-----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, C+EXe0i0HBXYeWfJU31sjCSCEsEJfwpLhmByJBeRAHgVBy+hvLUvNtccxFtRg417 YDivbF55szoS4lQYzTFeIA== 0000950112-95-002846.txt : 19951102 0000950112-95-002846.hdr.sgml : 19951102 ACCESSION NUMBER: 0000950112-95-002846 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19951101 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CORDIS CORP CENTRAL INDEX KEY: 0000024654 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 590870525 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-07671 FILM NUMBER: 95586412 BUSINESS ADDRESS: STREET 1: 5200 BLUE LAGOON DR STREET 2: STE 200 CITY: MIAMI STATE: FL ZIP: 33126 BUSINESS PHONE: 3058242000 MAIL ADDRESS: STREET 1: 14201 N W 60TH CITY: MIAMI LAKES STATE: FL ZIP: 33014 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CORDIS CORP CENTRAL INDEX KEY: 0000024654 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 590870525 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 5200 BLUE LAGOON DR STREET 2: STE 200 CITY: MIAMI STATE: FL ZIP: 33126 BUSINESS PHONE: 3058242000 MAIL ADDRESS: STREET 1: 14201 N W 60TH CITY: MIAMI LAKES STATE: FL ZIP: 33014 SC 14D9 1 CORDIS CORPORATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------- SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------- CORDIS CORPORATION (Name of Subject Company) CORDIS CORPORATION (Name of Person(s) Filing Statement) Common Stock, Par Value $1.00 Per Share (INCLUDING THE ASSOCIATED RIGHTS) (TITLE OF CLASS OF SECURITIES) 21852510 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------- ALFRED J. NOVAK VICE PRESIDENT AND CHIEF FINANCIAL OFFICER CORDIS CORPORATION 5200 BLUE LAGOON DRIVE SUITE 200 MIAMI, FLORIDA 33126 (305) 824-2000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT) COPY TO: CHARLES I. COGUT, ESQ. SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017-3954 (212) 455-2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is Cordis Corporation, a Florida corporation (the "Company"), and the address of its principal executive offices is 5200 Blue Lagoon Drive, Suite 200, Miami, Florida 33126. The title of the class of equity securities to which this Statement relates is the Common Stock, par value $1.00 per share (the "Common Stock"), of the Company, including the associated rights (the "Rights") issued pursuant to the Rights Agreement, dated as of October 13, 1995, between the Company and Chemical Mellon Shareholder Services L.L.C. References herein to the Shares means shares of the Common Stock and shall, unless the context requires otherwise, include the associated Rights. ITEM 2. TENDER OFFER OF THE BIDDER. This Statement relates to the tender offer disclosed in a Tender Offer Statement on Schedule 14D-1 dated October 19, 1995, as amended by Amendment No.1, dated October 20, 1995, Amendment No. 2, dated October 24, 1995, and Amendment No. 3, dated October 27, 1995 (as so amended, the "Schedule 14D-1"), by JNJ Acquisition Corp., a New Jersey corporation ("JNJ Acquisition") and a direct wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation ("J&J"), to purchase all the outstanding Shares at a price of $100 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 October 19, 1995 (the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"). J&J has advised the Company that it is prepared to pay $105 per Share in a stock-for-stock merger in which all outstanding Shares would be exchanged for common stock of J&J (the "Stock Merger"), subject to the condition that the Stock Merger be permitted to be accounted for as a "pooling-of-interests" in accordance with generally accepted accounting principles. In the Offer to Purchase, J&J indicated that JNJ Acquisition commenced the Offer because the Company had not met with representatives of J&J to discuss the Stock Merger, but that J&J intended to continue to seek to effect the Stock Merger, including through a solicitation of written consents from the Company's shareholders to remove and replace the Board of Directors of the Company (the "Board"). On October 20, 1995, JNJ Acquisition filed a Consent Statement on Schedule 14A with respect to such solicitation (the "J&J Proxy Statement"). According to the Schedule 14D-1, the principal executive offices of J&J and JNJ Acquisition are located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of the Company, which is the person filing this Statement, are set forth in Item 1 above. (b) Except as set forth in this Item 3(b), to the knowledge of the Company as of the date hereof, there are no material contracts, agreements, arrangements or understandings and no actual or potential conflicts of interest between the Company or its affiliates and (i) the Company, its executive officers, directors or affiliates or (ii) J&J or JNJ Acquisition or their respective executive officers, directors or affiliates. Severance and Related Matters. Certain contracts, agreements, arrangements or understandings between the Company and certain of its directors, executive officers and affiliates are described on pages 4, 5 and 7-18 of the Company's Proxy Statement dated September 15, 1995 for the 1995 Annual Meeting of Stockholders of the Company (the "Proxy Statement"). Pertinent portions of such pages are filed as Exhibit 1 hereto and are incorporated herein by reference. At a meeting of the Board held on October 31, 1995 (the "Meeting"), in order to ensure the continued dedication and objectivity of certain key executives and managers of the Company in the context of a threatened change of control of the Company, the Board authorized the Company to enter into severance compensation arrangements ("Severance Agreements") with such executives and managers ("Executives"). There are four types of Severance Agreements, with the type of agreement with 2 each Executive being determined by reference to a four-tiered severance structure adopted by the Board: Messrs. Strauss, Kranys, Novak, McDowell, Monks and Ratering are parties to Tier 1 Severance Agreements, and there are 10, 21 and 25 Tier 2 Severance Agreements, Tier 3 Severance Agreements, and Tier 4 Severance Agreements with Executives, respectively. Copies of the forms of Tier 1, Tier 2 and Tier 3 and Tier 4 Severance Agreements are filed as Exhibits 2, 3 and 4 hereto, respectively, and are incorporated herein by reference. The agreements provide for certain severance benefits to those individuals in the event of certain terminations of their employment following a Change in Control (as defined below). Other than the Tier 4 Severance Agreements, each of the Severance Agreements has a three-year term. All Severance Agreements provide for payment of severance benefits ("Severance") in the event of an Executive's termination of employment by the Company (or its successor) without Cause or by the Executive with Good Reason within three years (one year for Tier 4 Severance Agreements) following a Change in Control. In addition, the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") are entitled to payment under their Tier 1 Severance Agreements upon any termination of employment by them within 60 days after the first anniversary of a Change in Control. The Tier 1 Severance Agreements provide for Severance consisting of: (i) a lump sum payment equal to 2.99 times the sum of (A) Executive's base salary (including the annual amount of any automobile allowance) immediately prior to the Change in Control and (B) the highest bonus paid to Executive under the Company's executive incentive compensation plans during the three years preceding the Change in Control; (ii) continued medical benefits until the earlier of (A) the third anniversary of Executive's termination or (B) the commencement of comparable coverage with a subsequent employer; (iii) three years of age and service credit under the Company's retirement plans; and (iv) a gross-up payment for any excise taxes imposed on any "excess parachute payments" under the Internal Revenue Code of 1986, as amended (the "Code"). The Tier 2 Severance Agreements provide for Severance consisting of: (i) a lump sum payment equal to 2 times the sum of (A) Executive's base salary (including the annual amount of any automobile allowance) immediately prior to the Change in Control and (B) the highest bonus paid to Executive under the Company's executive incentive compensation plans during the three years preceding the Change in Control; (ii) continued medical benefits until the earlier of (A) the twenty-four months after Executive's termination or (B) the commencement of comparable coverage with a subsequent employer; (iii) twenty-four months of age and service credit under the Company's retirement plans; and (iv) a gross-up payment for any excise taxes imposed on any "excess parachute payments" under the Code. The Tier 3 Severance Agreements provide for Severance consisting of: (i) a lump sum payment equal to 1.5 times the sum of (A) Executive's base salary immediately prior to the Change in Control and (B) the highest bonus paid to Executive under the Company's executive incentive compensation plans during the three years preceding the Change in Control; (ii) continued medical benefits until the earlier of (A) the eighteen months after Executive's termination or (B) the commencement of comparable coverage with a subsequent employer; and (iii) eighteen months of age and service credit under the Company's retirement plans. The Tier 4 Severance Agreements expire upon the earlier of one year after a Change in Control or three years from the date of execution. These agreements provide for Severance consisting of: (i) a lump sum payment equal to 1 times the sum of (A) Executive's base salary immediately prior to the Change in Control and (B) the highest bonus paid to Executive under the Company's executive incentive compensation plans during the three years preceding the Change in Control; and (ii) continued medical benefits until the earlier of (A) the first anniversary of Executive's termination or (B) the commencement of comparable coverage with a subsequent employer. All agreements provide for payment, in a cash lump sum, of all amounts deferred by Executive under any non-qualified plan of deferred compensation maintained by the Company (notwithstanding the payment provisions of any such plans to the contrary) and any accrued but unused vacation time. 3 Payments and benefits under the Tier 3 and Tier 4 Severance Agreements are limited by the parachute limit imposed by Section 280G of the Code, unless an Executive would realize a greater net after tax benefit if no limitation were imposed. A "Change in Control" is deemed to have occurred if: (i) any person or persons acting in concert (excluding Company benefit plans) becomes the beneficial owner of securities of the Company having at least 25% of the voting power of the Company's then outstanding securities (unless the event causing the 25% threshold to be crossed is an acquisition of securities directly from the Company); (ii) the shareholders of the Company approve any merger or other business combination of the Company, sale of more than 50% of the Company's assets or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction and any trustee or fiduciary of any Company employee benefit plan own, immediately following the Transaction, at least 75% of the voting securities of the surviving company (or its parent) in the event of a merger or other business combination, or, in the event of a sale of assets, of the purchaser of such assets; or (iii) within any 24-month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period is deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has entered into an agreement to effect a Change in Control). Under all Severance Agreements, "Cause" is defined as (i) fraud, dishonesty or willful malfeasance in connection with Executive's employment which results in material harm to the Company; (ii) Executive's continued failure to substantially perform his duties and responsibilities after written notice thereof which is not cured within 10 business days; (iii) Executive's willful and material breach of the confidentiality or non-competition provisions of the Agreement; or (iv) Executive's plea of guilty or nolo contendere to, or nonappealable conviction of, a felony. Termination of an Executive for Cause under a Tier 1, Tier 2 or Tier 3 Severance Agreement can only be made by delivery to the Executive of a copy of a resolution duly adopted by a two-thirds majority of the Directors of the Company (after 30 days prior written notice and reasonable opportunity for the Executive to be heard before the Board prior to such vote), finding that in the reasonable judgment of such Board, the relevant conduct or event set forth in any of clauses (i) through (iv) in the definition of "Cause" above has occurred and that such occurrence warrants Executive's termination. Under the Tier 1, Tier 2 and Tier 3 Severance Agreements, "Good Reason" is defined as any (i) material diminution in the Executive's position, duties or responsibilities (in the case of the CEO and the CFO, the Company's stock ceasing to be publicly traded or the Company's becoming a subsidiary of a company whose stock is publicly traded, in each case, does not by itself constitute a diminution in position, duties or responsibilities); (ii) material adverse change in the Executive's salary and incentive compensation; (iii) failure by the Company either to continue in effect, or to provide reasonably similar benefit plans; (iv) relocation of the Executive's employment to a location in excess of 50 miles from the Executive's work site prior to the Change in Control; (v) reduction in paid vacation days; (vi) any material breach by the Company of any provision of the agreement; and (vii) failure of a successor of the Company to assume the agreement. Under the Tier 4 Severance Agreements, "Good Reason" is defined as any (i) material diminution in the Executive's position, duties or responsibilities; (ii) material adverse change in the Executive's salary and incentive compensation; and (iii) relocation of the Executive's employment to a location in excess of 50 miles from the Executive's work site prior to the Change in Control. In addition to authorizing the Severance Agreements, the Board approved the amendment of the definition of "change in control" in the Company's Supplemental Executive Retirement Plan (the "SERP"), Executive Deferred Compensation Plan, Director Deferred Compensation Plan and Director 4 Retirement Policy (the "Policy") to conform with the definition of "Change in Control" under the Severance Arrangements. The Board also authorized certain technical corrections to the SERP and the Policy. At a Board meeting held on October 9, 1995, the Board authorized the Company to enter into indemnification agreements with each member of the Board and certain executive officers. The new agreements replace the agreements with directors described in the Proxy Statement. The indemnification agreements supplement the protections afforded to the Company's directors and executive officers under the Company's Bylaws. In general, the indemnification agreements provide for the Company to indemnify the directors and executive officers against expenses, judgments, fines, penalties, and amounts paid in settlement arising in connection with third party proceedings and proceedings by or in the right of the Company against any director or executive officer relating to his or her services to the Company if such director or executive officer acted in good faith and in a manner such director or executive officer reasonably believed to be in the best interests of the Company, and, with respect to criminal proceedings, had no reasonable cause to believe his or her behavior was unlawful. The Company, pursuant to the indemnification agreements, retains subrogation rights to recover any advances which are subsequently paid by a third party. The indemnification agreements are binding on the Company and any successor to the Company. The foregoing description of the indemnification agreements is qualified in its entirety by reference to the form of agreement, a copy of which is filed as Exhibit 5 hereto and is incorporated herein by reference. Background. On September 6, 1995, Ralph S. Larsen, Chairman of the Board and Chief Executive Officer of J&J, contacted Dr. Robert Q. Marston, then Chairman of the Board of the Company, to advise Dr. Marston of J&J's interest in meeting with representatives of the Company to discuss areas of joint interest. Dr. Marston explained to Mr. Larsen that he would be stepping down as Chairman of the Board of the Company in October and that Mr. Strauss, the President and Chief Executive Officer, would be his successor as Chairman. Dr. Marston told Mr. Larsen that he would get back to him following consultation with Richard W. Foxen, a Director of the Company. Mr. Foxen telephoned Mr. Larsen later that day and Mr. Larsen advised him of J&J's desire to meet with representatives of the Company as soon as possible. Mr. Foxen agreed that he and Dr. Marston would meet with Mr. Larsen on September 12 in New York City. On September 12, 1995, Mr. Larsen and Robert N. Wilson, Vice Chairman of J&J, met with Dr. Marston and Mr. Foxen to discuss in general terms a possible merger between J&J and the Company. On September 13, 1995, Dr. Marston telephoned Mr. Larsen and informed him that he had reviewed the prior discussions only with Mr. Strauss. Dr. Marston had requested that Mr. Strauss telephone Mr. Larsen. Before this could be accomplished, however, Mr. Larsen telephoned Mr. Strauss concerning the meeting with Dr. Marston and Messrs. Foxen and Wilson. Mr. Larsen outlined the strategic basis for a business combination and indicated that he would like to meet as soon as possible. Mr. Strauss tentatively agreed to a meeting on either September 21 or 22, and said he would call Mr. Larsen on September 15 to confirm the date of the meeting. On September 15, 1995, Mr. Larsen called Mr. Strauss, and they scheduled the meeting for September 21, 1995. After being informed of Mr. Larsen's contacts with Dr. Marston and Messrs. Foxen and Strauss, at a telephonic meeting held on September 19, 1995, the full Board concluded that it would be premature to meet with representatives of J&J prior to the Annual Meeting of Stockholders of the Company, scheduled for October 10, 1995. On September 19, 1995, Mr. Strauss telephoned Mr. Larsen and informed him of the Board's decision to postpone any meeting until after the upcoming Annual Meeting. Mr. Strauss further informed Mr. Larsen that it had been decided that Mr. Strauss should be the contact for all 5 communications with J&J. On September 26, 1995, the Company retained Morgan Stanley & Co. Incorporated ("Morgan Stanley") to render financial advisory services to the Company. On October 11, 1995, Mr. Strauss telephoned Mr. Larsen and stated that the Board had met and had determined that Mr. Strauss should not meet with J&J at the present time. On October 19, 1995, J&J announced the Offer and the Stock Merger proposal. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) At the Meeting, the Board carefully considered the Company's business, financial condition and future prospects, the terms of the Offer and the Stock Merger and other matters, including presentations by its legal and financial advisors. After taking into account these matters, the Board determined by unanimous vote that both the Offer and the Stock Merger are inadequate and not in the best interests of the Company and its shareholders. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT ALL HOLDERS OF SHARES REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE OFFER. The Board believes that significant value will be created for shareholders through the pursuit of the current strategic plan as an independent company. The Board also continues to be committed to the maximization of shareholder value. In this regard, the Board has authorized management and the Company's advisors to explore all strategic alternatives and to report back to the Board at an early date. A copy of the letter to the Company's shareholders communicating the Board's recommendation and the press release relating thereto are filed as Exhibits 6 and 7 to this Statement and are incorporated herein by reference. (b) In reaching its determinations and recommendations described in Item 4(a) above, the Board considered a number of factors, including (without limitation) the following: (i) The Company's business, financial condition, results of operations, business strategy and future prospects, including growth opportunities in certain markets in which the Company operates or intends to operate. (ii) A presentation by Morgan Stanley concerning the Company and financial aspects of the Offer and the Stock Merger. (iii) The oral opinion of Morgan Stanley, confirmed in writing, to the effect that, as of the date of such opinion, the consideration to be received by the holders of Shares (other than J&J and its affiliates) pursuant to the Offer is inadequate, from a financial point of view, to such holders. The full text of such opinion, dated October 31, 1995, which sets forth the assumptions made and matters considered and limitations set forth by Morgan Stanley, is included as Annex A hereto and should be read in its entirety. (iv) The oral advice of Morgan Stanley to the Board at the Meeting concerning the inadequacy from a financial point of view of the purchase price component of the Stock Merger proposal. (v) The Board's belief, based in part on the factors referred to above, that neither of the $100 per Share cash price pursuant to the Offer or the $105 per Share in stock pursuant to the Stock Merger reflects the current value of the Company or the significant value that will be created for shareholders through the pursuit of the current strategic plan as an independent company. (vi) The Board's commitment to protecting the best interests of the Company's shareholders and the maximization of shareholder value. (vii) The fact that the combination of (A) the numerous conditions of the Offer which the Board believes are not material or related to the Company (and the satisfaction of which are determined in the sole judgment of JNJ Acquisition) and (B) J&J's stated intention in the Schedule 14D-1 and the J&J Proxy Statement to continue to seek to effect the Stock Merger instead of consummating the Offer, render the Offer illusory. 6 The foregoing discussion of the information and factors considered and given weight by the Board is not intended to be exhaustive. In view of the variety of factors considered in connection with its evaluation, the Board did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendation. In addition, individual members of the Board may have given different weight to different factors. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Pursuant to the terms of the engagement letter dated October 20, 1995, the Company has retained Morgan Stanley to render financial advisory services to the Company, and in accordance with such engagement, Morgan Stanley has advised the Company with respect to the Offer and related matters. The Company has agreed to pay Morgan Stanley an advisory fee, estimated to be between $200,000 and $400,000, as reimbursement for its time and efforts expended on behalf of the Company since September 26, 1995. If an Extraordinary Transaction (defined below) is consummated, Morgan Stanley will be entitled to a fee (a "Transaction Fee") against which any advisory fees paid will be credited. The amount of the Transaction Fee to be paid in connection with an Extraordinary Transaction, if any, would be calculated as a percentage of the aggregate transaction value of such transaction, with a fee percentage ranging from .45% for an Extraordinary Transaction with an aggregate transaction value of $1 billion to .37% for an Extraordinary Transaction with an aggregate transaction value of $3 billion. "Extraordinary Transaction" includes strategic alternatives, such as possible acquisitions, dispositions, divestitures, sale of a controlling interest in the Company, a recapitalization, joint venture or similar transaction. In addition, in the event that the Offer is withdrawn or does not, within 12 months from the date of the Offer, result in either the acquisition of 50% or more of the voting stock of the Company by J&J or any other party or in a change in a majority of the members of the Board, Morgan Stanley will charge an Independence Fee. The term "Independence Fee" shall mean a fee (against which any advisory fees will be credited) which is calculated based on the percentage of the aggregate transaction value of the Company implied by the consideration per Share offered in connection with the Offer, or the most recent proposed transaction resulting from the Offer (which percentage shall be determined on the same basis as the Transaction Fees described above). The Company has also agreed to reimburse Morgan Stanley for its reasonable expenses, including travel costs, document production and other similar expenses of this type, and also including the fees of outside counsel and other professional advisors should they be engaged with the Company's consent, and to indemnify Morgan Stanley and certain related persons against certain liabilities in connection with their engagement, including certain liabilities under the Federal securities laws. Morgan Stanley has provided certain financial advisory and financing services to the Company from time to time for which it has received customary compensation. Morgan Stanley has also in the past provided financial advisory and financing services to J&J unrelated to the foregoing proposed transactions, and has received customary fees for the rendering of such services. In the ordinary course of its business, Morgan Stanley may from time to time effect transactions and hold positions in securities of the Company and J&J. The Company has retained MacKenzie Partners, Inc. ("MacKenzie") to distribute information (including this Statement on Schedule 14D-9) on behalf of the Company in connection with the Offer and related matters and to assist the Company in its solicitation in opposition to J&J's solicitation pursuant to the J&J Proxy Statement, and has also retained Clark & Weinstock as a public relations advisor in connection with the Offer and related matters. Such firms will receive customary compensation for their services in an amount to be agreed upon with the Company and will be reimbursed for certain out-of-pocket expenses. Except as set forth above, neither the Company nor any person acting on its behalf has employed, retained or compensated any person to make solicitations or recommendations to others with respect to the Offer. 7 ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) Except as set forth below, there have been no transactions in Shares which were effected during the past 60 days by the Company, or to the best knowledge of the Company, by any executive officer, director, affiliate or subsidiary of the Company. Between September 1, 1995 and September 29, 1995, Egbert Ratering sold 52,286 Shares at an average price of $79.34 per Share. On September 1, 1995, Barbara Ramseyer sold 1,000 Shares at a price of $75.25 per Share. On September 7, 1995, Robert C. Strauss sold 1,000 Shares at a price of $77.00 per Share. Philip J. Monks exercised options for a total of 14,900 Shares on September 8, 1995, at an average exercise price of $29.22 per Share and sold 19,082 Shares at a price of $75.25 per Share. On September 22, 1995, Tony R. Brown sold 10,000 Shares at a price of $82.50 per Share. (b) To the best knowledge of the Company, (i) none of its executive officers, directors, affiliates or subsidiaries presently intends to tender Shares to the Purchaser pursuant to the Offer and (ii) none of its executive officers, directors, affiliates or subsidiaries presently intends to otherwise sell any Shares which are owned beneficially or held of record by such persons. The foregoing does not include any Shares over which, or with respect to which, any such executive officer, director or affiliate or subsidiary acts in a fiduciary or representative capacity or is subject to instructions from a third party with respect to such tender. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) As stated above in Item 4(b), the Board believes that neither of the $100 per Share cash price pursuant to the Offer or the $105 per Share in stock pursuant to the Stock Merger reflects the current value of the Company or the significant value that will be created for shareholders through the pursuit of the current strategic plan as an independent company. For this reason, and in light of the other factors referred to in such Item, and the Board's commitment to the maximization of shareholder value, the Board has authorized management and the Company's advisors to explore all strategic alternatives and to report back to the Board at an early date. These alternatives could lead to and involve undertaking negotiations which may result in: (i) an extraordinary transaction, such as a merger or reorganization, involving the Company or any subsidiary of the Company and another company; (ii) a purchase, sale or transfer of a material amount of assets by the Company or one or more subsidiaries of the Company; (iii) a tender offer for or other acquisition of securities by or of the Company; or (iv) a material change in the present capitalization or dividend policy of the Company. At the date hereof no negotiations are underway, although there have been unsolicited contacts from parties who have expressed their interest in the possibility of pursuing various types of transactions with the Company. The Board has determined that disclosure of the possible terms of any transactions or proposals of the type referred to above in this Item 7 prior to an agreement in principle with respect thereto would jeopardize the initiation or continuation of negotiations with respect to such transactions and has, accordingly, adopted a resolution directing management not to disclose such possible terms, or the parties thereto, until such an agreement has been reached. (b) There are no transactions, Board resolutions, agreements in principle or signed contracts in response to the Offer that relate to or would result in one or more of the events referred to in Item 7(a) above. 8 ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. RIGHTS AGREEMENT On October 12, 1995, the Board declared a dividend distribution of one Right for each outstanding share of Common Stock. The distribution was payable to holders of record on October 23, 1995. Each Right, when exercisable, entitles the registered holder to purchase from the Company one share of Common Stock at a price of $375 per share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and Chemical Mellon Shareholder Services L.L.C., as Rights Agent (the "Rights Agent"). The following is a general description only and is qualified in its entirety by the Rights Agreement, a copy of which is filed as Exhibit 8 hereto and is incorporated herein by reference. All undefined capitalized terms used in the discussion below are used as defined in the Rights Agreement. Initially, the Rights will be attached to all certificates representing shares of Common Stock then outstanding, and no separate certificates evidencing the Rights will be distributed. The Rights will separate from the Common Stock and a distribution of Rights Certificates will occur upon the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of Common Stock (the "Stock Acquisition Date") or (ii) 10 business days (or such later date as the Continuing Directors (as defined below) may determine) following the commencement of a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person of 15% or more of the outstanding shares of Common Stock (the earlier of such dates being called the "Distribution Date"). At its meeting on October 31, 1995, the Board determined to defer the Distribution Date until (i) the earlier of (A) the day prior to such date as any person becomes an Acquiring Person and (B) November 20, 1995 or (ii) such other time as shall be determined by the Continuing Directors (as hereinafter defined) prior to the occurrence of the dates referred to in (i). Until the Distribution Date, the Rights (i) will be evidenced by the Common Stock certificates, and will be transferred with and only with the Common Stock certificates, (ii) new Common Stock certificates issued after October 23, 1995 upon transfer or new issuance of the Common Stock will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificates. The Rights are not exercisable until the Distribution Date and will expire at the close of business on October 13, 2005, unless earlier redeemed or exchanged by the Company as described below. The Rights will not be exercisable by a holder in any jurisdiction where the requisite qualification to the issuance to such holder, or the exercise by such holder, of the Rights has not been obtained or is not obtainable. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will evidence the Rights. Except as otherwise determined by the Board, only shares of Common Stock issued prior to the Distribution Date will be issued with Rights. In the event that a person becomes the beneficial owner of 15% or more of the then outstanding shares of Common Stock (except pursuant to an offer for all outstanding shares of Common Stock which the Outside Directors determine to be fair to and otherwise in the best interests of the Company and its shareholders), each holder of a Right will, after the end of the Redemption Period referred to 9 below, have the right to exercise the Right by purchasing, for an amount equal to the Purchase Price, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times such amount. Notwithstanding any of the foregoing, following the occurrence of the events set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. However, Rights are not exercisable following the occurrence of the events set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. For example, at a Purchase Price of $375 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $750 worth of Common Stock (or other consideration, as noted above) for $375. In the event that, at any time following the Stock Acquisition Date, (i) the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation (other than a merger which follows an offer described in the second preceding paragraph), or (ii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall, after the end of the Redemption Period referred to below, have the right to receive, upon exercise, Common Stock of the acquiring company having a value equal to two times the Purchase Price of the Right, e.g., Common Stock of the acquiring company having a value of $750. At any time after a person or group of affiliated or associated persons becomes an Acquiring Person, the Board may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of Common Stock per Right (subject to adjustment). The Purchase Price payable, and the number of shares of Common Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on or a subdivision, combination or reclassification of the Common Stock; (ii) upon the grant to holders of the Common Stock of certain rights or warrants to subscribe for Common Stock or convertible securities at less than the current market price of the Common Stock; or (iii) upon the distribution to holders of the Common Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares will be issued and in lieu thereof, an adjustment in cash will be made based on the market price of the Common Stock on the last trading date prior to the date of exercise. In general, the Board may cause the Company to redeem the Rights in whole, but not in part, at any time during the period commencing on October 12, 1995 and ending on the tenth day following the Stock Acquisition Date, as such period may be extended or shortened by the Board (the "Redemption Period") at a price of $.005 per Right (payable in cash, Common Stock or other consideration deemed appropriate by the Board of Directors). Under certain circumstances set forth in the Rights Agreement, the decision to redeem the Rights will require the concurrence of a majority of the Continuing Directors, including in the event of a successful consent solicitation resulting in a change in a majority of the directors in office at the commencement of such solicitation. After the Redemption Period has expired, the Company's right of redemption may be reinstated (with the concurrence of the Continuing Directors) if an Acquiring Person reduces his beneficial ownership to 10% or less of the outstanding shares of Common Stock in a transaction or series of transactions not involving the Company and there are no other Acquiring Persons. Immediately upon the action of the Board ordering redemption of the Rights, with, where required, the concurrence of the Continuing Directors, the Rights will terminate and the only right of the holders of Rights will be to receive the $.005 redemption price. 10 The term "Continuing Director" means any member of the Board who was a member of the Board prior to the date of the Rights Agreement, and any person who is subsequently elected to the Board if such person is recommended or approved by a majority of the Continuing Directors, but shall not include an Acquiring Person or an affiliate or associate of an Acquiring Person, or any representative of the foregoing entities. The term "Outside Directors" means "Continuing Directors" who are not officers of the Company. