-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qgu3GP6Nj93rLpk0uSzlhaN5nbIPyo3gF542ZeBYBCdabeZM7dgs8ntPwpUreSMO kTS/53wROBdz1EJmhKEbGg== /in/edgar/work/20000821/0000950123-00-007905/0000950123-00-007905.txt : 20000922 0000950123-00-007905.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950123-00-007905 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20000821 GROUP MEMBERS: JOMED ACQUISITION CORP GROUP MEMBERS: JOMED NV SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ENDOSONICS CORP CENTRAL INDEX KEY: 0000883420 STANDARD INDUSTRIAL CLASSIFICATION: [3845 ] IRS NUMBER: 680028500 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: SEC FILE NUMBER: 005-43372 FILM NUMBER: 707037 BUSINESS ADDRESS: STREET 1: 2870 KILGORE ROAD CITY: RANCHO CORDOVA STATE: CA ZIP: 95670 BUSINESS PHONE: 9166388008 MAIL ADDRESS: STREET 1: 2870 KILGORD ROAD CITY: RANCHO CORDOVA STATE: CA ZIP: 95670 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JOMED ACQUISITION CORP CENTRAL INDEX KEY: 0001121277 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 000000000 STATE OF INCORPORATION: P7 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: CORPORATION TRUST CO STREET 2: 1209 ORANGE ST CITY: WILMINGTON STATE: DE ZIP: 00000 MAIL ADDRESS: STREET 1: JOMED AB STREET 2: DROTTNINGGATAN 94, S-252 21 HEISINGBORG CITY: SWEDEN STATE: V7 ZIP: 00000 SC TO-T 1 scto-t.txt THIRD PARTY TENDER OFFER STATEMENT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE TO (RULE 14d-100) TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ENDOSONICS CORPORATION (NAME OF SUBJECT COMPANY (ISSUER)) JOMED ACQUISITION CORP. JOMED N.V. (NAMES OF FILING PERSONS (OFFERORS)) ------------------------ COMMON STOCK, PAR VALUE $.001 PER SHARE (TITLE OF CLASS OF SECURITIES) ------------------------ 29264K105 (CUSIP NUMBER OF CLASS OF SECURITIES) ANTTI RISTINMAA JOMED N.V. DROTTNINGGATAN 94 S-252 21 HELSINGBORG SWEDEN TELEPHONE: 46-42-490-6000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSONS) ------------------------ COPY TO: BERTIL P-H LUNDQVIST, ESQ. RANDALL H. DOUD, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP FOUR TIMES SQUARE NEW YORK, NY 10036 TELEPHONE: 212-735-3000 ------------------------ CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- TRANSACTION VALUATION* AMOUNT OF FILING FEE - -------------------------------------------------------------------------------------------------------------------------- $233,044,306 $46,609 - -------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------
* For purposes of calculating amount of filing fee only. This amount assumes the purchase of (i) all outstanding shares of common stock of EndoSonics Corporation, including the related preferred share purchase rights, and (ii) shares of common stock of EndoSonics Corporation subject to options that will be vested and exercisable as of the closing of this offer. The amount of the filing fee calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of 1% of the transaction value. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number or the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Form or Registration No.: N/A Filing party: N/A Date Filed: N/A [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 1. SUMMARY TERM SHEET. The information set forth in the section of the Offer to Purchase entitled "Summary Term Sheet" is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The name of the subject company is EndoSonics Corporation, a Delaware corporation (the "Company"), and the address of its principal executive offices is 2870 Kilgore Road, Rancho Cordova, California 95670. Its telephone number is (916) 638-8008. (b) This Statement relates to the offer by JOMED Acquisition Corp. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of JOMED N.V., a corporation organized under the laws of The Netherlands ("JOMED"), to purchase all outstanding shares of common stock of the Company, par value $.001 per share, and the related rights to purchase preferred stock (the "Shares"), at a purchase price of $11.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(l)(A) and (a)(1)(B) (which are herein collectively referred to as the "Offer"). The information set forth under "Introduction" in the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market in which the Shares are traded and certain high and low sales prices for the Shares in such principal market is set forth in "Price Range of Shares; Dividends" in the Offer to Purchase and is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND OF THE FILING PERSON. (a),(b),(c) The information set forth in "Certain Information Concerning JOMED and the Purchaser" and Schedule I in the Offer to Purchase is incorporated herein by reference. ITEM 4. TERMS OF THE TRANSACTION. (a)(1)(i)-(viii), (xii) The information set forth under "Introduction", "Background of the Offer; Past Contacts or Negotiations with the Company", "Purpose of the Offer; Plans for the Company", "The Merger Agreement", "Certain Information Concerning the Company", "Certain Effects of the Offer", "Certain United States Federal Income Tax Consequences" and "Source and Amount of Funds" in the Offer to Purchase is incorporated herein by reference. (a)(1)(ix) Not applicable (a)(1)(x) Not applicable (a)(1)(xi) Not applicable (a)(2) Not applicable ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. The information set forth in "Background of the Offer; Past Contacts or Negotiations with the Company", "The Merger Agreement", "Certain Information Concerning JOMED and the Purchaser" and "Purpose of the Offer; Plans for the Company" in the Offer to Purchase is incorporated herein by reference. ITEM 6. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS. (a), (c)(1), (4-7) The information set forth in "Introduction," "The Merger Agreement," "Purpose of the Offer; Plans for the Company," "Certain Effects of the Offer," and "Dividends and Distributions" in the offer to Purchase is incorporated herein by reference. (c)(2) None. (c)(3) None. 1 3 ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in "Source and Amount of Funds" in the Offer to Purchase is incorporated herein by reference. (d) Not Applicable ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. The information set forth in "Introduction", "Certain Information Concerning the Company", "Certain Information Concerning JOMED and the Purchaser" and Schedule I in the Offer to Purchase is incorporated herein by reference. ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. The information set forth in "Introduction" and "Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 10. FINANCIAL STATEMENTS. The information set forth in "Certain Information Concerning JOMED and the Purchaser -- Financial Information", "Annex A -- Financial Statements of JOMED, N.V." and "Annex B -- Summary of Significant Differences between International Accounting Standards and U.S. Generally Accepted Accounting Principles" of the Offer to Purchase is incorporated herein by reference. ITEM 11. ADDITIONAL INFORMATION. The information set forth in "Introduction," "Certain Information Concerning JOMED and the Purchaser," "The Merger Agreement," "Certain Conditions of the Offer" and "Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. 2 4 ITEM 12. EXHIBITS. (a)(1)(A) Offer to Purchase dated August 21, 2000. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(E) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(5)(A) Joint Press Release issued by JOMED and the Company on August 7, 2000, (incorporated herein by reference to the Schedule TO filed by JOMED and the Purchaser with the Securities and Exchange Commission ("Commission") on August 7, 2000). (a)(5)(B) Summary Advertisement as published in The Wall Street Journal on August 21, 2000. (a)(5)(C) Consent of Independent Auditors, dated August 21, 2000 (b) Not applicable (d)(1) Agreement and Plan of Merger, dated as of August 5, 2000, among JOMED, the Purchaser and the Company (incorporated herein by reference to the Company's Current Report on Form 8-K filed with the Commission on August 9, 2000). (d)(2) Confidentiality Agreement, dated June 26, 2000, between JOMED and the Company (incorporated herein by reference to Exhibit (e)(2) to the Company's Schedule 14D-9 filed on August 21, 2000). (d)(3) Distribution Agreement, dated December 15, 1998, between the Company and JOMED (incorporated herein by reference to the Company's Annual Report on Form 10-K (File No. 0-19880) Filed with the Commission on March 31, 1999). (d)(4) Master Distribution Agreement, dated December 13, 1999, between the Company and JOMED (incorporated herein by reference to the Company's Annual Report on Form 10-K (File No. 0-19880) Filed with the Commission on March 30, 2000). (g) Not applicable. (h) Not applicable.
3 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. JOMED Acquisition Corp. By: /s/ TOR PETERS ------------------------------------ Name: Tor Peters Title: President JOMED N.V. By: /s/ TOR PETERS ------------------------------------ Name: Tor Peters Title: President Dated: August 21, 2000 4 6 EXHIBIT INDEX
EXHIBIT NO. EXHIBIT NAME PAGE NUMBER - ----------- ------------ ----------- (a)(1)(A) Offer to Purchase dated August 21, 2000..................... (a)(1)(B) Letter of Transmittal....................................... (a)(1)(C) Notice of Guaranteed Delivery............................... (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees................................ (a)(1)(E) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees................... (a)(1)(F) Guidelines for Certification of Taxpayer.................... Identification Number on Substitute Form W-9................ (a)(5)(A) Joint Press Release issued by JOMED and the Company on August 7, 2000, (incorporated herein by reference to the Schedule TO filed by JOMED and the Purchaser with the Securities and Exchange Commission ("Commission") on August 7, 2000).................................................... (a)(5)(B) Summary Advertisement as published in The Wall Street Journal on August 21, 2000.................................. (a)(5)(C) Consent of Independent Auditors, dated August 21, 2000 (b) Not applicable (d)(1) Agreement and Plan of Merger, dated as of August 5, 2000, among JOMED, the Purchaser and the Company (incorporated herein by reference to the Company's Current Report on Form 8-K filed with the Commission on August 9, 2000)............ (d)(2) Confidentiality Agreement, dated June 26, 2000, between JOMED and the Company (incorporated herein by reference to Exhibit (e)(2) to the Company's Schedule 14D-9 filed on August 21, 2000)............................................ (d)(3) Distribution Agreement, dated December 15, 1998, between the Company and JOMED (incorporated herein by reference to the Company's Annual Report on Form 10-K (File No. 0-19880) Filed with the Commission on March 31, 1999)................ (d)(4) Master Distribution Agreement, dated December 13, 1999, between the Company and JOMED (incorporated herein by reference to the Company's Annual Report on Form 10-K (File No. 0-19880) Filed with the Commission on March 30, 2000)... (g) Not applicable.............................................. (h) Not applicable..............................................
5 EX-99.A.1.A 2 ex99-a_1a.txt OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE RELATED RIGHTS TO PURCHASE PREFERRED STOCK) OF ENDOSONICS CORPORATION AT $11.00 NET PER SHARE BY JOMED ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF JOMED N.V. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 19, 2000, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER, DATED AS OF AUGUST 5, 2000 (THE "MERGER AGREEMENT"), AMONG JOMED N.V. ("JOMED"), A CORPORATION ORGANIZED UNDER THE LAWS OF THE NETHERLANDS, JOMED ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF JOMED (THE "PURCHASER"), AND ENDOSONICS CORPORATION ("ENDOSONICS" OR THE "COMPANY"), AND IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE OF THE COMPANY INCLUDING THE RELATED RIGHTS TO PURCHASE PREFERRED STOCK (COLLECTIVELY, THE "SHARES") THAT, TOGETHER WITH THE SHARES OF COMMON STOCK THEN OWNED BY JOMED AND/OR PURCHASER, REPRESENTS AT LEAST A MAJORITY OF THE SHARES OF COMMON STOCK OUTSTANDING ON A FULLY-DILUTED BASIS (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER HAVING EXPIRED OR BEEN TERMINATED, AND ALL CONSENTS AND APPROVALS FROM GOVERNMENTAL AUTHORITIES PURSUANT TO NATIONAL ANTITRUST OR COMPETITION LAWS, WHICH ARE REQUIRED TO COMPLETE THE TRANSACTION, HAVING BEEN OBTAINED, AND (3) THE SATISFACTION OF CERTAIN OTHER CONDITIONS, INCLUDING, BUT NOT LIMITED TO, THE CLOSING PRICE OF THE JOMED ORDINARY SHARES ON THE SWX SWISS EXCHANGE NOT BEING LESS THAN (I) 42 SWISS FRANCS OR (II) ONE-HALF OF THE CLOSING PRICE OF THE JOMED ORDINARY SHARES ON THE SWX SWISS EXCHANGE ON THE FIRST TRADING DAY (Continued on next page) The Dealer Manager for the Offer is: [CREDIT SUISSE/FIRST BOSTON LOGO] August 21, 2000 2 (Continued from front cover) FOLLOWING THE ANNOUNCEMENT OF THE OFFER AND THE MERGER (THE CLOSING PRICE OF THE JOMED ORDINARY SHARES ON AUGUST 7, 2000, THE FIRST TRADING DAY AFTER THE ANNOUNCEMENT OF THE OFFER AND THE MERGER, WAS 90 SWISS FRANCS PER SHARE) ON EITHER OF (I) THE DATE OF THE EXECUTION OF THE PURCHASE AGREEMENT FOR THE JOMED EQUITY OFFERING OR (II) ON THE FIRST TRADING DAY IMMEDIATELY PRIOR TO THE CLOSING DATE OF THE PURCHASE AGREEMENT, AS SUCH DATE IS DEFINED IN THE PURCHASE AGREEMENT. SEE SECTIONS 11 AND 15. THE COMPANY'S BOARD OF DIRECTORS, AT A SPECIAL MEETING HELD ON AUGUST 5, 2000, UNANIMOUSLY (1) DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS; (2) APPROVED AND DECLARED ADVISABLE THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER; AND (3) RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES THEREUNDER. ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER ALL OF YOUR SHARES OF COMMON STOCK PURSUANT TO THE OFFER. IMPORTANT Any stockholder of the Company wishing to tender Shares in the Offer must (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver the Letter of Transmittal and all other required documents to the Depositary (as defined herein) together with certificates representing the Shares tendered or follow the procedure for book-entry transfer set forth in Section 3 or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the stockholder. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such person if such stockholder wishes to tender such Shares. Any stockholder of the Company who wishes to tender Shares and cannot deliver certificates representing such Shares and all other required documents to the Depositary on or prior to the Expiration Date (as defined herein) or who cannot comply with the procedures for book-entry transfer on a timely basis may tender such Shares pursuant to the guaranteed delivery procedure set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or the Dealer Manager. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for copies of these documents. ii 3 TABLE OF CONTENTS
PAGE ---- SUMMARY TERM SHEET.......................................... 1 INTRODUCTION................................................ 5 THE TENDER OFFER............................................ 7 1. Terms of the Offer.................................... 7 2. Acceptance for Payment and Payment for Shares......... 8 3. Procedures for Accepting the Offer and Tendering Shares................................................ 9 4. Withdrawal Rights..................................... 12 5. Certain United States Federal Income Tax Consequences.......................................... 12 6. Price Range of Shares; Dividends...................... 13 7. Certain Information Concerning the Company............ 14 8. Certain Information Concerning JOMED and the Purchaser............................................. 15 9. Source and Amount of Funds............................ 17 10. Background of the Offer; Past Contacts or Negotiations with the Company...................................... 19 11. The Merger Agreement.................................. 24 12. Purpose of the Offer; Plans for the Company........... 37 13. Certain Effects of the Offer.......................... 38 14. Dividends and Distributions........................... 38 15. Certain Conditions of the Offer....................... 38 16. Certain Legal Matters; Regulatory Approvals........... 40 17. Fees and Expenses..................................... 42 18. Miscellaneous......................................... 42 SCHEDULE I -- Information Concerning Directors and Executive Officers of JOMED and the Purchaser....................... I-1 ANNEX A -- Financial Statements of JOMED N.V................ F-1 ANNEX B -- Summary of Significant Differences Between International Accounting Standards and U.S. Generally Accepted Accounting Principles............................ B-1
iii 4 SUMMARY TERM SHEET JOMED Acquisition Corp. is offering to purchase all of the outstanding common stock of EndoSonics Corporation for $11.00 per share in cash. The following are some of the questions you, as a stockholder of EndoSonics, may have and answers to those questions. We urge you to read carefully the remainder of this Offer to Purchase and the Letter of Transmittal because the information in this summary term sheet is not complete. Additional important information is contained in the remainder of this Offer to Purchase and the Letter of Transmittal. WHO IS OFFERING TO BUY MY SECURITIES? Our name is JOMED Acquisition Corp. We are a Delaware corporation formed for the purpose of making a tender offer for all of the common stock of EndoSonics and have carried on no activities other than in connection with the merger agreement among JOMED N.V., EndoSonics and ourselves. We are a wholly owned subsidiary of JOMED N.V., a corporation organized under the laws of The Netherlands. See the "Introduction" and Section 1. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are seeking to purchase all of the issued and outstanding shares of common stock of EndoSonics, including the related rights to purchase preferred stock. See the "Introduction" and Section 1. HOW MUCH ARE YOU OFFERING TO PAY? WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $11.00 per share, net to you, in cash. If you are the record owner of your shares and you tender your shares to us in the offer, you will not have to pay brokerage fees or similar expenses. If you own your shares through a broker or other nominee, and your broker tenders your shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. See "Introduction." DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? JOMED N.V., our parent company, will provide us with sufficient funds to purchase all shares validly tendered and not withdrawn in the Offer and to provide funding for the merger which is expected to follow the successful completion of the tender offer. JOMED will use funds received from an offering of JOMED's ordinary shares plus its existing resources and internally generated funds, including short-term borrowing in the ordinary course of business to finance the purchase. The tender offer is conditioned upon satisfaction of certain conditions that are also conditions to JOMED's equity offering. See Section 9. IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? We do not think our financial condition is relevant to your decision whether to tender in the offer because the form of consideration consists solely of cash. JOMED has arranged for $150,000,000 of our funding to come from the equity offering with the remainder to come from JOMED's existing resources and internally generated funds, including short-term borrowing in the ordinary course of business. JOMED's ability to complete JOMED's equity offering is subject to certain conditions. See Section 9. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You will have at least until 12:01 a.m., New York City time, on Tuesday, September 19, 2000, to tender your shares in the offer, unless the offer is extended. Further, if you cannot deliver everything that is required in order to make a valid tender by that time, you may be able to use a guaranteed delivery procedure, which is described later in this offer to purchase. See Sections 1 and 3. 1 5 CAN THE TENDER OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? We have agreed in the merger agreement that, without the consent of EndoSonics, we will have the right to extend the expiration date of the tender offer (which will initially be 20 business days from the commencement date of the tender offer): - for up to five additional business days; - from time to time thereafter if, at the scheduled or extended expiration date of the tender offer, any of the conditions to the tender offer will not have been satisfied or waived, until such conditions are satisfied or waived; - for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the tender offer or any period required by applicable law; or - for up to 10 additional business days, if, immediately prior to the scheduled or extended expiration date of the tender offer, the shares of EndoSonics common stock tendered and not withdrawn pursuant to the tender offer constitute more than 80% and less than 90% of the outstanding shares of EndoSonics common stock, notwithstanding that all conditions to the tender offer are satisfied as of the expiration date of the tender offer. If any of the conditions to the tender offer is not satisfied or waived on any scheduled or extended expiration date of the tender offer, we will extend the tender offer, if the condition or conditions could reasonably be expected to be satisfied, from time to time until such conditions are satisfied or waived, provided that we will not be required to extend the tender offer beyond November 15, 2000. See Section 1 of this offer to purchase for more details on our ability to extend the tender offer. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the tender offer, we will inform ChaseMellon Shareholder Services, L.L.C. (the depositary for the offer) of that fact and will make a public announcement of the extension not later than 9:00 a.m., New York City time, on the same day as the tender offer was scheduled to expire. See Section 1. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE TENDER OFFER? - We are not obligated to purchase any shares that are validly tendered unless the number of shares validly tendered and not properly withdrawn before the expiration date of the tender offer represents at least a number of shares of common stock, par value $0.001 per share of EndoSonics, that, together with the shares of common stock of EndoSonics then owned by JOMED and/or Purchaser, represents at least a majority of the shares of common stock of EndoSonics outstanding on a fully-diluted basis. We call this condition the "minimum condition." For purposes of the tender offer, "on a fully diluted basis" means, as of any time, on a basis that includes the number of shares of EndoSonics common stock that are actually issued and outstanding plus the maximum number of such shares that EndoSonics may be required to issue under stock options, warrants and other rights or securities convertible into shares of EndoSonics common stock, whether or not currently exercisable. See Section 11. - We are not obligated to purchase shares that are validly tendered if, among other things, there is a material adverse change in the business, assets, liabilities, financial condition, capitalization, operations or results of operations of EndoSonics. - We are not obligated to purchase shares that are validly tendered if, among other things, the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act has not expired or been terminated or if we have not obtained all consents and approvals from governmental authorities pursuant to national antitrust or competition laws that are required to complete the transaction. - Many (but not all) of the conditions to the consummation of JOMED's equity offering are also conditions of the tender offer. These conditions are listed in Section 15 and are collectively called the 2 6 "financing condition." One of those conditions is that we are not obligated to purchase shares that are validly tendered if, among other things, the closing price of JOMED's ordinary shares on the SWX Swiss Exchange is less than (i) 42 Swiss Francs or (ii) one-half of the closing price of JOMED's ordinary shares on the SWX Swiss Exchange on the first trading day following the announcement of the tender offer and the merger (the closing price of JOMED's ordinary shares on August 7, 2000, the first trading day after the announcement of the tender offer and the merger, was 90 Swiss Francs per share) on either of (i) the date of the execution of the purchase agreement for the JOMED's follow-on equity offering or (ii) on the first trading day immediately prior to the closing date of such purchase agreement, as such date is defined in the purchase agreement. The offer is also subject to a number of other conditions. We can waive some of the conditions to the offer without EndoSonics's prior written consent; however, we cannot waive the minimum condition. See Section 15. HOW DO I TENDER MY SHARES? To tender shares, you must deliver the certificates representing your shares, together with a completed letter of transmittal and any other documents required by the letter of transmittal, to ChaseMellon Shareholder Services, L.L.C., the depositary for the offer, not later than the time the tender offer expires. If your shares are held in street name, the shares can be tendered by your nominee through ChaseMellon Shareholder Services, L.L.C. If you are unable to deliver any required document or instrument to the depositary by the expiration of the tender offer, you may gain some extra time by having a broker, a bank or other fiduciary that is an eligible institution guarantee that the missing items will be received by the depositary within three Nasdaq National Market trading days. For the tender to be valid, however, the depositary must receive the missing items within that three trading day period. See Section 3. UNTIL WHAT TIME MAY I WITHDRAW PREVIOUSLY TENDERED SHARES? You may withdraw shares at any time until the tender offer has expired and, if we have not accepted your shares for payment by October 19, 2000, you may withdraw them at any time after that date until we accept shares for payment. See Section 4. HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to the depositary while you still have the right to withdraw the shares. See Section 4. WHAT DOES THE ENDOSONICS BOARD OF DIRECTORS RECOMMEND REGARDING THE OFFER? We are making the offer pursuant to a merger agreement, which has been unanimously approved by the EndoSonics board of directors. EndoSonics' board of directors, at a special meeting held on August 5, 2000, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the tender offer and the merger, are fair to and in the best interests of the EndoSonics stockholders; (2) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the tender offer and the merger; and (3) recommended that the EndoSonics stockholders accept the tender offer and tender their shares thereunder. Accordingly, EndoSonics' board of directors recommends that you accept the offer and tender all of your shares of common stock pursuant to the offer. See the "Introduction." IF THE NUMBER OF THE SHARES THAT ARE TENDERED AND ACCEPTED FOR PAYMENT PLUS THE NUMBER OF SHARES ALREADY OWNED BY JOMED CONSTITUTE A MAJORITY, WILL ENDOSONICS CONTINUE AS A PUBLIC COMPANY? No. Following the purchase of shares in the offer we expect to consummate the merger. If the merger takes place, EndoSonics will no longer be publicly owned. Even if for some reason the merger does not take 3 7 place, if we purchase all of the tendered shares, there may be so few remaining stockholders and publicly held shares that EndoSonics common stock will no longer be eligible to be traded through the Nasdaq National Market; there may not be a public trading market for EndoSonics common stock; and EndoSonics may cease making filings with the Securities and Exchange Commission or otherwise cease being required to comply with the SEC rules relating to publicly held companies. See Section 13. WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL OF THE SHARES ARE NOT TENDERED IN THE OFFER? Yes. If the number of shares of EndoSonics tendered together with the shares of EndoSonics common stock then owned by JOMED and/or Purchaser represent at least a majority of the shares of EndoSonics on a fully diluted basis, we will be merged with and into EndoSonics. If that merger takes place, JOMED will own all of the shares of EndoSonics, and all remaining stockholders of EndoSonics (other than us, JOMED and stockholders properly exercising dissenters' rights) will receive $11.00 per share in cash (or any higher price per share that is paid in the offer). See the "Introduction." IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If the merger described above takes place, stockholders not tendering in the tender offer will receive the same amount of cash per share that they would have received had they tendered their shares in the tender offer, subject to any dissenters' rights properly exercised under Delaware law. Therefore, if the merger takes place and you do not exercise dissenters' rights, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier if you tender your shares. If the merger does not take place, however, the number of stockholders and the number of shares of EndoSonics that are still in the hands of the public may be so small that there no longer will be an active public trading market (or, possibly, there may not be any public trading market) for the EndoSonics common stock. Also, as described above, EndoSonics may cease making filings with the SEC or otherwise may not be required to comply with the SEC rules relating to publicly held companies. See the "Introduction" and Sections 12 and 13. WHAT WAS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On August 4, 2000, the last trading day before we announced the acquisition, the last sale price of EndoSonics common stock reported on the Nasdaq National Market was $7 3/16 per share. On August 18, 2000, the last trading day before we commenced the tender offer, the last sale price of EndoSonics common stock reported on the Nasdaq National Market was $10 5/8. We encourage you to obtain a recent quotation for shares of EndoSonics common stock in deciding whether to tender your shares. See Section 6. GENERALLY, WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF TENDERING SHARES? The receipt of cash for shares pursuant to the tender offer or the merger will be a taxable transaction for United States federal income tax purposes and possibly for state, local and foreign income tax purposes as well. See Section 5. TO WHOM MAY I SPEAK IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? You may call MacKenzie Partners, Inc. collect at (212) 929-5500 or toll free at (800) 322-2885 or Credit Suisse First Boston Corporation ("Credit Suisse First Boston" or "CSFB") at (800) 881-8320 (toll free). MacKenzie Partners, Inc. is acting as the information agent and CSFB is acting as the dealer manager for our tender offer. See the back cover of this offer to purchase. 4 8 To the Holders of Shares of Common Stock of EndoSonics Corporation: INTRODUCTION JOMED Acquisition Corp. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of JOMED N.V., a corporation organized under the laws of The Netherlands ("JOMED"), hereby offers to purchase all of the issued and outstanding shares of common stock, par value $0.001 per share (the "Company Common Stock"), of EndoSonics Corporation (the "Company" or "EndoSonics"), including the related rights to purchase preferred stock (the "Rights") issued pursuant to the Preferred Shares Rights Agreement, dated October 20, 1998, between the Company and ChaseMellon Shareholders Services, L.L.C. (the Company Common Stock and the related Rights are herein together referred to as the "Shares"), at a purchase price of $11.00 per Share (the "Offer Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The Offer is being made pursuant to the Agreement and Plan of Merger dated as of August 5, 2000 (the "Merger Agreement") among JOMED, the Purchaser, and the Company. The Merger Agreement provides that following the Offer, the Purchaser will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation (the "Surviving Corporation"). The Company will be a wholly owned subsidiary of JOMED. Pursuant to the Merger, at the effective time of the Merger (the "Effective Time") each Share outstanding immediately prior to the Effective Time (other than Shares owned by JOMED, the Purchaser or the Company or any of their respective subsidiaries, all of which will be cancelled, and other than Shares that are held by stockholders, if any, who properly exercise their dissenters' rights under the Delaware General Corporation Law (the "DGCL")) will be converted into the right to receive $11.00 in cash, without interest (the "Merger Consideration"). The Merger Agreement is more fully described in Section 11. Tendering stockholders who are record owners of their Shares and tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by the Purchaser pursuant to the Offer. Stockholders who hold their Shares through a broker or bank should consult such institution as to whether it charges any service fees. JOMED or the Purchaser will pay all charges and expenses of CSFB, as dealer manager (in such capacity, "CSFB" or the "Dealer Manager"), ChaseMellon Shareholder Services, L.L.C., as depositary (the "Depositary"), and MacKenzie Partners, Inc., as information agent (the "Information Agent"), incurred in connection with the Offer. See Section 17. THE COMPANY'S BOARD OF DIRECTORS, AT A SPECIAL MEETING HELD ON AUGUST 5, 2000, UNANIMOUSLY (1) DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS; (2) APPROVED AND DECLARED ADVISABLE THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER; AND (3) RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES THEREUNDER. ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER ALL OF YOUR SHARES OF COMMON STOCK PURSUANT TO THE OFFER. U.S. Bancorp Piper Jaffray ("U.S. Bancorp Piper Jaffray"), the financial advisor to the EndoSonics Board of Directors, has delivered its written opinion, dated August 5, 2000, to the effect that, as of the date of the opinion, the consideration to be received by the Company's stockholders (other than JOMED and its affiliates) is fair, from a financial point of view, to such stockholders. The full text of U.S. Bancorp Piper Jaffray's written opinion, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is included as an annex to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which is being mailed to stockholders concurrently herewith. STOCKHOLDERS ARE URGED TO READ THE FULL TEXT OF SUCH OPINION CAREFULLY IN ITS ENTIRETY. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES THAT, TOGETHER WITH THE NUMBER OF SHARES ALREADY OWNED BY JOMED AND/OR THE PURCHASER, REPRESENTS AT LEAST A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"), (2) ANY WAITING PERIOD UNDER THE 5 9 HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE REGULATIONS THEREUNDER HAVING EXPIRED OR BEEN TERMINATED, AND ALL CONSENTS AND APPROVALS FROM GOVERNMENTAL AUTHORITIES PURSUANT TO NATIONAL ANTITRUST OR COMPETITION LAWS, WHICH ARE REQUIRED TO COMPLETE THE TRANSACTION, HAVE BEEN OBTAINED AND (3) THE SATISFACTION OF CERTAIN OTHER CONDITIONS, INCLUDING, BUT NOT LIMITED TO, THE CLOSING PRICE OF THE JOMED ORDINARY SHARES ON THE SWX SWISS EXCHANGE NOT BEING LESS THAN (i) 42 SWISS FRANCS OR (ii) ONE-HALF OF THE CLOSING PRICE OF THE JOMED ORDINARY SHARES ON THE SWX SWISS EXCHANGE ON THE FIRST TRADING DAY FOLLOWING THE ANNOUNCEMENT OF THE OFFER AND THE MERGER (THE CLOSING PRICE OF THE JOMED ORDINARY SHARES ON AUGUST 7, 2000, THE FIRST TRADING DAY AFTER THE ANNOUNCEMENT OF THE OFFER AND THE MERGER, WAS 90 SWISS FRANCS PER SHARE) ON EITHER OF (i) THE DATE OF THE EXECUTION OF THE PURCHASE AGREEMENT FOR THE JOMED EQUITY OFFERING (THE "PURCHASE AGREEMENT") OR (ii) ON THE FIRST TRADING DAY IMMEDIATELY PRIOR TO THE CLOSING DATE OF THE PURCHASE AGREEMENT, AS SUCH DATE IS DEFINED IN THE PURCHASE AGREEMENT. SEE SECTIONS 11 AND 15. For purposes of the Offer, "on a fully diluted basis" means, as of any time, on a basis that includes the number of Shares that are actually issued and outstanding plus the maximum number of Shares that the Company may be required to issue pursuant to obligations under stock options, warrants and other rights including restricted stock grants or securities convertible into shares of Company Common Stock, whether or not currently exercisable. The Company has represented to JOMED that, as of August 18, 2000, 17,844,098 shares were issued and outstanding (excluding shares held by EndoSonics in treasury), 3,341,748 shares were issuable upon options outstanding under the Company's stock option plans and other arrangements, no shares of the Company's preferred stock were issued and outstanding, and 1,131,594 shares were issued and held in the treasury of the Company. Accordingly, the Minimum Condition will be satisfied if 10,324,824 shares are tendered in the Offer and not properly withdrawn, which when added to the 268,100 shares held by JOMED and/or the Purchaser, would represent at least a majority of the shares outstanding on a fully-diluted basis. See Section 11. The Merger Agreement provides that promptly upon the purchase of and payment for not less than a majority of the outstanding Shares by JOMED or any of its subsidiaries pursuant to the Offer, JOMED shall be entitled to designate for appointment or election to the Company's Board of Directors, upon written notice to the Company, such number of directors, rounded up to the next whole number, on the Board of Directors such that the percentage of its designees on the Board shall equal the percentage of the Shares beneficially owned by JOMED and its affiliates. In furtherance thereof, the Company shall, upon request of the Purchaser, use its best efforts promptly to cause JOMED's designees to be so elected to the Company's Board of Directors, and in furtherance thereof, to the extent necessary, increase the size of the Board of Directors or use its best efforts to obtain the resignation of such number of its current directors as is necessary to give effect to the foregoing provision. At such time, the Company shall also, upon the request of the Purchaser, use its best efforts to cause Persons designated by JOMED to constitute at least the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of (i) each committee of the Company's Board of Directors, (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. The Merger Agreement provides that, until the Effective Time, the Board of Directors of the Company will have at least three directors who are directors of the Company on the date of the Merger Agreement. See Section 11. The Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares. If the Minimum Condition is satisfied, the Purchaser would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of the Company. The Company has agreed, if required, to cause a meeting of its stockholders to be held as promptly as practicable following consummation of the Offer for the purposes of considering and taking action upon the approval and adoption of the Merger Agreement. JOMED and the Purchaser have agreed to vote their Shares in favor of the approval and adoption of the Merger Agreement. See Section 11. This Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully before any decision is made with respect to the Offer. 6 10 THE TENDER OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered on or prior to the Expiration Date and not properly withdrawn as permitted under Section 4. The term "Expiration Date" means 12:01 a.m., New York City time, on Tuesday, September 19, 2000, unless the Purchaser, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event the term "Expiration Date" means the latest time and date on which the Offer, as so extended, expires. The Offer is conditioned upon the satisfaction of the Minimum Condition and the other conditions set forth in Section 15. Subject to the provisions of the Merger Agreement, the Purchaser may waive any or all of the conditions to its obligation to purchase Shares pursuant to the Offer (other than the Minimum Condition). If by the initial Expiration Date or any subsequent Expiration Date any or all of the conditions to the Offer have not been satisfied or waived, subject to the provisions of the Merger Agreement, the Purchaser may elect to (i) terminate the Offer and return all tendered Shares to tendering stockholders, (ii) waive all of the unsatisfied conditions (other than the Minimum Condition) and, subject to any required extension, purchase all Shares validly tendered by the Expiration Date and not properly withdrawn or (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the new Expiration Date, retain the Shares that have been tendered until the expiration of the Offer as extended. Under the terms of the Merger Agreement, the Purchaser may not, without the prior written consent of the Company: (i) waive the Minimum Condition and (ii) change the form of consideration to be paid, decrease the Offer Price, decrease the number of shares of Company Common Stock sought in the Offer, add to or modify, in a manner adverse to the stockholders of the Company, the conditions to the Offer set forth in Section 15 hereof, or (except as provided in the next paragraph) change the expiration date of the Offer. Subject to the terms of the Merger Agreement, the Purchaser may, without the consent of the Company, extend the expiration date of the Offer: (i) for up to five additional business days; (ii) from time to time after the time period in clause (i) if, at the scheduled or extended expiration date of the Offer, any of the conditions to the Offer will not have been satisfied or waived, until such conditions are satisfied or waived; (iii) for any period required by any rule, regulation, interpretation or position of the U.S. Securities and Exchange Commission ("SEC") or the staff thereof applicable to the Offer or any period required by applicable law; or (iv) for up to 10 additional business days, if, immediately prior to the scheduled or extended expiration date of the Offer, the Shares tendered and not withdrawn pursuant to the Offer constitute more than 80% and less than 90% of the outstanding Shares, notwithstanding that all conditions to the Offer are satisfied as of such expiration date of the Offer. If any of the conditions to the Offer is not satisfied or waived on any scheduled or extended expiration date of the Offer, the Purchaser will extend the Offer, if the condition or conditions could reasonably be expected to be satisfied, from time to time until such conditions are satisfied or waived, provided that the Purchaser will not be required to extend the Offer beyond November 15, 2000. Any extension under the circumstances described in (ii), (iii) or (iv) above will not exceed that number of days that the Purchaser reasonably believe is necessary to cause the conditions of the offer to be satisfied. The rights reserved by the Purchaser in the preceding paragraph are in addition to the Purchaser's rights pursuant to Section 15. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the same day as the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that material changes be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. 7 11 If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of or payment for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under Section 4. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by (i) Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of such bidder's offer and (ii) the terms of the Merger Agreement, which require that the Purchaser pay for Shares that are tendered pursuant to the Offer as soon as permitted after the Offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price, percentage of securities sought or inclusion of or changes to a dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality, of the changes. In the SEC's view, an offer should remain open for a minimum of five (5) business days from the date the material change is first published, sent or given to stockholders and, if material changes are made with respect to information that approaches the significance of price and share levels, a minimum of ten (10) business days may be required to allow for adequate dissemination to stockholders. Accordingly, if, prior to the Expiration Date, the Purchaser decreases the number of Shares being sought or increases or decreases the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the tenth business day from the date that notice of such increase or decrease is first published, sent or given to stockholders, the Offer will be extended at least until the expiration of such tenth business day. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided the Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment) and the satisfaction or earlier waiver of all the conditions to the Offer set forth in Section 15, the Purchaser will accept for payment and will pay for all Shares validly tendered on or prior to the Expiration Date and not properly withdrawn pursuant to the Offer as soon as it is permitted to do so under applicable law. Subject to the Merger Agreement and compliance with Rule 14e-1(c) under the Exchange Act, the Purchaser expressly reserves the right to delay payment for Shares in order to comply in whole or in part with any applicable law. See Section 16. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) the certificates evidencing such Shares (the "Share Certificates") or confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3, (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) in lieu of the Letter of Transmittal and (3) any other documents required by the Letter of Transmittal. 8 12 For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Offer Price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to the Purchaser's rights under Section 1 hereof, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering stockholders are entitled to withdrawal rights as described in Section 4 and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. Valid Tenders. In order for a stockholder validly to tender Shares pursuant to the Offer, either (1) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other documents required by the Letter of Transmittal must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case on or prior to the Expiration Date, or (2) the tendering stockholder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, that states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book- 9 13 entry transfer at the Book-Entry Transfer Facility, either the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (1) if the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (2) if the Shares are tendered for the account of a firm that is participating in the Security Transfer Agents Medallion Program, the Nasdaq National Market Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution" and collectively "Eligible Institutions"). In all other cases, all signatures on a Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a Share Certificate is registered in the name of a person or persons other than the signer of the Letter of Transmittal, or if payment is to be made to, or a Share Certificate not accepted for payment or not tendered is to be issued, in the name of, a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate duly executed stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and the Share Certificates evidencing such stockholder's Shares are not immediately available or such stockholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered; provided that all of the following conditions are satisfied: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (3) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal are received by the Depositary within three Nasdaq National Market trading days after the date of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by the Purchaser. In all cases, Shares will not be deemed validly tendered unless a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) is received by the Depositary. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, RECEIPT OF A BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. 10 14 Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination shall be final and binding on all parties. The Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived to the satisfaction of the Purchaser. None of JOMED, the Purchaser, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Other Requirements. By executing the Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints designees of the Purchaser as such stockholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser (including, with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such stockholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of the Purchaser will, with respect to the Shares and other securities for which the appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares, the Purchaser must be able to exercise full voting rights with respect to such Shares. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the Offer, as well as the tendering stockholder's representation and warranty that such stockholder has the full power and authority to tender and assign the Shares tendered, as specified in the Letter of Transmittal. The Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Backup Withholding. Under the "backup withholding" provisions of United States federal income tax law, the Depositary may be required to withhold 31% of the amount of any payments pursuant to the Offer. In order to prevent backup federal income tax withholding with respect to payments to certain stockholders of the Offer Price for Shares purchased pursuant to the Offer, each such stockholder must provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") and certify that such stockholder is not subject to backup withholding by completing the Substitute Form W-9 in the Letter of Transmittal. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service may impose a penalty on the stockholder and payment of cash to the stockholder pursuant to the Offer may be subject to backup withholding. All stockholders surrendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included in the Letter of Transmittal to provide the information necessary to avoid backup withholding. Non-corporate foreign stockholders should complete and sign a Form W-8, Certificate of Foreign Status (a copy of which may be obtained from the Depositary) in order to avoid backup withholding. See Instruction 8 of the Letter of Transmittal. 11 15 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable, except that such Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after October 19, 2000. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name, address and taxpayer identification number of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 hereof, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. If the Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described herein. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. None of JOMED, the Purchaser, the Dealer Manager, the Depositary, the Information Agent or any other person will be under duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3 hereof. 5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of certain United States federal income tax consequences of the Offer and the Merger to stockholders of the Company whose Shares are tendered and accepted for payment pursuant to the Offer or whose Shares are converted into the right to receive cash in the Merger. The discussion is for general information only and does not purport to consider all aspects of United States federal income taxation that might be relevant to stockholders of the Company. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing, proposed and temporary regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change, possibly with a retroactive effect. The discussion applies only to stockholders of the Company in whose hands Shares are capital assets within the meaning of Section 1221 of the Code and who do not own directly or through attribution 50% or more of the stock of the Company. This discussion does not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to certain types of stockholders (such as insurance companies, tax-exempt organizations, financial institutions and broker-dealers) who may be subject to special rules. This discussion does not discuss the United States federal income tax consequences to any stockholder of the Company who, for United States federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust, nor does it consider the effect of any foreign, state or local tax laws. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE 12 16 MERGER, ON A BENEFICIAL HOLDER OF SHARES, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND ANY STATE, LOCAL AND FOREIGN TAX LAWS AND OF CHANGES IN SUCH LAWS. The exchange of Shares for cash pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes and possibly for state, local and foreign income tax purposes as well. In general, a stockholder who sells Shares pursuant to the Offer or receives cash in exchange for Shares pursuant to the Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's adjusted tax basis in the Shares sold pursuant to the Offer or exchanged for cash pursuant to the Merger. Gain or loss will be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) tendered pursuant to the Offer or exchanged for cash pursuant to the Merger. Such gain or loss will be long-term capital gain or loss provided that a stockholder's holding period for such Shares is more than one year at the time of consummation of the Offer or the Merger, as the case may be. Capital gains recognized by an individual upon a disposition of a Share that has been held for more than one year generally will be subject to a maximum United States federal income tax rate of 20% or, in the case of a Share that has been held for one year or less, will be subject to tax at ordinary income tax rates. Certain limitations apply to the use of a stockholder's capital losses. A stockholder whose Shares are purchased in the Offer may be subject to 31% backup withholding unless certain information is provided to the Depositary or an exemption applies. See Section 3. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares trade on the Nasdaq National Market ("Nasdaq") under the symbol "ESON." The following table sets forth, for the periods indicated, the high and low sale prices per Share as well as the dividends paid to stockholders for the periods indicated. Share prices are as reported on the Nasdaq based on published financial sources.
COMMON STOCK ---------------------------- HIGH LOW DIVIDENDS ---- --- --------- Fiscal Year 1998: First Quarter............................................. $10 3/4 $7 15/16 -- Second Quarter............................................ 10 1/2 5 -- Third Quarter............................................. 9 7/8 4 -- Fourth Quarter............................................ 10 4 -- Fiscal Year 1999: First Quarter............................................. $12 11/16 $6 -- Second Quarter............................................ 8 3/4 4 1/4 -- Third Quarter............................................. 9 3/8 6 15/16 -- Fourth Quarter............................................ 8 3/4 3 -- Fiscal Year 2000: First Quarter............................................. $ 7 7/8 $4 1/8 -- Second Quarter............................................ 6 3/8 3 3/4 -- Third Quarter (through August 18, 2000)................... 10 3/4 5 1/4 --
On August 4, 2000, the last full day of trading before the public announcement of the execution of the Merger Agreement, the last reported sale price of the Shares on the Nasdaq was $7 3/16 per Share. On August 18, 2000, the last full day of trading before the commencement of the Offer, the last reported sale price of the Shares on the Nasdaq was 10 5/8 per Share. Stockholders are urged to obtain a current market quotation for the Shares. 13 17 7. CERTAIN INFORMATION CONCERNING THE COMPANY. General. EndoSonics is a Delaware corporation with its principal offices located at 2870 Kilgore Road, Rancho Cordova, California 95670. The telephone number of the Company is (916) 638-8008. According to the Company's Form 10-K for the fiscal year ended December 31, 1999 (the "1999 10-K"), the Company has been engaged primarily in the research and development, marketing and selling of devices for the diagnosis and treatment of cardiovascular disease. Since 1991, a majority of the Company's net revenue has been derived from sales of its IVUS coronary imaging systems and catheters. In July 1997, the Company acquired Cardiometrics Corporation, adding a product portfolio of cardiovascular functional measurement devices. In August 1998, Company acquired Navius Corporation, which added a line of therapeutic angioplasty balloon catheters and other therapeutic products under development. Certain Projected Financial Data of the Company. Prior to entering into the Merger Agreement, representatives of JOMED conducted a due diligence review of the Company and in connection with such review received certain projections of the Company's future operating performance. The Company does not in the ordinary course publicly disclose projections and these projections were based on numerous assumptions made by the Company's management, including, among others, unit sales, engineering costs, capital expenditures, depreciation and amortization and cost savings as well as industry performance and general business, economic, market and financial conditions, all of which are difficult to predict and many of which are beyond the Company's control. Accordingly, there can be no assurance that the assumptions made in preparing the projections will prove to be accurate. These projections do not give effect to the Offer or the potential combined operations of JOMED and the Company or any changes that may be made to the Company's operations or strategy after the consummation of the Offer. The information set forth below is presented for the limited purpose of giving the EndoSonics stockholders access to the material financial projections prepared by the Company's management that were made available to JOMED in connection with its due diligence investigation. IT IS THE UNDERSTANDING OF JOMED AND THE PURCHASER THAT THE PROJECTIONS SET FORTH BELOW WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO JOMED IN CONNECTION WITH ITS EVALUATION OF A BUSINESS TRANSACTION WITH THE COMPANY. THE PROJECTIONS DO NOT PURPORT TO PRESENT OPERATIONS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THE COMPANY'S INDEPENDENT AUDITORS HAVE NOT EXAMINED OR COMPILED THE PROJECTIONS PRESENTED HEREIN AND ACCORDINGLY ASSUME NO RESPONSIBILITY FOR THEM. THESE PROJECTIONS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF JOMED, THE PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF JOMED, THE PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY PERSON REGARDING THE ACTUAL PERFORMANCE OF THE COMPANY COMPARED TO THE INFORMATION CONTAINED IN THE PROJECTIONS, AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE 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. ENDOSONICS CORPORATION ($ IN MILLIONS)
PROJECTED FYE DECEMBER 31, -------------------------------------------------------- 2000 2001 2002 2003 2004 -------- -------- -------- -------- -------- Net Sales........................... 57.9 75.1 96.7 131.2 163.7 Gross Profit........................ 29.4 41.3 57.0 81.3 103.1 EBIT................................ (1.9) 3.5 11.3 21.9 32.8 Net Income.......................... (1.3) 4.0 12.0 23.1 25.4
14 18 The Company's financial projections are based upon the number of interventional procedures, reimbursement rates, competitive factors and the Company's historical performance in four market places: United States, Europe, Japan and rest of the world. In addition to the considerations above, forecasted net sales also consider the prevailing average selling prices and distribution organizations in each marketplace. Gross profit reflects the revenue mix in each period and assumes average selling prices deteriorate over time mitigated by cost reductions achieved through efficiencies and increased production volumes. EBIT includes selling, general and administrative expenses ("SG&A"), research and development ("R&D") and amortization of intangible assets. SG&A is projected to increase in absolute dollars but decline as a percentage of net sales from 36.0% in calendar year 2000 to 32.0% in calendar year 2004. R&D is also forecasted to increase in absolute dollars but decline as a percentage of sales from 14.6% in calendar year 2000 to 10.0% in calendar year 2004. Net income reflects the benefits of the Company's $52 million net operating loss carryforward. Available Information. The Shares are registered under the Exchange Act. Accordingly, the Company is subject to the informational reporting requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the SEC. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Company's filings are also available to the public on the SEC's Internet site (http://www.sec.gov). Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. 8. CERTAIN INFORMATION CONCERNING JOMED AND THE PURCHASER. General. JOMED is a corporation organized under the laws of The Netherlands with its principal offices located at Drottninggatan 94, S-25 21 Helsingborg, Sweden. The telephone number of JOMED is +46-42-490-6000. JOMED designs, develops, manufactures and markets medical devices for minimally invasive therapy, including interventional cardiology and interventional radiology and other minimally invasive cardiovascularsurgical procedures. JOMED's products are aimed at providing alternatives to drug therapy and highly invasive surgical treatments of vascular diseases. Its product offerings include a range of coronary and peripheral stents, stent grafts, angioplasty balloons and catheters. JOMED markets its products in over 60 countries through a direct sales force and a network of distributors. In addition, JOMED is developing new products for cardiac assist and minimally invasive cardiovascular surgery. The Purchaser is a Delaware corporation with its principal offices located at Drottninggatan 94, S-252 21 Helsingborg, Sweden. The telephone number of the Purchaser is +46-42-490-6000. The Purchaser is a wholly owned subsidiary of JOMED. The Purchaser has not carried on any activities other than in connection with the Merger Agreement. The name, citizenship, principal business address, business phone number, principal occupation or employment and five-year employment history for each of the directors and executive officers of JOMED and the Purchaser and certain other information are set forth in Schedule I hereto. As of August 18, 2000, JOMED owned 268,100 Shares which represent approximately 1.5% of all issued and outstanding Shares. Except as described above, (1) none of JOMED, the Purchaser nor, to the best knowledge of JOMED and the Purchaser, any of the persons listed in Schedule I hereto or any associate or majority-owned subsidiary of JOMED or the Purchaser or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any Shares, and (2) none of JOMED, the Purchaser nor, to the best knowledge of 15 19 JOMED and the Purchaser, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. Except as provided in the Merger Agreement, none of JOMED, the Purchaser nor, to the best knowledge of JOMED and the Purchaser, any of the persons listed in Schedule I hereto, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, guarantees of profits, division of profits or loss or the giving or withholding of proxies. In December 1998, the Company and JOMED entered into an agreement for exclusive distribution of certain EndoSonics products into specified European and Middle Eastern countries (the "1998 Distribution Agreement"). Also in December 1998, the Company and JOMED entered into an IVUS guided stent delivery system agreement that called for the development of a JOMED balloon and stent incorporated into a modular EndoSonics IVUS catheter (the "Stent Delivery System Agreement"). Under the terms of the Stent Delivery System Agreement, the Company was required to supply subassemblies to JOMED which would complete the manufacturing process and distribute the resulting product in the territory which was defined as certain European and Middle Eastern countries. In certain countries within the territory, the Company could distribute exclusively or jointly with JOMED. On August 27, 1999, the Company informed JOMED in writing of breaches of certain operational obligations by JOMED under the terms of both the 1998 Distribution Agreement and the Stent Delivery System Agreement. Following JOMED's failure to cure the breaches under the 1998 Distribution Agreement noted in the August 27, 1999 written notice, the 1998 Distribution Agreement was terminated on October 1, 1999. Following JOMED's failure to cure the breaches under the Stent Delivery System Agreement noted in the August 27, 1999 written notice, the Stent Delivery System Agreement was terminated on November 5, 1999. During the fourth quarter of 1999, the Company and JOMED agreed on a payment schedule for JOMED to pay its outstanding invoices as well as on a financial arrangement with regard to the mutual losses incurred in connection with the terminated Stent Delivery System Agreement. Subsequently, in December 1999, a new distribution agreement was restructured between JOMED and the Company to provide more specific metrics regarding performance and was implemented in December 1999 (the "Master Distribution Agreement"). Also in December 1999, JOMED satisfied its outstanding payment obligations to the Company. Except as set forth above, none of JOMED, the Purchaser nor, to the best knowledge of JOMED and the Purchaser, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, there have been no material contacts, negotiations or transactions between JOMED or any of its subsidiaries or, to the best knowledge of JOMED, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. None of the persons listed in Schedule I hereto has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the persons listed in Schedule I hereto has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Financial Information. Set forth below are certain selected summary information of JOMED. Unless otherwise stated, all financial data of JOMED for the years ended 1998 and 1999 herein are based on the audited consolidated financial statements of JOMED, and the financial data of JOMED for the six months ended June 30, 1999 and 2000 are based on the unaudited consolidated financial statements of JOMED, all of which are prepared in accordance with International Accounting Standards (IAS). The financial data for the 16 20 years ended 1996 and 1997 are based on the unaudited pro forma consolidated financial statements for those years which were prepared in accordance with IAS, subject to certain exceptions discussed below. The following table presents selected historical consolidated financial information for JOMED. JOMED in its present form came into existence with the acquisition by the group's holding company, JOMED N.V., of the shares of the group's subsidiaries on April 2, 1998 for in-kind contributions. The unaudited pro forma consolidated statements have been prepared for comparison purposes only for the period from January 1, 1996 to December 31, 1997 as if JOMED had already existed at the start of the periods. In the balance sheet of JOMED N.V., in-kind acquisitions of the shareholdings in the subsidiaries have been reflected retroactively as at January 1, 1996 at their book value on April 2, 1998. Consolidation has been achieved by offsetting investments in subsidiaries against the fair market value of the underlying net assets of the subsidiaries at the date of acquisition. The resulting difference has been recognized as goodwill and been amortized over an estimated useful life of 20 years. This is not in accordance with international accounting standards which would not permit recognition of goodwill prior to the date on which control of the subsidiaries passed to the parent company. With this exception and with the exception of the non-presentation of a pro forma statement of changes in stockholders' equity and of changes in cash flows, the unaudited pro forma financial statements have been prepared in accordance with IAS. In the opinion of management, these departures from IAS are necessary to ensure the comparability of the pro forma financial statements with those presented in the audited financial statements. All amounts are in Euros.
