materials, and supplies of the Company and its Subsidiaries (net
of the obsolescence reserves therefor shown in the
Companys financial statements and determined in the
ordinary course of business consistent with past practice) are
not obsolete, damaged, slow-moving, defective, or excessive, and
are reasonable and balanced in the circumstances of the Company
and its Subsidiaries.
Section 4.23 State Takeover Statutes. Except as set
forth on Section 4.23 of the Company Disclosure
Letter, no moratorium, fair price,
business combination, control share
acquisition or similar provision of any state statutory
anti-takeover Law (collectively, Takeover
Laws) applies to this Agreement, the Offer or the
Merger.
Section 4.24 No Rights Plan. Except as set forth on
Section 4.24 of the Company Disclosure Letter, there
is no stockholder rights plan, poison pill
anti-takeover plan or other similar device in effect to which
the Company is a party or is otherwise bound (any such plan, a
Rights Plan). Prior to the date hereof, the
Company has caused all Rights Plans, if any, to be amended such
that (a) Parent and Merger Sub are excluded from the
definition of Acquiring Person and (b) neither
the Offer nor the Merger will trigger the distribution or
exercisability of any rights granted thereunder.
Section 4.25 Related Party Transactions. No present
director, executive officer, stockholder owning five percent
(5%) or more of the Companys Shares, or Affiliate of the
Company or any of its Subsidiaries, nor, to the knowledge of the
Company, or any of such Persons Affiliates or immediate
family members (each of the foregoing, a Related
Party), is a party to any Contract with or binding
upon the Company or any of its Subsidiaries or any of their
respective properties or assets or has any interest in any Owned
Real Property or has engaged in any transaction with any of the
foregoing within the last twelve (12) months or that has
continuing obligations, in each case, that is of a type that
would be required to be disclosed in the Company SEC Documents
pursuant to Item 404 of
Regulation S-K,
and, to the knowledge of the Company, no former director or
officer is party to any such Contract that was not entered into
on an arms-length basis (an Affiliate
Transaction) that has not been so disclosed. To the
knowledge of the Company, no Related Party of the Company or any
of its Subsidiaries owns, directly or indirectly, on an
individual or joint basis, any material interest in, or serves
as an officer or director or in another similar capacity of, any
supplier or other independent contractor of the Company or any
of its Subsidiaries, or any organization which has a Contract
with the Company or any of its Subsidiaries.
Section 4.26 Brokers. No broker, investment banker,
financial advisor or other Person, other than B.
Riley & Co., LLC (the Financial
Advisor), the fees and expenses of which will be paid
by the Company, is entitled to any brokers, finders,
financial advisors or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or
any of its Affiliates. The Company has furnished to Parent a
true and complete copy of any Contract between the Company and
the Financial Advisor pursuant to which the Financial Advisor
could be entitled to any payment from the Company relating to
the transactions contemplated hereby. Section 4.26
of the Company Disclosure Letter sets forth (a) all
transaction fees and expenses (whether payable to financial
advisory, legal, accounting or other providers) that include a
success fee or other premium or additional fee due as a result
of execution and delivery of this Agreement or consummation of
the transactions contemplated hereby.
Section 4.27 Opinion of Financial Advisor. The
Company has received the opinion of the Financial Advisor, dated
the date of this Agreement, to the effect that, subject to the
assumptions, qualifications and other matters set forth therein,
as of such date, the consideration to be received by the holders
of Shares (other than as set forth in such opinion) pursuant to
this Agreement, is fair, from a financial point of view, to such
holders of Shares, other than Parent and Merger Sub, a signed
true and complete copy of which opinion has been provided to
Parent.
Section 4.28 Exclusivity of Representations and
Warranties. Neither the Company nor any of its Affiliates or
representatives is making any representation or warranty on
behalf of the Company of any kind or nature whatsoever, oral or
written, express or implied (including, but not limited to, any
relating to financial condition, results of operations,
prospects, assets or liabilities of the Company and its
Subsidiaries), except as expressly set
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forth in Article IV of this Agreement (as qualified
by the introductory paragraph to Article IV), and
the Company hereby disclaims any and all such other
representations and warranties. Without limiting the express
representations and warranties in this Article IV
(including any representations and warranties regarding
documents delivered or made available to Parent), and without
limiting the broad nature of the disclaimer set forth in the
prior sentence, no representation or warranty is being made as a
result of the Company making available to Parent and Merger Sub
or any of their Affiliates any management presentations,
information, documents, projections, forecasts and other
material in a data room or otherwise.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Each representation and warranty in this Article V
is made and given with the intention of inducing the Company to
enter into this Agreement. Parent and the Merger Sub each
jointly and severally represent and warrant to the Company as
follows:
Section 5.1 Organization, Standing and Power. Each
of Parent and Merger Sub (a) is a corporation duly
organized, validly existing and in good standing under the Laws
of the jurisdiction of its incorporation and (b) has the
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted, except as, individually or in the aggregate, has not
had and would not reasonably be expected to have a Parent
Material Adverse Effect. For purposes of this Agreement,
Parent Material Adverse Effect means any
event, change, circumstance, occurrence, effect or state of
facts that materially impairs the ability of Parent and Merger
Sub to consummate, or prevents or materially delays, the Offer,
the Merger or any of the other transactions contemplated by this
Agreement or would reasonably be expected to do so;
provided, however, that, Parent Material Adverse
Effect shall not include any event, change, circumstance,
occurrence, effect or state of facts to the extent arising out
of or attributable to any of the following, either alone or in
combination (1) generally affecting the industry in which
Parent operates, or the economy or the financial or securities
markets in the United States, including effects on such
industry, economy or markets resulting from any regulatory or
political conditions or developments in general, (2) any
outbreak or escalation of hostilities or declared or undeclared
acts of war or terrorism, weather, natural disasters or other
force majeure events, (3) reflecting or resulting from
changes in any Law or GAAP or interpretations thereof,
(4) the announcement of the execution of this Agreement or
the pendency of the Offer or the Merger or any other
transactions contemplated by this Agreement, (5) compliance
with the terms of, or the taking of any action required by, this
Agreement, or the failure to take any action prohibited by this
Agreement, or (6) any failure by Parent or its Subsidiaries
to meet any internal or external budgets, projections, forecasts
or predictions of financial performance.