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be subject to federal taxation to shareholders or to the Company, shareholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Company or for Common Stock of the acquiring company as set forth above. Other than those provisions relating to the principal economic terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Board prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, defect or inconsistency or to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement; provided however, no amendment to adjust the time period governing redemption may be made at such time as the Rights are not redeemable. AMENDMENT OF BYLAWS At a meeting on October 23, 1995, the Board amended the Company's Bylaws to adopt a record date procedure in connection with written consent solicitations. Under the new Bylaw, following a request for a record date in connection with a consent solicitation, the Board will be required to fix a record date within ten (10) business days, and the date set by the Board as the record date must be no later than ten (10) business days after the date on which the Board acts. FLORIDA TAKEOVER LEGISLATION Section 607.0901 of the Florida Business Corporation Act. Section 607.0901 of the Florida Business Corporation Act (the "FBCA"), in general, provides that any "Affiliated Transaction" (defined to include a variety of transactions, including a merger, as discussed below) between a Florida corporation (such as the Company) and an "Interested Shareholder" (defined generally as a beneficial owner of more than 10 percent of the outstanding voting shares of such corporation) requires, in addition to any other vote required by law or the corporation's articles of incorporation, approval by the holders of at least two-thirds of the voting shares of the corporation, excluding the shares beneficially owned by the Interested Shareholder unless (a) the Affiliated Transaction has been approved by a majority of the "Disinterested Directors" (as defined below), (b) the Interested Shareholder is the beneficial owner of at least 90 percent of the outstanding voting shares of the corporation (exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the Disinterested Directors) or (c) in the Affiliated Transaction, the per share consideration to be received by the holders of voting shares of the corporation is generally at least equal to the highest of (i) the highest per share price paid by the Interested Shareholder for the corporation's shares during the two-year period immediately preceding the announcement date of the Affiliated Transaction or in the transaction in which the Interested Shareholder became an Interested Shareholder, (ii) the higher of the fair market value of the corporation's shares on such announcement date or such determination date or (iii) a price based upon a combination of the foregoing. As used in Section 607.0901, unless otherwise specified in the corporation's original articles of incorporation, a "Disinterested Director" means as to any particular Interested Shareholder (1) any 11 member of the board of directors of the corporation who was a member of the board of directors before the later of January 1, 1987, or the date on which the Interested Shareholder became such and (2) any member of the board of directors of the corporation who was recommended for election by, or was elected to fill a vacancy and received the affirmative vote of, a majority of the Disinterested Directors then on the board of directors. Under Section 607.0901, the requirements described above do not apply if, among other things, (a) the corporation's original articles of incorporation contain a provision expressly electing not to be governed by Section 607.0901; (b) the corporation adopted an amendment to its articles of incorporation prior to January 1, 1989, expressly electing not to be governed by Section 607.0901, provided that any such amendment would not apply to any Affiliated Transaction of the corporation with an Interested Shareholder who became such on or prior to the effective date of such amendment; (c) the corporation adopts an amendment to its articles of incorporation or by-laws, approved by the affirmative vote of the holders, other than Interested Shareholders and their affiliates and associates, of a majority of the outstanding voting shares of the corporation, excluding the voting shares of Interested Shareholders and their affiliates and associates, expressly electing not to be governed by Section 607.0901, provided that such amendment to the articles of incorporation or by-laws would not be effective until 18 months after such vote and would not apply to any Affiliated Transaction of the corporation with an Interested Shareholder who became such prior to the date of such amendment; or (d) a shareholder becomes an Interested Shareholder "inadvertently" and, as soon as practicable thereafter, divests itself a sufficient amount of voting shares of the corporation so that such shareholder no longer is the beneficial owner, directly or indirectly, of 10% or more of the outstanding voting shares of the corporation, and which shareholder would not at any time within the five-year period preceding the first public announcement with respect to such Affiliated Transaction have been an Interested Shareholder but for such inadvertent acquisition. Section 607.0901 provides, except as described above, that the corporation may not merge or consolidate with an Interested Shareholder or any affiliate or associate thereof, and also may not engage in certain other transactions with an Interested Shareholder or any affiliate or associate thereof, including, without limitation, (a) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) of assets of the corporation or any subsidiary of the corporation (i) having an aggregate fair market value equal to 5% or more of the aggregate fair market value of all the assets of the corporation determined on a consolidated basis, (ii) having an aggregate fair market value equal to 5% or more of the aggregate fair market value of all the outstanding shares of the corporation or (iii) representing 5% or more of the earning power or net income, determined on a consolidated basis, of the corporation; (b) the issuance or transfer by the corporation or by any subsidiary of the corporation (in one transaction or a series of transactions) of any shares of the corporation or any subsidiary of the corporation which have an aggregate fair market value equal to 5% or more of the aggregate fair market value of all the outstanding shares of the corporation to the Interested Shareholder or any affiliate or associate of the Interested Shareholder, except pursuant to a transaction which effects a pro rata distribution to all shareholders of the corporation; (c) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by, or pursuant to any agreement, arrangement, or understanding (whether or not in writing) with, the Interested Shareholder or any affiliate or associate of the Interested Shareholder; (d) any reclassification of securities or recapitalization of the corporation, or any merger or consolidation of the corporation with any subsidiary of the corporation, or any other transaction (whether or not with or into or otherwise involving the Interested Shareholder), with the Interested Shareholder or any affiliate or associate of the Interested Shareholder, which has the effect, directly or indirectly (in one transaction or a series of transactions during any 12-month period), of increasing by more than 5% the percentage of the outstanding voting shares of the corporation or any subsidiary of the corporation beneficially owned by the Interested Shareholder; or (e) any receipt by the Interested Shareholder or any affiliate or associate of the Interested Shareholder of the benefit, directly or indirectly (except proportionately as a 12 shareholder of such corporation), of any loans, advances, guaranties, pledges or other financial assistance or any tax credits or other tax advantages provided by or through the corporation. The foregoing summary of Section 607.0901 does not purport to be complete and is qualified in its entirety by reference to the provisions of Section 607.0901. Section 607.0902 of the FBCA. Section 607.0902 provides, in general, that shares of an Issuing Public Corporation (as defined below) acquired in a Control Share Acquisition (as defined below) will not have voting rights unless, among other exceptions, (1) the Issuing Public Corporation's articles of incorporation or by-laws provide, before the time of the Control Share Acquisition, that Section 607.0902 does not apply to Control Share Acquisitions of shares of such Issuing Public Corporation, (2) the Issuing Public Corporation's board of directors approved the acquisition of shares prior to the acquisition or (3) the voting rights for such shares are granted by resolution approved at an annual or special meeting of shareholders of the Issuing Public Corporation by the affirmative vote of the holders of a majority of all the shares of each class or series entitled to vote separately on such a proposal, excluding Interested Shares (as defined below). As used in Section 607.0902: "Control Share Acquisition" means, in general, the acquisition (other than pursuant to a merger agreement to which the Issuing Public Corporation is a party or pursuant to an acquisition approved by the board of directors of such Issuing Public Corporation), directly or indirectly, of beneficial ownership of shares of an Issuing Public Corporation, and all acquisitions of such shares within 90 days before or after the date of the acquisition of beneficial ownership of shares that results in a Control Share Acquisition, which (but for the provisions of the statute) would have voting rights and which, when added to all other shares of such Issuing Public Corporation beneficially owned by such person, would entitle such person, upon acquisition of such shares, to vote or direct the voting of shares of such Issuing Public Corporation having voting power in the election of directors within any of the following ranges of such voting power: (i) one-fifth or more but less than one-third of all voting power; (ii) one-third or more but less than a majority of all voting power; or (iii) a majority or more of all voting power. "Interested Shares" means shares of an Issuing Public Corporation that are beneficially owned by one person who has acquired or proposes to acquire beneficial ownership of shares of such Issuing Public Corporation in a Control Share Acquisition, any officer of the Issuing Public Corporation or any employee of the Issuing Public Corporation who is also a director of such corporation. "Issuing Public Corporation" means a corporation that has (1) 100 or more shareholders, (2) its principal place of business, its principal office or substantial assets within Florida and (3) either more than ten percent of its shareholders residing within Florida, more than ten percent of its shares owned by Florida residents, or at least 1000 shareholders resident in Florida. Any person who proposes to make or has made a Control Share Acquisition may at the person's election deliver a statement (an "Acquiring Person Statement") to the Issuing Public Corporation at the Issuing Public Corporation's principal office. The Acquiring Person Statement must set forth (1) the identity of the acquiring person and each other member of any group of which the person is a part for purposes of determining shares acquired in a Control Share Acquisition, (2) a statement that the Acquiring Person Statement is given pursuant to Section 607.0902, (3) the number of shares of the Issuing Public Corporation owned, directly or indirectly, by the acquiring person and each other member of the group and (4) the range of voting power under which the Control Share Acquisition falls or would, if consummated, fall. If the Control Share Acquisition has not taken place, the Acquiring Person must also set forth (1) a description in reasonable detail of the terms of the proposed control-share acquisition and (2) representations of the acquiring person, together with a statement, in reasonable detail of the facts upon which 13 they are based, that the proposed Control Share Acquisition, if consummated, will not be contrary to law and that the acquiring person has the financial capacity to make the proposed Control Share Acquisition. If the Acquiring Person so requests at the time of delivery of an Acquiring Person Statement and gives an undertaking to pay the corporation's expenses of a special meeting, within ten days thereafter, the board of directors of the Issuing Public Corporation, or others authorized to call such a meeting under the Issuing Public Corporation's articles of incorporation or bylaws, shall call a special meeting of shareholders of the Issuing Public Corporation for the purpose of considering the voting rights to be accorded to shares acquired or to be acquired in the Control Share Acquisition. Such special meeting is required to be called within 10 days after the Issuing Public Corporation receives the request and must be held at least 30 days after, but not later than 50 days after, the request has been received. If no request is made, the voting rights to be accorded the shares acquired in the Control Share Acquisition shall be presented to the next special or annual meeting of the shareholders. The foregoing summary of Section 607.0902 does not purport to be complete and is qualified in its entirety by reference to the provisions of Section 607.0902. Unless the Company's Board of Directors approves the acquisition of Shares pursuant to the Offer or the purchaser obtains approval of voting rights for the Shares from shareholders of the Company at an annual or special meeting of shareholders as described above, the Shares acquired pursuant to the Offer would not have voting rights. LITIGATION On October 19, 1995, a complaint (the "J&J Complaint") entitled Johnson & Johnson and JNJ Acquisition Corp. v. Cordis Corporation, Civ. Action No. 95-2295, was filed against the Company in the United States District Court for the Southern District of Florida. Among other things, the J&J Complaint seeks injunctive and declaratory relief to prevent the Company from impeding or delaying the Offer, and the Stock Merger with the Company, through the use of the Company's anti-takeover devices or other defensive measures, and, specifically, an order compelling the Company, among other things, to redeem the Rights, or to amend the Rights Agreement to make the Rights inapplicable to the Offer and the Stock Merger. The J&J Complaint also seeks, among other things, costs and attorneys' fees. On October 26, 1995, the J&J Complaint was amended (the "Amended J&J Complaint") to allege violations of Florida law, and breach of fiduciary duty by the directors, in the Board's adoption of certain provisions of the Rights Agreement. The Amended J&J Complaint seeks, among other things, injunctive and declaratory relief against the operation or enforcement of those provisions. On that same date, J&J filed an emergency motion for expedited discovery. The emergency motion seeks immediate entry of a scheduling order for expedited discovery and a briefing and hearing schedule on a proposed motion for a preliminary injunction that J&J has not yet filed. The Company filed a memorandum in opposition to J&J's emergency motion on October 31, 1995. A reply memorandum was served upon the Company's Florida counsel, White & Case, that same day. The motion is currently pending before the United States District Court for the Southern District of Florida. On October 19, 1995, a purported class action complaint (the "State Shareholders Complaint") entitled Brickell Partners v. Robert C. Strauss, et al., Case No. 95-20617, was filed against the Company and eight of its current and former directors in the Circuit Court of the 11th Judicial Circuit in and for Dade County, Florida, alleging, among other things, breach of fiduciary duty to maximize shareholder value by failing to adequately consider the Offer, and failing to exercise independent business judgment in evaluating the Offer. The State Shareholders Complaint seeks, among other things, an order directing the defendants to take all appropriate steps to maximize value for, and protect the interests of, the Company's shareholders, including such steps in connection with any merger or 14 acquisition of the Company. It further seeks, among other things, an injunction with respect to the implementation of the Rights, as well as damages and costs. On October 20, 1995, a purported class action complaint (the "Federal Shareholders Complaint") entitled Brickell Partners, et al. v. Robert C. Strauss, et al., Civ. Action No. 95-2320, was filed against the Company and its current directors in the United States District Court for the Southern District of Florida, alleging, among other things, violation of Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-9 thereunder, and breach of fiduciary duty. As relief, the Federal Shareholders Complaint seeks a declaration that defendants have violated Section 14(a), and have breached their fiduciary duties, and, further, that the election of the Company's directors at the Annual Meeting of Stockholders is null and void. It also seeks, among other things, an order directing the defendants to fairly evaluate alternatives designed to maximize value for the Company's shareholders, and an injunction with respect to the implementation of the Rights and other defensive measures, as well as damages and costs. On October 26, 1995, the Federal Shareholders Complaint was amended (the "Amended Federal Shareholders Complaint") to allege further breaches of fiduciary duty by defendants, including with respect to the adoption of a Bylaw amendment, as well as certain provisions of the Company's Rights Agreement. The Amended Federal Shareholders Complaint seeks, among other things, a declaration that those provisions, as well as the Bylaw amendment, are null and void. On October 23, 1995, a purported class action complaint (the "Schneider Complaint") entitled Laz L. Schneider v. Robert C. Strauss, et al, Civ. Action No. 95-2338, was filed against the Company and its directors in the United States District Court for the Southern District of Florida, alleging, among other things, violation of Section 14(a) of the Exchange Act and Rule 14a-9 thereunder, and breach of fiduciary duty. As relief, the Schneider Complaint seeks a declaration that defendants have violated Section 14(a), and have breached their fiduciary duties, and, further, that the election of the Company's directors at the Annual Meeting of Stockholders is null and void. It also seeks injunctive relief, including, among other things, an order directing defendants to fairly evaluate alternatives designed to maximize value for the Company's shareholders, as well as damages and costs. On October 24, 1995, a purported class action complaint (the "Pratt Complaint") entitled Mary Pratt v. Catherine M. Burzik, et al., Civ. Action No. 95-2345, was filed against the Company and ten of its current and former directors in the United States District Court for the Southern District of Florida, alleging, among other things, violation of Section 14(a) of the Exchange Act and Rule 14a-9 thereunder, and breach of fiduciary duty to maximize shareholder value by failing to adequately consider the Offer, and failing to exercise independent business judgment in evaluating the Offer. As relief, the Pratt Complaint seeks a declaration that defendants have violated Section 14(a), and have breached their fiduciary duties, and, further, that the election of the Company's directors at the Annual Meeting of Stockholders is null and void. It also seeks injunctive relief, including, among other things, an order directing defendants to take appropriate steps to facilitate a premium acquisition of the Company in a manner designed to maximize value for the Company's stockholders, as well as damages and costs. Copies of the Amended J&J Complaint, the State Shareholders Complaint, the Amended Federal Shareholders Complaint, the Schneider Complaint and the Pratt Complaint are filed as Exhibits 9, 10, 11, 12 and 13 hereto, respectively, and are incorporated herein by reference. The foregoing descriptions of the Complaints are qualified in their entirety by reference to the Complaints. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. The following exhibits are filed herewith: Exhibit 1 -- Excerpts from the Company's Proxy Statement dated September 15, 1995 for its 1995 Annual Meeting of Stockholders. 15 Exhibit 2 --Form of Tier 1 Severance Compensation Agreement. Exhibit 3 --Form of Tier 2 and Tier 3 Severance Compensation Agreement. Exhibit 4 --Form of Tier 4 Severance Compensation Agreement. Exhibit 5 --Form of Indemnification Letter Agreement. Exhibit 6 --Letter to Cordis Shareholders, dated November 1, 1995.* Exhibit 7 --Press release issued by Cordis on November 1, 1995. Exhibit 8 --Rights Agreement, dated as of October 13, 1995, between the Company and Chemical Mellon Shareholder Services L.L.C.** Exhibit 9 --Amended Complaint in Johnson & Johnson and JNJ Acquisition Corp. v. Cordis Corporation (U.S. District Court, Southern District of Florida, October 26, 1995). Exhibit 10 --Complaint in Brickell Partners v. Robert C. Strauss, et al. (11th Circuit Court, Dade County, Florida, October 19, 1995). Exhibit 11 --Amended Complaint in Brickell Partners, et al. v. Robert C. Strauss, et al. (U.S. District Court, Southern District of Florida, October 26, 1995). Exhibit 12 --Complaint in Laz L. Schneider v. Robert C. Strauss, et al. (U.S. District Court, Southern District of Florida, October 23, 1995). Exhibit 13 --Complaint in Mary Pratt v. Catherine M. Burzik, et al. (U.S. District Court, Southern District of Florida, October 24, 1995). Exhibit 14 --Opinion of Morgan Stanley & Co. Incorporated dated October 31, 1995.*** - ------------ * Included in copy mailed to shareholders. ** Incorporated by reference to Exhibit 1 to the Company's Form 8-K dated October 23, 1995. *** Included as Annex A in copy mailed to shareholders. 16 SIGNATURE After reasonable 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. CORDIS CORPORATION By: /s/ ROBERT C. STRAUSS .......................................... Robert C. Strauss, Chairman, President and Chief Executive Officer Dated: November 1, 1995 17 EXHIBIT INDEX Exhibit 1-- Excerpts from the Company's Proxy Statement dated September 15, 1995 for its 1995 Annual Meeting of Stockholders. Exhibit 2--Form of Tier 1 Severance Compensation Agreement. Exhibit 3--Form of Tier 2 and Tier 3 Severance Compensation Agreement. Exhibit 4--Form of Tier 4 Severance Compensation Agreement. Exhibit 5--Form of Indemnification Letter Agreement. Exhibit 6--Letter to Cordis Shareholders, dated November 1, 1995.* Exhibit 7--Press release issued by Cordis on November 1, 1995. Exhibit 8--Rights Agreement, dated as of October 13, 1995, between the Company and Chemical Mellon Shareholder Services L.L.C.** Exhibit 9--Amended Complaint in Johnson & Johnson and JNJ Acquisition Corp. v. Cordis Corporation (U.S. District Court, Southern District of Florida, October 26, 1995). Exhibit 10--Complaint in Brickell Partners v. Robert C. Strauss, et al. (11th Circuit Court, Dade County, Florida, October 19, 1995). Exhibit 11--Amended Complaint in Brickell Partners, et al. v. Robert C. Strauss, et al. (U.S. District Court, Southern District of Florida, October 26, 1995). Exhibit 12--Complaint in Laz L. Schneider v. Robert C. Strauss, et al. (U.S. District Court, Southern District of Florida, October 23, 1995). Exhibit 13--Complaint in Mary Pratt v. Catherine M. Burzik, et al. (U.S. District Court, Southern District of Florida, October 24, 1995). Exhibit 14--Opinion of Morgan Stanley & Co. Incorporated dated October 31, 1995.*** - ------------ * Included in copy mailed to shareholders. ** Incorporated by reference to Exhibit 1 to the Company's Form 8-K dated October 23, 1995. *** Included as Annex A in copy mailed to shareholders. EX-1 2 EXHIBIT 1 Compensation of Directors Compensation of Directors. Directors who are compensated as employees of the Company receive no additional compensation as Directors. Each Director who is not an employee of the Company receives an annual retainer of $20,000; a fee of $1,250 for each Board Meeting attended; and $750 for each Committee Meeting attended. Committee Chairmen are paid $1,000 for each Committee Meeting attended. Dr. Marston, as Chairman of the Board during fiscal 1995, received an annual retainer of $75,000, but received no additional compensation for meeting attendance. Cordis Corporation Director Non-Qualified Stock Option Plan ("the Plan"). The Plan became effective on June 5, 1990. It provides incentives in the form of stock option grants to non-employee Directors of the Company. The grants are intended to recognize the expertise and contributions provided to the Company by the members of the Board of Directors and to provide the Board of Directors with a proprietary interest in the Company, enhancing their personal interest in the Company's continued success and progress. The Plan is administered by the Compensation Committee of the Board of Directors. The Plan currently authorizes the issuance of 200,000 shares of the Company's common stock. The options, 2,000 of which are granted automatically every year to each non-employee Director, fully vest one year after the anniversary of the date of the grant, are granted at a price equal to the market value of the shares on the date of the grant and must be exercised within ten years of the date of grant. In the case of a Director's death, the options vest immediately. The options continue to vest during the period of any disability or retirement. The options granted under this Plan are not assignable or transferable by optionees. The Plan provides that if there is a change in control, defined as the acquisition by any person of direct or indirect beneficial ownership of the Company's outstanding voting securities in a quantity sufficient to cause a change in the composition of the Company's Board of Directors, completion of a tender or exchange offer of 50% or more of the voting securities of the Company or the merger or consolidation of the Company with another corporation or the transfer of all or substantially all of the assets of the Company, all options will be 100% vested. 4 Cordis Corporation Director Retirement Plan. Each non-employee director who retires from the Board after he or she has served on the Board for five years is eligible for benefits, for a period equal to two times his or her years of active service as a Director, equal to the annual retainer paid at the time of his or her retirement, increased by one-half of any subsequent increase in the annual retainer awarded to active Directors. The Plan waives the years-of-service eligibility requirement if a Director is forced to retire as a result of a disability or incapacity or a merger or acquisition of the Company. The Plan, unless waived by the Board, requires a Director to retire from active service on the Board if his or her 72nd birthday occurs on or before the 15th day of October in any year in which such Director shall stand for reelection to the Board of Directors. If a retired Director dies during the period in which retirement benefits are payable, such payments shall be paid to the Director's designated beneficiary or to his or her estate, for a period of one year after his or her death or for the remaining period for which such retirement benefits are payable, whichever occurs first. Any Director who has been an employee of the Company shall not be eligible for benefits under the Plan except for reimbursement of expenses incurred in meeting attendance and meeting fees equal to the meeting fees paid to active Directors. In the event that a Director desires to retire or is forced to retire subsequent to the merger or acquisition of the Company, the Plan allows the retiring Director to elect acceleration of benefits under the Plan by requesting a present value, lump sum payment; to request the Company to purchase an annuity which would pay to the Director a sum equal to the benefits he or she would have received under the Plan; or to elect payments of benefits in accordance with the terms and provisions of the Plan. Cordis Corporation Director Deferred Compensation Plan. This Plan, restated and amended, effective July 1, 1995, allows non-employee directors to defer up to 100% of their compensation. The amounts deferred may be invested among a portfolio of funds selected and managed by the Company. Participants elect the timing and manner in which the amounts deferred shall be paid. All elections made by the participants are irrevocable except as specifically provided in the Plan. 5 Executive Compensation The following Summary Compensation Table represents, for each of the last three fiscal years, the annual compensation paid by the Company, together with long-term and other compensation, for the Chief Executive Officer and the four most highly compensated Executive Officers of the Company:
SUMMARY COMPENSATION TABLE Long Term Compensation -------------------- Annual Compensation Awards Payouts ---------------------------------------- --------- --------- Other All Annual Securities LTIP Other Salary Bonus Compensation Underlying Payouts Compensation Name and Principal Position Year ($) (1) ($) (1) (2) ($) Options(#) ($) (3) ($) (4) - --------------------------- ---- ------- ----------- ------------ ---------- -------- ------------ Robert C. Strauss 1995 $459,039 $ 22,750 25,000 $563,477 $8,386 President and Chief 1994 $430,000 30,000 $312,247 $8,174 Executive Officer 1993 $420,000 $183,951 22,000 $8,088 Rudy J. Kranys 1995 $235,961 $ 11,750 12,500 $256,231 $7,687 Senior Vice President 1994 $220,000 15,000 $149,687 $7,119 Worldwide Research and 1993 $215,000 $ 91,976 11,000 $7,036 Product Development Alfred J. Novak 1995 $235,961 $ 41,750 12,500 $281,705 $6,217 Vice President and 1994 $220,000 15,000 $156,122 $5,073 Chief Financial Officer 1993 $215,000 $ 91,976 11,000 $4,066 Philip J. Monks 1995 $199,464 $ 10,000 $36,258(5) 12,500 $283,331 N/A Vice President, Worldwide 1994 $196,622 $49,777(6) 15,000 $150,181 N/A Marketing and Sales 1993 $191,891 $ 91,976 $46,158(7) 11,000 N/A Egbert Ratering 1995 $199,464 $ 10,000 12,500 $283,331 N/A Vice President, Worldwide 1994 $196,717 $ 13,833(8) 15,000 $150,181 N/A Manufacturing 1993 $192,061 $ 91,976 11,000 N/A
- -------------- (1) Amounts shown include cash compensation earned by the named executive during the year covered, including amounts deferred at the election of those officers. Bonuses for fiscal 1995, 1994 and 1993 were paid in the fiscal year subsequent to the fiscal year in which they were earned. 7 (2) For 1995, the cash bonus amounts were awarded pursuant to the individual objective performance program. Mr. Novak received a special bonus in the amount of $30,000 to reward him for his efforts in connection with various business transactions and his temporary assumption of responsibility for the U.S. Marketing and Sales organization. For 1993 the amounts awarded pursuant to the 1991 Performance Unit Award Plan were in the form of Company stock. The value of the units was calculated according to the fair market value of Company stock on or about the date of payout based on the number of units awarded and percentage of achievement. The 1993 awards were based on one-year performance periods whereby the target amounts for return on assets and sales growth yielded payments of 100.941%. (3) In 1994 the amounts paid pursuant to the 1991 Performance Unit Award Plan were distributed as follows: 50% in the form of Company stock and 50% in cash. The value of the units awarded in stock was calculated according to the fair market value of Company stock on or about the date of payout based on the number of units awarded and percentage of achievement. The value of the units awarded in cash was calculated according to the average of the last twenty trading days in the month of June 1994. In 1995, the amounts paid were distributed 100% in the form of Company stock and the value of the units awarded was calculated according to the fair market value of Company stock as of the date of the Compensation Committee meeting, August 21, 1995, based on the number of units awarded and percentage of achievement. The 1994 and 1995 awards were based on three-year performance periods whereby the target performance achievements for return on assets, sales growth and targeted sales per employee yielded in 1994 a payment of 110.38% for the Corporate group, 105.83% for the Miami group and 106.18% for the European group, and in 1995 a payment of 138.61% for the Corporate group, 126.08% for the Miami group and 139.40% for the European group. (4) Company contributions to the Tax-Sheltered Investment Plan and dollar value of life insurance premiums paid by the Company. European Officers do not participate in the Tax-Sheltered Investment Plan. (5) Includes reimbursements of $17,052 for schooling of dependents under the Company's Expatriate Policy and automobile reimbursement allowance of $19,206. (6) Includes reimbursements of $33,638 for schooling of dependents under the Company's Expatriate Policy and automobile reimbursement allowance of $16,139. (7) Includes reimbursements of $32,118 for schooling of dependents under the Company's Expatriate Policy and automobile reimbursement allowance of $14,040. (8) Mr. Ratering received a bonus in 1994 for twenty years of service with the Company. REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION Compensation Committee of the Board Decisions regarding annual and long-term executive compensation of the Company's executives and the Chief Executive Officer are made by the Board upon the recommendation of the Compensation Committee. Recommendations of the Compensation Committee relating to the compensation of the Company's executive officers are submitted to the full Board for approval, except for awards under certain stock-based compensation plans, which are approved solely by the Committee. No member of the Compensation Committee is presently an officer or employee of the Company or any of its subsidiaries. The purpose of this report is to inform shareholders of the Company's compensation policies for the Chief Executive Officer and other executive officers and the rationale for compensation paid to executive officers and the Chief Executive Officer. 8 Policies and Objectives The Compensation Committee's executive compensation policies are designed to attract, motivate, reward and retain qualified executives by providing competitive levels of salary and incentive compensation to the Chief Executive Officer and other executive officers. This objective is achieved through cash compensation, the performance unit award and stock option plans and other programs described below. Executive compensation is intended to be competitive with the compensation levels of executives of other companies in the same industry, or with companies that have comparable sales volumes, while reflecting the Company's current and long- term performance. To establish competitive levels of compensation, the Compensation Committee annually evaluates total compensation packages offered by competitive companies. Executive level compensation is generally targeted above the median range of compensation paid to executives of companies of similar size and industry. Survey data analyzed in establishing compensation levels for executives include companies that are within the industry group, S & P Medical Products & Supplies Index, shown in the performance graph on page 17. The primary focus of the Compensation Committee in determining total executive compensation is incentive compensation based upon the Company's current and long-term performance, the long-term growth of the Company and shareholder value. As a result of the emphasis on corporate performance, in any given year the compensation of the Company's executives may differ significantly from the compensation paid to executives of the Company's competitors. All executive officers, including the Chief Executive Officer, are eligible to participate in the Company's incentive compensation plans, which currently consist of the 1991 Performance Unit Award Plan and the Non-Qualified Stock Option Plan for management. Subjective factors of individual performance are considered in establishing base salaries, the quantity of performance unit awards and stock option grants. A separate individual objective performance bonus program was also implemented exclusively for fiscal 1995 to reward individual achievement by certain officers of performance objectives approved by the Compensation Committee. Relationship of Executive Compensation to Company Performance The Compensation Committee's objective in setting the Chief Executive Officer's annual compensation and that of other executive officers is to base a significant percentage of compensation upon annual and long-term company performance criteria, and to a lesser degree, on individual performance. For this reason the Compensation Committee has emphasized return on assets, sales growth, sales per employee and other financial performance factors in determining the annual and long-term compensation for all executive officers. The Company's financial performance, as well as general market conditions, are significant factors influencing the Company's stock price. Base Salary The base salaries of the Chief Executive Officer and other senior executives are governed by Company performance and the competitive survey data previously described. As a result of salary comparisons for the chief executive officers and other executives in comparable companies surveyed and the current executive salary levels of the Company's Chief Executive Officer and other executives and the Company's overall performance, the Compensation Committee recommended and the Board approved a 5.81% increase in the Chief Executive Officer's base salary for 1995. There were no salary increases in 1994. 9 Cash and Stock Incentive Programs Performance Unit Award Plan The Company's 1991 Performance Unit Award Plan ("the Plan") is designed to provide long-term incentives to the Chief Executive Officer and other executives. The Compensation Committee has the exclusive power to select the officers and key employees who will be granted awards under the Plan, to determine the type, size and terms of awards granted, including the time of vesting and payment of awards, to establish objectives and conditions for vesting and earning awards, to determine terms and conditions for the lapse of restrictions applicable to any awards, and to determine whether awards will be paid. The Compensation Committee considers target performance objectives based on the Company's long-term financial goals and payout levels available under the Plan to determine the number of units awarded to the Chief Executive Officer and to other executive officers. Under the Plan, target performance objectives are established annually by the Compensation Committee and in the past differed according to geographical regions. Because of the Company's shift to a global focus, future objectives will place greater emphasis on performance in achieving corporate goals. These objectives may include one or more of the following performance measures: growth in Company sales, return on net assets and sales per employee. Performance criteria considered in determining the number of performance units, if any, to be granted to executives include: responsibility level, past performance, potential, cash compensation levels and other considerations as the Compensation Committee may deem appropriate. Grants of performance units to the Chief Executive Officer are assessed on the basis of the Chief Executive Officer's individual contributions to overall performance and the Company performance factors described above. Performance unit award payouts may range from zero up to percentages in excess of 100% of the target amount, depending upon the Company's performance in any given year. Awards under the Plan are made in Common Stock of the Company, cash or a combination of Common Stock and cash. For fiscal 1995, the amounts awarded pursuant to the Plan were in the form of Common Stock of the Company and the value of the units was calculated according to the fair market value of Company stock on August 21, 1995. For fiscal 1995 the amounts awarded were based on achievements calculated according to performance in geographical regions. The number of performance units awarded to the Chief Executive Officer, 6,000, during the past fiscal year, reflects the Company's successful performance and his individual contributions. Change of Control Arrangements. The Plan presently provides that in the event of a change in control of the Company, as defined in the Plan, performance unit awards will vest immediately in a pro rata amount, based upon the portion of the performance period elapsed prior to the change in control and certain projected assumptions of performance achievements, had the change in control not occurred. Non-Qualified Stock Option Plan The Company's Non-Qualified Stock Option Plan for management is intended to motivate the Chief Executive Officer, executives and key employees who contribute materially to the success and profitability of the Company by providing recipients of stock option grants with a proprietary interest in the Company, thereby enhancing their personal interest in the continued success of the Company. Options are awarded at the market value of the shares on the date of grant and become vested one year from the date of grant or at such other incremental vesting periods as the Compensation Committee establishes, subject to a change in control, as defined in the Plan. The Compensation Committee generally considers individual performance, responsibil- 10 ity, and the Company's financial performance during the fiscal year in determining the number of options awarded to the Chief Executive Officer and to the other executive officers. The stock options awarded to the Chief Executive Officer at the conclusion of the fiscal year, as reported in the Option Grants Table, were based upon Company performance, level of responsibility, salary and individual performance. The Compensation Committee considered the total number of options outstanding when determining the options awarded to the Chief Executive Officer and the other executive officers. The Plan currently authorizes a maximum of 2,625,000 shares of the Company's Common Stock. As of June 30, 1995, there were 554,820 shares available for future grants. The Compensation Committee believes that granting options to executives and key employees is consistent with the philosophy that stock ownership by management is beneficial to the enhancement of shareholder value. Change of Control Arrangements. The Plan presently provides that in the event of a change in control of the Company, defined as the acquisition by any person of direct or indirect beneficial ownership of the Company's outstanding voting securities in a quantity sufficient to cause a change in the composition of the Company's Board of Directors, completion of a tender or exchange offer of 50% or more of the voting securities of the Company or the merger or consolidation of the Company with another corporation or the transfer of all or substantially all of the assets of the Company, all options will be 100% vested. Other Plans For fiscal 1995, the Compensation Committee approved an individual objective performance bonus plan for the Chief Executive Officer and certain executive officers. The purpose of the plan is to reward the Chief Executive Officer and a select group of executive officers for achievement of certain individual performance objectives established by the Committee. Cash bonuses in the maximum amount of 7% of annual base salary were paid to the executives achieving some or all of their established goals, as determined by the Compensation Committee. The Compensation Committee determined that the Chief Executive Officer should be rewarded in the amount of 5% of his annual base salary. At various times in the past, the Company has adopted certain employee benefit plans in which executives, including the Chief Executive Officer, are permitted to participate on the same terms as non-executive employees who meet the applicable eligibility criteria. The Compensation Committee has determined that having the Company's matching contribution under the Tax-Sheltered Investment Plan in the form of Company stock is beneficial in further aligning employees' and shareholders' long-term financial interests. Other than the value of the Company match, benefits under the Tax-Sheltered Investment Plan are not tied to Company performance. As a further effort to motivate and retain qualified executives and key employees, the Cordis Corporation Executive Deferred Compensation Plan (the "Deferred Plan") as amended and restated effective July 1, 1995, and the Supplemental Executive Retirement Plan were implemented. The Chief Executive Officer, selected executives and other key employees are eligible to participate in either plan. Under the Deferred Plan, participants can defer up to 100% of their total cash compensation. Amounts deferred are invested among a portfolio of funds selected and managed by the Company. The Compensation Committee believes that its executive compensation objectives are served by the compensation policies and plans described above, by encouraging long-term performance and by promoting management retention, while aligning shareholders' and management's interests in the performance of the Company's Common Stock. 11 Tax Deductibility Considerations The Compensation Committee has reviewed the Company's compensation plans with regard to the deduction limitation under the Omnibus Budget Reconciliation Act of 1993. This Act made certain non-performance based compensation to executives of public companies in excess of $1 Million non- deductible to the Company beginning in fiscal 1995. At this time, it is not anticipated that any executive officer will receive any such compensation in excess of this limit during fiscal 1996. The Committee has determined that the Cordis Corporation Non-Qualified Stock Option Plan, as amended, meets the requirements for deductibility under the Act by limiting to 200,000 the amount of options that may be granted to any one officer or key employee over the next three years. The Committee will continue to review the issue and evaluate whether the compensation plans should be altered in the future to meet the deductibility requirements. SUBMITTED BY THE COMPENSATION COMMITTEE. Donald F. Malin, Jr. Richard W. Foxen J.L. de Ruyter van Steveninck 12 OPTION GRANTS TABLE The following table provides information on grants of options to purchase the Company's Common Stock pursuant to the Cordis Corporation Non- Qualified Stock Option Plan (the "Plan") during the fiscal year ended June 30, 1995 to the named Executive Officers:
Option Grants in Last Fiscal Year Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Individual Grants Term (10 Years) (2) ---------------------------------------------------- ---------------------------- % of Total Number of Options Securities Granted to Exercise Underlying Employees or Base Options Granted in Fiscal Price Expiration Name (#) (1) Year ($/Sh) Date 0%($) 5%($) 10%($) - ---- --------------- --------- ------ ---------- ----- -------- ---------- Robert C. Strauss 25,000 10.03% $63.00 6/12/05 $0 $990,500 $2,510,250 Rudy J. Kranys 12,500 5.02% $63.00 6/12/05 $0 $495,250 $1,255,125 Alfred J. Novak 12,500 5.02% $63.00 6/12/05 $0 $495,250 $1,255,125 Philip J. Monks 12,500 5.02% $63.00 6/12/05 $0 $495,250 $1,255,125 Egbert Ratering 12,500 5.02% $63.00 6/12/05 $0 $495,250 $1,255,125
- ------------------ ( 1 ) The Cordis Corporation Non-Qualified Stock Option Plan, as amended, provides for the grant of options for a period of ten (10) years from the date of grant. Under the Plan, the vesting schedule for the above executives is 10% during the second year, 20% during the third year, 30% during the fourth year, and the balance during the fifth year. All remaining options are exercisable and expire on the tenth anniversary of the date of grant. The exercise price of each share subject to options is equal to the fair market value of the share on the date of grant. (2) Optionees will not realize value under the 1995 option grants without a stock price appreciation which will benefit all shareholders. If the Company's stock does not appreciate in value above the option price set forth above, there will be no benefit to shareholders or to optionees. If the Company's stock appreciates 5% in value, the potential appreciation in stock value to shareholders would be approximately $648,245,000. If the Company's stock appreciates 10% in value, the potential appreciation in stock value to shareholders would be approximately $1,642,865,000. Total number of shares outstanding as of June 30, 1995, was 16,361,568. The assumed rates of stock price appreciation are set by the Securities and Exchange Commission's proxy statement disclosure rules. These assumptions are not intended to forecast future price appreciation of the Company's stock price. The Company's stock price may increase or decrease over the time period set forth above. 13 OPTION EXERCISES AND YEAR-END VALUE TABLE The following table contains information relating to the exercise of stock options by the named Executive Officers in fiscal 1995 as well as the number and value of their unexercised options as of June 30, 1995:
Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Values Number of Securities Underlying Unexercised Value of Unexercised Options at FY-End In-the-Money Options Shares Acquired Value (#) at FY-End ($) (2) --------------------------- -------------------------- Name on Exercise ( # ) Realized ($) ( 1 ) Exercisable Unexercisable Exercisable Unexercisable - ---- ----------------- ------------------ ----------- ------------- ----------- ------------- Robert C. Strauss 24,000 $1,059,000 44,800 76,200 $1,530,900 $1,551,850 Rudy J. Kranys 13,000 $ 645,125 22,400 38,100 $ 765,450 $ 775,925 Alfred J. Novak 23,000 $1,020,375 22,400 38,100 $ 765,450 $ 775,925 Philip J. Monks 19,000 $ 708,375 16,400 38,100 $ 585,450 $ 775,925 Egbert Ratering 13,000 $ 557,375 22,400 38,100 $ 765,450 $ 775,925
- ----------------- (1) Market value of underlying securities at exercise minus the exercise price. (2) Market value of underlying securities at June 30, 1995 closing ($66.75) minus the option price. The values were calculated only for "In-the-Money" options, which consist of those options with an exercise price below $66.75 per share. LONG-TERM INCENTIVE PLAN AWARDS TABLE The following table provides information relating to performance units awarded to the named Executive Officers under the Cordis Corporation 1991 Performance Unit Award Plan:
Long-Term Incentive Plans - Awards in Last Fiscal Year Performance Estimated Future Payouts Number of or Other Periods Under Non-Stock Price-Based Shares, Units Until Plans ----------------------------- or Other Maturation Threshold Target Maximum Name Rights(#) (1) or Payout (#) (#) (#) - ---- ------------- -------------- -------- ------ ------- Robert C. Strauss 6,000 7/1/95-6/30/98 0 6,000 11,250 Rudy J. Kranys 3,000 7/1/95-6/30/98 0 3,000 5,625 Alfred J. Novak 3,000 7/1/95-6/30/98 0 3,000 5,625 Philip J. Monks 3,000 7/1/95-6/30/98 0 3,000 5,625 Egbert Ratering 3,000 7/1/95-6/30/98 0 3,000 5,625
- ----------------- (1) The performance objectives are based on the following weighings: 50% of a payout is based on achievement of sales growth, 25% is based on achievement of return on assets and 25% is based on targeted improvement on sales per employee. 14 Retirement Benefits The following table illustrates the estimated aggregate annual retirement benefits under the Company's U.S. Retirement Plan and the U.S. Supplemental Executive Retirement Plan, assuming retirement at age 65, based on years of credited service and the highest five consecutive years' average pay. (Primary Social Security Benefits are not included. Effective July 1, 1989, the benefit formula under the Plan was changed from a Social Security Offset formula).
Pension Plan Table (U.S. Plan) Annual Retirement Years of Credited Service ------------------------------------------------------------ Average Salary 15 20 25 30 35 - -------------- -------- -------- -------- -------- -------- $150,000 . . . . . . . . . . . . . . . $ 35,900 $ 47,900 $ 59,900 $ 59,900 $ 59,900 $200,000 . . . . . . . . . . . . . . . $ 48,700 $ 64,900 $ 81,100 $ 81,100 $ 81,100 $250,000 . . . . . . . . . . . . . . . $ 61,400 $ 81,900 $102,400 $102,400 $102,400 $300,000 . . . . . . . . . . . . . . . $ 74,200 $ 98,900 $123,600 $123,600 $123,600 $350,000 . . . . . . . . . . . . . . . $ 86,900 $115,900 $144,900 $144,900 $144,900 $400,000 . . . . . . . . . . . . . . . $ 99,700 $132,900 $166,100 $166,100 $166,100 $450,000 . . . . . . . . . . . . . . . $112,400 $149,900 $187,400 $187,400 $187,400 $500,000 . . . . . . . . . . . . . . . $125,200 $166,900 $208,600 $208,600 $208,600 $550,000 . . . . . . . . . . . . . . . $137,900 $183,900 $229,900 $229,900 $229,900 $600,000 . . . . . . . . . . . . . . . $150,700 $200,900 $251,100 $251,100 $251,100
The Retirement Plan ("the Plan") is a defined benefit plan to which the Company contributes amounts required to fund this Plan as computed by standard actuarial methods. The Plan provides a monthly pension to qualifying employees who terminate from the Company with at least five years of service. A participant who is eligible to receive a retirement benefit will receive a monthly benefit equal to the sum of: (1) 1.1% of his average monthly earnings (over his five highest consecutive years of pay, including bonus and overtime up to 50% of base pay) times his years of service (maximum 25 years); and (2) 0.6% of the average monthly earnings in excess of Covered Compensation (average of taxable wage bases under Section 230 of the Social Security Act) times credited service (maximum 25 years). The credited years of service and current pay covered for each of the individuals named in the Cash Compensation Table is as follows: Years 1995 Covered Credited Compensation -------- ------------ Robert C. Strauss. . . . . . . 12 $775,921 Rudy J. Kranys . . . . . . . . 11 $389,294 Alfred J. Novak. . . . . . . . 11 $394,884 Philip J. Monks(1) . . . . . . -- Egbert Ratering(1) . . . . . . -- - ----------- (1) Philip J. Monks is a member of and contributes a percentage of his salary to the United Kingdom Plan which does not provide a guaranteed pension at retirement, but is based on funds accrued to purchase a pension to the member's requirement. The Company also contributes a percentage of Mr. Monks' salary to the United Kingdom Plan. Egbert Ratering is covered under the Dutch Plan, as set forth in the pension table below. 15 The following table illustrates the estimated aggregate annual retirement benefits under the Company's Dutch Retirement Plan based on years of credited service and last annual pay, as defined:
Pension Table (Dutch Plan) Years of Credited Service ------------------------------------------------------- Average Salary 15 20 25 30 35 -------------- -------- -------- -------- -------- -------- $150,000 . . . . . . . . . . . . $ 33,768 $ 45,024 $ 56,280 $ 67,537 $ 78,793 $200,000 . . . . . . . . . . . . $ 46,893 $ 62,524 $ 78,155 $ 93,787 $109,418 $250,000 . . . . . . . . . . . . $ 60,018 $ 80,024 $100,030 $120,037 $140,043 $300,000 . . . . . . . . . . . . $ 73,143 $ 97,524 $121,905 $146,287 $170,668 $350,000 . . . . . . . . . . . . $ 86,268 $115,024 $143,780 $172,537 $201,293 $400,000 . . . . . . . . . . . . $ 99,393 $132,524 $165,655 $198,787 $231,918 $450,000 . . . . . . . . . . . . $112,518 $150,024 $187,530 $225,037 $262,543 $500,000 . . . . . . . . . . . . $125,643 $167,524 $209,405 $251,287 $293,168 $550,000 . . . . . . . . . . . . $138,768 $185,024 $231,280 $277,537 $323,793 $600,000 . . . . . . . . . . . . $151,893 $202,524 $253,155 $303,787 $354,418
The Dutch Plan, available to all Roden employees, provides supplemental retirement benefits calculated on the basis of the number of years of service multiplied by 1.75% multiplied by the pension earnings (annual salary minus the social security offset of approximately $21,400). The Dutch Plan is designed to provide a pension benefit equal to 70% of the recipient's last pension earnings after 40 years of service; however, salary increases subsequent to age 55 are only partially taken into account. Both the Company and the employee contribute to the Plan. 16 Company Financial Performance The following graph compares the performance of the Company's Common Stock with the S&P 500 and the S&P Medical Products & Supplies Index. The comparison of total return (change in year end stock price plus reinvested dividends) for each of the years assumes that $100 was invested on June 30, 1990 in each of the Company, the S&P 500 Index and the S&P Medical Products & Supplies Index with investment weighted on the basis of market capitalization: COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG CORDIS CORPORATION, THE S&P 500 INDEX AND THE S&P MEDICAL PRODUCTS & SUPPLIES INDEX [GRAPH] 6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 - ------------------------------------------------------------------------- 6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 - ------------------------------------------------------------------------- Cordis Corporation $100.00 $147.00 $116.00 $168.00 $204.00 $351.00 S&P 500 $100.00 $107.00 $122.00 $138.00 $140.00 $177.00 S&P Medical Products & Supplies Index $100.00 $133.00 $152.00 $124.00 $120.00 $184.00 - ------------------------------------------------------------------------- * $100 Invested on 6/30/90 in Stock or Index -- including reinvestment of dividends. Fiscal Year ending June 30. 17 During 1987, the Company initiated a plan to dispose of all businesses other than its angiographic and neuroscience product lines. Since that time, the Company has strengthened its financial performance, as shown on the following charts, through sales growth, increased earnings per share from continuing operations and maintenance of a return on equity of greater than 20% for the past five years. [GRAPHS] 18 EX-2 3 Exhibit 2 SEVERANCE COMPENSATION AGREEMENT [TIER I] This Agreement ("Agreement") is dated as of ___________________________, 1995, by and between Cordis Corporation, a Florida corporation having offices at 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014 (the "Company"), and __________________, whose residence address is _______________________________________ (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances arising from the possibility or occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into severance agreements with those key executives of the Company who are designated by the Compensation Committee of the Board of Directors (the "Committee"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of the Company and has been designated by the Committee as an executive to be offered such a severance compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Change in Control. No compensation or other benefit shall ----------------- be payable under this Agreement unless and until (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is an employee of the Company and (ii) the Executive's employment by the Company thereafter shall have terminated in accordance with Sections 2 and 3 hereof. For purposes of this Agreement, a "Change in Control" shall be defined as: (a) any person or persons acting in concert (excluding Company benefit plans) becomes the beneficial owner of securities of the Company having at least 25% of 2 the voting power of the Company's then outstanding securities (unless the event causing the 25% threshold to be crossed is an acquisition of securities directly from the Company); or (b) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of more than 50% of the Company's assets or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the ------------ shareholders of the Company immediately prior to the Transaction and any trustee or fiduciary of any Company employee benefit plan own, immediately following the Transaction, at least 75% of the voting securities of the surviving company (or its parent) in the event of a merger or other business combination, or, in the event of a sale of assets, of the purchaser of such assets; or (c) within any 24 month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") ------------------- shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has entered into an agreement to effect a Change in Control). 2. Termination Following Change in Control. --------------------------------------- (a) If a Change in Control shall have occurred while the Executive is an employee of the Company, the Executive shall be entitled to the compensation provided for in Section 3 hereof upon the subsequent termination of the Executive's employment with the Company within the relevant periods herein provided, (i) by the Executive for Good Reason, as hereinafter defined, or (ii) by the Company other than for Cause (as hereinafter defined), or as a result of (A) the Executive's Disability (as hereinafter defined) or (B) the Executive's Retirement (as hereinafter defined). (b) Disability. For purposes of this Agreement, "Disability" ---------- shall mean the Executive's absence from the full-time performance of the Executive's duties pursuant to a determination made in accordance with the procedures established by the Company in connection with the Company's disability benefits plan, which plan was in effect immediately prior to the Change in Control, that the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" ---------- shall mean termination of the Executive's employment with the Company, on or after the Executive's normal or early retirement date, under the Company's retirement policy then generally applicable to its salaried employees, or in accordance with any retirement plan or arrangement with respect to the Executive in effect immediately prior to a Change in Control or thereafter established by the Company with the Executive's consent. 3 (d) Cause. For purposes of this Agreement, "Cause" shall mean: ----- (i) fraud, dishonesty or willful malfeasance by Executive in connection with Executive's employment with the Company which results in material harm to the Company; (ii) Executive's continued failure to substantially perform the duties and responsibilities of Executive's office after written notice from the Company setting forth the particulars of such failure and a reasonable opportunity, but not less than ten (10) business days, to cure; (iii) Executive's willful and material breach of the provisions of Section 10 or 11 of this Agreement; or (iv) Executive's plea of guilty or nolo contendere to, or nonappealable conviction of, a felony. Termination of Executive for Cause shall be made by delivery to Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a two-thirds majority of the Directors of the Company or of the ultimate parent of the entity which caused the Change in Control if the Company has become a subsidiary at a meeting of such Board of Directors called and held for such purpose (after 30 days prior written notice to Executive specifying the basis for such termination and the particulars thereof and reasonable opportunity for Executive to be heard before the Board prior to such vote), finding that in the reasonable judgment of such Board, the conduct or event set forth in any of clauses (i) through (iv) above has occurred and that such occurrence warrants Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" ----------- shall mean the occurrence, after a Change in Control, of any of the following without the Executive's express written consent: (i) Any material diminution in the Executive's position, duties or responsibilities with the Company from those in effect immediately prior to the Change in Control or which would constitute a material adverse alteration in the Executive's duties, responsibilities or other conditions of employment from those in effect immediately prior to the Change in Control[CEO and CFO only:]; provided, however, that -------- ------- (A) the Company's stock ceasing to be publicly traded or (B) the Company's becoming a subsidiary of a Company whose stock is publicly traded, in each case, shall not by itself be deemed to be a diminution in the Executive's position, duties or responsibilities for purposes of this Agreement. (ii) Any material adverse change in the Executive's salary and incentive compensation from the salary and incentive compensation in effect immediately prior to the Change in Control; 4 (iii) Any failure by the Company either to continue in effect, or to provide reasonably similar retirement, savings, medical, dental, accident, disability and life insurance plans and any other similar benefits, policy or program in which the Executive was a participant immediately prior to the Change in Control; (iv) Any relocation of the Executive's employment to a location in excess of 50 miles from the location at which the Executive was based immediately prior to the Change in Control; (v) Any failure by the Company to provide the Executive with the number of paid vacation days to which the Executive was entitled, in accordance with the Company's policy, in effect prior to the Change in Control; (vi) Any material breach by the Company of any provision of this Agreement; [and] (vii) Any failure by the Company to obtain from any successor to the Company a satisfactory agreement to assume and perform this Agreement, as contemplated by Section 7(a) hereof [{CEO and CFO only}; and (viii) Any termination of employment by the Executive within 60 days after the first anniversary of a Change in Control shall be deemed to be a termination by the Executive for Good Reason and Executive shall be entitled to the payments and benefits set forth in Section 3 hereof with respect to such a termination]. (f) Notice of Termination. Any purported termination of the --------------------- Executive's employment with the Company shall be communicated by a Notice of Termination to the Executive, if such termination is by the Company, or to the Company, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated. For purposes of this Agreement, no purported termination of Executive's employment with the Company shall be effective without such a Notice of Termination having been given. (g) Dispute Resolution. Any disputes arising from the operation ------------------ of this Agreement, including, but not necessarily being limited to, the manner of giving the Notice of Termination, the reasons or cause for Executive's termination or the amount of severance compensation due to Executive subsequent to Executive's termination, shall be resolved solely by arbitration. In the event that any such dispute, after notice thereof is given to the other party, in writing, is not able to be resolved by mutual agreement of the parties within sixty (60) days of the giving of such notice, Executive and the Company hereby agree to promptly submit such a dispute to binding arbitration in accordance with the rules of the American Arbitration Association, such arbitration to be held in the metropolitan area 5 nearest to, and in the same country as, Executive's place of residence, and further agree to be fully bound by the findings of such arbitration. 3. Compensation Upon Termination After a Change in Control. ------------------------------------------------------- (a) If within three (3) years after a Change in Control, the Executive's employment by the Company shall be terminated by the Company for any reason other than (i) the Executive's Disability, (ii) the Executive's Retirement, or (iii) for Cause, or if within three (3) years after a Change in Control, the Executive terminates his employment for Good Reason, the Company shall (subject only to any applicable payroll and other taxes required to be withheld) pay or cause to be paid to the Executive, a lump sum cash amount equal to 2.99 times the sum of (i) Executive's base salary (including the annual amount of any automobile allowance) immediately prior to the Change in Control and (ii) the highest bonus paid to the Executive under the Company's executive incentive compensation plans during the three years preceding the Change in Control. In addition, Executive shall be entitled to (i) continued medical, dental and life insurance coverage for Executive and executive's eligible dependents on the same basis as in effect prior to Executive's termination of employment until the earlier of (A) the third anniversary of Executive's termination or (B) the commencement of comparable coverage with a subsequent employer; provided, however, that such continued -------- ------- coverage shall not count against any continued coverage required by law; (ii) payment, in a cash lump sum, of all amounts deferred by Executive under any non- qualified plan of deferred compensation maintained by the Company (notwithstanding the payment provisions of any such plans to the contrary) and any accrued but unused vacation time and (iii) three years of age and service credit for all purposes under all retirement plans of the Company; provided, however, that to the extent any increase in benefits which would - -------- ------- result from such additional age and service credits could not be paid under the terms of any plan, the amount of such increase shall be calculated under the terms of each such plan and paid directly by the Company in the same form and at the same time that the benefits under each such plan are otherwise paid. (b) Gross Up. In the event it shall be determined that any -------- payment, benefit or distribution (or combination thereof) by the Company or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or under the terms of any other plan, program agreement or arrangement) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 6 (c) Subject to the provisions of Section 3(d), all determinations required to be made under this Section 3, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm as may be designated by Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment shall be paid by the Company to Executive within five (5) days after the receipt of the Accounting Firm's determination. (d) As soon as practicable, Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. If the Company notifies Executive in writing that it desires to contest such claim, Executive shall cooperate in all reasonable ways with the Company in such contest and the Company shall be entitled to participate in all proceedings relating to such claim; provided, however, -------- ------- that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after- tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, -------- ------- that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if Executive is required to extend the statute -------- ------- of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 4. Obligations Absolute; No Effect On Other Rights. ----------------------------------------------- (a) The obligations of the Company to make the payment to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation 7 any setoff, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) The provision of this Agreement, and any payment provided for herein, shall not supersede or in any way limit the rights, benefits, duties or obligations which the Executive may now or in the future have under any benefit, incentive or other plan or arrangement of the Company or any other agreement with the Company. 5. Not an Employment Agreement. This Agreement is not, and --------------------------- nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of any employment agreement or arrangement between the Company and the Executive that may then be in effect. 6. Term of Agreement. This Agreement shall commence on the ----------------- date hereof and shall continue in effect for a period of three (3) years. Any renewal of this Agreement shall be by means of a new Agreement, in writing, executed with the same formality as this Agreement and, on behalf of the Company, by an officer duly authorized by the Board of Directors to so enter into such a renewal of the Agreement. Notwithstanding, however, the requirement for a new Agreement, in writing, for a renewal of this Agreement subsequent to its initial three-year term, if a Change in Control shall have occurred during the initial term of this Agreement, this Agreement shall continue in effect for a period of 36 months beyond the date of such Change in Control. 7. Successors; Binding Agreement, Assignment. ----------------------------------------- (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 7(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this 8 Agreement to the Executive's devisee, legatee or other designee or, if there be no such designee, to the Executive's estate. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 8. Notice. For purpose of this Agreement, notices and all ------ other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed United States certified or registered mail, return receipt requested, postage prepaid, address to (i) the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Committee with a copy directed to the Secretary of the Company, or (ii) such other address for a party as such party may have furnished to the other in writing in accordance with this Section 8, except that notices of change of address shall be effective only upon receipt. 9. Expenses. In addition to all other amounts payable to the -------- Executive under this Agreement, the Company shall pay or reimburse the Executive for all costs and expenses (including without limitation, any and all court costs and attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; unless, in the case of an action brought by the Executive, it is determined by an arbitrator or by a court of competent jurisdiction that such action was frivolous and was not brought in good faith. 10. Confidentiality. The Executive shall retain in confidence --------------- any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 10. Upon termination of employment, the Executive will not take or keep any proprietary information or documentation belonging to the Company. 11. Non-Competition. The Executive covenants and agrees that, --------------- during the Executive's employment and for a period of one (1) year after termination of employment subsequent to a Change in Control, the Executive will not directly or indirectly own, operate, manage, consult with, control, participate in the management or control of, be employed by, maintain or continue any interest whatsoever in any enterprise that designs, manufactures, distributes, markets or promotes medical devices or their components in competition with the Company, in any technical area of expertise in which the Executive was involved during the year prior to termination of employment, without the written consent of an officer of the Company. The Executive further agrees that after termination of employment, the Executive will not, either directly or indirectly or in concert with others, seek to influence any employee to leave the Company's employment. The Executive further acknowledges that a lawsuit for damages for any of the provisions of paragraph 11 of this Agreement will be inadequate and agrees that the Company is entitled 9 to injunctive relief in case of any such breach. If any part of this Agreement is held to be invalid or unenforceable, such holding will not affect any other part of the Agreement. If, moreover, any part of this Agreement is for any reason held to be excessively broad as to time, duration, geographical scope, activity or subject, it will be construed by limiting or reducing it, so as to be enforceable to the extent compatible with the applicable law as it then exists. 12. Miscellaneous. No provision of this Agreement may be ------------- modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida without giving effect to its conflict of laws rules. 13. Severability. If any one or more of the provisions of this ------------ Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 14. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Florida. 15. Amendment/Waiver. This Agreement shall not be amended, ---------------- altered, or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder. 16. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. 17. Entire Agreement. This Agreement constitutes the entire ---------------- agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior 10 oral or written agreements, commitments or understanding with respect to the matters provided for herein. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. CORDIS CORPORATION ------------------------------- Witnesses: - ------------------------------- ------------------------------- Name: -------------------------- Title: ------------------------- - ------------------------------- ------------------------------- Executive EX-3 4 Exhibit 3 SEVERANCE COMPENSATION AGREEMENT [TIERS 2 and 3] This Agreement ("Agreement") is dated as of ___________________ ___________________________, 1995, by and between Cordis Corporation, a Florida corporation having offices at 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014 (the "Company"), and __________________, whose residence address is _______________________________________ (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances arising from the possibility or occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into severance agreements with those key executives of the Company who are designated by the Compensation Committee of the Board of Directors ("Committee"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of the Company and has been designated by the Committee as an executive to be offered such a severance compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Change in Control. No compensation or other benefit shall ----------------- be payable under this Agreement unless and until (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is an employee of the Company and (ii) the Executive's employment by the Company thereafter shall have terminated in accordance with Sections 2 and 3 hereof. For purposes of this Agreement, a "Change in Control" shall be defined as: (a) any person or persons acting in concert (excluding Company benefit plans) becomes the beneficial owner of securities of the Company having at least 25% of the voting 2 power of the Company's then outstanding securities (unless the event causing the 25% threshold to be crossed is an acquisition of securities directly from the Company); or (b) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of more than 50% of the Company's assets or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the ------------ shareholders of the Company immediately prior to the Transaction and any trustee or fiduciary of any Company employee benefit plan own, immediately following the Transaction, at least 75% of the voting securities of the surviving company (or its parent), in the event of a merger or other business combination, or, in the event of a sale of assets, of the purchaser of such assets; or (c) within any 24 month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") ------------------- shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has entered into an agreement to effect a Change in Control). 2. Termination Following Change in Control. --------------------------------------- (a) If a Change in Control shall have occurred while the Executive is an employee of the Company, the Executive shall be entitled to the compensation provided for in Section 3 hereof upon the subsequent termination of the Executive's employment with the Company within the relevant periods herein provided, (i) by the Executive for Good Reason, as hereinafter defined, or (ii) by the Company other than for Cause (as hereinafter defined), or is as a result of (A) the Executive's Disability (as hereinafter defined) or (B) the Executive's Retirement (as hereinafter defined). (b) Disability. For purposes of this Agreement, "Disability" ---------- shall mean the Executive's absence from the full-time performance of the Executive's duties pursuant to a determination made in accordance with the procedures established by the Company in connection with the Company's disability benefits plan, which plan was in effect immediately prior to the Change in Control, that the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" ---------- shall mean termination of the Executive's employment with the Company, on or after the Executive's normal or early retirement date, under the Company's retirement policy then generally applicable to its salaried employees, or in accordance with any retirement plan or arrangement with respect to the Executive in effect immediately prior to a Change in Control or thereafter established by the Company with the Executive's consent. 3 (d) Cause. For purposes of this Agreement, "Cause" shall mean: ----- (i) fraud, dishonesty or willful malfeasance by Executive in connection with Executive's employment with the Company which results in material harm to the Company; (ii) Executive's continued failure to substantially perform the duties and responsibilities of Executive's office after written notice from the Company setting forth the particulars of such failure and a reasonable opportunity, but not less than ten (10) business days, to cure; (iii) Executive's willful and material breach of the provisions of Section 10 or 11 of this Agreement; or (iv) Executive's plea of guilty or nolo contendere to, or nonappealable conviction of, a felony. Termination of Executive for Cause shall be made by delivery to Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a two-thirds majority of the Directors of the Company or of the ultimate parent of the entity which caused the Change in Control if the Company has become a subsidiary at a meeting of such Board of Directors called and held for such purpose (after 30 days prior written notice to Executive specifying the basis for such termination and the particulars thereof and reasonable opportunity for Executive to be heard before the Board prior to such vote), finding that in the reasonable judgment of such Board, the conduct or event set forth in any of clauses (i) through (iv) above has occurred and that such occurrence warrants Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" ----------- shall mean the occurrence, after a Change in Control, of any of the following without the Executive's express written consent: (i) Any material diminution in the Executive's position, duties or responsibilities with the Company from those in effect immediately prior to the Change in Control or which would constitute a material adverse alteration in the Executive's duties, responsibilities or other conditions of employment from those in effect immediately prior to the Change in Control; (ii) Any material adverse change in the Executive's salary and incentive compensation from the salary and incentive compensation in effect immediately prior to the Change in Control; (iii) Any failure by the Company either to continue in effect, or to provide reasonably similar retirement, savings, medical, dental, accident, disability and life insurance plans and any other similar benefits, policy or program in which the Executive was a participant immediately prior to the Change in Control; 4 (iv) Any relocation of the Executive's employment to a location in excess of 50 miles from the location at which the Executive was based immediately prior to the Change in Control; (v) Any failure by the Company to provide the Executive with the number of paid vacation days to which the Executive was entitled, in accordance with the Company's policy, in effect prior to the Change in Control; (vi) Any material breach by the Company of any provision of this Agreement; and (vii) Any failure by the Company to obtain from any successor to the Company a satisfactory agreement to assume and perform this Agreement, as contemplated by Section 7(a) hereof. (f) Notice of Termination. Any purported termination of the --------------------- Executive's employment with the Company shall be communicated by a Notice of Termination to the Executive, if such termination is by the Company, or to the Company, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated. For purposes of this Agreement, no purported termination of Executive's employment with the Company shall be effective without such a Notice of Termination having been given. (g) Dispute Resolution. Any disputes arising from the operation ------------------ of this Agreement, including, but not necessarily being limited to, the manner of giving the Notice of Termination, the reasons or cause for Executive's termination or the amount of severance compensation due to Executive subsequent to Executive's termination, shall be resolved solely by arbitration. In the event that any such dispute, after notice thereof is given to the other party, in writing, is not able to be resolved by mutual agreement of the parties within sixty (60) days of the giving of such notice, Executive and the Company hereby agree to promptly submit such a dispute to binding arbitration in accordance with the rules of the American Arbitration Association, such arbitration to be held in the metropolitan area nearest to, and in the same country as, Executive's place of residence, and further agree to be fully bound by the findings of such arbitration. 