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------------------- ------------------------------------------------- 1997 1996 2000 1999 1999 1998 PRO FORMA PRO FORMA (UNAUDITED) (UNAUDITED) (AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- --------- --------- ----------- ----------- (E '000) (E '000) INCOME STATEMENT Net sales........................ 29,859 19,823 43,723 25,502 15,216 6,284 Cost of goods sold............... (4,081) (5,021) (7,623) (3,078) (1,866) (1,131) ------- ------- ------- ------- ------- ------ GROSS PROFIT..................... 25,778 14,802 36,100 22,424 13,350 5,153 Operating costs and expenses..... (21,393) (12,727) (31,793) (16,436) (11,548) (4,349) ------- ------- ------- ------- ------- ------ OPERATING INCOME................. 4,385 2,075 4,307 5,988 1,802 804 Other expenses, net.............. (382) (549) (1,193) (329) (90) (48) ------- ------- ------- ------- ------- ------ INCOME BEFORE INCOME TAXES....... 4,003 1,526 3,114 5,659 1,712 756 ------- ------- ------- ------- ------- ------ NET INCOME....................... 2,612 940 2,134 2,983 861 441 ======= ======= ======= ======= ======= ======
AS OF JUNE 30, AS OF DECEMBER 31, ------------------------- ------------------------------------------------- 1997 1996 2000 1999 1999 1998 PRO FORMA PRO FORMA (UNAUDITED) (UNAUDITED) (AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- --------- --------- ----------- ----------- (E '000) (E '000) BALANCE SHEET DATA Total current assets............. 139,031 26,411 37,992 13,533 6,063 2,959 Total long-term assets........... 66,850 23,114 27,836 16,338 12,507 11,865 Total current liabilities........ (27,043) (16,214) (28,997) (13,414) (6,588) (3,415) Total long-term liabilities...... (19,119) (17,767) (1,366) (636) (140) 0 ------- ------- ------- ------- ------ ------ TOTAL SHAREHOLDERS' EQUITY....... 159,719 15,544 35,465 15,821 11,842 11,409 ======= ======= ======= ======= ====== ====== TOTAL ASSETS..................... 205,881 49,525 65,828 29,871 18,570 14,824 ======= ======= ======= ======= ====== ======
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to purchase Shares pursuant to the Offer and the Merger is estimated to be approximately $208,000,000 plus any related transaction fees and expenses. The Purchaser will obtain such funds from JOMED. On August 4, 2000, JOMED and Credit Suisse First Boston (Europe) Limited ("CSFB Europe") signed a commitment letter pursuant to which CSFB Europe agreed, 17 21 subject to the satisfaction of certain conditions, to, among other things, provide $150,000,000 through an offering of JOMED's ordinary shares (the "JOMED Equity Offering"). JOMED expects to fund $150,000,000 of its cash contribution from the JOMED Equity Offering, with the remainder expected to come from JOMED's existing resources and internally generated funds, including short-term borrowing in the ordinary course of business. JOMED expects to close the JOMED Equity Offering on September 19, 2000. JOMED expects the consummation of the JOMED Equity Offering to be subject to a number of conditions including, but not limited to, that: - all of the conditions for the closing of the Offer shall have been satisfied in the reasonable judgment of CSFB Europe (in such capacity, the "Global Coordinator" for the JOMED Equity Offering); - the Global Coordinator shall have received on or by the closing for the JOMED Equity Offering the opinions of counsel and letters from accountants specified in the purchase agreement for the JOMED Equity Offering (the "Purchase Agreement"); - the SWX Swiss Exchange shall have approved the JOMED Ordinary Shares to be issued in the JOMED Equity Offering for listing on the SWX New Market of the SWX Swiss Exchange or, prior to the date of the Purchase Agreement, no order suspending the public offering of the shares shall have been issued and no proceedings for any such purpose shall have been instituted or contemplated by the SWX Swiss Exchange or any other governmental or self-regulatory agency or body; - the Purchase Agreement for the JOMED Equity Offering shall not have been terminated by the Global Coordinator as a result of (a) the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange being less than (i) 42 Swiss Francs or (ii) one-half of the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange on the first trading day following the announcement of the Offer and the Merger (the closing price of the JOMED Ordinary Shares on August 7, 2000, the first trading day after the announcement of the Offer and the Merger, was 90 Swiss Francs per share) on either of (i) the date of the execution of the Purchase Agreement or (ii) on the first trading day immediately prior to the closing date of the Purchase Agreement, as such date is defined in the Purchase Agreement, (b) trading generally shall have been suspended or materially limited on or by, as the case may be, the SWX Swiss Exchange (whether on the SWX New Market segment or otherwise), (c) a general moratorium on commercial banking activities shall have been declared by authorities in either Switzerland or The Netherlands, (d) there shall have occurred a general crisis in international exchange markets or (e) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, whether or not foreseeable, that, in the judgment of the Global Coordinator, is material and adverse and, in the case of any of the foregoing events, such event, singly or together with any other such event, makes it, in the judgment of the Global Coordinator after consultation with the JOMED, impracticable to market the JOMED Ordinary Shares as contemplated through the JOMED Equity Offering; and - the Merger Agreement shall not have been terminated in accordance with its terms; as well as other customary equity offering conditions. No alternative financing plans or arrangements have been made in the event JOMED is unable to consummate the JOMED Equity Offering in connection with the Offer and the Merger. The Purchaser will not be obligated to accept Shares for payment pursuant to the Offer if the Financing Condition has not been satisfied. In connection with the JOMED Equity Offering, JOMED expects that it will agree to customary indemnification of the Global Coordinator, including indemnifying and holding harmless the Global Coordinator from and against any and all claims, actions, suits, liabilities, losses damages and expenses arising out of the JOMED Equity Offering and the transactions contemplated thereby. 18 22 10. BACKGROUND OF THE OFFER; PAST CONTACTS OR NEGOTIATIONS WITH THE COMPANY. In the fall of 1997, the Company's senior management and the Board of Directors began to examine the Company's strategic position in the interventional cardiology market in light of, among other things, the upcoming expiration of some of the Company's key distribution agreements, the ongoing healthcare reform and the continued emergence of managed care organizations in the United States, the increasing pressure on healthcare providers and other participants in the healthcare industry to reduce costs and, in light of this general market environment, the Company's prospects for continued growth as a manufacturer of stand-alone diagnostic products. Senior management and the Board of Directors determined that the Company should take action to explore strategic alternatives that would enable the Company to integrate its diagnostic technology with therapeutic modalities in a single product platform that would increase demand for the Company's core diagnostic technology. At a regularly scheduled Board of Directors meeting on November 3, 1997, Reinhard Warnking, the Company's President and Chief Executive Officer, raised the possibility of pursuing strategic partnerships and other alternative business ventures and combinations designed to enable the Company to integrate its diagnostic technology with therapeutic modalities in a single product platform. Representatives from U.S. Bancorp Piper Jaffray, the Company's financial advisor, were also in attendance at the meeting. At the conclusion of the meeting, the Board of Directors authorized Mr. Warnking to explore strategic alternatives and to engage U.S. Bancorp Piper Jaffray to assist in this process. Following the November 3, 1997 Board of Directors meeting, between November 3, 1997 and the end of April, 1998, the Company's senior management made preliminary contacts with several leading interventional cardiology companies to explore strategic options for the Company. Of the companies contacted by the Company, several received information about the Company prepared by management. After significant due diligence by several parties, none of the companies contacted by management expressed an interest in entering into a business combination with the Company at that time. In April 1998, the Company terminated its exclusive distribution agreement with Cordis Corporation, a unit of Johnson & Johnson, due to a decline in orders of the Company's products from Cordis in the United States, Europe and certain other territories and the anticipated inability of Cordis to meet the minimum agreed-upon sales performance milestones for these territories. Subsequently, the Company established a direct sales force in the United States and Germany and, in December 1998, entered into the 1998 Distribution Agreement with JOMED that granted JOMED exclusive distribution rights with respect to certain of the Company's products in specified European and Middle Eastern countries. Also in December 1998, the Company and JOMED entered into the Stent Delivery System Agreement that called for the development of a JOMED balloon and stent incorporated into a modular EndoSonics IVUS catheter. In June 1999, Mr. Peters contacted Mr. Warnking and requested a meeting to discuss JOMED's potential acquisition of the Company. On June 29, 1999, Mr. Warnking and representatives from U.S. Bancorp Piper Jaffray met with Mr. Peters and representatives from CSFB, JOMED's financial advisor in New York, New York. At this meeting, the parties discussed several proposed alternative transaction structures. After the June 29, 1999 meeting in New York, Messrs. Warnking and Peters and representatives from U.S. Bancorp Piper Jaffray and CSFB continued to discuss a potential business combination between the Company and JOMED. In late September 1999, Mr. Peters called Mr. Warnking and told him he was not interested in pursuing a business combination at that time. On October 4, 1999, the Company announced its operating results for the quarter ended September 30, 1999. The Company reported revenue of $10.5 million for the quarter, compared to $14.0 million for the prior quarter, a decrease of 24.8%. The Company stated that revenue for the quarter was lower than anticipated primarily as a result of a substantial decline in orders from the prior quarter from JOMED, which at the time was the Company's principal distributor in Europe, and that as a result of JOMED's failure to honor its payment obligations, the Company had terminated the 1998 Distribution Agreement. The Stent Delivery System Agreement was terminated on November 5, 1999. 19 23 In December 1999, a new distribution agreement was restructured between JOMED and the Company to provide more specific metrics regarding performance and was implemented in December 1999 (the "Master Distribution Agreement"). Also in December 1999, JOMED satisfied its outstanding payment obligations to the Company. JOMED's ordinary shares commenced trading on the SWX Swiss Exchange on April 19, 2000 and the related initial public offering was completed on April 26. On May 25, Messrs. Warnking and Peters met at the European Transcatheter Conference in Paris, France. Dr. Hans P. de Weerd, Senior Advisor to the Company, and Antti Ristinmaa, Vice President, Finance and Chief Financial Officer of JOMED, were also in attendance. Messrs. Warnking and Peters reinitiated their discussions concerning a potential business combination between the Company and JOMED. On May 29, Messrs. Warnking and de Weerd met with Mr. Peters and other senior management of JOMED in Rangendingen, Germany and Beringen, Switzerland. Mr. Peters proposed a business combination pursuant to which the Company would be acquired by and merged with and into JOMED, and discussion ensued. On May 31, Mr. Peters contacted Mr. Warnking by telephone to continue these discussions. After speaking with Mr. Peters, Mr. Warnking contacted U.S. Bancorp Piper Jaffray, and representatives from U.S. Bancorp Piper Jaffray contacted representatives from CSFB later that day and continued these merger discussions. Between May 31 and June 15, Messrs. Warnking and Peters and representatives from U.S. Bancorp Piper Jaffray and CSFB continued these discussions telephonically. Preliminary discussions concerning the appropriate valuation of the Company also ensued. On June 16, the Company's Board of Directors held a special telephonic meeting, at which all members of the Board of Directors except Thomas J. Cable were present, as well as U.S. Bancorp Piper Jaffray and representatives from Latham & Watkins, legal counsel to the Company ("Latham"). At this meeting, Mr. Warnking updated the Board of Directors on the status of his discussions with Mr. Peters, and discussion ensued regarding the history of the Company's relationship with JOMED, the strategic reasons for the combination of the Company with JOMED and the appropriate valuation of the Company in the proposed transaction. The Board of Directors authorized Mr. Warnking and U.S. Bancorp Piper Jaffray to continue their discussions with Mr. Peters and CSFB, to commence due diligence with JOMED and to negotiate and enter into a confidentiality agreement. On or about June 19, the financial advisors for a public medical device company ("Company A") contacted Mr. Warnking and requested a meeting. On June 23, Mr. Warnking and Jeffrey Elder, Senior Vice President and Chief Financial Officer of the Company, met with representatives from Company A and Company A's financial advisors at the Company's headquarters in Rancho Cordova, California and commenced discussions concerning a potential business combination between the Company and Company A. On June 26, Mr. Peters and other members of JOMED's senior management met with Mr. Warnking and other members of the Company's senior management at the Company's headquarters in Rancho Cordova, California to commence due diligence, and the Company and JOMED executed the Confidentiality Agreement. The Confidentiality Agreement included, among other provisions, two-year standstill and employee non-solicitation agreements by JOMED in favor of the Company. On June 27, two members of JOMED's senior management met with the general manager of the Company's manufacturing facilities in San Diego, California and Mr. de Weerd to conduct further operational and business due diligence. On June 29, Messrs. Warnking and de Weerd traveled to Company A's headquarters and met with Company A's Chairman and Chief Executive Officer and other members of Company A's senior management. On June 30, Messrs. Warnking and de Weerd and a representative from U.S. Bancorp Piper Jaffray met with Company A's Chairman and Chief Executive Officer and other members of Company A's senior management at Company A's headquarters to continue discussions concerning a potential business combination between the Company and Company A. Preliminary discussions concerning the appropriate valuation of 20 24 the Company also ensued, and Company A's representatives orally proposed to acquire the Company in a stock-for-stock merger transaction that would be accounted for as a pooling of interests. On July 3, the Company's Board of Directors held a special telephonic meeting, at which all members of the Board of Directors were present, as well as representatives from U.S. Bancorp Piper Jaffray and Latham. At this meeting, Mr. Warnking updated the Board of Directors on the status of his discussions with both JOMED and Company A, and discussion ensued regarding the relative merits of a transaction with JOMED versus a transaction with Company A, strategic considerations weighing in favor of each alternative transaction and the appropriate valuation of the Company in the proposed transactions. At the conclusion of the meeting, the Board of Directors authorized Mr. Warnking and U.S. Bancorp Piper Jaffray to continue discussions with both parties. On July 5, representatives from Company A again traveled to the Company's headquarters in Rancho Cordova, California and continued financial, operational and legal due diligence. On July 6, representatives from Company A performed additional operational due diligence at the Company's manufacturing facilities in San Diego, California. On July 7, Mr. Warnking again met with Company A's management at Company A's headquarters to continue negotiations and discussions with Company A. On July 7, Mr. Warnking received a letter from Mr. Peters containing an offer to purchase all of the outstanding shares of the Company's common stock for a price of $10.50 per share in cash. The letter indicated that the transaction would be structured as a cash tender offer for all of the shares of the Company's common stock followed by a merger of the Company with and into a wholly owned subsidiary of JOMED, with the Company surviving the merger as a wholly owned subsidiary of JOMED. The purchase offer was subject to JOMED's completion of additional due diligence, approval of the Company's Board of Directors and JOMED's board of directors, execution of a definitive agreement and the receipt of certain standard governmental, regulatory and third-party approvals. The offer letter also stated that the transaction would be financed from JOMED's current resources and a follow-on equity offering, but that in any event, any offer made by JOMED would not be contingent upon JOMED obtaining third-party financing. On July 9, representatives from Company A's financial advisors informed U.S. Bancorp Piper Jaffray that Company A was not in a position to propose a transaction that would be superior to the JOMED proposal. On July 10, the Company's Board of Directors held a special telephonic meeting, at which all members of the Board of Directors were present, as well as representatives from U.S. Bancorp Piper Jaffray and Latham. At this meeting, Mr. Warnking presented JOMED's proposal to the Board of Directors, and discussion ensued as to the merits of JOMED's proposal. The Board of Directors noted that JOMED's proposal was at a price that was in excess of the range of prices that had been discussed with Company A, that JOMED's offer was for cash rather than stock and that JOMED's offer was not contingent on JOMED's receipt of third-party financing, and the Board of Directors authorized management to pursue negotiations with JOMED on an expedited basis. After the meeting, Mr. Warnking sent a letter to Mr. Peters in response to JOMED's offer letter, responding to certain due diligence questions and other issues related to JOMED's proposal. In addition, representatives from U.S. Bancorp Piper Jaffray held several telephonic conversations with CSFB to discuss the valuation cited in JOMED's proposal. On July 12, Mr. Warnking received another letter from Mr. Peters containing an offer to purchase all of the outstanding shares of the Company's common stock for a price of $11.00 per share in cash. The offer letter indicated that the transaction would be structured as a cash tender offer for all of the shares of the Company's common stock followed by a merger of the Company with and into a wholly owned subsidiary of JOMED, with the Company surviving the merger as a wholly owned subsidiary of JOMED. The purchase offer was subject to JOMED's completion of additional confirmatory due diligence, approval of the Company's Board of Directors and JOMED's board of directors and execution of a definitive agreement, subject to customary closing conditions. The offer letter again stated that the transaction would be financed from JOMED's current resources and a follow-on equity offering, but that in any event, any offer made by JOMED would not be contingent upon JOMED obtaining third-party financing. 21 25 On July 14, the Company's Board of Directors held another telephonic special meeting, at which all directors were present. Representatives from U.S. Bancorp Piper Jaffray and Latham were also in attendance, and U.S. Bancorp Piper Jaffray presented the Board of Directors with an analysis that evaluated the valuation cited in JOMED's proposal. Discussion ensued, and the members of the Board of Directors were given an opportunity to ask additional questions about U.S. Bancorp Piper Jaffray's analysis and the methodology on which it was predicated. On July 20 and July 21, representatives from Skadden, Arps, Slate, Meagher & Flom LLP, JOMED's legal counsel ("Skadden"), performed legal due diligence near the Company's headquarters in Rancho Cordova, California. On the evening of July 20, Skadden delivered to Latham a proposed draft of a merger agreement, which proposed a cash tender offer followed by a merger. The draft merger agreement also proposed a lock-up option to purchase up to 19.9% of the Company's common stock in the event the Company ultimately decided to enter into an alternative transaction with a third party other than JOMED and gave JOMED the ability to terminate the agreement in the event that JOMED's stock price fell below a certain amount or in the event of a material adverse change in the Company's business between the signing and the closing of the agreement. On the afternoon of July 21, Messrs. Warnking and de Weerd and representatives of U.S. Bancorp Piper Jaffray and Latham held a telephonic conference call to discuss the proposed draft of the merger agreement and the legal and business issues presented thereby and proposed revisions thereto. Also on the afternoon of July 21, Skadden delivered to Latham a draft of the commitment letter from CSFB to JOMED with respect to JOMED's proposed equity offering. On the morning of July 24, the Company's Board of Directors held a regular meeting at the Company's headquarters in Rancho Cordova, California. All members of the Board of Directors attended the meeting either in person or by telephone, and representatives from U.S. Bancorp Piper Jaffray and Latham were also in attendance. Latham presented a summary of the proposed draft of the merger agreement and the comments that were proposed to be delivered to JOMED's counsel in response thereto. Particular emphasis was given to the inclusion of language in the proposed draft that gave JOMED the ability to terminate the merger agreement in the event that JOMED's stock price fell below a certain amount. The Board of Directors received a presentation by Latham concerning the Board's fiduciary obligations in considering such a transaction, and the Board of Directors authorized Mr. Warnking, U.S. Bancorp Piper Jaffray and Latham to negotiate a definitive merger agreement with JOMED, CSFB and Skadden. On the afternoon of July 24, Latham delivered comments on the proposed draft of the merger agreement to JOMED's counsel. Comments on the proposed draft of the merger agreement included, among other things, deletion of the proposed language that gave JOMED the ability to terminate the merger agreement in the event that JOMED's stock price fell below a certain amount, deletion of the proposed lock-up option to purchase up to 19.9% of the Company's common stock in the event the Company ultimately decided to enter into an alternative transaction with a third party other than JOMED, and revisions to the termination provisions, conditions to the Offer, the non-solicitation covenant and fees and expenses payable upon termination of the merger agreement. A due diligence meeting was held on July 26, 2000 involving JOMED's senior management and JOMED's financial advisors. On July 26, Messrs. Warnking, de Weerd, Elder and Peters and representatives from U.S. Bancorp Piper Jaffray, CSFB, Latham and Skadden met at Skadden's offices in New York, New York to discuss and negotiate the proposed draft merger agreement. At the meeting, much of the discussion focused on the inclusion of the proposed language that gave JOMED the ability to terminate the merger agreement in the event that JOMED's stock price fell below a certain amount, as well as additional conditions to the Offer many of which (but not all) were also conditions to the JOMED Equity Offering, that were proposed by JOMED at this meeting. Following the negotiations, on the evening of July 26, the Company's Board of Directors held another telephonic special meeting relating to JOMED's financing of the Offer. Representatives from U.S. Bancorp Piper Jaffray and Latham were also in attendance and updated the Board of Directors 22 26 on the status of the merger agreement negotiations. The Board of Directors authorized Mr. Warnking, U.S. Bancorp Piper Jaffray and Latham to continue to negotiate a definitive merger agreement with JOMED, CSFB and Skadden. The Board of Directors also instructed Mr. Warnking to contact Company A to determine whether the status of Company A's interest had changed. A representative of the Company contacted Company A and was informed that Company A's interest had not changed. On July 27, Skadden distributed a revised draft of the merger agreement to Latham. The revised draft omitted the 19.9% lock-up option, but still contained reference to the additional conditions to the Offer that were raised in the July 26 meeting in New York. The revised draft also proposed a termination fee of $8 million plus JOMED's expenses, with respect to which the revised draft proposed a cap of $3 million. After conferring with the Company and U.S. Bancorp Piper Jaffray, Latham transmitted additional comments on the revised draft of the merger agreement to Skadden on July 28. On July 31, U.S. Bancorp Piper Jaffray contacted CSFB to discuss the status, timing and likelihood of success of JOMED's proposed equity offering. Throughout the week of July 31, U.S. Bancorp Piper Jaffray continued to perform financial and operational due diligence on JOMED. On July 31, Mr. de Weerd met with Mr. Ristinmaa near JOMED's administration headquarters in Sweden to discuss the extent of JOMED's proposed financing contingency in the draft of the merger agreement and various ways to resolve the outstanding issues in connection therewith. On July 31 and August 1, a representative from JOMED's independent public accountants performed financial and accounting due diligence on the Company at the Company's headquarters in Rancho Cordova, California. On July 31 and August 1, a representative from the Company's independent auditors interviewed JOMED's independent public accountants near JOMED's administration headquarters in Sweden. On August 1, the representative met with Mr. Ristinmaa near JOMED's administration headquarters in Sweden. On August 2, representatives of the Company, JOMED, Latham and Skadden held a number of telephonic conference calls during the course of which outstanding issues on the draft merger agreement were discussed. In particular, outstanding issues regarding financing conditions were resolved and the termination fee was reduced from $8 million plus $3 million of expenses to $7 million including expenses, which remained capped at $3 million. On August 3, 2000, JOMED's board of directors held a special meeting to consider the terms of the proposed acquisition of EndoSonics. Members of JOMED's management and JOMED's financial representatives briefed the directors on the status of negotiations concerning the Merger Agreement. Management was directed to continue negotiations, with the understanding that definitive terms of the transaction would be presented to the directors at a subsequent meeting for final consideration and approval. In a telephone conversation on August 3, 2000, Mr. Peters informed Mr. Warnking that he believed that he was prepared to submit the transaction to JOMED's board of directors for their final consideration and approval. After further discussions, Mr. Warnking agreed to submit the proposed transaction at $11.00 per share to EndoSonics' Board of Directors for their consideration and approval. On August 4, JOMED's board of directors held a regular meeting in Amsterdam, The Netherlands. All members of JOMED's board of directors attended in person, Mr. Ristinmaa attended by telephone, and representatives from CSFB were also in attendance. CSFB presented a summary of the transaction rationale and financial projections of the Company and discussed the timing of a cash tender offer and financing. The JOMED board of directors approved the terms of the Merger Agreement and the financing. On August 4, U.S. Bancorp Piper Jaffray held a telephonic conference call with Mr. Ristinmaa to discuss JOMED's results of operations for the quarter ended June 30, JOMED's estimated results of operations for the quarter ending on September 30 and to conduct further financial and operational due diligence on JOMED. 23 27 On August 5, the Company's Board of Directors held a telephonic special meeting at which all directors except Dr. Gregg Stone were present. At this meeting, the Board of Directors considered the final terms of the Offer, the Merger and the Merger Agreement. The terms of the proposed transaction were reviewed with the Company's management and representatives of both Latham and U.S. Bancorp Piper Jaffray. The Board of Directors received and participated in a presentation by Latham with respect to the terms of the proposed transaction and a summary of the Board's fiduciary obligations in considering such a transaction. The Board of Directors also received and participated in a presentation by U.S. Bancorp Piper Jaffray with respect to the financial terms of the proposed transaction. At the conclusion of its presentation, representatives of U.S. Bancorp Piper Jaffray delivered the oral opinion of U.S. Bancorp Piper Jaffray to the Board (which was subsequently confirmed in writing) that, as of such date, the offer price of $11.00 per share in cash proposed to be received in the Offer and the Merger by the stockholders of the Company (other than JOMED, Purchaser and its affiliates) pursuant to the Merger Agreement is fair, from a financial point of view, to such stockholders. The Company's Board of Directors, at the August 5 special telephonic meeting, (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to and in the best interests of the Company's stockholders; (2) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger; and (3) recommended that the Company's stockholders accept the Offer and tender their Shares thereunder. The entire Board of Directors, including Dr. Gregg Stone, who was not present at the August 5 Board of Directors meeting, reaffirmed the above actions by unanimous written consent dated August 5, 2000. Following the approval by the Company's Board of Directors on August 5, Mr. Warnking executed the Merger Agreement and delivered it to JOMED, and Mr. Peters simultaneously delivered an executed copy of the Merger Agreement to the Company. On August 6, 2000, JOMED and EndoSonics jointly issued a press release announcing the execution of the Merger Agreement. On August 21, 2000, in accordance with the Merger Agreement, the Purchaser commenced the Offer. 11. THE MERGER AGREEMENT. General. The following is a summary of the material provisions of the Merger Agreement, a copy of which is filed as an exhibit to the Tender Offer Statement on Schedule TO filed by JOMED and the Purchaser pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act with the SEC in connection with the Offer (the "Schedule TO"). The summary is qualified in its entirety by reference to the Merger Agreement, which is deemed to be incorporated by reference herein. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Merger Agreement. The Offer. The Merger Agreement provides for the making of the Offer. The obligation of the Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the Minimum Condition and certain other conditions that are described in Section 15. Directors. The Merger Agreement provides that promptly upon the purchase of and payment for not less than a majority of the outstanding Shares by JOMED or any of its subsidiaries pursuant to the Offer, JOMED shall be entitled to designate for appointment or election to the Company's Board of Directors, upon written notice to the Company, such number of directors, rounded up to the next whole number, on the Board of Directors such that the percentage of its designees on the Board shall equal the percentage of the Shares beneficially owned by JOMED and its affiliates. In furtherance thereof, the Company shall, upon request of the Purchaser, use its best efforts promptly to cause JOMED's designees to be so elected to the Company's Board of Directors, and in furtherance thereof, to the extent necessary, increase the size of the Board of Directors or use its best efforts to obtain the resignation of such number of its current directors as is necessary to give effect to the foregoing provision. At such time, the Company shall also, upon the request of Purchaser, use its best efforts to cause Persons designated by JOMED to constitute at least the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of (i) each committee of 24 28 the Company's Board of Directors, (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. The Merger Agreement provides that, until the Effective Time, the Board of Directors of the Company will have at least three directors who are directors of the Company on the date of the Merger Agreement (the "Continuing Directors"). The Merger. The Merger Agreement provides that upon the terms and subject to the conditions set forth therein, at the Effective Time the Purchaser will be merged with and into the Company with the Company being the Surviving Corporation in the Merger. Following the Merger, the separate corporate existence of the Purchaser will cease, and the Company will continue as the Surviving Corporation and become a wholly owned subsidiary of JOMED. If required by the DGCL, the Company will call and hold a meeting of its stockholders (the "Company Stockholders' Meeting") promptly following consummation of the Offer for the purpose of voting upon the approval of the Merger Agreement. At any such meeting all Shares then owned by JOMED or the Purchaser or any subsidiary of JOMED will be voted in favor of adoption the Merger Agreement. Pursuant to the Merger Agreement, each Share outstanding at the Effective Time (other than Shares owned by JOMED or the Company or any of their respective subsidiaries, all of which will be cancelled, and other than Shares that are held by stockholders, if any, who properly exercise their dissenters' rights under the DGCL) will be converted into the right to receive the Merger Consideration. Stockholders who perfect their dissenters' rights under the DGCL will be entitled to the amounts determined pursuant to such proceedings. See Section 17. Representations and Warranties. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to JOMED and the Purchaser, including representations relating to the Company's due organization, good standing and corporate power, authorization and validity of the Merger Agreement, the Company's capitalization, necessary consents and approvals, no violations, the Company's reports and financial statements, information to be supplied, the absence of certain events with respect to the Company, litigation, the Company's title to properties and encumbrances on the Company's property, compliance with laws, Company employee benefit plans, taxes, intellectual property, broker's or finder's fees, environmental matters, state takeover statutes, voting requirements and approval by the Company's board of directors, the opinion of the Company's financial advisor, contracts, and products liability. Certain representations and warranties in the Merger Agreement made by the Company and JOMED are qualified as to "materiality" or "Material Adverse Effect." For purposes of the Merger Agreement and this Offer to Purchase, the term "Material Adverse Effect" means any event, change, occurrence, effect, fact or circumstance that is materially adverse to (i) the ability of the Company to perform its obligations under the Merger Agreement or to consummate the transactions contemplated thereby or (ii) the business, assets, liabilities, results of operations or financial condition of the Company and its subsidiaries, taken as a whole, provided however, that none of the following shall be deemed in themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: (a) any change in the market price or trading volume of the Company's stock after the date of the Merger Agreement; (b) any failure by the Company to meet internal projections or forecasts or published revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of the Merger Agreement; (c) any adverse change, effect, event, occurrence, state of facts or development to the extent attributable to the announcement or pendency of the Offer or the Merger (including any cancellations of or delays in customer orders, any reduction in sales, any disruption in supplier, distributor, partner or similar relationships or any loss of employees); (d) any adverse change, effect, event, occurrence, state of facts or development related to any action or inaction by JOMED or the Purchaser (including any cancellations of or delays in customer orders, 25 29 any reduction in sales, any disruption in supplier, distributor, partner or similar relationships or any loss of employees); (e) any adverse change, effect, event, occurrence, state of facts or development attributable to conditions affecting the industries in which the Company participates, the U.S. economy as a whole or foreign economies in any locations where the Company or any of its subsidiaries has material operations or sales; (f) any adverse change, effect, event, occurrence, state of facts or development attributable or relating to (i) out-of-pocket fees and expenses (including legal, accounting, investment banking and other fees and expenses) incurred in connection with the transactions contemplated by the Merger Agreement, or (ii) as a result of the Company's entry into, and as permitted by, the Merger Agreement, the payment of any amounts due to, or the provision of any other benefits (including benefits relating to acceleration of stock options) to, any officers or employees under employment contracts, non-competition agreements, employee benefit plans, severance arrangements or other arrangements in existence as of the date of the Merger Agreement; or (g) any adverse change, effect, event, occurrence, state of facts or development resulting from or relating to compliance with the terms of, or the taking of any action required by, or the failure to take any action prohibited by, the Merger Agreement. Pursuant to the Merger Agreement, JOMED and the Purchaser have made customary representations and warranties to the Company, including representations relating to their due organization, good standing and corporate power, authorization and validity of the Merger Agreement, their obtaining consents and approvals, no violations, information to be supplied by them, broker's or finder's fees, their ownership of capital stock, their activities prior to the signing of the Merger Agreement and financing. Covenants. The Merger Agreement contains various covenants of the parties thereto. A description of certain of these covenants follows: Company Conduct of Business Covenants. The Merger Agreement provides that, prior to the Effective Time and except as may be agreed in writing by JOMED, which will not be unreasonably withheld or delayed, or as expressly permitted by the Merger Agreement: (a) the Company and its subsidiaries will conduct their respective operations in all material respects only according to their ordinary and usual course of business consistent with past practice and shall use their reasonable best efforts to preserve intact their respective business organizations, keep available the services of their officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients, joint venture partners and others having significant business relationships with them; (b) except as disclosed in or expressly contemplated by the Merger Agreement, neither the Company nor any of its subsidiaries will: (1) make any change in or amendment to the Company's Certificate of Incorporation or its By-Laws; (2) issue or sell, or authorize to issue or sell, any shares of its capital stock or any other securities, or issue or sell, or authorize to issue or sell, any securities convertible into, or options, warrants or rights to purchase or subscribe for, or enter into any arrangement or contract with respect to the issuance or sale of, any shares of its capital stock or any other securities, or make any other changes in its capital structure, other than (i) the issuance of Shares upon the exercise of stock options outstanding on the date hereof, in accordance with their present terms, or (iii) issuances by a wholly owned subsidiary of the Company of capital stock to such subsidiary's parent, the Company or another wholly owned subsidiary of the Company; (3) declare, pay or set aside any dividend or other distribution or payment with respect to, or split, combine, redeem or reclassify, or purchase or otherwise acquire, any shares of its capital stock 26 30 or its other securities, other than dividends payable by a wholly owned subsidiary of the Company to the Company or another wholly owned subsidiary of the Company; (4) incur any capital expenditures or any obligations or liabilities in respect thereof, except for those (A) contemplated by the capital expenditure budget for the Company and its subsidiaries made available to JOMED, (B) incurred in the ordinary course of business of the Company and its subsidiaries and disclosed in the Merger Agreement (the "Capital Budget") or (C) not otherwise described in clauses (A) and (B) which, in the aggregate, do not exceed U.S.$1.0 million; (5) acquire or agree to acquire (A) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization of division thereof (including any of the Company's subsidiaries) or (B) any assets, including real estate, except (x) purchases of inventory, equipment, other non-material assets in the ordinary course of business consistent with past practice or (y) expenditures consistent with the Company's Capital Budget; (6) except in the ordinary course of business consistent with past practice and except to the extent required under existing employee and director benefit plans, agreements or arrangements as in effect on the date of the Merger Agreement, increase the compensation or fringe benefits of any of its directors, officers or employees or grant any severance or termination pay not currently required to be paid under existing severance plans or enter into any employment, consulting or severance agreement or arrangement with any present or former director, officer or other employee of the Company or any of its subsidiaries, or hire or agree to hire, or enter into any employment agreement with, any new or additional key employee or officer having an annual salary of U.S.$150,000 or more; (7) except as required to comply with applicable law or expressly provided in the Merger Agreement, (A) adopt, enter into, terminate or amend any Company Benefit Plan (as defined herein) or other arrangement for the current or future benefit or welfare of any director, officer or current or former employee, except to the extent necessary to coordinate any such Company Benefit Plans with the terms of the Merger Agreement, (B) pay any benefit not provided for under any Company Benefit Plan, accelerate the payment, right of payment or vesting of any bonus, severance, profit sharing, retirement, deferred compensation, stock option, insurance or other compensation or benefits, (C) grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Company Benefit Plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any Company Benefit Plans or agreements or awards made thereunder) or (D) except as required by the current terms thereof take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Company Benefit Plan; (8) transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of, encumber or subject to any lien, any material assets, other than in the ordinary course of business; (9) except as required by applicable law or GAAP, make any change in its methods of accounting; (10) adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries (other than the Merger) or any agreement relating to a Takeover Proposal, except as contemplated by the Merger Agreement (see "-- No Solicitation") (11) (i) incur or assume any long-term debt, or except in the ordinary course of business, incur or assume any short-term indebtedness in amounts not consistent with past practice; (ii) incur or modify any material indebtedness or other liability; (iii) assume, guarantee, endorse or 27 31 otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except in the ordinary course of business and consistent with past practice; (iv) make any loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned subsidiaries of the Company, or by such subsidiaries to the Company, or customary loans or advances to employees in accordance with past practice); (v) settle any claims in excess of U.S.$1 million other than in the ordinary course of business, in accordance with past practice, and without admission of liability; or (vi) enter into any material commitment or transaction in excess of U.S.$1 million except in the ordinary course of business; (12) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of any such claims, liabilities or obligations, in the ordinary course of business and consistent with past practice, or of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated subsidiaries; (13) enter into any agreement, understanding or commitment that materially restrains, limits or impedes the Company's or any of its subsidiaries' ability to compete with or conduct any business or line of business, including, but not limited to, geographic limitations on the Company's or any of its subsidiaries' activities; (14) plan, announce, implement or effect any material reduction in labor force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of the Company or its subsidiaries. However, routine employee terminations for cause shall not be considered subject to this provision; (15) take any action including, without limitation, the adoption of any shareholder rights plan or amendments to its certificate of incorporation or by-laws (or comparable governing documents), which would, directly or indirectly, restrict or impair the ability of JOMED to vote, or otherwise to exercise the rights and receive the benefits of a shareholder with respect to, securities of the Company acquired or controlled by JOMED or the Purchaser or permit any shareholder to acquire securities of the Company on a basis not available to JOMED or the Purchaser in the event that JOMED or the Purchaser were to acquire any additional Shares (subject to the Company's right to take action specifically permitted by the Merger Agreement); (16) materially modify, amend or terminate any material contract to which it is a party or waive or assign any of its material rights or claims except in the ordinary course of business consistent with past practice; (17) other than in the ordinary course of business consistent with past practice, make any tax election or enter into any settlement or compromise of any tax liability that in either case is material to the business of the Company and its subsidiaries as a whole; or (18) agree, in writing or otherwise, to take any of the foregoing actions. (c) The Company shall not, and shall not permit any of its subsidiaries to, take any voluntary action that would result in (i) any of its representations and warranties set forth in the Merger Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material manner having a Material Adverse Effect or (iii) any of the conditions to the Offer set forth in subsections (a), (c), (d) and (e) of Annex I of the Merger Agreement (and listed in Section 15 hereof) not being satisfied (subject to the Company's right to take action specifically permitted by the Merger Agreement). Confidentiality. The Merger Agreement provides that, prior to the Effective Time and after any termination of the Merger Agreement, each of JOMED and the Company will hold, and shall use its best 28 32 efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors, lenders and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the other party furnished to it or its affiliates in connection with the transactions contemplated by the Merger Agreement, except to the extent that such information can be shown to have been previously known on a nonconfidential basis by such party, in the public domain through no fault of such party or later lawfully acquired by such party from sources other than the other party. However, JOMED and the Company may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors, lenders and agents in connection with the transactions contemplated by the Merger Agreement so long as such party informs such persons of the confidential nature of such information and directs them to treat it confidentially. JOMED and the Company shall satisfy its obligation to hold any such information in confidence if it exercises the same care with respect to such information as it would take to preserve the confidentiality of its own similar information. If the Merger Agreement is terminated, JOMED and the Company shall, and shall use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors, lenders and agents to, destroy or deliver to the other party, upon request, all documents and other materials, and all copies thereof, that it or its affiliates obtained, or that were obtained on their behalf, from the other party in connection with the Merger Agreement and that are subject to such confidence. The confidentiality agreement dated June 26, 2000 between the JOMED and the Company shall remain in full force and effect. Special Meeting; Proxy Statement. Following the purchase of Shares pursuant to the Offer, if required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, will, in accordance with applicable law: (i) call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") for the purposes of considering and taking action upon the approval of the Merger and adoption of the Merger Agreement; (ii) prepare and file with the SEC a preliminary proxy or information statement relating to the Merger and the Merger Agreement (the "Proxy Statement") and obtain and furnish the information required to be included by the SEC in the Proxy Statement and, after consultation with JOMED, respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, to be mailed to its stockholders at the earliest practicable date, provided that no amendments or supplements to the Proxy Statement will be made by the Company without consultation with JOMED and its counsel; (iii) take all action necessary to solicit from its stockholders proxies, and take all other action necessary and advisable, to secure the vote of stockholders required by applicable law and the Company's Certificate of Incorporation or By-Laws to obtain the approval for the Merger Agreement and the Merger; and (iv) unless the Board of Directors of the Company otherwise determines (based on a majority vote of the Board of Directors in its good faith judgment that such other action is necessary to comply with its fiduciary duty to stockholders under applicable law after consulting with outside legal counsel) prior to the Company Shareholder Approval, (x) recommend approval and adoption by its stockholders of the Merger Agreement (the "Company Recommendation"), (y) not amend, modify, withdraw, condition or qualify the Company Recommendation in a manner adverse to JOMED or take any action or make any statement inconsistent with the Company Recommendation and (z) take all lawful action to solicit the Company Shareholder Approval whether or not the Company Recommendation remains in effect. JOMED will vote, or cause to be voted, all of the Shares acquired in the Offer or otherwise then owned by it, the Purchaser or any of JOMED's other subsidiaries in favor of the approval and adoption of the Merger Agreement. 29 33 In the event that JOMED, the Purchaser and any other subsidiaries of JOMED acquires in the aggregate at least 90% of the outstanding shares of each class of capital stock of the Company pursuant to the Offer or otherwise, the parties hereto will, subject to the conditions to the Merger set forth in the Merger Agreement, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. Reasonable Best Efforts. The Merger Agreement provides that JOMED, the Purchaser and the Company will use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger, and the other transactions contemplated by the Merger Agreement, including: (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision ("Governmental Authority") and the making of all necessary registrations and filings (including filings with any Governmental Authority, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority; (ii) the obtaining of all necessary consents, approvals or waivers from third parties; (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of any of the transactions contemplated by the Merger Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed; (iv) the obtaining of the financing contemplated by the JOMED Equity Offering, including the Company's providing financial statements and financial and other business information required to be disclosed by JOMED in connection therewith; and (v) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, the Merger Agreement; provided, however, that no loan agreement or contract for borrowed money entered into by the Company or any of its subsidiaries shall be repaid except as currently required by its terms, in whole or in part, and no contract shall be amended to increase the amount payable thereunder or otherwise to be more burdensome to the Company or any of its subsidiaries in order to obtain any such consent, approval or authorization without first obtaining the written approval of JOMED. The Merger Agreement provides that the Company shall give prompt notice to JOMED of (i) any representation or warranty made by it contained in the Merger Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect (including in the case of representations or warranties by the Company, the Company receiving knowledge of any fact, event or circumstance which may cause any representation qualified as to the knowledge of the Company to be or become untrue or inaccurate in any respect) or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement. However, no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under the Merger Agreement. The Company acknowledges that if after the date of the Merger Agreement the Company receives knowledge of any fact, event or circumstance that would cause any representation or warranty that is conditioned as to the knowledge of the Company to be or become untrue or inaccurate in any respect, the receipt of such knowledge shall constitute a breach of the representation or warranty that is so conditioned as of the date of such receipt. The Merger Agreement provides that JOMED will, at its expense, engage a nationally-recognized agent to provide information to stockholders of the Company with respect to the Offer and to encourage stockholders to deliver their shares to the designated depositary for the Offer. 30 34 Employee Stock Options and Other Employee Benefits. The Merger Agreement provides that the Company, the Company's Board of Directors and each relevant committee of the Company's Board of Directors shall, effective as of the consummation of the Offer, cause each share of restricted Company Common Stock, including those subject to mandatory resale provisions under Dutch law (collectively, "Restricted Shares"), and each employee, consultant or director option to purchase Shares (collectively, the "Stock Options") which is outstanding immediately prior to the consummation of the Offer under the Company's Restated 1988 Stock Option Plan, the Company's 1998 Stock Option Plan, and the Company's 1999 Nonstatutory Stock Option Plan (including, without limitation, any option originally granted under the Microsound Corporation 1997 Stock Plan), each as amended, all other plans and all individual grants of the Company or its subsidiaries (the "Stock Option Plans") to vest all Restricted Shares and to have all restrictions and mandatory resale provisions lapse (in the case of the Restricted Shares), and (in the case of the Stock Options), whether or not then exercisable or vested, to become fully exercisable and vested. The Company shall use its reasonable best efforts to cause each Stock Option that is outstanding immediately prior to the consummation of the Offer to be cancelled in exchange for an amount in cash, payable at the consummation of this Offer to Purchase, equal to the product of (i) the number of Shares subject to such Stock Option and (ii) the excess, if any, of the Offer Price over the per share exercise price of such Stock Option. The Company, the Company's Board of Directors and each relevant committee of the Company's Board of Directors shall use their reasonable best efforts to obtain the written consent of the holder of each Stock Option, effective upon the consummation of the Offer, to such cancellation. Subject to having obtained any necessary consents from the holders of Stock Options, the Company shall cause the Company's Board of Directors or each relevant committee of the Company's Board of Directors to make any amendments to the Stock Option Plans or stock option agreements thereunder which may be needed or desirable to implement such cancellation. Further, concurrent with the execution of the Merger Agreement, the Company, the Company's Board of Directors and each relevant committee thereof shall take any and all action required with respect to the Company's 1998 Employee Stock Purchase Plan (the "Stock Purchase Plan") to set a New Purchase Date (as defined in the Stock Purchase Plan) with respect to the Offering Period (as defined in the Stock Purchase Plan) commencing August 1, 2000, which New Purchase Date shall be no later than fifteen (15) days after the date of the Merger Agreement. The Company, the Company's Board of Directors and each relevant committee thereof shall provide any written notice required under Section 18(b) of the Stock Purchase Plan with respect to the foregoing. The Merger Agreement also provides that the Company will cause all of its Stock Option Plans, its 1998 Employee Stock Purchase Plan and its 1984 Restricted Stock Purchase Plan (together, the "Company Stock Plans") to terminate as of the Effective Time and the provisions in any other of the Company's benefit plans or any other plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time, and the Company shall use its reasonable best efforts to ensure that following the Effective Time no holder of a stock option or any participant in any Company Stock Plan or Company benefit plan or any other plan shall have any right thereunder to acquire any capital stock of the Company, JOMED or the Surviving Corporation. No Solicitation. The Merger Agreement provides that the Company shall, and shall use its reasonable best efforts to cause its affiliates, officers, directors, employees, financial advisors, attorneys and other advisors, representatives and agents to, immediately cease any discussions or negotiations with third parties with respect to any Takeover Proposal (as defined below). The Company shall not, nor shall it authorize or permit any of its affiliates to, nor shall it authorize or permit any officer, director or employee of or any financial advisor, attorney or other advisor, representative or agent of it or any of its affiliates, to (i) directly or indirectly solicit, facilitate, initiate or encourage the making or submission of, any Takeover Proposal (including, without limitation, the taking of any action which would make Section 203 of the DGCL inapplicable to a Takeover Proposal), (ii) enter into any agreement, arrangement or understanding with respect to any Takeover Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by the Merger Agreement, (iii) initiate or participate in any way in any discussions or negotiations regarding, or furnish or disclose to any person (other 31 35 than a party to the Merger Agreement) any information with respect to, or take any other action to facilitate or in furtherance of any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Takeover Proposal, or (iv) grant any waiver or release under any standstill or similar agreement with respect to any class of the Company's equity securities (other than to permit the Company to receive an unsolicitated Takeover Proposal that did not result from a breach of this provision); provided that prior to the acceptance for payment of shares of the Shares pursuant to the Offer, in response to an unsolicited Takeover Proposal that did not result from the breach of this provision and following delivery to JOMED of notice of the Takeover Proposal in compliance with its obligations under this provision, the Company may participate in discussions or negotiations with or furnish information (pursuant to a confidentiality/standstill agreement with customary terms) to any third party which makes a bona fide written Takeover Proposal if (A) a majority of the Company's Board of Directors reasonably determines in good faith (after consultation with its financial advisor) that taking such action would be reasonably likely to lead to the delivery to the Company of a Superior Proposal and (B) a majority of the Company's Board of Directors determines in good faith (after consultation with outside legal counsel) that it is necessary to take such actions in order to comply with its fiduciary duties under applicable law. Without limiting the foregoing, the Company agrees that any violation of the restrictions set forth in this provision by any of its, or any of its subsidiaries', officers, employees, affiliates or directors or any advisor, representative, consultant or agent retained by the Company or any of its subsidiaries or affiliates in connection with the transactions contemplated in the Merger Agreement, whether or not such Person is purporting to act on behalf of the Company or any of its subsidiaries, shall constitute a breach of this provision by the Company. For purposes of the Merger Agreement, "Takeover Proposal" means any inquiry, proposal or offer from any person or group relating to (i) any direct or indirect acquisition or purchase of 20% or more of the assets of the Company or any of its subsidiaries or 20% or more of any class of equity securities of the Company or any of its subsidiaries, (ii) any tender offer or exchange offer that, if consummated, would result in any Person beneficially owning 20% or more of any class of equity securities of the Company or any of its subsidiaries or (iii) any merger, consolidation, business combination, sale of all or any substantial portion of the assets, recapitalization, liquidation or a dissolution of, or similar transaction of the Company or any of its subsidiaries other than the Offer or the Merger; and "Superior Proposal" means a bona fide written Takeover Proposal made by a third party to purchase at least a majority of the outstanding equity securities of the Company pursuant to a tender offer, exchange offer, merger or other business combination (x) on terms which a majority of the Company's Board of Directors determines in good faith (after consultation with its financial advisor) to be superior to the Company and its stockholders (in their capacity as stockholders) from a financial point of view (taking into account, among other things, all legal, financial, regulatory and other aspects of the proposal and identity of the offeror) as compared to the transactions contemplated in the Merger Agreement and any alternative proposed by JOMED or the Purchaser in accordance with the Merger Agreement and (y) which is reasonably capable of being consummated. In the Merger Agreement, the Company agrees that, except in connection with the acceptance of a Superior Proposal, neither its Board of Directors nor any committee thereof shall (i) approve or recommend, or, in the case of a committee, propose to the Board of Directors to approve or recommend any Takeover Proposal or (ii) approve, recommend or cause it to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") related to any Takeover Proposal. Prior to the acceptance for payment of shares of the Shares pursuant to the Offer, the Company and/or its Board of Directors may take the actions otherwise prohibited by the Merger Agreement if (i) a third party makes a Superior Proposal, (ii) the Company complies with its obligations under the Merger Agreement to inform JOMED of the Superior Proposal, (iii) all of the conditions to the Company's right to terminate the Merger Agreement have been satisfied and (iv) simultaneously therewith, the Merger Agreement is terminated due to the Company's acceptance of a Superior Proposal. The Merger Agreement also provides that the Company will promptly notify JOMED in writing of any Takeover Proposal or any inquiry regarding the making of any Takeover Proposal. 32 36 Nothing contained in the Merger Agreement prohibits the Company or the Company's Board of Directors from at any time taking and disclosing to its stockholders a position contemplated by Rule 14e-2 promulgated under the Exchange Act or from making any disclosure to the Company's stockholders required by applicable law. Public Announcements. JOMED and the Company agree they will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by the Merger Agreement and shall not issue any such press release or make any such public statement prior to such consultation and review by the other party of such release or statement, except as may be required by law, court process or by obligations pursuant to any listing agreement with a national securities exchange. Indemnification; Insurance. In the Merger Agreement, JOMED, the Purchaser and the Surviving Corporation agree that all rights to indemnification existing in favor of the present or former directors, officers, employees, fiduciaries and agents of the Company or any of its subsidiaries (collectively, the "Indemnified Parties") as provided in the Company's Certificate of Incorporation or By-Laws or the certificate or articles of incorporation, by-laws or similar organizational documents of any of the subsidiaries as in effect as of the Effective Time shall survive the Merger and shall continue in full force and effect for six years after the Effective Time (without modification or amendment, except as required by applicable law) in accordance with their terms, to the fullest extent permitted by law, and shall be enforceable by the Indemnified Parties against the Surviving Corporation. JOMED will cause to be maintained in effect for not less than six years from the Effective Time the current policies of the directors' and officers' liability insurance maintained by the Company (provided that the Purchaser may substitute therefor polices of at least equivalent coverage containing terms and conditions which are no less advantageous) with respect to matters occurring prior to the Effective Time, provided that in no event will the Purchaser or the Surviving Corporation be required to expend to maintain or procure insurance coverage pursuant to this provision any amount per annum in excess of U.S.$400,000. In the event the payment of such amount for any year is insufficient to maintain such insurance or equivalent coverage cannot otherwise be obtained, the Surviving Corporation shall purchase as much insurance as may be purchased for the amount indicated. The provisions of this provision shall survive the consummation of the Merger and expressly are intended to benefit each of the Indemnified Parties. Employee Benefits. For a period of one year following the Effective Time, the Purchaser will, or will cause the Surviving Corporation to, provide all of the employees of the Surviving Corporation and its subsidiaries with employee benefit plans, programs, policies or arrangements (the "Purchaser Benefit Plans") as are substantially equivalent, in the aggregate, to those currently provided by the current benefit plans of the Company. Except to the extent that benefits may be duplicated, each Purchaser Benefit Plan shall give full credit for each employee's period of service with the Company and its subsidiaries prior to the Effective Time for all purposes for which such service was recognized under the Company benefit plans prior to the Effective Time, including, but not limited to, recognition of service for vesting, amount of benefits, eligibility to participate, and eligibility for disability and early retirement benefits (including subsidies relating to such benefits) and full credit for deductibles satisfied under the benefit plans toward any deductibles for the same period following the Effective Time, and shall waive any pre-existing condition limitation for any Company employee covered under any Company benefit plan immediately prior to the Effective Time. Option to Acquire Additional Shares. The Merger Agreement provides that the Company shall grant to the Purchaser an irrevocable option (the "Option") to purchase up to that number of newly issued Shares (the "Option Shares") equal to the number of Shares that, when added to the number Shares owned by JOMED, the Purchaser and its affiliates immediately following consummation of the Offer, shall constitute one share more than 90% of the shares of Common Company Stock then outstanding on a fully diluted basis (after giving effect to the issuance of the Option Shares) for a consideration per Option Share equal to the Offer Price. Such Option shall be exercisable only after the purchase of and payment for Shares pursuant to the Offer by JOMED or the Purchaser as a result of which JOMED and its affiliates own beneficially at least 85% of the outstanding Shares on a fully diluted basis. Such Option shall not be exercisable if (i) the number 33 37 of Shares subject thereto exceeds the number of authorized Shares available for issuance, or (ii) the exercise of the Option would violate the applicable rules of the Nasdaq National Market applicable to the Company. In the event the Purchaser wishes to exercise the Option, the Purchaser shall give the Company a one-day prior written notice of its exercise of the Option specifying the number of Shares that are or will be owned by JOMED, the Purchaser and its affiliates immediately following consummation of the Offer and a place and a time (which may be concurrent with the consummation of the Offer) for the closing of such purchase. The Company shall, as soon as practicable following receipt of the notice, deliver written notice to the Purchaser specifying the number of Option Shares. At the closing of the purchase of the Option Shares, the portion of the purchase price owing upon exercise of such Option which equals the product of (x) the number of Shares purchased pursuant to such Option multiplied by (y) the Offer Price shall be paid to the Company in cash by wire transfer or cashier's check. Conditions to the Merger. The Merger Agreement provides that the obligations of JOMED, the Purchaser and the Company to consummate the Merger are subject to the satisfaction of the following conditions at or prior to the Effective Time: - the Merger Agreement shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable law, in order to consummate the Merger; - no provision of any applicable law or regulation and no judgment, injunction, order or decree of any Governmental Authority of competent jurisdiction shall prohibit the consummation of the Merger; and - the Purchaser shall have purchased Shares pursuant to the Offer; provided, however, that neither JOMED nor the Purchaser shall be entitled to rely on this clause if either of them shall have failed to purchase Shares pursuant to the Offer in breach of their obligations under the Merger Agreement. Pursuant to the Merger Agreement, the obligations of JOMED and the Purchaser to consummate the Merger are subject to the Company having performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time. Conversely, the obligations of the Company to consummate the Merger are subject to the JOMED and the Purchaser having performed in all material respects all of their obligations hereunder required to be performed by either of them at or prior to the Effective Time. Termination. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after adoption of the Merger Agreement by stockholders: (a) by mutual written consent of JOMED and the Company; or (b) by JOMED: (1) provided that neither JOMED nor the Purchaser is in material breach of its obligations under the Merger Agreement, if at any time prior to the acceptance for payment of Shares pursuant to the Offer, the Company has breached in any material respect any representation, warranty, covenant or other agreement contained in the Merger Agreement, which (i) would give rise to the failure of a condition set forth in paragraph (d) of Section 15 of this Offer to Purchase, (ii) cannot be or has not been cured prior to the Termination Date and (iii) has not been waived by JOMED pursuant to the provisions of the Merger Agreement; (2) if at any time prior to the acceptance for payment of Shares pursuant to the Offer, (A) the Company, or its Board of Directors, as the case may be, shall have (w) entered into any agreement with respect to any Takeover Proposal other than the Offer or the Merger or a confidentiality/standstill agreement permitted under the Merger Agreement, (x) amended, conditioned, qualified, withdrawn or modified, or, in the case of a committee, proposed to the Board of Directors, or resolved to do so, in a manner adverse to JOMED or the Purchaser, its approval and recommendation of the Offer, the Merger and the Merger Agreement, or (y) approved or recommended, or, in the case of a committee, proposed to the Board of Directors, to approve or recommend, any Takeover Proposal other than the Offer or the Merger, 34 38 or (B) the Company or the Company's Board of Directors or any committee thereof shall have resolved to do any of the foregoing; or (3) if the Company breaches in any material respect its obligations under the sections of the Merger Agreement relating to Takeover Proposals; (c) by the Company, if at any time prior to the acceptance for payment of Shares pursuant to the Offer a Superior Proposal is received by the Company and the Board of Directors of the Company reasonably determines in good faith (after consultation with outside legal counsel) that it is necessary to terminate the Merger Agreement and enter into an agreement to effect the Superior Proposal in order to comply with its fiduciary duties under applicable law; provided that the Company may not terminate the Merger Agreement pursuant to this provision unless and until (i) three (3) business days have elapsed following delivery to JOMED of a written notice of such determination by the Board of Directors of the Company and during such three (3) business day period the Company has fully cooperated with JOMED, including, without limitation, informing JOMED of the terms and conditions of such Superior Proposal, and the identity of the person making such Superior Proposal, with the intent of enabling both parties to agree to a modification of the terms and conditions of the Merger Agreement so that the transactions contemplated in the Merger Agreement may be effected; (ii) at the end of such three (3) business day period the Takeover Proposal continues to constitute a Superior Proposal and the Board of Directors of the Company confirms its determination (after consultation with outside legal counsel) that it is necessary to terminate the Merger Agreement and enter into an agreement to effect the Superior Proposal to comply with its fiduciary duties under applicable law; and (iii) (x) at or prior to such termination, JOMED has received all fees and expenses as set forth in the Merger Agreement by wire transfer in immediately available funds and (y) immediately following such termination the Company enters into a definitive acquisition, merger or similar agreement to effect the Superior Proposal; or (d) by either JOMED or the Company: (1) if the Offer has not been consummated on or before November 15, 2000 (the "Termination Date"); provided that the right to terminate the Merger Agreement pursuant to this clause shall not be available to any party whose failure to fulfill any material obligation of the Merger Agreement or other material breach of the Merger Agreement has been the cause of, or resulted in, the failure of the Offer to have been consummated on or prior to the aforesaid date; or (2) if any court of competent jurisdiction or any Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently restricting, enjoining, restraining or otherwise prohibiting acceptance for payment of, and payment for, Shares pursuant to the Offer or consummation of the Merger and such order, decree, ruling or other action shall have become final and nonappealable; (e) by the Company, provided the Company is not in material breach of its obligations under the Merger Agreement, if JOMED or the Purchaser shall have (x) failed to commence the Offer by August 21, 2000 after the public announcement by JOMED and the Company of the Merger Agreement, (y) failed to pay for Shares pursuant to the Offer in accordance with the Merger Agreement, or (z) breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in the Merger Agreement. Payment of Certain Fees and Expenses. If the Merger Agreement is terminated by JOMED as set forth in paragraphs (b)(1), (b)(2)(A)(w), (b)(2)(A)(y), (b)(2)(B) (unless related to a resolution to take any of the actions set forth in paragraph (b)(2)(A)(x), in which case the provisions set forth below shall apply) or (b)(3) above, or by the Company as set forth in paragraph (c) above, then the Company shall (A) reimburse JOMED for all of its Expenses and (B) pay to JOMED in immediately available funds a 35 39 termination fee in an amount equal to U.S.