Section 5.2 Authority. Each of Parent and Merger Sub
has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Parent and Merger
Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Parent and Merger
Sub and no other corporate proceedings on the part of Parent or
Merger Sub are necessary to approve this Agreement or to
consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Parent and Merger Sub
and, assuming the due authorization, execution and delivery by
the Company, constitutes a valid and binding obligation of each
of Parent and Merger Sub, enforceable against each of Parent and
Merger Sub in accordance with its terms (except to the extent
that enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar Laws affecting
the enforcement of creditors rights generally or by
general principles of equity).
Section 5.3 No Conflict; Consents and Approvals.
(a) The execution, delivery and performance of this
Agreement by each of Parent and Merger Sub does not, and,
assuming that all consents, approvals, authorizations and other
actions described in this Section 5.3 have been
obtained and all filings and obligations described in this
Section 5.3 have been made, the consummation of the
Offer and the Merger and compliance by each of Parent and Merger
Sub with the provisions hereof will not, conflict with, or
result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under, or give
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rise to a right of, or result in, termination, cancellation,
modification or acceleration of any obligation or to the loss of
a material benefit under, or result in the creation of any Lien
in or upon any of the properties, assets or rights of Parent or
Merger Sub under, or give rise to any increased, additional,
accelerated or guaranteed rights or entitlements under, or
require any consent, waiver or approval of any Person pursuant
to, any provision of (i) the certificate of incorporation
or bylaws of Parent or Merger Sub, each as amended to date,
(ii) any material Contract to which Parent or Merger Sub is
a party by which Parent, Merger Sub or any of their respective
properties or assets may be bound or (iii) subject to the
governmental filings and other matters referred to in
Section 5.3(b), any material Law or any rule or
regulation of the NYSE applicable to Parent or Merger Sub or by
which Parent, Merger Sub or any of their respective properties
or assets may be bound.
(b) No consent, approval, order or authorization of, or
registration, declaration, filing with or notice to, any
Governmental Entity is required by or with respect to Parent or
Merger Sub in connection with the execution, delivery and
performance of this Agreement by Parent and Merger Sub or the
consummation by Parent and Merger Sub of the Merger and the
other transactions contemplated hereby or compliance with the
provisions hereof, except for (i) such filings and reports
as required pursuant to the applicable requirements of the
Securities Act, the Exchange Act and any other applicable state
or federal securities, takeover and blue sky laws,
(ii) the filing of the Florida Certificate of Merger with
the Florida Secretary of State as required by the Florida Act,
(iii) any filings required under the rules and regulations
of the NYSE, (iv) such filings and consents as may be
required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or
required approval triggered by the Merger or by the transactions
contemplated by this Agreement, and (v) such other
consents, approvals, orders, authorizations, registrations,
declarations, filings or notices the failure of which to be
obtained or made, individually or in the aggregate, have not had
and would not reasonably be expected to have a Parent Material
Adverse Effect.
Section 5.4 Certain Information. The Offer Documents
will not, at the times they are first filed with the SEC,
amended or supplemented or first published, sent or given to the
Stockholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The
Offer Documents will, at the times they are first filed with the
SEC, at the times they are amended or supplemented and as of as
of the date first published, sent or given to the Stockholders,
comply as to form in all material respects with the provisions
of the Exchange Act. Notwithstanding the foregoing, neither
Parent nor Merger Sub makes any representation or warranty with
respect to statements included or incorporated by reference in
the Offer Documents based on information supplied by or on
behalf of the Company, any of its Subsidiaries or Affiliates
specifically for inclusion or incorporation by reference
therein. None of the information supplied or to be supplied by
or on behalf of Parent or Merger Sub specifically for inclusion
in the
Schedule 14D-9
or the Proxy Statement will, at the respective times they are
first published, sent or given to the Stockholders and, in the
case of the Proxy Statement, at the time of the Company
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, neither Parent nor
Merger Sub makes any representation or warranty with respect to
statements included or incorporated by reference in the
Schedule 14D-9
or the Proxy Statement based on information supplied by or on
behalf of Company specifically for inclusion or incorporation by
reference therein.
Section 5.5 Merger Sub. All of the issued and
outstanding capital stock of Merger Sub is owned directly by
Parent.
Section 5.6 Financing. Parent and Merger Sub will
have, as of the respective dates of consummation of the Offer
and the Merger, sufficient funds to consummate the Offer and the
Merger on the terms and subject to the conditions set forth
herein.
Section 5.7 Vote/Approval Required. No vote or
consent of the holders of any class or series of capital stock
of Parent is necessary to approve this Agreement or the Merger
or the other transactions contemplated hereby. The vote or
consent of Parent as the sole sh