3. Compensation Upon Termination After a Change in Control. ------------------------------------------------------- (a) If within three (3) years after a Change in Control, the Executive's employment by the Company shall be terminated by the Company for any reason other than (i) the Executive's Disability, (ii) the Executive's Retirement, or (iii) for Cause, or if within three (3) years after a Change in Control, the Executive terminates his employment for Good Reason, the Company shall (subject only to any applicable payroll and other taxes required to be withheld) pay or cause to be paid to the Executive, a lump sum cash amount equal [two (2)][one and one-half (1.5)] times the sum of (i) Executive's base salary (including the annual 5 amount of any automobile allowance [Tier 2 only]) immediately prior to the Change in Control and (ii) the highest bonus paid to the Executive under the Company's executive incentive compensation plans during the three years preceding the Change in Control. In addition, Executive shall be entitled to (i) continued medical, dental and life insurance coverage for Executive and executive's eligible dependents on the same basis as in effect prior to Executive's termination of employment until the earlier of (A) [twenty- four] [eighteen] months after the Executive's termination or (B) the commencement of comparable coverage with a subsequent employer; provided, -------- however, that such continued coverage shall not count against any continued - ------- coverage required by law; (ii) payment, in a cash lump sum, of all amounts deferred by Executive under any non-qualified plan of deferred compensation maintained by the Company (notwithstanding the payment provisions of any such plans to the contrary) and any accrued but unused vacation time and (iii) [twenty-four] [eighteen] months of age and service credit for all purposes under all retirement plans of the Company; provided, however, that -------- ------- to the extent any increase in benefits which would result from such additional age and service credits could not be paid under the terms of any plan, the amount of such increase shall be calculated under the terms of each such plan and paid directly by the Company in the same form and at the same time that the benefits under each such plan are otherwise paid. [The Following Paragraph (b) Applies to Tier 3 Only] (b) Parachute Payment Limitation. If any payment or benefit to the ---------------------------- Executive under this Agreement would be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code") and if, after reduction for any applicable federal excise tax imposed by Code Section 4999 (the "Excise Tax") and federal income tax imposed by the Code, the Executive's net proceeds of the amounts payable and the benefits provided under this Agreement would be less than the amount of the Executive's net proceeds resulting from the payment of the Reduced Amount described below, after reduction for federal income taxes, then the amount payable and the benefits provided under this Agreement shall be limited to the Reduced Amount. The "Reduced Amount" shall be the largest amount that could be received by the Executive under this Agreement such that no amount paid to the Executive under this Agreement and any other agreement, contract, or understanding heretofore or hereafter entered into between the Executive and the Company (the "Other Agreements") and any formal or informal plan or other arrangement heretofore or hereafter adopted by the Company for the direct or indirect provision of compensation to the Executive (including groups or classes of participants or beneficiaries of which the Executive is a member), whether or not such compensation is deferred, is in cash, or is in the form if a benefit to or for the Executive (a "Benefit Plan") would be subject to the Excise Tax. In the event that the amount payable to the Executive shall be limited to the Reduced Amount, then the Executive shall have the right, in the Executive's sole discretion, to designate those payments or benefits under this Agreement, any Other Agreements, and/or any Benefit Plans, that should be reduced or eliminated so as to avoid having the payment to the Executive under this Agreement be subject to the Excise Tax. [The Following Paragraphs (b), (c) and (d) Apply to Tier 2 Only] (b) Gross Up. In the event it shall be determined that any payment, -------- benefit or distribution (or combination thereof) by the Company or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or under the terms of any other plan, program agreement or arrangement) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (c) Subject to the provisions of Section 3(d), all determinations required to be made under this Section 3, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm as may be designated by Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment shall be paid by the Company to Executive within five (5) days after the receipt of the Accounting Firm's determination. (d) As soon as practicable, Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. If the Company notifies Executive in writing that it desires to contest such claim, Executive shall cooperate in all reasonable ways with the Company in such contest and the Company shall be entitled to participate in all proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs -------- ------- and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such -------- ------- claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if Executive is required to extend the statute of - -------- ------- limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 6 4. Obligations Absolute; No Effect On Other Rights. ----------------------------------------------- (a) The obligations of the Company to make the payment to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any setoff, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) The provision of this Agreement, and any payment provided for herein, shall not supersede or in any way limit the rights, benefits, duties or obligations which the Executive may now or in the future have under any benefit, incentive or other plan or arrangement of the Company or any other agreement with the Company. 5. Not an Employment Agreement. This Agreement is not, and --------------------------- nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of any employment agreement or arrangement between the Company and the Executive that may then be in effect. 6. Term of Agreement. This Agreement shall commence on the ----------------- date hereof and shall continue in effect for a period of three (3) years. Any renewal of this Agreement shall be by means of a new Agreement, in writing, executed with the same formality as this Agreement and, on behalf of the Company, by an officer duly authorized by the Board of Directors to so enter into such a renewal of the Agreement. Notwithstanding, however, the requirement for a new Agreement, in writing, for a renewal of this Agreement subsequent to its initial three-year term, if a Change in Control shall have occurred during the initial term of this Agreement, this Agreement shall continue in effect for a period of 36 months beyond the date of such Change in Control. 7. Successors; Binding Agreement, Assignment. ----------------------------------------- (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 7(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. 7 (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or, if there be no such designee, to the Executive's estate. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 8. Notice. For purpose of this Agreement, notices and all ------ other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed United States certified or registered mail, return receipt requested, postage prepaid, address to (i) the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Committee with a copy directed to the Secretary of the Company, or (ii) such other address for a party as such party may have furnished to the other in writing in accordance with this Section 8, except that notices of change of address shall be effective only upon receipt. 9. Expenses. In addition to all other amounts payable to the -------- Executive under this Agreement, the Company shall pay or reimburse the Executive for all costs and expenses (including without limitation, any and all court costs and attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; unless, in the case of an action brought by the Executive, it is determined by an arbitrator or by a court of competent jurisdiction that such action was frivolous and was not brought in good faith. 10. Confidentiality. The Executive shall retain in confidence --------------- any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 10. Upon termination of employment, the Executive will not take or keep any proprietary information or documentation belonging to the Company. 11. Non-Competition. The Executive covenants and agrees that, --------------- during the Executive's employment and for a period of six (6) months thereafter, the Executive will not directly or indirectly own, operate, manage, consult with, control, participate in the management or control of, be employed by, maintain or continue any interest whatsoever in any enterprise that designs, manufactures, distributes, markets or promotes medical devices or their components in competition with the Company, in any technical area of expertise in which the Executive was involved during the year prior to termination of employment, without the written consent of an officer of the Company. The Executive further agrees that 8 after termination of employment, the Executive will not, either directly or indirectly or in concert with others, seek to influence any employee to leave the Company's employment. The Executive further acknowledges that a lawsuit for damages for any of the provisions of paragraph 11 of this Agreement will be inadequate and agrees that the Company is entitled to injunctive relief in case of any such breach. If any part of this Agreement is held to be invalid or unenforceable, such holding will not affect any other part of the Agreement. If, moreover, any part of this Agreement is for any reason held to be excessively broad as to time, duration, geographical scope, activity or subject, it will be construed by limiting or reducing it, so as to be enforceable to the extent compatible with the applicable law as it then exists. 12. Miscellaneous. No provision of this Agreement may be ------------- modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida without giving effect to its conflict of laws rules. 13. Severability. If any one or more of the provisions of this ------------ Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 14. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Florida. 15. Amendment/Waiver. This Agreement shall not be amended, ---------------- altered, or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder. 16. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. 9 17. Entire Agreement. This Agreement constitutes the entire ---------------- agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior oral or written agreements, commitments or understanding with respect to the matters provided for herein. 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. CORDIS CORPORATION ------------------------------------- Witnesses: - ---------------------------------- ------------------------------------- Name: ------------------------------- Title: ------------------------------- - ---------------------------------- ------------------------------------- Executive EX-4 5 Exhibit 4 SEVERANCE COMPENSATION AGREEMENT [TIER 4] This Agreement ("Agreement") is dated as of_______________________ ___, 1995, by and between Cordis Corporation, a Florida corporation having offices at 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014 (the "Company"), and__________________, whose residence address is ____________________________ __________(the "Executive"). WHEREAS, the Company's Board of Directors has authorized the Company to enter into severance agreements with those executives of the Company who are designated by the Compensation Committee of the Board of Directors ("Committee"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is an executive of the Company and has been designated by the Committee as an executive to be offered such a severance compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Change in Control. No compensation or other benefit shall ----------------- be payable under this Agreement unless and until (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is an employee of the Company and (ii) the Executive's employment by the Company thereafter shall have terminated in accordance with Sections 2 and 3 hereof. For purposes of this Agreement, a "Change in Control" shall be defined as: (a) any person or persons acting in concert (excluding Company benefit plans) becomes the beneficial owner of securities of the Company having at least 25% of the voting power of the Company's then outstanding securities (unless the event causing the 25% threshold to be crossed is an acquisition of securities directly from the Company); or (b) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of more than 50% of the Company's assets or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the ------------ shareholders of the Company immediately prior to the Transaction and any trustee or fiduciary of any Company employee benefit plan own, immediately following the Transaction, at least 75% of the voting securities of the surviving 2 company (or its parent), in the event of a merger or other business combination, or, in the event of a sale of assets, of the purchaser of such assets; or (c) within any 24 month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") ------------------- shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has entered into an agreement to effect a Change in Control). 2. Termination Following Change in Control. --------------------------------------- (a) If a Change in Control shall have occurred while the Executive is an employee of the Company, the Executive shall be entitled to the compensation provided for in Section 3 hereof upon the subsequent termination of the Executive's employment with the Company within the relevant periods herein provided, (i) by the Executive for Good Reason, as hereinafter defined, or (ii) by the Company other than for Cause (as hereinafter defined), or is as a result of (A) the Executive's Disability (as hereinafter defined) or (B) the Executive's Retirement (as hereinafter defined). (b) Disability. For purposes of this Agreement, "Disability" ---------- shall mean the Executive's absence from the full-time performance of the Executive's duties pursuant to a determination made in accordance with the procedures established by the Company in connection with the Company's disability benefits plan, which plan was in effect immediately prior to the Change in Control, that the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" ---------- shall mean termination of the Executive's employment with the Company, on or after the Executive's normal or early retirement date, under the Company's retirement policy then generally applicable to its salaried employees, or in accordance with any retirement plan or arrangement with respect to the Executive in effect immediately prior to a Change in Control or thereafter established by the Company with the Executive's consent. (d) Cause. For purposes of this Agreement, "Cause" shall mean: ----- (i) fraud, dishonesty or willful malfeasance by Executive in connection with Executive's employment with the Company which results in material harm to the Company; (ii) Executive's continued failure to substantially perform the duties and responsibilities of Executive's office after written notice from the Company setting 3 forth the particulars of such failure and a reasonable opportunity, but not less than ten (10) business days, to cure; (iii) Executive's willful and material breach of the provisions of Section 10 or 11 of this Agreement; or (iv) Executive's plea of guilty or nolo contendere to, or nonappealable conviction of, a felony. Termination of Executive for Cause shall be made by delivery to Executive of written notice to the Executive setting specifying the basis for such termination and the particulars thereof and determining that in the reasonable judgment of the Company, the conduct or event set forth in any of clauses (i) through (iv) above has occurred and that such occurrence warrants Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" ----------- shall mean the occurrence, after a Change in Control, of any of the following without the Executive's express written consent: (i) Any material diminution in the Executive's position, duties or responsibilities with the Company from those in effect immediately prior to the Change in Control or which would constitute a material adverse alteration in the Executive's duties, responsibilities or other conditions of employment from those in effect immediately prior to the Change in Control; (ii) Any material adverse change in the Executive's compensation structure in effect immediately prior to the Change in Control; and (iii) Any relocation of the Executive's employment to a location in excess of 50 miles from the location at which the Executive was based immediately prior to the Change in Control; (f) Dispute Resolution. Any disputes arising from the operation ------------------ of this Agreement shall be resolved solely by arbitration in accordance with the rules of the American Arbitration Association, such arbitration to be held in the metropolitan area nearest to, and in the same country as, Executive's place of residence. Executive and the Company agree to be fully bound by the findings of such arbitration. 3. Compensation Upon Termination After a Change in Control. ------------------------------------------------------- (a) If within one (1) year after a Change in Control, the Executive's employment by the Company shall be terminated by the Company for any reason other than (i) the Executive's Disability, (ii) the Executive's Retirement, or (iii) for Cause, or if within one (1) year after a Change in Control, the Executive terminates his employment for Good Reason, the Company shall (subject only to any applicable payroll and other taxes required to be withheld) pay or cause to be paid to the Executive, a lump sum cash amount equal to one 4 (1) times the sum of (i) Executive's base salary immediately prior to the Change in Control and (ii) the highest bonus paid to the Executive under the Company's executive incentive compensation plans during the three years preceding the Change in Control. In addition, Executive shall be entitled to (i) continued medical, dental and life insurance coverage for Executive and executive's eligible dependents on the same basis as in effect prior to Executive's termination of employment until the earlier of (A) twelve (12) months after the Executive's termination or (B) the commencement of comparable coverage with a subsequent employer; provided, however, that -------- ------- such continued coverage shall not count against any continued coverage required by law and (ii) payment, in a cash lump sum, of all amounts deferred by Executive under any non-qualified plan of deferred compensation maintained by the Company (notwithstanding the payment provisions of any such plans to the contrary) and any accrued but unused vacation time. (b) Parachute Payment Limitation. If any payment or benefit to ---------------------------- the Executive under this Agreement would be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code") and if, after reduction for any applicable federal excise tax imposed by Code Section 4999 (the "Excise Tax") and federal income tax imposed by the Code, the Executive's net proceeds of the amounts payable and the benefits provided under this Agreement would be less than the amount of the Executive's net proceeds resulting from the payment of the Reduced Amount described below, after reduction for federal income taxes, then the amount payable and the benefits provided under this Agreement shall be limited to the Reduced Amount. The "Reduced Amount" shall be the largest amount that could be received by the Executive under this Agreement such that no amount paid to the Executive under this Agreement and any other agreement, contract, or understanding heretofore or hereafter entered into between the Executive and the Company (the "Other Agreements") and any formal or informal plan or other arrangement heretofore or hereafter adopted by the Company for the direct or indirect provision of compensation to the Executive (including groups or classes of participants or beneficiaries of which the Executive is a member), whether or not such compensation is deferred, is in cash, or is in the form if a benefit to or for the Executive (a "Benefit Plan") would be subject to the Excise Tax. In the event that the amount payable to the Executive shall be limited to the Reduced Amount, then the Executive shall have the right, in the Executive's sole discretion, to designate those payments or benefits under this Agreement, any Other Agreements, and/or any Benefit Plans, that should be reduced or eliminated so as to avoid having the payment to the Executive under this Agreement be subject to the Excise Tax. 4. Obligations Absolute; No Effect On Other Rights. ----------------------------------------------- (a) The obligations of the Company to make the payment to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any setoff, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. 5 (b) The provision of this Agreement, and any payment provided for herein, shall not supersede or in any way limit the rights, benefits, duties or obligations which the Executive may now or in the future have under any benefit, incentive or other plan or arrangement of the Company or any other agreement with the Company. 5. Not an Employment Agreement. This Agreement is not, and --------------------------- nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of any employment agreement or arrangement between the Company and the Executive that may then be in effect. 6. Term of Agreement. This Agreement shall commence on the ----------------- date hereof and shall continue in effect until the expiration of the one- year period following a Change in Control; provided, however, that this -------- ------- Agreement shall terminate, in all events, terminate no later than three years after the date hereof. Any renewal of this Agreement shall be by means of a new Agreement, in writing, executed with the same formality as this Agreement and, on behalf of the Company, by an officer duly authorized by the Board of Directors to so enter into such a renewal of the Agreement. 7. Successors; Binding Agreement, Assignment. ----------------------------------------- (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 7(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or, if there be no such designee, to the Executive's estate. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 8. Notice. For purpose of this Agreement, notices and all ------ other communications provided for in this Agreement shall be in writing and shall be deemed to 6 have been duly given when personally delivered or when mailed United States certified or registered mail, return receipt requested, postage prepaid, address to (i) the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Committee with a copy directed to the Secretary of the Company, or (ii) such other address for a party as such party may have furnished to the other in writing in accordance with this Section 8, except that notices of change of address shall be effective only upon receipt. [9. Expenses. In addition to all other amounts payable to the -------- Executive under this Agreement, the Company shall pay or reimburse the Executive for all costs and expenses (including without limitation, any and all court costs and attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; unless, in the case of an action brought by the Executive, it is determined by an arbitrator or by a court of competent jurisdiction that such action was frivolous and was not brought in good faith.] 10. Confidentiality. The Executive shall retain in confidence --------------- any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 10. Upon termination of employment, the Executive will not take or keep any proprietary information or documentation belonging to the Company. 11. Non-Competition. The Executive covenants and agrees that, --------------- during the Executive's employment, the Executive will not directly or indirectly own, operate, manage, consult with, control, participate in the management or control of, be employed by, maintain or continue any interest whatsoever in any enterprise that designs, manufactures, distributes, markets or promotes medical devices or their components in competition with the Company, in any technical area of expertise in which the Executive is involved, without the written consent of an officer of the Company. The Executive further agrees that after termination of employment, the Executive will not, either directly or indirectly or in concert with others, seek to influence any employee to leave the Company's employment. The Executive further acknowledges that a lawsuit for damages for any of the provisions of paragraph 11 of this Agreement will be inadequate and agrees that the Company is entitled to injunctive relief in case of any such breach. If any part of this Agreement is held to be invalid or unenforceable, such holding will not affect any other part of the Agreement. If, moreover, any part of this Agreement is for any reason held to be excessively broad as to time, duration, geographical scope, activity or subject, it will be construed by limiting or reducing it, so as to be enforceable to the extent compatible with the applicable law as it then exists. 7 12. Miscellaneous. No provision of this Agreement may be ------------- modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida without giving effect to its conflict of laws rules. 13. Severability. If any one or more of the provisions of this ------------ Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 14. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Florida. 15. Amendment/Waiver. This Agreement shall not be amended, ---------------- altered, or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder. 16. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. 17. Entire Agreement. This Agreement constitutes the entire ---------------- agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior oral or written agreements, commitments or understanding with respect to the matters provided for herein. 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. CORDIS CORPORATION ---------------------------------- Witnesses: - -------------------------------- ---------------------------------- Name: ----------------------------- Title: ---------------------------- - -------------------------------- ---------------------------------- Executive EX-5 6 Exhibit 5 October 9, 1995 Dear : The services of the Directors and Officers of Cordis Corporation (the "Company") are of the utmost importance to the Company's continued advancement and success. The Company's Bylaws provide that its Directors, Officers, employees and agents shall be indemnified to the fullest extent permitted by law, and the Company presently provides liability insurance coverage for its Directors and Officers to the extent considered advisable and at acceptable premium costs. The recognition that Bylaw provisions may be amended in future situations, have caused us to review the nature of the indemnification rights available to our Directors and Officers. Accordingly, we have determined that it is to the Company's advantage to assure that its Directors and certain of its Officers be protected through binding contractual arrangements with the Company. Consequently, as an inducement to you to continue to serve the Company and its subsidiaries, the Company and you agree as follows: 1. Actions, Suits or Proceedings ----------------------------- (a) The Company hereby agrees to indemnify you, in connection with any threatened, pending or completed action, suit or proceeding ("action"), whether civil, criminal, administrative or investigative (including without limitation, an action by or in the right of the Company), to which you were or are a party, or to which you are threatened, subject to clause 1(c) below, to be made a party by reason of the fact that you are or previously were an Officer or Director of the Company or any predecessor of the Company, or by reason of your activities in such capacity, or by reason of your serving at the request of the Company as a director, officer, employee, partner, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any and all expenses (including fees and expenses of counsel), judgments, fines and amounts paid in settlement (provided, that such settlements are made with the approval -------- of the Board of Directors of the Company and provided further that the -------- ------- settlement amount in an action by or in the right of the Company shall not exceed, in the judgment of the Board of Directors, the estimated expense of litigating the action to conclusion), actually and reasonably incurred by you in connection with or in anticipation of any such action, except to the extent that it shall be determined that 2 you failed to act in good faith and in a manner you reasonably believed to be in or not opposed to the best interest of the Company, and, with respect to any criminal action, that you had reasonable cause to believe your conduct was unlawful. Such determination (except as provided in clauses 1(b), 1(c) and 1(d) below, and except as determined by the court or other adjudicative body in which such action was brought) shall be made in the specific case (i) by the Board of Directors of the Company, by a majority vote of a quorum consisting of Directors who were not parties to such action, (ii) if such a quorum is not obtainable (or, even if obtainable) by the majority vote of a committee designated by the Board of Directors (in which designation Directors who are parties may participate) consisting solely of two or more Directors who are not parties at the time of determination, (iii) by independent legal counsel (in writing) selected by the Board of Directors prescribed in subclause (i) or the committee prescribed in subclause (ii), or if a quorum of Directors cannot be obtained for subclause (i) and the committee cannot be designated under subclause (ii), selected by the full Board of Directors (in which Directors who are parties may participate), or (iv) by the stockholders of the Company by a majority vote of a quorum consisting of stockholders who are not parties, or if no such quorum is obtainable, by a majority vote of stockholders who are not parties, in either event only if the issue is presented to the stockholders by Directors qualifying under subclause (i). Except as otherwise expressly provided in this Agreement, you shall be presumed to be entitled to indemnification hereunder, and the Company shall have the burden of proof to overcome such presumption in connection with any of the foregoing determinations. For purposes of this paragraph 1, determination of any action by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of --------------- itself, create a presumption that you did not act in good faith and in a manner which you reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that you had reasonable cause to believe that your conduct was unlawful. (b) Notwithstanding anything contained in clause (a) above to the contrary, the determination described therein shall be made in writing by independent legal counsel (as defined below) if there has been a change in control (as defined below), and any person elected, appointed or designated to the Company's Board of Directors by a party (other than the Company) to a change of control (including a "Successor" under paragraph 6 below) shall not be eligible to participate 3 in any action as a Director, committee member or otherwise in such determination or the selection of persons to make such determination. For this purpose, (i) a "change in control" shall mean a situation in which the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter, and (ii) "independent legal counsel" shall mean a law firm or a member of a law firm that neither presently is, nor in the past five years has been, retained to represent (A) the Company or you in any matter material to either of us, (B) any other party to an action giving rise to a claim for indemnification under this letter agreement, or (C) any "Successor" or party (other than the Company) to a change in control; notwithstanding the foregoing, the term "independent legal counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing under the law of the State of Florida, would have a conflict of interest in representing either the Company or you in an action to determine your rights under this Agreement. (c) Notwithstanding anything contained in this paragraph 1 to the contrary, in the case of an action by, or in the right of the Company to procure a judgment in its favor, no indemnification shall be made in respect of any claim, issue or matter as to which you shall have been adjudged to be liable to the Company unless and only to the extent that the court in which such action was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability, but in view of all circumstances of the case, you are fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (d) To the extent that you are successful on the merits or otherwise in defense of any such action, or in defense of any claim, issue or matter therein, you shall be indemnified against such expenses actually and reasonably incurred by you in connection therewith. (e) The amounts which you are entitled to receive pursuant to this paragraph 1 are hereinafter called the "Indemnified Amounts." 2. Payments -------- Upon written request by you in accordance with this paragraph 2, the Company hereby covenants and agrees to promptly pay to you the Indemnified Amounts (less any Advancement Amounts 4 received by you under paragraph 3 below) by check drawn on the Company's bank. Any written request to the Company for Indemnified Amounts shall include an itemized list setting forth in detail the dollar amount expended (or incurred and expected to be expended) for each Indemnified Amount, together with the supporting bills, agreements or other documentation, and the Advancement Amounts received. In the event you are unsuccessful on the merits in the defense of any section referred to in paragraph 1 above, your written request to the Company for Indemnified Amounts shall also include a written certificate by you stating whether (i) you acted in good faith and in a manner reasonably believed by you to be in or not opposed to the best interests of the Company and (ii) with respect to the Indemnified Amounts incurred in connection with a criminal action or proceeding, you had no reason to believe your conduct was unlawful. 3. Advancement of Expenses ----------------------- Expenses incurred directly by you in defending any action referred to in paragraph 1 above shall be paid to you by the Company in advance of the final disposition of such action (an "Advancement Amounts") upon your written request, which shall include the following: (i) an itemized listing setting forth in detail the amounts expended (or incurred and expected to be expended) for any such expenses, together with the supporting bills, agreements or other documentation and (ii) an undertaking by you, or on your behalf, to repay the Advancement Amounts to the Company if you should ultimately be found not to be entitled to indemnification for such exercises pursuant to paragraph 1 of this Agreement. You may make as many requests for advancement under this paragraph 3 as you deem reasonably necessary to cover expenses expended or incurred and expected to be expended; provided, however, that each such request (except the last -------- ------- request) shall be for the sum of at least $2,500. In addition, unless you shall ultimately be found not to be entitled to the indemnification pursuant to paragraph 1 above, you shall have the right to reimbursement for that portion of Indemnified Amounts which is in excess of Advancement Amounts by following the procedure set out in paragraph 2 above. Alternatively, if you are entitled to seek Indemnified Amounts pursuant to paragraph 1 above and the total of the Advancement Amounts received therefor exceeds the total of such Advancement Amounts, you shall pay to the Company the amount of such excess. 4. Indemnification Not Exclusive, Subrogation Rights ------------------------------------------------- The indemnification and advancement of expenses provided for hereunder (a) shall not be deemed exclusive of any other rights to which you may be entitled under the common law or 5 statute (including Section 607.0850 of the Florida Business Corporation Act, or any successor thereto or amendment thereto), ordinance, regulation, agreement, certificate of incorporation, by-law provision, vote of stockholders or disinterested Directors or otherwise, both as to action in your official capacity and as to action in any other capacity while holding such office, subject to the limitations set forth in Section 607.0850(7) of the Florida Business Corporation Act, and (b) shall continue as to you after you have ceased to be a Director or Officer and shall inure to the benefit of your heirs, executors and administrators. In the event you shall receive payment from any insurance carrier, or from plaintiff in any motion against you in respect of expenses for which Indemnified Amounts are or shall have been paid in whole or in part by the Company pursuant hereto, you shall reimburse to the Company the amount, if any, by which the sum of such payments by such insurance carrier or such plaintiff and payments by the Company to you exceeds such Indemnified Amounts; provided, however, that such portions, if any, of such insurance -------- ------- proceeds that are required to be reimbursed by the Company to the insurance carrier under the terms of its insurance policy shall not be deemed to be payments by the Company hereunder. In addition, the Company shall be subrogated to your rights (to the extent thereof) against any insurance carrier in respect of such Indemnified Amounts paid by the Company. Such right of subrogation shall be terminated upon receipt by the Company of the amount to be reimbursed by you pursuant to the first sentence of this paragraph. 