$7 million less Expenses paid or payable by the Company (the "Termination Fee"). If the Merger Agreement is terminated by JOMED or the Company as set forth in paragraph (d)(1) above due to a reason other than the conditions listed in paragraphs (a), (b), (f), (g), (h), (i) or (j) of Section 15 of this Offer, and (x) a Takeover Proposal has been made and publicly announced or communicated to the Company's stockholders after the date of the Merger Agreement and prior to the Termination Date and (y) concurrently with or within twelve (12) months of the date of such termination a Third Party Acquisition Event occurs, then the Company shall within one business day of the occurrence of such a Third Party Acquisition Event (including any revisions or amendments thereto), if any, pay to JOMED the Termination Fee and reimburse JOMED for all of its Expenses. "Third Party Acquisition Event" shall mean (i) the consummation of a Takeover Proposal involving the purchase of a majority of either the equity securities of the Company or of the consolidated assets of the Company and its subsidiaries, taken as a whole, or any such transaction that, if it had been proposed prior to the termination of the Merger Agreement would have constituted a Takeover Proposal or (ii) the entering into by the Company or any of its subsidiaries of a definitive agreement with respect to any such transaction. "Expenses" shall mean documented and reasonable out-of-pocket fees and expenses up to a maximum aggregate amount of U.S.$3 million incurred or paid in connection with the Merger or the consummation of any of the transactions contemplated by the Merger Agreement, including, but not limited to, all filing fees, printing fees and reasonable fees and expenses of law firms, commercial banks, investment banking firms, accountants, experts and consultants. If the Merger Agreement is terminated by JOMED pursuant to paragraph (b)(2)(A)(x) above, then (i) the Company shall (A) pay to JOMED 50% of the Termination Fee and (B) reimburse JOMED for all of its Expenses and (ii) if concurrently with or within 12 months after such termination a Third Party Acquisition Event occurs, then the Company shall pay to JOMED 50% of the Termination Fee within one business day of the occurrence of such a Third Party Acquisition Event (including any revisions or amendments thereto). Effect of Termination. In the event of termination of the Merger Agreement by JOMED or the Company, the Merger Agreement shall forthwith become void and there shall be no liability hereunder on the part of the Company, JOMED or the Purchaser or their respective officers or directors (except for the provisions described in "Confidentiality," "Effect of Termination," "Payment of Certain Fees and Expenses" and "Assignment" of this Section 11 of the Offer, and certain other provisions of the Merger Agreement relating to notices, entire agreement, enforcement, applicable law, waiver of jury trial and JOMED guarantee, which shall survive the termination). However, no provision described in "Effect of Termination" and "Payment of Certain Fees and Expenses" shall relieve any party hereto from any liability for any breach of the Merger Agreement. Assignment. Neither the Merger Agreement nor any of the rights, interests or obligations under the Merger Agreement may be assigned by any of the parties to the Merger Agreement (JOMED, the Purchaser and the Company) without the prior written consent of the other parties, except that the Purchaser may assign and transfer its right and obligations hereunder to any of its affiliates. Amendment or Supplement. Subject to applicable law, the Merger Agreement may be amended, modified and supplemented in writing by JOMED, the Purchaser and the Company in any and all respects before the Effective Time (notwithstanding the Company Shareholder Approval contemplated by the Merger Agreement), by action taken by the respective Boards of Directors of JOMED, the Purchaser and the Company (or, if required by the Merger Agreement, the Continuing Directors) or by the respective officers authorized by such Boards of Directors or the Continuing Directors, as the case may be. However, that after the Company Shareholder Approval, no amendment shall be made which by law requires further approval by the stockholders of the Company without such further approval. Guarantee. JOMED has guaranteed the performance of any and all obligations and liabilities of the Purchaser under or arising out of the Merger Agreement and the transactions contemplated thereby. 36 40 12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY. Purpose of the Offer. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is to acquire all outstanding Shares not tendered and purchased pursuant to the Offer. If the Offer is successful, the Purchaser intends to consummate the Merger as promptly as practicable. The Company's Board of Directors has approved the Merger and the Merger Agreement. Depending upon the number of Shares purchased by the Purchaser pursuant to the Offer, the Company's Board of Directors may be required to submit the Merger Agreement to the Company's stockholders for approval and adoption at a stockholder's meeting convened for that purpose in accordance with the DGCL. If stockholder approval is required, the Merger Agreement must be approved by a majority of all votes entitled to be cast at such meeting. If the Minimum Condition is satisfied, the Purchaser will have sufficient voting power to approve the Merger Agreement at the stockholders' meeting without the affirmative vote of any other stockholder. If the Purchaser acquires at least 90% of the then outstanding Shares pursuant to the Offer, the Merger may be consummated without a stockholder meeting and without the approval of the Company's stockholders. The Merger Agreement provides that the Purchaser will be merged into the Company and that the certificate of incorporation and bylaws of the Purchaser will be the certificate of incorporation and bylaws of the Surviving Corporation following the Merger; provided that, at the Effective Time, such certificate of incorporation shall be amended to provide that the name of the corporation shall be "EndoSonics Corporation." Appraisal Rights. Under the DGCL, holders of Shares do not have dissenters' rights in connection with the Offer. In connection with the Merger, however, stockholders of the Company may have the right to dissent and demand appraisal of their Shares under the DGCL. Dissenting stockholders who comply with the applicable statutory procedures under the DGCL will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) and to receive payment of such fair value in cash. Any such judicial determination of the fair value of the Shares could be based upon considerations other than or in addition to the price per Share paid in the Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Stockholders should recognize that the value so determined could be higher or lower than the price per Share paid pursuant to the Offer or the consideration per Share to be paid in the Merger. Moreover, the Purchaser may argue in an appraisal proceeding that, for purposes of such a proceeding, the fair value of the Shares is less than the price paid in the Offer or the Merger. Plans for the Company. Pursuant to the terms of the Merger Agreement, promptly upon the purchase of and payment for any Shares by the Purchaser pursuant to the Offer, JOMED currently intends to seek maximum representation on the Company's Board of Directors, subject to the requirement in the Merger Agreement that if Shares are purchased pursuant to the Offer, there shall be until the Effective Time at least three members of the Company's Board of Directors who were directors as of the date of the Merger Agreement. Except as otherwise set forth in this Offer to Purchase, it is expected that, initially following the Merger, the business and operations of the Company will be continued substantially as they are currently being conducted. JOMED will continue to evaluate the business and operations of the Company during the pendency of the Offer. In addition, after the consummation of the Offer and the Merger JOMED intends to conduct a comprehensive review of the Company's business, operations, capitalization, corporate structure and management with a view to optimizing development of the Company's potential in conjunction with JOMED'S businesses. After such review JOMED will determine what actions or changes, if any, would be desirable in light of the circumstances which then exist. 37 41 Except as described above or elsewhere in this Offer to Purchase, the Purchaser and JOMED have no present plans or proposals that would relate to or result in (i) any extraordinary corporate transaction involving the Company or any of its subsidiaries (such as a merger, reorganization, liquidation, relocation of any operations or sale or other transfer of a material amount of assets), (ii) any sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (iii) any material change in the Company's capitalization or dividend policy or (iv) any other material change in the Company's corporate structure or business. 13. CERTAIN EFFECTS OF THE OFFER. Market for the Shares. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly, which could adversely affect the liquidity and market value of the remaining Shares held by stockholders other than the Purchaser. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether such reduction would cause future market prices to be greater or less than the Offer Price. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the SEC if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for trading on the Nasdaq. JOMED and the Purchaser currently intend to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration are met. 14. DIVIDENDS AND DISTRIBUTIONS. As discussed in Section 11, the Merger Agreement provides that from the date of the Merger Agreement to the Effective Time, without the prior written approval of JOMED, the Company will not and will not permit any of its subsidiaries to authorize or pay any dividends on or make any distribution with respect to its outstanding shares of capital stock (other than dividends or distributions by wholly owned subsidiaries of the Company). 15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, but subject to compliance with the provisions of the Merger Agreement which require JOMED to extend the expiration date of the Offer if the conditions to the Offer could reasonably be expected to be satisfied, the Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer in accordance with the Merger Agreement, if prior to the expiration date of the Offer, (i) the Minimum Condition shall not have been satisfied, or (ii) the applicable waiting period under the HSR Act or any of the European antitrust laws shall not have expired or been terminated or (iii) at any time on or after the date of the Merger Agreement and prior to the expiration date of the Offer, any of the following conditions exists: (a) there shall have been any action threatened or taken, or any statute, rule, regulation, judgment, order or injunction promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or 38 42 the Merger by any domestic or foreign Federal or state governmental regulatory or administrative agency or authority or court or legislative body or commission which directly or indirectly (l) prohibits, or imposes any material limitations, other than limitations generally affecting the industries in which the Company and JOMED conduct their business, on, JOMED's or the Purchaser's ownership or operation (or that of any of their respective subsidiaries or affiliates) of all or a material portion of the Company's businesses or assets as a whole, or compels JOMED or the Purchaser or their respective subsidiaries and affiliates to dispose of or hold separate any material portion of the business or assets of the Company or JOMED in each case taken as a whole, (2) prohibits, or makes illegal, the acceptance for payment, payment for or purchase of shares of Shares or the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement, (3) results in the material delay in the ability of the Purchaser, or renders the Purchaser unable, to accept for payment, pay for or purchase a material amount of the shares of Shares, or (4) imposes material limitations on the ability of the Purchaser or JOMED effectively to exercise full rights of ownership of the shares of the Shares including, without limitation, the right to vote the shares of the Shares purchased by it on all matters properly presented to the Company's stockholders; or (b) there shall have occurred (1) any general suspension of trading in, or limitation on prices for, securities in the Nasdaq National Market System (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index) or a general suspension or material limitation on trading on or by, as the case may be, the SWX Swiss Exchange (whether on the SWX New Market segment or otherwise) for a minimum of three consecutive trading days, (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, The Netherlands, Switzerland or Sweden (whether or not mandatory), (3) a commencement or escalation of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, The Netherlands, Switzerland or Sweden which materially adversely affects or delays the Offer, (4) any limitation (whether or not mandatory) by any Governmental Authority on the extension of credit by banks or other financial institutions in a manner which prohibits the extension of funds to JOMED or the Purchaser or (5) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (c) any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving a prospective change) in the business, assets, liabilities, financial condition, capitalization, operations or results of operations of the Company or any of its subsidiaries that is or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect; or (d) (1) the Company shall have breached or failed to perform in all material respects any of its obligations under the Merger Agreement, (2) any of the representations and warranties of the Company contained in the Merger Agreement that are qualified by reference to a Material Adverse Effect shall not be true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date), or (3) any of the representations and warranties of the Company contained in the Merger Agreement that are not so qualified shall not be true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date), except, in the case of clause (3) only, for such inaccuracies as are not reasonably likely to, individually or in the aggregate, result in a Material Adverse Effect; or (e) the Company's Board of Directors shall have withdrawn, or modified or changed in a manner adverse to JOMED or the Purchaser (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or the Merger, or recommended another proposal or offer, or shall have resolved to do any of the foregoing; or (f) if on either of (i) the date of the execution of the Purchase Agreement or (ii) on the first trading day immediately prior to the closing date of the Purchase Agreement, as such date is defined in the Purchase Agreement, the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange 39 43 shall be less than (i) 42 Swiss Francs or (ii) one-half of the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange on the first trading day following the announcement of the Offer and the Merger; or (g) all of the conditions for the closing of the Offer shall not have been satisfied in the reasonable judgment of Credit Suisse First Boston (Europe) Limited (the "Global Coordinator") for the JOMED Equity Offering; or (h) the Global Coordinator shall not have received on or by the closing for the JOMED Equity Offering the opinions of counsel and letters from accountants specified in the Purchase Agreement; or (i) the SWX Swiss Exchange shall not have approved the JOMED Ordinary Shares to be issued in the JOMED Equity Offering for listing on the SWX New Market of the SWX Swiss Exchange or, prior to the date of the Purchase Agreement, an order suspending the public offering of the shares shall have been issued or proceedings for any such purpose shall have been instituted or contemplated by the SWX Swiss Exchange or any other governmental or self-regulatory agency or body; or (j) the Purchase Agreement for the JOMED Equity Offering shall have been terminated by the Global Coordinator as a result of (i) the occurrence of condition (f) as set forth above, (ii) trading generally shall have been suspended or materially limited on or by, as the case may be, the SWX Swiss Exchange (whether on the SWX New Market segment or otherwise), (iii) a general moratorium on commercial banking activities shall have been declared by authorities in either Switzerland or The Netherlands, (iv) there shall have occurred a general crisis in international exchange markets or (v) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, whether or not foreseeable, that, in the judgment of the Global Coordinator, is material and adverse and, in the case of any of the foregoing events, such event, singly or together with any other such event, makes it, in the judgment of the Global Coordinator after consultation with the JOMED, impracticable to market the JOMED Ordinary Shares as contemplated through the JOMED Equity Offering; or (k) the Merger Agreement shall have been terminated in accordance with its terms; ((g) through (k) above, collectively, the "Financing Condition") which in the reasonable judgment of JOMED or the Purchaser but subject to the provisions of the Merger Agreement, in any such case, and regardless of the circumstances (including any action or inaction by JOMED or the Purchaser) giving rise to such conditions makes it inadvisable to proceed with the Offer and/or with such acceptance for payment of or payments for shares of Shares. Subject to the provisions of the Merger Agreement, the foregoing conditions are for the sole benefit of JOMED and the Purchaser and may be asserted by the Purchaser or, subject to the terms of the Merger Agreement may be waived by JOMED or the Purchaser, in whole or in part at any time and from time to time in the sole discretion of JOMED or the Purchaser. The failure by JOMED or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. General. The Purchaser is not aware of any pending legal proceeding relating to the Offer. Except as described in this Section 16, based on its examination of publicly available information filed by the Company with the SEC and other publicly available information concerning the Company, the Purchaser is not aware of any governmental license or regulatory permit that appears to be material to the Company's business that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by any governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Purchaser or JOMED as contemplated herein. Should any such approval or other action be required, the Purchaser currently contemplates that, except as described below under "State Takeover Statutes," such approval or other action will be sought. While the Purchaser does not currently intend to delay acceptance for payment of Shares 40 44 tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that if such approvals were not obtained or such other actions were not taken, adverse consequences might not result to the Company's business, or certain parts of the Company's business might not have to be disposed of, any of which could cause the Purchaser to elect to terminate the Offer without the purchase of Shares thereunder under certain conditions. See Section 15. State Takeover Statutes. A number of states have adopted laws that purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or that have substantial assets, stockholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted such laws. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquirer from voting shares of a target corporation without the prior approval of the remaining stockholders where, among other things, the corporation is incorporated in, and has a substantial number of stockholders in, the state. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL ("Section 203") prevents an "interested stockholder" (including a person who has the right to acquire 15% or more of the corporation's outstanding voting stock) from engaging in a "business combination" (defined to include mergers and certain other actions) with a Delaware corporation for a period of three years following the date such person became an interested stockholder. The Company's Board of Directors approved for purposes of Section 203 the entering into by the Purchaser, JOMED and the Company of the Merger Agreement and the consummation of the transactions contemplated thereby and has taken all appropriate action so that Section 203, with respect to the Company, will not be applicable to JOMED and the Purchaser by virtue of such actions. If any government official or third party should seek to apply any state takeover law to the Offer or the Merger or other business combination between the Purchaser or any of its affiliates and the Company, the Purchaser will take such action as then appears desirable, which action may include challenging the applicability or validity of such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover statutes is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities or holders of Shares, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer or the Merger. In such case, the Purchaser may not be obligated to accept for payment or pay for any tendered Shares. See Section 15. United States Antitrust Compliance. Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The purchase of Shares pursuant to the Offer is subject to such requirements. Pursuant to the requirements of the HSR Act, the Purchaser expects to file a Notification and Report Form with respect to the Offer and Merger with the Antitrust Division and the FTC on or about August 21, 2000. The initial waiting period applicable to the purchase of Shares pursuant to the Offer would expire at 41 45 11:59 p.m., New York City time, 15 days after such filing. However, prior to such time, the Antitrust Division or the FTC may extend the waiting period by requesting additional information or documentary material relevant to the Offer from the Purchaser. If such a request is made, the waiting period will be extended until 11:59 p.m., New York City time, on the tenth day after substantial compliance by the Purchaser with such request. Only one extension of the waiting period pursuant to a request for additional information or documentary material is authorized by the rules promulgated under the HSR Act. Thereafter, such waiting period can be extended only by court order or by consent of the Purchaser. The Antitrust Division and the FTC scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares by the Purchaser pursuant to the Offer. At any time before or after the consummation of any such transactions, the Antitrust Division or the FTC could take such action under the antitrust laws of the United States as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking divestiture of the Shares so acquired or divestiture of substantial assets of JOMED or the Company. Private parties (including individual States) may also bring legal actions under the antitrust laws of the United States. The Purchaser does not believe that the consummation of the Offer would violate any applicable antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See Section 15, including conditions with respect to litigation and certain governmental actions and Section 11 for certain termination rights. Other Filings. JOMED and the Company each conduct operations in a number of foreign countries, and filings may have to be made with foreign governments under their pre-merger notification statutes. The filing requirements of various nations are being analyzed by the parties and, where necessary, such filings will be made. 17. FEES AND EXPENSES. CSFB is acting as the Dealer Manager in connection with the Offer and JOMED's proposed acquisition of the Company. CSFB will receive reasonable and customary compensation for its services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. JOMED and the Purchaser will indemnify CSFB and certain related persons against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. JOMED and the Purchaser have retained MacKenzie Partners, Inc. to be the Information Agent and ChaseMellon Shareholder Services, L.L.C. to be the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telecopy, telegraph and personal interview and may request banks, brokers, dealers and other nominees to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent and the Depositary each will receive reasonable and customary compensation for their respective services in connection with the Offer, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under federal securities laws. Neither JOMED nor the Purchaser will pay any fees or commissions to any broker or dealer or to any other person (other than to the Dealer Manager and the Depositary) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 18. MISCELLANEOUS. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. However, the Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction. 42 46 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF JOMED OR THE PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. The Purchaser and JOMED have filed with the SEC a Tender Offer Statement on Schedule TO pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, together with exhibits furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the recommendation of the Company's Board of Directors with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. A copy of such documents, and any amendments thereto, may be examined at, and copies may be obtained from, the SEC (but not the regional offices of the SEC) in the manner set forth under Section 7 above. JOMED ACQUISITION CORP. August 21, 2000 43 47 SCHEDULE I INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF JOMED AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF JOMED. The following tables set forth the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years for each member of the Management Board and executive officer, of JOMED N.V. Unless indicated otherwise, each person is a citizen of Sweden with a principal business address at Drottninggatan 94, S-252 21 Helsingborg, Sweden. JOMED Management Board
PRINCIPAL OCCUPATION OR NAME (AND CITIZENSHIP) TITLE EMPLOYMENT - ---------------------- ----- ----------------------- Tor Peters (Sweden)......... President and Chief Executive Officer JOMED Antti Ristinmaa (Sweden).... Vice President of Finance JOMED Dr. Peter Klemm (Germany)... Vice President Operations JOMED Rudi Ott (Switzerland)...... Vice President Clinical and Regulatory Affairs JOMED Dr. Randolf von Oepen (Germany)................. Vice President, Research and Development JOMED
- Tor Peters has served as President and Chief Executive Officer of JOMED since 1998 and Chief Executive Officer of JOMED i Helsingborg International AB from 1996 to 1999. From 1993 through 1995, Mr. Peters was Marketing Manager for Cardiology at SciMed Life Systems Inc. From 1988 to 1993, he was Sales Manager for Novo Pharma. - Antti Ristinmaa has been JOMED's Vice President of Finance since 1998. From 1994 to 1998, Mr. Ristinmaa served as the Vice President of Business Control and Treasurer for Perstorp. From 1990 to 1994, he was Vice President of Finance at Huhtamaki. - Dr. Peter Klemm is Vice President Operations and is also responsible for JOMED's cardiac assist products since 1999. From 1996 to 1999, he was Head of Research for Grunenthal GmbH. From 1993 to 1996, Dr. Klemm was a senior scientist at Hoechst Marion Rousel. He received his doctorate in pharmacology from the University of Mainz and has completed post-doctoral research at the William Harvey Research Institute in London. - Rudi Ott is Vice President Clinical and Regulatory Affairs. Prior to joining the Company in 1999, he was Vice President Clinical and Regulatory for Schneider from 1994 to 1999 after having spent 10 years with Ciba-Geigy. He graduated in 1978 from medical school in Germany. - Dr. Randolf von Oepen joined JOMED in 1994 and became Vice President, Research and Development, in 1998. Dr. von Oepen holds a doctorate in mechanical engineering from the RWTH Institute in Aachen, Germany. The members of the Management Board may be contacted at JOMED's executive offices in Helsingborg, Sweden. I-1 48 JOMED Supervisory Board The table below sets forth the names and addresses of the current members of the Supervisory Board of the Company and their principal occupation or employment history:
PRINCIPAL OCCUPATION OR NAME PRINCIPAL BUSINESS ADDRESS DATE OF APPOINTMENT EMPLOYMENT - ---- -------------------------- ------------------- ------------------------------ Jan-Eric Osterlund.... 23 Tedworth Square, February 2, 1998 Chairman of JOMED and Chairman Chelsea, London or director of several SW3 4DR investment and healthcare United Kingdom companies. Ahmet Aykac........... Rue Albert Einstein December 15, 1999 Professor and Director of the BP 169 Theseus Institute, Sophia 06903 Sophia Antipolis Antipolis, France. Cedex France Siegfried Einhellig... Schweidnitzer Strasse 33 February 2, 1998 Consultant to JOMED and 80997 Munich director of Prva Obrtnicka Germany Stedionica. Lars Sunnanvader...... Silberburgstrasse 6 February 2, 1998 Chairman of the Supervisory 72379 Hechinge Board of JOSTRA Medizintechnik Germany AG, a medical device company. Rene Garo............. Waldeggstrasse 2 March 24, 2000 Medical Technology Advisor. St. Niklaus 4532 Feldbrunnen Switzerland
- Mr. Jan-Eric Osterlund is a partner of QueQuoin Holdings, an investment group specializing in medical venture capital since 1992. He is also chairman of Phairson Medical Ltd (a UK biotechnology group), Egalet A/S (a Danish drug-delivery company) and Epiport Ltd (a drug-delivery company). Mr. Osterlund also serves as a director of Vasogen Inc., a public Canadian medical device company. He has also been a director of several Swedish public companies, having served as Chairman of Investment AB Skrinet and as a director of Independent Leasing AB. - Dr. Ahmet Aykac is the Director General of the Theseus Institute and Professor of Economics and Organizations since 1995. He is also a consultant to the boards of several national and international agencies and private organizations. Dr. Aykac is a fellow of the New York Academy of Sciences. - Mr. Siegried Einhellig is a consultant to JOMED and a director of Prva Obrtnicka Stedionica d.d., a Croatian bank, assisting with its international expansion plans. From 1997 to 1999, Mr. Einhellig was Vice President of Sales for the JOMED Group and Executive Director of JOMED Deutschland GmbH. Prior to joining the Company, he was Vice President Europe for Boston Scientific GmbH's SciMed Division. - Mr. Lars Sunnanvader is the founder of JOMED. He served as the Chief Executive Officer of JOMED Implantate GmbH from 1990 to 1999. Mr. Sunnanvader also founded Jostra Medizintechnik AG and is a member of its Supervisory Board. - Mr. Rene Garo is a member of the boards of Swisslog Holding AG (listed on the SWX Swiss Exchange), Illbruck GmbH, Digital-Logic AG and Confida Consulting AG. He is also an investment advisor to MicroValue AG. From 1996 to 1999, he was Chief Executive Officer of Haag-Streit Holding AG, a producer of ophthalmic diagnostic instruments. Mr. Garo served as Chief Executive Officer of MattisMedical AG from 1992 to 1996. I-2 49 ANNEX A FINANCIAL STATEMENTS INDEX TO THE FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS OF JOMED N.V Report of Independent Public Accountant................... F-2 JOMED Group Consolidated Income Statement for the years ended December 31, 1999, 1998, and for the period from January 1, 1996 through December 31, 1997.............. F-3 JOMED Group Consolidated Balance Sheet as of December 31, 1996, 1997, 1998 and 1999.............................. F-4 JOMED Group Consolidated Cash Flow Statement for the years ended December 31, 1999 and 1998....................... F-5 JOMED N.V. Parent Company Consolidated Cash Flow Statement.............................................. F-6 JOMED N.V. Parent Company Balance Sheet for the years ended December 31, 1999, 1998 and 1997................. F-7 JOMED N.V. Parent Company Cash Flow Statement for the years ended December 31, 1999, 1998 and 1997........... F-8 Statement of Changes in Stockholder's equity, consolidated........................................... F-9 Statement of Changes in Stockholder's equity, parent company................................................ F-10 Notes to the Financial Statements......................... F-11 FINANCIAL STATEMENTS OF JOMED FOR THE FIRST SIX MONTHS OF 2000...................................................... F-30
F-1 50 REPORT OF INDEPENDENT PUBLIC ACCOUNTANT To the Board of JOMED N.V. Financial Statements for the years ended December 31, 1999 and 1998. We have audited the accompanying balance sheets of JOMED N.V. and the consolidated balance sheets of JOMED N.V. and its subsidiaries as at December 31, 1999 and 1998 and the related income statements and consolidated income statements together with the cash flow statements and consolidated cash flow statements for the years then ended, prepared in accordance with International Accounting Standards (IAS). These financial statements and consolidated financial statements are the responsibility of JOMED's management. Our responsibility is to express an opinion on these financial statements and consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. These standards require that we plan and perform an audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and the consolidated financial statements present fairly, in all material respects, the financial position and the consolidated financial position of the company as at December 31, 1999 and 1998 and the results of operations and consolidated results of operations together with the cash flows and the consolidated cash flows for the years then ended in conformity with IAS. Malmo, March 28, 2000 ARTHUR ANDERSEN AB /s/ Mats Fredricson Mats Fredricson Authorized Public Accountant F-2 51 JOMED GROUP CONSOLIDATED INCOME STATEMENT
UNAUDITED UNAUDITED PRO FORMA PRO FORMA NOTE 1999 1998 1997 1996 ---- ------- ------ --------- --------- (E '000) NET SALES.................................. 1 43,723 25,502 15,216 6,284 Cost of goods sold......................... (7,623) (3,078) (1,866) (1,131) ------- ------ ------ ------ GROSS PROFIT............................... 36,100 22,424 13,350 5,153 Manufacturing overheads.................... (4,196) (2,521) (1,644) (675) Sales & Marketing.......................... (18,994) (9,175) (6,486) (1,807) General & Administration................... (5,547) (2,401) (1,400) (1,257) Research & Development..................... (3,255) (2,419) (2,194) (655) Other operating income..................... 199 80 176 45 ------- ------ ------ ------ OPERATING RESULT........................... 2 4,307 5,988 1,802 804 ------- ------ ------ ------ Result from financial investments: Interest income............................ 85 35 34 6 Interest expenses.......................... (1,200) (260) (112) (54) Result from associated companies........... (78) (104) (12) -- ------- ------ ------ ------ NON-OPERATING RESULT....................... (1,193) (329) (90) (48) ------- ------ ------ ------ INCOME BEFORE INCOME TAXES................. 3 3,114 5,659 1,712 756 Income taxes............................... (1,143) (2,676) (851) (315) ------- ------ ------ ------ INCOME AFTER TAXES......................... 1,971 2,983 861 441 Minority interest.......................... 163 -- -- -- ------- ------ ------ ------ NET INCOME................................. 4 2,134 2,983 861 441 ======= ====== ====== ====== EARNINGS PER SHARE......................... E212 E298 E86 E44
F-3 52 JOMED GROUP CONSOLIDATED BALANCE SHEET
UNAUDITED UNAUDITED PRO FORMA PRO FORMA DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, NOTE 1999 1998 1997 1996 ---- ------------ ------------ ------------ ------------ (E '000) ASSETS................................ 1 Non-current assets: Intangible assets..................... 6 14,442 11,983 10,304 10,904 Equipment and equipment under construction........................ 7 9,161 3,889 1,455 961 Investments in associates............. 8 342 357 402 -- Other financial assets................ 9 1,962 -- -- -- Deferred tax.......................... 3 1,929 109 346 -- ------ ------ ------ ------ 27,836 16,338 12,507 11,865 ------ ------ ------ ------ Current assets: Inventories........................... 10 7,408 3,176 1,068 513 Receivables and other assets.......... 11 Trade accounts receivable............. 23,502 8,045 3,768 1,214 Other receivables and other assets.... 2,926 1,213 857 365 Other current assets.................. 990 -- -- -- Cash and cash equivalents............. 12 3,166 1,099 370 867 ------ ------ ------ ------ 37,992 13,533 6,063 2,959 ------ ------ ------ ------ TOTAL ASSETS.......................... 65,828 29,871 18,570 14,824 ====== ====== ====== ====== EQUITY AND LIABILITIES Equity: 13 Issued capital........................ 182 163 161 167 Share premium......................... 29,887 12,906 12,757 13,197 Other reserves........................ 3,262 (231) (1,937) (2,396) Net income............................ 2,134 2,983 861 441 ------ ------ ------ ------ 35,465 15,821 11,842 11,409 ------ ------ ------ ------ Non-current liabilities: Interest bearing liabilities.......... 14 926 354 97 -- Deferred tax.......................... 3 440 282 43 -- ------ ------ ------ ------ 1,366 636 140 -- ------ ------ ------ ------ Current liabilities: Trade accounts payable................ 6,662 2,471 2,081 1,123 Interest bearing liabilities.......... 16 11,242 4,561 1,556 939 Other current liabilities............. 17 11,093 6,382 2,951 1,353 ------ ------ ------ ------ 28,997 13,414 6,588 3,415 ------ ------ ------ ------ TOTAL EQUITY AND LIABILITIES.......... 65,828 29,871 18,570 14,824 ====== ====== ====== ====== CONTINGENT LIABILITIES................ -- -- -- -- PLEDGED ASSETS........................ 18 10,767 6,410 2,114 --
F-4 53 JOMED GROUP CONSOLIDATED CASH FLOW STATEMENT
NOTE 1999 1998 ---- ------- ------ (E '000) Operating activities: Operating result............................................ 4,307 5,988 Adjustments for items not included in cash flow: Depreciation and amortization............................... 2,558 1,156 ------- ------ Cash flow from operating activities, before working capital changes................................................... 6,865 7,144 Increase in inventories..................................... (4,232) (2,680) Increase in current receivables............................. (18,160) (4,305) Increase in current liabilities............................. 7,544 2,718 ------- ------ Cash flow from operating activities......................... (7,983) 2,877 Income taxes paid........................................... (2,330) (1,034) ------- ------ NET CASH FROM OPERATING ACTIVITIES.......................... (10,313) 1,843 ------- ------ Investing activities: Acquisition of intangible assets............................ (2,252) (250) Acquisition of equipment.................................... (7,006) (2,715) Acquisition of subsidiaries................................. 19 15 (51) Interest received........................................... 85 35 Investing in financial assets and associated companies...... (1,955) (402) ------- ------ CASH FLOW FROM INVESTING ACTIVITIES......................... (11,113) (3,383) ------- ------ Financing activities: Share issue................................................. 17,000 -- Interest paid............................................... (1,200) (260) ------- ------ Increase in interest bearing liabilities.................... 7,205 2,885 ------- ------ CASH FLOW FROM FINANCING ACTIVITIES......................... 23,005 2,625 ------- ------ CHANGE IN CASH AND CASH EQUIVALENTS......................... 1,579 1,085 ======= ====== Cash and cash equivalents -- opening balance................ 1,099 26 Cash and cash equivalents -- closing balance................ 3,166 1,099 Translation difference...................................... (488) 12
F-5 54 JOMED N.V. PARENT COMPANY INCOME STATEMENT
1999 1998 1997 ---- ---- ---- (E '000) NET SALES................................................... -- -- -- Cost of goods sold.......................................... -- -- -- ---- ---- -- GROSS PROFIT Manufacturing (overheads)................................... -- -- -- Sales and Marketing......................................... -- -- -- General and Administration.................................. (189) (142) -- Research and Development.................................... -- -- -- OPERATING RESULT............................................ -- -- -- ---- ---- -- Result from financial investments: (189) (142) -- Interest income............................................. 7 -- 18 INCOME BEFORE INCOME TAXES.................................. (182) (142) 18 Income taxes................................................ -- -- -- ---- ---- -- NET INCOME.................................................. (182) (142) 18 ==== ==== ==
F-6 55 JOMED N.V. PARENT COMPANY BALANCE SHEET
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1997 ------------ ------------ ------------ (E '000) ASSETS Non-current assets.................................... -- -- -- Shares in subsidiary companies........................ 15,651 13,929 -- ------ ------ --- 15,651 13,929 -- ------ ------ --- Current assets Receivables, inter-company............................ 17,019 -- -- Other receivables..................................... 4 -- -- Cash and cash equivalents............................. 37 28 26 ------ ------ --- 17,060 28 26 ------ ------ --- TOTAL ASSETS.......................................... 32,711 13,957 26 ====== ====== === EQUITY AND LIABILITIES Equity Issued capital........................................ 182 163 18 Share premium......................................... 29,887 12,906 -- Other reserves........................................ (135) 7 (11) Net income............................................ (182) (142) 18 ------ ------ --- 29,752 12,934 25 ------ ------ --- Current liabilities Accounts payable, inter-company....................... 1,750 578 -- Other current liabilities............................. 1,209 445 1 ------ ------ --- 2,959 1,023 1 ------ ------ --- TOTAL EQUITY AND LIABILITIES.......................... 32,711 13,957 26 ====== ====== ===
F-7 56 JOMED N.V. PARENT COMPANY CASH FLOW STATEMENT
NOTE 1999 1998 1997 -------- ------- ---- ---- (E '000) Operating activities: Operating result........................................ (189) (142) -- Adjustments for items not included in cash flow: Depreciation and amortization........................... -- -- -- ------- ---- -- Cash flow from operating activities, before working capital changes....................................... (189) (142) -- Increase in inventories................................. -- -- -- Increase in current receivables......................... (17,023) -- -- Increase in current liabilities......................... 1,936 1,022 -- ------- ---- -- Cash flow from operating activities..................... (15,276) 880 -- ------- ---- -- Income taxes paid....................................... -- -- -- ------- ---- -- NET CASH FROM OPERATING ACTIVITIES...................... (15,276) 880 -- Investing activities: Acquisition of intangible assets........................ -- -- -- Acquisition of equipment................................ -- -- -- Acquisition of subsidiaries............................. (1,722) (879) -- Interest received....................................... 7 -- 18 Investing in financial assets and associated companies............................................. -- -- -- ------- ---- -- CASH FLOW FROM INVESTING ACTIVITIES..................... (1,715) (879) 18 ------- ---- -- Financing activities: Share issue............................................. 17,000 -- -- Interest paid........................................... -- -- -- Increase in interest bearing liabilities................ -- -- -- ------- ---- -- CASH FLOW FROM FINANCING ACTIVITIES..................... 17,000 -- -- ======= ==== == CHANGE IN CASH AND CASH EQUIVALENTS..................... 9 1 18 ======= ==== == Cash and cash equivalents -- opening balance............ 28 26 8 Cash and cash equivalents -- closing balance............ 37 28 26 Translation difference.................................. -- (1) --
F-8 57 STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY, CONSOLIDATED (E'000)
ACCUMULATED ISSUED CAPITAL SHARE PREMIUM PROFIT TOTAL EQUITY -------------- ------------- ----------- ------------ Balance January 1, 1998................. 18 -- 7 25 Issue of shares......................... 145 12,906 -- 13,051 Net profit.............................. -- -- 2,983 2,983 Translation differences................. -- -- (238) (238) Balance December 31, 1998............... 163 12,906 2,752 15,821 Issue of shares......................... 19 16,981 -- 17,000 Net profit.............................. -- -- 2,134 2,134 Translation differences................. -- -- 510 510 --- ------ ----- ------ Balance December 31, 1999............... 182 29,887 5,396 35,465 === ====== ===== ======
F-9 58 STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY, PARENT COMPANY (E'000)
ACCUMULATED ISSUED CAPITAL SHARE PREMIUM PROFIT TOTAL EQUITY -------------- ------------- ----------- ------------ Balance January 1, 1997................. 18 -- (11) 7 Net profit.............................. -- -- 18 18 --- ------ ---- ------ Balance December 31, 1997............... 18 -- 7 25 Issue of shares......................... 145 12,906 -- 13,051 Net profit.............................. -- -- (142) (142) --- ------ ---- ------ Balance December 31, 1998............... 163 12,906 (135) 12,934 Issue of shares......................... 19 16,981 -- 17,000 Net profit.............................. -- -- (182) (182) --- ------ ---- ------ Balance December 31, 1999............... 182 29,887 (317) 29,752 === ====== ==== ======
F-10 59 NOTES TO THE FINANCIAL STATEMENTS GENERAL JOMED N.V. ("JOMED"), Corp. Id. No. 33252637, having its legal seat in Amsterdam, is engaged in the holding and managing of investments in companies which are leaders in stent technology and the development of new medical technology in the field of interventional cardiology, interventional radiology, cardiac assist and minimal invasive cardiac surgery. JOMED was incorporated as Maartin Vooges Brood en Banket B.V on August 17, 1977 and was dormant until January 1998. On April 2, 1998, JOMED was renamed JOMED N.V. and acquired 100% of the share capital of JOMED GmbH, JOMED Deutschland GmbH and JOMED i Helsingborg International AB by means of an issue of shares. The result of these three subsidiaries have been consolidated with effect from April 2, 1998 using the acquisition method. Goodwill, calculated as the excess of the fair value of the shares issued in consideration over the fair value of the separable net assets acquired, is amortized over its estimated useful life of 20 years in accordance with international accounting standards. For comparison purposes only, JOMED has also presented unaudited pro forma consolidated financial statements for the period from January 1, 1996 to December 31, 1997 as if the acquisition had taken place on January 1, 1996 at the same fair market value but using the exchange rates prevailing at that date. The resulting goodwill has then been amortized in the pro forma financial statements on the same basis as in the audited financial statements. This is not in accordance with international accounting standards ("IAS") which does not permit recognition of goodwill prior to the date on which control of the subsidiaries passed to the parent company. With this exception and with the exception of the non-presentation of a pro forma statement of changes in stockholders' equity and the non-presentation of the pro forma cash-flow statement, the unaudited pro forma financial statements have been prepared in accordance with international accounting standards. In the opinion of the directors, these departures from international accounting standards are necessary to ensure the comparability of the pro forma financial statements with that presented in the audited financial statements. The financial statements have been presented in euro since January 1, 1999. For 1998 the financial statements were presented in NLG and then translated into euro. The exchange rates for the periods prior to 1998 were derived from official ECU rates for each year. The description of JOMED's activities and the group structure, as included in the notes to the consolidated financial statements, also apply to the financial statements of the parent company. ACCOUNTING POLICIES The consolidated financial statements of the Group are prepared in accordance with the rules of the International Accounting Standards Committee (IASC). In addition, the IASs that were effective on the balance sheet date, JOMED has also adopted the following IASs prior to their effective date: IAS 22 (revised) on Business combinations, IAS 36 on Impairment of assets and IAS 38 on Intangible assets. The financial statements of the consolidated companies are prepared according to uniform recognition and valuation principles. Valuation adjustments made for tax reasons are not reflected in the group statements. The individual consolidated companies' statements are prepared as of the closing date for the group statements. Assets and liabilities are stated at face value unless indicated otherwise. Certain income statement and balance sheet items are combined for the sake of clarity, as explained in the Notes. F-11 60 NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) In a few instances, estimates and assumptions have to be made. These affect the classification and valuation of assets, liabilities, income, expenses and contingent liabilities. The actual values may vary from the estimates made. The accounting principles as described in the notes to the consolidated financial statements, also apply to the financial statements of the parent company. CHANGE IN ACCOUNTING POLICIES The financial statements have been presented in accordance with the rules of the International Accounting Standards Committee (IASC) since January 1999. Prior to 1999, the financial statements were presented in accordance with Dutch GAAP. The comparative information for 1998 has also been prepared and presented in accordance with IASs. The statutory financial statements have been prepared in accordance with IAS for 1999 and in accordance with Dutch GAAP for previous years. COMPANIES CONSOLIDATED The consolidated financial statements ending December 31, 1999 include the financial statements of JOMED and the following subsidiaries (the "Subsidiaries"). The book values of the subsidiaries in the financial statements of the parent company are presented in the columns below as at their date of acquisition or as at the date they were established:
AS AT ACQUISITION DATE (A)/DATE OF ESTABLISHMENT BOOK VALUE IN PARENT NAME LEGAL SEAT (S) COMPANY - ------------------------------- ------------------------------ ------------- -------------------- 1999 1998 -------- -------- (E'000) WHOLLY OWNED: Companies acquired as part of the reorganization in 1998: JOMED GmbH Rangendingen, Germany A 1998 7,026 7,026 JOMED Deutschland GmbH Munchen, Germany A 1998 2,510 2,510 JOMED i Helsingborg International AB and its wholly owned subsidiary Helsingborg, Sweden A 1998 3,514 3,514 JOMED U.K. Ltd. Cheshire, United Kingdom JOMED Italia S.p.a. Milan, Italy A 1998 859 793 JOMED France SARL Voisins le Bretonneux, France S 1998 46 46 JOMED Benelux B.V. Ulestraten, the Netherlands S 1998 18 18 JOMED S.A. (Pty) Ltd. Midrand, South Africa S 1998 22 22 JOMED AG Beringen, Switzerland S 1999 313 -- JOMED Distribution Centre B.V. Ulestraten, the Netherlands S 1999 18 -- JOMED Japan Co. Ltd. Tokyo, Japan S 1999 372 -- JOMED Poland Sp. z o o. Warsaw, Poland S 1999 38 -- JOMED Singapore Pte. Ltd. Singapore S 1999 60 -- NOT WHOLLY OWNED: JOMED do Brasil Ltda, ownership of 50% and with controlling influence Parana, Brazil A 1999 855 -- ------ ------ 15,651 13,929 ====== ======
The following companies are manufacturing companies: JOMED GmbH and JOMED AG. The other companies are sales companies. F-12 61 NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Assets, shareholders' equity and liabilities of foreign subsidiaries are for consolidation purposes translated into euro at the exchange rate in force on the closing date of each period. Income and expenses are translated at the average exchange rate for each period. JOMED Distribution Centre BV, JOMED Japan Co., Ltd., JOMED AG, JOMED Poland Sp.z o.o., JOMED Singapore Pte Ltd. and JOMED do Brasil Ltda. are included in the statements for the first time. The resulting changes in the consolidated financial statements do not affect comparability with the preceding year's financial statements. In 1999 a total of E1,722 thousand (1998: E879 thousand) was spent on acquisitions and recently formed companies. JOMED do Brasil Ltda was 50% acquired on January 1, 1999 for E855 thousand and is a distributor of JOMED products. JOMED do Brasil Ltda is consolidated since it is subject to the control of the Group. JOMED appoints the majority of the board members and the General Manager. Goodwill of E857 thousand resulting from the acquisition is amortized over an estimated economic life of 20 years. JOMED Italia S.p.a. was acquired for E859 thousand. Goodwill of E746 thousand resulting from the acquisition is amortized over an estimated economic life of 20 years. FOREIGN CURRENCY TRANSLATION The foreign currency receivables and payables are translated at the exchange rate in force on the closing date of each period. Assets and liabilities denominated in foreign currencies are translated into euros (and for years prior to 1998, ECU) at the exchange rate in force on the closing date of each period. Transactions in foreign currencies are translated at the exchange rate in effect at the time of the transaction. Foreign currency exchange differences relating to current business operations have been credited/debited to operating income. Foreign currency exchange differences of a financial nature have been reported under financial income and expenses. The financial statements have been presented in euro since January 1999 and JOMED has adopted the euro as its reporting currency for fiscal periods beginning January 1, 1999. For prior periods, the reporting currency has been NLG. For 1998 the financial statements were presented in NLG and then translated into euro at the fixed exchange rate of NLG 2.20371 = E1.00. The exchange rates for the periods prior to 1998 were derived from official ECU rates for each year. This results in difference in goodwill amount between the years, due to different exchange rates for IAS 1998 and 1999 and pro forma respectively. The majority of foreign subsidiaries are to be regarded as foreign entities since they are financially, economically and organizationally autonomous. Their functional currencies according to IAS 21 (The Effects of Changes in Foreign Exchange Rates) are thus the respective local currencies. The assets, liabilities and equity of these foreign subsidiaries are for consolidation purposes translated into euros at the exchange rate in force on the closing date of each period. The income and expenses items of these foreign subsidiaries have been translated at average exchange rates for each year. The subsidiary operating in Brasil, in a hyperinflationary economy, has adopted the euro as its reporting currency for IAS purposes. A temporal translation method is therefore used that is recognized in income. Equipment is translated at the average exchange rates in the year of acquisition, along with the relevant depreciation. All other balance sheet items are translated at closing rates. Income and expense items (except depreciation) are translated at average rates for the year. Foreign currency exchange differences arising from the translation of foreign subsidiaries' balance sheets are shown in a separate stockholders' equity item. In the case of divestiture, the respective foreign currency exchange differences are reversed and recognized in income. F-13 62 NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The following exchange rates for major foreign currencies against the euro have been used as follows:
INCOME BALANCE STATEMENT SHEET PRO FORMA PRO FORMA 1999 1998* 1997* 1996* 1999 1998* 1997* 1996* ----- --------- ----- ----- ----- --------- ----- ----- USD.......................... 0.938 0.898 0.885 -- 0.995 0.853 0.916 -- DEM.......................... 0.511 0.511 0.511 0.520 0.511 0.511 0.511 0.519 NLG.......................... 0.454 0.454 0.449 0.464 0.454 0.454 0.449 0.462 FRF.......................... 0.152 0.152 -- -- 0.152 0.152 -- -- ITL/1000..................... 0.516 0.516 -- -- 0.516 0.516 -- -- GBP.......................... 1.517 1.492 1.457 -- 1.611 1.431 1.515 -- CHF.......................... 0.625 -- -- -- 0.623 -- -- -- JPY/1000..................... 8.580 -- -- -- 9.745 -- -- -- ZAR.......................... 0.153 0.163 -- -- 0.162 0.147 -- -- BRL.......................... 0.524 -- -- -- 0.558 -- -- -- PLN.......................... 0.241 -- -- -- 0.241 -- -- -- SGD.......................... 0.572 -- -- -- 0.598 -- -- -- SEK.......................... 0.113 0.113 0.116 0.119 0.117 0.106 0.116 0.117
- --------------- * Derived from official ECU rates. CONSOLIDATION METHODS Consolidation is achieved by offsetting investments in subsidiaries against the fair market value of the underlying net assets at the date of acquisition. The resulting differences are recognized as goodwill. Inter-group sales, profits, losses, income, expenses, receivables and payables are eliminated. Deferred taxes are recognized for temporary differences related to consolidation entries. CASH FLOW STATEMENT The cash flow statement shows how the liquidity of JOMED was affected by the inflow and outflow of cash and cash equivalents during each year. Cash flows are classified by operating, investing and financing activities in accordance with IAS 7 (Cash Flow Statements). An adjustment is shown to reconcile cash and cash equivalents at the end of each year to the liquid assets reflected in the balance sheet. In accordance with IAS the amounts reported by foreign subsidiaries are translated at average exchange rates for the year, with the exception of cash and cash equivalents, which are translated at the exchange rate in force on the closing date in each period. The effect of changes in exchange rates on cash and cash equivalents are shown separately. PRINCIPLES OF DETERMINATION OF INCOME The following principles are observed in the preparation of the income statement: Net sales are defined as revenue from sale and delivery of goods, net of discounts and sales tax. Cost of goods sold comprises the manufacturing cost of the goods and any write-downs to lower net realisable value. Manufacturing cost includes such items as: - the cost of raw materials and supplies, energy and other materials - depreciation and the cost of maintenance of the assets used in production - salaries, wages and social charges for the personnel involved in manufacturing. F-14 63 NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) DEFERRED TAX Deferred taxes are calculated at the rates on the closing date of each period based on the statutory regulations in force, or already substantially enacted in relation to future periods and thus expected to apply in the individual countries at the time of realization. Deferred taxes primarily result from temporary differences between the carrying amounts of assets or liabilities in the accounting and tax balance sheets of the individual consolidated companies, as well as from consolidation measures. The deferred taxes are computed according to IAS 12 (Income Taxes). INTANGIBLE ASSETS According to IAS 38 (Intangible Assets), research and development are mainly charged to the income statement. When certain conditions are fulfilled, development projects are capitalized. The capitalized development costs are amortized over their estimated useful lives on a straight-line basis over 3-6 years and the amortization begins when the development of each project is finalized. Intangible assets that have been acquired are recognized at cost and amortized over their estimated useful lives. Write-downs are made for any declines in value that are expected to be permanent. Intangible assets are written back if the reasons for previous years' write-downs no longer apply. Goodwill, including that resulting from capital consolidation, is capitalized in accordance with IAS 22 (Business Combinations) and normally amortized on a straight-line basis of 20 years. The value of goodwill is regularly reassessed in line with IAS 36 (Impairment of Assets) and written down, if necessary. Other purchased intangible fixed assets other than goodwill are amortized on a straight-line basis, over a period, which in general is five years. EQUIPMENT Equipment is carried at the cost of acquisition. Assets subject to depletion are depreciated over their estimated useful lives. Write-downs are made for any declines in value that are expected to be permanent, aside from those reflected in depreciation. Assets are written back if the reasons for previous years' write-downs no longer apply. Expenses for repair of equipment are normally charged against income. They are, however, capitalized in exceptional cases if they result in an enlargement or substantial improvement of the respective assets. The following depreciation periods, based on the estimated useful lives of the respective assets, are applied throughout the Group: Equipment: 3-10 years In accordance with IAS 17 (Leases), assets leased on terms equivalent to financing a purchase by a long-term loan (finance leases) are capitalized at the cost which would have been incurred if the assets had been purchased. They are depreciated over their estimated useful lives or the respective lease terms, whichever the shorter. The future lease payments are recorded as liabilities. FINANCIAL FIXED ASSETS Participation in associated companies and investments in other securities are carried individually at cost. Write-downs are made for any declines in value that are expected to be permanent. Investments are written back if the reasons for previous years' write-downs no longer apply. F-15 64 NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) INVESTMENTS IN ASSOCIATED COMPANIES The cost of acquisition of participation in associated companies included at the equity method is adjusted annually to reflect changes in JOMED's share of each associated company's equity. If JOMED's investment is 20-50% of the total shares or voting value and if JOMED does have significant influence the entity is classified as associated. In each first-time consolidation, differences between the cost of acquisition and the fair value of the underlying net assets at the dates of acquisition are allocated to assets or liabilities by the same method applied to fully consolidated subsidiaries. Corline Systems AB and JOMED Canada Inc. are included using the equity method. INVENTORIES Raw materials, supplies, and goods purchased for resale are valued at the cost of acquisition; work in process and finished goods are valued at the cost of production. If the inventory values are lower at the closing date of each period because of a drop in market prices, for example, the lower amounts are shown. Inventories are determined by the first-in first-out (FIFO) principle. Provisions are made for obsolescence. The cost of production comprises the direct cost of materials, direct manufacturing expenses, appropriate allocations of material and manufacturing overheads, and an appropriate share of the depreciation and write-downs of assets that are attributable to production. It includes the shares of expenses for Company pension plans and discretionary employee benefits that are attributable to production. RECEIVABLES AND OTHER ASSETS Accounts receivable -- trade, other receivables and other assets as presented under current assets mature within one year. Accounts receivable-trade, other receivables and other assets are stated at nominal value, less any necessary write-downs for amounts unlikely to be recovered. CURRENT LIABILITIES Current liabilities are carried at nominal value. The current liabilities are due within twelve months. ACCOUNTS PAYABLE -- TRADE Accounts payable -- trade are mainly payable to third parties. They are carried at nominal value. All accounts payable -- trade are due within twelve months. HEDGING INSTRUMENTS Forward contracts have been used to hedge the exchange rate risk associated with accounts receivable at the balance sheet date. The accounts receivable have been translated at the balance sheet date at the rate implicit in the contracts. In the opinion of the directors, the resulting balance sheet recognition of the forward contracts in accounts receivable approximates their fair value at the balance sheet date. F-16 65 NOTES TO THE INCOME STATEMENT NOTE 1 SEGMENT REPORTING IAS 14 (Segment Reporting) requires a breakdown of certain data in the financial statements by business segment and geographical region. In the opinion of the directors, the group's different product groups do not constitute different business segments since the production processes, gross margins and customer base are similar for each of them. Sales by product group are analysed below:
UNAUDITED UNAUDITED PRO FORMA PRO FORMA SALE 1999 1998 1997 1996 - ---- ------ ------ --------- --------- (E '000) Coronary stents.............................. 34,591 21,345 14,218 6,284 PTCA Balloon Catheter........................ 3,685 1,148 400 -- Peripheral stents............................ 5,447 3,009 598 -- ------ ------ ------ ----- 43,723 25,502 15,216 6,284 ====== ====== ====== =====
Since all manufacturing processes are located in Western Europe and geographical segmentation relates primarily to customer location, the directors regard the geographical segments as secondary in accordance with IAS 14. The analysis of sales and assets by geographical segments is set out below:
UNAUDITED UNAUDITED PRO FORMA PRO FORMA SALE 1999 1998 1997 1996 - ---- ------ ------ --------- --------- (E '000) Western Europe............................... 19,970 15,625 10,727 5,781 Eastern Europe, Middle East and Africa....... 16,710 6,585 3,452 503 Asia and the Pacific Rim..................... 3,150 1,534 1,037 -- The Americas................................. 3,893 1,758 -- -- ------ ------ ------ ----- 43,723 25,502 15,216 6,284 ====== ====== ====== =====
UNAUDITED UNAUDITED PRO FORMA PRO FORMA ASSET 1999 1998 1997 1996 - ----- ------ ------ --------- --------- (E '000) Western Europe............................... 62,534 29,743 18,570 14,824 Eastern Europe, Middle East and Africa....... 673 128 -- -- Asia and the Pacific Rim..................... 931 -- -- -- The Americas................................. 1,690 -- -- -- ------ ------ ------ ------ 65,828 29,871 18,570 14,824 ====== ====== ====== ======
UNAUDITED UNAUDITED PRO FORMA PRO FORMA ACQUISITION OF INTANGIBLE ASSETS, EQUIPMENT 1999 1998 1997 1996 - ------------------------------------------- ------ ------ --------- --------- (E '000) Western Europe............................... 10,227 17,657 1,248 12,436 Eastern Europe, Middle East and Africa....... 12 10 -- -- Asia and the Pacific Rim..................... 127 -- -- -- The Americas................................. 128 -- -- -- ------ ------ ----- ------ 10,494 17,667 1,248 12,436 ====== ====== ===== ======
F-17 66 NOTES TO THE INCOME STATEMENT -- (CONTINUED) NOTE 2 PERSONNEL EXPENSES The breakdowns of personnel expenses are as follows:
UNAUDITED UNAUDITED PRO FORMA PRO FORMA 1999 1998 1997 1996 ------ ----- --------- --------- (E '000) Salaries and wages............................ 12,075 6,379 3,499 1,177 Social expenses............................... 2,048 1,168 530 205 Pension expenses.............................. 449 461 65 10 ------ ----- ----- ----- 14,572 8,008 4,094 1,392 ====== ===== ===== =====
Pension expenses relate to a defined contribution scheme covering all employees and are expensed in the year in which they are payable. All previous direct pension agreements have been fully paid during 1999. The breakdowns of average number of employees in functional areas are as follows:
UNAUDITED UNAUDITED PRO FORMA PRO FORMA 1999 1998 1997 1996 ---- ---- --------- --------- (E '000) Manufacturing.................................... 142 91 44 14 Sales & marketing................................ 78 53 23 13 General and administration....................... 56 18 7 6 Research & development........................... 42 22 6 1 --- --- -- -- 318 184 80 34 === === == ==
The overall compensation paid to the member of the Management Board, Tor Peters, for the year 1999 amounted to E188 thousand (1998: E113 thousand) and to the Board of Supervisory Directors E50 thousand (1998: E12 thousand). Members of the Management Board held at December 31, 1999, an aggregate of shares representing a holding of 29.59% in JOMED. In accordance with his employment agreement, the Chief Executive Officer and President has a term of notice of 12 months. F-18 67 NOTES TO THE INCOME STATEMENT -- (CONTINUED) NOTE 3 INCOME TAXES JOMED and its subsidiaries are subject to the income taxes of the jurisdictions where they are located or have their registered offices. The national corporate income tax rates are as follows:
1999 1998 1997 1996 ------- ----- ----- ----- JOMED N.V....................................... 35% 35% 35% 35% JOMED GmbH...................................... 40/30% 45/30% 45/30% 45/30% JOMED Deutschland GmbH.......................... 40/30% 45/30% 45/30% 45/30% JOMED France SARL............................... 36.67% 36.67% -- -- JOMED Italia S.p.a.............................. 41.25% 41.25% -- -- JOMED S.A. (Pty) Ltd............................ 30% 35% -- -- JOMED Distribution Centre B.V................... 35% 35% -- -- JOMED Benelux B.V............................... 35% 35% -- -- JOMED i Helsingborg International AB............ 28% 28% 28% 28% JOMED AG........................................ 17.8/28% -- -- -- JOMED Japan Co. Ltd............................. 30% -- -- -- JOMED U.K. Ltd.................................. 30% 31% -- -- JOMED Poland Sp. z. oo.......................... 34% -- -- -- JOMED Singapore Pte. Ltd........................ 26% -- -- -- JOMED do Brasil Ltda............................ 35% -- -- --
Legislation in the Netherlands and certain other countries provides companies with an opportunity to defer tax payments through appropriations to non-taxed reserves. The consolidated income statement and balance sheet do not show any non-taxed reserves, instead in the consolidated accounts the non-taxed reserves are split between deferred tax and shareholders' non-distributable equity. When these reserves are brought back to income, either in accordance with tax regulations or voluntarily, they will be taxed at the rates then applicable, unless they are used to cover a loss. Deferred taxes are also recognized on the amount by which fair market values of acquired assets and/or liabilities differ from their tax value, and on any restructuring provision etc. When calculating deferred tax, the actual nominal tax rate in the respective country has been applied. This item comprises the income taxes paid or accrued in the individual countries, plus deferred taxes:
UNAUDITED UNAUDITED PRO PRO FORMA FORMA 1999 1998 1997 1996 ------ ------ --------- --------- (E'000) Income taxes................................ (2,833) (2,177) (1,133) (315) Deferred taxes.............................. 1,690 (499) 282 -- ------ ------ ------ ---- (1,143) (2,676) 851 (315) ====== ====== ====== ====
F-19 68 NOTES TO THE INCOME STATEMENT -- (CONTINUED) Deferred taxes are comprised as follows:
UNAUDITED UNAUDITED PRO FORMA PRO FORMA DECEMBER 31, DECEMBER 31, DECEMBER 31 DECEMBER 31, 1999 1998 1997 1996 ------------ ------------ ----------- ------------ (E'000) Intra-group profit............... 1,525 149 346 -- Tax loss carry forward........... 404 170 -- -- Provisions....................... -- (210) -- -- Changes in the tax rates relating to previous year's balances.... -- -- -- -- Deferred tax assets.............. 1,929 109 346 -- Non-taxed reserves............... (440) (282) -- -- Changes in the tax rates relating to previous year's balances.... -- -- -- -- Deferred tax liabilities......... (440) (282) (43) --
The potential tax savings relating to tax loss carry forwards are only recognized as deferred tax income if it is sufficiently likely that this income will be realized. Tax loss carry forwards of E404 thousand remained unutilized. The deferred tax asset associated with the tax loss carry forward is considered likely to be utilized within the foreseeable future since it relates to companies with a history of profits in the last years. The relation between actual income tax expenses and income before income taxes is described below.
