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Agreement and Plan of Merger

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Title:

Agreement and Plan of Merger

Entities:

Kyphon Inc.

Date:

2007

Size:

247KB total

Price:

$79

ID:

#2712467

► Plans ► Agreements ► Agreements & Plans of Merger
► Healthcare ► Medical Equipment & Supplies

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AGREEMENT AND PLAN OF MERGER

BY AND AMONG

KYPHON INC.

NEPTUNE ACQUISITION SUB, INC.

AND

ST. FRANCIS MEDICAL TECHNOLOGIES, INC.

AND WITH RESPECT TO ARTICLE VII ONLY

PHILIP M. YOUNG

AS STOCKHOLDERS REPRESENTATIVE

Dated as of December 4, 2006

TABLE OF CONTENTS


		Page
ARTICLE I. THE MERGER		1

1.1	The Merger	1
1.2	Effective Time; Closing	1
1.3	Effect of the Merger	2
1.4	Certificate of Incorporation and Bylaws	2
1.5	Directors and Officers	2
1.6	Effect on Capital Stock	2
1.7	Additional Merger Consideration	4
1.8	Surrender of Certificates	8
1.9	No Further Ownership Rights in Company Capital Stock	10
1.10	Lost, Stolen or Destroyed Certificates	10
1.11	Further Action	11

ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY		11

2.1	Organization; Standing and Power; Charter Documents; Subsidiaries	11
2.2	Capital Structure	12
2.3	Authority; Non-Contravention; Necessary Consents	14
2.4	Financial Statements	15
2.5	Corporate Governance	16
2.6	Undisclosed Liabilities	16
2.7	Absence of Certain Changes or Events	17
2.8	Taxes	17
2.9	Intellectual Property	20
2.10	Compliance; Permits	24
2.11	Litigation	25
2.12	Brokers and Finders Fees; Fees and Expenses	25
2.13	Employee Benefit Plans	25
2.14	Real Property	29
2.15	Assets	29
2.16	Environmental Matters	29
2.17	Contracts	30
2.18	Regulatory Compliance	32
2.19	Health Care Compliance	33
2.20	Insurance	34
2.21	Interested Party Transactions	34
2.22	Customers and Suppliers	35

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		35

-i-

TABLE OF CONTENTS

(Continued)


		Page
3.1	Organization; Standing and Power; Charter Documents; Subsidiaries	35
3.2	Merger Sub	36
3.3	Authority; Non-Contravention; Necessary Consents	36
3.4	Compliance; Permits	37
3.5	Litigation	37
3.6	SEC Filings; Financial Statements	37
3.7	Absence of Certain Changes or Events	39
3.8	Intellectual Property	39
3.9	Availability of Funds	40

ARTICLE IV. CONDUCT BY THE COMPANY PRIOR TO THE EFFECTIVE TIME		41

4.1	Conduct of Business by the Company	41

ARTICLE V. ADDITIONAL AGREEMENTS		44

5.1	Acquisition Proposals	44
5.2	Information Statement	45
5.3	Stockholder Approval	45
5.4	Confidentiality; Access to Information; No Modification of Representations, Warranties or Covenants	45
5.5	Public Disclosure	46
5.6	Regulatory Filings; Reasonable Best Efforts	46
5.7	Employee Benefits	48
5.8	Indemnification	51
5.9	Certain Tax Matters	52
5.10	Third Party Consents	54
5.11	Merger Sub Compliance	54
5.12	Termination of Credit Facility	55

ARTICLE VI. CONDITIONS TO THE MERGER		55

6.1	Conditions to the Obligations of Each Party to Effect the Merger	55
6.2	Additional Conditions to the Obligations of the Company	55
6.3	Additional Conditions to the Obligations of Parent and Merger Sub	56

ARTICLE VII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW		57

7.1	Definitions	57
7.2	Survival of Representations and Warranties	59
7.3	Representative Reimbursement Amount Deposit	59
7.4	Set-Off From Earnout Amount	59

-ii-

TABLE OF CONTENTS

(Continued)


		Page
7.5	Exclusive Remedy	61
7.6	Distribution of Earnout Amount	61
7.7	Stockholders Representative	62
7.8	Third-Party Claims	63
7.9	No Other Representations and Warranties	64
7.10	Resolution of Claims	65

ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER		65

8.1	Termination	65
8.2	Notice of Termination; Effect of Termination	66
8.3	Fees and Expenses	67
8.4	Amendment	67
8.5	Extension; Waiver	67

ARTICLE IX. GENERAL PROVISIONS		67

9.1	Notices	67
9.2	Interpretation; Knowledge	68
9.3	Counterparts	70
9.4	Entire Agreement; Third-Party Beneficiaries	70
9.5	Severability	70
9.6	Other Remedies	70
9.7	Governing Law	70
9.8	Consent to Jurisdiction	71
9.9	Rules of Construction	71
9.10	Assignment	71
9.11	No Waiver	71

-iii-

Exhibits


Exhibit A		Form of Management Escrow Agreement
Exhibit B		Form of Closing Certificate
Exhibit C		Form of Parachute Payment Waiver
Exhibit D		Form of Legal Opinion

-iv-

Index of Defined Terms


Term		Section

Acquisition Proposal		5.1(a)

Action		7.1

Action of Divestiture		5.6(e)

Affiliate		9.2(b)

Agreement		Preamble

Assets		2.15

Cash Payment Right		1.6(d)

Certificate of Merger		1.2

Certificates		1.8(c)

Change of Control		1.7(a)

Claim		7.10(a)

Closing		1.2

Closing Certificate		1.6(f)

Closing Date		1.2

Closing Expenses		7.1

Code		1.8(d)

Company		Preamble

Company Balance Sheet		2.4

Company Benefit Plans		2.13(b)(i)

Company Board Recommendation		2.3(a)(iv)

Company Business		2.9(a)(i)

Company Capital Stock		1.6(a)

Company Charter Documents		2.1(b)

Company Common Stock		1.6(a)

Company Disclosure Letter		Article II Preamble

Company Indemnified Liabilities		5.8(a)

Company Indemnified Parties		5.8(a)

Company Indemnified Proceedings		5.8(a)

Company Intellectual Property		2.9(a)(v)

Company IP Contract		2.9(a)(ii)

-v-


Term		Section

Company Material Contract		2.17(a)

Company Option		1.6(d)

Company Option Plan		1.6(d)

Company Participants		5.7(a)

Company Permits		2.10(b)

Company Preferred Stock		2.2(a)(ii)

Company Products		2.9(a)(iii)

Company Registered Intellectual Property		2.9(a)(vi)

Company Restricted Stock		5.7(f)(ii)

Company Stockholder		7.1

Confidentiality Agreement		5.4(a)

Contract		2.2(a)

Credit Facility		5.12

D&O Insurance		5.8(c)

Deductible Amount		7.4(b)

Deferred Payments		1.7(b)(i)

Delaware Law		Recitals

DGCL		1.6(c)(i)

Disputed Items		1.7(c)(ii)

Dispute Notice		1.7(c)(ii)

Dissenting Shares		1.6(c)(i)

DOJ		5.6(a)(i)

Earnout Amount		1.7(a)

Earnout Revenue		1.7(a)

Earnout Statement		1.7(c)(i)

Effective Time		1.2

Employee		2.13(a)(ii)

End Date		8.1(c)

Environmental Laws		2.16(i)

ERISA		2.13(b)(i)

ERISA Affiliate		2.13(b)(i)

-vi-


Term		Section

Exchange Agent		1.8(a)

Exchange Fund		1.8(b)

FDA		2.18(a)

Final Deferred Payment		1.7(b)(i)(2)

Financial Statements		2.4

Financing		3.9

Financing Commitment		3.9

First Deferred Payment Date		1.7(a)

First Earnout Amount		1.7(a)

First Earnout Revenue		1.7(a)

FTC		5.6(a)(i)

GAAP		2.4

Governmental Consents		6.1(b)

Governmental Entity		2.3(c)

Hazardous Materials		2.16(a)(ii)

Health Care Laws		2.19(b)

HSR Act		2.3(c)

Indemnification Termination Date		7.1

Indemnified Parties		7.1

Information Statement		5.2

Initial Deferred Payment		1.7(b)(i)(1)

Intellectual Property		2.9(a)(iv)

International Employee Plan		2.13(g)

IPD Devices		1.7(a)

IRS		7.1

Knowledge		9.2(c)

Leased Real Property		2.14

Leases		2.14

Legal Proceedings		2.11

Legal Requirements		2.2(d)

Lender		3.9

-vii-


Term		Section

Liens		2.1(c)