5. Notification and Defense of Claim --------------------------------- Promptly after receipt of notice of the commencement of any action with respect to which a claim is to be made by you against the Company under this Agreement, you shall notify the Company of the commencement thereof, but the omission to so notify the Company shall not relieve the Company from any liability that the Company may have to you hereunder unless the Company is materially prejudiced thereby. With respect to any such action, suit or proceeding as to which you notify the Company of the commencement thereof: (a) The Company shall be entitled to participate therein at its own expense. (b) Except as otherwise provided below, the Company shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to you. After notice from the Company to you of the Company's election so to assume the defense thereof, the Company shall not be liable to you under this Agreement for any legal or other expenses subsequently incurred by you in connection with the defense thereof except as provided below. You shall have the right to employ your 6 own counsel in such action, but the fees and disbursements of such counsel incurred after notice from the Company of the Company's assumption of the defense thereof shall be at your expense unless (i) the employment of separate counsel by you has been authorized by the Company, (ii) you and the Company shall have reasonably and in good faith concluded that there may be a conflict of interest between the Company and you in the conduct of the defense of such action, (iii) such action seeks solely penalties or other relief against you with respect to which the Company could not provide monetary indemnification to you (such as injunctive relief or incarceration), or (iv) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and disbursements of your counsel shall be at the expense of the Company. (c) The Company shall not be liable to indemnify you under this Agreement for any amounts paid in settlement of any action effected without the Company's written consent. The Company shall not settle any action in any manner that would impose any penalty, prohibition or limitation on you without your written consent. Neither the Company nor you shall unreasonably withhold consent to any proposed settlement. 6. Successors; Binding Agreement ----------------------------- The Company shall use its best efforts to require any entity that acquires, directly or indirectly, by purchase of stock or assets, merger, consolidation or otherwise, all or substantially all of the business and/or assets of the Company (a "Successor") by agreement in form and substance reasonably satisfactory to you, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such transaction had taken place. This Agreement shall inure to the benefit of and be enforceable by your personal and legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts are still payable to you hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement. 7. Enforcement ----------- The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on the Company hereby in order to induce you to continue in your present position as a Director and/or Officer of the Company and acknowledges that you are relying upon this Agreement in continuing in such capacity. 7 In the event you are required to bring any action to enforce rights or to collect monies due under this Agreement and are successful in such action, the Company shall reimburse you for all fees and expenses (including reasonable fees and expenses of counsel) actually incurred by you in bringing and pursuing such action. 8. Miscellaneous ------------- No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by you and either the President of the Company or other Officer of the Company specifically designated by the Board of Directors. No waiver by either party hereto, at any time, of any breach by the other party hereto of, or compliance by the other party hereto with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, other than those set forth expressly in this Agreement have been made by either party hereto with respect to the subject matter hereof. 9. Validity -------- The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts ------------ This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 11. Supersession ------------ This Agreement replaces and supersedes in its entirety the letter agreement between the Company and the undersigned concerning the subject matter hereof dated February 16, 1988. It this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed 8 copy of this letter, which shall then constitute our agreement on this matter. The agreement shall be considered entered into and effective as of the date you sign this letter agreement. Sincerely, Robert C. Strauss President and Chief Executive Officer Agreed to and Accepted as of this day of 19 . - ------ ----------- -- EX-6 7 Exhibit 6 [ CORDIS LETTERHEAD ] November 1, 1995 Dear Shareholder: On October 19, 1995, Johnson & Johnson ("J&J") and its wholly owned subsidiary, JNJ Acquisition Corp. announced a tender offer (the "Offer") for all of the Company's outstanding common stock (together with the associated rights) at a price of $100 per share in cash. In its Offer materials, J&J indicated that it is prepared to pay $105 per share in a stock-for-stock merger in which all outstanding shares of common stock of the Company would be exchanged for common stock of J&J (the "Stock Merger Proposal"), subject to certain conditions. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT BOTH THE OFFER AND THE STOCK MERGER PROPOSAL ARE INADEQUATE AND NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU REJECT THE OFFER AND NOT TENDER YOUR SHARES TO J&J. In reaching the determination that the Offer and the Stock Merger Proposal are inadequate and not in the best interests of the Company or its shareholders, your Board gave careful consideration to the Company's business, financial condition, results of operations, business strategy and future prospects, including growth opportunities in certain markets in which the Company presently operates or intends to operate, the opinion of the Company's financial advisor, Morgan Stanley & Co. Incorporated, that the consideration to be received by the holders of the Company's shares in the Offer is inadequate from a financial point of view and its advice concerning the inadequacy from a financial point of view of the proposed purchase price component of the Stock Merger Proposal, the Board's belief that neither of the $100 per share cash price pursuant to the Offer or the $105 per share in stock pursuant to the Stock Merger Proposal reflects the current value of the Company, the numerous conditions to consummation of the Offer, and the other factors described in the attached Schedule 14D-9. We urge you to read carefully the attached document in its entirety, including the opinion of Morgan Stanley & Co. Incorporated included as an Annex, so that you will be fully informed as to the Board's recommendation. YOUR BOARD OF DIRECTORS BELIEVES THAT SIGNIFICANT VALUE WILL BE CREATED FOR SHAREHOLDERS THROUGH THE PURSUIT OF THE CURRENT STRATEGIC PLAN BY AN INDEPENDENT CORDIS. THE BOARD ALSO CONTINUES TO BE COMMITTED TO THE MAXIMIZATION OF SHAREHOLDER VALUE. IN THIS REGARD, THE BOARD HAS AUTHORIZED MANAGEMENT AND THE COMPANY'S ADVISORS TO EXPLORE ALL STRATEGIC ALTERNATIVES AND TO REPORT BACK TO THE BOARD AT AN EARLY DATE. Thank you for your continued support. ROBERT C. STRAUSS Chairman, President and Chief Executive Officer EX-7 8 Exhibit 7 NEWS RELEASE [CORDIS LETTERHEAD] For Immediate Release: November 1, 1995 - --------------------- Cordis Board Rejects J&J Cash Offer and ---------------------------------------- Stock Proposal; Directs Management ---------------------------------- to Explore Alternatives ----------------------- Miami (Nov. 1)--The board of directors of Cordis Corporation (Nasdaq:CORD) has unanimously voted to reject the previously announced unsolicited offer by Johnson & Johnson (NYSE:JNJ) to acquire all the outstanding shares of common stock of the company at a price of $100 per share in cash and its alternative proposal to acquire the company through a stock-for-stock merger at $105 per share. In a meeting held yesterday the board determined that both the unsolicited $100 cash offer and the $105 stock proposal by J&J are inadequate, and the board recommends that Cordis stockholders reject the pending offer. The board believes that significant value will be created for stockholders through the pursuit of the current strategic plan by an independent Cordis. The board also continues to be committed to the maximization of stockholder value. In this regard, the board has authorized management and the company's advisors to explore all strategic alternatives and to report back to the board at an early date. The board has also deferred the distribution date of the company's rights until such later date as may be determined by the board. Accordingly, the rights will continue to trade with the company's common stock. Miami-based Cordis Corporation and its subsidiaries manufacture and market a variety of medical devices and systems for the cardiology, electrophysiology, radiology, interventional neuroradiology and neuroscience markets. -30- Florida and Trade Press Financial Media - ----------------------- --------------- Chick McDowell Fred Garcia Cordis Corporation Gene Donati (305) 824-2821 Clark & Weinstock (212) 953-2550 EX-8 9 Exhibit 8 ______________________ CORDIS CORPORATION and CHEMICAL MELLON SHAREHOLDER SERVICES L.L.C., as Rights Agent ________________________ Rights Agreement Dated as of October 13, 1995 ________________________ Table of Contents ----------------- Section Page - ------- ---- 1 Certain Definitions . . . . . . . . . . . . . . . . 1 2 Appointment of Rights Agent . . . . . . . . . . . . 6 3 Issue of Rights Certificates . . . . . . . . . . . 6 4 Form of Rights Certificates . . . . . . . . . . . . 8 5 Countersignature and Registration . . . . . . . . . 9 6 Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates . . . . . . . . . . . . . . . 10 7 Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . . . . 11 8 Cancellation and Destruction of Rights Certificates 13 9 Reservation and Availability of Common Stock . . . 13 10 Common Stock Record Date . . . . . . . . . . . . . 15 11 Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights . . . . . . . . . . . . . . . 15 12 Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . . . 24 13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . . . . 24 14 Fractional Rights and Fractional Shares . . . . . . 27 15 Rights of Action . . . . . . . . . . . . . . . . . 28 16 Agreement of Rights Holders . . . . . . . . . . . . 28 17 Rights Certificate Holder Not Deemed a Shareholder 29 18 Duties of Rights Agent . . . . . . . . . . . . . . 29 19 Compensation and Indemnification of the Rights Agent 32 - i - 20 Merger or Consolidation or Change of Name of Rights Agent 32 21 Change of Rights Agent . . . . . . . . . . . . . . 33 22 Issuance of New Rights Certificates . . . . . . . . 34 23 Redemption . . . . . . . . . . . . . . . . . . . . 35 24 Exchange . . . . . . . . . . . . . . . . . . . . . 36 25 Notice of Certain Events . . . . . . . . . . . . . 37 26 Notices . . . . . . . . . . . . . . . . . . . . . . 38 27 Supplements and Amendments . . . . . . . . . . . . 39 28 Successors . . . . . . . . . . . . . . . . . . . . 40 29 Determinations and Actions by the Board of Directors, etc. . . . . . . . . . . . . . . . . . . . . . . 40 30 Benefits of this Agreement . . . . . . . . . . . . 40 31 Severability . . . . . . . . . . . . . . . . . . . 40 32 Governing Law . . . . . . . . . . . . . . . . . . . 41 33 Counterparts . . . . . . . . . . . . . . . . . . . 41 34 Descriptive Headings . . . . . . . . . . . . . . . 41 EXHIBIT A -- Form of Rights Certificate EXHIBIT B -- Summary of Rights to Purchase Common Stock - ii - RIGHTS AGREEMENT ---------------- Agreement, dated as of October 13, 1995 (the "Agreement"), between Cordis Corporation, a Florida corporation (the "Company"), and Chemical Mellon Shareholder Services L.L.C. (the "Rights Agent"). WHEREAS, on October 12, 1995 (the "Rights Dividend Declaration Date"), the Board of Directors of the Company authorized and declared a dividend distribution of one Right for each share of Common Stock (as hereinafter defined) of the Company outstanding at the Close of Business on October 23, 1995 (the "Record Date"), and has authorized the issuance of one Right with respect to each share of Common Stock of the Company issued between the Record Date (whether originally issued or delivered from the Company's treasury) and the Distribution Date (as hereinafter defined), each Right initially representing the right to purchase one share of Common Stock upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, ------------------- the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, or (iii) any employee benefit plan of the Company or any Subsidiary of the Company, or any Person or entity holding shares of Common Stock for or pursuant to the terms of any such plan to the extent, and only to the extent, of such shares so held. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares of Common Stock outstanding, increases the proportionate number of shares of Common Stock beneficially owned by such Person to 15% or more of the shares of Common Stock of the Company then outstanding; provided, however, that if a Person shall become the Beneficial -------- ------- Owner of 15% or more of the Common Stock of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares of Common Stock of the Company, then such Person shall be deemed to be an "Acquiring Person" if such Person is then the Beneficial Owner of 15% or more of the Common Stock then outstanding. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of this Agreement (the "Exchange Act"). (c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, other rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person -------- ------- shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not -------- ------- be deemed the "Beneficial Owner" of, or to "beneficially own," any -2- security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (c)) or disposing of any voting securities of the Company; provided, however, -------- ------- that nothing in this paragraph (c) shall cause a person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "Board" shall mean the Board of Directors of the Company. (e) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (f) "Close of Business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that -------- ------- if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day. (g) "Common Stock" when used with reference to the Company shall mean the shares of common stock, $1.00 par value, of the Company. "Common Stock" when used with reference to any Person other than the Company shall mean the class of capital stock with the greatest aggregate voting power, or the class of equity securities or other equity interests having power to control or direct the management of such Person. - 3 - (h) "Company" shall mean Cordis Corporation, a Florida corporation. (i) "Continuing Director" shall mean (i) any member of the Board of Directors of the Company, while such Person is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative of any Acquiring Person or of any such Affiliate or Associate, and was a member of the Board as of the date of this Agreement, or (ii) any Person who subsequently becomes a member of the Board, while such Person is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, if such Person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. (j) "Distribution Date" shall mean the earlier of (i) the Close of Business on the tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date), or (ii) the Close of Business on the tenth Business Day (or, if such tenth Business Day occurs before the Record Date, the Close of Business on the Record Date), or such specified or unspecified later date on or after the Record Date as may be determined by action of a majority of the Continuing Directors, after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company or any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity holding shares of Common Stock for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would be the beneficial owner of 15% or more of the outstanding shares of Common Stock. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended as in effect on the date of this Agreement. (l) "Exchange Date" shall have the meaning set forth in Section 7(a) hereof. (m) "Expiration Date" shall have the meaning set forth in Section 7(a) hereof. - 4 - (n) "Final Expiration Date" shall have the meaning set forth in Section 7(a) hereof. (o) "Outside Directors" shall mean the Continuing Directors who are not officers of the Company. (p) "Person" shall mean any individual, firm, corporation, partnership or other entity, and shall include any successor (by merger or otherwise) of such entity. (q) "Principal Party" shall have the meaning set forth in section 13(b) hereof. (r) "Purchase Price" shall have the meanings set forth in Sections 4(a) and 11(a)(ii) hereof. (s) "Record Date" shall mean the close of business on October 23, 1995. (t) "Redemption Period" shall have the meaning set forth in Section 23(a) hereof. (u) "Rights Agent" shall mean Chemical Mellon Shareholder Services L.L.C. (v) "Rights Certificate" shall have the meaning set forth in Section 3 hereof. (w) "Rights Dividend Declaration Date" shall mean the close of business on October 12, 1995. (x) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) hereof. (y) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof. (z) "Securities Act" shall mean the Securities Act of 1933, as amended as in effect on the date of this Agreement. (aa) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. - 5 - (bb) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interests is owned, directly or indirectly, by such Person, or is otherwise controlled by such Person. (cc) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. Section 2. Appointment of Rights Agent. The Company hereby --------------------------- appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. Section 3. Issue of Rights Certificates. ---------------------------- (a) As promptly as practicable following the Record Date, the Company will send a copy of a Summary of Rights to Purchase Common Stock, in substantially the form attached hereto as Exhibit B (the "Summary of Rights"), by first-class, postage prepaid mail, to each record holder of Common Stock as of the Close of Business on the Record Date at the address of such holder shown on the records of the Company. With respect to certificates for shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates for the Common Stock and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the Distribution Date (or the earlier Expiration Date or Final Expiration Date), the transfer of any certificate representing shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby. (b) Rights shall be issued in respect of all shares of Common Stock issued (whether originally issued or from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date or the Final Expiration Date. Rights shall also be issued to the extent provided in Section 22 in respect of all shares of Common Stock which are issued (whether originally issued or from the Company's treasury) after the Distribution Date and prior to the Expiration Date. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights - 6 - Agreement between Cordis Corporation (the "Company") and Chemical Mellon Shareholder Services L.L.C. (the "Rights Agent") dated as of October 13, 1995 (the "Rights Agreement"),the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement as in effect on the date of mailing without charge promptly after the receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. The Rights shall not be exercisable, and shall be void so long as held, by a holder in any jurisdiction where the requisite qualification to the issuance to such holder, or the exercise by such holder, of the Rights in such jurisdiction shall not have been obtained or be obtainable. With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Stock represented thereby. (c) Until the Distribution Date (i) the Rights will be evidenced (subject to the provisions of paragraph (a) of this Section 3) by the certificates for Common Stock registered in the names of the holders thereof (which certificates for Common Stock shall also be deemed to be Rights Certificates) and not by separate Rights Certificates, and (ii) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). - 7 - (d) As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Rights Certificate, in substantially the form of Exhibit A hereto, evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. Section 4. Form of Rights Certificates. --------------------------- (a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever issued, shall be dated as of the Record Date, and on their face shall entitle the holders thereof to purchase such number of shares of Common Stock as shall be set forth therein at the price set forth therein (such exercise price per share, the "Purchase Price"), but the amount and type of securities purchasable upon exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant to Section 3(d) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred - 8 - Rights or (B) a transfer which a majority of the Continuing Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement. Section 5. Countersignature and Registration. --------------------------------- (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, President or any Vice-President either manually or by facsimile signature, and have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates. - 9 - Section 6. Transfer, Split Up, Combination and Exchange of Rights ------------------------------------------------------ Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. - ----------------------------------------------------------------------- (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Expiration Date or Final Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of shares of Common Stock (or following a Triggering Event, other securities, cash, or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the person entitled thereto a Rights Certificate or Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed, or mutilated. - 10 - Section 7. Exercise of Rights; Purchase Price; Expiration Date of ------------------------------------------------------ Rights. - ------ (a) Subject to Section 7(e) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent, together with payment of the Purchase Price for each share of Common Stock as to which the Rights are exercised, at or prior to the earlier of (i) the close of business on October 13, 2005 (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, or (iii) the time at which such Rights are exchanged (the "Exchange Date") as provided in Section 24 hereof, or (iv) the time at which the Rights expire pursuant to Section 13(d) hereof (the earliest of (i), (ii), (iii) and (iv) being herein referred to as the "Expiration Date"). (b) Each Right shall entitle the registered holder thereof to purchase one share of Common Stock, and the Purchase Price for each share of Common Stock pursuant to the exercise of a Right shall initially be $375, and shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one share of Common Stock to be purchased and an amount equal to any applicable transfer tax required to be paid by the registered holder of such Rights Certificate in cash, or by certified check, cashier's check or bank draft payable to the order of the Company, the Rights Agent shall, subject to Section 18 (j) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Common Stock (or make available, if the Rights Agent is the transfer agent) certificates for the total number of shares of Common Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Common Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of shares of Common Stock as are to be purchased (in which case certificates for the shares of Common Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary to comply with such request, (ii) requisition from the Company the amount of cash, if any, - 11 - to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) after receipt thereof, promptly deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, which a majority of the Continuing Directors, in their sole discretion, determines is or was involved in or caused or facilitated, directly or indirectly (including through any change in the Board), such Section 11(a)(ii) Event, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which a majority of the Continuing Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action, and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. - 12 - (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. --------------------------------------------------- All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any provisions of this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Common Stock. -------------------------------------------- (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Common Stock (and following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities) or out of any authorized and issued shares held in its Treasury, the number of shares of Common Stock (and following the occurrence of a Triggering Event, shares of Common Stock and/or other securities) that, as provided in this Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights. (b) So long as the shares of Common Stock issuable and deliverable upon the exercise of Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the - 13 - Company upon exercise of the Rights has been determined in accordance with this Agreement, a registration statement under the Securities Act of 1933 (the "Act"), with respect to the Common Stock or other securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the Expiration Date. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. Upon any suspension of exercisability of Rights referred to in this Section 9(c), the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable and shall be void so long as held, by a holder in any jurisdiction where the requisite qualification to the issuance to such holder, or the exercise by such holder, of the Rights in such jurisdiction shall not have been obtained or be obtainable, or the exercise thereof shall not be permitted under applicable law or a registration statement shall not have been declared effective. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Common Stock delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly authorized and validly issued and fully paid and non-assessable. (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates or of any certificates for a number of shares of Common Stock upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of certificates for a number of shares of Common Stock in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered - 14 - for exercise or to issue or deliver any certificates for a number of shares of Common Stock in a name other than that of the registered holder upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Common Stock Record Date. Each person in whose name ------------------------ any certificate for a number of shares of Common Stock (or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of shares of Common Stock (or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, -------- however, that if the date of such surrender and payment is a date upon - ------- which the Common Stock (or other securities, as the case may be) transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Common Stock (or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number and ---------------------------------------- Kind of Shares or Number of Rights. The Purchase Price, the number and - ---------------------------------- kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding Common Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Common Stock or the number and kind of shares of capital stock issuable on such date, as the case may be, shall be proportionately - 15 - adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the aggregate adjusted Purchase Price then in effect necessary to exercise a Right in full, the aggregate number and kind of shares of Common Stock or the number and kind of shares of capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Common Stock (or other capital stock, as the case may be) transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) Subject to Sections 23 and 24 of the Agreement, in the event that any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan), alone or together with its Affiliates and Associates, shall, at any time after the Rights Dividend Declaration Date, become an Acquiring Person, unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof, or is an acquisition of shares of Common Stock pursuant to a cash tender offer made pursuant to Section 14(d) of the Exchange Act for all outstanding shares of Common Stock (other than shares of Common Stock beneficially owned by the person making the offer or by its Affiliates or Associates) at a price and on terms determined by at least a majority of the Outside Directors, after receiving advice from one or more investment banking firms, to be (a) at a price which is fair to shareholders (taking into account all factors which such members of the Board deem relevant including, without limitation, prices which could reasonably be achieved if the Company or its assets were sold on an orderly basis designed to realize maximum value) and (b) otherwise in the best interests of the Company and its shareholders, proper provision shall be made so that promptly following the Redemption Period (as defined in Section 23(a)), each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof and the payment of an amount equal to the then current Purchase Price in accordance with the terms of this Agreement, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of shares of Common Stock for which a Right was or would have been exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, whether or not such Right was then exercisable, and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement except to the extent set forth in Section - 16 - 13 hereof) by 50% of the current market price per share of Common Stock (determined pursuant to Section 11(d) hereof) on the date of such first occurrence (such number of shares, the "Adjustment Shares"). (iii) In the event that the number of shares of Common Stock which is authorized by the Company's Restated Articles of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Board shall (acting by at least a majority of the Continuing Directors), to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party: (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for some or all of the Adjustment Shares, upon exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of the Company, including, without limitation, shares, or units of shares, of preferred stock which the Board of Directors has deemed to have the same value as shares of Common Stock (such shares of equity securities being herein called "common stock equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board of Directors based upon the advice of an investment banking firm selected by the Board of Directors; provided, however, if the Company shall not have made adequate -------- ------- provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If, upon the occurrence of a Section 11(a)(ii) Event, the Board of Directors shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, then if the Board so elects, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that action is to be taken pursuant to the preceding provisions of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of - 17 - the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to the first sentence of this Section 11(a)(iii) and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be deemed to have the same value as the Common Stock on such date. The Board may, but shall not be required to, establish procedures to allocate the right to receive shares of Common Stock upon the exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii). (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Common Stock (or shares having the same rights, privileges and preferences as the shares of Common Stock ("equivalent common stock") or securities convertible into Common Stock at a price per share of Common Stock or per share of equivalent common stock (or having a conversion price per share of Common Stock, if a security convertible into Common Stock) less than the current per share market price of the Common Stock (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock and/or equivalent common stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date, plus the number of additional shares of Common Stock and/or equivalent common stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. Shares of Common Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so - 18 - issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Common Stock, but including any dividend payable in stock other than Common Stock), or subscription rights or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current per share market price of the Common Stock (as defined in Section 11(d)) on such record date, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Common Stock and the denominator of which shall be such current per share market price of the Common Stock. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) For the purpose of any computation hereunder, the "current market price" of the Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of Common Stock for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in -------- ------- the event that the current market price of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (i) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into such Common Stock (other than the Rights), or (ii) any subdivision, combination or reclassification of such Common Stock, and prior to the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be appropriately adjusted to take into account ex-dividend trading. The closing - 19 - price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares of Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board of Directors shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business, or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the term "Trading Day" shall mean a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York are not authorized or obligated by law or executive order to close. If the Common Stock is not publicly held or not listed or traded, "current market price" shall mean the fair value per share as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in such price; provided, however, that any adjustments which by reason of this -------- ------- Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten- thousandth of a share of Common Stock or other share, as the case may be. Notwithstanding the first sentence of this Section 11(e), an adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date. - 20 - (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Common Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of shares of Common Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that fraction of a shares (or number of shares) of Common Stock (calculated to the nearest one-thousandth) obtained by (i) multiplying (x) the number of shares covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of shares of Common Stock issuable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of shares of Common Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public - 21 - announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the fraction of a share (or number of shares) of Common Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per share and the number of shares which were expressed in the initial Rights Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then-par value, if any, of the number of shares of Common Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable such number of shares of Common Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of shares of Common Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of shares of Common Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, -------- however, that the Company shall deliver to such holder a due bill or other - ------- appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. - 22 - (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Common Stock, (ii) issuance wholly for cash of any shares of Common Stock at less than the current market price, (iii) issuance wholly for cash of shares of Common Stock or securities which by their terms are convertible into or exchangeable for Common Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Common Stock shall not be taxable to such stockholders. (n) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then - 23 - outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event. Section 12. Certificate of Adjusted Purchase Price or ----------------------------------------- Number of Shares. Whenever an adjustment is made as provided in - ---------------- Sections 11 and 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Common Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate. Section 13. Consolidation, Merger or Sale or Transfer ----------------------------------------- of Assets or Earning Power. - -------------------------- (a) Subject to Section 23 of this Agreement, in the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case (except as may be contemplated by Section 13(d) hereof), proper - 24 - provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall, upon the expiration of the Redemption Period (as defined in Section 23(a)), thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of shares of Common Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of shares of Common Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and (2) dividing that product (which product, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by 50% of the current market price (determined pursuant to Section 11(d) hereof) per share of the shares of Common Stock of such Principal Party on the date of consummation of such Section 13 Event (or the fair market value on such date or other securities or property of the Principal Party, as provided for herein); (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof (other than Sections 11(a)(ii) and 11(a)(iii)) shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) and Section 11(a)(iii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and - 25 - (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if -------- ------- the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value. (c) The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any such Section 13 Event, the Principal Party will (i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; and (ii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a) hereof. - 26 - (d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is consummated with a Person or Persons (or a wholly owned subsidiary of any such Person or Persons) who acquired shares of Common Stock pursuant to a cash tender offer for all outstanding shares of Common Stock which complies with the provisions of Section 11(a)(ii) hereof, (ii) the price per share of Common Stock offered in such transaction is not less than the price per share of Common Stock paid to all holders of Common Stock whose shares were purchased pursuant to such cash tender offer and (iii) the form of consideration being offered to the remaining holders of shares of Common Stock pursuant to such transaction is the same as the form of consideration paid pursuant to such cash tender offer. Upon consummation of any such transaction contemplated by this Section 13(d), all Rights hereunder shall expire. Section 14. Fractional Rights and Fractional Shares. --------------------------------------- (a) The Company shall not be required to issue fractions of Rights except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of the whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, or, in case no such sale takes place on such day, the average of the high bid and low asked prices, in either case as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. In the event the Rights are listed or admitted to trading on a national securities exchange, the closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the high bid and low asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to the national securities exchange on which the Rights are listed or admitted to trading. - 27 - (b) The Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) share of Common Stock. For purposes of this Section 14(b), the current market value of a share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14. Section 15. Rights of Action. All rights of action in respect of ---------------- this Agreement, except the rights of action vested in the Rights Agent pursuant to Section 18 and Section 20 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right --------------------------- by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Stock; (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper - 28 - instrument of transfer and with the appropriate form of assignment and the certificate contained therein duly completed and executed; (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be affected by any notice to the contrary; and (d) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any government authority, prohibiting or otherwise restraining performance of such obligation; provided, however, -------- the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Certificate Holder Not Deemed a Shareholder. -------------------------------------------------- No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Common Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Duties of Rights Agent. The Rights Agent undertakes ---------------------- the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: - 29 - (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of "current market price") be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith, or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except as to its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required under the provisions of Section 11 or 13 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common - 30 - Stock will, when so issued, be validly authorized and issued, fully paid and non-assessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the President, a Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instruction in response to such application specifying the action to be taken or omitted. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect, or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect, or misconduct; provided, however, -------- ------- reasonable care was exercised in the selection and continued employment thereof. - 31 - (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company. Section 19. Compensation and Indemnification of the Rights Agent. ---------------------------------------------------- (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The indemnity provided for hereunder shall survive the expiration of the Rights and the termination of this Agreement. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons. Section 20. Merger or Consolidation or Change of Name ----------------------------------------- of Rights Agent. - --------------- (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation - 32 - succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such -------- ------- corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at any such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 21. Change of Rights Agent. The Rights Agent or any ---------------------- successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Rights Certificates by first- class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a - 33 - corporation organized and doing business under the laws of the United States or of the States of Florida or New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the States of Florida or New York), in good standing, having a principal office in the States of Florida or New York which is authorized under such laws to exercise corporate trust power and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding ----------------------------------- any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price per share and the number or kind of class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date (other than upon exercise of a Right) and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate -------- ------- shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. - 34 - Section 23. Redemption. ---------- (a) The Board of Directors of the Company may, at its option, at any time during the period commencing on the Rights Dividend Declaration Date and ending on the earlier of (i) the Close of Business on the tenth day following the Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the Close of Business on the tenth day following the Record Date), as such period may be extended or shortened in the discretion of the Board of Directors (the "Redemption Period") or (ii) the Final Expiration Date, cause the Company to redeem all but not less than all the then outstanding Rights at a redemption price of $.005 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"); provided, however, that, if the Board of Directors -------- ------- authorizes redemption of the Rights or a change in the Redemption Period in either of the circumstances set forth in clauses (i) and (ii) below, then there must be Continuing Directors then in office and such authorization shall require the concurrence of a majority of such Continuing Directors: (i) such authorization occurs on or after the time a Person becomes an Acquiring Person, or (ii) such authorization occurs on or after the date of a change (resulting from a proxy or consent solicitation or from a vote or written consent(s)) in a majority of the directors in office at the commencement of such solicitation, or prior to such vote or consent(s), if any Person who is a participant in such solicitation, vote or consent(s) has stated (or, if a majority of the directors in office at the commencement of such solicitation or prior to such vote or consent(s) has determined in good faith) that such Person (or any of its Affiliates or Associates) intends to take, or may consider taking, any action which would result in such Person becoming an Acquiring Person or which would cause the occurrence of a Triggering Event unless, concurrently with such a proxy or consent solicitation or such vote or consent(s), effected in compliance with applicable law and regulations, such Person (or one or more of its Affiliates or Associates) is making a cash tender offer pursuant to a Schedule 14D-1 (or any successor form) filed with the Securities and Exchange Commission for all outstanding shares of Common Stock not beneficially owned by such Person (or by its Affiliates or Associates) in compliance with Section 11(a)(ii). If, following the occurrence of a Stock Acquisition Date and following the expiration of the Company's right of redemption hereunder (i) a Person who is an Acquiring Person shall have transferred or otherwise disposed of a number of shares of Common Stock in one transaction or series of transactions, not directly or indirectly involving the Company or any of its Subsidiaries, which did not result in the occurrence of a Triggering Event such that such Person is thereafter a Beneficial Owner of 10% or less of the outstanding shares of Common Stock, (ii) there are no other Persons, immediately following the occurrence of the event described in clause (i), who are Acquiring Persons, and (iii) the Board of Directors (with the concurrence of - 35 - a majority of the Continuing Directors) shall so approve, then the Company's right of redemption shall be reinstated and thereafter be subject to the provisions of this Section 23. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event or a Section 13 Event until such time as the Company's right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the current market price of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors. (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Section 24. Exchange. -------- (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) or Section 7(e) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice - 36 - of any such exchange; provided, however, that the failure to give, or any -------- ------- defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) or Section 7(e) hereof) held by each holder of Rights. (c) In the event that there shall not be sufficient Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. (d) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this paragraph (d), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. Notice of Certain Events. ------------------------ (a) In case the Company shall propose, at any time after the Distribution Date (i) to pay any dividend payable in stock of any class to the holders of Common Stock or to make any other distribution to the holders of Common Stock (other than a regular quarterly cash dividend out of earnings or retained earnings), or (ii) to offer to the holders of Common Stock rights or warrants to subscribe for or to purchase any additional shares of Common Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision of outstanding Common Stock), or (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) to, any other Person, or (v) to effect the liquidation, dissolution or winding up of the Company, then, in - 37 - each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Common Stock for purposes of such action and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Common Stock whichever shall be the earlier. (b) In case any Section 11(a)(ii) Event shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Common Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate other securities. Section 26. Notices. Notices or demands authorized by this ------- Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to, or on behalf of, the Company, shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Cordis Corporation P.O. Box 025700 Miami, Florida 33102 Attention: General Counsel Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made - 38 - if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Chemical Mellon Shareholder Services L.L.C. 85 Challenger Road Overpeck Center Ridgefield Park, New Jersey 07660 Attention: Stock Transfer Administration Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to any such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. Prior to the -------------------------- Distribution Date and subject to the penultimate sentence of this Section 27, the Company may (acting by at least a majority of the Continuing Directors), and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Common Stock. From and after the Distribution Date and subject to the penultimate sentence of this Section 27, the Company may (acting by at least a majority of the Continuing Directors), and the Rights Agent shall at any time and from time to time, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of any such Person); provided, however, that this Agreement may not be supplemented or -------- ------- amended to lengthen (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of any such Person). Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price, the Final Expiration Date, the Purchase Price or the number of shares of - 39 - Common Stock for which a Right is exercisable. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of shares of Common Stock. Section 28. Successors. All the covenants and provisions of this ---------- Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Determinations and Actions by the Board of ------------------------------------------ Directors, etc. For all purposes of this Agreement, any calculation of the - -------------- number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d- 3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors (with, where specifically provided for herein, the concurrence of the Continuing Directors or Outside Directors) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board (with, where specifically provided for herein, the concurrence of the Continuing Directors or Outside Directors) or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including without limitation a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board (with, where specifically provided for herein, the concurrence of the Continuing Directors or Outside Directors) in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject any director to any liability to the holders of the Rights. Section 30. Benefits of this Agreement. Nothing in this -------------------------- Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of Common Stock). Section 31. Severability. If any term, provision, covenant or ------------ restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, - 40 - provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this -------- ------- Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors determines in its good faith judgment that severing the invalid language from this Agreement would materially and adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board of Directors. Section 32. Governing Law. This Agreement, each Right and each ------------- Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Florida and for all purposes shall be governed by and construed in accordance with laws of such State. Section 33. Counterparts. This Agreement may be executed in any ------------ number of counterparts. It shall not be necessary that the signature of or on behalf of each party appears on each counterpart, but it shall be sufficient that the signature of or on behalf of each party appears on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in any proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of or on behalf of all of the parties. Section 34. Descriptive Headings. Descriptive headings of the -------------------- several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. - 41 - IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. CORDIS CORPORATION Attest: By /s/ Ana Maria Gonzalez By /s/ Robert C. Strauss ------------------------------ ---------------------- Name: Ana Maria Gonzalez Name: Robert C. Strauss ------------------ ---------------------- Title: Secretary Title: President, Chief Executive --------- -------------------------- Officer and Chairman -------------------- of the Board ------------ CHEMICAL MELLON SHAREHOLDER SERVICES L.L.C. Attest: By /s/ Barry Rosenthal By /s/ Marie Sandauer --------------------- --------------------------- Name: Barry Rosenthal Name: Marie Sandauer --------------- ---------------------- Title: Account Officer Title: Assistant Vice President --------------- ------------------------ - 42 - Exhibit A --------- [Form of Rights Certificate] Certificate No. R Rights ---------------- NOT EXERCISABLE AFTER OCTOBER 13, 2005 OR EARLIER IF REDEEMED OR EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.005 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF ANY SUCH PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*/ -- - -------------------- */ The portion of the legend in brackets shall be inserted only if - -- applicable and shall replace the preceding sentence. Rights Certificate CORDIS CORPORATION This certifies that , or ------------------------------------- registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of October 13, 1995 (the "Rights Agreement"), between Cordis Corporation, a Florida corporation (the "Company"), and Chemical Mellon Shareholder Services L.L.C. (the "Rights Agent"), to purchase from the Company at any time prior to October 13, 2005 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one share of Common Stock, $1.00 par value (the "Common Stock"), of the Company, at a purchase price of $___ per share (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of , 199 , based on the Common Stock as constituted at such - ------------------ - date, and are subject to adjustment upon the happening of certain events as provided in the Rights Agreement. From and after the occurrence of an event described in Section 11(a)(ii) of the Rights Agreement, the Rights evidenced by this Rights Certificate beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement), which the Continuing Directors (as defined in the Rights Agreement), in their sole discretion, determines is or was involved in or caused or facilitated, directly or indirectly (including through any change in the Board), such Section 11(a)(ii) Event, (ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, concurrently with or after such transfer, became an Acquiring Person or an Affiliate or Associate of an Acquiring Person shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event. The Rights evidenced by this Rights Certificate shall not be exercisable, and shall be void so long as held, by a holder in any jurisdiction where the requisite qualification to the issuance to such holder, or the exercise by such holder, of the Rights in such jurisdiction shall not have been obtained or be obtainable. As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Common Stock or other securities, which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events (as such term is defined in the Rights Agreement). This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Common Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $.005 per Right at any time prior to the earlier of the close of business on (i) the tenth day following the Stock Acquisition Date (as such time period may be changed in the discretion of the Company's Board of Directors pursuant to the Rights Agreement), and (ii) the Final Expiration Date (as defined in the Rights Agreement). Under certain circumstances set forth in the Rights Agreement, the decision to redeem (or to change such time period) shall require the concurrence of a majority of the Continuing Directors. After the expiration of the redemption period, the Company's right of redemption may be reinstated if an Acquiring Person reduces his beneficial ownership to 10% or less of the outstanding shares of Common Stock in a transaction or series of transactions not involving the Company, and such reinstatement is approved by the Company's Board of Directors (with the concurrence of a majority of the Continuing Directors). - 2 - At any time after a person becomes an Acquiring Person, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such Acquiring Person which have become void), in whole or in part, at an exchange ratio of one share of Common Stock per Right (subject to adjustment). No fractional shares of Common Stock will be issued upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Common Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of , 19 --------------------- --- -- ATTEST: CORDIS CORPORATION - ------------------------------------- By: ----------------------- Name: ----------------- Title: ----------------- - 3 - Countersigned: - ------------------------------------- - ------------------------------------- By: ------------------------------------ Authorized Signature - 4 - [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT ------------------ (To be executed by the registered holder if such holder desires to transfer the Rights Certificate.) FOR VALUE RECEIVED -------------------------------------------------------------- hereby sells, assigns and transfers unto ---------------------------------------- (Please print name and address of transferee) - -------------------------------------------------------------------------------- this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint --------------------- Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. Dated: , 19 --------------------- -- ------------------------------------ Signature Signature Guaranteed: Certificate ----------- The undersigned hereby certifies by checking the appropriate boxes that: (1) this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of any such Person. Dated: , 19 -------------------- -- -------------------------------- Signature Signature Guaranteed: NOTICE ------ The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. FORM OF ELECTION TO PURCHASE ---------------------------- (To be executed if the registered holder desires to exercise Rights represented by the Rights Certificate.) To: -------------------------------------------------- The undersigned hereby irrevocably elects to exercise ------------ Rights represented by this Rights Certificate to purchase the shares of Common Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to: - ---------------------------------------------------------------- (Please print name and address) - ---------------------------------------------------------------- Please insert social security or other identifying number: ----------------------------------- If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: - ---------------------------------------------------------------- (Please print name and address) - ---------------------------------------------------------------- Please insert social security or other identifying number: ----------------------------------- - ---------------------------------------------------------------- Dated: , 19 ---------------- -- ------------------------------ Signature Signature Guaranteed: Certificate ----------- The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of any such Person. Dated: , 19 ------------------ -- ------------------------------- Signature Signature Guaranteed: NOTICE ------ The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. Exhibit B --------- SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK On October 12, 1995, the Board of Directors of Cordis Corporation (the "Company") declared a dividend distribution of one Right for each outstanding share of common stock, $1.00 par value (the "Common Stock"), of the Company. The distribution is payable to shareholders of record on October 23, 1995. Each Right, when exercisable, entitles the registered holder to purchase from the Company one share of Common Stock at a price of $375 per share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and Chemical Mellon Shareholder Services L.L.C., as Rights Agent (the "Rights Agent"). Initially, the Rights will be attached to all certificates representing shares of Common Stock then outstanding, and no separate certificates evidencing the Rights will be distributed. The Rights will separate from the Common Stock and a distribution of Rights Certificates will occur upon the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of Common Stock (the "Stock Acquisition Date") or (ii) 10 business days (or such later date as the Continuing Directors may determine) following the commencement of a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person of 15% or more of the outstanding shares of Common Stock (the earlier of such dates being called the "Distribution Date"). Until the Distribution Date, the Rights (i) will be evidenced by the Common Stock certificates, and will be transferred with and only with the Common Stock certificates, (ii) new Common Stock certificates issued after October 23, 1995 upon transfer or new issuance of the Common Stock will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. The Rights are not exercisable until the Distribution Date and will expire at the close of business on October 13, 2005, unless earlier redeemed or exchanged by the Company as described below. The Rights will not be exercisable by a holder in any jurisdiction where the requisite qualification to the issuance to such holder, or the exercise by such holder, of the Rights has not been obtained or is not obtainable. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will evidence the Rights. Except as otherwise determined by the Board of Directors, only shares of Common Stock issued prior to the Distribution Date will be issued with Rights. In the event that a Person becomes the beneficial owner of 15% or more of the then outstanding shares of Common Stock (except pursuant to an offer for all outstanding shares of Common Stock which the Outside Directors determine to be fair to and otherwise in the best interests of the Company and its shareholders), each holder of a Right will, after the end of the Redemption Period referred to below, have the right to exercise the Right by purchasing, for an amount equal to the Purchase Price, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times such amount. Notwithstanding any of the foregoing, following the occurrence of the events set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. However, Rights are not exercisable following the occurrence of the events set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. For example, at a Purchase Price of $375 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $750 worth of Common Stock (or other consideration, as noted above) for $375. Assuming that the Common Stock had a per share value of $83 at such time, the holder of each valid Right would be entitled to purchase 9 shares of Common Stock for $375. In the event that, at any time following the Stock Acquisition Date, (i) the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation (other than a merger which follows an offer described in the second preceding paragraph), or (ii) 50% or more of the Company's assets or earning power is sold or transferred, - 2 - each holder of a Right (except Rights which previously have been voided as set forth above) shall, after the end of the Redemption Period referred to below, have the right to receive, upon exercise, Common Stock of the acquiring company having a value equal to two times the Purchase Price of the Right, e.g., Common Stock of the acquiring company having a value of $750. ---- At any time after a person or group of affiliated or associated persons becomes an Acquiring Person, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of Common Stock per Right (subject to adjustment). The Purchase Price payable, and the number of shares of Common Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of the Common Stock, (ii) upon the grant to holders of the Common Stock of certain rights or warrants to subscribe for Common Stock or convertible securities at less than the current market price of the Common Stock or (iii) upon the distribution to holders of the Common Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares will be issued and in lieu thereof, an adjustment in cash will be made based on the market price of the Common Stock on the last trading date prior to the date of exercise. In general, the Board of Directors may cause the Company to redeem the Rights in whole, but not in part, at any time during the period commencing on October 12, 1995 and ending on the tenth day following the Stock Acquisition Date, as such period may be extended or shortened by the Board (the "Redemption Period") at a price of $.005 per Right (payable in cash, Common Stock or other consideration deemed appropriate by the Board of Directors). Under certain circumstances set forth in the Rights Agreement, the decision to redeem the Rights will require the concurrence of a majority of the Continuing Directors. After the redemption period has expired, the Company's right of redemption may be reinstated (with the concurrence of the Continuing Directors) if an Acquiring Person reduces his beneficial ownership to 10% or less of the outstanding shares of Common Stock in a transaction or series of transactions not involving the Company and there are no other Acquiring Persons. Immediately upon the action of the Board of Directors of the Company ordering redemption of the Rights, with, where required, the concurrence of the - 3 - Continuing Directors, the Rights will terminate and the only right of the holders of Rights will be to receive the $.005 redemption price. The term "Continuing Director" means any member of the Board of Directors of the Company who was a member of the Board prior to the date of the Rights Agreement, and any person who is subsequently elected to the Board if such person is recommended or approved by a majority of the Continuing Directors, but shall not include an Acquiring Person or an affiliate or associate of an Acquiring Person, or any representative of the foregoing entities. The term "Outside Directors" means "Continuing Directors" who are not officers of the Company. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be subject to federal taxation to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Company or for Common Stock of the acquiring company as set forth above. Other than those provisions relating to the principal economic terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Board of Directors of the Company prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, defect or inconsistency or to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement; provided however, no amendment to adjust the time period -------- ------- governing redemption may be made at such time as the Rights are not redeemable. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Current Report on Form 8-K. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. * * * - 4 - EX-9 10 Exhibit 9 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA - -------------------------------------- JOHNSON & JOHNSON and | JNJ ACQUISITION CORP., | CIV-HIGHSMITH Plaintiffs, | | Case No. 95-2295 V. | | Magistrate Judge Turnoff CORDIS CORPORATION, | | Defendant. | FIRST AMENDED | COMPLAINT | --------- - -------------------------------------- Johnson & Johnson and JNJ Acquisition Corp. ("JNJ"), as and for their first amended complaint, allege upon knowledge with respect to themselves and their own acts, and upon information and belief as to all other matters, as follows: Nature of the Action -------------------- 1. Plaintiffs bring this action for injunctive and/or declaratory relief: (a) to prevent the anti-takeover devices and other defensive measures of defendant Cordis Corporation ("Cordis") from impeding or delaying plaintiffs' tender offer, proposed merger and consent solicitation, in violation of the fiduciary duties of Cordis's Board of Directors; (b) to prevent Cordis from otherwise taking actions that impede or delay plaintiffs' tender offer, proposed merger and consent solicitation, which will be made in compliance with all applicable laws, obligations and agreements. Jurisdiction and Venue ---------------------- 2. The Court has jurisdiction of the subject matter of this action pursuant to 28 U.S.C. Sec. 1331, 1332(a), 1337(a) and 1367(a). The plaintiffs and defendant are citizens of different states, and the matter in controversy exceeds the sum of $50,000, exclusive of interest and costs. 3. Venue is proper in this district pursuant to 28 U.S.C. Sec. 1391(a)-(c). The Parties ----------- 4. Plaintiff Johnson & Johnson is a New Jersey corporation with its principal place of business in New Jersey. Johnson & Johnson's principal line of business is the manufacture and sale of a broad range of products in the health care field. Johnson & Johnson owns common stock of Cordis. 5. Plaintiff JNJ is a New Jersey corporation with its principal place of business in New Jersey. It is a wholly owned subsidiary of Johnson & Johnson, was organized to acquire control of Cordis, and has not conducted any unrelated activities since its organization. All -2- outstanding shares of capital stock of JNJ are owned by Johnson & Johnson. JNJ owns common stock of Cordis. 6. Defendant Cordis is a Florida corporation with its principal place of business in Miami, Florida. It is engaged in the business of designing, manufacturing and marketing medical devices, primarily angiographic catheters, neuroscience devices and other related medical devices. The Offer, Proposed Merger and Consent Solicitation --------------------------------------------------- 7. On October 19, 1995, Johnson & Johnson announced its intention to commence, through its wholly owned subsidiary, JNJ, a tender offer for all outstanding shares of Cordis common stock (together with the associated purchase rights issued in connection with Cordis's Poison Pill (as defined below in Para. 30)), at the price of $100.00 per share (and associated right) net to the seller in cash (the "Offer"). The Offer is conditioned, inter alia, upon: (i) valid ---------- tender of a majority of all outstanding shares on a fully diluted basis of Cordis's common stock; (ii) redemption, invalidation or inapplicability of the Poison Pill; (iii) inapplicability of Fla. Stat. Section 607.0901 or approval of the Proposed Cash Merger (as defined below in Para. 8) by Cordis's Board of Directors pursuant to the provisions of Fla. Stat. Sec. 607.0901; and (v) inapplicability of Fla. Stat. Sec. 607.0902 or approval of the Offer by Cordis's Board of -3- Directors pursuant to the provisions of Fla. Stat. Sec. 607.0902. The Offer is not subject to any condition relating to plaintiffs' ability to finance the Offer or the Proposed Cash Merger. 8. As soon as practicable following consummation of the Offer, Johnson & Johnson will seek to have Cordis consummate a merger with JNJ or another direct or indirect wholly owned subsidiary of Johnson & Johnson (the "Proposed Cash Merger"). The purpose of the Proposed Cash Merger is to acquire all shares not tendered and purchased pursuant to the Offer or otherwise. Pursuant to the Proposed Cash Merger, each then outstanding share (other than shares owned by JNJ, Johnson & Johnson or any of their subsidiaries, shares held in the treasury of Cordis and shares owned by shareholders who perfect any available dissenters' rights under the Florida Business Corporation Act) would be converted into the right to receive an amount in cash equal to the price per share paid pursuant to the Offer. 9. With the announcement of the Offer, Johnson & Johnson also announced that it is prepared to pay $105.00 per share in a negotiated stock- for-stock tax-free merger, which would be accounted for as a pooling of interests (the "Stock Merger"). In the tender offer materials JNJ stated that if Cordis did not promptly agree to effect the Stock Merger, JNJ intended to solicit written -4- consents from Cordis's shareholders to remove and replace Cordis's current Board of Directors and to take such other actions as are deemed necessary at the time. 10. In view of Cordis's response to the Offer, plaintiffs intend to solicit written consents from Cordis's shareholders (the "Consent Solicitation") for the following purposes (the "Proposals"): (i) to remove all nine of the present members of the Board of Directors of Cordis; (ii) to amend Section 2 of Article II of Cordis's By-laws to fix the number of directors of Cordis at three; (iii) to elect three nominees to serve as directors of Cordis (the "New Directors"); and (iv) to repeal each provision of Cordis's By-laws or amendment thereto adopted subsequent to April of 1977 and prior to the effectiveness of the Proposals. 11. The Consent Solicitation is designed to facilitate the Stock Merger. If elected, the New Directors intend to discharge fully their obligations owing to Cordis and its shareholders under Florida law. Subject to such obligations, the New Directors intend to (a) redeem the Poison Pill (or amend it to make it inapplicable to the Stock Merger); (b) approve, submit and recommend to the shareholders of Cordis approval of, the Stock Merger; and (c) take such other action as may be required to expedite the prompt consummation of the Stock Merger. If a transaction, other than the Stock Merger, offering more -5- value to Cordis's shareholders is purposed, the New Directors intend to take actions to facilitate such a transaction, subject in all cases to fulfillment of their obligations as directors of Cordis. 12. The Consent Solicitation is not a request for the tender of shares of Cordis stock; it is not an offer with respect to such a tender; and it is not a solicitation of proxies to vote with respect to any matter. By executing and delivering a consent, a Cordis shareholder is executing and delivering a consent, a Cordis shareholder is exercising such shareholder's own voting power and is not authorizing any other person with respect to any matter. 13. On October 24, 1995, plaintiffs delivered to the Secretary of Cordis a written request that the Board of Directors fix a record date for the Consent Solicitation. 14. The purpose of the Offer and the Proposed Cash Merger is to enable Johnson & Johnson, if it is not able to effect a combination or merger with Cordis through the Stock Merger, to acquire control of, and the entire equity interest in, Cordis. The purpose of the Stock Merger is to acquire control of, and the entire equity interest in, Cordis. 15. The Offer and Stock Merger are clearly in the best interests of Cordis's shareholders. The Offer is a fully financed, all cash offer, available to all Cordis shareholders, for all outstanding shares; it is not "front- -6- end loaded" or otherwise coercive in nature. The Stock Merger is likewise for all outstanding shares; it is not "front-end loaded" or otherwise coercive in nature. The offer price and the Stock Merger price are pre-emptive and represent a full and fair value to Cordis's shareholders. 16. The Offer and Stock Merger provide Cordis's shareholders with the opportunity to realize a substantial premium over the market price of their shares prior to announcement of the Offer. The Offer price and the Stock Merger price represent a substantial premium over the market price of Cordis shares prior to July 18, 1995, the date on which it was incorrectly reported in the press that there were merger discussions between Johnson & Johnson and Cordis, which has since then bolstered the market price of Cordis shares. The Offer price and Stock Merger price also represent a substantial premium over the market price of the shares immediately prior to announcement of the Offer. On the last Nasdaq National Market trading day before announcement of the Offer, the last reported sale quotation of Cordis shares on the Nasdaq National Market was $86.00 per share. 17. The Officer, Proposed Cash Merger, Consent Solicitation and Stock Merger do not pose any threat to the interests of Cordis's shareholders or to Cordis's corporate policy and effectiveness. -7- 18. The Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger comply or will comply with all applicable laws, obligations and agreements. The tender offer documents fairly disclose all information material to the decision of Cordis's shareholders whether to accept or reject the offer, in compliance with plaintiffs' obligations under the securities laws. The Consent Solicitation materials will fully disclose all information material to the decision of Cordis's shareholders in compliance with plaintiffs' obligations under the securities laws. Plaintiffs have made the filing required by the Hart-Scott-Rodino Act. 19. The Offer, Proposed Cash Merger and Stock Merger cannot be completed successfully unless Cordis's anti-takeover devices are removed. Certain of Cordis's anti-takeover devices are also designed to prevent or impede the consummation of the Consent Solicitation and Stock Merger. Given the nature of the Offer and the Stock Merger and their benefits, Cordis should remove these barriers and assist plaintiffs in obtaining any necessary regulatory approvals. In any event, Cordis should not be permitted to attempt to delay consummation of the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger by litigation in other forums, including litigation on the propriety of its anti- takeover devices. -8- Contacts Between Johnson & Johnson and Cordis --------------------------------------------- 20. Cordis is unwilling even to meet to consider or discuss a combination or merger with Johnson & Johnson. 21. On September 6, 1995, Mr. Ralph S. Larsen, Chairman of the Board and Chief Executive Officer of Johnson & Johnson telephoned Dr. Robert Q. Marston, then Chairman of the Board of Cordis, to advise him of Johnson & Johnson's interest in meeting with representatives of Cordis to discuss a combination or merger on a negotiated basis. Larsen briefly outlined the strategic advantages to both Cordis and Johnson & Johnson of a combination. Marston explained to Larsen that he would be stepping down as Chairman of the Board of Cordis in October and that Mr. Robert C. Strauss, the President and Chief Executive Officer of Cordis, would be his successor as Chairman. Marston told Larsen that he would get back to him following consultation with Mr. Richard W. Foxen, a Director of Cordis. Foxen telephoned Larsen later that day, and Larsen advised Foxen of Johnson & Johnson's desire to meet with representatives of Cordis as soon as possible. Larsen described Johnson & Johnson's decentralized operating philosophy and indicated Johnson & Johnson's intention to leave Cordis as an autonomous operating company within Johnson & Johnson's family of companies. Foxen agreed that -9- he and Marston would meet with Larsen on September 12 in New York City. 22. At the meeting on September 12, 1995, Larsen and Mr. Robert N. Wilson, Vice Chairman of Johnson & Johnson, reviewed with Marston and Foxen the reasons that a combination of Johnson & Johnson and Cordis was in the best interests of all parties, and expressed Johnson & Johnson's interest in moving forward with a transaction to be structured as a stock-for-stock tax-free merger to be accounted for as a pooling-of-interests. Larsen and Wilson again emphasized Johnson & Johnson's desire to keep Cordis intact and autonomous in its current location in Florida. 