UNAUDITED UNAUDITED PRO FORMA PRO FORMA 1999 1998 1997 1996 ------- ------ --------- --------- (E'000) Income before income taxes.................. 3,114 5,659 1,712 756 Tax at the domestic rates applicable to accounting profits in the country concerned................................. (1,037) (2,130) (876) (315) Tax effect of expenses that are not deductible for tax purposes............... (1,796) (47) (257) -- Tax expense................................. (2,833) (2,177) (1,133) (315) Deferred tax: Intra-group profit........................ 1,737 (115) 325 -- Tax loss carry forward.................... 418 85 -- -- Provisions................................ (337) (210) -- -- Non-taxed reserves........................ (128) (259) (43) -- Actual income tax expense................... (1,143) (2,676) (851) (315)
The tax expenses have been calculated based on profit per country and each country's current tax rate has been used. NOTE 4 EARNINGS PER SHARE Earnings per share are determined according to IAS 33 (Earnings Per Share) by dividing the net income by the weighted average number of shares. In 1999, the number of shares increased from 10,000 to 11,111. Earnings per share were E212 on weighted average. There was no reliable fair value during the year and therefore the options did not have any quantifiable dilutive effect. F-20 69 NOTES TO THE INCOME STATEMENT -- (CONTINUED) NOTE 5 TRANSACTIONS WITH RELATED PARTIES JOMED maintains a long-standing business relationship with Lars Sunnanvader. Mr. Sunnanvader is JOMED's founder, a member of its Supervisory Board. In the past, JOMED has engaged in transactions with Jostra Medizintechnik AG, which is controlled by Mr. Sunnanvader. Jostra Medizintechnik AG owns 50% of JOMED's 50%-owned associated company Corline Systems AB. Lara Rheinmann GmbH, which is 30%-owned by Mr. Sunnanvader and 15% by Siegfried Einhellig, member of the Supervisory Board, supplies JOMED with PTFE (graft material) for use in its stent grafts. In addition, JOMED rents its facilities in Rangendingen, Germany, from Anna and Monika Sunnanvader, who are related to Mr. Sunnanvader. The annual rent is E448 thousand. The rental agreement expires in the year 2008, at which time JOMED has an option to extend the lease for an additional one-year term. JOMED also has an option to purchase the facility for approximately E5.1 million, which may be exercised at any time upon 30-days notice. On September 1, 1999, JOMED entered into a two-year consultancy agreement with Mr. Siegfried Einhellig, a member of the Supervisory Board. Pursuant to this agreement, Mr. Einhellig has been retained to act as a consultant on sales and marketing matters for JOMED. The agreement provides that Mr. Einhellig is entitled to receive the following compensation for performing these services: E153,387 per year from September 1, 1999 until June 30, 2000 and E89,476 per year thereafter. JOMED believes that the terms of all related-party transactions are customary and that they are in all material respects no less favourable to JOMED than those which could be obtained from unaffiliated third parties in arm's length negotiations. F-21 70 NOTES TO THE BALANCE SHEET NOTE 6 INTANGIBLE ASSETS Changes in intangible assets are as follows:
PATENTS, COMPLETED DEVELOPMENT LICENSES & DEVELOPMENT PROJECTS IN (E '000) GOODWILL SIMILAR RIGHTS PROJECTS PROGRESS TOTAL - -------- -------- -------------- ----------- ----------- ------ Opening balance January 1, 1998..... -- -- -- -- -- Acquired assets..................... -- 430 -- -- 430 Amortisation on acquired assets..... -- (78) -- -- (78) Additions 1998...................... 11,867 35 -- 215 12,117 Amortisation April-December 1998.... (445) (46) -- -- (491) Changes in exchange rates........... -- 5 -- -- 5 ------ ----- --- ----- ------ Book value December 31, 1998........ 11,422 346 -- 215 11,983 ------ ----- --- ----- ------ Additions 1999...................... 922 1,206 168 878 3,174 Amortisation 1999................... (642) (88) (7) -- (737) Changes in exchange rates........... -- -- -- 22 22 ------ ----- --- ----- ------ Book value December 31, 1999........ 11,702 1,464 161 1,115 14,442 ------ ----- --- ----- ------ Original cost....................... 12,789 1,671 168 1,093 15,721 Accumulated amortisation............ (1,087) (212) (7) -- (1,306) Changes in exchange rates........... -- 5 -- 22 27 ------ ----- --- ----- ------ Book value December 31, 1999........ 11,702 1,464 161 1,115 14,442 ====== ===== === ===== ======
UNAUDITED PRO FORMA The following table presents the pro forma goodwill and intangible assets on the assumption that the acquisition of JOMED GmbH, JOMED Deutschland GmbH and JOMED i Helsingborg International AB took place on January 1, 1996 at the same fair value but using the exchange rates ruling at that date.
PATENTS, LICENSES & (E '000) GOODWILL SIMILAR RIGHTS TOTAL - -------- -------- -------------- ------ Opening balance January 1, 1996............................. -- -- -- Additions 1996.............................................. 11,344 45 11,389 Amortisation 1996........................................... (572) (8) (580) Changes in exchange rates................................... 95 -- 95 ------ --- ------ Book value December 31, 1996................................ 10,867 37 10,904 Additions 1997.............................................. -- 385 385 Amortisation 1997........................................... (553) (70) (623) Changes in exchange rates................................... (362) -- (362) ------ --- ------ Book value December 31, 1997................................ 9,952 352 10,304 ====== === ======
The figures for 1996 and 1997 have been derived from the pro-forma consolidated statements. Development projects in progress are yet to be completed and are not subject to amortisation. Completed projects are subject to amortisation. F-22 71 NOTES TO THE BALANCE SHEET -- (CONTINUED) The foreign currency exchange rate differences are the differences between the amounts at the beginning and the end of the year that result from translating foreign subsidiaries' figures at the respective different exchange rates in force on the closing date in each period. The fair value of these assets is not materially different from the carrying value. NOTE 7 EQUIPMENT AND EQUIPMENT UNDER CONSTRUCTION Changes in equipment and equipment under construction are as follows:
EQUIPMENT UNDER EQUIPMENT CONSTRUCTION TOTAL --------- ------------ ------ (E '000) Opening balance January 1, 1998..................... -- -- -- Acquired assets..................................... 1,822 53 1,875 Depreciation on acquired assets..................... (420) -- (420) Additions 1998...................................... 2,426 819 3,245 Depreciation 1998................................... (811) -- (811) ------ ---- ------ Book value December 31, 1998........................ 3,017 872 3,889 ------ ---- ------ Additions 1999...................................... 8,192 (872) 7,320 Depreciation 1999................................... (2,087) -- (2,087) Changes in exchange rates........................... 39 -- 39 ------ ---- ------ Book value December 31, 1999........................ 9,161 -- 9,161 ------ ---- ------ Original cost....................................... 12,440 -- 12,440 Accumulated depreciation............................ 3,318 -- (3,318) Changes in exchange rates........................... 39 -- 39 ------ ---- ------ Book value December 31, 1999........................ 9,161 -- 9,161 ====== ==== ======
UNAUDITED PRO FORMA The following table presents the movements in equipment and equipment under construction in the predecessor comparison for the years ended December 31, 1996 and December 31, 1997:
EQUIPMENT UNDER EQUIPMENT CONSTRUCTION TOTAL --------- ------------ ----- (E '000) -------- Opening balance January 1, 1996...................... -- -- -- Additions 1996....................................... 777 270 1,047 Depreciation (net) 1996.............................. (86) -- (86) ----- ---- ----- Book value December 31, 1996......................... 691 270 961 ----- ---- ----- Additions 1997....................................... 1,071 (208) 863 Depreciation (net) 1997.............................. (337) -- (337) Changes in exchange rates............................ (23) (9) (32) ----- ---- ----- Book value December 31, 1997......................... 1,402 53 1,455 ===== ==== =====
The foreign currency exchange rate differences are the differences between the amounts at the beginning and the end of the year that result from translating foreign subsidiary's figures at the respective different exchange rates in force on the closing date in each period. F-23 72 NOTES TO THE BALANCE SHEET -- (CONTINUED) FINANCIAL LEASES Capitalised equipment held under finance leases includes assets with a total net value of:
(E '000) -------- 35794....................................................... 243 36159....................................................... 620 36524....................................................... 668
The gross carrying amounts of these assets total E1,093 thousand. The fair value of the equipment is not materially different from the carrying value. OPERATIONAL LEASE The commitments under operational lease are in total less than E1 million as at December 31, 1999 and mature within five years. NOTE 8 INVESTMENTS IN ASSOCIATES Changes in investments are as follows: Participation in associated companies represents the 50% stake in the shares of Corline Systems AB, Uppsala, Sweden and the 49% stake in the shares of JOMED Canada Inc., Toronto, Canada.
(E '000) -------- Opening balance January 1, 1998............................. -- Acquisition 1998............................................ 490 Share of net income for the year 1998....................... (104) Changes in exchange rates................................... (29) ---- Book value December 31, 1998................................ 357 Acquisition 1999............................................ 17 Share of net income for the period 1999..................... (78) Changes in exchange rates................................... 46 ---- Book value December 31, 1999................................ 342 UNAUDITED PRO FORMA Book value January 1, 1996.................................. -- Acquisition 1997............................................ 414 Share of net income for the year 1997....................... (12) ---- Book value December 31, 1997................................ 402 ====
The figures for 1996 and 1997 have been derived from the pro-forma consolidated statements. The fair value of these investments is not materially different from the carrying value. NOTE 9 OTHER FINANCIAL ASSETS Other financial assets represent an investment in 268,100 shares in EndoSonics Corp, amounting to E1,962 thousand. The fair value of this investment is not materially different from the carrying value. F-24 73 NOTES TO THE BALANCE SHEET -- (CONTINUED) NOTE 10 INVENTORIES Inventories comprise the following:
UNAUDITED UNAUDITED PRO FORMA PRO FORMA 1999 1998 1997 1996 ----- ----- --------- --------- (E '000) Raw materials and supplies.................... 973 612 200 206 Work in progress.............................. 1,216 529 89 92 Finished goods................................ 5,219 2,035 779 215 ----- ----- ----- --- 7,408 3,176 1,068 513 ===== ===== ===== ===
NOTE 11 RECEIVABLES AND OTHER ASSETS Trade accounts receivable, other receivables and other assets as presented under current assets mature within one year. Trade accounts receivable, other receivables and other assets are stated at nominal value, less any necessary write-downs for amounts unlikely to be recovered.
UNAUDITED UNAUDITED PRO FORMA PRO FORMA 1999 1998 1997 1996 ------ ----- --------- --------- (E '000) Accounts receivable trade.................... 22,098 7,724 3,734 1,214 Receivables from non-consolidated companies.................................. 1,404 321 34 -- Other receivables............................ 2,926 1,213 857 365 Other short-term assets...................... 990 ------ ----- ----- ----- 27,418 9,258 4,625 1,579 ====== ===== ===== =====
Other receivables consist mainly of trade tax. Other current assets consist of development projects in progress invoiced in the beginning of year 2000. NOTE 12 CASH AND CASH EQUIVALENTS At December 31, 1999, the amount of cash and cash equivalents was freely available. NOTE 13 SHAREHOLDERS On April 2, 1998, certain subsidiaries were acquired by JOMED in return for the issue of shares. At December 31, 1999, the authorized share capital amounted to E181,510 of 11,111 shares with a par value of E16.3 per share. As at December 31, 1999 11,111 shares were issued and paid-up and are held by the following shareholders:
SHARES OWNED PERCENTAGE PRIOR TO OWNED BEFORE SHAREHOLDER OFFERING OFFERING - ----------- ------------ ------------ Tor Peters................................................. 3,288 29.59% Capir Holdings Ltd......................................... 1,814 16.32% Siegfried Einhellig........................................ 1,121 10.09% Anna Sunnanvader........................................... 928 8.35% Monika Sunnanvader......................................... 674 6.07% Annika Sunnanvader......................................... 674 6.07% Lars Sunnanvader........................................... 509 4.58% SGA........................................................ 250 2.25%
F-25 74 NOTES TO THE BALANCE SHEET -- (CONTINUED)
SHARES OWNED PERCENTAGE PRIOR TO OWNED BEFORE SHAREHOLDER OFFERING OFFERING - ----------- ------------ ------------ Kurt Spranger.............................................. 200 1.80% Randolf von Oepen.......................................... 134 1.21% Sadco...................................................... 125 1.13% Other Investors............................................ 1,394 12.55% ------ ----- 11,111 100%
STOCK OPTION PLAN In 1999 JOMED set up a Stock Option Plan for members of management and key employees. Options were been granted to the 16 participants in the plan over up to an aggregate of 355 shares of JOMED, representing 3.2% of JOMED's current nominal share capital at December 31, 1999. The options may be exercised within four annual option periods. The first option period is from June 30, 1999 to June 30, 2000; the second, December 30, 1999 to December 29, 2000; the third, December 29, 2000 to December 28, 2001; and the fourth, December 28, 2001 to December 30, 2002. Only 25% of the total options available to each member of the Stock Option Plan are eligible to be exercised within any one option period. Any options not exercised within their respective option period lapse. Each of the options entitles its holder to purchase a share of JOMED at E12,780. The Stock Option Plan has closed, and no further options will be issued under this plan. JOMED is exempt from provisions of the Lock-up Agreement in issuing shares pursuant to the exercise of options under the Stock Option Plan. Since 1998, Capir Holdings Ltd., an investment holding company, has held an option to subscribe 526 shares of JOMED at DEM 7,000,000. NOTE 14 NON-CURRENT INTEREST BEARING LIABILITIES Financial obligations are carried at nominal or redemption value, whichever is higher. They comprise the following:
UNAUDITED UNAUDITED PRO FORMA PRO FORMA 1999 1998 1997 1996 ---- ---- --------- --------- (E '000) Liabilities under lease agreements............... 365 354 97 -- Loans............................................ 561 -- -- -- --- --- -- -- 926 354 97 -- === === == ==
JOMED has long-term loans amounting to a total of E561 thousand granted from financial institutions with an average interest rate of 5%. These loans are secured by chattel mortgages on machinery, other operational and office equipment as well as inventories. Liabilities due to financial leases are E365 thousand. The total amount is due within one to five years.
(E '000) -------- The loans are raised in: CHF to the equivalence of................................... 312 DEM to the equivalence of................................... 249 --- Total....................................................... 561 ===
F-26 75 NOTES TO THE BALANCE SHEET -- (CONTINUED) NOTE 15 EXCHANGE AND INTEREST RATE RISKS EXCHANGE RATE RISKS JOMED is subject to foreign exchange fluctuations in its normal course of business. Invoices to customers within the European Union are usually denominated in euro or local currencies and in other countries, mainly in U.S. dollars. In 1999 JOMED earned approximately 51% of its sales revenues in U.S. Dollars, 32% in euro-linked currencies and 17% in other currencies. Most of JOMED's expenses, on the other hand, are in euro-linked currencies. With the implementation of the euro, JOMED's foreign exchange exposure has been somewhat reduced. However, with the projected growing importance of sales outside Europe, exchange rates will continue to have a strong impact on the operations and the results of JOMED. At year-end 1999, JOMED had covered its estimated United States dollar exchange exposures as of 31 December 1999 with forward contracts. These forward contracts are spread over 2000 to match anticipated incoming receipts and have a value of USD 19.5 million. INTEREST RATE RISK All of JOMED's credit facilities bear market rate interest and are therefore subject to interest rate fluctuations. As of December 31, 1999, JOMED had available credit facilities of E21.5 million and had drawn down E11.5 million on these credit lines. JOMED's bank loans and credit facilities are renewable on a yearly basis and have until now primarily been used for investments in fixed assets and working capital. NOTE 16 CURRENT INTEREST BEARING LIABILITIES The individual items are as follows:
UNAUDITED PRO UNAUDITED PRO FORMA FORMA 1999 1998 1997 1996 ------ ----- ------------- ------------- (E '000) Finance lease.......................... 303 266 146 -- Loans.................................. 10,939 4,295 1,410 939 ------ ----- ----- --- 11,242 4,561 1,556 939 ====== ===== ===== ===
JOMED has interest bearing loans amounting to E10,939 thousand granted from financial institutions, with an average interest rate of 5%. These loans are secured by chattel mortgages on the machinery, other operational and office equipment as well as inventories.
(E '000) -------- The loans are raised in: SEK to the equivalent of.................................... 9,925 CHF to the equivalent of.................................... 553 DEM to the equivalent of.................................... 461 ------ Total....................................................... 10,939 ======
F-27 76 NOTES TO THE BALANCE SHEET -- (CONTINUED) NOTE 17 OTHER CURRENT LIABILITIES The individual items are as follows:
UNAUDITED PRO UNAUDITED PRO FORMA FORMA 1999 1998 1997 1996 ------ ----- ------------- ------------- (E '000) Payroll liabilities.................... 353 133 150 53 Taxes on income........................ 2,842 2,339 1,196 300 Liabilities for social expenses........ 741 110 250 175 Advance payments received.............. 195 46 -- -- Other liabilities...................... 6,962 3,754 1,355 825 ------ ----- ----- ----- 11,093 6,382 2,951 1,353 ====== ===== ===== =====
Tax liabilities include not only Group companies' own tax liabilities, but also taxes withheld by them for payment to authorities on behalf of third parties. Liabilities for social expenses include, in particular, social insurance contributions that had not been paid by the closing date. The other liabilities comprise numerous individual items such as guarantees and commissions to customers. NOTE 18 PLEDGED ASSETS
UNAUDITED PRO UNAUDITED PRO FORMA FORMA 1999 1998 1997 1996 ------ ----- ------------- ------------- (E '000) Chattel mortgages...................... 467 423 457 -- Pledged inventories, machinery and equipment receivables................ 10,300 5,987 1,657 -- ------ ----- ----- -- 10,767 6,410 2,114 -- ====== ===== ===== ==
F-28 77 NOTES TO THE CASH FLOW STATEMENT NOTE 19 ACQUISITION OF SUBSIDIARIES During 1999, 50% of shares of JOMED do Brasil Ltda was acquired at a price of E855 thousand. Goodwill amounted to E857 thousand. Additional consideration payable in connection with the purchase of JOMED Italia S.p.a., acquired during 1998, amounted to E65 thousand. The purchase prices had not been paid at year-end. JOMED i Helsingborg International AB, JOMED GmbH and JOMED Deutschland GmbH were acquired as part of the reconstruction of the company structure in 1998. These acquisitions did not result in an outflow of cash since they were paid with in shares..
1999 1998 ---- ------ (E '000) Fixed assets................................................ 19 2,319 Inventories................................................. 402 496 Receivables and other assets................................ 96 4,953 Cash and cash equivalents................................... 15 345 Long-term liabilities....................................... -- -- Accounts payable -- trade................................... (536) (6,442) Purchase price -- paid...................................... -- 396 Liquid assets in the acquired company....................... 15 345 Effect on the liquid assets of the Group.................... 15 (51)
The cash and cash equivalents acquired as part of the acquisition of subsidiaries is shown as an investment activity. F-29 78 FINANCIAL STATEMENTS OF JOMED FOR THE FIRST SIX MONTHS OF 2000 JOMED CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, -------------------------- 2000 1999 ----------- ----------- (UNAUDITED) (UNAUDITED) NET SALES................................................... 29,859 19,823 Cost of goods sold.......................................... (4,081) (5,021) GROSS PROFIT................................................ 25,778 14,802 Manufacturing overheads..................................... (1,562) (1,326) Sales & Marketing........................................... (12,679) (7,786) General & Administration.................................... (4,211) (1,923) Research & Development...................................... (3,152) (1,662) Other operating income...................................... 211 (30) OPERATING RESULT............................................ 4,385 2,075 Result from financial investments: Interest income............................................. 521 80 Interest expenses........................................... (855) (563) Result from associated companies............................ (48) (66) NON-OPERATING RESULT........................................ (382) (549) INCOME BEFORE INCOME TAXES.................................. 4,003 1,526 Income taxes................................................ (1,174) (548) INCOME AFTER TAXES.......................................... 2,829 978 Minority interest........................................... (217) (38) NET INCOME.................................................. 2,612 940
F-30 79 JOMED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, -------------------------- 2000 1999 ----------- ----------- (UNAUDITED) (UNAUDITED) ASSETS Non-current assets: Intangible assets........................................... 51,626 12,418 Equipment and equipment under construction.................. 11,345 6,757 Investments in associates................................... 332 327 Other financial assets...................................... 1,996 2,322 Deferred tax................................................ 1,551 1,290 66,850 23,114 Current assets: Inventories................................................. 12,938 6,247 Receivables and other assets Trade accounts receivable................................... 29,144 16,299 Other receivables and other assets.......................... 5,545 2,649 Cash and cash equivalents................................... 91,404 1,216 139,031 26,411 TOTAL ASSETS................................................ 205,881 49,525 EQUITY AND LIABILITIES Equity: Issued capital.............................................. 232 163 Share premium............................................... 151,916 12,906 Other reserves.............................................. 4,959 1,535 Net income.................................................. 2,612 940 159,719 15,544 Non-current liabilities: Interest bearing liabilities................................ 6,787 17,767 Convertible loan notes...................................... 12,000 -- Deferred tax................................................ 332 -- 19,119 17,767 Current liabilities: Trade accounts payable...................................... 4,940 7,208 Interest bearing liabilities................................ 8,507 280 Other current liabilities................................... 13,596 8,726 27,043 16,214 TOTAL EQUITY AND LIABILITIES................................ 205,881 49,525
F-31 80 JOMED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED JUNE 30, ----------------- 2000 1999 ------- ------ E '000 Operating activities: Operating result............................................ 4,385 2,075 Adjustments for items not included in cash flow............. 641 839 Cash flow from operating activities, before working capital changes................................................... 5,026 2,914 Increase in inventories..................................... (5,387) (3,071) Increase in current receivables............................. (6,635) (9,690) Increase in current liabilities............................. 325 6,621 Cash flow from operating activities......................... (6,671) (3,226) Income taxes paid........................................... (2,429) (1,536) NET CASH FROM OPERATING ACTIVITIES.......................... (9,100) (4,762) Investing activities: Acquisition of intangible assets............................ (12,967) (1,498) Acquisition of equipment.................................... (2,789) (3,576) Acquisition of subsidiaries................................. (89) (857) Investing in financial assets............................... (23) (2,322) CASH FLOW FROM INVESTING ACTIVITIES......................... (15,868) (8,253) Financing activities: Share issue................................................. 110,258 Increase in interest bearing liabilities.................... 2,948 13,132 CASH FLOW FROM FINANCING ACTIVITIES......................... 113,206 13,132 CHANGE IN CASH AND CASH EQUIVALENTS......................... 88,238 117 Cash and cash equivalents -- opening balance................ 3,166 1,099 Cash and cash equivalents -- closing balance................ 91,404 1,216
F-32 81 ANNEX B SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The financial statements in Annex A to this Offer to Purchase conform with International Accounting Standards (IAS), which differ in certain respects from United States Generally Accepted Accounting Principles (US GAAP). FINANCIAL STATEMENTS - GENERAL REQUIREMENTS Contents of Financial Statements Under IAS, two years' balance sheets, income, recognized gains and losses and cash flows statements, changes in equity, accounting policies and notes are required. US GAAP is comparable to the IAS, except that three years of income, recognized gains and losses and cash flows statements, changes in equity, accounting policies and notes are required (but not balance sheets). True and Fair View Override Under IAS, standards may be overridden (in rare cases) to give a "true and fair view" of information. Under US GAAP, no override of standards is permitted. Accounting Convention Under IAS, historical cost are generally used, but some assets may be revalued. Under US GAAP, no revaluations are permitted, except that some securities and derivatives may be valued at fair value. Changes in Accounting Policies Under IAS, either restate comparatives and prior year opening retained earnings or include effect in current year income. Under US GAAP, generally include effect in current year income statement. Correction of Fundamental Errors Under IAS, either restate comparatives or include effect in current year income. Under US GAAP, restate comparatives. GROUP REPORTING Definition of Subsidiary Under IAS, the determination of whether an entity is a "subsidiary" is based on voting control or actual dominant influence. Under US GAAP, the determination of whether an entity is a "subsidiary" is based on controlling interest through a majority of voting shares. Presentation of Associate Results Under IAS, the equity method is used to present a company's share of profits and losses of one of its associates. Under US GAAP, the equity method is used to present a company's share of the post-tax results of its associates. B-1 82 Disclosures about Significant Associates Under IAS, minimal disclosures regarding significant associates are required. Under US GAAP, detailed information on a significant associates' assets, liabilities and results must be disclosed. Equity Method or Proportional Consolidation for Joint Ventures Under IAS, both proportional consolidation and equity methods are permitted to consolidate joint ventures. Under US GAAP, the equity method is generally used to consolidate joint ventures. FOREIGN CURRENCY TRANSACTION Hyperinflation - Foreign Entity Under IAS, local statements of foreign entity are translated to current price levels prior to translation. Under US GAAP, local currency statements are remeasured using the reporting currency as the functional currency. BUSINESS COMBINATIONS Purchase Method - Fair Values on Acquisition Under IAS, the fair value assets and liabilities of an acquired entity is presented. Some liabilities relating to the acquired entity may be recognized in restricted circumstances. US GAAP is broadly comparable to IAS but value must be allocated to all intangibles. Some plant closure and restructuring liabilities relating to the acquired entity may be provided in fair value exercise if certain criteria are met. Purchase Method - Subsequent Adjustments to Fair Values Under IAS, fair values can be corrected against goodwill up to the end of the year after acquisition if additional evidence of value becomes available, with subsequent adjustments in the income statement being recorded. Reversals of acquisition provisions always adjust goodwill. US GAAP is broadly comparable to IAS, except that the investigation of values must be ongoing and the correction against goodwill will only be allowed within a maximum of one year from acquisition. Reversals of acquisition provisions always adjust goodwill. Purchase Method - Contingent Consideration Under IAS, contingent consideration is estimated at acquisition then subsequently corrected against goodwill. Under US GAAP, contingent consideration is not recognized until the contingency is resolved or the amount is determinable. Purchased Method - Minority Interests at Acquisition Under IAS, a minority interest, at acquisition, is stated at the owner's share of fair value of net assets or at the owner's share of pre-acquisition carrying value of net assets. Under US GAAP, minority interests, at acquisition, are usually stated at share of pre-acquisition carrying value of net assets. Purchase Method - Disclosure Under IAS, disclosures include names and descriptions of combining entities, method of accounting for acquisition and date of acquisition. US GAAP is broadly comparable to IAS, but pro-forma income statement information as if an acquisition occurred at start of comparable period must also be presented. Purchase Method - Goodwill Under IAS, goodwill is capitalized and amortized over useful life, which is normally not longer than 20 years. Under US GAAP, goodwill is capitalized and amortized over useful life, with a maximum of 40 years. B-2 83 MAIN ACCOUNTING PRINCIPLES Intangible Assets Under IAS, intangible assets are capitalized if recognition criteria are met, and intangible assets must be amortized over useful life, which is normally no longer than 20 years, with reevaluations being permitted only in rare circumstances. Under US GAAP, intangible assets are capitalized and amortized over useful life, which is no longer than 40 years, with reevaluations not being permitted. Research & Development Costs Under IAS, research costs are expensed as incurred. Development costs must be capitalized and amortized if stringent criteria are met. Under US GAAP, both research and development costs are expensed as incurred. Some software development costs must be capitalized. Property, Plant and Equipment Under IAS, historical cost or revalued amounts are used. Frequent valuations of entire classes of assets are necessary when revalued amounts are used. Under US GAAP, revaluations are not permitted. Investment Properties Under IAS, investment properties are either treated as investment or property, plant and equipment. Under US GAAP, investment properties are treated as "other properties" (historical cost is used). Impairment of Assets Under IAS, if impairment of assets is indicated, assets are written down to the higher of net selling price and value in use based on discounted cash flows. Under US GAAP, an impairment review is based on undiscounted cash flows. If the undiscounted cash flows are less than the carrying amount, impairment loss is measured using discounted cash flows. Capitalization of Borrowing Costs Under IAS, capitalization of borrowing costs is permitted for qualifying assets. Under US GAAP, capitalization of borrowing costs is compulsory when related to construction of certain qualifying assets. Investments Under IAS, long-term investments are carried at cost or revalued amounts. Revaluations are recorded consistently in income statement or equity, and current asset investments are carried at the lower of cost and market value or at market value. Market value changes are recorded in income statement. However, there are some recent proposals to carry some financial assets at fair value. Under US GAAP, if an investment is held to maturity then it is carried at amortized cost, otherwise it is carried at fair value. Unrealized gains/losses are taken to other comprehensive income or (if trading securities) to income statement. Inventories and Long-term Contracts Under IAS, inventories and long-term contracts are carried at the lower of cost and NRV, and FIFO, LIFO or the weighted average method are used to determine cost. US GAAP is broadly comparable to IAS; however, LIFO is more commonly used. Provisions - General Under IAS, provisions relating to present obligations are recorded separately from past events if probable outflow of resources can be reliably estimated. Under US GAAP, there are separate rules for specific situations (employee termination cost, environmental liabilities, etc.) B-3 84 Provisions - Restructuring Under IAS, restructuring provisions are made if a detailed formal plan exists and has been announced or implemented. Under US GAAP, restructuring provisions are made if management has committed to such provisions and the implementation process has begun. Employee Stock Compensation Under IAS, disclosures of employee stock compensation are required but there are no standards for proposals on measurement. Under US GAAP, the cost of employee stock compensation share awards or options are charged over the period of employee's performance. Two alternative methods are available for cost: intrinsic value (market price at measurement date less any employee contribution or exercise price) or fair value using the option pricing model. Employee Share Option Plans - Presentation in Balance Sheet of Sponsor IAS has no standard or proposals for the presentation in the balance sheet of a sponsor of the sponsor's employee share option plans. Under US GAAP, employee stock option plan shares are classified as deduction from equity, and the debt of an employee stock option plan is included on the sponsor's balance sheet. Deferred Income Taxes Under IAS, the full provision method is used, driven by balance sheet temporary differences. Deferred income tax assets are recognized if recovery is probable. US GAAP is comparable to IAS, but all deferred income tax assets are recognized and then a valuation allowance is provided if a recovery is less than 50% likely. Capital Instruments - Categorization of Shares Under IAS, capital instruments are classified depending on the substance of the obligations of the issuer. Mandatory redeemable preference shares are generally liabilities, not equity. Under US GAAP, shareholders' equity is categorized between common stock and other categories. Redeemable preference shares are normally categorized in a "mezzanine" category (between debt and equity). Capital Instruments - Convertible Debt Under IAS, convertible debt is accounted for on a split basis, allocating proceeds between equity and debt. Under US GAAP, convertible debt is a liability. Derivatives and Other Financial Instruments - Measurement of Derivative Instruments and Hedging Activities Under IAS, there is no guidance currently with respect to the measurement of derivative instruments and hedging activities. Under US GAAP, derivatives and hedges are measured at fair value, with changes in fair value being carried to the income statement (except for effective cash flow hedges where they are taken to comprehensive income (i.e. in equity) until effect of transaction goes through income, then they are transferred to the income statement). Derivatives and Other Financial Instruments - Disclosures Under IAS, credit risk, exposures to interest rates, fair values of financial assets and liabilities, information on hedges are disclosed, as well as information about policies and strategies. US GAAP is comparable to IAS, but additional required disclosures about hedging objectives, strategies, fair value hedges and cash flow hedges are required. B-4 85 OTHER ACCOUNTING AND REPORTING ISSUES Related Party Transactions - Disclosures Under IAS, the names of related parties, nature of relationship and types of transactions are disclosed. For control relationships, disclosure is made regardless of whether transactions between the related parties occur. However, some exemptions are available for separate financial statements of subsidiaries. US GAAP is broadly comparable to IAS; however, exemptions are narrower than under IAS. Extraordinary and Exceptional Items Under IAS, extraordinary items are limited to a few events outside control of the company and exceptional items are usually shown in the notes. US GAAP is broadly comparable to IAS; however, subtotals of income for operations before exceptional items are not shown. Segment Reporting - Accounting Policies Under IAS, consolidated GAAP accounting policies are used for segment reporting. Under US GAAP, internal financial reporting policies are used for segment reporting even if accounting policies may differ from consolidated GAAP. Segment Reporting - Disclosures Under IAS, disclosures for primary segment format include sales, profits, capex, assets and liabilities. For secondary segment format, sales, assets and capital expenditures are disclosed. Under US GAAP, disclosures are similar to IAS. However, liabilities and geographical capital expenditures are not required to be disclosed. Depreciation, amortization, tax, interest and exceptional/extraordinary items are required to be disclosed if reported internally. Cash Flow Statements - Formats and Method Under IAS, headings are standard, but there is flexibility over their contents. The direct or indirect method is used. US GAAP has similar headings to IAS, but more specific guidance is given for items to include in each heading. Under US GAAP, the direct or indirect method is used. Cash Flow Statements - Definition of Cash and Cash Equivalents Under IAS, cash includes overdrafts and cash equivalents with short-term maturities (less than 3 months). Under US GAAP, cash excludes overdrafts but includes cash equivalents with short-term maturities. Cash Flow Statements - Exemptions Under IAS, no exemptions are available. Under US GAAP, limited exemptions for certain investment enterprises are available. Statement of Recognized Gains and Losses Under IAS, a statement of recognized gains and losses is given either as a separate primary statement or it is separately highlighted in a primary statement of movements in equity. Under US GAAP, total comprehensive income is disclosed, either combined with income statements or as under IAS. Also, cumulative amounts are tracked and disclosed. Operating and Financial Review IAS has no mandatory standard for operating and financial review. However IAS includes suggested features, such as an analytical discussion of business and financial information. Under US GAAP, public entities must prepare a "Management's Discussion and Analysis ("MD&A") including contents mandated by U.S. Securities and Exchange Commission rules and focusing on liquidity, capital resources and results of operation. B-5 86 Manually signed facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of the addresses set forth below: The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Facsimile Transmission (for Eligible Institutions only): (201) 296-4293 Confirm by Telephone: (201) 296-4860 By Overnight Courier: By Mail: By Hand: ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder Services, L.L.C. Services, L.L.C. Services, L.L.C. Reorganization Department Reorganization Department 120 Broadway, 13th Floor 85 Challenger Road P.O. Box 3301 New York, NY 10271 Mail Stop -- Reorg South Hackensack, NJ 07606 Attn: Reorganization Ridgefield Park, NJ 07660 Department
Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager, at the addresses and telephone numbers set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and related materials may be obtained from the Information Agent or the Dealer Manager as set forth below and will be furnished promptly at the Purchaser's expense. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [MacKenzie Partners, Inc. Logo] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or toll-free (800) 322-2885 The Dealer Manager for the Offer is: [CREDIT SUISSE/FIRST BOSTON LOGO] Eleven Madison Avenue New York, New York 10010-3629 Call Toll Free: (800) 881-8320 EX-99.A.1.B 3 ex99-a_1b.txt LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE RELATED RIGHTS TO PURCHASE PREFERRED STOCK) OF ENDOSONICS CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 21, 2000 BY JOMED ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF JOMED N.V. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 19, 2000, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By First Class Mail: By Overnight Courier, Certified or By Hand: Express Mail Delivery: ChaseMellon Shareholder Services, ChaseMellon Shareholder Services, ChaseMellon Shareholder L.L.C. L.L.C. Services, L.L.C. P.O. Box 3301 Reorganization Department 120 Broadway, 13th Floor Reorganization Department Mail Stop-Reorg New York, New York 10271 South Hackensack, New Jersey 07606 85 Challenger Road Attn: Reorganization Department Ridgefield Park, New Jersey 07660
Facsimile Transmission for Eligible Institutions: For Confirmation by Telephone: (201) 296-4293 (201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR BELOW, WITH SIGNATURE GUARANTEE IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. 2
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES CERTIFICATE(S) AND SHARE(S) TENDERED (PLEASE FILL IN, IF BLANK) (PLEASE ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ SHARE TOTAL NUMBER OF NUMBER CERTIFICATE SHARES REPRESENTED OF SHARES NUMBER(S)(1) BY CERTIFICATE(S) TENDERED(2) ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ TOTAL SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ (1) Need not be completed by shareholders who deliver Shares by book-entry transfer ("Book-Entry Shareholders"). (2) Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed to have been tendered. See Instruction 4. [ ] CHECK HERE IF CERTIFICATES HAVE BEEN LOST OR MUTILATED. SEE INSTRUCTION 11. - ------------------------------------------------------------------------------------------------------------------------
The names and addresses of the registered holders of the tendered Shares should be printed, if not already printed above, exactly as they appear on the Share Certificates tendered hereby. This Letter of Transmittal is to be used by shareholders of EndoSonics Corporation (the "Company") if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Section 3 of the Offer to Purchase) is utilized, if delivery of Shares is to be made by book-entry transfer to an account maintained by the Depositary at the Book-Entry Transfer Facility (as defined in Section 2 of the Offer to Purchase and pursuant to the procedures set forth in Section 3 thereof). Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available, or who cannot complete the procedure for book-entry transfer on a timely basis, or who cannot deliver all other required documents to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase), must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. TENDER OF SHARES [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: - -------------------------------------------------------------------------------- Account Number: - -------------------------------------------------------------------------------- Transaction Code Number: - -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): - -------------------------------------------------------------------------------- Window Ticket Number (if any): - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: - -------------------------------------------------------------- Name of Eligible Institution that Guaranteed Delivery: - ------------------------------------------------------------ 2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to JOMED Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of JOMED N.V., a corporation organized under the laws of The Netherlands, the above-described shares of common stock, par value $.001 per share, and the related rights to purchase preferred stock (the "Shares"), of EndoSonics Corporation, a Delaware corporation (the "Company"), pursuant to the Purchaser's offer to purchase all outstanding Shares, at a purchase price of $11.00 per Share, net to the seller in cash (the "Offer Price"), without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 21, 2000, and in this Letter of Transmittal (which together with any amendments or supplements thereto or hereto, collectively constitute the "Offer"). Receipt of the Offer is hereby acknowledged. Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of any such extension or amendment), and effective upon acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to or upon the order of the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all dividends, distributions, rights, other Shares or other securities issued or issuable in respect thereof on or after the date hereof (collectively, "Distributions")) and irrevocably constitutes and appoints ChaseMellon Shareholder Services, L.L.C. (the "Depositary") the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any and all Distributions), or transfer ownership of such Shares (and any and all Distributions) on the account books maintained by any of the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, (ii) present such Shares (and any and all Distributions) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any and all Distributions), all in accordance with the terms of the Offer. By executing this Letter of Transmittal, the undersigned hereby irrevocably appoints Tor Peters and Antti Ristinmaa in their respective capacities as officers or directors of the Purchaser, and any individual who shall thereafter succeed to any such office of the Purchaser, and each of them, and any other designees of the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof or otherwise in such manner as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, all of the Shares (and any and all Distributions) tendered hereby and accepted for payment by the Purchaser. This appointment will be effective if and when, and only to the extent that, the Purchaser accepts such Shares for payment pursuant to the Offer. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke any prior powers of attorney and proxies granted by the undersigned at any time with respect to such Shares (and any and all Distributions), and no subsequent powers of attorney, proxies, consents or revocations may be given by the undersigned with respect thereto (and, if given, will not be deemed effective). The Purchaser reserves the right to require that, in order for the Shares or other securities to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares (and any and all Distributions), including voting at any meeting of the Company's stockholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, that the undersigned owns the Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act, and that, 3 4 when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of the Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price, the amount or value of such Distribution as determined by the Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that the valid tender of the Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms or conditions of any such extension or amendment). Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the Merger Agreement, the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in this Letter of Transmittal. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of all the Shares purchased and/or return any certificates for the Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of all the Shares purchased and/or return any certificates for the Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and/or return any certificates evidencing Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return any such certificates (and any accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that the Purchaser has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. 4 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares accepted for payment or certificates representing Shares not tendered or accepted for payment are to be issued in the name of someone other than the undersigned. Issue: [ ] Check [ ] Certificate(s) to Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (Also complete Substitute Form W-9 below) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares accepted for payment and/or certificates representing Shares not tendered or accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown under "Description of Shares Tendered." Mail: [ ] Check [ ] Certificate(s) to Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ 5 6 IMPORTANT SHAREHOLDER: SIGN HERE (COMPLETE SUBSTITUTE FORM W-9 INCLUDED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF OWNER(S)) Name(s) ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Capacity (Full Title) ---------------------------------------------------------------- (SEE INSTRUCTIONS) Address------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- Area Code and Telephone Number ----------------------------------------------------- Taxpayer Identification or Social Security Number ------------------------------------------- (SEE SUBSTITUTE FORM W-9) Dated: - --------------------------- , 2000 (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by the person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5). GUARANTEE OF SIGNATURES(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE BELOW. Authorized Signatures(s) ------------------------------------------------------------- Name -------------------------------------------------------------------------- Name of Firm --------------------------------------------------------------------- Address------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ----------------------------------------------------- Dated: - --------------------------- , 2000 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee is required on this Letter of Transmittal (a) if this Letter or Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's systems whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. Requirements of Tender. This Letter of Transmittal is to be completed by shareholders if certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing tendered Shares, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Shareholders whose Share Certificates are not immediately available, or who cannot complete the procedure for delivery by book-entry transfer on a timely basis or who cannot deliver all other required documents to the Depositary prior to the Expiration Date, may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq National Market trading days after the date of execution of such Notice of the Guaranteed Delivery. If Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND THE RISK OF THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares and any other required information should be listed on a separate signed schedule attached hereto. 4. Partial Tenders (not applicable to shareholders who tender by book-entry transfer). If fewer than all the Shares evidenced by any Share Certificate are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shared Tendered." In this case, new Share Certificates for the Shares that were evidenced by your old Share Certificates, but were not tendered by you, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless indicated. 7 8 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations. If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of the authority of such person so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment to be made or certificates for Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s). Signatures on any such Share Certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed and transmitted hereby, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificate(s). Signature(s) on any such Share Certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, the Purchaser will pay all stock transfer taxes with respect to the transfer and sale of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificate(s) for Shares not tendered or not accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered certificate(s) are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such other person) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased unless evidence satisfactory to the Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) evidencing the Shares tendered hereby. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check and/or such certificates are to be returned to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal must be completed. 8. Substitute Form W-9. A tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify whether the shareholder is subject to backup withholding of Federal income tax. If a tendering shareholder is subject to backup withholding, the shareholder must cross out Item (Y) of Part (3) of the Certification Box of the Substitute Form W-9. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to Federal income tax withholding of 31% of any payments made to the shareholder, but such withholdings will be refunded if the tendering shareholder provides a TIN within 60 days. Certain shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign shareholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 9. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of 8 9 Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at the address and phone number set forth below, or from brokers, dealers, commercial banks or trust companies. 10. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement (as defined in the Offer to Purchase), the Purchaser reserves the right, in its sole discretion, to waive, at any time or from time to time, any of the specified conditions of the Offer (other than the Minimum Condition), in whole or in part, in the case of any Shares tendered. 11. Lost, Destroyed or Stolen Certificates. If any certificate representing Shares has been lost, destroyed or stolen, the shareholder should promptly notify American Stock Transfer, in its capacity as transfer agent for the shares, at 800-937-5449. The shareholder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE HEREOF) TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING SHAREHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 9 10 IMPORTANT TAX INFORMATION Under the federal income tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary with such shareholder's correct TIN on the Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's Social Security Number. If a tendering shareholder is subject to backup withholding, such shareholder must cross out Item (Y) of Part (3) of the Certification box on the Substitute Form W-9. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder may be subject to backup withholding of 31%. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements may be obtained from the Depositary. Exempt shareholders, other than foreign individuals, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN). WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the Social Security Number or Employer Identification Number of the record holder of the Shares. If the Shares are in more than one name, or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for the TIN in Part I, and sign and dated the Substitute Form W-9. If "Applied For" is written in Part I, the Depositary will withhold 31% of payments made for the shareholder, but such withholdings will be refunded if the tendering shareholder provides a TIN within 60 days. 10 11 - ---------------------------------------------------------------------------------------------------------------------------- PAYOR: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. - ---------------------------------------------------------------------------------------------------------------------------- NAME ----------------------------------------------------------------------------------- ADDRESS SUBSTITUTE FORM W-9 ---------------------------------------------------------------------------------------- (Number and Street) ---------------------------------------------------------------------------------------- (Zip Code) (City) (State) ----------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY PART 1(A) -- PLEASE PROVIDE YOUR TIN IN THE BOX AT TIN INTERNAL REVENUE SERVICE RIGHT AND CERTIFY BY SIGNING AND DATING BELOW ---------------------------------- ----------------------------------------------------------------------------------------- PART 1(B) -- PLEASE CHECK THE BOX AT RIGHT IF YOU HAVE APPLIED FOR, AND ARE AWAITING RECEIPT OF YOUR TIN [ ] ----------------------------------------------------------------------------------------- PAYER'S REQUEST FOR PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE "EXEMPT" HERE TAXPAYER IDENTIFICATION NUMBER ("TIN") (SEE INSTRUCTIONS) ------------------------------------------------------------------------------------ ----------------------------------------------------------------------------------------- PART 3 -- CERTIFICATION UNDER PENALTIES OF PERJURY, I CERTIFY THAT (X) The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me), and (Y) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Sign Here W SIGNATURE ------------------------------- DATE------------------- - ----------------------------------------------------------------------------------------------------------------------------
CERTIFICATION OF INSTRUCTIONS -- You must cross out Item (Y) of Part 3 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such Item (Y). YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 1(b) OF THE SUBSTITUTE FORM W-9 INDICATING YOU HAVE APPLIED FOR, AND ARE AWAITING RECEIPT OF, YOUR TIN. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (1) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (2) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO THE PAYOR BY THE TIME OF PAYMENT, 31 PERCENT OF ALL REPORTABLE PAYMENTS MADE TO ME PURSUANT TO THIS OFFER WILL BE WITHHELD. --------------------------------------------------------- --------------------------------------------------------- Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 12 MANUALLY SIGNED FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH SHAREHOLDER OF THE COMPANY OR SUCH SHAREHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ON THE FIRST PAGE. Questions and requests for assistance or for additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and locations listed below, and will be furnished promptly at the Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [MacKenzie Partners, Inc. Logo] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or toll-free (800) 322-2885 The Dealer Manager for the Offer is: [CREDIT SUISSE/FIRST BOSTON LOGO] Eleven Madison Avenue New York, New York 10010-3629 Call Toll Free: (800) 881-8320 12 EX-99.A.1.C 4 ex99-a_1c.txt NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE RELATED RIGHTS TO PURCHASE PREFERRED STOCK) OF ENDOSONICS CORPORATION TO JOMED ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF JOMED N.V. (NOT TO BE USED FOR SIGNATURE GUARANTEES) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 19, 2000, UNLESS THE OFFER IS EXTENDED. This Notice of Guaranteed Delivery, or a form substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available, if the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach ChaseMellon Shareholder Services, L.L.C. (the "Depositary") on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). This form may be delivered by hand, transmitted by facsimile transmission or mailed (to the Depositary). See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By First Class Mail: By Overnight Courier, Certified or By Hand: Express Mail Delivery: ChaseMellon Shareholder ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. Reorganization Department Services, L.L.C. 120 Broadway, 13th Floor P.O. Box 3301 Reorganization Department New York, NY 10271 South Hackensack, NJ 07606 85 Challenger Road Attn: Reorganization Department Mail Stop-Reorg Ridgefield Park, NJ 07660
Facsimile Transmission for Eligible Institutions: For Confirmation by Telephone: (201) 296-4293 (201) 296-4860
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN ONE SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN THE FACSIMILE NUMBER SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. THIS NOTICE OF GUARANTEED DELIVERY TO THE DEPOSITARY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE) UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER TO TRANSMITTAL. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal or an Agent's Message (as defined in the Offer to Purchase) and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. 2 Ladies and Gentlemen: The undersigned hereby tenders to JOMED Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of JOMED N.V., a company organized under the laws of The Netherlands, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 21, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of common stock, par value $.001 per share, including the related rights to purchase preferred stock (the "Shares"), of EndoSonics Corporation, a Delaware corporation (the "Company"), set forth below, pursuant to the guaranteed delivery procedures set forth in the Offer to Purchase. Number of Shares Tendered: SIGN HERE Name(s) of Record Holder(s) ---------------------- ------------------------------------------- Certificate No(s) (if available): ------------------------------------------- ------------------------------------------- (PLEASE PRINT) ------------------------------------------- Address(es): [ ] Check if securities will be tendered by ------------------------------------------- book-entry transfer ------------------------------------------- Name of Tendering Institution: (ZIP CODE) ------------------------------------------- Area Code and Telephone No(s): ------------------------------------------- Account No.: SIGNATURE(S) --------------------------------------- ------------------------------------------- ------------------------------------------- Dated: , 2000 ----------------------------------------
2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program, (a) represents that the above named person(s) "own(s)" the Shares tendered hereby with the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents that such tender of Shares complies with Rule 14e-4 and (c) guarantees to deliver to the Depositary either the certificates evidencing all tendered Shares, in proper form for transfer, or to deliver Shares pursuant to the procedure for book-entry transfer into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), in either case together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three Nasdaq National Market trading days after the days after the date hereof. Name of Firm: -------------------------------------------- ------------------------------------- (AUTHORIZED SIGNATURE) Address: Title: - -------------------------------------------- -------------------------------------------- - -------------------------------------------- Name: ZIP CODE -------------------------------------------- Area Code and Tel. No. (PLEASE TYPE OR PRINT) -------------------------- Dated: , 2000 ------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A.1.D 5 ex99-a_1d.txt BROKER DEALER LETTER 1 [LETTERHEAD] OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE RELATED RIGHTS TO PURCHASE PREFERRED STOCK) OF ENDOSONICS CORPORATION BY JOMED ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF JOMED N.V. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 19, 2000, UNLESS THE OFFER IS EXTENDED. August 21, 2000 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: JOMED Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of JOMED N.V., a corporation organized under the laws of The Netherlands ("JOMED"), has made an offer to purchase all outstanding shares of common stock, par value $.001 per share, including the related rights to purchase preferred stock (collectively, the "Shares"), of EndoSonics Corporation, a Delaware corporation (the "Company"), at a purchase price of $11.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 21, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") enclosed herewith. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available, who cannot complete the procedures for book-entry transfer on a timely basis, or who cannot deliver all other required documents to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") prior to the Expiration Date (as defined in the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. The Offer is conditioned upon, among other things, (1) there being validly tendered and not properly withdrawn prior to the expiration of the Offer a number of Shares that, together with the Shares then owned by JOMED and/or Purchaser, represents at least a majority of the Shares outstanding on a fully diluted basis, (2) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder having expired or been terminated, and all consents and approvals from Governmental Authorities pursuant to national antitrust or competition laws, which are required to complete the transaction, having been obtained and (3) the satisfaction of certain other conditions including, but not limited to, the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange not being less than (i) 42 Swiss Francs or (ii) one-half of the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange on the first trading day following the announcement of the Offer and the Merger (the closing price of the JOMED Ordinary Shares on August 7, 2000, the first trading day after the announcement of the Offer and the Merger, was 90 Swiss Francs per share) on either of (i) the date of the execution of the purchase agreement for the JOMED Equity Offering (the "Purchase Agreement") or (ii) on the first trading day 2 immediately prior to the closing date of the Purchase Agreement, as such date is defined in the Purchase Agreement. See Sections 11 and 15. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. 1. Offer to Purchase dated August 21, 2000; 2. Letter of Transmittal for your use in accepting the Offer and tendering Shares and for the information of your clients (manually signed facsimile copies of the Letter of Transmittal may be used to tender Shares); 3. Notice of Guaranteed Delivery to be used to accept the Offer if Share Certificates are not immediately available or if such certificates and all other required documents cannot be delivered to the Depositary, or if the procedures for book-entry transfer cannot be completed on a timely basis; 4. A printed form of letter that may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. The letter to stockholders of the Company from Reinhard J. Warnking, Chairman and Chief Executive Officer of the Company, accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company, which includes the recommendation of the Board of Directors of the Company (the "Board of Directors") that stockholders accept the Offer and tender their Shares to the Purchaser pursuant to the Offer; and 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. The Company's Board of Directors, at a special meeting held on August 5, 2000, unanimously (1) determined that the Merger Agreement (as defined below) and the transactions contemplated thereby, including the Offer and the Merger (as defined below), are fair to and in the best interests of the Company's stockholders; (2) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger; and (3) recommended that the Company's stockholders accept the Offer and tender their Shares thereunder. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of August 5, 2000 (the "Merger Agreement"), among JOMED, the Purchaser and the Company. The Merger Agreement provides for, among other things, the making of the Offer by the Purchaser, and further provides that the Purchaser will be merged with and into the Company (the "Merger") as soon as practicable following the satisfaction or waiver of each of the conditions to the Merger set forth in the Merger Agreement. Following the Merger, the Company will continue as the surviving corporation, wholly owned by JOMED, and the separate corporate existence of the Purchaser will cease. In order to take advantage of the Offer, (i) a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and other required documents should be sent to the Depositary and (ii) Share Certificates representing the tendered Shares should be delivered to the Depositary, or such Shares should be tendered by book-entry transfer into the Depositary's account maintained at the Book-Entry Transfer Facility (as described in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their Share Certificates or other required documents prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. 2 3 The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Depositary as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse you for customary mailing and handling costs incurred by you in forwarding the enclosed materials to your customers. The Purchaser will pay or cause to be paid all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, except as otherwise provided in Instruction 6 of the Letter of Transmittal. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 19, 2000, UNLESS THE OFFER IS EXTENDED. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent at the address and telephone number set forth on the back cover of the Offer to Purchase. Very truly yours, /s/ Credit Suisse First Boston CREDIT SUISSE FIRST BOSTON CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF JOMED, THE PURCHASER, THE COMPANY, THE INFORMATION AGENT, THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.A.1.E 6 ex99-a_1e.txt CLIENT LETTER 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF ENDOSONICS CORPORATION BY JOMED ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF JOMED N.V. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 19, 2000, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration is the Offer to Purchase dated August 21, 2000 (the "Offer to Purchase") and a related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") in connection with the offer by JOMED Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of JOMED N.V., a company organized under the laws of The Netherlands ("JOMED"), to purchase all outstanding shares of common stock, par value $.001 per share, including the related rights to purchase preferred stock (collectively, the "Shares"), of EndoSonics Corporation, a Delaware corporation (the "Company"), at a purchase price of $11.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal enclosed herewith. We are the holder of record of Shares for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The enclosed Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase. Your attention is invited to the following: 1. The offer price is $11.00 per Share, net to you in cash, without interest thereon. 2. The Offer is being made for all outstanding Shares. 3. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of August 5, 2000 (the "Merger Agreement"), among JOMED, the Purchaser and the Company. The Merger Agreement provides, among other things, that the Purchaser will be merged with and into the Company (the "Merger") following the satisfaction or waiver of each of the conditions to the Merger set forth in the Merger Agreement. 4. The Company's Board of Directors, at a special meeting held on August 5, 2000, unanimously (1) determined that the Merger Agreement (as defined below) and the transactions contemplated thereby, including the Offer and the Merger (as defined below), are fair to and in the best interests of the Company's stockholders; (2) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger; and (3) recommended that the Company's stockholders accept the Offer and tender their Shares thereunder. 5. The Offer and withdrawal rights will expire at 12:01 a.m., New York City time, on Tuesday, September 19, 2000 (the "Expiration Date"), unless the Offer is extended. 2 6. Any stock transfer taxes applicable to the sale of Shares to the Purchaser pursuant to the Offer will be paid by the Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. The Offer is conditioned upon, among other things, (1) there being validly tendered and not properly withdrawn prior to the expiration of the Offer a number of Shares that together, with the Shares then owned by JOMED and/or Purchaser, represents at least a majority of Shares outstanding on a fully diluted basis, (2) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder having expired or been terminated, and all consents and approvals from Governmental Authorities pursuant to national antitrust or competition laws, which are required to complete the transaction, having been obtained and (3) the satisfaction of certain other conditions including, but not limited to, the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange not being less than (i) 42 Swiss Francs or (ii) one-half of the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange on the first trading day following the announcement of the Offer and the Merger (the closing price of the JOMED Ordinary Shares on August 7, 2000, the first trading day after the announcement of the Offer and the Merger, was 90 Swiss Francs per share) on either of (i) the date of the execution of the purchase agreement for the JOMED Equity Offering (the "Purchase Agreement") or (ii) on the first trading day immediately prior to the closing date of the Purchase Agreement, as such date is defined in the Purchase Agreement. See Sections 11 and 15. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser shall make a good faith effort to comply with such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) holders of Shares in such state. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser one or more registered brokers or dealers licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form set forth on the reverse side of this letter. An envelope to return your instructions to us is also enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the reverse side of this letter. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the Expiration Date. 2 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF ENDOSONICS CORPORATION BY JOMED ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF JOMED N.V. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated August 21, 2000 and the related Letter of Transmittal, in connection with the offer by JOMED Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of JOMED N.V., a company organized under the laws of The Netherlands (the "Parent"), to purchase all outstanding shares of common stock, par value $.001 per share, including the related rights to purchase preferred stock (collectively, the "Shares"), of EndoSonics Corporation, a Delaware corporation (the "Company"), at a purchase price of $11.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. This will instruct you to tender to the Purchaser the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. Number of Shares SIGN HERE to Be Tendered:* ------------------- ----------------------------------------------------- ----------------------------------------------------- SIGNATURE(S) Account No.: --------------------------------- ----------------------------------------------------- ----------------------------------------------------- Dated: , 2000 ----------------------------------------------------- ----------------------------------------------------- PRINT NAME(S) AND ADDRESS(ES) ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- AREA CODE AND TELEPHONE NUMBER(S) ----------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
- --------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.A.1.F 7 ex99-a_1f.txt W-9 GUIDELINES 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- ------------------------------------------------------------ GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals The actual owner (joint account) of the account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under state law 5. Sole proprietorship account The owner(3) - ------------------------------------------------------------
- ------------------------------------------------------------ GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ------------------------------------------------------------ 6. A valid trust, estate, or pension The legal entity trust (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) 7. Corporate account The corporation 8. Association, club, religious, The organization charitable, educational or other tax-exempt organization account 9. Partnership The partnership 10. A broker or registered nominee The broker or nominee 11. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show the name of the owner. Either the social security number or the employer identification number may be furnished. (4) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Card (for resident individuals), Form SS-4, Application for Employer Identification Number (for businesses and all other entities), or Form W-7, Application for IRS Individual Taxpayer Identification Number (for alien individuals required to file U.S. tax returns), at an office of the Social Security Administration or the Internal Revenue Service. To complete the Substitute Form W-9, if you do not have a taxpayer identification number, check the appropriate box in Part 1(b), sign and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING Set forth below is a list of payees that are exempt from backup withholding with respect to all or certain types of payments. For interest and dividends, all listed payees are exempt except the payee in item (9). For broker transactions, all payees listed in items (1) through (13) and any person registered under the Investment Advisors Act of 1940 who regularly acts as a broker is exempt. For payments subject to reporting under Sections 6041 and 6041A, the payees listed in items (1) through (7) are generally exempt. For barter exchange transactions and patronage dividends, the payees listed in items (2) through (6) are exempt. (1) A corporation. (2) An organization exempt from tax under Section 501(a), an IRA, or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(f)(2). (3) The United States or any agency or instrumentality thereof. (4) A state, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. (5) A foreign government, or a political subdivision, agency or instrumentality thereof. (6) An international organization or any agency or instrumentality thereof. (7) A foreign central bank of issue. (8) A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under Section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or custodian. (15) A trust exempt from tax under Section 664 or described in Section 4947(a)(1). Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) distributions made by an ESOP. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Exempt payees described above should file a Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART 2 OF THE FORM, AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends and patronage dividends, that are not subject to information reporting, are also not subject to backup withholding. For details, see Sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N and the regulations promulgated thereunder. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONSULT YOUR TAX ADVISOR OR THE INTERNAL REVENUE SERVICE EX-99.A.5.A 8 ex99-a_5a.txt JOINT PRESS RELEASE 1 Exhibit (a)(5)(A) JOMED AGREES TO ACQUIRE US COMPANY ENDOSONICS CORPORATION JOMED N.V. (SWX: JOM), the European medical technology company, and California-based EndoSonics Corporation (NASDAQ: ESON) announced today that the companies have entered into a definitive merger agreement pursuant to which JOMED will acquire all of the outstanding stock of EndoSonics Corporation against cash payment of US$11.00 per share, or a total of approximately US$205 million. The transaction has been approved by the boards of both companies. Under the terms of the definitive agreement, JOMED will commence a cash tender offer on or before August 21st, 2000 for all of the outstanding common stock of EndoSonics at a price of US$11.00 per share. US$150 million of the purchase price is intended to be funded through an offering of new JOMED shares and JOMED has arranged for commitments with Credit Suisse First Boston to provide this financing. The balance of the purchase price will come from JOMED's existing cash. EndoSonics Corporation had sales of US$48 million in 40 countries in 1999. EndoSonics is a leading developer and manufacturer of products for visualization through intravascular ultrasound, pressure monitoring guide wires and wires for intravascular flow measurement. "EndoSonics products represent an excellent complement to JOMED's product range globally" stated Tor Peters, President and CEO of JOMED. "In addition to the synergy in our existing international sales and manufacturing organizations, we will also gain access to an established US sales force, helping us to penetrate the large US market faster and more effectively than would otherwise be the case," he continued. Reinhard Warnking, CEO of EndoSonics Corporation described the acquisition as "a historic merger between two companies with a very similar vision and dedication to significantly improved clinical outcomes by creating a truly differentiated IVUS-guided therapeutic solution. Together with JOMED, smart guided therapy has a unique opportunity to dramatically improve and achieve a significantly positive impact on minimally invasive vascular intervention." Tor Peters also stated that the acquisition is expected to be earnings enhancing in the first full year after acquisition. "By combining JOMED and EndoSonics Corporation we are forming the world's fastest growing and widest range company in the field of minimally invasive vascular intervention and therapy," he said. After the combination with EndoSonics Corporation, the enlarged JOMED will have a headcount of nearly 1,000 and annualized combined sales in excess of EUR 110 million (US$99 million). The closing of the tender offer will be conditioned upon (i) at least a majority of EndoSonics Corporation's fully diluted shares being tendered and not withdrawn prior to the expiration of the tender offer; (ii) expiration or termination of the appropriate waiting period under the Hart-Scott-Rodino Act; (iii) the satisfaction of certain conditions to funding under the Credit Suisse First Boston commitment letter; and (iv) other customary closing conditions. The tender offer is expected to close in mid-to-late September. Subsequent to the consummation of the tender offer, JOMED will acquire the remaining shares of EndoSonics Corporation's outstanding common stock through a merger of a wholly-owned subsidiary of JOMED with and into EndoSonics Corporation. Upon the closing of the merger, each then outstanding share of EndoSonics Corporation's common stock will be converted into the right to receive US$11.00 per share in cash. 2 *** JOMED is the leading European developer and manufacturer of stents for interventional cardiology. It currently offers a range of more than 600 products. In 1999, JOMED achieved a turnover of EUR 43.7 million (US$39.5 million) and a net profit of EUR 2.1 million (US$1.9 million). In the first quarter of 2000, JOMED increased its sales by 65% and EBIT by 130%. JOMED intends to become a world leader among the suppliers of innovative products for minimally invasive interventions in blood vessels. EndoSonics Corporation, headquartered in Rancho Cordova, California, is a leading developer, manufacturer and marketer of intravascular ultrasound (IVUS) imaging products, angioplasty catheters, and functional assessment products to assist in the diagnosis and treatment of cardiovascular and peripheral vascular disease. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements, the accuracy of which is necessarily subject to risks and uncertainties. Actual results may differ significantly from the discussion of such matters in the forward-looking statements. Factors that may cause such difference include, but are not limited to, those factors set forth in EndoSonics' Annual Report on Form 10-K for the year ended December 31, 1999, and other filings from time to time with the Securities and Exchange Commission. Credit Suisse First Boston is acting as exclusive financial advisor to JOMED in connection with the acquisition and the related financing. U.S. Bancorp Piper Jaffray Inc. acted as exclusive financial advisor to EndoSonics in this transaction and rendered a fairness opinion. Investors and security holders are strongly advised to read both the tender offer documents and the solicitation/recommendation statement regarding the tender offer referred to in this press release, when they become available, because they will contain important information. The tender offer documents will be filed by JOMED with the U.S. Securities and Exchange Commission (the "Commission"), and the solicitation/recommendation statement will be filed by EndoSonics Corporation with the Commission. Investors and security holders may obtain a free copy of these documents (when available) and other related material filed by JOMED and EndoSonics Corporation with the Commission at the Commission's website at www.sec.gov. The tender offer statement and related offering documents may be obtained for free from JOMED by directing such request to: Regula Suter, regula.suter@JOMED.com. The solicitation/recommendation statement and such other documents may be obtained from EndoSonics Corporation by directing such request to: Jeffrey Elder, jelder@endosonics.com. Contact: JOMED N.V.