Losses		7.1

Management Escrow Agreement		1.6(d)

Management Shares		5.7(f)(ii)

Material Adverse Effect		9.2(d)

Merger		1.1

Merger Consideration		7.1

Merger Sub		Preamble

Necessary Consents		2.3(c)

Neutral Arbitrator		1.7(c)(iii)

Objection Notice		7.10(a)

Officers Certificate		7.1

Option Shares		1.6(d)

Outstanding Shares		7.1

Parachute Payment Waiver		5.10(f)

Parent		Preamble

Parent Balance Sheet		3.6(b)

Parent Disclosure Letter		Article III Preamble

Parent ESPP		5.7(b)

Parent Financials		3.6(b)

Parent Permits		3.4(b)

Parent SEC Reports		3.6(a)

Per Share Consideration		7.1

Per Share Earnout Amount		1.7(a)

Permits		2.10(b)

Person		9.2(e)

Post-Closing Tax Period		7.1

Pre-Closing Tax Period		7.1

Pro Rata Portion		7.1

Programs		2.19(a)

Registered Intellectual Property		2.9(a)(vii)

-viii-


Term		Section

Representative Reimbursement Amount		7.1

Resolution Period		1.7(c)(ii)

Revenue		1.7(a)

Safety Notices		2.18(h)(i)

Second Deferred Payment Date		1.7(a)

Second Earnout Amount		1.7(a)

Second Earnout Revenue		1.7(a)

Series A Preferred Stock		1.6(a)

Series B Preferred Stock		1.6(a)

Series C Preferred Stock		1.6(a)

Significant Customer		2.22(a)

Significant Supplier		2.22(b)

Specified Persons		1.7(a)

Stockholder Approval		Recitals

Stockholders Representative		7.7(a)

Stockholders Representative Expenses		7.7(b)

Straddle Period		7.1

Subsidiary		2.1(a)

Subsidiary Charter Documents		2.1(b)

Surviving Corporation		1.1

Tax		2.8(a)

Taxes		2.8(a)

Tax Claim		5.9(c)

Tax Period		7.1

Tax Returns		2.8(b)(i)

Third Party Claim		7.8

Threshold Amount		7.4(b)

Transaction Costs		8.3

Transfer Taxes		5.10(d)

Treasury Regulations		2.8(b)(vii)

-ix-

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this Agreement) is made and entered into as of December 4, 2006, by and among Kyphon Inc., a Delaware corporation (Parent), Neptune Acquisition Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of Parent (Merger Sub), and St. Francis Medical Technologies, Inc., a Delaware corporation (the Company), and with respect to Article VII only, Philip M. Young, as Stockholders Representative.

RECITALS

A. The respective Boards of Directors of Parent, Merger Sub and the Company have deemed it advisable and in the best interests of their respective corporations and stockholders that Parent and the Company consummate the business combination and other transactions provided for herein in order to advance their respective long-term strategic business interests.

B. The respective Boards of Directors of Parent, Merger Sub and the Company have approved, in accordance with applicable provisions of the laws of the State of Delaware (Delaware Law), this Agreement and the transactions contemplated hereby, including the Merger (as defined in Section 1.1).

C. Promptly following the execution and delivery of this Agreement, stockholders of the Company representing the requisite number of shares of each class of the Companys capital stock will, through an action by written consent (the Stockholder Approval), adopt this Agreement.

D. Parent, Merger Sub and the Company desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger.

NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I.

THE MERGER

1.1 The Merger. At the Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions of Delaware Law, Merger Sub shall be merged with and into the Company (the Merger), the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation. The Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the Surviving Corporation.

1.2 Effective Time; Closing. Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger with the Secretary of State of the State of Delaware in accordance

with the relevant provisions of Delaware Law (the Certificate of Merger) (the time of such filing with the Secretary of State of the State of Delaware (or such later time as may be agreed in writing by the Company and Parent and specified in the Certificate of Merger) being the Effective Time) as soon as practicable on or after the Closing Date (as defined below). The closing of the Merger (the Closing) shall take place at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, located at One Market, San Francisco, California, at a time and date to be specified by the parties, which shall be no later than the second business day after the satisfaction or waiver of the conditions set forth in Article VI (other than those that by their terms are to be satisfied or waived at the Closing), or at such other time, date and location as the parties hereto agree in writing. The date on which the Closing occurs is referred to herein as the Closing Date.

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