23. On September 13, 1995, Marston telephoned Larsen and informed him that he had reviewed the prior discussions with other Directors of Cordis as well as with Strauss. Marston then requested that Larsen telephone Strauss. Larsen immediately telephoned Strauss, and outlined the strategic basis for a business combination and emphasized that he would like to meet as soon as possible to discuss a negotiated transaction. Strauss tentatively agreed to a meeting on either September 21 or 22, and said he would call Larsen on September 15 to confirm the date of the meeting. On September 15, 1995, Larsen called Strauss and they scheduled the meeting for September 21, 1995. -10- 24. On September 19, 1995, Strauss telephoned Larsen and informed him that there had been a telephonic meeting of the Board of Directors of Cordis at which it was decided that it would be premature to meet with representatives of Johnson & Johnson until after the Annual Meeting of shareholders of Cordis, scheduled for October 10, 1995. Larsen inquired as to the reason for the delay and Strauss responded that the Board of Directors of Cordis wanted time to do an evaluation of Cordis. Larsen agreed to postpone the meeting until after Cordis's Annual Meeting. 25. On October 11, 1995, Strauss telephoned Larsen and stated that the Board of Directors of Cordis had met and had determined that Cordis should remain independent, and that Strauss should not meet with Johnson & Johnson. Larsen inquired as to how this determination could have been made without the Board being informed of the terms that Johnson & Johnson would propose, the strategic reasons for a combination and the benefits to Cordis's shareholders, employees and customers of a combination of merger. Strauss responded that he was not authorized to meet, and would not meet, with Larsen. Larsen asked Strauss to reconsider and again expressed a desire for a negotiated combination or merger. -11- Cordis's Anti-Takeover Devices and Other Defensive Measures - ----------------------------------------------------------- 26. Cordis has available various anti-takeover devices and other defensive measures--including a "Poison Pill," the Florida Affiliated Transactions Statute, Fla. Stat. Sec. 607.0901 ("Section 607.0901"), and the Florida Control-Share Acquisitions Statute, Fla. Stat. Sec 607.0902 ("Section 607.0902")--which may be used or relied upon to block or to attempt to block the Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger. 27. Cordis has also amended its By-laws in an effort to prevent or inhibit the Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger. In light of its opposition to a combination or merger, Cordis may also attempt to use other defensive measures in order to prevent the shareholders from deciding upon the merits of plaintiffs' proposals for themselves. 28. Given the nature of the Offer and the Stock Merger and their substantial value to Cordis's shareholders, use of or reliance upon Cordis's anti-takeover devices or other defensive measures against the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger represents an unreasonable response to the Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger, forecloses effective shareholder action and is in violation of the fiduciary duties owed to plaintiffs. -12- 29. Cordis's shareholders have previously rejected at least one potential anti-takeover device, despite the recommendation of Cordis's Board of Directors. In Cordis's September 15, 1995 Proxy Statement, the Cordis Board of Directors recommended that Cordis's shareholders adopt an amendment to Article III of Cordis's Restated Articles of Incorporation to increase the authorized number of shares of common stock of Cordis from fifty million shares to one hundred fifty million shares. In describing this proposed amendment, the Proxy Statement stated, inter alia: ---------- "the mere existence of such a block of authorized but unissued shares, and the Board's ability to issue such shares without shareholder approval, might deter a bidder from seeking to acquire shares of the Company on an unfriendly basis." At Cordis's Annual Meeting, on October 10, 1995, Cordis's shareholders rejected this proposal. Poison Pill - ----------- 30. On or about October 13, 1995, only days after Cordis's shareholders rejected the adoption of the Board-recommended anti-takeover device and only days after Cordis stated its unwillingness even to meet to discuss or consider a combination or merger with Johnson & Johnson, Cordis announced that its Board of Directors had adopted a poison pill rights agreement (the "Poison Pill"). The adoption of the Poison Pill in these circumstances -13- represents the Board's attempt to block plaintiffs from proceeding with their acquisition of Cordis. 31. As part of the Poison Pill, the Board authorized and declared a dividend of one capital stock purchase right (a "Right") per share of common stock of Cordis, payable to shareholders of record as of the close of business on October 23, 1995. The Rights will expire on October 13, 2005 (the "Final Expiration Date"), unless the Rights are earlier redeemed or the final Expiration Date is extended. 32. Each Right initially entitles the holder to purchase one share of Cordis common stock at a price of $375 (the "Purchase Price"). The number of shares a holder can purchase per Right is subject to adjustment as described below. a. In the event that any person (an "Acquiring Person") becomes the beneficial owner of 15 percent or more of the outstanding shares of Cordis common stock (except pursuant to a cash offer for all outstanding shares of Cordis common stock, which offer has been determined to be fair and in the best interests of Cordis and its shareholder by a majority of those Cordis directors who are not officers of Cordis and who are Continuing Directors (as defined therein)), then each holder of a Right, other than an Acquiring Person, -14- is entitled, after exercising the Right and tendering the Purchase Price, to receive common stock having a market value equal to two times the Purchase Price. The effect of this provision is to entitle the holder of a Right to purchase Cordis common stock having a value of $750 after paying the Purchase Price of only $375. This provision becomes effective after Cordis's right of redemption has expired. b. In the event that Cordis is acquired pursuant to a merger or other business combination in which (1) Cordis is not the surviving corporation or (2) Cordis is the surviving corporation, but all of its outstanding common stock is exchanged for the securities of another entity, the holder of a Right, other than an Acquiring Person, is entitled, after exercising the Right and tendering the Purchase Price, to receive common stock of the acquiring company having a market value equal to two times the Purchase Price. This provision becomes effective after Cordis's right of redemption has expired. 33. The Poison Pill provides that the Rights do not become exercisable until after the "Distribution Date." The Distribution Date is defined as the earlier of (a) the close of business on the tenth day after the first public announcement that a person has acquired beneficial ownership -15- of 15 percent or more of the outstanding shares of Cordis common stock or (b) the close of business on the tenth business day (or such later date as determined by the Continuing Directors (as defined therein)) following the commencement of a tender offer the consummation of which would result in the beneficial ownership by a person of 15 percent or more of the outstanding shares of common stock. 34. At any time prior to the earlier of (a) the close of business on the tenth day following the announcement that a person is the beneficial owner of 15 percent or more of the outstanding shares of common stock (the "Stock Acquisition Date") or (b) the Final Expiration Date, Cordis's Board, subject to the restrictions discussed below, may redeem the Rights in whole, but not in part, at a price of $.005 per Right. 35. The Board's ability to redeem the Rights, however, is purportedly restricted by a provision of the Poison Pill that serves no purpose other than to entrench the current Board (the "Redemption Restriction"). Under this provision, in the event that redemption by the Board occurs after (a) a person becomes the beneficial owner of 15 percent or more of the outstanding shares of Cordis common stock (becomes an Acquiring Person) or (b) a majority of the members of the Board have been replaced pursuant to a proxy or consent solicitation or pursuant to a vote or written -16- consent in which a person participating in the solicitation, vote or consent has stated that it intends to become an Acquiring Person, then redemption by the Board is only effective if that Board includes "Continuing Directors" and a majority of the Continuing Directors concurred with the decision to redeem the Rights. "Continuing Directors" is defined as directors who were members of the Board on October 13, 1995 or whose nomination was approved or recommended by a majority of the Continuing Directors. In an instance where a majority of the members of the Board have been replaced pursuant to a proxy or consent solicitation, the need for the Continuing Directors to approve the redemption of the Rights is obviated only if (1) concurrently with the proxy or consent solicitation the person intending to become an Acquiring Person is also making a cash tender offer for all outstanding shares of Cordis common stock and (2) a majority of the Continuing Directors who are not officers of Cordis have determined that the tender offer is fair to shareholders and is in the best interests of Cordis and its shareholders. 36. As an alternative to redemption, Cordis's Board can also amend the Poison Pill to make it inapplicable to the Offer and Proposed Cash Merger. However, the provision of the Poison Pill allowing amendment by the Board also requires that amendments to the Poison Pill be approved -17- by a majority of Continuing Directors (the "Amendment Restriction"). 37. Cordis's Poison Pill is designed to make it prohibitively expensive to acquire control of Cordis, and thus allows the Board to withhold approval of the Offer and Proposed Cash Merger regardless of the interests of Cordis's shareholders. Given the nature and value of the Offer and the Stock Merger, Cordis should redeem the Rights under the provisions of the Poison Pill, or amend the Poison Pill to make the Rights inapplicable to the Offer and Proposed Cash Merger, to enable the shareholders to exercise their right as the owners of Cordis to decide upon the merits of the Offer for themselves. 38. The failure to redeem the Rights or amend the Poison Pill violates the fiduciary duties owed to plaintiffs because it will deny plaintiffs meaningful access to or control over the assets of Cordis and will hinder or prevent plaintiffs from exercising their fundamental shareholder rights under Florida law. Plaintiffs will suffer irreparable injury as a result of the loss of the unique opportunity to acquire control of Cordis. 39. The Redemption Restriction and the Amendment Restriction (collectively, the "Restrictions") also purport to allow the current Board to withhold approval of the Stock Merger, even if that Board is replaced by a vote of the -18- shareholders of Cordis through the Consent Solicitation. Under the Restrictions, the New Directors are purportedly without power or authority to redeem the Rights or amend the Poison Pill so that the Stock Merger may go forward. 40. Under Florida law, the shareholders of Cordis have the right to elect and remove directors. Subject only to limitations contained in the articles of incorporation, the duly elected directors are empowered to exercise all corporate powers and to direct the management of the business and affairs of the corporation. 41. Because the Restrictions, which are not contained in the Articles of Incorporation of Cordis, purport to prevent future directors form exercising certain corporate powers and to limit the ability of future directors to direct the management of the business and affairs of the corporation, the Restrictions violate Florida law. 42. The Restrictions are a blatant attempt to entrench the current Board and to deny the shareholders of Cordis the opportunity to decide for themselves whether to accept plaintiffs' proposals as set forth in the Consent Solicitation. The adoption of the Restrictions is in violation of Cordis's Board's fiduciary duties, is designed to prevent future directors from acting in the best interests of the company and represents an intentional -19- effort by the current Board to manipulate the corporate machinery so as to prevent the effectiveness of a shareholder vote pursuant to the Consent Solicitation. 43. The adoption of the Restrictions also violates the fiduciary duties owed to plaintiffs because it will deny plaintiffs meaningful access to or control over the assets of Cordis and will hinder or prevent plaintiffs from exercising their fundamental shareholder rights under Florida law. Until the Restrictions are declared invalid or immediately revoked, plaintiffs will continue to suffer irreparable injury because Cordis's shareholders will be wrongfully deterred from giving their consents to the Proposals in the Consent Solicitation, thereby depriving plaintiffs of the unique opportunity to acquire control of Cordis. Florida Control-Share Acquisitions Statute, - ------------------------------------------- Section 607.0902 - ---------------- 44. Sec. 607.0902, entitled "Control-share acquisitions," applies to any corporation (an "Issuing Public Corporation") that has not opted out of the statute's coverage that (i) has 100 or more shareholders; (ii) has its principal place of business, its principal office, or substantial assets within Florida; and (iii) has either (a) more than 10 percent of its shareholders resident in Florida, (b) more than 10 percent of its shares owned by -20- residents of Florida, or (c) 1000 shareholders resident in Florida. Cordis has not opted out of the statute's coverage. 45. Sec. 607.0902 provides that shares in a corporation that are acquired in a control share acquisition have voting rights only to the extent authorized by a majority of shareholders other than holders of interested shares (defined to include shares which are beneficially owned by an acquiring person, any officer of the issuing corporation or any employee of the corporation who is also a director). A control share acquisition is defined, inter alia, as the ----- ---- acquisition of beneficial ownership of shares with (i) one-fifth or more but less than one-third of all voting power; (ii) one-third or more but less than a majority of all voting power; or (iii) a majority or more of all voting power. A control share acquisition does not include an acquisition which has been approved by the board of directors of the Issuing Public Corporation. 46. The Consent Solicitation is not a control share acquisition. 47. The effect of Sec. 607.0902 is that shares acquired in an unsolicited tender offer only carry voting rights to the extent authorized by a majority of holders of shares other than those already acquired in the tender offer. Moreover, the shareholder vote on the resolution -21- regarding the voting rights to be accorded the acquiror's control shares is not required to be taken until the next scheduled special or annual meeting of shareholders, unless the acquiring person delivers a control share acquisition statement to the Issuing Public Corporation, requests a special meeting of shareholders for the specific purpose of determining control share voting rights, and agrees to pay the Issuing Public Corporation's expenses for the special meeting. In that event, the directors of the Issuing Public Corporation may wait for up to 50 days after receipt of the demand by the acquiring person before holding the special meeting. 48. Given the nature and value to Cordis's shareholders of the Offer, Cordis should approve the Offer so that Sec. 607.0902 will be inapplicable, take no steps to apply or enforce the provisions of Sec. 607.0902, and should permit the Offer to proceed unhindered so that Cordis's shareholders can decide upon its merits for themselves. 49. The failure to approve the Offer violates the fiduciary duties owed to plaintiffs because it will deny plaintiffs meaningful access to or control over the assets of Cordis and will hinder or prevent plaintiffs from exercising their fundamental shareholder rights under Florida law. Plaintiffs will suffer irreparable injury as a -22- result of the loss of the unique opportunity to acquire control of Cordis. Florida Affiliated Transactions Statute. - ---------------------------------------- Sec. 607.0901 - ------------- 50. Section 607.0901, entitled "Affiliated Transactions," applies to any Florida corporation that has not opted out of the statute's coverage. Cordis has not opted out of the statute's coverage. Section 607.0901 also applies to foreign corporations that satisfy certain statutory requirements. 51. Section 607.0901 was designed to impede coercive and inadequate tender offers and to assure that shareholders in a hostile takeover receive a fair price in a second-step merger. Section 607.0901 provides that if a person acquires more than ten percent of a corporation's voting shares (thereby becoming an "Interested Shareholder"), such Interested Shareholder may not engage in an "Affiliated Transaction" (defined to include a merger or consolidation) with the corporation. However, Section 607.0901 will not prohibit an Affiliated Transaction under various differing circumstances, including any instance in which the Affiliated Transaction has been approved by a majority of the Disinterested Directors (as therein defined). -23- 52. Given the nature and value to Cordis's shareholders of the Offer, Cordis should approve the Proposed Cash Merger so that Section 607.0901 will be inapplicable, take no steps to apply or enforce the provisions of Section 607.0901 and should permit the Offer to proceed unhindered so that Cordis's shareholders can decide upon its merits for themselves. 53. The failure to approve the Proposed Cash Merger violates the fiduciary duties owed to plaintiffs because it will deny plaintiffs meaningful access to or control over the assets of Cordis and will hinder or prevent plaintiffs from exercising their fundamental shareholder rights under Florida law. Plaintiffs will suffer irreparable injury as a result of the loss of the unique opportunity to acquire control of Cordis. Restrictive By-law Amendment - ---------------------------- 54. On October 23, 1995, the Board of Directors of Cordis approved an amendment to Cordis's By-laws relating to fixing the record date for determining the shareholders entitled to consent to corporate action in writing without a meeting (the "Record Date By-law") 55. Prior to the adoption of the Record Date By-law, Cordis's By-laws did not contain any provision relating to fixing the record date for a consent solicitation. Under Florida law, absent a by-law to the contrary, the record -24- date is fixed as the date on which the first written consent is delivered to the company. 56. Under the terms of the Record Date By-law, the Board of Directors of Cordis is empowered to fix the record date. The obligation of the Board of Directors to fix a record date is triggered by the receipt by the Secretary of Cordis of either a request that the Board of Directors fix a record date (the "Record Date Demand") or the first written consent. However, under the Record Date By-law, the Board of Directors may wait ten business days after receipt of the Record Date Demand or the first written consent, whichever is earlier, before meeting to adopt a resolution to fix the record date. Moreover, under the Record Date By-law, the Board of Directors may fix the record date as late as ten business days after the date that the Board of Directors adopts the resolution fixing the record date. In short, by adopting the Record Date By-law, the Board of Directors of Cordis has given itself the power to postpone the record date by twenty business days. 57. No reasonable business purpose is served by delaying the fixing of the record date in the manner allowed by the Record Date By-law. The Record Date By-law was adopted in response to plaintiffs' announcement of their intent to commence a consent solicitation to, inter alia, replace ---------- the current directors of Cordis, and was intended to -25- entrench the current management and directors of Cordis and to delay or impede the Consent Solicitation and the Stock Merger. 58. Adoption of the Record Date By-law represents an unreasonable response to the Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger, represents an intentional effort by the current Board to manipulate the corporate machinery so as to prevent the effectiveness of a shareholder vote pursuant to the Consent Solicitation and demonstrates the bad faith of Cordis's current Board of Directors. 59. Plaintiffs have nonetheless sought to comply with the Record Date By-law. On October 24, 1995, JNJ delivered a written request to Cordis requesting that the Board of Directors of Cordis fix a record date as soon as possible for plaintiffs' consent solicitation. Irreparable Injury ------------------ 60. Cordis's use of or reliance upon its anti-takeover devices and other defensive measures to obstruct the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger will deny plaintiffs meaningful access to or control over the assets of Cordis, will hinder or prevent plaintiffs from exercising their fundamental shareholder rights under Florida law and will cause plaintiffs irreparable injury as a result of the loss of the unique -26- opportunity to acquire control of Cordis. These injuries will be suffered directly by plaintiffs and are separate and distinct from the injuries that such actions will cause Cordis's other shareholders, who will be deprived of the fundamental right to decide for themselves whether or not to accept the Offer and to sell their shares for a substantial premium. 61. Plaintiffs have no adequate remedy at law. Only through the exercise of the Court's equitable powers will plaintiffs be protected from immediate and irreparable injury. Unless the Court enjoins the application of Cordis's anti-takeover devices to the Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger and enjoins Cordis from impeding the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger by any other defensive measures, including litigation in other forums, plaintiffs will be precluded from consummating the Offer, which is conditioned on removal or inapplicability of Cordis's anti-takeover devices, will be denied any meaningful access to or control over the assets of Cordis and will be hindered in or prevented from exercising their fundamental shareholder rights under Florida law. Should that occur, plaintiffs will have lost the unique opportunity to acquire control of Cordis. -27- Declaratory Relief ------------------ 62. The Court may grant the declaratory relief sought herein pursuant to 28 U.S.C. Section 2201 and Fed. R. Civ. P. 57. Cordis's expressed unwillingness even to meet to consider or discuss a combination or merger with plaintiffs and the recent adoption of the Poison Pill and the Record Date By-law demonstrate that there is a substantial controversy between the parties. The adverse legal interests of the parties are real and immediate. The granting of the requested declaratory relief will serve the public interest by affording relief from uncertainty and by avoiding delay and will conserve judicial resources by avoiding piecemeal litigation. COUNT ONE --------- (INJUNCTIVE RELIEF) 63. Plaintiffs repeat, reaver, and incorporate each averment contained in Paragraphs 1 through 62 of this Complaint as if fully set forth herein. 64. The Offer is fully financed; it is non-coercive and non- discriminatory; it is fair to Cordis's shareholders; and it represents a substantial premium over the market price of Cordis shares. 65. The Stock Merger is not subject to a financing condition; it is non-coercive and non-discriminatory; it is fair to Cordis's shareholders; and it -28- represents a substantial premium over the market price of Cordis's shares. 66. The Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger comply with all applicable laws, obligations, and agreements and pose no threat to the interests of Cordis's shareholders or to Cordis's corporate policy or effectiveness. Use of or reliance upon Cordis's anti- takeover devices or any other defensive measures to prevent Cordis's shareholders from deciding for themselves whether or not to accept the Offer and whether or not to consent to plaintiffs' proposals set forth in the Consent Solicitation is not proportionate to any threat posed, nor within the range of reasonable responses to the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger, forecloses effective shareholder action and is in breach of the fiduciary duties owed to plaintiffs. Plaintiffs seek injunctive relief against such breaches of fiduciary duties. COUNT TWO --------- (DECLARATORY AND INJUNCTIVE RELIEF) 67. Plaintiffs repeat, reaver and incorporate each averment contained in Paragraphs 1 through 62 of this Complaint as if fully set forth herein. 68. The Redemption Restriction and the Amendment Restriction violate Florida law and were adopted in violation of the fiduciary duties of the Board of Directors -29- of Cordis in an attempt to manipulate the corporate machinery so as to entrench the current Board of Directors and to prevent future directors from acting in the best interests of the company. 69. The adoption of the Restrictions also violates the fiduciary duties owed to plaintiffs because it will deny plaintiffs meaningful access to or control over the assets of Cordis and will hinder or prevent plaintiffs from exercising their fundamental shareholder rights under Florida law. 70. Plaintiffs seek injunctive declaratory relief against the operation or enforcement of these illegal provisions and against these continuing breaches of fiduciary duty. COUNT THREE ----------- (DECLARATORY AND INJUNCTIVE RELIEF) 71. Plaintiffs repeat and reaver as if fully set forth herein each averment in Paragraphs 1 through 62 of this Complaint. 72. The Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger comply or will comply with all applicable laws, obligations and agreements. Given the nature of the Offer and its benefits, Cordis should assist plaintiffs in obtaining any necessary regulatory approvals. In any event, Cordis should not be permitted to attempt to -30- delay consummation of the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger by litigation in other forums. To prevent any unnecessary impediment to consummation of the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger, plaintiffs seek declaratory and injunctive relief against Cordis's commencement of proceedings in any forum other than this Court which would impede their commencement, continuation or consummation. WHEREFORE, plaintiffs respectfully request that this Court enter an order: (a) enjoining Cordis, its directors, officers, successors, agents, servants, subsidiaries, employees and attorneys, and all persons acting in concert or participating with them, from taking any steps to impede or frustrate the ability of Cordis's shareholders to consider and make their own determination as to whether to accept the terms of the Offer or to give or withhold consent to the terms of the Consent Solicitation, or taking any other action to thwart or interfere with the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger; (b) compelling Cordis to redeem the Rights associated with the Poison Pill or to amend the Poison Pill so as to make the Rights inapplicable to the Offer -31- and Proposed Cash Merger, and enjoining Cordis, its directors, officers, successors, agents, servants, subsidiaries, employees and attorneys, and all persons acting in concert or participating with them, from taking any action to implement, distribute or recognize any rights or powers with respect to said Rights (other than to redeem the Rights), and from taking any actions pursuant to the Poison Pill that would dilute or interfere with plaintiffs' voting rights or in any other way discriminate against plaintiffs in the exercise of their rights with respect to their Cordis stock; (c) compelling Cordis to approve the Offer and the Proposed Cash Merger for the purposes of Sections 607.0901 and 607.0902, and enjoining Cordis, its directors, officers, successors, agents, servants, subsidiaries, employees and attorneys, and all persons acting in concert or participation with them, from taking any actions to enforce or apply Sections 607.0901 and 607.0902 that would interfere with the commencement, continuation or consummation of the Offer or Proposed Cash Merger; (d) declaring and adjudging that the Restrictions are in violation of Florida law and the fiduciary duties owed to plaintiffs and all other Cordis -32- shareholders; and compelling Cordis to revoke the Restrictions and enjoining Cordis, its directors, offers, successors, agents, servants, subsidiaries, employees and attorneys, and all persons acting in concert or participation with them, from taking any actions to enforce or apply the Restrictions that would interfere with plaintiffs' voting rights; discriminate in any way against plaintiffs in the exercise of their rights with respect to their Cordis stock; impede or frustrate the ability of Cordis's shareholders to consider and make their own determination as to whether to accept the terms of the Offer or to give or withhold consent to the terms of the Consent Solicitation; or otherwise interfere, impede or delay the commencement, continuation or consummation of the Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger; (e) declaring and adjudging that the Offer, Proposed Cash Merger, Consent Solicitation and Stock Merger comply with all applicable laws, obligations and agreements; (f) declaring and adjudging that Cordis, its directors, officers, successors, agents, servants, subsidiaries, employees and attorneys, and all persons acting in concert or participation with them, may not commence, and enjoining them from commencing, in any -33- forum other than this Court, any judicial proceedings that would require litigation, by way of claim, defense or counterclaim, of any of the claims, defenses or counterclaims which may be asserted in this lawsuit and that would delay or impede commencement, continuation or consummation of the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger, including, without limitation, any proceedings challenging the Offer, Proposed Cash Merger, Consent Solicitation or Stock Merger or seeking to enforce, apply or declare the validity of any of Cordis's anti-takeover devices or other defensive measures; (g) awarding plaintiffs their costs and disbursements in this action, including reasonable attorneys' fees; and -34- (h) granting such other and further relief as to the Court seems just and proper. Dated: October 26, 1995 GREENBERG, TRAURIG, HOFFMAN, LIPOFF, ROSEN & QUENTEL, P.A. 1221 Brickell Avenue Miami, FL 33131 Telephone: (305) 579-0500 Facsimile: (305) 579-0717 By: /S/ DAVID L. ROSS ------------------------- DAVID L. ROSS Florida Bar No. 270954 PEDRO J. MARTINEZ-FRAGA Florida Bar No. 752282 C. RYAN REETZ Florida Bar No. 934062 Attorneys for Plaintiffs ` Johnson & Johnson and JNJ Acquisition Corp. -35- CERTIFICATE OF SERVICE ---------------------- I HEREBY CERTIFY that a true and correct copy of the foregoing document was served by hand delivery upon Defendant Cordis Corporation, c/o Daniel G. Hall, Registered Agent, 14201 N.W. 60th Avenue, Miami, Florida 33014, this 26th day of October, 1995. /s/ David L. Ross ------------------------- David L. Ross -36- EX-10 11 Exhibit 10 IN THE CIRCUIT COURT OF THE 11TH JUDICIAL CIRCUIT IN AND FOR DADE COUNTY, FLORIDA GENERAL JURISDICTION DIVISION BRICKELL PARTNERS, a Florida Partnership, CASE NO: Individually And On Behalf of All Others Similarly Situated, Plaintiff, CLASS ACTION COMPLAINT ---------------------- - against - ROBERT C. STRAUSS, WILTON W. WEBSTER, ROBERT Q. MARSTON, DAVID R. CHALLONER, RICHARD W. FOXEN, DONALD F. MALIN, JR., JAN VAN STEVENINICK, PATRICIA K. WOOLF and CORDIS CORPORATION, Defendants. ____________________________________/ Plaintiff, by its attorneys, alleges upon personal knowledge as to his own acts and upon information and belief as to all other matters, as follows: JURISDICTION AND VENUE ---------------------- 1. This is an action for injunctive relief and damages in excess of fifteen thousand ($15,000) dollars, exclusive of interest, costs, and attorney fees. 2. Plaintiff Brickell Partners ("Brickell") is a partnership organized under the laws of the State of Florida, which is located in Miami, Dade County, Florida. A. Defendant Cordis Corporation ("Cordis" or the "Company") is a corporation organized under the laws of the State of Florida, with its principal place of business in Miami Lakes, Dade County, Florida. NATURE OF THE ACTION -------------------- 1. This is a stockholders' class action lawsuit brought on behalf of the public stockholders of Cordis Corp., who have been, and continue to be, deprived of the opportunity to realize fully the benefits of their investment in the Company. The individual defendants have wrongfully refused to properly consider a bona fide offer for the Company ---- ---- from Johnson & Johnson ("J&J"), and have taken a reactive defensive action, which was wrongfully designed to entrench Cordis officers and directors in their positions of control, and which was and is unreasonable in relation to any perceived threat posed by J&J's offer. In furtherance of these efforts, the individual defendants specifically adopted and implemented a Rights Agreement dated on or about October 16, 1995 (known in the parlance of the financial marketplace as a "Poison Pill"), which is designed to deter unsolicited acquisition offers by creating economic penalties for any person attempting to effect a business combination without approval of the individual defendants. As reported by the financial news media, the individual defendants have failed and refused to adequately consider the J&J offer. Their actions constitute unfair dealing and a breach of fiduciary duty to maximize shareholder value. The individual defendants are using their fiduciary positions of control over Cordis to thwart others in their legitimate attempts to acquire Cordis, and the individual defendants are trying to 2 entrench themselves in their positions with the Company. Parties ------- 2. Plaintiff is and, at all relevant times, has been the owner of shares of Cordis common stock. 3. Cordis is a corporation duly organized and existing under the laws of the State of Florida. Cordis designs, manufactures and sells certain medical devices consisting of angiographic catheters, neuroscience devices and related instrumentation. Cordis maintains its principal executive offices at 14201 Northwest 60th Avenue, Miami Lakes, Florida. Cordis has approximately 16.4 million shares of common stock outstanding and hundreds of stockholders of record. Cordis' stock trades over the NASDAQ National Market System. 4. Defendant Robert C. Strauss ("Strauss") is and at all relevant times hereto has been the President, Chief Executive Officer, and a director of Cordis. 5. Wilton W. Webster ("Webster") is and at all relevant times hereto has been a Vice President and a director of Cordis. 6. Defendants Robert Q. Marston, David R. Challoner, Richard W. Foxen, Donald F. Malin, Jr., Jan Van Steveninick, and Patricia K. Woolf are directors of Cordis. 7. The defendants named in paragraphs 4 through 6 are hereinafter referred to as the "Individual Defendants." 8. Because of their positions as officers/directors of the Company, the Individual Defendants owe a fiduciary duty of loyalty and due care to plaintiff and the other members of the 3 class. 9. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his/her capacity as an officer and/or director of the Company, and the liability of each arises from the fact that he or she has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS ------------------------ 10. Plaintiff brings this case in his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all stockholders of the Company, except defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants, or any of the Company's principal stockholders, who will be threatened with injury arising from defendants' actions as is described more fully below. 11. This action is properly maintainable as a class action. 12. The class is so numerous that joinder of all members is impracticable. The Company has thousands of stockholders who are scattered throughout the United States. 13. There are questions of law and fact common to the class that predominate over questions affecting any individual class member. The common questions include, inter alia, whether: ----- ---- a. defendants have breached their fiduciary duties owed by them to plaintiffs and other members of the Class by 4 failing and refusing to attempt in good faith to maximize shareholder value in the sale of Cordis; b. Cordis' Poison Pill was defensively enacted and implemented to entrench defendants in their office and deprive Cordis public shareholders of the maximum value of their holdings; c. defendants have breached or aided and abetted the breach of the fiduciary duties owed by them to plaintiffs and other members of the Class; d. defendants engaged in a plan and scheme to thwart and reject offers and proposals from third parties, including J&J; and (v) plaintiffs and the other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 14. Plaintiff is committed to prosecuting the action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the class and plaintiff has the same interests as the other members of the class. Plaintiff is an adequate representative of the class. SUBSTANTIVE ALLEGATIONS ----------------------- 15. By the acts, transactions, and courses of conduct alleged herein, defendants, individually and as part of a common plan and scheme and/or aiding and abetting one another in total 5 disregard of their fiduciary duties, are attempting to deprive plaintiff and the Class unfairly of the opportunity to maximize the value of their investment in Cordis. 16. On October 19, 1995, the Dow Jones News Wire reported that J&J ------------------- would commence "a $100-a-share cash tender offer for all of the outstanding stock of Cordis after Cordis rebuffed J&J's offer to negotiate a merger." The estimated value of the tender offer is $1.6 billion. 17. J&J announced that it had previously offered as much as $105-a- share in a stock-for-stock, tax-free transaction which was valued at $1.7 billion - or $100 million more than the tender offer. However, Cordis rejected this transaction and refused to negotiate with J&J. The $105 per share offering price represents a 22% premium over the trading price of Cordis stock on one day prior to announcement of the J&J tender offer. 18. As further evidence of defendants' intransigence, The Wall Street --------------- Journal reported on October 16, 1995, that the Individual Defendants had adopted - ------- and implemented a Poison Pill in anticipation of the J&J tender offer. Under the Plan, which is effective immediately, shareholders are given a dividend of one share purchase right ("Right") for each common share outstanding at the close of business on October 23, 1995. 19. The adoption and implementation of the Poison Pill has the force and effect of entrenching the Individual Defendants in their corporate offices against any real or perceived threat to their control, and dramatically impairs the rights of Class members 6 to exercise freedom of choice in a proxy contest or to avail themselves of a bona fide offer to purchase their shares by an acquiror, such as J&J, ---- ---- unfavored by incumbent management. This fundamental shift of control of the Company's destiny from the hands of its shareholders to the hands of the Individual Defendants results in a heightened fiduciary duty of the Individual Defendants to consider, in good faith, a third party bid, such as J&J, and further requires the Individual Defendants to pursue a third party's interest in acquiring the Company and to negotiate in good faith with a bidder on behalf of the Company's shareholders. 