Antti Ristinmaa Tor Peters CHIEF FINANCIAL OFFICER PRESIDENT AND CHIEF EXECUTIVE OFFICER phone +46-42-490-6034 phone +41-52-674-8506 EndoSonics Corporation Jeffrey Elder Morgan-Walke Associates, Inc. SR. VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Jim Byers, Danielle Scheg phone 001-916-638-8008 (Investor Relations), Christopher Katis (Media) phone 001-415-296-7383
EX-99.A.5.B 9 ex99-a_5b.txt SUMMARY ADVERTISEMENT 1 Exhibit (a) (5) (B) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made only by the Offer to Purchase, dated August 21, 2000, and the related Letter of Transmittal and any amendments or supplements thereto, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, the Purchaser (as defined below) may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In those jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Credit Suisse First Boston Corporation ("Credit Suisse First Boston"), the Dealer Manager, or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Related Rights to Purchase Preferred Stock) of EndoSonics Corporation at $11.00 Net Per Share by JOMED Acquisition Corp., a wholly owned subsidiary of JOMED N.V. JOMED Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of JOMED N.V., a corporation organized under the laws of The Netherlands ("JOMED"), is offering to purchase all outstanding shares of common stock, par value $.001 per share, including the related rights to purchase preferred stock (the "Shares"), of EndoSonics Corporation, a Delaware corporation (the "Company"), at a price of $11.00 per Share, net to the seller in cash, on the terms and subject to the conditions set forth in the Offer to Purchase, dated August 21, 2000 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Tendering stockholders who have Shares registered in their names and who tender directly to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") will not be charged brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. Stockholders who hold their Shares through a broker or bank should consult such institution as to whether it charges any service fees. The Purchaser will pay all charges and expenses of the Dealer Manager, the Depositary and MacKenzie Partners, Inc., which is acting as the information agent (the "Information Agent"), incurred in connection with the Offer. Following the consummation of the Offer, the Purchaser intends to effect the Merger described below. 2 THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 19, 2000, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, (1) there being validly tendered and not properly withdrawn prior to the expiration of the Offer a number of Shares that, together with the Shares then owned by JOMED and/or Purchaser, represents at least a majority of the outstanding Shares on a fully diluted basis (the "Minimum Condition"), (2) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder having expired or been terminated, and all consents and approvals from Governmental Authorities pursuant to national antitrust or competition laws, which are required to complete the transaction, having been obtained and (3) the satisfaction of certain other conditions, including, but not limited to, the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange not being less than (i) 42 Swiss Francs or (ii) one-half of the closing price of the JOMED Ordinary Shares on the SWX Swiss Exchange on the first trading day following the announcement of the Offer and the Merger (the closing price of the JOMED Ordinary Shares on August 7, 2000, the first trading day after the announcement of the Offer and the Merger, was 90 Swiss Francs per share) on either of (i) the date of the execution of the purchase agreement for the JOMED Equity Offering (the "Purchase Agreement") or (ii) on the first trading day immediately prior to the closing date of the Purchase Agreement, as such date is defined in the Purchase Agreement. See Sections 11 and 15 of the Offer to Purchase. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of August 5, 2000 (the "Merger Agreement"), among JOMED, the Purchaser and the Company. The purpose of the Offer is for JOMED, through the Purchaser, to acquire a majority voting interest in the Company as the first step in acquiring the entire equity interest in the Company. The Merger Agreement provides that, among other things, the Purchaser will commence the Offer and that as promptly as practicable after the purchase of Shares pursuant to the Offer and the satisfaction or waiver of the other conditions set forth in the Merger Agreement and in accordance with relevant provisions of the General Corporation Law of the State of Delaware (the "DGCL"), the Purchaser will merge with and into the Company (the "Merger"), with the Company continuing as the surviving corporation. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares that are held by stockholders, if any, who properly exercise their dissenters' rights under the DGCL) will automatically be converted into the right to receive $11.00 in cash, without interest thereon. The Company's Board of Directors, at a special meeting held on August 5, 2000, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to and in the best interests of the Company's stockholders; (2) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger; and (3) recommended that the Company's stockholders accept the Offer and tender their shares thereunder. Accordingly, the board of directors of the Company recommends that you accept the offer and tender all of your shares of common stock pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, the Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all cases, on the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting such payment to tendering stockholders. Under no circumstances will interest on the purchase price of Shares be paid by the Purchaser because of any delay in making any payment. Payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after the timely receipt by the Depositary of (i) certificates for such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant to the procedures set forth in the Offer to Purchase, (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with all required signature guarantees or, in the case of book-entry transfer, an Agent's Message (as defined in the Offer the Purchase), and (iii) any other documents required by the Letter of Transmittal. 3 Subject to the terms of the Merger Agreement, the Purchaser may, without the consent of the Company, extend the Expiration Date of the Offer: (i) for up to five additional business days; (ii) from time to time after the time period in clause (i) if, at the scheduled or extended Expiration Date of the Offer, any of the conditions to the Offer will not have been satisfied or waived, until such conditions are satisfied or waived; (iii) for any period required by any rule, regulation, interpretation or position of the U.S. Securities and Exchange Commission ("SEC") or the staff thereof applicable to the Offer or any period required by applicable law; or (iv) for up to 10 additional business days, if, immediately prior to the scheduled or extended Expiration Date of the Offer, the Shares tendered and not properly withdrawn pursuant to the Offer constitute more than 80% and less than 90% of the outstanding Shares, notwithstanding that all conditions to the Offer are satisfied as of such Expiration Date of the Offer. If any of the conditions to the Offer is not satisfied or waived on any scheduled or extended Expiration Date of the Offer, the Purchaser will extend the Offer, if the condition or conditions could reasonably be expected to be satisfied, from time to time until such conditions are satisfied or waived, provided that the Purchaser will not be required to extend the Offer beyond November 15, 2000. Any extension under the circumstances described in (ii), (iii) or (iv) above will not exceed that number of days that the Purchaser reasonably believe is necessary to cause the conditions of the Offer to be satisfied. The term "Expiration Date" means 12:01 a.m., New York City time, on Tuesday, September 19, 2000, unless the Purchaser shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Any extension of the period during which the Offer is open will be followed, as promptly as practicable, by public announcement thereof, such announcement to be issued not later than 9:00 a.m., New York City time, on the same day as the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw such stockholder's Shares (except during the subsequent offering period.) Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment pursuant to the Offer, also may be withdrawn at any time after October 19, 2000. Except as otherwise provided in Section 4 of the Offer to Purchase, tenders of Shares made pursuant to the Offer are irrevocable. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any notice of withdrawal must specify the name, address and taxpayer identification number of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such shares, if different from that of the person who tendered the Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered for the account of an Eligible Institution (as defined in the Offer to Purchase), the signature on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer as set forth in the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, and its determination will be final and binding on all parties. The exchange of Shares for cash pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes and possibly for state, local and foreign income tax purposes as well. In general, a stockholder who sells Shares pursuant to the Offer or receives cash in exchange for Shares pursuant to the Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's adjusted tax basis in the Shares sold pursuant to the Offer or exchanged for cash pursuant to the Merger. Provided that such Shares constitute capital assets in the hands of the stockholder, such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the holder has held the Shares for more than one year at the time of sale. The maximum United States federal income tax rate applicable to individual taxpayers on long-term capital gains is 20%, and the deductibility of capital losses is subject to limitations. All stockholders should consult with their own tax advisors as to the particular tax consequences of the Offer and the Merger to them, including the applicability and effect of the alternative minimum tax 4 and any state, local or foreign income and other tax laws and of changes in such tax laws. For a more complete description of certain United States federal income tax consequences of the Offer and the Merger, see Section 5 of the Offer to Purchase. The information required to be disclosed by Paragraph (d)(1) of Rule 14d-6 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Purchaser with its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other related materials are being mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing JOMED Acquisition Corp., for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully before any decision is made with respect to the Offer. Questions and requests for assistance and copies of the Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below and will be furnished promptly at the Purchaser's expense. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: MackKenzie-logo 156 Fifth Avenue New York, New York 10010 Call Collect (212) 929-5500 Banks and Brokerage Firms Call: (800) 322-2885 Stockholders Please Call: (800) 929-5500 The Dealer Manager for the Offer is: Credit Suisse/First Boston-logo Eleven Madison Avenue New York, New York 10010-3629 Toll Free: 800-881-8320 August 21, 2000 EX-99.A.5.C 10 ex99-a_5c.txt CONSENT OF ARTHUR ANDERSEN AB 1 Exhibit (a)(5)(c) CONSENT OF INDEPENDENT AUDITORS The Board of Directors JOMED N.V.: We consent to use of our report, dated 28 March 2000, on the financial statements of JOMED N.V., which is incorporated by reference herein. By: /s/ Enla Lembrer Astrom ---------------------- Arthur Andersen AB Malmo, Sweden 21 August 2000 EX-99.D.1 11 ex99-d_1.txt AGREEMENT AND PLAN OF MERGER 1 EXHIBIT (d)(1) AGREEMENT AND PLAN OF MERGER BY AND AMONG JOMED N.V. JOMED ACQUISITION CORP. AND ENDOSONICS CORPORATION DATED AS OF AUGUST 5, 2000 2 TABLE OF CONTENTS
PAGE -------- ARTICLE I DEFINITIONS.................................................................... 2 Section 1.1 DEFINITIONS................................................. 2 ARTICLE II THE OFFER...................................................................... 9 Section 2.1 THE OFFER................................................... 9 Section 2.2 COMPANY ACTION.............................................. 11 Section 2.3 DIRECTORS................................................... 12 Section 2.4 MERGER WITHOUT MEETING OF SHAREHOLDERS...................... 13 ARTICLE III THE MERGER AND RELATED MATTERS................................................. 14 Section 3.1 THE MERGER.................................................. 14 Section 3.2 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION... 14 Section 3.3 BY-LAWS OF THE SURVIVING CORPORATION........................ 14 Section 3.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION......... 14 Section 3.5 CLOSING..................................................... 15 ARTICLE IV CONVERSION OF SECURITIES....................................................... 15 Section 4.1 CONVERSION OF CAPITAL STOCK................................. 15 Section 4.2 EXCHANGE OF CERTIFICATES.................................... 16 Section 4.3 DISSENTERS' RIGHTS.......................................... 17 Section 4.4 LOST, STOLEN OR DESTROYED CERTIFICATES...................... 18 Section 4.5 COMPANY STOCK PLANS......................................... 18
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PAGE -------- ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................. 19 Section 5.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER......... 20 Section 5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT..................... 20 Section 5.3 CAPITALIZATION.............................................. 21 Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS....................... 22 Section 5.5 COMPANY REPORTS AND FINANCIAL STATEMENTS.................... 23 Section 5.6 INFORMATION TO BE SUPPLIED.................................. 24 Section 5.7 ABSENCE OF CERTAIN EVENTS................................... 24 Section 5.8 LITIGATION.................................................. 25 Section 5.9 TITLE TO PROPERTIES; ENCUMBRANCES........................... 25 Section 5.10 COMPLIANCE WITH LAWS........................................ 25 Section 5.11 COMPANY EMPLOYEE BENEFIT PLANS.............................. 28 Section 5.12 [Intentionally Left Blank.]................................. 31 Section 5.13 TAXES....................................................... 31 Section 5.14 INTELLECTUAL PROPERTY....................................... 33 Section 5.15 BROKER'S OR FINDER'S FEE.................................... 34 Section 5.16 ENVIRONMENTAL MATTERS....................................... 34 Section 5.17 STATE TAKEOVER STATUTES..................................... 36 Section 5.18 VOTING REQUIREMENTS; BOARD APPROVAL......................... 36 Section 5.19 OPINION OF FINANCIAL ADVISOR................................ 37 Section 5.20 CONTRACTS................................................... 37 Section 5.21 PRODUCTS LIABILITY.......................................... 37 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER......................... 38 Section 6.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER......... 38 Section 6.2 AUTHORIZATION AND VALIDITY OF AGREEMENT..................... 38 Section 6.3 CONSENTS AND APPROVALS; NO VIOLATIONS....................... 38 Section 6.4 INFORMATION TO BE SUPPLIED.................................. 39 Section 6.5 BROKER'S OR FINDER'S FEE.................................... 40 Section 6.6 OWNERSHIP OF CAPITAL STOCK.................................. 40 Section 6.7 NO PRIOR ACTIVITIES......................................... 40 Section 6.8 FINANCING................................................... 40
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PAGE -------- ARTICLE VII COVENANTS PRIOR TO CLOSING DATE................................................ 41 Section 7.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS..... 41 Section 7.2 CONFIDENTIALITY............................................. 42 Section 7.3 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE...................................................... 42 Section 7.4 COMPANY SHAREHOLDER MEETING; PREPARATION OF PROXY STATEMENT................................................. 46 Section 7.5 REASONABLE BEST EFFORTS; NOTIFICATION; INFORMATION AGENT.... 47 Section 7.6 NO SOLICITATION............................................. 48 Section 7.7 ANTITRUST LAWS.............................................. 51 Section 7.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE......... 52 Section 7.9 PUBLIC ANNOUNCEMENTS........................................ 52 Section 7.10 TRANSFER TAXES.............................................. 52 Section 7.11 EMPLOYEE BENEFITS........................................... 53 Section 7.12 OPTION TO ACQUIRE ADDITIONAL SHARES......................... 53 Section 7.13 ACTIONS REGARDING THE RIGHTS................................ 54 Section 7.14 PARENT APPROVAL OF INCREASE TO AUTHORIZED CAPITAL........... 54 ARTICLE VIII CONDITIONS TO THE MERGER....................................................... 54 Section 8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY..................... 54 Section 8.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER....... 55 Section 8.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY................ 55 ARTICLE IX TERMINATION AND ABANDONMENT.................................................... 55 Section 9.1 TERMINATION................................................. 55 Section 9.2 EFFECT OF TERMINATION....................................... 57 Section 9.3 PAYMENT OF CERTAIN FEES..................................... 57
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PAGE -------- ARTICLE X MISCELLANEOUS.................................................................. 59 Section 10.1 REPRESENTATIONS AND WARRANTIES.............................. 59 Section 10.2 EXTENSION; WAIVER........................................... 59 Section 10.3 NOTICES..................................................... 59 Section 10.4 ENTIRE AGREEMENT............................................ 60 Section 10.5 BINDING EFFECT; BENEFIT; ASSIGNMENT......................... 60 Section 10.6 AMENDMENT AND MODIFICATION.................................. 61 Section 10.7 FURTHER ACTIONS............................................. 61 Section 10.8 HEADINGS.................................................... 61 Section 10.9 ENFORCEMENT................................................. 61 Section 10.10 COUNTERPARTS................................................ 62 Section 10.11 APPLICABLE LAW.............................................. 62 Section 10.12 SEVERABILITY................................................ 62 Section 10.13 WAIVER OF JURY TRIAL........................................ 62 Section 10.14 PARENT GUARANTEE............................................ 62
6 AGREEMENT AND PLAN OF MERGER A G R E E M E N T AND PLAN OF MERGER, dated as of August 5, 2000 (this "AGREEMENT"), by and among JOMED N.V., a company organized under the laws of The Netherlands ("PARENT"), JOMED ACQUISITION CORP., a Delaware corporation and a direct wholly owned subsidiary of Parent ("PURCHASER"), and ENDOSONICS CORPORATION, a Delaware corporation (the "COMPANY"). WHEREAS, the Boards of Directors of Parent and the Company each have determined that it is advisable and in the best interests of each corporation and their respective shareholders to consummate the acquisition of the Company by Parent, upon the terms and subject to the conditions set forth herein; WHEREAS, in furtherance thereof, it is proposed that Purchaser make a cash tender offer to acquire any and all shares of the issued and outstanding common stock, U.S.$.001 par value, of the Company (the "COMPANY COMMON STOCK"), including the related Rights (as hereinafter defined), for U.S.$11.00 per share, net to the seller in cash; and WHEREAS, also in furtherance of such acquisition, the Boards of Directors of each of Parent, Purchaser and the Company have approved this Agreement and the transactions contemplated hereby, including the merger of Purchaser with and into the Company, with the Company as the surviving corporation following the Offer (as hereinafter defined). NOW THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 DEFINITIONS. When used in this Agreement, the following terms shall have the respective meanings specified therefor below (such meanings to be equally applicable to both the singular and plural forms of the terms defined). "ACTIVITIES TO DATE" shall have the meaning set forth in Section 5.10(c). "ACQUISITION AGREEMENT" shall have the meaning set forth in Section 7.6(b). 2 7 "AFFILIATE" of any Person shall mean any Person directly or indirectly controlling, controlled by, or under common control with, such Person; PROVIDED that, for the purposes of this definition, "control" (including with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or partnership interests, by contract or otherwise. "AGREEMENT" shall have the meaning set forth in the preamble hereto. "ANTITRUST AUTHORITIES" shall have the meaning set forth in Section 7.7(d). "ANTITRUST LAW" shall have the meaning set forth in Section 7.7(d). "ACQUIRING PERSON" shall have the meaning set forth in Section 5.17(b). "BUSINESS DAY" means a day other than a Saturday, a Sunday or a day on which banks in New York, New York are permitted or required to close. "CAPITAL BUDGET" shall have the meaning set forth in Section 7.3(b)(5). "CERTIFICATE OF MERGER" shall have the meaning set forth in Section 3.1(b). "CERTIFICATES" shall have the meaning set forth in Section 4.2(b). "CLOSING" shall have the meaning set forth in Section 3.5. "CLOSING DATE" shall have the meaning set forth in Section 3.5. "CODE" shall have the meaning set forth in Section 5.11(b). "COMPANY" shall have the meaning set forth in the preamble hereto. "COMPANY BENEFIT PLANS" shall have the meaning set forth in Section 5.11(a). "COMPANY COMMON STOCK" shall have the meaning set forth in the recitals hereof. "COMPANY DISCLOSURE SCHEDULE" shall have the meaning set forth in Article V. 3 8 "COMPANY MATERIAL ADVERSE EFFECT" shall mean any event, change, occurrence, effect, fact or circumstance that is materially adverse to (i) the ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated hereby or (ii) the business, assets, liabilities, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that none of the following shall be deemed in themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Company Material Adverse Effect: (a) any change in the market price or trading volume of the Company's stock after the date hereof; (b) any failure by the Company to meet internal projections or forecasts or published revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of this Agreement; (c) any adverse change, effect, event, occurrence, state of facts or development to the extent attributable to the announcement or pendency of the Offer or the Merger (including any cancellations of or delays in customer orders, any reduction in sales, any disruption in supplier, distributor, partner or similar relationships or any loss of employees); (d) any adverse change, effect, event, occurrence, state of facts or development related to any action or inaction by Parent or Purchaser (including any cancellations of or delays in customer orders, any reduction in sales, any disruption in supplier, distributor, partner or similar relationships or any loss of employees); (e) any adverse change, effect, event, occurrence, state of facts or development attributable to conditions affecting the industries in which the Company participates, the U.S. economy as a whole or foreign economies in any locations where the Company or any of its Subsidiaries has material operations or sales; (f) any adverse change, effect, event, occurrence, state of facts or development attributable or relating to (i) out-of-pocket fees and expenses (including legal, accounting, investment banking and other fees and expenses) incurred in connection with the transactions contemplated by this Agreement, or (ii) as a result of the Company's entry into, and as permitted by, this Agreement, the payment of any amounts due to, or the provision of any other benefits (including benefits relating to acceleration of stock options) to, any officers or employees under employment contracts, non-competition agreements, employee benefit plans, severance arrangements or other arrangements in existence as of the date of this Agreement; or (g) any adverse change, effect, event, occurrence, state of facts or development resulting from or relating to compliance with the terms of, or the taking of any action required by, or the failure to take any action prohibited by, this Agreement. "COMPANY PREFERRED STOCK" shall have the meaning set forth in Section 5.3(a). "COMPANY PRODUCTS" shall have the meaning set forth in Section 5.10(c). "COMPANY RECOMMENDATION" shall have the meaning set forth in Section 7.4. 4 9 "COMPANY SEC REPORTS" shall have the meaning set forth in Section 5.5(a). "COMPANY SHAREHOLDER APPROVAL" shall mean the approval of not less than a majority of the vote of all outstanding shares of Company Common Stock (voting as one class, with each share having one vote) of this Agreement and the Merger at the Company Shareholder Meeting. "COMPANY SHAREHOLDER MEETING" shall have the meaning set forth in Section 7.4. "COMPANY STOCK PLANS" shall have the meaning set forth in Section 4.5(c). "CONTRACTS" shall have the meaning set forth in Section 5.4. "DEFECT" shall have the meaning set forth in Section 5.21. "DGCL" shall mean the Delaware General Corporation Law, as currently in effect and amended from time to time. "DISSENTING SHAREHOLDERS" shall have the meaning set forth in Section 4.1(c). "DISTRIBUTION DATE" shall have the meaning set forth in Section 5.17(b). "EFFECTIVE TIME" shall have the meaning set forth in Section 3.1(b). "ENVIRONMENTAL CLAIMS" shall have the meaning set forth in Section 5.16(b). "ENVIRONMENTAL LAW" shall have the meaning set forth in Section 5.16(b). "ERISA" shall have the meaning set forth in Section 5.11(a). "ERISA AFFILIATE" shall have the meaning set forth in Section 5.11(a). "EUROPEAN ANTITRUST LAWS" shall have the meaning set forth in Section 5.4. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXPENSES" shall have the meaning set forth in Section 9.3(b). "FDA" shall mean the U.S. Food and Drug Administration. 5 10 "FULLY DILUTED BASIS" with respect to any Person, shall mean all outstanding securities entitled generally to vote in the election of directors of such Person on a fully diluted basis, after giving effect to the exercise or conversion of all options, rights and securities exercisable for or convertible into such voting securities. "GAAP" shall mean generally accepted accounting principles of the United States of America, as in effect from time to time. "GLOBAL COORDINATOR" shall mean Credit Suisse First Boston (Europe) Limited, the Global Coordinator for the Parent Equity Offering. "GOVERNMENTAL AUTHORITY" shall have the meaning set forth in Section 5.4. "HAZARDOUS MATERIALS" shall have the meaning set forth in Section 5.16(b). "HSR ACT" shall have the meaning set forth in Section 5.4. "INDEMNIFIED PARTIES" shall have the meaning set forth in Section 7.8(a). "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth in Section 5.14(a). "ISSUANCE OBLIGATION" shall have the meaning set forth in Section 5.3(a). "LAWS" shall have the meaning set forth in Section 5.4. "LICENSES" shall have the meaning set forth in Section 5.10(c). "LIENS" shall mean any and all security interests, liens, claims, pledges, options, rights of first refusal, agreements, charges or other encumbrances of any nature or any other limitation or restriction (including any restriction on the right to vote or sell the same, except as may be provided under applicable Federal or state securities laws). "MATERIAL CONTRACTS" shall have the meaning set forth in Section 5.20. "MERGER" shall have the meaning set forth in Section 3.1(a). "MERGER CONSIDERATION" shall have the meaning set forth in Section 4.1(c). "MINIMUM CONDITION" shall have the meaning set forth in Section 2.1(a). 6 11 "OFFER" shall have the meaning set forth in Section 2.1(a). "OFFER DOCUMENTS" shall have the meaning set forth in Section 2.1(b). "OFFER PRICE" shall the meaning set forth in Section 2.1(a). "OFFER TO PURCHASE" shall have the meaning set forth in Section 2.1(a). "OPTION" shall have the meaning set forth in Section 7.12(a). "OPTION SHARES" shall have the meaning set forth in Section 7.12(a). "ORDERS" shall have the meaning set forth in Section 5.4. "PARENT" shall have the meaning set forth in the preamble hereto. "PARENT DISCLOSURE SCHEDULE" shall have the meaning set forth in Article VI. "PARENT EQUITY OFFERING" shall have the meaning set forth in Section 6.3. "PARENT MATERIAL ADVERSE EFFECT" shall mean any event, change, occurrence, effect, fact or circumstance that is materially adverse to (i) the ability of Parent to perform its obligations under this Agreement or to consummate the transactions contemplated hereby or (ii) the business, assets, liabilities, results of operations or financial condition of Parent and its Subsidiaries, taken as a whole. "PARENT ORDINARY SHARES" shall have the meaning set forth in Section 6.3. "PAYING AGENT" shall have the meaning set forth in Section 4.2(a). "PBGC" shall mean the Pension Benefit Guaranty Corporation. "PERMITS" shall have the meaning set forth in Section 5.10(b). "PERSON" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a limited liability company, a group and a government or other department or agency thereof. "PRODUCT" shall have the meaning set forth in Section 5.21. 7 12 "PROXY STATEMENT" shall have the meaning set forth in Section 7.4. "PURCHASE AGREEMENT" shall mean the agreement to be entered into between the Parent and the Global Coordinator acting on behalf of the several Managers named therein relating to the purchase of Parent Ordinary Shares in the Parent Equity Offering, substantially in the form attached to the commitment letter referred to in Section 6.8. "PURCHASER" shall have the meaning set forth in the preamble hereto. "PURCHASER BENEFIT PLANS" shall have the meaning set forth in Section 7.11. "PURCHASER COMMON STOCK" shall mean Purchaser's common stock, par value U.S.$.01 per share. "REGISTRATIONS" shall have the meaning set forth in Section 5.10(h). "RELEASES" shall have the meaning set forth in Section 5.16(b). "RETURNS" shall have the meaning set forth in Section 5.13(a). "RIGHTS" means the preferred share purchase rights issued by the Company pursuant to the Rights Agreement. "RIGHTS AGREEMENT" means the Preferred Shares Rights Agreement, dated October 20, 1998, between the Company and ChaseMellon Shareholders Services, L.L.C. "SCHEDULE 14D-9" shall have the meaning set forth in Section 2.2(b). "SCHEDULE TO" shall have the meaning set forth in Section 2.1(b). "SEC" shall mean the U.S. Securities and Exchange Commission. "SECRETARY OF STATE" shall have the meaning set forth in Section 3.1(b). "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "STOCK OPTIONS" shall have the meaning set forth in Section 4.5(a). "STOCK OPTION PLANS" shall have the meaning set forth in Section 4.5(a). 8 13 "SUBSIDIARY" with respect to a Person shall mean (x) any partnership of which such Person or any of its Subsidiaries is a general partner or (y) any other entity in which such Person or any of its Subsidiaries owns or has the power to vote more than 50% of the equity interests in such entity having general voting power to participate in the election of the governing body of such entity. "SUPERIOR PROPOSAL" shall have the meaning set forth in Section 7.6(a). "SURVIVING CORPORATION" shall have the meaning set forth in Section 3.1(a). "TAKEOVER PROPOSAL" shall have the meaning set forth in Section 7.6(a). "TAXES" shall have the meaning set forth in Section 5.13(a). "TERMINATION DATE" shall have the meaning set forth in Section 9.1(d)(1). "TERMINATION FEE" shall have the meaning set forth in Section 9.3(a). "THIRD PARTY ACQUISITION EVENT" shall have the meaning set forth in Section 9.3(b). "TRANSFER TAXES" shall have the meaning set forth in Section 7.10. "U.S. $" shall mean United States dollars. "VOTING DEBT" shall have the meaning set forth in Section 5.3(a). "WARN ACT" shall have the meaning set forth in Section 5.22. ARTICLE II THE OFFER Section 2.1 THE OFFER. (a) Provided that this Agreement shall not have been terminated pursuant to Section 9.1 hereof, following the public announcement of the terms of this Agreement (which public announcement shall occur no later than the first Business Day following the execution of this Agreement), not later than August 21, 2000, Purchaser shall, and Parent shall cause Purchaser to, commence (within the meaning of Rule 14d-2 under the Exchange Act) a tender offer (the "OFFER") to purchase any and all of the shares of Company 9 14 Common Stock outstanding (including the related Rights) at a price of U.S.$11.00 per share, net to the seller in cash (such price, or such higher price pershare of Company Common Stock as may be paid in the Offer, being referred to herein as the "OFFER PRICE"). The Offer shall be subject to the condition that there shall be validly tendered in accordance with the terms of the Offer, prior to the expiration date of the Offer and not withdrawn, a number of shares of Company Common Stock that, together with the shares of Company Common Stock then owned by Parent and/or Purchaser, represents at least a majority of the shares of Company Common Stock outstanding on a fully-diluted basis (the "MINIMUM CONDITION") and to the other conditions set forth in Annex I hereto. The Offer shall be made by means of an offer to purchase (the "OFFER TO PURCHASE") and the related letter of transmittal, each in form reasonably satisfactory to the Company, containing the terms set forth in this Agreement and the conditions set forth in Annex I. Purchaser expressly reserves the right, subject to compliance with the Exchange Act, to waive any of the conditions to the Offer and to make any change in the terms of or conditions to the Offer; PROVIDED that (i) the Minimum Condition may be waived only with the prior written consent of the Company and (ii) no change may be made that changes the form of consideration to be paid, decreases the Offer Price, decreases the number of shares of Company Common Stock sought in the Offer, adds to or modifies, in a manner adverse to the stockholders of the Company, the conditions to the Offer set forth in Annex I, or (except as provided in the next sentence) changes the expiration date of the Offer, without the prior written consent of the Company. Without the consent of the Company, Purchaser shall have the right to extend the expiration date of the Offer (which shall initially be 20 Business Days from the commencement date of the Offer), (i) for up to five additional Business Days, (ii) from time to time thereafter if, at the scheduled or extended expiration date of the Offer, any of the conditions to the Offer shall not have been satisfied or waived, until such conditions are satisfied or waived, (iii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law, or (iv) for up to 10 additional Business Days, if, immediately prior to the scheduled or extended expiration date of the Offer, the Company Common Stock tendered and not withdrawn pursuant to the Offer constitute more than 80% and less than 90% of the outstanding Company Common Stock, notwithstanding that all conditions to the Offer are satisfied as of such expiration date of the Offer. If any of the conditions to the Offer is not satisfied or waived on any scheduled or extended expiration date of the Offer, Purchaser shall, and Parent shall cause Purchaser to, extend the Offer, if such condition or conditions could reasonably be expected to be satisfied, from time to time until such conditions are satisfied or waived; PROVIDED that Purchaser shall not be required to extend the Offer beyond November 15, 2000. Subject to the foregoing and upon the terms and subject to the conditions of the Offer, Purchaser shall, and Parent shall cause it to, 10 15 accept for payment and pay for, as promptly as practicable after the expiration of the Offer, all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer. (b) As soon as practicable on the date of commencement of the Offer, Parent and Purchaser shall file with the SEC a Tender Offer Statement on Schedule TO (the "SCHEDULE TO") with respect to the Offer (such Schedule TO and such documents included therein pursuant to which the Offer will be made, including the Offer to Purchase and the related letter of transmittal, together with any supplements or amendments thereto, the "OFFER DOCUMENTS"). Parent, Purchaser and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect. Parent and Purchaser agree to take all steps necessary to cause the Schedule TO as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of shares of Company Common Stock, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given an opportunity to review and comment on the Offer Documents prior to their being filed with the SEC or disseminated to the holders of shares of Company Common Stock. The Purchaser also agrees to provide the Company and its counsel in writing with any comments the Purchaser and its counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments and shall provide the Company and its counsel a reasonable opportunity to review and comment on the response of the Purchaser to such comments. Section 2.2 COMPANY ACTION. (a) The Company hereby approves of and consents to the Offer and represents that its Board of Directors, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and are fair to and in the best interests of the Company's stockholders, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger, in accordance with the requirements of the DGCL and (iii) resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by its stockholders. The Company further represents that U.S. Bancorp Piper Jaffray Inc. has delivered to the Company's Board of Directors its written opinion that the consideration to be paid in the Offer and the Merger is fair to the holders of shares of Company Common Stock (other than Parent, Purchaser or their Affiliates) from a financial point of view. The Company has been advised that all of its directors and executive officers who own shares of Company Common Stock intend either to tender their shares of Company Common Stock pursuant to the Offer or to vote in favor of the Merger. The Company will promptly furnish Parent with a list of its stockholders, mailing labels and any available listing or computer file containing the names and addresses of all record holders of shares of Company Common Stock and lists of securities positions of shares of Company Common Stock held in stock depositories, in each case true and 11 16 correct as of the most recent practicable date, and will provide to Parent such additional information (including updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Parent may reasonably request in connection with the Offer. (b) As soon as practicable on the day that the Offer is commenced, the Company shall file with the SEC and disseminate to holders of shares of Company Common Stock, in each case as and to the extent required by applicable federal securities laws, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the "SCHEDULE 14D-9") that shall reflect the recommendations of the Company's Board of Directors referred to above. The Company, Parent and Purchaser each agree promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect. The Company 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 holders of shares of Company Common Stock, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given an opportunity to review and comment on the Schedule 14D-9 prior to its being filed with the SEC. The Company also agrees to provide Parent and its counsel in writing with any comments 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 shall provide Parent and its counsel a reasonable opportunity to review and comment on the response of the Company to such comments. Section 2.3 DIRECTORS. (a) Promptly upon the purchase of and payment for not less than a majority of the outstanding shares of Company Common Stock by Parent or any of its Subsidiaries pursuant to the Offer, Parent shall be entitled to designate for appointment or election to the Company's Board of Directors, upon written notice to the Company, such number of directors, rounded up to the next whole number, on the Board of Directors such that the percentage of its designees on the Board shall equal the percentage of the outstanding shares of Company Common Stock beneficially owned by Parent and its affiliates. In furtherance thereof, the Company shall, upon request of the Purchaser, use its best efforts promptly to cause Parent's designees to be so elected to the Company's Board, and in furtherance thereof, to the extent necessary, increase the size of the Board of Directors or use its best efforts to obtain the resignation of such number of its current directors as is necessary to give effect to the foregoing provision. At such time, the Company shall also, upon the request of Purchaser, use its best efforts to cause Persons designated by Parent to constitute at least the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of (i) each committee of the Company's Board of Directors, (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. 12 17 Notwithstanding the foregoing, until the Effective Time, the Board of Directors of the Company shall have at least three directors who are directors of the Company on the date of this Agreement (the "CONTINUING DIRECTORS"). The Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 2.3(a), including mailing to stockholders the information required by such Section 14(f) and Rule 14f-1 (or, at Parent's request, furnishing such information to Parent for inclusion in the Offer Documents initially filed with the SEC and distributed to the stockholders of the Company) as is necessary to enable Parent's designees to be elected to the Company's Board of Directors. The Company's obligations to appoint Parent's designees to the Company's Board of Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Parent or Purchaser shall supply the Company in writing, and be solely responsible for, any information with respect to either of them and their nominees, officers, directors and Affiliates required by such Section 14(f) and Rule 14f-1 as is necessary in connection with the appointment of any of Parent's designees under this Section 2.3(a). The provisions of this Section 2.3(a) are in addition to and shall not limit any rights which Purchaser, Parent or any of their Affiliates may have as a holder or beneficial owner of shares of Company Common Stock as a matter of law with respect to the election of directors or otherwise. (b) Following the election or appointment of Parent's designees pursuant to Section 2.3(a), the approval of a majority of the Continuing Directors shall be required to authorize (and such authorization shall constitute the authorization of the Company's Board of Directors and no other action on the part of the Company, including any action by any committee thereof or any other director of the Company, shall be required or permitted to authorize) (i) any termination of this Agreement by the Company, (ii) any amendment of this Agreement requiring action by the Company's Board of Directors, (iii) any extension of time for performance of any obligation or action hereunder by Parent or Purchaser or (iv) any waiver of compliance with any of the agreements or conditions contained herein for the benefit of the Company; PROVIDED that if there shall be no such Continuing Directors, such actions may be effected by majority vote of the entire Board of Directors of the Company. Section 2.4 MERGER WITHOUT MEETING OF SHAREHOLDERS. In the event that Purchaser or any of its Subsidiaries shall acquire at least 90% of the outstanding shares of Company Common Stock pursuant to the Offer or otherwise, each of the parties hereto shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable (and in any event not more than five Business Days) after such acquisition, without the Company Shareholder Meeting, in accordance with Section 253 of the DGCL. 13 18 ARTICLE III THE MERGER AND RELATED MATTERS Section 3.1 THE MERGER. (a) Subject to the terms and upon the conditions of this Agreement, at the Effective Time the Company and Purchaser shall consummate a merger (the "MERGER") pursuant to which (a) Purchaser shall be merged with and into the Company and the separate corporate existence of Purchaser shall thereupon cease and (b) the Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the "SURVIVING CORPORATION") and shall continue to be governed by the Laws of the State of Delaware. (b) Parent, Purchaser and the Company shall cause a Certificate of Merger, or, if applicable in the event that Purchaser acquires at least 90% of the outstanding shares of Company Common Stock, a Certificate of Ownership and Merger (as applicable, the "CERTIFICATE OF MERGER"), to be executed and filed on the date of the Closing (or on such other date as Parent and the Company may agree) with the Secretary of State of Delaware (the "SECRETARY OF STATE") as provided in the DGCL. The Merger shall become effective on the date on which the Certificate of Merger has been duly filed with the Secretary of State or such time as is agreed upon by the parties and specified in the Certificate of Merger, and such time is hereinafter referred to as the "EFFECTIVE TIME." (c) From and after the Effective Time, the Merger shall have the effects set forth in this Agreement and in the DGCL. Section 3.2 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The Certificate of Incorporation of Purchaser, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation. Section 3.3 BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of Purchaser, as in effect immediately prior to the Effective Time, shall be the By-Laws of the Surviving Corporation. Section 3.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the Effective Time, the directors of Purchaser immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each of such directors to hold office, subject to the applicable provisions of the DGCL and the Certificate of Incorporation and By-Laws of the Surviving Corporation, until the next annual stockholders' meeting of the Surviving Corporation and until their respective successors shall be duly elected or appointed and qualified. At the Effective Time, the officers of the Company immediately prior to the Effective Time shall, subject to the 14 19 applicable provisions of the Certificate of Incorporation and By-Laws of the Surviving Corporation, be the officers of the Surviving Corporation until their respective successors shall be duly elected or appointed and qualified. Section 3.5 CLOSING. The closing of the Merger (the "CLOSING") shall take place at 10:00 a.m., local time, on the later to occur of (a) the day of (and immediately following) the receipt of approval of the Merger by the Company's stockholders, or as soon as practicable (and in any event not more than five Business Days) after expiration of the Offer if such approval is not required and (b) a date to be specified by the parties, which shall be no later than the second business day after satisfaction or waiver of all of the conditions set forth in Article VIII hereof (the "CLOSING DATE"), at the offices of Skadden, Arps, Slate, Meagher & Flom, Four Times Square, New York, New York, unless another date or place is agreed to in writing by the parties hereto. ARTICLE IV CONVERSION OF SECURITIES Section 4.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any shares of Company Common Stock or any shares of capital stock of Purchaser: (a) PURCHASER CAPITAL STOCK. Each share of capital stock of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. (b) CANCELLATION OF TREASURY STOCK AND PURCHASER-OWNED STOCK. All shares of Company Common Stock that are owned by the Company or any Subsidiary of the Company and any shares of Company Common Stock owned by Purchaser or any Subsidiary of the Purchaser immediately prior to the Effective Time shall be cancelled and retired and shall cease to exist and no consideration shall be delivered in exchange therefor; PROVIDED that shares of Company Common Stock held beneficially or of record by any plan, program or arrangement sponsored or maintained for the benefit of employees of the Company or any Subsidiaries thereof shall not be deemed to be held by the Company regardless of whether the Company has, directly or indirectly, the power to vote or control the disposition of such shares. (c) EXCHANGE OF SHARES OF COMPANY COMMON STOCK. Each share of Company Common Stock (other than shares to be cancelled in accordance with Section 4.1(b) and any shares which are held by stockholders exercising appraisal rights pursuant to Section 262 of the 15 20 DGCL ("DISSENTING SHAREHOLDERS")) issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the Offer Price in cash, payable to the holder thereof, without interest (the "MERGER CONSIDERATION"), upon surrender of the certificate formerly representing such share in the manner provided in Section 4.2. All such shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 4.2, without interest, or the right, if any, to receive payment from the Surviving Corporation of the "fair value" of such shares of Company Common Stock as determined in accordance with Section 262 of the DGCL. Section 4.2 EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to the Effective Time, Parent shall designate a New York City-based bank or trust company reasonably acceptable to the Company to act as agent for the holders of shares of Company Common Stock in connection with the Merger (the "PAYING AGENT") to receive the funds to which holders of such shares shall become entitled pursuant to Section 4.1(c). Prior to the filing of the Certificate of Merger with the Secretary of State, Parent shall deposit with the Paying Agent cash in U.S. dollars in an amount sufficient to pay the Merger Consideration as provided herein. The Paying Agent shall invest such funds as directed by the Surviving Corporation on a daily basis; PROVIDED that no such investment or loss thereon shall affect the amounts payable to the Company's stockholders pursuant to this Article IV. Parent and the Surviving Corporation shall replace any monies lost through an investment made pursuant to this Section 4.2. Any interest and other income resulting from such investments shall be paid promptly to the Surviving Corporation. (b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates, which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "CERTIFICATES"), whose shares were converted pursuant to Section 4.1 into the right to receive the Merger Consideration (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent and the Company may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each share formerly represented by such Certificate and the Certificate so surrendered shall 16 21 forthwith be cancelled. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer 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 surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 4.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 4.2. The right of any stockholder to receive the Merger Consideration shall be subject to and reduced by any applicable withholding Tax obligation. (c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN THE SHARES OF COMPANY COMMON STOCK. At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of the shares of Company Common Stock on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of the shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock, except as otherwise provided for herein or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article IV. (d) TERMINATION OF FUND; NO LIABILITY. At any time following six months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 4.3 DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement to the contrary, if any Dissenting Shareholder shall demand to be paid the "fair value" of such holder's shares of Company Common Stock, as provided in Section 262 of the DGCL, such shares shall not be converted into or be exchangeable for the right to receive the Merger Consideration except as provided in this Section 4.3 and the Company shall give Parent notice thereof and Parent shall have the right to participate in all negotiations and proceedings with respect to any such 17 22 demands. Neither the Company nor the Surviving Corporation shall, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment. If any Dissenting Shareholder shall fail to perfect or shall have effectively withdrawn or lost the right to dissent, the shares of Company Common Stock held by such Dissenting Shareholder shall thereupon be treated as though such shares had been converted into the Merger Consideration pursuant to Section 4.1. Section 4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or destroyed Certificate the Merger Consideration for each of the shares of Company Common Stock represented by such Certificate. Section 4.5 COMPANY STOCK PLANS. (a) The Company, the Company's Board of Directors and each relevant committee of the Company's Board of Directors shall, effective as of the consummation of the Offer, cause each share of restricted Company Common Stock, including those subject to mandatory resale provisions under Dutch law (collectively, "RESTRICTED SHARES"), and each employee, consultant or director option to purchase shares of Company Common Stock (collectively, the "STOCK OPTIONS") which is outstanding immediately prior to the consummation of the Offer under the Company's Restated 1988 Stock Option Plan, the Company's 1998 Stock Option Plan, and the Company's 1999 Nonstatutory Option Plan (including, without limitation, any option originally granted under the Microsound Corporation 1997 Stock Plan), each as amended, all other plans and all individual grants of the Company or its Subsidiaries (the "STOCK OPTION PLANS") to vest all Restricted Shares and to have all restrictions and mandatory resale provisions lapse (in the case of the Restricted Shares), and (in the case of the Stock Options), whether or not then exercisable or vested, to become fully exercisable and vested. For purposes of each Stock Option Plan in which the defined term "Corporate Transaction" is used, the Company shall cause the Company's Board of Directors or each relevant committee of the Company's Board of Directors acting as administrator of each such Stock Option Plan to determine prior to the consummation of the Offer that the consummation of the Offer and the Merger constitute a single "Corporate Transaction". The Company shall use its reasonable best efforts to cause each Stock Option that is outstanding immediately prior to the consummation of the Offer to be cancelled in exchange for an amount in cash, payable at the consummation of the Offer, equal to the product of (i) the number of shares of Company Common Stock subject to such Stock Option and (ii) the excess, if any, of the Offer Price over the per share exercise price of such Stock Option. The Company, the Company's Board of Directors and each relevant committee of the Company's Board of Directors shall use 18 23 their reasonable best efforts to obtain the written consent of the holder of each Stock Option, effective upon the consummation of the Offer, to such cancellation. Subject to having obtained any necessary consents from the holders of Stock Options, the Company shall cause the Company's Board of Directors or each relevant committee of the Company's Board of Directors to make any amendments to the Stock Option Plans or stock option agreements thereunder which may be needed or desirable to implement such cancellation. (b) Concurrent with the execution of this Agreement, the Company, the Company's Board of Directors and each relevant committee thereof shall take any and all action required with respect to the Company's 1988 Employee Stock Purchase Plan (the "Stock Purchase Plan") to set a New Purchase Date (as defined in the Stock Purchase Plan) with respect to the Offering Period (as defined in the Stock Purchase Plan) commencing August 1, 2000, which New Purchase Date shall be no later than fifteen (15) days after the date hereof. The Company, the Company's Board of Directors and each relevant committee thereof shall provide any written notice required under Section 18(b) of the Stock Purchase Plan with respect to the foregoing. (c) All Stock Option Plans, the 1998 Employee Stock Purchase Plan and the 1984 Restricted Stock Purchase Plan (together, the "COMPANY STOCK PLANS") shall terminate as of the Effective Time and the provisions in any other Company Benefit Plan (as hereinafter defined) or any other plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time, and the Company shall use its reasonable best efforts to ensure that following the Effective Time no holder of a Stock Option or any participant in any Company Stock Plan or Company Benefit Plan or any other plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation. (d) The Company shall take all such steps as may be required to cause the transactions contemplated by this Section 4.5 and any other dispositions of equity securities of the Company (including derivative securities) in connection with this Agreement by each individual who is a director or officer of the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in accordance with the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP. 19 24 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as disclosed in (i) the Company's disclosure schedule delivered concurrently with the delivery of this Agreement (the "COMPANY DISCLOSURE SCHEDULE") or (ii) the Company SEC Reports (as hereinafter defined) made or filed prior to the date of this Agreement, the Company hereby represents and warrants to Parent and Purchaser as follows: Section 5.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Each of the Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions which recognize the concept of good standing) under the laws of the jurisdiction of its incorporation and each such Person has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. The Company and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize the concept of good standing) in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. The Company has made available to Parent complete and correct copies of the Certificate of Incorporation and By-laws of the Company, in each case as amended (if so amended) to the date of this Agreement, and has made available the certificates of incorporation and by-laws or other organizational documents of its Subsidiaries, in each case as amended (if so amended) to the date of this Agreement. Other than as set forth in Section 5.1 of the Company Disclosure Schedule, the respective certificates of incorporation and by-laws or other organizational documents of the Subsidiaries of the Company do not contain any provision limiting or otherwise restricting the ability of the Company to control its Subsidiaries. Section 5.1 of the Company Disclosure Schedule sets forth a list of all Subsidiaries of the Company and their respective jurisdictions of incorporation or organization and identifies the Company's (direct or indirect) percentage of equity ownership therein. Section 5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining the Company Shareholder Approval, to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company, and the consummation by it of the transactions contemplated hereby, have been duly 20 25 authorized and approved by its Board of Directors and no other corporate action on the part of the Company is necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby, other than obtaining the Company Shareholder Approval, if necessary. This Agreement has been duly executed and delivered by the Company and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. Section 5.3 CAPITALIZATION. (a) The authorized capital stock of the Company consists of 25,000,000 shares of Company Common Stock and 5,000,000 shares of preferred stock, par value U.S.$.001 per share (the "COMPANY PREFERRED STOCK"). At the close of business on July 31, 2000: (i) 17,798,165 shares of Company Common Stock were issued and outstanding (excluding shares held by the Company in its treasury), (ii) 6,576,142 shares of Company Common Stock were reserved for issuance under the Stock Option Plans and other arrangements, (iii) no shares of Company Preferred Stock were issued and outstanding and (iv) 1,139,107 shares of Company Common Stock were held by the Company in its treasury. All issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth in Section 5.3(a) of the Company Disclosure Schedule, there are no outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to shares of capital stock or other equity interests of the Company or any of its Subsidiaries, pursuant to which the Company or any of its Subsidiaries is or may become obligated to issue shares of its capital stock or other equity interests or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of the capital stock or other equity interests of the Company or any of its Subsidiaries (each an "ISSUANCE OBLIGATION"). There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any outstanding securities of the Company. The Company has no authorized or outstanding bonds, debentures, notes or other indebtedness the holders of which have the right to vote (or convertible or exchangeable into or exercisable for securities the holders of which have the right to vote) with the stockholders of the Company on any matter ("VOTING DEBT"). Except as set forth in Section 5.3(a) of the Company Disclosure Schedule, there are no restrictions of any kind which prevent or restrict the payment of dividends by the Company or any of its Subsidiaries and there are no limitations or restrictions on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests. (b) All of the issued and outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable. Except as set forth in the Company SEC Reports or 21 26 Section 5.3(b) of the Company Disclosure Schedule, no Subsidiary of the Company has outstanding Voting Debt and no Subsidiary of the Company is bound by, obligated under, or party to an Issuance Obligation with respect to any security of the Company or any Subsidiary of the Company and there are no obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding securities of any of its Subsidiaries or any capital stock of, or other ownership interests in, any of its Subsidiaries. (c) Except for the Company's interest in its Subsidiaries, and as set forth in the Company SEC Reports or Section 5.3(c) of the Company Disclosure Schedule, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture, limited liability company or other business association or entity which is material to the Company and its Subsidiaries, taken as a whole. Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming (i) the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), are made and the waiting periods thereunder (if applicable) have been terminated or expired, (ii) the prior notification and reporting requirements of the antitrust laws of the member states of the European Union as may be applicable (collectively, the "EUROPEAN ANTITRUST LAWS") are satisfied and any antitrust filings/notifications which must or may be effected at the national level in countries having jurisdiction are made and any applicable waiting periods thereunder have been terminated or expired, (iii) the prior notification and reporting requirements of other antitrust or competition laws as may be applicable are satisfied and any antitrust filings/notifications which must or may be effected in countries having jurisdiction are made, (iv) the applicable requirements of the Exchange Act are met, (v) the requirements under any applicable foreign or state securities or blue sky laws are met, (vi) the filing of the Certificate of Merger and other appropriate merger documents, if any, as required by the DGCL, are made and (vii) in the case of this Agreement, the Company Shareholder Approval is received, the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (including the changes in the composition of the Board of Directors of the Company) do not and will not: (A) violate or conflict with any provision of the Company's Certificate of Incorporation or the Company's By-Laws or the comparable governing documents of any of its Subsidiaries; (B) violate or conflict with any statute, law, ordinance, rule or regulation (together, "LAWS") or any order, judgment, decree, writ, permit or license (together, "ORDERS"), of any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision (a "GOVERNMENTAL AUTHORITY") applicable to the Company or any of its Subsidiaries or by which any of their respective properties or assets may be bound; (C) except as set forth in Section 5.4 of the Company Disclosure Schedule, require any filing with, or 22 27 permit, consent or approval of, or the giving of any notice to, any Governmental Authority; or (D) except as set forth in Section 5.4 of the Company Disclosure Schedule, result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under, or give rise to any obligation, right of termination, cancellation, acceleration or increase of any obligation or a loss of a material benefit under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, contract, lease or other instrument or obligation of any kind ("CONTRACTS") to which the Company or any of its Subsidiaries is a party, or by which any such Person or any of its properties or assets are bound, excluding from the foregoing clauses (B), (C) and (D) conflicts, violations, breaches, defaults, rights of payment and reimbursement, terminations, modifications, accelerations and creations and impositions of Liens which could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect or prevent the consummation of any of the transactions contemplated by this Agreement. Section 5.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. (a) Since December 31, 1997, the Company and, to the extent applicable, its Subsidiaries, have filed all forms, reports and documents with the SEC required to be filed by it pursuant to the federal securities laws and the SEC rules and regulations thereunder, and all forms, reports, schedules, registration statements and other documents filed with the SEC by the Company and, to the extent applicable, its Subsidiaries have complied in all material respects with all applicable requirements of the federal securities laws and the SEC rules and regulations promulgated thereunder. The Company has, prior to the date of this Agreement, made available to Parent true and complete copies of all forms, reports, registration statements and other filings filed by the Company and its Subsidiaries with the SEC since December 31, 1997 (such forms, reports, registration statements and other filings, together with any exhibits, any amendments thereto and information incorporated by reference therein, are sometimes collectively referred to as the "COMPANY SEC REPORTS"). As of their respective dates, the Company SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and the unaudited consolidated interim financial statements of the Company included in the Company SEC Reports (i) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC, (ii) were prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) and (iii) present fairly, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and changes in stockholders' equity and cash flows for the periods then ended (subject, in the case of unaudited 23 28 statements, to normal year-end adjustments). The Company has heretofore made available to Parent true and correct copies of any amendments and/or modifications to any Company SEC Reports which have not yet been filed with the SEC but that are required to be filed with the SEC in accordance with applicable federal securities laws and the SEC rules and regulations. (b) Except as set forth or provided in the Company SEC Reports or Section 5.5(b) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), in each case that is required by GAAP to be set forth on a consolidated balance sheet of the Company, except for (i) liabilities and obligations under this Agreement or incurred in connection with the transactions contemplated hereby and (ii) liabilities and obligations incurred in the ordinary course of business consistent with past practice since March 31, 2000 which could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in default in respect of the material terms and conditions of any indebtedness or other agreement which could reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. Section 5.6 INFORMATION TO BE SUPPLIED. (a) Each of the Schedule 14D-9 and the Proxy Statement and the other documents required to be filed by the Company with the SEC in connection with the Offer, the Merger and the other transactions contemplated hereby will comply as to form in all material respects with the requirements of the Exchange Act and will not, on the date of its filing or, in the case of the Proxy Statement, on the dates it is mailed to stockholders of the Company and at the time of the Company Shareholder Meeting, and none of the written information supplied or to be supplied by the Company expressly for inclusion or incorporation by reference in the Offer Documents will at the time the Offer Documents are filed with the SEC and first published, sent or given to the Company's stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (b) Notwithstanding the foregoing provisions of this Section 5.6, no representation or warranty is made by the Company with respect to statements made or incorporated by reference in the Proxy Statement or the Schedule 14D-9 based on information supplied by Parent or Purchaser expressly for inclusion or incorporation by reference therein or based on information which is not made in or incorporated by reference in such documents but which should have been disclosed pursuant to Section 6.4. 24 29 Section 5.7 ABSENCE OF CERTAIN EVENTS. Except as disclosed in the Company SEC Reports filed prior to the date hereof or in Section 5.7 of the Company Disclosure Schedule or as required or expressly permitted by this Agreement, since December 31, 1999(*) the Company and its Subsidiaries have operated their respective businesses only in the ordinary course and, except as disclosed in the Company SEC Reports or in Section 5.7 of the Company Disclosure Schedule, there has not occurred (i) any event, occurrence or conditions which could reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect; and (ii) neither the Company nor any of its Subsidiaries has taken any of the actions described in Sections 7.3(b)(3), (5), (7), (9) or (17). Section 5.8 LITIGATION. Except as disclosed in the Company SEC Reports filed prior to the date hereof or Section 5.8 of the Company Disclosure Schedule, there are no investigations, actions, suits or proceedings pending against the Company or its Subsidiaries or, to the knowledge of the Company, threatened against the Company or its Subsidiaries (or any of their respective properties, rights or franchises), at law or in equity, or before or by any federal or state commission, board, bureau, agency, regulatory or administrative instrumentality or other Governmental Authority or any arbitrator or arbitration tribunal, that could reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect, and, to the knowledge of the Company, no development has occurred with respect to any pending or threatened action, suit or proceeding that could reasonably be expected to result in a Company Material Adverse Effect or could reasonably be expected to prevent, materially impair or materially delay the consummation of the transactions contemplated hereby. Neither the Company nor any of its Subsidiaries is subject to any judgment, order or decree entered in any lawsuit or proceeding which could reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. Section 5.9 TITLE TO PROPERTIES; ENCUMBRANCES. Except as disclosed in Section 5.9 of the Company Disclosure Schedule, the Company and each of its Subsidiaries has good, valid and marketable title to, or in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets except where to failure to have such good, valid and marketable title could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect; in each case subject to no Liens, except for (A) Liens reflected in the consolidated balance sheet as of March 31, 2000, (B) Liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such property by the Company or any of its Subsidiaries in the operation of their respective businesses, (C) Liens for current Taxes, assessments or governmental charges or levies on property not yet due or which are being contested in good faith and (D) Liens which 25 30 could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. Section 5.10 COMPLIANCE WITH LAWS. Except as disclosed in the Company SEC Reports and except as disclosed in Section 5.10 of the Company Disclosure Schedule: (a) The Company and each of its Subsidiaries have complied and are presently complying in all material respects with all applicable Laws, and neither the Company nor any of its Subsidiaries has received written notification of any asserted present or past failure to so comply, except in each case where such non-compliance could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. (b) The Company and its Subsidiaries hold, to the extent legally required, all federal, state, local and foreign permits, approvals, licenses, authorizations, certificates, rights, exemptions and orders from Governmental Authorities (the "PERMITS") that are required for the operation of the respective businesses of the Company and/or its Subsidiaries as now conducted, except where the failure to hold any such Permit could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect, and there has not occurred any default under any such Permit, except to the extent that such default could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. (c) (A) With respect to each of the Company's and its Subsidiaries' products and, to the extent applicable, products under development (collectively, the "COMPANY PRODUCTS"), (1) the Company or any of its Subsidiaries has obtained, unless otherwise exempt, all applicable approvals, clearances, authorizations, licenses and registrations required by United States or foreign governments or government agencies, to permit any manufacturing, distribution, sales, marketing or human research activities of the Company (the "ACTIVITIES TO DATE") with respect to each Company Product (collectively, the "LICENSES"); (2) the Company and each of its Subsidiaries are in compliance in all material respects with all terms and conditions of each License and with all requirements pertaining to the Activities to Date with respect to each Company Product which is not required to be the subject of a License; (3) the Company and each of its Subsidiaries are in compliance in all material respects with all applicable Laws regarding registration, license, certification for each site (in any country) at which each Company Product is manufactured, processed, packed, held for distribution or from which and into which it is distributed; and (4) to the extent any Company Product has been exported from the United States, the Company has exported such Company Product in compliance in all material respects with 21 U.S.C. Section 381(e) or Section 382; (B) all manufacturing operations performed by or on behalf of the Company have been and are being conducted in all material respects in compliance with current good manufacturing practices, and Quality System regulations issued by the FDA and, to the extent applicable, 26 31 counterpart regulations in the European Union and all other countries where compliance is required; (C) all nonclinical laboratory studies of Company Products under development, as described in 21 C.F.R. Section 58.3(d), sponsored by the Company and intended to be used to support regulatory clearance or approval, have been and are being conducted in compliance in all material respects with the laboratory practice regulations set forth in 21 C.F.R. Part 58 and applicable counterpart regulations in the European Union and all other countries; (D) the Company and each of its Subsidiaries are in compliance in all material respects with all applicable reporting requirements for all Licenses or plant registrations described in clause (A) above, including, but not limited to, the applicable adverse event reporting requirements of 21 C.F.R. Section 803; except, in the case of the preceding clauses (A) through (D), for any such failures to obtain or noncompliance which, individually or in the aggregate, could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. For purposes of this Section 5.10(c), the term "Licenses" shall specifically include, with respect to the United States, Company Product license applications, pre-market approval applications, pre-market notifications under Section 510(k) of the Federal Food, Drug and Cosmetic Act, as amended, and investigational device exemptions, and Company Product export applications issued by the FDA. (d) To the knowledge of the Company, no filing or submission to the FDA or any other Governmental Authority with regard to the Company Products that is the basis for any approval or clearance contains any material omission or materially false information. (e) To the knowledge of the Company, the Company is in compliance with all FDA and non-United States equivalent agencies and similar state and local Governmental Agency requirements concerning the maintenance, compilation and filing of reports, including medical device reports, with regard to the Company Products, except where such non-compliance could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. (f) Except as disclosed in Schedule 5.10(f) of the Company Disclosure Schedule, the Company has not received any written notice or other written communication from the FDA or any other Governmental Authority (A) contesting the pre-market clearance or approval of, the uses of or the labeling and promotion of any of the Company Products or (B) otherwise alleging any violation of any Laws by the Company, except, in each case, as could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. (g) Except as set forth in Schedule 5.10(g) of the Company Disclosure Schedule, there have been no recalls, field notifications or seizures ordered or adverse regulatory actions taken (or to the Company's knowledge threatened) by the FDA or any other Governmental 27 32 Authority with respect to any of the Company Products, including any facilities where any such Company Products are produced, processed, packaged or stored and neither the Company nor any of its Subsidiaries has within the last three years, either voluntarily or at the request of any Governmental Authority, initiated or participated in a recall of any Product or provided post-sale warnings regarding any Product, except, in each case, as could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. (h) Except as set forth in Schedule 5.10(h) of the Company Disclosure Schedule, the Company and each of its Subsidiaries own and hold all Company Product registrations, licenses, pricing approvals, marketing authorizations and all other approvals ("REGISTRATIONS") necessary to manufacture, market, sell and distribute the Company Products in each country where the Company Products are currently marketed, sold and distributed, except any such Registration which the Company's failure to own or hold, individually or in the aggregate, could not reasonably be expected to have a Company Material Adverse Effect. Section 5.11 COMPANY EMPLOYEE BENEFIT PLANS. (a) Schedule 5.11(a) of the Company Disclosure Schedule contains a true and complete list of each material bonus, deferred compensation, incentive compensation, stock purchase, stock option, severance or termination pay, hospitalization or other medical, life or other insurance, supplemental unemployment benefits, profit-sharing, pension, or retirement plan, program, agreement or arrangement, and each other material employee benefit plan, program, agreement or arrangement, sponsored, maintained or contributed to or required to be contributed to (at any time during the past six years) by the Company, any of its Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA AFFILIATE"), that together with the Company or any Subsidiary of the Company would be deemed a "single employer" within the meaning of section 4001 of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder ("ERISA"), for the benefit of any employee or terminated employee of the Company, its Subsidiaries or any ERISA Affiliate, whether formal or informal and whether legally binding or not (the "COMPANY BENEFIT PLANS"). (b) With respect to each Company Benefit Plan, the Company has made available to Parent a true and complete copy thereof (including all amendments thereto), as well as true and complete copies of the annual reports, if required under ERISA, with respect thereto for the last completed plan year; the actuarial reports, if required under ERISA, with respect thereto for the last completed plan year; the most recent report prepared with respect thereto in accordance with Statement of Financial Accounting Standards No. 87, Employer's Accounting for Pensions; the most recent Summary Plan Description, together with each Summary of Material Modifications, if required under ERISA with respect thereto; if the Company Benefit Plan is funded through a trust or any third party funding vehicle, the trust or other funding agreement (including all 28 33 amendments thereto) and the latest financial statements thereof; and the most recent determination letter received from the Internal Revenue Service, if any, with respect to each Company Benefit Plan that is intended to be qualified under section 401 of the Internal Revenue Code of 1986, as from time to time amended (the "CODE"). (c) No Company Benefit Plan is subject to Title IV of ERISA, and no material liability under Title IV of ERISA has been incurred by the Company, its Subsidiaries or any ERISA Affiliate since the effective date of ERISA that has not been satisfied in full, and no condition exists that presents a material risk to the Company, its Subsidiaries or any ERISA Affiliate of incurring a material liability under such Title, other than liability for premiums due to the PBGC (which premiums have been paid when due). (d) Neither the Company, nor any Subsidiary of the Company, nor any ERISA Affiliate, nor any Company Benefit Plan, nor any trust created thereunder, nor, to the knowledge of the Company, any trustee or administrator thereof has engaged in a transaction in connection with which the Company, any Subsidiary of the Company or any ERISA Affiliate, any Company Benefit Plan, any such trust, or any trustee or administrator thereof, could reasonably be expected to be subject to either a civil penalty assessed pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant to section 4975 or 4976 of the Code which would have a Company Material Adverse Effect. (e) All material contributions which the Company, any Subsidiary of the Company or an ERISA Affiliate are required to make with respect to each Company Benefit Plan (for which contribution deductions are governed by section 404(a) of the Code) for the plan years of such plans ending with or within the most recent tax year of the Company, the Subsidiary or ERISA Affiliate ended prior to the date of this Agreement either (A) were made prior to the last day of such tax year or (B) have been or will be made subsequent to such last day within the time required by section 404(a)(6) of the Code in order to be deemed to have been made on the last day of such tax year; and all material contribution amounts properly accrued through the Closing Date with respect to the current plan year of each Company Benefit Plan will be paid by the Company, a Subsidiary of the Company or ERISA Affiliate, as appropriate, on or prior to the Closing Date or will be properly recorded on the Balance Sheet in accordance with Financial Accounting Standards Board Statement No. 87; and all material contributions required to be made with respect thereto (whether pursuant to the terms of any Company Benefit Plan or otherwise) on or prior to the date of this Agreement have been timely made. (f) No Company Benefit Plan is a "multiemployer pension plan," as such term is defined in section 3(37) of ERISA. 29 34 (g) Except as set forth in Schedule 5.11(g) of the Company Disclosure Schedule, each Company Benefit Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA and the Code. (h) Each Company Benefit Plan which is intended to be "qualified" within the meaning of section 401(a) of the Code has received either a favorable opinion letter from the IRS that the form of such plan is so qualified or a favorable determination letter from the IRS that such plan is so qualified and the trusts maintained thereunder are exempt from taxation under section 501(a) of the Code, and to the Company's knowledge no event has occurred since the date of such letter which would reasonably be expected to adversely affect such qualified or exempt status. (i) Except as set forth in Schedule 5.11(i) of the Company Disclosure Schedule, no Company Benefit Plan provides death or medical benefits (whether or not insured), with respect to current or former employees of the Company, its Subsidiaries or any ERISA Affiliate beyond their retirement or other termination of service (other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any "employee pension plan," as that term is defined in section 3(2) of ERISA, or (iii) benefits the full cost of which is borne by the current or former employee (or his beneficiary). (j) Except as disclosed in Schedule 5.11(j) of the Company Disclosure Schedule or expressly provided in this Agreement, the consummation of the transactions contemplated by this Agreement (and/or any related event) will not (i) entitle any current or former employee or officer of the Company or any ERISA Affiliate to severance pay, or any other material payment from the Company, (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer, or (iii) require the Company or any ERISA Affiliate to fund or make any payments to any trust or other funding vehicle in respect of any Company Benefit Plan. (k) Except as set forth in Schedule 5.11(k) of the Company Disclosure Schedule, there are no pending, or, to the knowledge of the Company, threatened claims by, on behalf of or against any Company Benefit Plan, by any employee or beneficiary covered under any such Company Benefit Plan, or otherwise involving any such Company Benefit Plan (other than routine claims for benefits) that would have a Company Material Adverse Effect. (l) Except as disclosed in Section 5.11(1) of the Company Disclosure Schedule, there are no outstanding stock appreciation rights or restricted stock of the Company. Except as disclosed in Section 5.11(1) of the Company Disclosure Schedule, there are no outstanding 30 35 shares of Company Common Stock which are subject to the Company's form of "Stock Purchase Agreement" relating to "Mandatory Resale Provisions under Dutch Law". (m) Except as set forth in Schedule 5.11(m) of the Company Disclosure Schedule, no Company Benefit Plan is subject to ERISA pursuant to Section 4(b)(4) of ERISA. Each Company Benefit Plan relating to employees not employed in the United States (A) is in compliance with, in all material respects, all requirements of law applicable thereto and the respective requirements of the governing documents of such plan and (B) is fully and properly funded in accordance with, and the assets thereof are held by a person authorized to hold such assets under, applicable law and regulation and the governing documents of such plan except to the extent the failure to be in compliance with the statements in clauses (A) and (B) would not have a Company Material Adverse Effect. (n) Except as set forth in Schedule 5.11(n) of the Company Disclosure Schedule, there has not been any adoption or amendment by the Company or any of its Subsidiaries or any ERISA Affiliate of any Company Benefit Plan since January 1, 2000. Except as disclosed in Schedule 5.11(n) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries, nor any ERISA Affiliate has any formal plan or commitment, whether legally binding or not, to create any additional Company Benefit Plan or modify or change any existing Company Benefit Plan that would affect any employee or terminated employee of the Company, a Subsidiary of the Company or any ERISA Affiliate. All employment, consulting, severance, termination, change in control or indemnification agreements, arrangements or understandings between the Company or any of its Subsidiaries and any current or former officer or director of the Company or any of its Subsidiaries which are required to be disclosed in the SEC Documents have been disclosed therein. Section 5.12 [Intentionally Left Blank.] Section 5.13 TAXES. Except as set forth in Section 5.13 of the Company Disclosure Schedule: (a) TAX RETURNS. The Company and each of its Subsidiaries has timely filed or caused to be timely filed with the appropriate Taxing authorities all Federal income and all other material returns, statements, forms and reports for Taxes (as hereinafter defined) ("RETURNS") that are required to be filed by, or with respect to, the Company and such Subsidiaries on or prior to the Closing Date. The Returns as filed were correct and complete in all material respects. "TAXES" shall mean all taxes, assessments, charges, duties, fees, levies or other governmental charges including, without limitation, all Federal, state, local, foreign and other income, franchise, profits, capital gains, capital stock, transfer, sales, use, occupation, property, excise, 31 36 severance, windfall profits, stamp, license, payroll, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and shall include any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify, any person or other entity. (b) PAYMENT OF TAXES. All material Taxes and Tax liabilities of the Company and its Subsidiaries that have become due and payable have been timely paid or fully provided for as a liability on the financial statements of the Company and its Subsidiaries (or in the notes thereto) in accordance with GAAP. (c) OTHER TAX MATTERS. Except as set forth in Schedule 5.13(c) of the Company Disclosure Schedule, no material deficiencies for any Taxes have been asserted or assessed against the Company or any of its Subsidiaries, which are not reserved for or which are not being contested in good faith by appropriate proceedings. To the knowledge of the Company, no Governmental Authority is presently conducting a Tax audit or investigation with respect to the Company or any of its Subsidiaries, or has asked for an extension or waiver of an applicable statute of limitations. With respect to Taxes or any Tax Return, no power of attorney has been executed by the Company or any of its Subsidiaries. (d) Neither the Company nor any of its Subsidiaries has been included in any "consolidated," "unitary" or "combined" Return (other than Returns which include only the Company and any Subsidiaries of the Company) provided for under the laws of the United States, any foreign jurisdiction or any state or locality with respect to material Taxes for any taxable period for which the statute of limitations has not expired. (e) All material Taxes which the Company or any of its Subsidiaries is (or was) required by law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper authorities to the extent due and payable. (f) There are no Tax sharing, allocation, indemnification or similar agreements (in writing) in effect as between the Company, any of its Subsidiaries, or any predecessor or Affiliate of any of them and any other party under which the Company (or any of its Subsidiaries) could be liable for any material Taxes of any party other than the Company or any Subsidiary of the Company. (g) [Intentionally Left Blank.] 32 37 (h) [Intentionally Left Blank.] (i) No election under Section 341(f) of the Code has been made or shall be made prior to the Closing Date to treat the Company or any of its Subsidiaries as a consenting corporation, as defined in Section 341 of the Code. (j) Except as set forth in Schedule 5.13(j) of the Company Disclosure Schedule, no transaction contemplated by this Agreement is subject to withholding under Section 1445 of the Code. (k) [Intentionally Left Blank.] (l) There are no Liens for Taxes upon any property or assets of the Company or any of its Subsidiaries, except for Liens for Taxes not yet due or for which adequate reserves have been established in accordance with GAAP. (m) No unresolved written claim has been made and delivered by any Taxing authority in a Jurisdiction where the Company or any of its Subsidiaries does not pay Taxes or file Returns that the Company or any of its Subsidiaries is or may be subject to Taxes assessed by such jurisdiction. Section 5.14 INTELLECTUAL PROPERTY. (a) Schedule 5.14(a) of the Company Disclosure Schedule sets forth a true and complete list of all patents, registered and material unregistered trademarks, trade names, service marks and registered copyrights and applications therefor owned or filed by the Company and its Subsidiaries, all license agreements to third-party intellectual property rights bearing royalties or fees in excess of $100,000 per annum payable to any licensor, and all license agreements pursuant to which the Company or any of its Subsidiaries licenses any of its intellectual property to third parties for fees or royalties in excess of $100,000 per annum (collectively, "INTELLECTUAL PROPERTY RIGHTS"). To the knowledge of the Company, each of the Company and each of its Subsidiaries owns or has sufficient unrestricted right to use the Intellectual Property Rights in order to allow it to conduct, and continue to conduct, its business as currently conducted in all material respects, and the consummation of the transactions contemplated hereby will not alter or impair such ability in any respect which would have a Company Material Adverse Effect. (b) There is no restriction or encumbrance on the right of the Company to transfer to Purchaser any of the Intellectual Property Rights, or to grant licenses to the Intellectual Property Rights, other than any such Liens that alone or in the aggregate would not result in a Company Material Adverse Effect or as disclosed on Schedule 5.14(b) of the Company Disclosure 33 38 Schedule or contained in express restrictions on sublicensing as may be set forth in any of the license agreements listed on Schedule 5.14. To the knowledge of the Company, and except as disclosed on Schedule 5.14(b) of the Company Disclosure Schedule, there are no pending oppositions, cancellations, invalidity proceedings, interference or re-examination proceedings with respect to the Intellectual Property Rights and no such proceedings are threatened. (c) To the knowledge of the Company, and except as disclosed on Schedule 5.14(c) of the Company Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries has received any written notice from any other Person challenging the right of the Company or any of its Subsidiaries to use any of the Intellectual Property Rights, and (ii) no claims are pending by any Person with respect to the ownership, validity, enforceability or use of any such Intellectual Property Rights challenging or questioning the validity or effectiveness of any of the foregoing. Except as disclosed on Schedule 5.14(c) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has made any claim of a violation or infringement by others of its rights to or in connection with the Intellectual Property Rights. Section 5.15 BROKER'S OR FINDER'S FEE. Except for the fees of U.S. Bancorp Piper Jaffray Inc. (whose fees and expenses will be paid by the Company in accordance with the Company's agreement with such firm, a true and correct copy of which has been previously delivered to Parent by the Company), no agent, broker, Person or firm acting on behalf of the Company is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. Section 5.16 ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Company SEC Reports or as set forth in Schedule 5.16 of the Company Disclosure Schedule, and except to the extent that, individually or in the aggregate, failure to satisfy the following representations has not had, and could not reasonably be expected to have a Company Material Adverse Effect. (i) The Company and each of its Subsidiaries are, and have been, and each of the Company's former Subsidiaries, while a Subsidiary of the Company, were in compliance with all applicable Environmental Laws; (ii) Neither the Company nor any Subsidiary of the Company has received any Environmental Claim, and there are no present or, to the knowledge of the Company, past actions, activities, circumstances, conditions, events or incidents, including, without limitation, the Release, threatened Release or presence of any Hazardous Material which could form the basis of any Environmental Claim against the Company, or to the best 34 39 knowledge of the Company, against any person or entity whose liability for any Environmental Claim the Company has or may have retained or assumed either contractually or by operation of law. (iii) Except for leases entered into in the ordinary course of business, as to which no written notice of a claim for indemnity or reimbursement has been received by the Company, neither the Company nor any of its Subsidiaries has entered into any agreement that may require it to pay to, reimburse, guarantee, pledge, defend, indemnify, or hold harmless any Person for or against any Environmental Claim. (iv) During the period of ownership or operation by the Company and its Subsidiaries of any of their respective current or previously owned or leased properties, there have been no Releases or threatened Releases of Hazardous Material by the Company or any of its Subsidiaries or, to the knowledge of the Company, by any other person or entity, in, on, under or affecting such properties. (v) To the knowledge of the Company, prior to the period of ownership or operation by the Company and its Subsidiaries of any of their respective current or previously owned or leased properties, there were no Releases or threatened Releases of Hazardous Material in, on, under or affecting any such property. (vi) Neither the Company nor any of its Subsidiaries has treated, stored or disposed of "hazardous waste", as that term is defined in the Resource Conservation and Recovery Act, 42 U.S.C. 6901 ET SEQ., analogous state laws, or the regulations promulgated thereunder, such that the Company or any of its Subsidiaries would be required to obtain a hazardous waste facility permit under said laws for such treatment, storage or disposal. (b) For purposes of this Section 5.16, the following terms shall have the following meanings: "ENVIRONMENTAL CLAIMS" means any claim, demand, notice, complaint, court order, administrative order or request for information from any Governmental Entity or private party, alleging violation of, or asserting any noncompliance with or liability under or potential liability under, any Environmental Laws, except for matters which are no longer threatened or pending and for which the Company or its Subsidiaries are not subject to further requirements pursuant to an administrative or court order, judgment, or a settlement agreement. 35 40 "ENVIRONMENTAL LAWS" means any federal, state, or local statute, law, rule, regulation, ordinance, code or rule of common law and any judicial or administrative interpretation thereof binding on the Company or its operations or property as of the date hereof and Closing Date, including any judicial or administrative order, consent decree or judgment, relating to the environment, health or Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and their state and local counterparts and equivalents. "HAZARDOUS MATERIALS" means (A) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (B) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "extremely hazardous substances," "restricted hazardous wastes," "toxic substances," "pollutants," "toxic pollutants," "contaminants" or words of similar import, under any applicable Environmental Law; and (C) any other chemical, material or substances, exposure to which is prohibited, limited or regulated by any Governmental Authority. "RELEASES" means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying or seeping into or upon any land or water or air, or otherwise entering into the environment. Section 5.17 STATE TAKEOVER STATUTES. (a) The Board of Directors of the Company has approved the Offer, the Merger and this Agreement and such approval is sufficient to render inapplicable to the Offer, the Merger, this Agreement and the other transactions contemplated hereby the provisions of Section 203 of the DGCL. No other takeover statute or similar statute or regulation of any state is applicable to the Offer, the Merger, this Agreement and the other transactions contemplated hereby. (b) The Board of Directors of the Company has taken all necessary action so that (i) the Rights will not be exercisable, trade separately, or be otherwise affected by the Offer, the Merger or the other transactions required hereby, (ii) none of Parent and its Affiliates will be deemed to be an "ACQUIRING PERSON" for purposes thereof in consummating the Offer and Merger and (iii) a "DISTRIBUTION DATE" shall not occur by virtue of the Offer, the Merger or the other transactions contemplated hereby. The Company will take any action reasonably requested 36 41 by Parent to ensure and confirm that the Company, Parent and their respective affiliates will not have any obligations in connection with the Rights or the Rights Agreement in connection with the Offer, the Merger and the other transactions contemplated hereby on the terms provided herein. Section 5.18 VOTING REQUIREMENTS; BOARD APPROVAL. (a) The affirmative vote of the holders of at least a majority of the outstanding shares of the Company Common Stock (voting as one class, with each share of the Company Common Stock having one (1) vote) entitled to be cast approving this Agreement is the only vote of the holders of any class or series of the Company's capital stock necessary to approve this Agreement, the Merger and the transactions contemplated hereby. (b) The Board of Directors of the Company has, as of the date of this Agreement, (i) determined that the Offer and the Merger are advisable and fair to, and in the best interests of the Company and its stockholders, (ii) approved this Agreement and the transactions contemplated hereby and (iii) resolved to recommend that the stockholders of the Company approve and adopt this Agreement, the Offer and the Merger. Section 5.19 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of U.S. Bancorp Piper Jaffray Inc. to the effect that, as of the date of this Agreement, the consideration payable in the Offer and the Merger to the holders of the Company Common Stock is fair to such holders (other than Parent, Purchaser or their Affiliates) from a financial point of view, and a copy of such opinion has been, or promptly upon receipt thereof will be, delivered to Parent; it being understood and acknowledged by Parent and Purchaser that such opinion has been rendered for the benefit of the Board of Directors of the Company, and is not intended to, and may not, be relied upon by Parent, its Affiliates or their respective shareholders. Section 5.20 CONTRACTS. Except as set forth in Schedule 5.20 of the Company Disclosure Schedule and except for this Agreement, since December 31, 1999, neither the Company nor any of its Subsidiaries has entered into any contract, agreement or amendment thereto that would be required to be filed as an exhibit to a Form 10-K filed by the Company with the SEC as of the date of this Agreement. Section 5.21 PRODUCTS LIABILITY. As used in this Section 5.21, the term "PRODUCT" shall mean any product designed, manufactured, shipped, sold, marketed, distributed and/or otherwise introduced into the stream of commerce by or on behalf of the Company or any of its Subsidiaries, including, without limitation, any product sold in the United States by the Company or any of its Subsidiaries as the distributor, agent, or pursuant to any other contractual relationship with a non-US. manufacturer; and the term "DEFECT" shall mean a defect or impurity of any kind, 37 42 whether in design, manufacture, processing, or otherwise, including, without limitation, any dangerous propensity associated with any reasonably foreseeable use of a Product, or the failure town of the existence of any defect, impurity, or dangerous propensity. Except as set forth in Section 5.21 of the Company Disclosure Schedule, there is no pending or, to the knowledge of the Company, threatened, claim, action, suit, inquiry, proceeding or investigation by any individual or Governmental Authority in which a Product is alleged to have a Defect, except any such claim, action, suit, inquiry, proceeding or investigation which, individually or in the aggregate, could not reasonably be expected to have a Company Material Adverse Effect. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Except as disclosed in Parent's disclosure schedule delivered concurrently with the delivery of this Agreement (the "PARENT DISCLOSURE SCHEDULE"), Parent and Purchaser hereby represent and warrant, jointly and severally, to the Company as follows: Section 6.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Each of Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and each such Person has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions to be consummated by it. Section 6.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of Parent and Purchaser has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Parent and Purchaser, and the consummation by each such party of the transactions contemplated hereby, have been duly authorized and unanimously approved by the respective Board of Directors of Parent and Purchaser and no other corporate action on the part of either of Parent or Purchaser is necessary to authorize the execution, delivery and performance of this Agreement by each of Parent and Purchaser and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and Purchaser and is a valid and binding obligation of each of Parent and Purchaser, enforceable against each of Parent and Purchaser in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. 38 43 Section 6.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming (i) the filings required under the HSR Act are made and the waiting periods thereunder (if applicable) have been terminated or expired, (ii) the prior notification and reporting requirements of the European Antitrust Laws are satisfied and any antitrust filings/notifications which must or may be effected at the national level in countries having jurisdiction are made and any applicable waiting periods thereunder have been terminated or expired, (iii) the prior notification and reporting requirements of other antitrust or competition laws as may be applicable are satisfied and any antitrust filings/notifications which must or may be effected in countries having jurisdiction are made, (iv) the applicable requirements of the Exchange Act are met, (v) the requirements under any applicable foreign or state securities or blue sky laws are met, (vi) the filing of the Certificate of Merger and other appropriate merger documents, if any, as required by the DGCL, are made, and (vii) the stockholders of the Parent have approved an increase in the authorized capital of the Parent and a waiver of preemptive rights in order for the Parent to make an US $150 million equity offering (the "PARENT EQUITY OFFERING") of ordinary bearer shares, nominal value (0.01 per share, of the Parent ("PARENT ORDINARY SHARES")), the execution and delivery of this Agreement by Parent and Purchaser and the consummation by Parent and Purchaser of the transactions contemplated hereby do not and will not: (A) violate or conflict with any provision of the governing documents of Parent, Purchaser or any of their respective Subsidiaries; (B) violate or conflict with any Laws or Orders of any Governmental Authority applicable to Parent, Purchaser or any of their respective Subsidiaries or by which any of their respective properties or assets may be bound; (C) except as set forth in Section 6.3 of the Parent Disclosure Schedule, require any filing with, or permit, consent or approval of, or the giving of any notice to, any Governmental Authority; or (D) except as set forth in Section 6.3 of the Parent Disclosure Schedule, result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Parent, Purchaser or any of their respective Subsidiaries under, or give rise to any obligation, right of termination, cancellation, acceleration or increase of any obligation or a loss of a material benefit under, any of the terms, conditions or provisions of any Contracts to which Parent, Purchaser or any of their respective Subsidiaries is a party, or by which any such Person or any of its properties or assets are bound, excluding from the foregoing clauses (B), (C) and (D) conflicts, violations, breaches, defaults, rights of payment and reimbursement, terminations, modifications, accelerations and creations and impositions of Liens which could not reasonably be expected to, individually or in the aggregate, have a Parent Material Adverse Effect or impair Parent's or Purchaser's ability to consummate the transactions to be consummated by them pursuant to this Agreement. Parent has obtained and made available to the Company a valid, binding and enforceable commitment from Tor Peters, President of Parent, that Mr. Peters will vote all shares of Parent owned by him, and the shares of Parent owned by certain other shareholders for which he has received proxies, in favor of approving an increase in the autho- 39 44 rized capital of the Parent and a waiver of preemptive rights in order for the Parent to consummate the Parent Equity Offering by issuing a number of shares sufficient to receive the $150 million proceeds from the Parent Equity Offering, subject to condition (f) as set forth in Annex I to this Agreement. Section 6.4 INFORMATION TO BE SUPPLIED. (a) Each of the Offer Documents and the other documents required to be filed by Parent with the SEC in connection with the Offer, the Merger and the other transactions contemplated hereby will comply as to form, in all material respects, with the requirements of the Exchange Act and will not, on the date of its filing, and none of the information supplied or to be supplied by Parent or the Purchaser expressly for inclusion or incorporation by reference in the Schedule 14D-9 or the Proxy Statement will, in the case of the Schedule 14D-9, at the time the Schedule 14D-9 is filed with the SEC and first published, sent or given to the Company's stockholders or, in the case of the Proxy Statement on the dates the Proxy Statement is mailed to stockholders of the Company and at the time of the Company Shareholder Meeting will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (b) Notwithstanding the foregoing provisions of this Section 6.4, no representation or warranty is made by Parent with respect to statements made or incorporated by reference in the Offer Documents, the Schedule 14D-9 or Proxy Statement based on information supplied by the Company expressly for inclusion or incorporation by reference therein or based on information which is not made in or incorporated by reference in such documents but which should have been disclosed pursuant to Section 5.6. Section 6.5 BROKER'S OR FINDER'S FEE. Except for Credit Suisse First Boston Corporation ("CSFB") (whose fees and expenses will be paid by Parent or Purchaser), no agent, broker, Person or firm acting on behalf of Parent or Purchaser is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. Section 6.6 OWNERSHIP OF CAPITAL STOCK. Except as set forth in Section 6.6 of the Parent Disclosure Schedule, neither Parent, Purchaser nor any of their respective Subsidiaries beneficially owns, directly or indirectly, any capital stock of the Company or is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any capital stock of the Company, other than as contemplated by this Agreement. 40 45 Section 6.7 NO PRIOR ACTIVITIES. Purchaser was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has no Subsidiaries and has undertaken no business or activities other than in connection with entering into this Agreement and engaging in the transactions contemplated hereby. Section 6.8 FINANCING. At the expiration of the Offer and at the Effective Time, provided that the Parent Equity Offering has been completed as contemplated in the Purchase Agreement, Parent and Purchaser will have available all the funds necessary to purchase all the shares of Company Common Stock pursuant to the Offer and the Merger and to pay all fees and expenses payable by the Parent or the Purchaser related to the transactions contemplated by this Agreement. Parent has delivered to the Company true and correct copies of that certain firm commitment letter addressed to Parent from CSFB dated August 4, 2000, as well as evidence satisfactory to the Company that Parent has sufficient net cash which, when added to the amounts to be obtained under such commitment letter, will constitute sufficient funds to make all of the payments referred to in the previous sentence. Parent has been advised by CSFB that CSFB knows of no fact or circumstance that is reasonably likely to result in any of the conditions to funding in such firm commitment letter or the purchase agreement attached thereto not being satisfied, and Parent and Purchaser know of no such fact or circumstance. Parent and Purchaser covenant and agree that, upon the Company's request, Parent and Purchaser shall provide the Company with information regarding the status of the such financing. ARTICLE VII COVENANTS PRIOR TO CLOSING DATE Section 7.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the period commencing on the date hereof and ending on the earlier of (i) the Closing Date and (ii) the date on which this Agreement is terminated pursuant to Section 9.1 hereof, the Company shall, and shall cause its Subsidiaries to, upon reasonable notice, afford the other party, and its respective counsel, accountants, consultants, financing sources and other authorized representatives, access during normal business hours to its and its Subsidiaries' executive officers, properties, books and records in order that they may have the opportunity to make such investigations as they shall reasonably deem necessary of its and its Subsidiaries' affairs; such investigation shall not, however, affect the representations and warranties made by the Company in this Agreement. The Company shall furnish promptly to Parent and Purchaser shall furnish promptly to the Company (x) a copy of each form, report, schedule, statement, registration statement and other document filed by it during such period pursuant to the requirements of federal, state or foreign securities laws and (y) all other information concerning its or its Subsidiaries' business, properties and personnel as Parent or Purchaser may reasonably request. 41 46 The Company agrees to cause its officers and employees to furnish such additional financial and operating data and other information and respond to such inquiries as Parent or Purchaser shall from time to time reasonably request. Parent and Purchaser shall make all reasonable efforts to minimize any disruption to the businesses of the Company and its Subsidiaries which may result from the requests made hereunder. Section 7.2 CONFIDENTIALITY. Prior to the Effective Time and after any termination of this Agreement, each of Parent and the Company shall hold, and shall use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors, lenders and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the other party furnished to it or its Affiliates in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been previously known on a nonconfidential basis by such party, in the public domain through no fault of such party or later lawfully acquired by such party from sources other than the other party; PROVIDED that each of Parent and the Company may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors, lenders and agents in connection with the transactions contemplated by this Agreement so long as such party informs such Persons of the confidential nature of such information and directs them to treat it confidentially. Each of Parent and the Company shall satisfy its obligation to hold any such information in confidence if it exercises the same care with respect to such information as it would take to preserve the confidentiality of its own similar information. If this Agreement is terminated, each of Parent and the Company shall, and shall use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors, lenders and agents to, destroy or deliver to the other party, upon request, all documents and other materials, and all copies thereof, that it or its Affiliates obtained, or that were obtained on their behalf, from the other party in connection with this Agreement and that are subject to such confidence. Notwithstanding anything to the contrary in this Agreement, the confidentiality agreement dated June 26, 2000 between the Parent and the Company shall remain in full force and effect. Section 7.3 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE. The Company agrees that, except as permitted, required or specifically contemplated by, or otherwise described in, this Agreement or otherwise consented to or approved in writing by Parent (which consent or approval shall not be unreasonably withheld or delayed), during the period commencing on the date hereof until the Effective Time: (a) The Company and each of its Subsidiaries shall conduct their respective operations in all material respects only according to their ordinary and usual course of business consistent with past practice and shall use their reasonable best efforts to preserve intact their 42 47 respective business organizations, keep available the services of their officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients, joint venture partners and others having significant business relationships with them; (b) Except as set forth in Section 7.3(b) of the Company Disclosure Schedule or as expressly contemplated by this Agreement, neither the Company nor any of its Subsidiaries shall: (1) make any change in or amendment to the Company's Certificate of Incorporation or its By-Laws; (2) issue or sell, or authorize to issue or sell, any shares of its capital stock or any other securities, or issue or sell, or authorize to issue or sell, any securities convertible into, or options, warrants or rights to purchase or subscribe for, or enter into any arrangement or contract with respect to the issuance or sale of, any shares of its capital stock or any other securities, or make any other changes in its capital structure, other than (i) the issuance of Company Common Stock upon the exercise of Stock Options outstanding on the date hereof, in accordance with their present terms, or (iii) issuances by a wholly owned Subsidiary of the Company of capital stock to such Subsidiary's parent, the Company or another wholly owned Subsidiary of the Company; (3) declare, pay or set aside any dividend or other distribution or payment with respect to, or split, combine, redeem or reclassify, or purchase or otherwise acquire, any shares of its capital stock or its other securities, other than dividends payable by a wholly owned Subsidiary of the Company to the Company or another wholly owned Subsidiary of the Company; (4) incur any capital expenditures or any obligations or liabilities in respect thereof, except for those (A) contemplated by the capital expenditure budget for the Company and its Subsidiaries made available to Parent, (B) incurred in the ordinary course of business of the Company and its Subsidiaries and set forth in Schedule 7.3(b) of the Company Disclosure Schedule (the "CAPITAL BUDGET") or (C) not otherwise described in clauses (A) and (B) which, in the aggregate, do not exceed U.S.$1.0 million; (5) acquire or agree to acquire (A) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization of division thereof (including any of the Company's Subsidiaries) or (B) any assets, including real estate, except (x) purchases of inventory, equipment, other non-material 43 48 assets in the ordinary course of business consistent with past practice or (y) expenditures consistent with the Company's Capital Budget; (6) except in the ordinary course of business consistent with past practice and except to the extent required under existing employee and director benefit plans, agreements or arrangements as in effect on the date of this Agreement, increase the compensation or fringe benefits of any of its directors, officers or employees or grant any severance or termination pay not currently required to be paid under existing severance plans or enter into any employment, consulting or severance agreement or arrangement with any present or former director, officer or other employee of the Company or any of its Subsidiaries, or hire or agree to hire, or enter into any employment agreement with, any new or additional key employee or officer having an annual salary of U.S.$150,000 or more; (7) except as required to comply with applicable law or expressly provided in this Agreement, (A) adopt, enter into, terminate or amend any Company Benefit Plan or other arrangement for the current or future benefit or welfare of any director, officer or current or former employee, except to the extent necessary to coordinate any such Company Benefit Plans with the terms of this Agreement, (B) pay any benefit not provided for under any Company Benefit Plan, accelerate the payment, right of payment or vesting of any bonus, severance, profit sharing, retirement, deferred compensation, stock option, insurance or other compensation or benefits, (C) grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Company Benefit Plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any Company Benefit Plans or agreements or awards made thereunder) or (D) except as required by the current terms thereof take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Company Benefit Plan; (8) transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of, encumber or subject to any Lien, any material assets, other than in the ordinary course of business; (9) except as required by applicable law or GAAP, make any change in its methods of accounting; 44 49 (10) adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries (other than the Merger) or any agreement relating to a Takeover Proposal, except as provided for in Section 7.6; (11) (i) incur or assume any long-term debt, or except in the ordinary course of business, incur or assume any short-term indebtedness in amounts not consistent with past practice; (ii) incur or modify any material indebtedness or other liability; (iii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, except in the ordinary course of business and consistent with past practice; (iv) make any loans, advances or capital contributions to, or investments in, any other Person (other than to wholly owned Subsidiaries of the Company, or by such Subsidiaries to the Company, or customary loans or advances to employees in accordance with past practice); (v) settle any claims in excess of U.S.$1 million other than in the ordinary course of business, in accordance with past practice, and without admission of liability; or (vi) enter into any material commitment or transaction in excess of U.S.$1 million except in the ordinary course of business; (12) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of any such claims, liabilities or obligations, in the ordinary course of business and consistent with past practice, or of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated Subsidiaries; (13) enter into any agreement, understanding or commitment that materially restrains, limits or impedes the Company's or any of its Subsidiaries' ability to compete with or conduct any business or line of business, including, but not limited to, geographic limitations on the Company's or any of its Subsidiaries' activities; (14) plan, announce, implement or effect any material reduction in labor force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of the Company or its Subsidiaries; PROVIDED, HOWEVER, that routine employee terminations for cause shall not be considered subject to this clause (14); (15) take any action including, without limitation, the adoption of any shareholder rights plan or amendments to its Certificate of Incorporation or By-Laws (or comparable governing documents), which would, directly or indirectly, restrict or impair 45 50 the ability of Parent to vote, or otherwise to exercise the rights and receive the benefits of a shareholder with respect to, securities of the Company acquired or controlled by Parent or Purchaser or permit any shareholder to acquire securities of the Company on a basis not available to Parent or Purchaser in the event that Parent or Purchaser were to acquire any additional shares of the Company Common Stock (subject to the Company's right to take action specifically permitted by Section 7.6); (16) materially modify, amend or terminate any material contract to which it is a party or waive or assign any of its material rights or claims except in the ordinary course of business consistent with past practice; (17) other than in the ordinary course of business consistent with past practice, make any tax election or enter into any settlement or compromise of any tax liability that in either case is material to the business of the Company and its Subsidiaries as a whole; or (18) agree, in writing or otherwise, to take any of the foregoing actions. (c) The Company shall not, and shall not permit any of its Subsidiaries to, take any voluntary action that would result in (i) any of its representations and warranties set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material manner having a Company Material Adverse Effect or (iii) any of the conditions to the Offer set forth in subsections (a), (c), (d) and (e) of Annex I not being satisfied (subject to the Company's right to take action specifically permitted by Section 7.6). Section 7.4 COMPANY SHAREHOLDER MEETING; PREPARATION OF PROXY STATEMENT. If required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its stockholders (the "COMPANY SHAREHOLDER MEETING") as promptly as practicable following the acceptance for payment and purchase of shares by Company Common Stock by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon the approval of the Merger and the adoption of this Agreement; (ii) prepare and file with the SEC a preliminary proxy or information statement in accordance with the Exchange Act relating to the Merger and this Agreement and use its best efforts to obtain and furnish the information required to be included by the 46 51 Exchange Act and the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendment or supplement thereto (the "PROXY STATEMENT"), to be mailed to its stockholders, PROVIDED that no amendment or supplement to the Proxy Statement will be made by the Company without consultation with Parent and its counsel; (iii) take all action necessary to solicit from its stockholders proxies, and shall take all other action necessary and advisable, to secure the vote of stockholders required by applicable law and the Company's Certificate of Incorporation or By-Laws to obtain the approval for this Agreement and the Merger; and (iv) unless the Board of Directors of the Company otherwise determines (based on a majority vote of the Board of Directors in its good faith judgment that such other action is necessary to comply with its fiduciary duty to stockholders under applicable law after consulting with outside legal counsel) prior to the Company Shareholder Approval, (x) the Company's Board of Directors shall recommend approval and adoption by its stockholders of this Agreement (the "COMPANY RECOMMENDATION"), (y) neither the Company's Board of Directors nor any committee thereof shall amend, modify, withdraw, condition or qualify the Company Recommendation in a manner adverse to Parent or take any action or make any statement inconsistent with the Company Recommendation and (z) the Company shall take all lawful action to solicit the Company Shareholder Approval whether or not the Company Recommendation remains in effect. Section 7.5 REASONABLE BEST EFFORTS; NOTIFICATION; INFORMATION AGENT. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger, and the other transactions contemplated by this Agreement, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from any Governmental Authority and the making of all necessary registrations and filings (including filings with any Governmental Authority, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of any of the transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining 47 52 order entered by any court or other Governmental Authority vacated or reversed, (iv) the obtaining of the financing contemplated by the Parent Equity Offering, including the Company's providing financial statements and financial and other business information required to be disclosed by Parent in connection therewith, and (v) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement; PROVIDED, HOWEVER, that no loan agreement or contract for borrowed money entered into by the Company or any of its Subsidiaries shall be repaid except as currently required by its terms, in whole or in part, and no contract shall be amended to increase the amount payable thereunder or otherwise to be more burdensome to the Company or any of its Subsidiaries in order to obtain any such consent, approval or authorization without first obtaining the written approval of Parent. (b) The Company shall give prompt notice to Parent of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect (including in the case of representations or warranties by the Company, the Company receiving knowledge of any fact, event or circumstance which may cause any representation qualified as to the knowledge of the Company to be or become untrue or inaccurate in any respect) or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; PROVIDED, HOWEVER, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. The Company acknowledges that if after the date of this Agreement the Company receives knowledge of any fact, event or circumstance that would cause any representation or warranty that is conditioned as to the knowledge of the Company to be or become untrue or inaccurate in any respect, the receipt of such knowledge shall constitute a breach of the representation or warranty that is so conditioned as of the date of such receipt. (c) Parent shall, at its expense, engage a nationally-recognized agent to provide information to stockholders of the Company with respect to the Offer and to encourage stockholders to deliver their shares to the designated depositary for the Offer. Section 7.6 NO SOLICITATION. (a) The Company shall, and shall use its reasonable best efforts to cause its Affiliates, officers, directors, employees, financial advisors, attorneys and other advisors, representatives and agents to, immediately cease any discussions or negotiations with third parties with respect to any Takeover Proposal (as defined below). The Company shall not, nor shall it authorize or permit any of its Affiliates to, nor shall it authorize or permit any officer, director or employee of or any financial advisor, attorney or other advisor, representative or agent of it or any of its Affiliates, to (i) directly or indirectly solicit, facilitate, initiate or encourage the making or submission of, any Takeover Proposal (including, without limitation, 48 53 the taking of any action which would make Section 203 of the DGCL inapplicable to a Takeover Proposal), (ii) enter into any agreement, arrangement or understanding with respect to any Takeover Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement, (iii) initiate or participate in any way in any discussions or negotiations regarding, or furnish or disclose to any Person (other than a party to this Agreement) any information with respect to, or take any other action to facilitate or in furtherance of any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Takeover Proposal, or (iv) grant any waiver or release under any standstill or similar agreement with respect to any class of the Company's equity securities (other than to permit the Company to receive an unsolicitated Takeover Proposal that did not result from a breach of this Section 7.6); PROVIDED that prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer, in response to an unsolicited Takeover Proposal that did not result from the breach of this Section 7.6 and following delivery to Parent of notice of the Takeover Proposal in compliance with its obligations under Section 7.6(d) hereof, the Company may participate in discussions or negotiations with or furnish information (pursuant to a confidentiality/ standstill agreement with customary terms) to any third party which makes a bona fide written Takeover Proposal if (A) a majority of the Company's Board of Directors reasonably determines in good faith (after consultation with its financial advisor) that taking such action would be reasonably likely to lead to the delivery to the Company of a Superior Proposal and (B) a majority of the Company's Board of Directors determines in good faith (after consultation with outside legal counsel) that it is necessary to take such actions in order to comply with its fiduciary duties under applicable law. Without limiting the foregoing, the Company agrees that any violation of the restrictions set forth in this Section 7.6(a) by any of its, or any of its Subsidiaries', officers, employees, Affiliates or directors or any advisor, representative, consultant or agent retained by the Company or any of its Subsidiaries or Affiliates in connection with the transactions contemplated hereby, whether or not such Person is purporting to act on behalf of the Company or any of its Subsidiaries, shall constitute a breach of this Section 7.6(a) by the Company. For purposes of this Agreement, "TAKEOVER PROPOSAL" means any inquiry, proposal or offer from any Person or group relating to (i) any direct or indirect acquisition or purchase of 20% or more of the assets of the Company or any of its Subsidiaries or 20% or more of any class of equity securities of the Company or any of its Subsidiaries, (ii) any tender offer or exchange offer that, if consummated, would result in any Person beneficially owning 20% or more of any class of equity securities of the Company or any of its Subsidiaries or (iii) any merger, consolidation, business combination, sale of all or any substantial portion of the assets, recapitalization, liquidation or a dissolution of, or similar transaction of the Company or any of its Subsidiaries other than the Offer or the Merger; and "SUPERIOR PROPOSAL" means a bona fide written Takeover Proposal made by a third party to purchase at least a majority of the outstanding equity 49 54 securities of the Company pursuant to a tender offer, exchange offer, merger or other business combination (x) on terms which a majority of the Company's Board of Directors determines in good faith (after consultation with its financial advisor) to be superior to the Company and its stockholders (in their capacity as stockholders) from a financial point of view (taking into account, among other things, all legal, financial, regulatory and other aspects of the proposal and identity of the offeror) as compared to the transactions contemplated hereby and any alternative proposed by Parent or Purchaser in accordance with Section 9.1(c) hereof and (y) which is reasonably capable of being consummated. (b) The Company agrees that, except as set forth in Section 7.6(c), neither its Board of Directors nor any committee thereof shall (i) approve or recommend, or, in the case of a committee, propose to the Board of Directors to approve or recommend any Takeover Proposal or (ii) approve, recommend or cause it to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "ACQUISITION AGREEMENT") related to any Takeover Proposal. (c) Notwithstanding anything to the contrary herein, prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer, the Company and/or its Board of Directors may take the actions otherwise prohibited by Sections 7.6(a) and (b) if (i) a third party makes a Superior Proposal, (ii) the Company complies with its obligations under Section 7.6(d), (iii) all of the conditions to the Company's right to terminate this Agreement in accordance with Section 9.1(c) hereof have been satisfied (including expiration of the three (3) Business Day period described therein and the payment of all amounts required pursuant to Section 9.3 hereof) and (iv) simultaneously therewith, this Agreement is terminated in accordance with Section 9.1(c) hereof. (d) The Company agrees that in addition to the obligations of the Company set forth in paragraphs (a), (b) and (c) of this Section 7.6, promptly after receipt thereof, the Company shall advise Parent in writing of any request for information or any Takeover Proposal, or any inquiry, discussions or negotiations with respect to any Takeover Proposal, and the terms and conditions of such request, Takeover Proposal, inquiry, discussions or negotiations, and the Company shall promptly provide to Parent copies of any written materials received by the Company in connection with any of the foregoing, and the identity of the Person or group making any such request, Takeover Proposal or inquiry or with whom any discussions or negotiations are taking place. The Company agrees that it shall simultaneously provide to Parent any non-public information concerning the Company provided to any other Person or group in connection with any Takeover Proposal which was not previously provided to Parent. 50 55 (e) Parent agrees that nothing contained in this Section 7.6 shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with respect to any tender offer. (f) The Company agrees that immediately following the execution of this Agreement, it shall request each Person who has heretofore executed a confidentiality agreement in connection with such Person's consideration of acquiring the Company or any portion thereof to return or destroy (which destruction shall be certified in writing by an executive officer of such Person) all confidential information heretofore furnished to such Person by or on its behalf. Section 7.7 ANTITRUST LAWS. (a) Each party hereto shall (i) take promptly (but in no event later than August 21, 2000) all actions necessary to make the filings required of it or any of its Affiliates under any applicable Antitrust Laws in connection with this Agreement and the transactions contemplated hereby, (ii) comply at the earliest practicable date with any formal or informal request for additional information or documentary material received by it or any of its Affiliates from any Antitrust Authority and (iii) cooperate with one another in connection with any filing under applicable Antitrust Laws and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement initiated by any Antitrust Authority. (b) Each party hereto shall use its reasonable best efforts to resolve such objections, if any, as may be asserted with respect to the transactions contemplated by this Agreement under any Antitrust Law; PROVIDED HOWEVER, that the Company shall not, without the prior written consent of Parent, commit to any divestiture transaction and Parent shall not be required to divest or hold separate or otherwise take or commence to take any action that, in the reasonable discretion of Parent, materially limits its ability to conduct the business or its ability to retain, the Company or any of its affiliates or any material portion of the assets of the Company. (c) Each party hereto shall promptly inform the other parties of any material communication made to, or received by such party from, any Antitrust Authority or any other Governmental Authority regarding any of the transactions contemplated hereby. (d) For purposes of this Agreement, (i) "ANTITRUST AUTHORITIES" means the Federal Trade Commission, the Antitrust Division of the Department of Justice, the attorneys general of the several states of the United States and any other Governmental Authority having jurisdiction with respect to the transactions contemplated hereby pursuant to applicable Antitrust Laws and (ii) "ANTITRUST LAW" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, European Antitrust Laws and all other federal, state and foreign statutes, rules, regulations, orders, decrees, administrative and 51 56 judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade. Section 7.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) Parent, Purchaser and the Surviving Corporation agree that all rights to indemnification existing in favor of the present or former directors, officers, employees, fiduciaries and agents of the Company or any of its Subsidiaries (collectively, the "INDEMNIFIED PARTIES") as provided in the Company's Certificate of Incorporation or By-Laws or the certificate or articles of incorporation, by-laws or similar organizational documents of any of the Subsidiaries as in effect as of the Effective Time shall survive the Merger and shall continue in full force and effect for six years after the Effective Time (without modification or amendment, except as required by applicable law) in accordance with their terms, to the fullest extent permitted by law, and shall be enforceable by the Indemnified Parties against the Surviving Corporation. (b) Purchaser shall cause to be maintained in effect for not less than six years from the Effective Time the current policies of the directors' and officers' liability insurance maintained by the Company (provided that Purchaser may substitute therefor polices of at least equivalent coverage containing terms and conditions which are no less advantageous) with respect to matters occurring prior to the Effective Time, provided that in no event shall Purchaser or the Surviving Corporation be required to expend to maintain or procure insurance coverage pursuant to this Section 7.8 any amount per annum in excess of U.S.$400,000. In the event the payment of such amount for any year is insufficient to maintain such insurance or equivalent coverage cannot otherwise be obtained, the Surviving Corporation shall purchase as much insurance as may be purchased for the amount indicated. The provisions of this Section 7.8 shall survive the consummation of the Merger and expressly are intended to benefit each of the Indemnified Parties. Section 7.9 PUBLIC ANNOUNCEMENTS. The initial press release with respect to the execution of this Agreement shall be a joint press release acceptable to Parent and the Company. Thereafter, Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation and review by the other party of such release or statement, except as may be required by law, court process or by obligations pursuant to any listing agreement with a national securities exchange. 52 57 Section 7.10 TRANSFER TAXES. The Company and Parent shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees and any similar taxes which become payable in connection with the transactions contemplated by this Agreement (together with any related interest, penalties or additions to tax, "TRANSFER TAXES"). All Transfer Taxes shall be paid by the Company and expressly shall not be a liability of any holder of the Company Common Stock. Section 7.11 EMPLOYEE BENEFITS. For a period of one year following the Effective Time, Purchaser shall, or shall cause the Surviving Corporation to, provide all of the employees of the Surviving Corporation and its subsidiaries with employee benefit plans, programs, policies or arrangements (the "PURCHASER BENEFIT PLANS") as are substantially equivalent, in the aggregate, to those currently provided by the current Company Benefit Plans. Except to the extent that benefits may be duplicated, each Purchaser Benefit Plan shall give full credit for each employee's period of service with the Company and its Subsidiaries prior to the Effective Time for all purposes for which such service was recognized under the Company Benefit Plans prior to the Effective Time, including, but not limited to, recognition of service for vesting, amount of benefits, eligibility to participate, and eligibility for disability and early retirement benefits (including subsidies relating to such benefits) and full credit for deductibles satisfied under the benefit plans toward any deductibles for the same period following the Effective Time, and shall waive any pre-existing condition limitation for any Company employee covered under any Company Benefit Plan immediately prior to the Effective Time. Section 7.12 OPTION TO ACQUIRE ADDITIONAL SHARES. (a) The Company hereby grants to Purchaser an irrevocable option (the "OPTION") to purchase up to that number of newly issued shares of Company Common Stock (the "OPTION SHARES") equal to the number of shares of Company Common Stock that, when added to the number shares of Company Common Stock owned by Parent, Purchaser and its Affiliates immediately following consummation of the Offer, shall constitute one share more than 90% of the shares of Common Company Stock then outstanding on a fully diluted basis (after giving effect to the issuance of the Option Shares) for a consideration per Option Share equal to the Offer Price. (b) Such Option shall be exercisable only after the purchase of and payment for shares of Company Common Stock pursuant to the Offer by Parent or Purchaser as a result of which Parent and its Affiliates own beneficially at least 85% of the outstanding shares of Company Common Stock on a fully diluted basis. Such Option shall not be exercisable if (i) the 53 58 number of shares of Company Common Stock subject thereto exceeds the number of authorized shares of Company Common Stock available for issuance, or (ii) the exercise of the Option would violate the applicable rules of the Nasdaq National Market applicable to the Company. (c) In the event Purchaser wishes to exercise the Option, Purchaser shall give the Company a one-day prior written notice of its exercise of the Option specifying the number of shares of Company Common Stock that are or will be owned by Parent, Purchaser and its Affiliates immediately following consummation of the Offer and a place and a time (which may be concurrent with the consummation of the Offer) for the closing of such purchase. The Company shall, as soon as practicable following receipt of the notice, deliver written notice to Purchaser specifying the number of Option Shares. At the closing of the purchase of the Option Shares, the portion of the purchase price owing upon exercise of such Option which equals the product of (x) the number of shares of Company Common Stock purchased pursuant to such Option multiplied by (y) the Offer Price shall be paid to the Company in cash by wire transfer or cashier's check. Section 7.13 ACTIONS REGARDING THE RIGHTS. The Company shall not modify or waive, except as specifically provided herein, the terms of its Rights Agreement, or take any action to redeem the Rights, except in connection with its entering into an Acquisition Agreement pursuant to Section 7.6(c). Section 7.14 PARENT APPROVAL OF INCREASE TO AUTHORIZED CAPITAL. Parent shall promptly (but in no event later than August 25, 2000) obtain all requisite corporate and stockholder approvals and waivers of preemptive rights to authorize an increase in the authorized capital of Parent sufficient to enable the Parent to make the Parent Equity Offering. ARTICLE VIII CONDITIONS TO THE MERGER Section 8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of the Company, Parent and Purchaser to consummate the Merger are subject to the satisfaction of the following conditions: (a) this Agreement shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable law, in order to consummate the Merger; 54 59 (b) no provision of any applicable law or regulation and no judgment, injunction, order or decree of any Governmental Authority of competent jurisdiction shall prohibit the consummation of the Merger; and (c) Purchaser shall have purchased shares of Company Common Stock pursuant to the Offer; PROVIDED, HOWEVER, that neither Parent nor Purchaser shall be entitled to rely on the condition in this clause (c) if either of them shall have failed to purchase shares of Company Common Stock pursuant to the Offer in breach of their obligations under this Agreement. Section 8.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER. The obligations of Parent and Purchaser to consummate the Merger are subject to the satisfaction of the following further condition: that the Company shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time. Section 8.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the Company to consummate the Merger are subject to the satisfaction of the following further condition: that Parent and Purchaser shall have performed in all material respects all of their obligations hereunder required to be performed by either of them at or prior to the Effective Time. ARTICLE IX TERMINATION AND ABANDONMENT Section 9.1 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after the Company Shareholder Approval: (a) by mutual written consent of Parent and the Company; or (b) by Parent: (1) provided that neither Parent nor Purchaser is in material breach of its obligations under this Agreement, if at any time prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer, the Company has breached in any material respect any representation, warranty, covenant or other agreement contained in this Agreement, which (i) would give rise to the failure of a condition set forth in clause (d) of Annex I, (ii) cannot be or has not been cured prior to the Termination Date and (iii) has not been waived by Parent pursuant to the provisions hereof; 55 60 (2) if at any time prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer, (A) the Company, or its Board of Directors, as the case may be, shall have (w) entered into any agreement with respect to any Takeover Proposal other than the Offer or the Merger or a confidentiality/standstill agreement permitted under Section 7.6, (x) amended, conditioned, qualified, withdrawn or modified, or, in the case of a committee, proposed to the Board of Directors, or resolved to do so, in a manner adverse to Parent or Purchaser, its approval and recommendation of the Offer, the Merger and this Agreement, or (y) approved or recommended, or, in the case of a committee, proposed to the Board of Directors, to approve or recommend, any Takeover Proposal other than the Offer or the Merger, or (B) the Company or the Company's Board of Directors or any committee thereof shall have resolved to do any of the foregoing; or (3) if the Company breaches in any material respect its obligations under Section 7.6 or Section 9.1(c) hereof; (c) by the Company, if at any time prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer a Superior Proposal is received by the Company and the Board of Directors of the Company reasonably determines in good faith (after consultation with outside legal counsel) that it is necessary to terminate this Agreement and enter into an agreement to effect the Superior Proposal in order to comply with its fiduciary duties under applicable law; PROVIDED that the Company may not terminate this Agreement pursuant to this Section 9.1(c) unless and until (i) three (3) Business Days have elapsed following delivery to Parent of a written notice of such determination by the Board of Directors of the Company and during such three (3) Business Day period the Company has fully cooperated with Parent, including, without limitation, informing Parent of the terms and conditions of such Superior Proposal, and the identity of the Person making such Superior Proposal, with the intent of enabling both parties to agree to a modification of the terms and conditions of this Agreement so that the transactions contemplated hereby may be effected; (ii) at the end of such three (3) Business Day period the Takeover Proposal continues to constitute a Superior Proposal and the Board of Directors of the Company confirms its determination (after consultation with outside legal counsel) that it is necessary to terminate this Agreement and enter into an agreement to effect the Superior Proposal to comply with its fiduciary duties under applicable law; and (iii) (x) at or prior to such termination, Parent has received all fees and Expenses set forth in Section 9.3 hereof by wire transfer in immediately available funds and (y) immediately following such termination the Company enters into a definitive acquisition, merger or similar agreement to effect the Superior Proposal; (d) by either Parent or the Company: 56 61 (1) if the Offer has not been consummated on or before November 15, 2000 (the "TERMINATION DATE"); PROVIDED that the right to terminate this Agreement pursuant to this clause shall not be available to any party whose failure to fulfill any material obligation of this Agreement or other material breach of this Agreement has been the cause of, or resulted in, the failure of the Offer to have been consummated on or prior to the aforesaid date; or (2) if any court of competent jurisdiction or any Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently restricting, enjoining, restraining or otherwise prohibiting acceptance for payment of, and payment for, shares of Company Common Stock pursuant to the Offer or consummation of the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (e) by the Company, provided the Company is not in material breach of its obligations under this Agreement, if Parent or Purchaser shall have (x) failed to commence the Offer by August 21, 2000 after the public announcement by Parent and the Company of this Agreement, (y) failed to pay for shares of Company Common Stock pursuant to the Offer in accordance with Section 2.1 hereof, or (z) breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement. Section 9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by Parent or the Company, as provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability hereunder on the part of the Company, Parent or Purchaser or their respective officers or directors (except as set forth in Section 7.2, this Section 9.2 and Sections 9.3, 10.3, 10.4, 10.5, 10.9, 10.11, 10.13 and 10.14, which shall survive the termination); PROVIDED, HOWEVER, that nothing contained in this Section 9.2 or in Section 9.3 shall relieve any party hereto from any liability for any breach of this Agreement. Section 9.3 PAYMENT OF CERTAIN FEES. (a) If this Agreement is terminated by Parent in accordance with Section 9.1(b)(1), 9.1(b)(2)(A)(w), 9.1(b)(2)(A)(y), 9.1(b)(2)(B) (unless related to a resolution to take any of the actions set forth in Section 9.1(b)(2)(A)(x), in which case Section 9.3(c) shall apply) or 9.1(b)(3) hereof or by the Company pursuant to Section 9.1(c), then the Company shall (A) reimburse Parent for all of its Expenses and (B) pay to Parent in immediately available funds a termination fee in an amount equal to U.S.$7 million less Expenses paid or payable by the Company (the "TERMINATION FEE"). (b) If this Agreement is terminated by Parent or the Company pursuant to Section 9.1(d)(1) hereof due to a reason other than the conditions listed in sections (a), (b), (f), (g), (h), (i) 57 62 or (j) of Annex I to this Agreement and (x) a Takeover Proposal has been made and publicly announced or communicated to the Company's stockholders after the date of this Agreement and prior to the Termination Date and (y) concurrently with or within twelve (12) months of the date of such termination a Third Party Acquisition Event occurs, then the Company shall within one Business Day of the occurrence of such a Third Party Acquisition Event (including any revisions or amendments thereto), if any, pay to Parent the Termination Fee and reimburse Parent for all of its Expenses. "THIRD PARTY ACQUISITION EVENT" shall mean (i) the consummation of a Takeover Proposal involving the purchase of a majority of either the equity securities of the Company or of the consolidated assets of the Company and its Subsidiaries, taken as a whole, or any such transaction that, if it had been proposed prior to the termination of this Agreement would have constituted a Takeover Proposal or (ii) the entering into by the Company or any of its Subsidiaries of a definitive agreement with respect to any such transaction. "EXPENSES" shall mean documented and reasonable out-of-pocket fees and expenses up to a maximum aggregate amount of U.S.$3 million incurred or paid in connection with the Merger or the consummation of any of the transactions contemplated by this Agreement, including, but not limited to, all filing fees, printing fees and reasonable fees and expenses of law firms, commercial banks, investment banking firms, accountants, experts and consultants. (c) If this Agreement is terminated by Parent pursuant to Section 9.1(b)(2)(A)(x), then (i) the Company shall (A) pay to Parent 50% of the Termination Fee and (B) reimburse Parent for all of its Expenses and (ii) if concurrently with or within 12 months after such termination a Third Party Acquisition Event occurs, then the Company shall pay to Parent 50% of the Termination Fee within one Business Day of the occurrence of such a Third Party Acquisition Event (including any revisions or amendments thereto). (d) Any payment of the Termination Fee (and reimbursement of Expenses) pursuant to this Section 9.3 shall be made within one Business Day after termination of this Agreement (or as otherwise expressly set forth in this Agreement) by wire transfer of immediately available funds. If either party fails to pay to (or reimburse) the other party any fee or expense due hereunder (including the Termination Fee), such party shall pay the costs and expenses (including legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, taken to collect payment, together with interest on the amount of any unpaid fee and/or expense at the publicly announced prime rate for leading money center banks as published in THE WALL STREET JOURNAL from the date such fee was required to be paid to the date it is paid. 58 63 (e) Parent and Purchaser agree that the payment of the Termination Fee shall be the sole and exclusive remedy for termination of this Agreement by the Parent and Purchaser pursuant hereto. ARTICLE X MISCELLANEOUS Section 10.1 REPRESENTATIONS AND WARRANTIES. The respective representations and warranties of the Company, on the one hand, and Parent and Purchaser, on the other hand, contained herein or in any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party. Each and every such representation and warranty shall expire with, and be terminated and extinguished by, the Closing and thereafter none of the Company, Parent or Purchaser shall be under any liability whatsoever with respect to any such representation or warranty. This Section 10.1 shall have no effect upon any other obligation of the parties hereto, whether to be performed before or after the Effective Time. Section 10.2 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken by or on behalf of the respective Boards of Directors of the Company (or, if required by Section 2.3, the Continuing Directors), Parent or Purchaser, may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (iii) waive compliance with any of the agreements or conditions contained herein by the other parties hereto. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Section 10.3 NOTICES. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person or mailed, certified or registered mail with postage prepaid, or sent by telex, telegram or telecopier, as follows: 59 64 (a) if to the Company, to it at: EndoSonics Corporation 2870 Kilgore Road Rancho Cordova, California 95670 Telecopy: (916) 638-7976 Attention: Chief Executive Officer with a copy (which shall not constitute notice) to: Latham & Watkins 505 Montgomery Street, Suite 1900 San Francisco, CA 94111 Telecopy: (415) 395-8095 Attention: John M. Newell, Esq. (b) if to either Parent or Purchaser, to it at: JOMED N.V. Drottninggatan 94 S-252 21 Heisingborg, Sweden Telecopy: +46-42-490-6001 Attention: Chief Executive Officer in each case, with a copy (which shall not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Telecopy: 212-735-2000 Attention: Bertil Lundqvist, Esq. or to such other Person or address as any party shall specify by notice in writing to each of the other parties. All such notices, requests, demands, waivers and communications shall be deemed to have been received on the date of delivery unless if mailed, in which case on the third Business Day after the mailing thereof except for a notice of a change of address, which shall be effective only upon receipt thereof. 60 65 Section 10.4 ENTIRE AGREEMENT. This Agreement and the schedules and other documents referred to herein or delivered pursuant hereto, collectively contain the entire understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior agreements and understandings, oral and written, with respect thereto. Section 10.5 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and, with respect to the provisions of Section 7.8 hereof, shall inure to the benefit of the Persons or entities benefitting from the provisions thereof who are intended to be third-party beneficiaries thereof and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except that Purchaser may assign and transfer its right and obligations hereunder to any of its Affiliates. Except as provided in the immediately preceding sentence, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. Section 10.6 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement may be amended, modified and supplemented in writing by the parties hereto in any and all respects before the Effective Time (notwithstanding the Company Shareholder Approval), by action taken by the respective Boards of Directors of Parent, Purchaser and the Company (or, if required by Section 2.3, the Continuing Directors) or by the respective officers authorized by such Boards of Directors or the Continuing Directors, as the case may be; PROVIDED, HOWEVER, that after the Company Shareholder Approval, no amendment shall be made which by law requires further approval by the stockholders of the Company without such further approval. Section 10.7 FURTHER ACTIONS. Each of the parties hereto agrees that, except as otherwise provided in this Agreement and subject to its legal obligations and fiduciary duties, it will use its reasonable best efforts to fulfill all conditions precedent specified herein, to the extent that such conditions are within its control, and to do all things reasonably necessary to consummate the transactions contemplated hereby. Section 10.8 HEADINGS. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 61 66 Section 10.9 ENFORCEMENT. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereto (a) irrevocably and unconditionally consents to submit to the jurisdiction of any federal court located in the State of Delaware or any Delaware State court for the purpose of any action arising out of or based upon this Agreement or any of the transactions contemplated by this Agreement brought by any party hereto and for the recognition and enforcement of any judgment rendered in respect thereof, and (b) waives, and agrees not to assert by way of motion, as a defense, or otherwise, in any such action, any claim that it is not subject to the personal jurisdiction of the above-named courts, that its assets or property is exempt or immune from attachment or execution, that the action is brought in an inconvenient forum, that the venue of the action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above-named courts. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in The Netherlands, Switzerland, Sweden, or any other jurisdiction by suit on the judgment or in any other manner provided by law. Section 10.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. Section 10.11 APPLICABLE LAW. This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws rules thereof. Section 10.12 SEVERABILITY. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 10.13 WAIVER OF JURY TRIAL. Each of the parties to this Agreement hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement or the transactions contemplated hereby. 62 67 Section 10.14 PARENT GUARANTEE. Parent hereby guarantees the due performance of any and all obligations and liabilities of Purchaser under or arising out of this Agreement and the transactions contemplated hereby. [SIGNATURE PAGE FOLLOWS] 63 68 IN WITNESS WHEREOF, each of Parent, Purchaser and the Company has caused this Agreement to be executed by its officers thereunto duly authorized, all as of the date first above written. JOMED N.V. By: /s/ TOR PETERS ----------------------------------------- Name: Tor Peters Title: CHIEF EXECUTIVE OFFICER JOMED ACQUISITION CORP. By: /s/ TOR PETERS ----------------------------------------- Name: Tor Peters Title: ENDOSONICS CORPORATION By: /s/ REINHARD WARNKING ----------------------------------------- Name: Reinhard Warnking Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
69 ANNEX I CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, but subject to compliance with Section 2.1(a) of the Agreement and Plan of Merger dated as of August 5, 2000 among Parent, Purchaser and the Company (the "MERGER AGREEMENT") (each defined term used herein shall have the meaning assigned to such term in the Merger Agreement), Purchaser shall not be required to accept for payment or pay for any shares of Company Common Stock tendered pursuant to the Offer, and may terminate or amend the Offer in accordance with the Merger Agreement, if prior to the expiration date of the Offer, (i) the Minimum Condition shall not have been satisfied, or (ii) the applicable waiting period under the HSR Act or any of the European Antitrust Laws shall not have expired or been terminated or (iii) at any time on or after the date of the Merger Agreement and prior to the expiration date of the Offer, any of the following conditions exists: (a) there shall have been any action threatened or taken, or any statute, rule, regulation, judgment, order or injunction promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Merger by any domestic or foreign Federal or state governmental regulatory or administrative agency or authority or court or legislative body or commission which directly or indirectly (l) prohibits, or imposes any material limitations, other than limitations generally affecting the industries in which the Company and Parent conduct their business, on, Parent's or Purchaser's ownership or operation (or that of any of their respective Subsidiaries or Affiliates) of all or a material portion of the Company's businesses or assets as a whole, or compels Parent or Purchaser or their respective Subsidiaries and Affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent in each case taken as a whole, (2) prohibits, or makes illegal, the acceptance for payment, payment for or purchase of shares of Company Common Stock or the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement, (3) results in the material delay in the ability of Purchaser, or renders Purchaser unable, to accept for payment, pay for or purchase a material amount of the shares of Company Common Stock, or (4) imposes material limitations on the ability of Purchaser or Parent effectively to exercise full rights of ownership of the shares of the Company Common Stock including, without limitation, the right to vote the shares of the Company Common Stock purchased by it on all matters properly presented to the Company's stockholders; or (b) there shall have occurred (1) any general suspension of trading in, or limitation on prices for, securities in the Nasdaq National Market System (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index) or a general suspension or material limitation on trading on or by, as the case may be, the SWX Swiss Exchange 70 (whether on the SWX New Market segment or otherwise) for a minimum of three consecutive trading days, (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, The Netherlands, Switzerland or Sweden (whether or not mandatory), (3) a commencement or escalation of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, The Netherlands, Switzerland or Sweden which materially adversely affects or delays the Offer, (4) any limitation (whether or not mandatory) by any Governmental Authority on the extension of credit by banks or other financial institutions in a manner which prohibits the extension of funds to Parent or Purchaser or (5) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (c) any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving a prospective change) in the business, assets, liabilities, financial condition, capitalization, operations or results of operations of the Company or any of its Subsidiaries that is or is reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect; or (d) (1) the Company shall have breached or failed to perform in all material respects any of its obligations under the Merger Agreement, (2) any of the representations and warranties of the Company contained in the Merger Agreement that are qualified by reference to a Company Material Adverse Effect shall not be true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date), or (3) any of the representations and warranties of the Company contained in the Merger Agreement that are not so qualified shall not be true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date), except, in the case of clause (3) only, for such inaccuracies as are not reasonably likely to, individually or in the aggregate, result in a Company Material Adverse Effect; or (e) the Company's Board of Directors shall have withdrawn, or modified or changed in a manner adverse to Parent or the Purchaser (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or the Merger, or recommended another proposal or offer, or shall have resolved to do any of the foregoing; or (f) if on either of (i) the date of the execution of the Purchase Agreement or (ii) on the first trading day immediately prior to the closing date of the Purchase Agreement, as such date is defined in the Purchase Agreement, the closing price of the Parent Ordinary Shares on the SWX Swiss Exchange shall be less than (i) 42 Swiss Francs or (ii) one-half of the closing price of the Parent Ordinary Shares on the SWX Swiss Exchange on the first trading day following the announcement of the Offer and the Merger. (g) All of the conditions for the closing of the Offer shall not have been satisfied in the reasonable judgment of the Global Coordinator for the Parent Equity Offering. (h) The Global Coordinator for the Parent Equity Offering shall not have received on or by the closing for the Parent Equity Offering the opinions of counsel and letters from accountants specified in the Purchase Agreement. (i) The SWX Swiss Exchange shall not have approved the Parent Ordinary Shares to be issued in the Parent Equity Offering for listing on the SWX New Market of the SWX Swiss Exchange or, prior to the date of the Purchase Agreement, an order suspending the public offering of the shares shall have been issued or proceedings for any such purpose shall have been instituted or contemplated by the SWX Swiss Exchange or any other governmental or self-regulatory agency or body. (j) The Purchase Agreement for the Parent Equity Offering shall have been terminated by the Global Coordinator as a result of (i) the occurrence of condition (f) as set forth above, (ii) trading generally shall have been suspended or materially limited on or by, as the case may be, the SWX Swiss Exchange (whether on the SWX New Market segment or otherwise), (iii) a general moratorium on commercial banking activities shall have been declared by authorities in either Switzerland or the Netherlands, (iv) there shall have occurred a general crisis in international exchange markets or (v) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, whether or not foreseeable, that, in the judgment of the Global Coordinator, is material and adverse and, in the case of any of the foregoing events, such event, singly or together with any other such event, makes it, in the judgment of the Global Coordinator after consultation with the Parent, impracticable to market the Parent Ordinary Shares as contemplated through the Parent Equity Offering. (k) the Merger Agreement shall have been terminated in accordance with its terms; which in the reasonable judgment of Parent or Purchaser but subject to the provisions of the Merger Agreement, in any such case, and regardless of the circumstances (including any action or inaction by Parent or Purchaser) giving rise to such conditions makes it inadvisable to proceed with the Offer and/or with such acceptance for payment of or payments for shares of Company Common Stock. 71 Subject to the provisions of the Merger Agreement, the foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted by Purchaser or, subject to the terms of the Merger Agreement may be waived by Parent or Purchaser, in whole or in part at any time and from time to time in the sole discretion of Parent or Purchaser. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. EX-99.E.1 12 ex99-e_1.txt CONFIDENTIALITY AGREEMENT 1 Exhibit (e)(1) ENDOSONICS CORPORATION 2870 Kilgore Road Rancho Cordova, California 95670 June 26, 2000 JOMED NV Bamford Weg 1 6235 NS Ulestraten The Netherlands Attention: Tor Peters, President & Chief Executive Officer Ladies and Gentlemen: In connection with your consideration of a possible transaction with Endosonics Corporation and/or its subsidiaries, affiliates or stockholders (collectively, the "Company"), the Company is prepared to make available to you certain information concerning the Company. As a condition to, and in consideration of, furnishing such information to you and your directors, officers, employees, subsidiaries, affiliates, agents or advisors (including without limitation, attorneys, accountants, consultants, bankers and financial advisors) (collectively, "Representatives"), you agree to treat any information concerning the Company, including, without limitation, its business, financial condition, operations, assets, plans, projections, customers, suppliers, confidential or proprietary information (whether prepared by the Company, its Representatives or otherwise and irrespective of the form of communication) which is furnished to you or to your Representatives before or after the date hereof by or on behalf of the Company, together with any analyses, compilations, forecasts, studies and/or other documents or records prepared by you or your Representatives which contain, are based on or otherwise reflect or are generated in whole or in part from such information, including that stored on any computer, word processor or other similar device (herein collectively referred to as the "Evaluation Material") in accordance with the provisions of this letter agreement, and to take or abstain from taking certain other actions hereinafter set forth. The term "Evaluation Material" does not include information which you can prove (i) is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives, (ii) is already in your or your Representatives' possession, provided that such information is not subject to a contractual, legal or fiduciary obligation of confidentiality, or (iii) becomes available to you or your Representatives on a non-confidential basis from a source other than the Company or any of its Representatives, provided that such source is not bound by a contractual, legal or fiduciary obligation to keep such information confidential. You hereby agree that you and your Representatives shall use the Evaluation Material solely for the purpose of evaluating a possible negotiated transaction between the Company and you, and that the Evaluation Material will be kept confidential by you and your Representatives and will not be disclosed by you or your Representatives in any manner; provided, however, that (i) you may 2 make any disclosure of such Evaluation Material to which the Company gives its prior written consent and (ii) you may disclose any of such Evaluation Material to your Representatives who need to know such information for the purpose of evaluating a possible transaction with the Company and you, provided that prior to making such disclosure such Representatives shall agree to be bound by the provisions of this letter agreement applicable to Representatives. You will be responsible for any breach of this letter agreement by your Representatives, including those who subsequent to the first date of disclosure of the Evaluation Material cease to be a Representative. You agree that you and your Representatives, except as required by law or unless consented to in writing by the Company, will not disclose to any other person (other than to your Representatives who need to know such information for the purpose of evaluating a possible transaction with the Company and you and who have prior to such disclosure agreed to be bound by the terms of this letter agreement applicable to Representatives) the fact that the Evaluation Material has been made available, that discussions or negotiations are taking place concerning a possible transaction involving the Company or any of the terms, conditions or other facts with respect thereto (including the status thereof). The term "person" as used in this letter agreement shall be broadly interpreted to include the media and any corporation, partnership, group, individual or other entity. In the event that you or any of your Representatives are requested or required (by applicable law, regulation, legal process, oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any of the Evaluation Material, you shall provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this letter agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by the Company, you or any of your Representatives are nonetheless, in the opinion of counsel, legally compelled to disclose Evaluation Material or else stand liable for contempt or suffer other censure or penalty, you or your Representatives may, without liability hereunder, disclose only that portion of the Evaluation Material which such counsel advises you is legally required to be disclosed, provided that you shall exercise your reasonable efforts to preserve the confidentiality of the Evaluation Material, including, without limitation, by cooperating with the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Evaluation Material. If you decide that you do not wish to proceed with a transaction with the Company, you will promptly inform the Company of that decision. In that case, or at any time upon the request of the Company for any reason, you and your Representatives will promptly deliver to the Company all Evaluation Material (and all copies thereof) furnished to your or your Representatives by or on behalf of the Company pursuant hereto. In the event of such a decision or request, all other Evaluation material, including all Evaluation Material prepared by you or your Representatives shall be destroyed, and such destruction shall be certified in writing to the Company by an authorized officer supervising such destruction. Notwithstanding the return of destruction of the Evaluation Material, you and your Representatives will continue to be bound by your obligations of confidentiality and other obligations hereunder. Notwithstanding the foregoing, the Swedish counsel of Jomed will be entitled to maintain a single copy of any confidential information for archival purposes. 3 Although the Company has endeavored to include in the Evaluation Material information which it believes to be relevant for the purpose of your investigation, you understand and acknowledge that neither the Company nor any of its representatives make any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material. You agree that neither the Company nor any of its representatives shall have any liability to you or to any of your Representatives relating to or resulting from the use of the Evaluation Material or any errors therein or omissions therefrom. Only those representations or warranties which are made in a final definitive agreement regarding any transactions contemplated hereby, when, as and if executed, and subject to such limitations and restrictions as may be specified therein, will have any legal effect. You agree that, for a period of two years from the date of this letter agreement, unless you shall have been specifically invited in writing by the Company, neither you nor any of your partners, officers, directors, employees or affiliates will, directly or indirectly, in any manner (a) effect or seek, offer or propose to effect (except in a confidential, nonpublic manner to the Board of Directors of the Company) or participate in, or in any way assist any other person to effect or seek, offer or propose to effect (except in a confidential, nonpublic manner to the Board of Directors of the Company) or participate in (i) any acquisition of any securities or assets of the Company, other than the acquisition of assets in the ordinary course of business; (ii) any tender or exchange offer, merger or other business combination involving the Company; (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company; or (iv) any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting securities of the Company; (b) form, join or in any way participate in a "group" (as defined under the Securities Exchange Act of 1934 (the "Exchange Act")) with respect to the matters set forth in (a) above; or (c) otherwise act, alone or in concert with others, to seek to control or influence the management, Board of Directors or policies of the Company. You also agree during such period not to request the Company (or its directors, officers, employees or agents), directly or indirectly, to amend or waive any provision of this paragraph (including this sentence). The provisions of this paragraph shall not apply to the sale by Jomed of any shares in Endosonics that are held of this date. In addition, the provisions of this paragraph shall terminate in the event that Endosonics executes a definitive agreement to be acquired with any third party. In consideration of the Evaluation Material being furnished to you, you hereby agree that, for a period of two years from the date hereof, neither you nor any of your affiliates will solicit to employ, or employ, any officers, senior managers or key employees of the Company, or any former officer, senior manager or key employee whose employment with the Company has ceased within 180 days of such solicitation or hire, without obtaining the prior written consent of the Company You understand and agree that no contract or agreement providing for any transaction involving the Company shall be deemed to exist between you and the Company unless and until a final definitive agreement has been executed and delivered, and you hereby waive, in advance, any claims (including, without limitation, breach of contract) in connection with any transaction involving the Company unless and until you and the Company shall have entered into a final definitive agreement. For the purposes of this agreement, the term "definitive agreement" does not include an executed letter of intent or memorandum of understanding or any other preliminary written agreement. You also agree that unless and until a final definitive agreement regarding a 4 transaction between the Company and you has been executed and delivered, neither the Company nor you will be under any legal obligation of any kind whatsoever with respect to such a transaction by virtue of this letter agreement except for the matters specifically agreed to herein. This letter agreement contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof and cannot be amended or waived except with the written consent of the Company and you. If any term, provision, covenant or restriction of this letter agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this letter agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. This letter agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of laws thereof. In the event of litigation relating to this letter agreement, if a court of competent jurisdiction determines that you or your Representatives have breached this letter agreement, then you shall be liable and pay to the Company the reasonable legal fees incurred by the Company in connection with such litigation, including any appeal therefrom. The term of this agreement shall be for five years from the date hereof. Please confirm your agreement with the foregoing by signing and returning one copy of this letter agreement to the undersigned, whereupon this letter agreement shall become a binding agreement between you and the Company. Very truly yours, ENDOSONICS CORPORATION By: /s/ Reinhard Warnking ------------------------------- Name: Reinhard Warnking Title: Chairman & Chief Executive Officer Accepted and agreed as of the date first written above: JOMED NV By: /s/ Tor Peters ---------------------------- Name: Tor Peters Title: President & Chief Executive Officer EX-99.E.2 13 ex99-e_2.txt CONFIDENTIALITY AGREEMENT 1 Exhibit (e)(2) DISTRIBUTION AGREEMENT This Distribution Agreement is made this 15th day of December, 1998, by and between EndoSonics Europe B.V., De Bruyn Kopsstraat 15, 2288 EC Rijswijk, The Netherlands ("EndoSonics"), a wholly owned subsidiary of EndoSonics Corporation, 2870 Kilgore Road, Rancho Cordova, CA 95670, USA, and JOMED N.V., Stravinskylaan 2001, P.O. Box 75640, 1070 AP Amsterdam, The Netherlands, and any of its wholly owned subsidiaries ("Distributor"). In consideration of the mutual promises and covenants contained herein, the parties agree as follows: 1. DEFINITIONS The following terms when used in their capitalized form shall have the following meanings: 1.1. "Agreement" shall mean this Distribution Agreement, as amended, modified, or supplemented from time to time. 1.2. "Catheters" shall mean any of the catheters as defined in Exhibit A. 1.3. "Confidential Information" shall have the meaning provided in Section 0 hereof. 1.4. "GMP" shall mean the good manufacturing practices for medical devices set forth by any act, statute, or regulation of any kind governing the products in the Territory. 1.5. "Minimum Purchase Commitment" shall have the meaning provided in Section 0 hereof. 1.6. "Products" shall mean those EndoSonics products listed in Exhibit A attached hereto. 1.7. "Renewal term" shall have the meaning provided in Section 0 hereof. 1.8. "System" shall mean any of the systems or system options as defined in Exhibit A. 1.9. "Term" shall have the meaning provided in Section 0 hereof. 1.10. "Territory" shall mean those countries listed in Exhibit B hereof. 1.11. "Trademarks" shall mean each trademark, trade name, service marks, the name "EndoSonics" or any derivation thereof, brand names, signs, symbols or slogans now or hereafter used by EndoSonics in connection with the Products. 1.12. "Wires" shall mean any of the wires as defined in Exhibit A. 2 2. APPOINTMENT; RELATIONSHIP OF PARTIES 2.1. Appointment EndoSonics hereby appoints Distributor as its distributor of the Products in the Territory, subject to the rights as stipulated in Exhibit B hereto. Distributor's rights shall be exclusive for the first 12 months of this Agreement, and shall be non-exclusive thereafter, provided however, that the exclusive period may be extended in certain geographic areas for another 12 months upon the mutual written consent of the parties. Distributor shall not distribute or otherwise promote the Products in any way outside the Territory, without the prior written authorization of EndoSonics. During the Term and each Renewal Term, if any, Distributor shall not sell or commercially promote products that compete with Products, nor shall Distributor represent, or provide either directly or indirectly marketing services to, any manufacturer or distributor in the Territory, that relate to such competing products. 2.2. Exclusive Account Protection Irrespective of Distributor's appointment under the foregoing Section 0, Distributor shall retain exclusive rights to sell Catheters or Wires, whichever applies, to each end-customer account in which Distributor, during the Term, has placed a System other than on the basis of an outright capital equipment sale, and to which it retains legal title. This exclusive right shall be for the shorter of a period of three (3) years following the installation of said System or the duration of the implicit or explicit financing program agreed to between Distributor and end-customer, the terms of which shall be disclosed to EndoSonics upon Distributor's claim of exclusive rights under this section. 2.3. Relationship of Parties The relationship of Distributor to EndoSonics hereunder shall be solely that of an independent contractor. Distributor and EndoSonics each acknowledge and agree that neither Distributor nor EndoSonics is an employee, employer, agent, partner, or joint venturer of the other. Neither Distributor nor EndoSonics shall have or hold itself as having the right or authority to assume or create any obligation or responsibility, whether express or implied, on behalf of or in the name of the other, except with the express written authority of the other. 3. TERM - TERMINATION 3.1. Term The term ("Term") of this Agreement shall commence the date hereof, and, unless terminated sooner pursuant to the provisions of Sections 0, shall terminate two (2) years from the date hereof; provided, however, that this Agreement may be extended for successive one-year periods (each such period, a "Renewal Term") upon the mutual written consent of the parties. 3.2. Termination of Agreement This Agreement shall terminate upon the happening of any of the following events: 3 (a) either party's failure to cure the breach of any material term, covenant, or condition of this Agreement within 30 days after the breaching party receives notice of such breach; (b) immediately upon written notice to one party upon the change in the structure or organization of the other party including, without limitation, the acquisition or merger of the other party; (c) immediately upon either parties' cessation to function as a going concern; or (d) immediately upon either parties' dissolution, liquidation, insolvency, bankruptcy, assignment for the benefit of creditors or admission in writing of its inability to pay its debts as they mature. 3.3. Obligations upon Termination or Expiration On termination or expiration of this Agreement by either party for any reason: (a) All rights granted by EndoSonics to Distributor shall cease immediately, except that EndoSonics, at its sole discretion, may permit Distributor to sell any Products for which it has paid full list price for a period of three (3) months following such termination or expiration, for the sole purpose of depleting its inventory of Products. If Distributor has not sold its remaining inventory of Products at the end of said three-month period, EndoSonics, at its sole discretion, may extend such three month period for an additional three months. If EndoSonics refuses to extend such three month period, EndoSonics shall purchase all of Distributor's remaining inventory of Products at fair market value, provided that none of the remaining inventory being purchased by EndoSonics shall have been used, removed from its original packaging or carry an expired sterilization date; (b) Provided that the Agreement is not terminated as a result of Distributor's breach, EndoSonics shall fulfill any unexecuted orders placed by the Distributor prior to such termination or expiration subject to advance payment, and provided that Distributor shows official written documentation of pending orders from its customers; (c) Distributor shall promptly pay all outstanding invoices, if any, for Products shipped by EndoSonics prior to such termination or expiration; (d) Distributor shall forthwith return to EndoSonics or otherwise dispose of as EndoSonics may direct, all promotional literature, manuals, catalogues, instruction sheets, diagrams and other typed or printed matter relating to the Products or to the business of EndoSonics and all copies thereof in the possession or under the control of the Distributor; (e) Distributor shall not claim, nor have the right to claim any compensation or indemnity whatsoever for surrendering the representation of the Products, the customers or the goodwill it has acquired for the Products or for any other or similar reason, regardless of which party terminates the Agreement or for what reasons. 4 4. SALES OF PRODUCTS TO DISTRIBUTOR 4.1. Price Prices to Distributor for Products shall be those set forth in the price list attached in Exhibit A. EndoSonics shall provide at least 60 days prior written notice of changes in said price list. Price changes shall not affect unfulfilled purchase orders accepted by EndoSonics prior to the effective date of such changes. 4.2. Orders All orders for Products by Distributor shall be initiated by a written purchase order sent to EndoSonics and requesting a delivery date, provided, however, that an order may initially be placed orally. No order shall be binding upon EndoSonics until accepted by EndoSonics in writing, and EndoSonics shall have no liability to Distributor with respect to purchase orders that are not accepted. EndoSonics shall use commercially reasonable efforts to deliver Products at the times specified in its written acceptance of Distributor's purchase orders. 4.3. Shipments (a) Systems: All EndoSonics systems delivered pursuant to the terms of this Agreement shall be suitably packed for air freight shipment in EndoSonics' standard shipping crates, marked for shipment to Distributor's address set forth above, and delivered to Distributor or its carrier agent ex-works Rancho Cordova, California, USA. (b) Catheters and Wires: All Catheters and Wires delivered pursuant to the terms of this Agreement shall be suitably packed for airfreight shipment in EndoSonics standard shipping boxes, marked for shipment at Distributor's address set forth above, and delivered to Distributor or its carrier agent ex-works Rijswijk, The Netherlands. (c) Partial shipments: Unless specifically disallowed by Distributor, EndoSonics may make deliveries of shipments in installments. Such partial shipments shall be billed upon shipment by EndoSonics. (d) Choice of carrier: Unless otherwise instructed in writing by Distributor, EndoSonics shall select the carrier. All freight, insurance, and other shipping expenses, as well as any special packing expense, shall be paid by Distributor. Distributor shall also bear all applicable taxes, duties, and similar charges that may be assessed against the Products after delivery to Distributor or its carrier ex works Rancho Cordova, USA or Rijswijk, The Netherlands, whichever applies. 4.4. Payment Terms EndoSonics shall submit an invoice to Distributor upon shipment of all Products ordered by Distributor. The invoice shall cover Distributor's Purchase Price for the Products plus any freight, value-added, sales or other taxes, duties and other applicable costs initially paid by EndoSonics but to be borne by Distributor. Payment shall be made by wire transfer, check or other instrument approved by EndoSonics, within 60 days net, 30 days -1% discount, from the date of receipt of each invoice. No part of any amount payable to EndoSonics hereunder may be reduced due to any counterclaim, set-off, adjustment or other right which Distributor might have against EndoSonics, any other party or otherwise. 5 EndoSonics, at its sole discretion, reserves the right to limit the amount of credit it may extend to Distributor, to require full or partial payment in advance, or to revoke any credit previously extended, if, in EndoSonics' judgment, Distributor's financial condition does not warrant proceeding on the terms specified. 4.5. Payment Currency All payments to be made by either party hereunder shall be made in United States Dollars, or such other currency as the parties may agree upon. In the event another currency is so agreed upon, then the amount to be paid shall be calculated using the New York foreign exchange selling rate for that other currency for the business day preceding the invoice date as published in the Wall Street Journal. 4.6. Rejection of Products Distributor shall inspect all Products promptly within 10 days of receipt. Distributor shall reject any Products in which the integrity of product sterility has been violated. Upon product rejection or product failure, Distributor shall notify EndoSonics and request a Returned Goods Authorization ("RGA") number. Only upon receipt of an RGA number, Distributor shall return to EndoSonics the rejected or failed Products, freight prepaid, in its original shipping carton with the RGA number displayed on the outside of the carton. Upon receipt of failed Products, EndoSonics will test such Products for failure analysis. If specific failure is observed, EndoSonics will, at its expense, replace failed Products with the same or similar Products of equal value. 4.7. Product modifications/obsolescence EndoSonics reserves the right to change its Products and/or its specifications or to discontinue the manufacture of one or more of the Products, without payment or compensation to Distributor, provided that at least sixty (60) days written notice is given to Distributor in case of a Product and/or specification change, and at least one hundred twenty (120) days written notice is given to Distributor in case of a Product discontinuation. EndoSonics agrees to supply sufficient quantities of spare parts of any discontinued product to cover customer orders and/or tenders applied for by Distributor prior to the notice of a discontinued product. 5. PURCHASE COMMITMENTS 5.1. Aggregate Minimum Purchase Commitment During the first 12 months of the Term, Distributor shall purchase a minimum amount of Products (the "Minimum Purchase Commitment") as stipulated in Exhibit C. Distributor's failure to meet the aggregate Minimum Purchase Commitment shall constitute a material breach and basis for termination of this Agreement under Section 0, unless the sale of Products in one or more geographic areas of the Territory is restricted by regulatory authority having jurisdiction over Products, or EndoSonics is unable to deliver Products by agreed upon delivery dates, in which event Distributor shall be proportionally excused from the Minimum Purchase Commitment. Upon execution of this Agreement, Distributor shall place a non-cancelable purchase order for Products with the delivery dates as stipulated in Exhibit C. Such non-cancelable purchase order shall be binding on Distributor except to the extent that the sale of the Products is restricted by regulatory authority having jurisdiction over the 6 products. EndoSonics shall extend special pricing and payment terms with regard to said non-cancelable purchase order. For the purposes of this provision, a "purchase" of Products within the time periods set forth in Exhibit C shall mean EndoSonics' shipment of such Products on or before the last day of each of such time periods. 5.2. Purchase Commitment by Geographic Territory During the first 12 months of the Term, Distributor shall purchase a minimum amount of Products for each of the geographic areas as stipulated in the individual schedules included under Exhibit C. If during the first 12 months of the Term Distributor fails to meet at least 75% of said minimum purchase amount (as measured by the total sales amount in US Dollars) in any of the geographic areas, the parties shall jointly decide on corrective actions to be undertaken in each such area, and shall agree on a reasonable minimum commitment for the ensuing 6 months. If Distributor fails to meet said agreed upon 6-month minimum commitment, the distribution rights in the affected geographic area shall be cancelled effective immediately, and the Minimum Purchase Commitment shall be proportionally reduced. 6. ADDITIONAL OBLIGATIONS OF DISTRIBUTOR 6.1. Promotion of the Products In addition to meeting the Minimum Purchase Commitment, Distributor shall use its best efforts to promote the sale of the Products within the Territory, to develop a market for the Products and to enhance the Company's image in the marketplace as a provider of quality medical devices. Distributor's obligations shall include, but not be limited to, preparing promotional materials in appropriate languages for the Territory, advertising the Products in trade publications within the Territory, participating in and featuring the Products at appropriate trade shows, and directly soliciting orders from customers for the Product. 6.2. Market Analysis Upon execution of this Agreement and within 30 days prior to the beginning of each calendar year thereafter, Distributor shall provide EndoSonics with an analysis of market changes and trends, competition and an assessment of customer requirements for the Products, and Distributor and EndoSonics shall mutually agree in writing on the sales promotion activities and performance criteria to be met by Distributor for the year. 6.3. Finances and Personnel Distributor shall devote sufficient financial resources, technically qualified sales representatives and clinical personnel to market and sell the Products, in accordance with its obligations hereunder. Additionally, distributor shall provide adequate training to physicians and nursing staff to assist them in the proper use of the Products. Distributor shall provide adequate contact with existing and potential customers within the Territory on a regular basis, consistent with good business practice. 6.4. Forecasts Upon execution of this Agreement, and within the first week of every quarter 7 thereafter, Distributor shall provide EndoSonics with a 6-month rolling forecast, showing prospective orders by Product model and intended submittal date. The rolling forecast shall be updated quarterly by Distributor. 6.5. Meetings Distributor shall periodically make arrangements for EndoSonics' representatives to conduct sales meetings with Distributor's sales force in the Territory. EndoSonics and Distributor shall mutually agree on the date, time and location of such meetings. 6.6. Inventory Distributor shall, at its own expense, maintain sufficient inventory of the Products, including inventory for demonstration purposes to fulfill its commitments under this Agreement. 6.7. Representations Distributor shall not make any false or misleading representations to customers or others regarding EndoSonics or the Products. Distributor shall not make any representations, warranties or guarantees with respect to the specifications, features or capabilities of the Products that are not consistent with EndoSonics' documentation accompanying the Products or EndoSonics' literature describing the Products, including the limited warranty and disclaimers. 6.8. Import and Export Requirements Distributor shall, at its own expense, pay for all import and export licenses and permits, pay customs charges and duty fees, and take all other actions required to accomplish the export and import of the Products purchased by Distributor. Distributor acknowledges that EndoSonics is subject to regulation by agencies of the US and other governments, including the US Department of Commerce, which prohibit export or diversion of certain technical products to certain countries. Distributor agrees to comply with all export laws and restrictions and regulations of the US Department of Commerce or other United States or foreign agency or authority, and not to export, or allow the export or re-export of, any Proprietary Information or Products or any direct product thereof in violation of any such restrictions, laws or regulations. 7. ADDITIONAL OBLIGATIONS OF ENDOSONICS 7.1. Product and Marketing Materials EndoSonics, at its expense, shall promptly provide Distributor with reasonable amounts of printed commercial and technical data and information and other publications which EndoSonics may have available from time to time. 7.2. Territorial Inquiries EndoSonics shall refer to Distributor all customer leads and any correspondence or inquiries related to selling, marketing, or servicing of Products in the Territory which EndoSonics may receive while this Agreement is in effect. Similarly, Distributor shall promptly refer to EndoSonics any such customer leads, correspondence or inquiries outside the Territory. 8 7.3. Distributor and Customer Support EndoSonics shall provide a reasonable level of product application and technical support to Distributor. EndoSonics may, at its own discretion and expense, choose to send a representative to visit customers and prospects in the Distributor's Territory, and Distributor agrees to allow access and give support to perform such tasks, provided that such visits are coordinated with Distributor. Any product application support provided by EndoSonics such as application specialist's visits to Distributor's Territory will not be invoiced to the Distributor unless specifically requested by Distributor. 8. SERVICE AND MAINTENANCE, WARRANTY AND INSTALLATION 8.1. Systems Warranty and Service and Maintenance Agreements EndoSonics shall make available to purchasers of the Systems its standard warranty as stipulated in Exhibit D. Such warranty for the first year after delivery shall be included in the purchase price of the Systems. EndoSonics shall make an annual extended service and maintenance agreement available, substantially in the form set forth in Exhibit E, exclusively through Distributor in the Territory as from the first year after delivery of the Systems. Distributor shall purchase such annual service and maintenance agreement for each of the Systems to which it retains title in the Territory at a cost set forth in Exhibit A. 8.2. Systems Service and Maintenance EndoSonics shall be solely responsible within the Territory for the service, repair and maintenance of all Systems, including dispatching calls and providing Distributor reports from time to time. Upon termination of this Agreement for any reason whatsoever, EndoSonics shall take such steps as are necessary to guarantee on-going service, repair and maintenance of the systems installed through Distributor to end customers. Distributor or the end-customers of Distributor shall bear the cost of all service, repairs and maintenance performed that is not covered under warranty or an annual service and maintenance agreement. 8.3. Catheter and Wire Warranty EndoSonics shall provide Product warranty for its Catheters and Wires as stipulated in Exhibit D. 8.4. Systems Installation EndoSonics shall support Distributor with the installation of the Systems at the location of the end-user. Such installation shall include the training of customers with respect to the Products sold. Distributor shall be responsible for all reasonable travel expenses and related disbursements incurred by EndoSonics in connection with said installations. 9. MAINTENANCE OF RECORDS/PRODUCT RECALLS 9.1. Maintenance of Records Distributor and EndoSonics shall, in compliance with applicable law, including GMP's, maintain accurate records regarding the Products including, without limitation, records 9 of direct sales of Products to third parties, lot numbers, serial numbers, and other manufacturing documentation necessary to ensure traceability of Products. The parties shall retain these records pursuant to the GMP's and applicable law. 9.2. Product Recalls In the event of any recall of Products, either voluntary or otherwise, Distributor shall cooperate with and assist EndoSonics in locating and retrieving such recalled Products, as requested by EndoSonics and at EndoSonics' expense. 10. COMPLAINTS AND RETURNS/REGULATORY REPORTING/ADVERSE IMPACT 10.1. Complaints and Returns Distributor shall, as soon as reasonably practicable, notify, document and forward to EndoSonics all customer complaints and any Products returned in connection therewith. EndoSonics shall respond to Distributor within ten business days of receipt of a complaint and Distributor shall report EndoSonics' findings to customers, if applicable. EndoSonics shall work diligently to resolve all customer complaints. 10.2. Regulatory Reporting and Analysis of returned Products EndoSonics shall file, or cause to be filed, all reports required of a manufacturer pursuant to the applicable medical device reporting regulations. EndoSonics, as the manufacturer of the Products, shall perform all failure analysis on the Product within 30 days of receipt of each failed Product and shall file all reports required with the applicable regulatory agency. EndoSonics shall further cooperate with and assist Distributor in submitting all reports that Distributor may be required to file. Distributor shall promptly provide EndoSonics with copies of all such reports. 10.3. Adverse Impact on the Products Each party shall notify the other party's Regulatory Affairs and Quality Assurance Officer or other designee as soon as reasonably practicable of all actions or anticipated actions by any regulatory authority, that could adversely affect the manufacture, marketing, distribution or sale of the Product. Each party shall promptly provide copies to the other party of all reports, citations, violations, warnings and deficiencies received by such party in connection with the Products. 11. GOVERNMENT APPROVALS/REGISTRATION SUPPORT 11.1. Government Approvals Distributor shall obtain all required government approvals or registrations, if any, prior to the sale of any Product in the Territory. All approvals and registrations shall be obtained under EndoSonics' name, and EndoSonics and Distributor shall equally share in the cost involved. In case of necessary adaptation or modification of Products due to local requirements, the parties will assist each other and will agree upon whether to conduct such adaptations or modifications at EndoSonics' or Distributor's facilities. Upon termination of this Agreement for any reason, Distributor shall take all necessary steps to transfer any government approvals for Products to EndoSonics or EndoSonics' nominee (or if such transfer is not permitted, to cooperate in the cancellation of 10 Distributor's government approvals and the re-issuance thereof to EndoSonics or EndoSonics' nominee). Distributor shall promptly return to EndoSonics all data and information relating to Product and make no further use thereof. 11.2. Registration Support EndoSonics shall assist Distributor in registering the Products in the Territory by providing Distributor with: (a) materials in EndoSonics' possession necessary to obtain health registrations and marketing approvals, licenses and permits; (b) certificates of analysis, export and compliance; (c) trademark authorizations; and (d) such other information as Distributor shall reasonably request from time to time. 12. TRADEMARKS AND PROTECTION OF PROPRIETARY RIGHTS 12.1. Registration of Trademarks EndoSonics shall, at its expense, use reasonable efforts to protect and maintain all registrations, filings and issuance of its Trademarks in full force and effect. 12.2. Title The proprietary rights of EndoSonics in and to Trademarks and any items related thereto are protected by the law of copyright, trademark, trade secrets and unfair competition. Distributor shall have no proprietary interest whatsoever in the Trademarks. 12.3. Notification of Infringement Distributor shall promptly notify EndoSonics of any infringement, of which Distributor has knowledge, of the proprietary rights of EndoSonics in and to the Products or the Trademarks in the Territory and shall cooperate with EndoSonics in any action by EndoSonics to investigate or remedy any such infringement. All costs and expenses of investigating and remedying any such infringement shall be borne by EndoSonics. 12.4. Use of Trademarks EndoSonics hereby grants to Distributor a non-exclusive license to use the Trademarks for the purpose of identifying and marketing the Products in the Territory. Any use of the Trademarks will be in accordance with such instructions as EndoSonics may give Distributor from time to time. Distributor shall not grant any sub-licenses to use the Trademarks to any Person, agent or other party without the prior written consent of EndoSonics in each instance. Upon the expiration or termination of this Agreement, the non-exclusive license granted hereunder to Distributor shall expire and Distributor shall immediately cease using the Trademarks. 12.5. Quality Control 11 In order to comply with EndoSonics quality control standards, Distributor shall (a) use the Trademarks in compliance with all relevant laws and regulations in the Territory; (b) accord EndoSonics, after previous written request, the right to inspect all marketing and promotional materials in Distributor's possession containing the Trademarks in order to confirm that Distributor's use of such Trademarks is in compliance with this Agreement; and (c) not modify any of the Trademarks in any way and not use any of the Trademarks on any goods or services other than the Products or in connection therewith. In the event EndoSonics has a good faith and substantial reason to believe that Distributor is not complying with this provision, EndoSonics may, within 30 days of a written notification to Distributor stating and justifying the reasons, suspend Distributor's right to use the Trademarks until such time as Distributor gives EndoSonics adequate assurances that it has taken corrective measures and that it will thereafter comply with this provision. 12.6. Limitation of Distributor's Rights and Software License Distributor shall have no access to or rights in the source codes of any software included in the Products. Distributor shall have no right to copy, modify or re-manufacture any Product or part thereof and shall comply with the confidentiality obligations under Section 0. For each System sold, EndoSonics licenses Distributor and its end customer with a one-time paid in full perpetual license to use the EndoSonics software and related updates and releases on the specific System sold. 13. INDEMNIFICATION 13.1. Indemnification by Distributor Except with respect to any of the following that arises from gross negligence or willful misconduct of EndoSonics or its agents and subject to Section 0 Distributor shall indemnify, defend and hold harmless EndoSonics, its directors, officers, employees, representatives and agents from and against any and all claims, suits, losses, damages, costs, fees and expenses (including reasonable attorney's fees), and other liabilities asserted by parties, both governmental and non-governmental, resulting from or arising out of (a) any misrepresentation of Distributor contained herein or breach of any warranty made by Distributor; (b) any breach, violation or non-performance of any covenant, condition or agreement in this Agreement by Distributor; and (c) the material inaccuracy of any representation or warranty of the Products made by Distributor. 13.2. Indemnification by EndoSonics Except with respect to any of the following that arises from the gross negligence or willful misconduct of Distributor or its agents and subject to Section 0, EndoSonics shall indemnify, defend and hold harmless Distributor, its directors, officers, employees, representatives and agents from and against any and all claims, suits, losses,damages, costs, fees and expenses (including reasonable attorneys' fees), and other liabilities asserted by third parties, both governmental and nongovernmental, resulting from or arising out of (a) any misrepresentation of EndoSonics contained herein or breach of any warranty or guaranty made by EndoSonics, (b) any breach, violation or nonperformance of any covenant, condition or agreement in this Agreement by EndoSonics, (c) the design of the Products, (d) any injury to any property or person arising in connection with the design, manufacture, use or application of the Products, (e) any infringement or alleged infringement of the 12 Products on any product, device, method, process, trade name, trademark or patent, and (f) any and all taxes, fees, fines, penalties, assessments, charges, expenses or other governmental levies assessed on the Products which are not attributable to Distributor's acts or omissions. 13.3. Limitations to Indemnity The indemnities of Sections 0 and 0 shall not apply (a) if the indemnified party fails to give the indemnifying party prompt notice of any claim it receives and such failure materially prejudices the indemnifying party, or (b) unless the indemnifying party is given the opportunity to approve any settlement. Furthermore, the indemnifying party shall not be liable for attorneys' fees or expenses of litigation of the indemnified party unless the indemnified party gives the indemnifying party the opportunity to assume control of the defense or settlement. In addition, if the indemnifying party assumes such control, it shall only be responsible for the legal fees and litigation expenses of the attorneys it designates to assume control of the litigation. In no event shall the indemnifying party assume control of the defense of the indemnified party without the consent of the indemnified party (which consent shall be given or not at its sole discretion). 14. CONFIDENTIALITY Distributor acknowledges that by reason of its relationship to EndoSonics hereunder it will have access to confidential or proprietary information ("Confidential Information"). Confidential Information shall include all technology, inventions, designs, processes, formulas, computer software, specifications, customer lists, product development plans, forecasts, and all other business, technical and financial information provided to Distributor. Distributor agrees that it will not use in any way for its own account or the account of any third party, nor disclose to any third party, any Confidential Information revealed to it by EndoSonics. Distributor shall take every reasonable precaution to protect the confidentiality of such information. Upon request by Distributor, EndoSonics shall advise whether or not it considers any particular information or materials to be confidential. Distributor shall not publish any technical description of the Products beyond the description published by EndoSonics (except to translate that description into appropriate languages for the Territory). In the event of termination of this Agreement, there shall be no use or disclosure by Distributor of Confidential Information of EndoSonics, and Distributor shall not manufacture or have manufactured any devices, components or assemblies utilizing any of EndoSonics' Confidential Information. The duty of confidentiality set forth herein shall not apply to information that: (a) is, at the time of disclosure, in the public domain; (b) after disclosure, enters the public domain except where such entry is a direct result of a breach of this Agreement; (c) prior to disclosure, was already known to the party receiving such information, as evidenced by its written records; 13 (d) subsequent to disclosure, is obtained from a third party in possession of such information and not under a contractual or fiduciary obligation to keep such information in confidence; (e) is filed with any governmental or any regulatory authority and available to the public; or (f) is disclosed pursuant to any judicial or governmental requirement or order. Distributor's duty of confidentiality set forth above shall be limited to the Term, each Renewal Term, if any, and 2 years from the expiration thereof. 15. MISCELLANEOUS 15.1. Notices All notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing, shall be deemed to have been duly given when delivered in person, or when sent by telex or telecopy or other facsimile transmission (with the receipt confirmed), or on the third business day after posting thereof by registered or certified mail, return receipt requested, prepaid and addressed as follows (or such other address as the parties may designate by written notice in the manner of aforesaid): If to Distributor: Company: JOMED International AB Address: Drottninggatan 94 City: S-25221 Helsingborg Country: Sweden Attention: Mr. Tor Peters Position: President Telephone: +46-42-490.6000 Facsimile: +46-42-490.6001 If to EndoSonics: EndoSonics Europe B.V. P.O. Box 1178 2280 CD Rijswijk The Netherlands Attention: Dr. J.P.C. de Weerd Managing Director Telephone: +31-70-307.3929 Facsimile: +31-70-307.3922 15.2. Governing Law and Jurisdiction This Agreement shall be governed by and construed in all respects in accordance with the laws of the Netherlands and fall under the jurisdiction of the place of office of EndoSonics. 15.3. Entire Agreement This Agreement sets forth the entire understanding of the parties with respect to the 14 subject matter hereof. This Agreement supersedes all prior representations, agreements and understandings among the parties with respect to such subject matter. 15.4. Amendments No changes or amendments or alterations to this Agreement shall be effective unless in writing and signed by all parties hereto. 15.5. Remedies Cumulative The rights, powers and remedies set forth herein are cumulative and shall be in addition to any and all other rights, powers and remedies provided by law. The exercise of any right or remedy hereunder shall not in any way constitute a cure under this Agreement, or prejudice either party in the exercise of any of its rights under this Agreement or law. 15.6. Non-Assignment This Agreement may not be assigned by either party without the prior written consent of the other party. 15.7. Force Majeure Non-performance of either party shall be excused (except for payment of moneys and confidentiality) to the extent that performance is rendered impossible by strike, fire, flood, governmental acts or orders or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the reasonable control of and is not caused by the negligence of the non-performing party. 15.8. Legal Expenses The prevailing party in any legal action brought by one party against the other arising out of this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorney's fees. 15.9. Survival of Certain Terms The provisions of Sections 0, 0, 0, 0,0, 0, and 0 shall survive the termination of this Agreement for any reason. All other rights and obligations of the parties shall cease upon termination of this Agreement. 15.10. Waiver No waiver of any default in the performance of any of the duties or obligations arising out of this Agreement shall be valid unless in writing and signed by the waiving party. Waiver of any one default shall not constitute or be construed as creating waiver of any other default or defaults. No course of dealing between the parties shall operate as a waiver or preclude the exercise of any rights or remedies under this Agreement. Failure on the part of either party to object to any act or failure to act of the other party, or declare the other party in default, regardless of the extent of such default, shall not constitute a waiver by the party of its rights hereunder. 15.11. Severability If any provision of this Agreement shall be held to be unenforceable in whole or in part, then the invalidity of such provision shall not be held to invalidate any other provision herein and all other provisions shall remain in full force and effect. 15.12. Counterparts This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. 15 IN WITNESS WHEREOF, this Agreement has been executed by both parties as of the date first written above. EndoSonics Europe B.V. Distributor Signature: Signature: ----------------------- ------------------------ Name: Dr. J.P.C. de Weerd Name: Mr. T. Peters Title: Managing Director Title: President Date: Date: ----------------------- ------------------------ 16 EXHIBIT A ENDOSONICS/CARDIOMETRICS PRODUCTS AND PRICES ENDOSONICS SYSTEMS, SYSTEM OPTIONS AND ACCESSORIES:
PART NUMBER DESCRIPTION PRICE (US$) ----------- ----------- ----------- [ * ] [ * ] [ * ]
PRICE SPECIAL PRICING CONDITIONS: DESCRIPTION (US$) ----------- ----- [ * ] [ * ] [ * ]
ENDOSONICS CATHETERS:
PART NUMBER DESCRIPTION PRICE (US$) ----------- ----------- ----------- [ * ] [ * ] [ * ]
- ------------------ [*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 17 ENDOSONICS/CARDIOMETRICS PRODUCTS AND PRICES (continued) CARDIOMETRICS SYSTEMS AND ACCESSORIES:
PART NUMBER DESCRIPTION PRICE (US$) ----------- ----------- ----------- [ * ] [ * ] [ * ]
CARDIOMETRICS FLOWIRE(R) DOPPLER GUIDE WIRES:
PART NUMBER DESCRIPTION PRICE (US$) ----------- ----------- ----------- [ * ] [ * ] [ * ]
CARDIOMETRICS WAVEWIRE(TM) PRESSURE GUIDE WIRES:
PART NUMBER DESCRIPTION PRICE (US$) ----------- ----------- ----------- [ * ] [ * ] [ * ]
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 18 ENDOSONICS/CARDIOMETRICS PRODUCTS AND PRICES (continued)
USAGE DISCOUNTS AVAILABLE 0.014" FLOWIRE(R) / WAVEWIRE(TM): ------------------------------------- 0.018" FLOWIRE(R): FLOWIRE(R)/ -------------------------- WAVEWIRE(TM) # OF FLOWIRE(R) # OF BOXES PRICE EACH BOXES PRICE EACH ---------- ------------ ----- ---------- 1-3 [ * ] 1-3 [ * ] 4-6 [ * ] 4-6 [ * ] 7-9 [ * ] 7-9 [ * ] 10+ [ * ] 10+ [ * ]
SMARTWIRE(R) DOPPLER GUIDE WIRES
UNIT PRICE EXTENDED PART NUMBER DESCRIPTION (US$) PRICE* (US$) - ----------- ----------- ---------- ------------ 1450J 0.014 OD SmartWire(R) "J" Tip [ * ] [ * ]
*NOTE: EXTENDED PRICE REPRESENTS FIVE (5) WIRES PER BOX All Products sales are ex-works Rijswijk, The Netherlands, except the Oracle(R) In-Vision(TM) Imaging System, FloMap(R) I and II Systems, SmartMap(R) System and WaveMap(R) System which are ex-works Rancho Cordova, California, USA. [*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 19 EXHIBIT B DISTRIBUTION RIGHTS BY TERRITORY
Territory Distribution Rights - --------- ------------------- United Kingdom Full product line (includes EndoSonics and Cardiometrics products) East Block, excluding Poland, Czech Full product line (includes EndoSonics and Republic, Slovakia, Bosnia and Croatia Cardiometrics products) Scandinavia (Sweden, Norway, Denmark, Full product line (includes EndoSonics and Finland) Cardiometrics products) Baltic States (Estonia, Latvia, Lithuania) Full product line (includes EndoSonics and Cardiometrics products) Middle East (Lebanon, Syria, Jordan, Saudi Full product line (includes EndoSonics and Arabia, Kuwait, Qatar, Bahrain, United Cardiometrics products) Arab Emirates, Oman, Egypt) France EndoSonics products only Italy EndoSonics products only Turkey EndoSonics products only Israel EndoSonics products only
20 EXHIBIT C MINIMUM PURCHASE COMMITMENT AND INITIAL PURCHASE ORDER The following schedules ("1999 EndoSonics Plan" by country) set forth the minimum purchases of Products by Distributor required over the first 12 months of this Agreement for all geographic areas within the Territory. Purchases may be made by Distributor in advance of the time period specified to count towards future periods. System purchases include system placements by Distributor in connection with the distribution of the "JOSONICS Flex System", as stipulated in the IVUS Guided Stent Delivery System Development, Supply and Distribution Agreement of even date. Non-cancelable purchase order: The following schedule specifies the non cancelable purchase order which Distributor shall place at the time of signing the Agreement. The quantity of Products on this purchase order shall count towards the Minimum Purchase Commitment as specified above. Delivery date: Prior to December 29, 1998.
EndoSonics Products Cardiometrics Products ------------------------ --------------------------------------- (Mega PV Flo Wave Flo Wave Territory Five-64(TM) Sonics(R) 0.018" FloMap Map II Map Wire Wire - ---------------------- ----------- --------- ------ ------- ------ ----- ---- ---- United Kingdom [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] East Bloc [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] France [ * ] [ * ] [ * ] Italy [ * ] [ * ] [ * ] Turkey [ * ] [ * ] Israel [ * ] Middle East [ * ] Scandinavia [ * ]
[ * ] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 21 EXHIBIT D WARRANTY 1. SYSTEMS LIMITED WARRANTY NOTICE: EndoSonics reserves the right to make changes in its products in order to improve design or performance. Subject to the conditions and limitations on liability stated herein, EndoSonics warrants that Systems as so delivered shall materially conform to EndoSonics' then current specifications for Systems, for a period of one year from the date of delivery. ANY LIABILITY OF ENDOSONICS WITH RESPECT TO THE SYSTEM OR THE PERFORMANCE THEREOF UNDER ANY WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY WILL BE LIMITED EXCLUSIVELY TO SYSTEM REPAIR, REPLACEMENT OR, IF REPLACEMENT IS INADEQUATE AS A REMEDY OR, IN ENDOSONICS' OPINION IMPRACTICAL, TO REFUND THE PRICE PAID FOR THE SYSTEM. EXCEPT FOR THE FOREGOING, THE SYSTEM IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. FURTHER, ENDOSONICS DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE SYSTEM OR WRITTEN MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. Distributor understands that EndoSonics is not responsible for and will have no liability for any items or any services provided by any persons other than EndoSonics' authorized personnel. EndoSonics shall have no liability for delays or failures beyond its reasonable control. The happening of any one or more of the following events will void the warranty: 1 - Defects due to negligence, alteration, modification, installation or repair by anyone other than EndoSonics authorized personnel, or a representative of Distributor authorized by EndoSonics to repair the material. 2 - Abuse or misuse by end customer. 3 - Attempted or actual dismantling, disassembling, service or repair in a procedure not specifically authorized by EndoSonics. 4 - Operating the System in a manner that is not in conformance with purchase specifications and specifications contained in the Operator's manual, and/or supplements. 5 - Maintenance of the System which is not in accordance with procedures in the Operator's manual, and/or supplements. 6 - Repair, alteration or modification of the System in any way other than by EndoSonics' authorized personnel, or without EndoSonics' authorization. If claims under this warranty become necessary, and the System or components of the System are to be returned, Distributor shall contact EndoSonics for instructions and issuance of a Returned Materials Authorization number. The System or components 22 will not be accepted for warranty purposes unless the return has been authorized by EndoSonics. System parts or components repaired or replaced under warranty bear the same warranty expiration date as the original equipment. Consumable parts (including, but not limited to rechargeable batteries, etc.) are warranted only against defects in materials and workmanship. System parts purchased outside the original warranty period are warranted for a period of 90 days, subject to all of the restrictions contained in this Limited Warranty. Use of unauthorized replacement parts may void the warranty. In all cases, EndoSonics will be the sole judge as to what constitutes warrantable damage. 2. CATHETERS AND WIRES LIMITED WARRANTY Subject to the conditions and limitations on liability stated herein, EndoSonics warrants that catheters and wires, as so delivered, shall materially conform to EndoSonics' then current specifications for these catheters or wires upon receipt. ANY LIABILITY OF ENDOSONICS, WITH RESPECT TO CATHETERS OR WIRES OR THE PERFORMANCE THEREOF UNDER ANY WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY, WILL BE LIMITED EXCLUSIVELY TO CATHETER OR WIRE REPLACEMENT OR, IF REPLACEMENT IS INADEQUATE AS A REMEDY OR, IN ENDOSONICS' OPINION IMPRACTICAL, TO REFUND THE PRICE PAID FOR THE CATHETER OR WIRE. EXCEPT FOR THE FOREGOING, CATHETERS AND WIRES ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. FURTHER, ENDOSONICS DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF CATHETERS OR WIRES OR WRITTEN MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. Distributor understands that EndoSonics is not responsible for and will have no liability for any items or any services provided by any persons other than EndoSonics' authorized personnel. EndoSonics shall have no liability for delays or failures beyond its reasonable control. Additionally, this warranty does not apply if: 1. A catheter or wire is used in a manner other than described by EndoSonics in the Directions for Use supplied with the catheter or wire. 2. A catheter or wire is used in a manner that is not in conformance with purchase specifications or specifications contained in the Directions for Use. 3. A catheter or wire is re-used or re-sterilized. 4. A catheter or wire carries an expired sterilization date. 5. A catheter or wire is repaired, altered or modified in any way by personnel other than EndoSonics authorized personnel, or without EndoSonics' authorization. All catheters and wires shall be inspected for obvious damage upon arrival. If catheters or wires have been damaged in transit, EndoSonics must be notified within 72 hours. If claims under this warranty become necessary, contact EndoSonics for instructions and issuance of a Returned Goods Authorization number, if a catheter or wire is to be 23 returned. Catheters or wires will not be accepted for warranty purposes unless the return has been authorized by EndoSonics. IN NO EVENT SHALL ENDOSONICS BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES DUE TO ANY CAUSE WHATSOEVER. No suit or action shall be brought against EndoSonics more than one year after the related cause of action has occurred. THE FOREGOING CONSTITUTES ENDOSONICS' SOLE LIABILITY AND DISTRIBUTOR'S SOLE REMEDY WITH RESPECT TO PRODUCTS SOLD BY ENDOSONICS. 24 EXHIBIT E ENDOSONICS EXTENDED MAINTENANCE AGREEMENT This Extended Maintenance Agreement is made and entered into this ________th day of __________, 1998, by and between EndoSonics Europe B.V., De Bruyn Kopsstraat 15, 2288 EC Rijswijk, The Netherlands (hereinafter referred to as "EndoSonics") and _________________________ (hereinafter referred to as "Customer"). The Extended Maintenance Agreement covers the following: Equipment: ----------------------------------------- Serial no.: ----------------------------------------- Period: , 1998 to , 1999 -------------- ----------- CONDITIONS OF EXTENDED MAINTENANCE AGREEMENT 1. CALL WINDOW 8:30 A.M. to 5:00 P.M. (Central European Time) Monday through Friday excluding holidays. 2. RESPONSE TIME 48 Hour Response Time during specified call window. 3. PAYMENT SCHEDULE Annually in advance. 4. TERM The Extended Maintenance Agreement shall be effective when signed by both parties. The initial term is twelve (12) months from the commencement date, unless modified on the face of the contract document. 5. AUTOMATIC RENEWAL At the end of each term, the Extended Maintenance Agreement shall be automatically renewed for twelve (12) months, unless terminated by either of the parties at least two (2) months prior to the expiry date. 6. ELIGIBILITY FOR SERVICE The Extended Maintenance Agreement shall only be valid as long as the equipment covered by it is properly installed, and is serviced by EndoSonics authorized personnel only. EndoSonics site environmental conditions must be met at all times. 7. SERVICE RESPONSIBILITIES OF ENDOSONICS 7.1. EndoSonics shall maintain the equipment in good condition and furnish service for calls received within the call window. Specifically, EndoSonics shall: 25 A. Provide scheduled planned maintenance and safety check one (1) time per year. Planned maintenance is to be scheduled two weeks in advance within the call window; excluding holidays. B. Provide response to requests for remedial service within the call window. Requests for service outside these hours will be provided on a best effort basis at an additional charge. C. Provide all expenses incurred by EndoSonics Technical Representative including airfare, lodging, and travel time fees. D. Provide original parts or parts of at least equal quality. E. Provide all applicable safety and reliability modifications at no charge. F. Provide all applicable software updates at no charge. 7.2. EndoSonics shall, at no additional cost to the customer, provide replacement equipment on loan, should EndoSonics fail to service or repair customer's equipment within a reasonable time period. 7.3. Parts not covered under this Agreement are: Supplies, Video Cassettes and Consumables. 8. RESPONSIBILITIES OF CUSTOMER Customer shall notify EndoSonics immediately of equipment malfunction and allow EndoSonics full unrestricted access to all equipment and areas in which the equipment is commonly operated. 9. CHARGES 9.1. The charge for Extended Maintenance during the initial term of this Agreement is US$ . 9.2 Payments of service charges are due forty-five (45) days from the date of the invoice. 9.3. All service calls received outside the call window are subject to a four (4) hour minimum charge and any additional hours necessary to complete the repair are based upon the overtime rates prevailing at the time. EndoSonics' overtime rates are: (a) one and one half (1.5) times the normal hourly rate after 5:00 P.M. and before 8:00 A.M. Monday through Friday and all day Saturday. (b) two (2) times the normal hourly rate on Sundays and scheduled holidays. 9.4. Charges are exclusive of, and Customer is responsible for, all sales, use, and like taxes where applicable. 10. The provisions of the Agreement shall be interpreted under the laws of The Netherlands. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. AGREED TO AND ACCEPTED Customer EndoSonics Europe B.V. Name: Name: Dr. J.P.C. de Weerd Title: Title: Managing Director Signature: Signature: EX-99.E.3 14 ex99-e_3.txt MASTER DISTRIBUTION AGREEMENT 1 Exhibit (e)(3) MASTER DISTRIBUTION AGREEMENT This Master Distribution Agreement is made this 13th day of December, 1999, by and between EndoSonics Europe B.V., De Bruyn Kopsstraat 15, 2288 EC Rijswijk, The Netherlands ("EndoSonics"), a wholly owned subsidiary of EndoSonics Corporation, 2870 Kilgore Road, Rancho Cordova, CA 95670, USA, and JOMED N.V., Stravinskylaan 2001, P.O. Box 75640, 1070 AP Amsterdam, The Netherlands, acting for and on behalf of its wholly owned subsidiaries ("Distributor"). In consideration of the mutual promises and covenants contained herein, the parties agree as follows: 1. DEFINITIONS The following terms when used in their capitalized form shall have the following meanings: 1.1. "Agreement" shall mean this Master Distribution Agreement, as amended, modified, or supplemented from time to time. 1.2. "Catheters" shall mean any of the catheters as defined in Exhibit A. 1.3. "Confidential Information" shall have the meaning provided in Section 14 hereof. 1.4. "GMP" shall mean the good manufacturing practices for medical devices set forth by any act, statute, or regulation of any kind governing the products in the Territory. 1.5. "Minimum Purchase Commitment" shall have the meaning provided in Section 5 hereof. 1.6. "Products" shall mean those EndoSonics products listed in Exhibit A attached hereto. 1.7. "Renewal term" shall have the meaning provided in Section 3.1 hereof. 1.8. "System" shall mean any of the systems or system options as defined in Exhibit A. 1.9. "Term" shall have the meaning provided in Section 3.1 hereof. 1.10. "Territory" shall mean those countries listed in Exhibit B hereof. 1.11. "Trademarks" shall mean each trademark, trade name, service marks, the name "EndoSonics" or any derivation thereof, brand names, signs, symbols or slogans now or hereafter used by EndoSonics in connection with the Products. 1.12. "Wires" shall mean any of the wires as defined in Exhibit A. -1- 2 2. APPOINTMENT; RELATIONSHIP OF PARTIES 2.1. Appointment EndoSonics hereby appoints Distributor as its exclusive distributor of the Products in the Territory, subject to the terms of this Agreement. Distributor shall not distribute or otherwise promote the Products in any way outside the Territory, without the prior written authorization of EndoSonics. During the Term and each Renewal Term, if any, EndoSonics shall not appoint any other distributor for the sale, distribution or marketing of Products in the Territory. During the Term and each Renewal Term, if any, Distributor shall not sell or commercially promote products, incorporating intravascular ultrasound and/or physiological assessment technology, that compete with Products, nor shall Distributor represent, or provide either directly or indirectly marketing services to, any manufacturer or distributor in the Territory, that relate to such competing products. 2.2. Exclusive Account Protection Following expiration or termination, other than by reason of a Distributor default, of this Agreement, Distributor shall retain exclusive rights to sell Catheters or Wires, whichever applies, to each end-customer account in which Distributor, during the Term, has placed a System other than on the basis of an outright capital equipment sale, and to which it retains legal title. This exclusive right shall be for the shorter of a period of three (3) years following the installation of said System or the duration of the implicit or explicit financing program agreed to between Distributor and end-customer, the terms of which shall be disclosed to EndoSonics upon Distributor's claim of exclusive rights under this section. 2.3. Relationship of Parties The relationship of Distributor to EndoSonics hereunder shall be solely that of an independent contractor. Distributor and EndoSonics each acknowledge and agree that neither Distributor nor EndoSonics is an employee, employer, agent, partner, or joint venturer of the other. Neither Distributor nor EndoSonics shall have or hold itself as having the right or authority to assume or create any obligation or responsibility, whether express or implied, on behalf of or in the name of the other, except with the express written authority of the other. 3. TERM - TERMINATION 3.1. Term The term ("Term") of this Agreement shall commence the date hereof, and, unless terminated sooner pursuant to the provisions of Sections 3.3, shall terminate two (2) years from the date hereof; provided, however, that the parties shall meet in January 2001 to negotiate in good faith an extension of this Agreement for one year beyond the Term, if -2- 3 Distributor has met its obligations under this Agreement for the preceding year. Following the Term, this Agreement may be extended for successive one-year periods (each such period, a "Renewal Term") upon the mutual written consent of the parties. 3.2. Termination of Distribution Rights by Geographic Area It is understood and agreed between the parties that the distribution rights under this Agreement are granted to Distributor on a geographic area by area basis. At EndoSonics' option, the distribution rights in any geographic area within the Territory shall terminate upon Distributor's failure to meet the Minimum Purchase Commitment in said area subject to the provisions of Section 5. Upon such termination, Exhibit B of this Agreement shall be amended accordingly, and all rights granted by EndoSonics to Distributor within this geographic area shall cease immediately. 3.3. Termination of Entire Agreement This Agreement shall terminate in its entirety upon the happening of any of the following events: (a) either party's failure to cure the breach of any material term, covenant, or condition of this Agreement within 30 days after the breaching party receives notice of such breach; (b) immediately upon written notice to one party upon the change in the structure or organization of the other party including, without limitation, the acquisition or merger of the other party; (c) immediately upon either parties' cessation to function as a going concern; or (d) immediately upon either parties' dissolution, liquidation, insolvency, bankruptcy, assignment for the benefit of creditors or admission in writing of its inability to pay its debts as they mature. 3.4. Obligations upon Termination or Expiration On termination or expiration of this Agreement by either party for any reason: (a) All rights granted by EndoSonics to Distributor shall cease immediately, except that EndoSonics, at its sole discretion, may permit Distributor to sell any Products for which it has paid full list price for a period of three (3) months following such termination or expiration, for the sole purpose of depleting its inventory of Products. If Distributor has not sold its remaining inventory of Products at the end of said three-month period, EndoSonics, at its sole discretion, may extend such three month period for an additional three months. If EndoSonics refuses to extend such three month period, EndoSonics shall purchase all of Distributor's remaining inventory of Products at fair market value, provided that none of the remaining inventory being purchased by EndoSonics shall have been used, removed from its original packaging or carry an expired sterilization date; (b) Provided that the Agreement is not terminated as a result of Distributor's breach, EndoSonics shall fulfill any unexecuted orders placed by the Distributor prior to such -3- 4 termination or expiration subject to advance payment, and provided that Distributor shows official written documentation of pending orders from its customers; (c) Distributor shall promptly pay all outstanding invoices, if any, for Products shipped by EndoSonics prior to such termination or expiration; (d) Distributor shall forthwith return to EndoSonics or otherwise dispose of as EndoSonics may direct, all promotional literature, manuals, catalogues, instruction sheets, diagrams and other typed or printed matter relating to the Products or to the business of EndoSonics and all copies thereof in the possession or under the control of the Distributor; (e) Distributor shall not claim, nor have the right to claim any compensation or indemnity whatsoever for surrendering the representation of the Products, the customers or the goodwill it has acquired for the Products or for any other or similar reason, regardless of which party terminates the Agreement or for what reasons. 4. SALES OF PRODUCTS TO DISTRIBUTOR 4.1. Price Prices to Distributor for Products shall be those set forth in the price list attached in Exhibit A. EndoSonics shall provide at least 60 days prior written notice of changes in said price list. Price changes shall not affect unfulfilled purchase orders accepted by EndoSonics prior to the effective date of such changes. 4.2. Purchase Orders Purchase orders for Products by Distributor shall be placed with EndoSonics on a monthly basis, on or before the 10th of the month in which Product shipment is requested. Purchase orders shall include a specification of unit quantities by Product model, broken down by geographic area as defined in Exhibit B hereof. Purchase order quantities for any month shall conform to forecast as specified in Section 6.4. All orders for Products by Distributor shall be initiated by a written purchase order sent to EndoSonics and requesting a delivery date, provided, however, that an order may initially be placed orally. No order shall be binding upon EndoSonics until accepted by EndoSonics in writing, and EndoSonics shall have no liability to Distributor with respect to purchase orders that are not accepted. EndoSonics shall use commercially reasonable efforts to deliver Products at the times specified in its written acceptance of Distributor's purchase orders. 4.3. Shipments (a) Systems: All EndoSonics systems delivered pursuant to the terms of this Agreement shall be suitably packed for air freight shipment in EndoSonics' standard shipping crates, marked for shipment to Distributor's distribution center, and delivered to Distributor or its carrier agent ex-works Rancho Cordova, California, USA. (b) Catheters and Wires: All Catheters and Wires delivered pursuant to the terms of this Agreement shall be suitably packed for airfreight shipment in EndoSonics standard shipping boxes, marked for shipment to Distributor's distribution center set forth -4- 5 above, and delivered to Distributor or its carrier agent ex-works Rijswijk, The Netherlands. (c) Partial shipments: Unless specifically disallowed by Distributor, EndoSonics may make deliveries of shipments in installments. Such partial shipments shall be billed upon shipment by EndoSonics. (d) Choice of carrier: Unless otherwise instructed in writing by Distributor, EndoSonics shall select the carrier. All freight, insurance, and other shipping expenses, as well as any special packing expense, shall be paid by Distributor. Distributor shall also bear all applicable taxes, duties, and similar charges that may be assessed against the Products after delivery to Distributor or its carrier ex works Rancho Cordova, USA or Rijswijk, The Netherlands, whichever applies. 4.4. Payment Terms EndoSonics shall submit an invoice to Distributor upon shipment of all Products ordered by Distributor. The invoice shall cover Distributor's Purchase Price for the Products plus any freight, value-added, sales or other taxes, duties and other applicable costs initially paid by EndoSonics but to be borne by Distributor. Payment shall be made by wire transfer, check or other instrument approved by EndoSonics, within 60 days net, 30 days -1% discount, from the date of each invoice. No part of any amount payable to EndoSonics hereunder may be reduced due to any counterclaim, set-off, adjustment or other right which Distributor might have against EndoSonics, any other party or otherwise. EndoSonics, at its sole discretion, reserves the right to limit the amount of credit it may extend to Distributor, to require full or partial payment in advance, or to revoke any credit previously extended, if, in EndoSonics' judgment, Distributor's financial condition does not warrant proceeding on the terms specified. 4.5. Payment Currency All payments to be made by either party hereunder shall be made in United States Dollars, or such other currency as the parties may agree upon. In the event another currency is so agreed upon, then the amount to be paid shall be calculated using the New York foreign exchange selling rate for that other currency for the business day preceding the invoice date as published in the Wall Street Journal. 4.6. Rejection of Products Distributor shall inspect all Products promptly within 20 days of receipt. Distributor shall reject any Products in which the integrity of product sterility has been violated. Upon product rejection or product failure, Distributor shall notify EndoSonics and request a Returned Goods Authorization ("RGA") number. Only upon receipt of an RGA number, Distributor shall return to EndoSonics the rejected or failed Products, freight prepaid, in its original shipping carton with the RGA number displayed on the outside of the carton. Upon receipt of failed Products, EndoSonics will test such Products for failure analysis. If specific failure is observed, EndoSonics will, at its expense, replace failed Products with the same or substantially the same Products of equal value. -5- 6 4.7. Product modifications/obsolescence EndoSonics reserves the right to change its Products and/or its specifications or to discontinue the manufacture of one or more of the Products, without payment or compensation to Distributor, provided that at least sixty (60) days written notice for Catheters and Wires, and at least one hundred twenty (120) days written notice for Systems, is given to Distributor in case of a Product and/or specification change, and at least one hundred twenty (120) days written notice for Catheters and Wires, and at least one hundred eighty (180) days written notice for Systems, is given to Distributor in case of a Product discontinuation. EndoSonics agrees to supply sufficient quantities of spare parts of any discontinued product to cover customer orders and/or tenders applied for by Distributor prior to the notice of a discontinued product. 5. MINIMUM PURCHASE COMMITMENT During the Term, Distributor shall purchase an annual minimum amount, with reasonable Quarterly allocation, of Products (the "Minimum Purchase Commitment") for each of the geographic areas as stipulated in the individual schedules included under Exhibit C. If Distributor fails to meet the Minimum Purchase Commitment in any of the geographic areas, the parties shall jointly decide on corrective actions to be undertaken in each such area, and shall agree on a reasonable Minimum Purchase Commitment for the ensuing 6 months. If Distributor fails to meet said agreed upon 6-month Minimum Purchase Commitment, this shall constitute a material breach and basis for termination of distribution rights under Section 3.2, unless the sale of Products in such geographic area of the Territory is restricted by regulatory authority having jurisdiction over Products, or EndoSonics is unable to deliver Products by agreed upon delivery dates. For the purposes of this provision, a "purchase" of Products within the time period set forth in Exhibit C shall mean EndoSonics' shipment of such Products on or before the last day of each of such time periods. 6. ADDITIONAL OBLIGATIONS OF DISTRIBUTOR 6.1. Promotion of the Products In addition to meeting the Minimum Purchase Commitment, Distributor shall use its best efforts to promote the sale of the Products within the Territory, to develop a market for the Products and to enhance the Company's image in the marketplace as a provider of quality medical devices. Distributor's obligations shall include, but not be limited to, preparing promotional materials in appropriate languages for the Territory, advertising the Products in trade publications within the Territory, participating in and featuring the Products at appropriate trade shows, and directly soliciting orders from customers for the Product. 6.2. Market Analysis Upon execution of this Agreement and within 30 days prior to the beginning of each calendar year thereafter, Distributor shall provide EndoSonics with an analysis of market changes and trends, competition and an assessment of customer requirements for the Products, and Distributor and EndoSonics shall mutually agree in writing on the sales promotion activities and performance criteria to be met by Distributor for the year. -6- 7 6.3. Finances and Personnel Distributor shall devote sufficient financial resources, technically qualified sales representatives and clinical personnel to market and sell the Products, in accordance with its obligations hereunder. Additionally, distributor shall provide adequate training to physicians and nursing staff to assist them in the proper use of the Products. Distributor shall provide adequate contact with existing and potential customers within the Territory on a regular basis, consistent with good business practice. 6.4. Forecasts Upon execution of this Agreement, and prior to the 15th of each month thereafter, Distributor shall provide EndoSonics with a 6-month rolling forecast in written or electronic form, showing prospective orders by Product and intended submittal date for each geographic area in the Territory. The rolling forecast shall be updated monthly by Distributor. All forecasts shall be good faith estimates of Distributors' requirements; provided, however, that Distributor shall be obligated to purchase 100% (on a unit basis) of the Product quantity specified for the initial month of each such forecast. In addition, the initial month of Distributors' subsequent, monthly updated, rolling forecast shall not deviate by more than 25% of the previous forecast for that same month. 6.5. Product Disposition by Distributor Distributor shall provide EndoSonics with a monthly specification of all Product shipments to its subsidiaries, agents, or representatives, broken down by geographic area as defined in Exhibit B hereof, to enable EndoSonics to track Distributor's performance by geographic area under this Agreement. Said specifications shall be provided, in written or electronic form, on or before the 15th of each month, showing Product shipments for the immediately preceding month. 6.6. Meetings Distributor shall periodically make arrangements for EndoSonics' representatives to conduct sales meetings with Distributor's sales force in the Territory. EndoSonics and Distributor shall mutually agree on the date, time and location of such meetings. 6.7. Inventory Distributor shall, at its own expense, maintain sufficient inventory of the Products, including inventory for demonstration purposes to fulfill its commitments under this Agreement. 6.8. Representations Distributor shall not make any false or misleading representations to customers or others regarding EndoSonics or the Products. Distributor shall not make any representations, warranties or guarantees with respect to the specifications, features or capabilities of the Products that are not consistent with EndoSonics' documentation accompanying the Products or EndoSonics' literature describing the Products, including the limited warranty and disclaimers. -7- 8 6.9. Import and Export Requirements Distributor shall, at its own expense, pay for all import and export licenses and permits, pay customs charges and duty fees, and take all other actions required to accomplish the export and import of the Products purchased by Distributor. Distributor acknowledges that EndoSonics is subject to regulation by agencies of the US and other governments, including the US Department of Commerce, which prohibit export or diversion of certain technical products to certain countries. Distributor agrees to comply with all export laws and restrictions and regulations of the US Department of Commerce or other United States or foreign agency or authority, and not to export, or allow the export or re-export of, any Proprietary Information or Products or any direct product thereof in violation of any such restrictions, laws or regulations. 7. ADDITIONAL OBLIGATIONS OF ENDOSONICS 7.1. Product and Marketing Materials EndoSonics, at its expense, shall promptly provide Distributor with reasonable amounts of printed commercial and technical data and information and other publications which EndoSonics may have available from time to time. 7.2. Territorial Inquiries EndoSonics shall refer to Distributor all customer leads and any correspondence or inquiries related to selling, marketing, or servicing of Products in the Territory which EndoSonics may receive while this Agreement is in effect. Similarly, Distributor shall promptly refer to EndoSonics any such customer leads, correspondence or inquiries outside the Territory. 7.3. Distributor and Customer Support EndoSonics shall provide a reasonable level of product application and technical support to Distributor. EndoSonics may, at its own discretion and expense, choose to send a representative to visit customers and prospects in the Distributor's Territory, and Distributor agrees to allow access and give support to perform such tasks, provided that such visits are coordinated with Distributor. Any product application support provided by EndoSonics such as application specialist's visits to Distributor's Territory will not be invoiced to the Distributor unless specifically requested by Distributor. 8. SERVICE AND MAINTENANCE, WARRANTY AND INSTALLATION 8.1. Systems Warranty and Service and Maintenance Agreements EndoSonics shall make available to purchasers of the Systems its standard warranty as stipulated in Exhibit D. Such warranty for the first year after delivery shall be included in the purchase price of the Systems. EndoSonics shall make an annual extended service and maintenance agreement available, substantially in the form set forth in Exhibit E, exclusively through Distributor in the Territory as from the first year after delivery of the Systems. Distributor shall purchase such annual service and maintenance agreement for each of the Systems to which it retains title in the Territory at a cost set forth in Exhibit A. -8- 9 8.2. Systems Service and Maintenance EndoSonics shall be solely responsible within the Territory for the service, repair and maintenance of all Systems, including dispatching calls and providing Distributor reports from time to time. Upon termination of this Agreement for any reason whatsoever, EndoSonics shall take such steps as are necessary to guarantee on-going service, repair and maintenance of the systems installed through Distributor to end customers. Distributor or the end-customers of Distributor shall bear the cost of all service, repairs and maintenance performed that is not covered under warranty or an annual service and maintenance agreement. 8.3. Catheter and Wire Warranty EndoSonics shall provide Product warranty for its Catheters and Wires as stipulated in Exhibit D. 8.4. Systems Installation EndoSonics shall support Distributor with the installation of the Systems at the location of the end-user. Such installation shall include the training of customers with respect to the Products sold. Distributor shall be responsible for all reasonable travel expenses and related disbursements incurred by EndoSonics in connection with said installations. 9. MAINTENANCE OF RECORDS/PRODUCT RECALLS 9.1. Maintenance of Records Distributor and EndoSonics shall, in compliance with applicable law, including GMP's, maintain accurate records regarding the Products including, without limitation, records of direct sales of Products to third parties, lot numbers, serial numbers, and other manufacturing documentation necessary to ensure traceability of Products. The parties shall retain these records pursuant to the GMP's and applicable law. 9.2. Product Recalls In the event of any recall of Products, either voluntary or otherwise, Distributor shall cooperate with and assist EndoSonics in locating and retrieving such recalled Products, as requested by EndoSonics and at EndoSonics' expense. 10. COMPLAINTS AND RETURNS/REGULATORY REPORTING/ADVERSE IMPACT 10.1. Complaints and Returns Distributor shall, as soon as reasonably practicable, notify, document and forward to EndoSonics all customer complaints and any Products returned in connection therewith. EndoSonics shall respond to Distributor within ten business days of receipt of a complaint and Distributor shall report EndoSonics' findings to customers, if applicable. EndoSonics shall work diligently to resolve all customer complaints. -9- 10 10.2. Regulatory Reporting and Analysis of returned Products EndoSonics shall file, or cause to be filed, all reports required of a manufacturer pursuant to the applicable medical device reporting regulations. EndoSonics, as the manufacturer of the Products, shall perform all failure analysis on the Product within 30 days of receipt of each failed Product and shall file all reports required with the applicable regulatory agency. EndoSonics shall further cooperate with and assist Distributor in submitting all reports that Distributor may be required to file. Distributor shall promptly provide EndoSonics with copies of all such reports. 10.3. Adverse Impact on the Products Each party shall notify the other party's Regulatory Affairs and Quality Assurance Officer or other designee as soon as reasonably practicable of all actions or anticipated actions by any regulatory authority, that could adversely affect the manufacture, marketing, distribution or sale of the Product. Each party shall promptly provide copies to the other party of all reports, citations, violations, warnings and deficiencies received by such party in connection with the Products. 11. GOVERNMENT APPROVALS/REGISTRATION SUPPORT 11.1. Government Approvals Distributor shall obtain all required government approvals or registrations, if any, prior to the sale of any Product in the Territory. All approvals and registrations shall be obtained under EndoSonics' name, and EndoSonics and Distributor shall equally share in the cost involved. In case of necessary adaptation or modification of Products due to local requirements, the parties will assist each other and will agree upon whether to conduct such adaptations or modifications at EndoSonics' or Distributor's facilities. Upon termination of this Agreement for any reason, Distributor shall take all necessary steps to transfer any government approvals for Products to EndoSonics or EndoSonics' nominee (or if such transfer is not permitted, to cooperate in the cancellation of Distributor's government approvals and the re-issuance thereof to EndoSonics or EndoSonics' nominee). Distributor shall promptly return to EndoSonics all data and information relating to Product and make no further use thereof. 11.2. Registration Support EndoSonics shall assist Distributor in registering the Products in the Territory by providing Distributor with: (a) materials in EndoSonics' possession necessary to obtain health registrations and marketing approvals, licenses and permits; (b) certificates of analysis, export and compliance; (c) trademark authorizations; and -10- 11 (d) such other information as Distributor shall reasonably request from time to time. 12. TRADEMARKS AND PROTECTION OF PROPRIETARY RIGHTS 12.1. Registration of Trademarks EndoSonics shall, at its expense, use reasonable efforts to protect and maintain all registrations, filings and issuance of its Trademarks in full force and effect. 12.2. Title The proprietary rights of EndoSonics in and to Trademarks and any items related thereto are protected by the law of copyright, trademark, trade secrets and unfair competition. Distributor shall have no proprietary interest whatsoever in the Trademarks. 12.3. Notification of Infringement Distributor shall promptly notify EndoSonics of any infringement, of which Distributor has knowledge, of the proprietary rights of EndoSonics in and to the Products or the Trademarks in the Territory and shall cooperate with EndoSonics in any action by EndoSonics to investigate or remedy any such infringement. All costs and expenses of investigating and remedying any such infringement shall be borne by EndoSonics. 12.4. Use of Trademarks EndoSonics hereby grants to Distributor a non-exclusive license to use the Trademarks for the purpose of identifying and marketing the Products in the Territory. Any use of the Trademarks will be in accordance with such instructions as EndoSonics may give Distributor from time to time. Except for its affiliated companies, subdistributors and agents, Distributor shall not grant any sub-licenses to use the Trademarks to any Person, agent or other party without the prior written consent of EndoSonics in each instance. Upon the expiration or termination of this Agreement, the non-exclusive license granted hereunder to Distributor shall expire and Distributor shall immediately cease using the Trademarks. 12.5. Quality Control In order to comply with EndoSonics quality control standards, Distributor shall (a) use the Trademarks in compliance with all relevant laws and regulations in the Territory; (b) accord EndoSonics, after previous written request, the right to inspect all marketing and promotional materials in Distributor's possession containing the Trademarks in order to confirm that Distributor's use of such Trademarks is in compliance with this Agreement; and (c) not modify any of the Trademarks in any way and not use any of the Trademarks on any goods or services other than the Products or in connection therewith. In the event EndoSonics has a good faith and substantial reason to believe that Distributor is not complying with this provision, EndoSonics may, within 30 days of a written notification to Distributor stating and justifying the reasons, suspend Distributor's right to use the Trademarks until such time as Distributor gives EndoSonics adequate assurances that it has taken corrective measures and that it will thereafter comply with this provision. -11- 12 12.6. Limitation of Distributor's Rights and Software License Distributor shall have no access to or rights in the source codes of any software included in the Products. Distributor shall have no right to copy, modify or re-manufacture any Product or part thereof and shall comply with the confidentiality obligations under Section 14. For each System sold, EndoSonics licenses Distributor and its end customer with a one-time paid in full perpetual license to use the EndoSonics software and related updates and releases on the specific System sold. 13. INDEMNIFICATION 13.1. Indemnification by Distributor Except with respect to any of the following that arises from gross negligence or willful misconduct of EndoSonics or its agents and subject to Section 13.3 Distributor shall indemnify, defend and hold harmless EndoSonics, its directors, officers, employees, representatives and agents from and against any and all claims, suits, losses, damages, costs, fees and expenses (including reasonable attorney's fees), and other liabilities asserted by parties, both governmental and non-governmental, resulting from or arising out of (a) any misrepresentation of Distributor contained herein or breach of any warranty made by Distributor; (b) any breach, violation or non-performance of any covenant, condition or agreement in this Agreement by Distributor; and (c) the material inaccuracy of any representation or warranty of the Products made by Distributor. 13.2. Indemnification by EndoSonics Except with respect to any of the following that arises from the gross negligence or willful misconduct of Distributor or its agents and subject to Section 13.3, EndoSonics shall indemnify, defend and hold harmless Distributor, its directors, officers, employees, representatives and agents from and against any and all claims, suits, losses, damages, costs, fees and expenses (including reasonable attorneys' fees), and other liabilities asserted by third parties, both governmental and nongovernmental, resulting from or arising out of (a) any misrepresentation of EndoSonics contained herein or breach of any warranty or guaranty made by EndoSonics, (b) any breach, violation or nonperformance of any covenant, condition or agreement in this Agreement by EndoSonics, (c) the design of the Products, (d) any injury to any property or person arising in connection with the design, manufacture, use or application of the Products, (e) any infringement or alleged infringement of the Products on any product, device, method, process, trade name, trademark or patent, and (f) any and all taxes, fees, fines, penalties, assessments, charges, expenses or other governmental levies assessed on the Products which are not attributable to Distributor's acts or omissions. 13.3. Limitations to Indemnity The indemnities of Sections 13.1 and 13.2 shall not apply (a) if the indemnified party fails to give the indemnifying party prompt notice of any claim it receives and such failure materially prejudices the indemnifying party, or (b) unless the indemnifying party is given the opportunity to approve any settlement. Furthermore, the indemnifying party shall not be liable for attorneys' fees or expenses of litigation of the indemnified party unless the indemnified party gives the indemnifying party the opportunity to assume control of -12- 13 the defense or settlement. In addition, if the indemnifying party assumes such control, it shall only be responsible for the legal fees and litigation expenses of the attorneys it designates to assume control of the litigation. In no event shall the indemnifying party assume control of the defense of the indemnified party without the consent of the indemnified party (which consent shall be given or not at its sole discretion). 14. CONFIDENTIALITY Distributor acknowledges that by reason of its relationship to EndoSonics hereunder it will have access to confidential or proprietary information ("Confidential Information"). Confidential Information shall include all technology, inventions, designs, processes, formulas, computer software, specifications, customer lists, product development plans, forecasts, and all other business, technical and financial information provided to Distributor. Distributor agrees that it will not use in any way for its own account or the account of any third party, nor disclose to any third party, any Confidential Information revealed to it by EndoSonics. Distributor shall take every reasonable precaution to protect the confidentiality of such information. Upon request by Distributor, EndoSonics shall advise whether or not it considers any particular information or materials to be confidential. Distributor shall not publish any technical description of the Products beyond the description published by EndoSonics (except to translate that description into appropriate languages for the Territory). In the event of termination of this Agreement, there shall be no use or disclosure by Distributor of Confidential Information of EndoSonics, and Distributor shall not manufacture or have manufactured any devices, components or assemblies utilizing any of EndoSonics' Confidential Information. The duty of confidentiality set forth herein shall not apply to information that: (a) is, at the time of disclosure, in the public domain; (b) after disclosure, enters the public domain except where such entry is a direct result of a breach of this Agreement; (c) prior to disclosure, was already known to the party receiving such information, as evidenced by its written records; (d) subsequent to disclosure, is obtained from a third party in possession of such information and not under a contractual or fiduciary obligation to keep such information in confidence; (e) is filed with any governmental or any regulatory authority and available to the public; or (f) is disclosed pursuant to any judicial or governmental requirement or order. Distributor's duty of confidentiality set forth above shall be limited to the Term, each Renewal Term, if any, and 2 years from the expiration thereof. -13- 14 15. MISCELLANEOUS 15.1. Notices All notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing, shall be deemed to have been duly given when delivered in person, or when sent by telex or telecopy or other facsimile transmission (with the receipt confirmed), or on the third business day after posting thereof by registered or certified mail, return receipt requested, prepaid and addressed as follows (or such other address as the parties may designate by written notice in the manner of aforesaid): If to Distributor: Company: JOMED International AB Address: Drottninggatan 94 City: S-25221 Helsingborg Country: Sweden Attention: Mr. Tor Peters Position: President Telephone: +46-42-490.6000 Facsimile: +46-42-490.6001 If to EndoSonics: EndoSonics Europe B.V. P.O. Box 1178 2280 CD Rijswijk The Netherlands Attention: Mr. Leo H. Vogelzang Director Telephone: +31-70-307.3929 Facsimile: +31-70-307.3922 With a copy to: EndoSonics Corporation 2870 Kilgore Road Rancho Cordova, CA 95670 USA Attention: Mr. Gary Wilson Vice President Worldwide Sales & Marketing Telephone: +1-916-861.0105 Facsimile: +1-916-631.9546 -14- 15 15.2. Governing Law and Jurisdiction This Agreement shall be governed by and construed in all respects in accordance with the laws of the Netherlands and fall under the jurisdiction of the place of office of EndoSonics. 15.3. Entire Agreement This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof. This Agreement supersedes all prior representations, agreements and understandings among the parties with respect to such subject matter. 15.4. Amendments No changes or amendments or alterations to this Agreement shall be effective unless in writing and signed by all parties hereto. 15.5. Remedies Cumulative The rights, powers and remedies set forth herein are cumulative and shall be in addition to any and all other rights, powers and remedies provided by law. The exercise of any right or remedy hereunder shall not in any way constitute a cure under this Agreement, or prejudice either party in the exercise of any of its rights under this Agreement or law. 15.6. Non-Assignment This Agreement may not be assigned by either party without the prior written consent of the other party. 15.7. Force Majeure Non-performance of either party shall be excused (except for payment of moneys and confidentiality) to the extent that performance is rendered impossible by strike, fire, flood, governmental acts or orders or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the reasonable control of and is not caused by the negligence of the non-performing party. 15.8. Legal Expenses The prevailing party in any legal action brought by one party against the other arising out of this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorney's fees. 15.9. Survival of Certain Terms The provisions of Sections 3.4, 8.2, 8.3, 9,10.2, 10.3, and 14 shall survive the termination of this Agreement for any reason. All other rights and obligations of the parties shall cease upon termination of this Agreement. 15.10. Waiver No waiver of any default in the performance of any of the duties or obligations arising out of this Agreement shall be valid unless in writing and signed by the waiving party. Waiver of any one default shall not constitute or be construed as creating waiver of any other default or defaults. No course of dealing between the parties shall operate as a waiver or preclude the exercise of any rights or remedies under this Agreement. Failure on the part of either party to object to any act or failure to act of the other party, or declare the other party in default, regardless of the extent of such default, shall not constitute a waiver by the party of its rights hereunder. 15.11. Severability If any provision of this Agreement shall be held to be unenforceable in whole or in part, then -15- 16 the invalidity of such provision shall not be held to invalidate any other provision herein and all other provisions shall remain in full force and effect. 15.12. Counterparts This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. IN WITNESS WHEREOF, this Agreement has been executed by both parties as of the date first written above. EndoSonics Europe B.V. Distributor Signature: Signature: ------------------------- ------------------------- Name: Mr. L.H. Vogelzang Name: Mr. T. Peters Title: Director Title: President Date: Date: ------------------------- ------------------------- -16- 17 EXHIBIT A ENDOSONICS/CARDIOMETRICS PRODUCTS AND PRICES ENDOSONICS SYSTEMS, SYSTEM OPTIONS AND ACCESSORIES: [ * ] ENDOSONICS CATHETERS: [ * ] [ * ] Confidential Treatment Requested. Confidential portion has been filed separately with the Securities and Exchange Commission. -17- 18 ENDOSONICS/CARDIOMETRICS PRODUCTS AND PRICES (continued) CARDIOMETRICS SYSTEMS AND ACCESSORIES: [ * ] CARDIOMETRICS FLOWIRE(R) DOPPLER GUIDE WIRES: [ * ] CARDIOMETRICS WAVEWIRE(TM) PRESSURE GUIDE WIRES: [ * ] USAGE DISCOUNTS AVAILABLE [ * ] All Products sales are ex-works Rijswijk, The Netherlands, except the Oracle(R) In-Vision(TM) Imaging System, FloMap(R) I and II Systems, and WaveMap(R) System which are ex-works Rancho Cordova, California, USA. [ * ] Confidential Treatment Requested. Confidential portion has been filed separately with the Securities and Exchange Commission. -18- 19 EXHIBIT B DISTRIBUTION RIGHTS BY GEOGRAPHIC AREA Territory - - Baltic States (Estonia, Latvia, Lithuania) - - East Block, excluding Poland, Czech Republic, Slovakia, Bosnia and Croatia - - Israel - - Italy - - Middle East (Lebanon, Northern Africa, Syria, Jordan, Saudi Arabia, Kuwait, Qatar, Bahrain, United Arab Emirates, Oman, Egypt) - - Nordic (Sweden, Norway, Denmark, Finland, Iceland) - - Russia - - South Africa - - Switzerland - - Turkey - - United Kingdom -19- 20 EXHIBIT C MINIMUM PURCHASE COMMITMENT [ * ] [ * ] Confidential Treatment Requested. Confidential portion has been filed separately with the Securities and Exchange Commission. -20- 21 EXHIBIT D WARRANTY 1. SYSTEMS LIMITED WARRANTY NOTICE: EndoSonics reserves the right to make changes in its products in order to improve design or performance. Subject to the conditions and limitations on liability stated herein, EndoSonics warrants that Systems as so delivered shall materially conform to EndoSonics' then current specifications for Systems, for a period of one year from the date of delivery. ANY LIABILITY OF ENDOSONICS WITH RESPECT TO THE SYSTEM OR THE PERFORMANCE THEREOF UNDER ANY WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY WILL BE LIMITED EXCLUSIVELY TO SYSTEM REPAIR, REPLACEMENT OR, IF REPLACEMENT IS INADEQUATE AS A REMEDY OR, IN ENDOSONICS' OPINION IMPRACTICAL, TO REFUND THE PRICE PAID FOR THE SYSTEM. EXCEPT FOR THE FOREGOING, THE SYSTEM IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. FURTHER, ENDOSONICS DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE SYSTEM OR WRITTEN MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. Distributor understands that EndoSonics is not responsible for and will have no liability for any items or any services provided by any persons other than EndoSonics' authorized personnel. EndoSonics shall have no liability for delays or failures beyond its reasonable control. The happening of any one or more of the following events will void the warranty: 1 - Defects due to negligence, alteration, modification, installation or repair by anyone other than EndoSonics authorized personnel, or a representative of Distributor authorized by EndoSonics to repair the material. 2 - Abuse or misuse by end customer. 3 - Attempted or actual dismantling, disassembling, service or repair in a procedure not specifically authorized by EndoSonics. 4 - Operating the System in a manner that is not in conformance with purchase specifications and specifications contained in the Operator's manual, and/or supplements. 5 - Maintenance of the System which is not in accordance with procedures in the Operator's manual, and/or supplements. 6 - Repair, alteration or modification of the System in any way other than by EndoSonics` authorized personnel, or without EndoSonics' authorization. -21- 22 If claims under this warranty become necessary, and the System or components of the System are to be returned, Distributor shall contact EndoSonics for instructions and issuance of a Returned Materials Authorization number. The System or components will not be accepted for warranty purposes unless the return has been authorized by EndoSonics. System parts or components repaired or replaced under warranty bear the same warranty expiration date as the original equipment. Consumable parts (including, but not limited to rechargeable batteries, etc.) are warranted only against defects in materials and workmanship. System parts purchased outside the original warranty period are warranted for a period of 90 days, subject to all of the restrictions contained in this Limited Warranty. Use of unauthorized replacement parts may void the warranty. In all cases, EndoSonics will be the sole judge as to what constitutes warrantable damage. 2. CATHETERS AND WIRES LIMITED WARRANTY Subject to the conditions and limitations on liability stated herein, EndoSonics warrants that catheters and wires, as so delivered, shall materially conform to EndoSonics' then current specifications for these catheters or wires upon receipt. ANY LIABILITY OF ENDOSONICS, WITH RESPECT TO CATHETERS OR WIRES OR THE PERFORMANCE THEREOF UNDER ANY WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY, WILL BE LIMITED EXCLUSIVELY TO CATHETER OR WIRE REPLACEMENT OR, IF REPLACEMENT IS INADEQUATE AS A REMEDY OR, IN ENDOSONICS' OPINION IMPRACTICAL, TO REFUND THE PRICE PAID FOR THE CATHETER OR WIRE. EXCEPT FOR THE FOREGOING, CATHETERS AND WIRES ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. FURTHER, ENDOSONICS DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF CATHETERS OR WIRES OR WRITTEN MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. Distributor understands that EndoSonics is not responsible for and will have no liability for any items or any services provided by any persons other than EndoSonics' authorized personnel. EndoSonics shall have no liability for delays or failures beyond its reasonable control. Additionally, this warranty does not apply if: 1. A catheter or wire is used in a manner other than described by EndoSonics in the Directions for Use supplied with the catheter or wire. 2. A catheter or wire is used in a manner that is not in conformance with purchase specifications or specifications contained in the Directions for Use. 3. A catheter or wire is re-used or re-sterilized. 4. A catheter or wire carries an expired sterilization date. 5. A catheter or wire is repaired, altered or modified in any way by personnel other than EndoSonics authorized personnel, or without EndoSonics' authorization. -22- 23 All catheters and wires shall be inspected for obvious damage upon arrival. If catheters or wires have been damaged in transit, EndoSonics must be notified within 72 hours. If claims under this warranty become necessary, contact EndoSonics for instructions and issuance of a Returned Goods Authorization number, if a catheter or wire is to be returned. Catheters or wires will not be accepted for warranty purposes unless the return has been authorized by EndoSonics. IN NO EVENT SHALL ENDOSONICS BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES DUE TO ANY CAUSE WHATSOEVER. No suit or action shall be brought against EndoSonics more than one year after the related cause of action has occurred. THE FOREGOING CONSTITUTES ENDOSONICS' SOLE LIABILITY AND DISTRIBUTOR'S SOLE REMEDY WITH RESPECT TO PRODUCTS SOLD BY ENDOSONICS. -23- 24 EXHIBIT E ENDOSONICS EXTENDED MAINTENANCE AGREEMENT This Extended Maintenance Agreement is made and entered into this ___________th day of _________________, 1999, by and between EndoSonics Europe B.V., De Bruyn Kopsstraat 15, 2288 EC Rijswijk, The Netherlands (hereinafter referred to as "EndoSonics") and ______________________________ (hereinafter referred to as "Customer"). The Extended Maintenance Agreement covers the following: Equipment: ______________________________ Serial no.: ______________________________ Period: ______________, 1999 to ___________, 2000 CONDITIONS OF EXTENDED MAINTENANCE AGREEMENT 1. CALL WINDOW 8:30 A.M. to 5:00 P.M. (Central European Time) Monday through Friday excluding holidays. 2. RESPONSE TIME 48 Hour Response Time during specified call window. 3. PAYMENT SCHEDULE Annually in advance. 4. TERM The Extended Maintenance Agreement shall be effective when signed by both parties. The initial term is twelve (12) months from the commencement date, unless modified on the face of the contract document. 5. AUTOMATIC RENEWAL At the end of each term, the Extended Maintenance Agreement shall be automatically renewed for twelve (12) months, unless terminated by either of the parties at least two (2) months prior to the expiry date. 6. ELIGIBILITY FOR SERVICE The Extended Maintenance Agreement shall only be valid as long as the equipment covered by it is properly installed, and is serviced by EndoSonics authorized personnel only. EndoSonics site environmental conditions must be met at all times. 7. SERVICE RESPONSIBILITIES OF ENDOSONICS -24- 25 7.1. EndoSonics shall maintain the equipment in good condition and furnish service for calls received within the call window. Specifically, EndoSonics shall: A. Provide scheduled planned maintenance and safety check one (1) time per year. Planned maintenance is to be scheduled two weeks in advance within the call window; excluding holidays. B. Provide response to requests for remedial service within the call window. Requests for service outside these hours will be provided on a best effort basis at an additional charge. C. Provide all expenses incurred by EndoSonics Technical Representative including airfare, lodging, and travel time fees. D. Provide original parts or parts of at least equal quality. E. Provide all applicable safety and reliability modifications at no charge. F. Provide all applicable software updates at no charge. 7.2. EndoSonics shall, at no additional cost to the customer, provide replacement equipment on loan, should EndoSonics fail to service or repair customer's equipment within a reasonable time period. 7.3. Parts not covered under this Agreement are: Supplies, Video Cassettes and Consumables. 8. RESPONSIBILITIES OF CUSTOMER Customer shall notify EndoSonics immediately of equipment malfunction and allow EndoSonics full unrestricted access to all equipment and areas in which the equipment is commonly operated. 9. CHARGES 9.1. The charge for Extended Maintenance during the initial term of this Agreement is US$_____________. 9.2 Payments of service charges are due forty-five (45) days from the date of the invoice. 9.3. All service calls received outside the call window are subject to a four (4) hour minimum charge and any additional hours necessary to complete the repair are based upon the overtime rates prevailing at the time. EndoSonics' overtime rates are: (a) one and one half (1.5) times the normal hourly rate after 5:00 P.M. and before 8:00 A.M. Monday through Friday and all day Saturday. (b) two (2) times the normal hourly rate on Sundays and scheduled holidays. 9.4. Charges are exclusive of, and Customer is responsible for, all sales, use, and like taxes where applicable. 10. The provisions of the Agreement shall be interpreted under the laws of The Netherlands. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. AGREED TO AND ACCEPTED Customer EndoSonics Europe B.V. Name: Name: F. van den Broek Title: Title: Service Manager Signature: Signature: -25- -----END PRIVACY-ENHANCED MESSAGE-----