20. The purpose, intent and effect of the Poison Pill, in the face of a pending offer for the Company, is to thwart, deter, impede, and delay the acquisition of Cordis by J&J. 21. Defendants' recalcitrance to consider and promptly act upon J&J's earlier overtures and formal offer has no valid business purpose, and simply evidences their disregard for the attractive premium being offered to Cordis shareholders. By failing to meet and negotiate or offer to meet and negotiate with J&J, defendants are depriving plaintiff and the Class of the right to share in the assets and businesses of Cordis and receive the maximum value for their shares. 22. Cordis represents a highly attractive acquisition candidate. Defendants' conduct would deprive Cordis' public shareholders of the very substantial control premium that J&J is prepared to pay, or of the enhanced premium which further negotiation or exposure of Cordis to the market could provide. 7 23. Defendants owe fundamental fiduciary obligations to Cordis's shareholders to take all necessary and appropriate steps to maximize the value of their shares. In addition, the Individual Defendants have the responsibility to act independently so that the interests of Cordis's public stockholders will be protected, to seriously consider all bona fide offers for the Company, ---- ---- and to conduct fair and active bidding procedures or other mechanisms for checking the market to assure that the highest possible price is achieved. Further, the directors of Cordis must adequately ensure that no conflict of interest exists between the Individual Defendants' own interests and their fiduciary obligations to maximum stockholder value or, if such conflicts exist, to insure that all such conflicts will be resolved in the best interests of the Company's shareholders. 24. Because defendants dominate and control the business and corporate affairs of Cordis and because they are in possession of private corporate information concerning Cordis' assets, businesses and future prospects, their exists an imbalance and disparity of knowledge of economic power between defendants and the public shareholders of Cordis. This discrepancy makes it grossly and inherently unfair for defendants to entrench themselves at the expense of its public shareholders. 25. The Individual Defendants have breached their fiduciary and other common law duties owed to plaintiffs and other members of the Class in that they have not and are not exercising independent business judgment and have acted and are acting to the 8 detriment of the Class. 26. In connection with the conduct described herein, the Individual Defendants breached their fiduciary duties by, among others things: a. rejecting the J&J proposal without fully informing themselves about or intentionally ignoring the future prospects of a combined Cordis/J&J company, or the intrinsic worth of Cordis; b. failing and refusing to meet with representatives of J&J; and c. erecting defensive measures such as Cordis' Poison Pill plan, which was designed to make its prohibitively expensive for an unapproved third party from acquiring the assets or control of the Company. 27. Moreover, defendants have refused to take those steps necessary to ensure that Cordis's shareholders will receive maximum value for their shares of Cordis stock. Defendants have thus refused to seriously consider the pending offer, and have failed to announced any active auction or open bidding procedures best calculated to maximize shareholder value in selling the Company. 28. The Individual Defendants are acting to entrench themselves in their offices and positions and maintain their substantial salaries and perquisites, all at the expense and to the 9 detriment of the public shareholders of Cordis. 29. By the acts, transactions and courses of conduct alleged herein, the Individual Defendants, individually and as part of a common plan and scheme in breach of their fiduciary duties and obligations, are attempting unfairly to deprive plaintiff and other members of the Class of the premium they could realize in an acquisition transaction and to ensure continuance of their positions as directors and officers, all to the detriment of Cordis' public shareholders. The Individual Defendants have been engaged in a wrongful effort to entrench themselves in their offices and positions of control and prevent the acquisition of Cordis except on terms which would further their own personal interests. 30. As a result of the actions of the Individual Defendants, plaintiffs and the other members of the Class have been and will be damaged in that they have not and will not receive their fair proportion of the value of Cordis's assets and businesses and/or have been and will be prevented from obtaining a fair and adequate price for their shares of Cordis's common stock. 31. Plaintiff seeks preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiff and the Class of their rights to realize a full and fair value for their stock at a substantial premium over the market price, by unlawfully entrenching themselves in their positions of control, and to compel defendants to carry out their fiduciary duties to maximize 10 shareholder value. 32. Only through the exercise of this Court's equitable powers can plaintiff be fully protected from the immediate and irreparable injury which defendants' actions threaten to inflict. Defendants are precluding the shareholders' enjoyment of the full economic value of their investment by failing to proceed expeditiously and in good faith to evaluate and pursue a premium acquisition proposal which would provide consideration for all shares at a very attractive price. 33. Unless enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the members of the Class, and/or aid and abet and participate in such breaches of duty, and will prevent the sale of Cordis at a substantial premium, all to the irreparable harm of plaintiff and other members of the Class. 34. Plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgments as follows: (a) Declaring this to be a proper class action and certifying plaintiff as a class representative; (b) Ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by announcing their intention to: (i) cooperate fully with any entity or person, including J&J, having a bona fide interest in proposing any transactions which would ---- ---- maximize shareholder value, including but 11 not limited to, a merger or acquisition of Cordis; (ii) immediately undertake an appropriate evaluation of Cordis's worth as a merger/acquisition candidate; (iii) take all appropriate steps to enhance Cordis's value and attractiveness as a merger/acquisition candidate; (iv) take all appropriate steps to effectively expose Cordis to the marketplace in an effort to create an active auction of the Company; (v) act independently so that the interests of the Company's public shareholders will be protected; and (vi) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interest and their fiduciary obligation to maximize shareholder value or, in the event such conflicts exist, to ensure that all conflicts of interest are resolved in the best interests of the public shareholders of Cordis; (c) Ordering the Individual Defendants, jointly and severally to account to plaintiff and the Class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; (d) Preliminarily and permanently enjoining the implementation of the Company's Poison Pill; (e) Awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and 12 (f) Granting such other and further relief as may be just and proper. JURY DEMAND ----------- Plaintiff and the plaintiff class hereby demand a trial by jury on all issues contained herein, so triable. Dated: October 19, 1995 LERNER & PEARCE, P.A. By: /s/ Robert W. Pearce ---------------------------- Robert W. Pearce 2888 East Oakland Park Blvd. Fort Lauderdale, FL 33306 (305) 563-8111 Florida Bar No: 344575 Attorneys for Plaintiff Of Counsel: WECHSLER HARWOOD HALEBIAN & FEFFER LLP 805 Third Avenue New York, New York 10022 (212) 935-7400 13 EX-11 12 Exhibit 11 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA ___________________________________X ) BRICKELL PARTNERS, ) Civil Action No. a Florida Partnership ) 95-2320-Civ-Moore and HARRY LEWIS, Individually ) And On Behalf of All Others ) Similarly Situated, ) ) Plaintiffs, ) ) AMENDED CLASS - against - ) ACTION COMPLAINT ) ---------------- ) ROBERT C. STRAUSS, WILTON W. ) WEBSTER, JR., DAVID R. ) CHALLONER, RICHARD W. ) FOXEN, DONALD F. MALIN, JR., ) JAN VAN STEVENINCK, PATRICIA K. ) WOOLF, CATHERINE M. BURZIK, ) WILLIAM J. RAZZOUK and CORDIS ) CORPORATION, ) ) Defendants. ) ___________________________________X Plaintiffs, by their attorneys, allege upon personal knowledge as to their own acts and upon information and belief as to all other matters, as follows: JURISDICTION AND VENUE ---------------------- 1. Plaintiffs bring this action pursuant to Sections 14(a) and 20 of the Securities Exchange Act of 1934 (the "1934 Act") and Rule 14a-9 adopted by the Securities Exchange Commission (the "SEC") thereunder and applicable principles of common law. 2. This Court has jurisdiction pursuant to Section 27 of the 1934 Act 15 U.S.C. Sec. 78aa, and under principles of pendent jurisdiction. 3. Venue is proper in this district because the events and omissions giving rise to the claims alleged herein have occurred, are occurring and, unless restrained, will continue to occur, in this district, including the dissemination of false and misleading proxy solicitation material. Cordis is incorporated in Florida and has its principal place of business in this district. In addition, defendants transacted business in this district during the Class Period, as defined below. 4. In connection with the acts and conduct alleged in this complaint, defendants directly and indirectly, used the means and instrumentalities of interstate commerce, including the mails and telephone communication, and the facilities of national securities exchanges, namely, NASDAQ's National Market System. Parties ------- 5. Plaintiffs are and, at all relevant times, have been the owners of shares of Cordis common stock. 6. Cordis is a corporation duly organized and existing under the laws of the State of Florida. Cordis designs, manufactures and sells certain medical devices consisting of angiographic catheters, neuroscience devices and related instrumentation. Cordis maintains its principal executive offices at 14201 Northwest 60th Avenue, Miami Lakes, Florida. Cordis has approximately 16.4 million - 2 - shares of common stock outstanding and hundreds of stockholders of record. Cordis stock trades over the NASDAQ National Market System. 7. Defendant Robert C. Strauss ("Strauss") is and at all relevant times hereto has been the President, Chief Executive Officer, and Chairman of the Board of Directors of Cordis. 8. Wilton W. Webster, Jr. ("Webster") is and at all relevant times hereto has been a Vice President and a director of Cordis. 9. Defendants David R. Challoner, Richard W. Foxen, Donald F. Malin, Jr., Jan van Steveninck, Catherine M. Burzik, William J. Razzouk, and Patricia K. Woolf are directors of Cordis. 10. The defendants named in paragraphs 7 through 9 are hereinafter referred to as the "Individual Defendants." 11. Because of their positions as officers/directors of the Company, the Individual Defendants owe a fiduciary duty of loyalty and due care to plaintiffs and the other members of the class. 12. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his/her capacity as an officer and/or director of the Company, and the liability of each arises from the fact that he or she - 3 - has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS ------------------------ 13. Plaintiffs bring this action in their own behalf and as a class action, pursuant to Rule 23(a) and (b)(2) and (3) of the Federal Rules of Civil Procedure, on behalf of all stockholders of the Company as of August 15, 1995 and their successors in interest, except defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants, or any of the Company's principal stockholders, who will be threatened with injury arising from defendants' actions as is described more fully below. 14. This action is properly maintainable as a class action. 15. The class is so numerous that joinder of all members is impracticable. The Company has thousands of stockholders who are scattered throughout the United States. 16. There are questions of law and fact common to the class that predominate over questions affecting any individual class member. The common questions include, inter alia, whether: ----- ---- (a) defendants violated federal securities laws by the acts and omissions alleged herein; - 4 - (b) the proxy solicitation material disseminated by Cordis to the Class omitted and/or misrepresented material facts; (c) defendants participated in and pursued the common course of conduct complained of; (d) defendants acted willfully or recklessly in omitting and/or misrepresenting material facts; (e) defendants breached their fiduciary duties owed by them to plaintiffs and other members of the Class by failing and refusing to attempt in good faith to maximize shareholder value in the sale of Cordis; (f) Cordis' Poison Pill was defensively enacted and implemented to entrench defendants in their office and deprive Cordis public shareholders of the maximum value of their holdings; (g) defendants have breached or aided and abetted the breach of the fiduciary duties owed by them to plaintiffs and other members of the Class; (h) defendants engaged in a plan and scheme to thwart and reject offers and proposals from third parties, including Johnson & Johnson ("J&J"), who is a major manufacturer and seller of a range of health care products; and (i) plaintiffs and the other members of the Class are being and will continue to be injured by the - 5 - wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 17. Plaintiffs are committed to prosecuting the action and have retained competent counsel experienced in litigation of this nature. Plaintiffs' claims are typical of the claims of the other members of the class and plaintiffs have the same interests as the other members of the class. Plaintiffs are adequate representatives of the class. SUBSTANTIVE ALLEGATIONS ----------------------- J&J's $100 Per Share Offer - -------------------------- 18. As described below, prior to October 19, 1995, representatives of J&J initiated a series of communications with Cordis representatives in an effort to explore a Cordis/J&J business combination. After delaying a formal response to these inquiries, on or about October 11, 1995, Cordis advised J&J that the Company would remain independent. 19. On October 19, 1995, the Dow Jones News Wire reported that J&J ------------------- would commence "a $100-a-share cash tender offer for all of the outstanding stock of Cordis after Cordis rebuffed J&J's offer to negotiate a merger." The estimated value of the tender offer is $1.6 billion. Also on October 19, 1995, J&J announced its intention to solicit written consents from Cordis shareholders to remove and - 6 - replace the Individual Defendants if Cordis does not promptly agree to the merger (the "consent solicitation"). 20. In connection with the tender offer, J&J announced that it had previously offered as much as $105-a-share in a stock-for-stock, tax-free transaction which was valued at $1.7 billion - or $100 million more than the tender offer. However, Cordis rejected this transaction and refused to negotiate with J&J. The $105 per share offering price represents a 22% premium over the trading price of Cordis stock on one day prior to announcement of the J&J tender offer. The Poison Pill and By-Law Amendment - ------------------------------------ 21. As further evidence of defendants' intransigence, on October 16, 1995, Cordis issued a press release (the "October 16, 1995 press release") that the Company had adopted and implemented a Poison Pill (the "Poison Pill") in anticipation of the J&J tender offer. Under the Plan, which is effective immediately, shareholders are given a dividend of one share purchase right (the "right") for each common share outstanding at the close of business on October 23, 1995. Under the terms of the Poison Pill, as disclosed in the October 16, 1995 press release, in the event a person (i.e., J&J) acquires 15% or more of ---- Cordis common stock, holders of rights other than the acquiring party, would be entitled to purchase Company common shares at one-half of their then-current market - 7 - price. These terms of the Poison Pill have the effect of potentially making it prohibitively expensive to acquire control of the Company. 22. Although not disclosed in the October 16, 1995 press release, the Poison Pill also contained redemption and amendment provisions (collectively the "redemption and amendment provisions") typically not found in poison pills adopted by other companies. Under this provision, and in circumstances applicable here, the decision to redeem the rights or amend the Poison Pill requires the concurrence of a majority of the Company's "continuing directors" (i.e. the Individual Defendants). As described below, the redemption and amendment provisions seriously jeopardize the ability of a company, i.e., J&J, ---- to conduct a consent solicitation to remove and replace Cordis directors. 23. On October 20, 1995, J&J announced that it had filed preliminary written consent materials with the SEC. 24. On October 24, 1995, Cordis announced that the Individual Defendants had adopted a change in the Company's by-laws (the "by-law amendment"). The by-law amendment, which is designed to delay J&J from launching its consent solicitation, requires that (a) the Individual Defendants be told in advance of any attempt by a shareholder to launch a consent solicitation; and (b) the - 8 - record date be set within twenty business days thereafter. As a result of the by-law amendment, J&J cannot commence the consent solicitation until November 21, 1995. 25. On or about October 25, 1995, Cordis disclosed for the first time the redemption and amendment provisions of the Poison Pill. 26. The adoption and implementation of the Poison Pill, including the redemption and amendment provisions, has the force and effect of entrenching the Individual Defendants in their corporate offices against any real or perceived threat to their control, and dramatically impairs the rights of Class members to exercise freedom of choice in a consent solicitation or to avail themselves of a bona fide offer to purchase their shares by an acquiror, such as J&J, unfavored - ---- ---- by incumbent management. This fundamental shift of control of the Company's destiny from the hands of its shareholders to the hands of the Individual Defendants results in a heightened fiduciary duty of the Individual Defendants to consider, in good faith, a third party bid, such as J&J, and further requires the Individual Defendants to pursue a third party's interest in acquiring the Company and to negotiate in good faith with a bidder on behalf of the Company's shareholders. 27. The purpose, intent and effect of the Poison Pill and the by-law amendment, in the face of J&J's interest in acquiring the Company, is to thwart, deter, impede, and - 9 - delay the acquisition of Cordis of J&J. Moreover, the redemption and amendment provisions of the Poison Pill are an improper and unlawful attempt by the Individual Defendants to interfere with the consent solicitation. Unless these provisions are declared null and void, Cordis shareholders may not agree to the consent solicitation because of an uncertainty as to whether J&J could thereafter redeem the rights or amend the Poison Pill and consummate its tender offer. 28. Defendants' recalcitrance to consider and promptly act upon J&J's earlier overtures described below and formal offer has no valid business purpose, and simply evidences their disregard for the attractive premium being offered to Cordis shareholders. By failing to meet and negotiate or offer to meet and negotiate with J&J, defendants are depriving plaintiffs and the Class of the right to share in the assets and businesses of Cordis and receive the maximum value for their shares. Pre-Tender Offer Communications Between J&J and Cordis - ------------------------------- 29. On October 20, 1995, it was reported by The Wall Street Journal ----------------------- that J&J had been attempting to negotiate a merger with Cordis for more than a month and had each of its acquisition overtures rebuffed by the Company. 30. J&J had initiated a series of telephone conferences and meetings with Cordis on several occasions commencing September 6, 1995. On September 12, 1995, Ralph - 10 - S. Larsen ("Larsen"), Chairman of the Board of J&J, held a teleconference with a Robert Marston ("Marston"), the Company's former Chief Executive Officer, to outline the strategic advantages of a Cordis/J&J combination. Among other things, Larsen indicated that it was J&J's intent to have Cordis operated as a separate subsidiary within the J&J company. Marston did not respond to Larsen's proposal but stated that Cordis would have to consider the proposal. 31. On September 13, 1995, representatives of J&J and Cordis spoke and after reviewing the strategic benefits of the merger, set up another meeting regarding a negotiated transaction on either September 21, 1995. However, on September 19, 1995, defendant Strauss telephoned Larsen that the Cordis Board of Directors had met and determined that it would be premature to meet with J&J until after the October 10, 1995 Annual Meeting. 32. Cordis filed certain proxy materials (the "proxy materials") with the SEC in connection with its Annual Meeting on October 10, 1995 (the "Annual Meeting"). The proxy materials were disseminated on or about September 15, 1995 to stockholders of record as of August 15, 1995. The proxy materials made no mention or disclosure of the serious merger interest expressed by J&J or the other discussions referred to above. As a result, the proxy materials were materially incomplete because of defendants' - 11 - failure to disclose the existence of the J&J bona fide interest in completing an ---- ---- acquisition. 33. Cordis's proxy material related to the Company's September 15, 1995 Annual Meeting, which was held to consider, inter alia: (a) the election ----- ---- of the Company's directors, and (b) an amendment to the Company's articles of incorporation to increase the number of authorized but unissued shares which could be issued in the event of a hostile offer. The proxy materials only stated that approval of the proposed amendments to Cordis's articles of incorporation "might deter a bidder from seeking to acquire shares of the Company on an unfriendly basis." No mention, however, was made of the fact J&J had already made repeated overtures for control of the Company prior to the October 10, 1995 meeting. At a vote taken at the Annual Meeting, the Company's shareholders approved the election of the directors but soundly defeated the proposal concerning the amendments to the articles of incorporation. 34. Despite the defendants' failure to secure a mandate from the Company's shareholders not to obstruct an acquisition offer which could maximize the value of the stockholders' investment, defendants nevertheless contacted J&J on October 11, 1995 and informed them, without shareholders' knowledge, that Cordis would remain independent. Moreover, six days later defendants caused Cordis to institute the Poison Pill. - 12 - 35. Defendants continued their pattern of misrepresentation when they announced the creation of the Poison Pill on October 16, 1995. It was reported by the Dow Jones News Wire that the Company had stated that it had ------------------- not enacted the Poison Pill in response to any takeover attempt. In light of the on-going attempts by J&J, Cordis had no truthful basis to make any such representation. Moreover, it was not until October 25, 1995 that the full terms of the Poison Pill, including the redemption and amendment provisions, were disclosed. Count I ------- Violation of Section 14(a) of the Securities and Exchange Act of 1934 and SEC Rule 14a-9 -------------------------------------------- 36. Plaintiffs repeat and reallege the allegations set forth above in paragraphs 1 through 35. 37. Section 14(a) provides, in pertinent part, as follows: It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce. . . in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit. . . any proxy or consent or authorization in respect of any security . . . registered pursuant to section 12 of this title. 38. Rule 14a-9 is a rule promulgated by the SEC under Section 14(a). Rule 14a-9 provides, in pertinent part, as follows: - 13 - No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing such statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact necessary in order to make the statements therein not false or misleading . . . . 39. In disseminating the proxy materials in connection with October 10, 1995 shareholder meeting, defendants intentionally or with reckless disregard omitted and misrepresented material facts concerning the existence of takeover attempts by J&J and the other communications with J&J as set forth above. 40. The Cordis securities are registered pursuant to Section 12 of the 1934 Act, as amended. 41. The proxy materials were disseminated by defendants on behalf of Cordis. Thus all defendants, who constitute the Board of Cordis participated in the violation of Section 14(a) and Rule 14a-9. 42. As a result of the actions of defendants, plaintiffs and the other members of the Class have and will be damaged in that they will have been provided with the proxy materials which contain material misrepresentations and omissions. 43. As a proximate result of the violations of Section 14(a) and Rule 14a-9 alleged herein, plaintiffs and - 14 - the Class have suffered and will suffer immediate and irreparable injury. 44. Plaintiffs and the Class have no adequate remedy at law. COUNT II -------- Breach of Fiduciary Duty ------------------------ 45. Plaintiffs repeat and reallege the allegations set forth in paragraphs 1 through 44. 46. Defendants owe fundamental fiduciary obligations to Cordis's shareholders to take all necessary and appropriate steps to maximize the value of their shares. In addition, the Individual Defendants have the responsibility to act independently so that the interests of Cordis's public stockholders will be protected, to seriously consider all bona fide ---- ---- offers for the Company, and to conduct fair and active bidding procedures or other mechanisms for checking the market to assure that the highest possible price is achieved. Further, the directors of Cordis must adequately ensure that no conflict of interest exists between the Individual Defendants' own interests and their fiduciary obligations to maximize stockholder value or, if such conflicts exist, to insure that all such conflicts will be resolved in the best interests of the Company's shareholders. 47. Because defendants dominate and control the business and corporate affairs of Cordis and because they - 15 - are in possession of private corporate information concerning Cordis's assets, businesses and future prospects, there exists an imbalance and disparity of knowledge of economic power between defendants and the public shareholders of Cordis. This discrepancy makes it grossly and inherently unfair for defendants to entrench themselves at the expense of its public shareholders. 48. The Individual Defendants have breached their fiduciary and other common law duties owed to plaintiffs and other members of the Class in that they have not and are not exercising independent business judgment and have acted and are acting to the detriment of the Class. 49. In connection with the conduct described herein, the Individual Defendants breached their fiduciary duties by, among other things: a. rejecting the J&J proposal without fully informing themselves about or intentionally ignoring the future prospects of a combined Cordis/J&J company, or the intrinsic worth of Cordis; b. failing and refusing to meet with representatives of J&J; c. erecting defensive measures such as Cordis's Poison Pill plan, which was designed to interfere with the consent - 16 - solicitation and make it prohibitively expensive for an unapproved third party from acquiring the assets or control of the Company; and d. Adopting the by-law amendment. 50. Moreover, defendants have refused to take those steps necessary to ensure that Cordis's shareholders will receive maximum value for their shares of Cordis stock. Defendants have thus refused to seriously consider the pending offer, and have failed to announce any active auction or open bidding procedures best calculated to maximize shareholder value in selling the Company. 51. The Individual Defendants are acting to entrench themselves in their offices and positions and maintain their substantial salaries and perquisites, all at the expense and to the detriment of the public shareholders of Cordis. 52. By the acts, transactions and courses of conduct alleged herein, the Individual Defendants, individually and as part of a common plan and scheme in breach of their fiduciary duties and obligations, are attempting to improperly interfere with the consent solicitation and to unfairly deprive plaintiffs and other members of the Class of the premium they could realize in an acquisition transaction and to ensure continuance of their positions as directors and officers, all to the detriment of - 17 - Cordis's public shareholders. The Individual Defendants have been engaged in a wrongful effort to entrench themselves in their offices and positions of control and prevent the acquisition of Cordis except on terms which would further their own personal interests. 53. As a result of the actions of the Individual Defendants, plaintiffs and the other members of the Class have been and will be damaged in that they are being denied the opportunity to participate in the consent solicitation and have not and will not receive their fair proportion of the value of Cordis's assets and businesses and/or have been and will be prevented from obtaining a fair and adequate price for their shares of Cordis's common stock. 54. Plaintiffs seek preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiffs and the Class of their rights to realize a full and fair value for their stock at a substantial premium over the market price, by unlawfully entrenching themselves in their positions of control, and to compel defendants to carry out their fiduciary duties to maximize shareholder value. 55. Only through the exercise of this Court's equitable powers can plaintiffs be fully protected from the immediate and irreparable injury which defendants' actions threaten to inflict. Defendants are precluding the - 18 - shareholders' enjoyment of the full economic value of their investment by failing to proceed expeditiously and in good faith to evaluate and pursue a premium acquisition proposal which would provide consideration for all shares at a very attractive price. 56. Unless enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiffs and the members of the Class, and/or aid and abet and participate in such breaches of duty, and will prevent the sale of Cordis at a substantial premium, all to the irreparable harm of plaintiffs and other members of the Class. 57. Plaintiffs and the Class have no adequate remedy at law. WHEREFORE, plaintiffs demand judgment as follows: (a) Declaring this to be a proper class action and certifying plaintiffs as class representatives; (b) Declaring that defendants have violated Section 14(a) of the 1934 Act and Rule 14a-9 promulgated thereunder; (c) Declaring the election of the Company's directors at the Annual Meeting null and void as a result of their election on materially fraudulent proxy materials, and directing the appointment of a trustee to consider and respond to J&J's offer; - 19 - (d) Declaring that defendants have breached their fiduciary duties to plaintiffs and the other members of the Class; (e) Ordering the Individual Defendants to carry out their fiduciary duties to plaintiffs and the other members of the Class by announcing their intention to: (i) cooperate fully with any entity or person, including J&J, having a bona fide interest in proposing any transactions ---- ---- which would maximize shareholder value, including but not limited to, a merger or acquisition of Cordis; (ii) immediately undertake an appropriate evaluation of Cordis's worth as a merger/acquisition candidate; (iii) take all appropriate steps to enhance Cordis's value and attractiveness as a merger/acquisition candidate; (iv) take all appropriate steps to effectively expose Cordis to the marketplace in an effort to create an active auction of the Company; (v) act independently so that the interests of the Company's public shareholders will be protected; and (vi) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interest and their fiduciary obligation to maximize - 20 - shareholder value or, in the event such conflicts exist, to ensure that all conflicts of interest are resolved in the best interests of the public shareholders of Cordis; (f) Ordering the Individual Defendants, jointly and severally to account to plaintiffs and the Class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; (g) Ordering defendants to use the Company's Poison Pill only in such a manner to maximize shareholder value; (h) Declare the redemption and amendment provisions of the Poison Pill and the by-law amendment null and void; (i) Awarding plaintiffs the costs and disbursements of this action, including a reasonable allowance for plaintiffs' attorneys' and expert fees; and (j) Granting such other and further relief as may be just and proper. - 21 - JURY DEMAND ----------- Plaintiffs and the Class, pursuant to Fed. R. Civ. P. 38(b), hereby demand a trial by jury on all issues contained herein. Dated: October 26, 1995 HANZMAN CRIDEN KORGE HERTZBERG & CHAYKIN, P.A. By: /s/ Michael E. Criden --------------------------- Michael E. Criden, F.B.N. 714356 Mark J. Heise, F.B.N. 771090 2100 First Union Financial Center 200 S. Biscayne Boulevard Miami, FL 33131 (305) 579-1222 LERNER & PEARCE, P.A. Robert W. Pearce 2888 East Oakland Park Blvd. Fort Lauderdale, FL 33306 (305) 563-8111 Co-Liaison Attorneys for Plaintiffs OF Counsel: WECHSLER HARWOOD HALEBIAN & FEFFER LLP 805 Third Avenue New York, New York 10022 (212) 935-7400 GOODKIND LABATON RUDOFF & SUCHAROW LLP 100 Park Avenue New York, New York 10017 (212) 907-0700 - 22 - CERTIFICATE OF SERVICE ---------------------- I HEREBY CERTIFY that a true and correct copy of the foregoing was hand-delivered this 26th day of October, 1995 to: CHARLES C. KLINE, ESQUIRE, WHITE & CASE, Attorneys for Defendants, at 200 South Biscayne Boulevard, Suite 4900, Miami, Florida, 33131; and by mail to MICHAEL CHEPIGA, ESQUIRE, SIMPSON, THACHER & BARTLETT, Attorneys for Defendants, at 425 Lexington Avenue, New York, New York, 10017-3909. HANZMAN CRIDEN KORGE HERTZBERG & CHAYKIN, P.A. By: /s/ Michael E. Criden ------------------------- Michael E. Criden, F.B.N. 714356 Mark J. Heise, F.B.N. 771090 2100 First Union Financial Center 200 S. Biscayne Boulevard Suite 2100 Miami, FL 33131 (305) 579-1222 - 23 - EX-12 13 Exhibit 12 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA - -----------------------------------------X ) LAZ L. SCHNEIDER, On Behalf ) Civil Action No. of the LAZ L. SCHNEIDER IRA ) ROLLOVER, And On Behalf of ) All Others Similarly Situated, ) CLASS ACTION COMPLAINT ) ---------------------- ) Plaintiff, ) ) - against - ) ) ROBERT C. STRAUSS, WILTON W. ) WEBSTER, JR., DAVID R. ) CHALLONER, RICHARD W ) FOXEN, DONALD F. MALIN, JR. ) JAN VAN STEVENINCK, PATRICIA K. ) WOOLF, CATHERINE M. BURZIK, ) WILLIAM J. RAZZOUK, and ) CORDIS CORPORATION, ) ) Defendants. ) - -----------------------------------------X Plaintiff, by his attorneys, alleges upon personal knowledge as to his own acts and upon information and belief as to all other matters, as follows: JURISDICTION AND VENUE ---------------------- 1. Plaintiff brings this action pursuant to Sections 14(a) and 20 of the Securities Exchange Act of 1934 (the "1934 Act") and Rule 14a-9 adopted by the Securities Exchange Commission (the "SEC") thereunder and applicable principles of common law. 2. This Court has jurisdiction pursuant to Section 27 of the 1934 Act 15 U.S.C. Sec. 78aa, and 28 U.S.C. Sec. 1967. 3. Venue is proper in this district because the events and omissions giving rise to the claims alleged herein have occurred, are occurring and, unless restrained, will continue to occur, in this district, including the dissemination of false and misleading proxy solicitation material. Cordis is incorporated in Florida and has its principal place of business in this district. In addition, defendants transacted business in this district during the Class Period, as defined below. 4. In connection with the acts and conduct alleged in this complaint, defendants directly and indirectly, used the means and instrumentalities of interstate commerce, including the mails and telephone communication, and the facilities of national securities exchanges, namely, NASDAQ's National Market System. Parties ------- 5. Plaintiff is and, at all relevant times, has been the owner of shares of Cordis common stock. 6. Cordis is a corporation duly organized and existing under the laws of the State of Florida. Cordis designs, manufactures and sells certain medical devices consisting of angiographic catheters, neuroscience devices and related instrumentation. Cordis maintains its principal executive offices at 14201 Northwest 60th Avenue, Miami Lakes, Florida. Cordis has approximately 16.4 million - 2- shares of common stock outstanding and hundreds of stockholders of record. Cordis' stock trades over the NASDAQ National Market System. 7. Defendant Robert C. Strauss ("Strauss") is and at all relevant times hereto has been the President; Chief Executive Officer, and Chairman of the Board of Directors of Cordis. 8. Wilton W. Webster, Jr. ("Webster") is and at all relevant times hereto has been a Vice President and a director of Cordis. 9. Defendants David R. Challoner, Richard W. Foxen, Donald F. Malin, Jr., Jan van Steveninck, Catherine M. Burzik, William J. Razzouk, and Patricia K. Woolf are directors of Cordis. 10. The defendants named in paragraphs 7 through 9 are hereinafter referred to as the "Individual Defendants." 11. Because of their positions as officers/directors of the Company, the Individual Defendants owe a fiduciary duty of loyalty and due care to plaintiff and the other members of the class. 12. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his/her capacity as an officer and/or director of the Company, and the liability of each arises from the fact that he or she - 3 - has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS ------------------------ 13. Plaintiff brings this action on his own behalf and as a class action, pursuant to Rule 23 (a) and (b) (2) and (3) of the Federal Rules of Civil Procedure, on behalf of all stockholders of the Company as of August 15, 1995 and their successors in interest, except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants, or any of the Company's principal stockholders, who will be threatened with injury arising from defendants' actions as is described more fully below. 14. This action is properly maintainable as a class action. 15. The class is so numerous that joinder of all members is impracticable. The Company has thousands of stockholders who are scattered throughout the United States. 16. There are questions of law and fact common to the class that predominate over questions affecting any individual class member. The common questions include, inter alia, whether: ----- ---- (a) defendants violated federal securities laws by the acts and omissions alleged herein; - 4 - (b) the proxy solicitation material disseminated by Cordis to the Class omitted and/or misrepresented material facts; (c) defendants participated in and pursued the common course of conduct complained of; (d) defendants acted willfully or recklessly in omitting and/or misrepresenting material facts; (e) defendants breached their fiduciary duties owed by them to plaintiff and other members of the Class by failing and refusing to attempt in good faith to maximize shareholder value in the sale of Cordis; (f) Cordis' Poison Pill was defensively enacted and implemented to entrench defendants in their office and deprive Cordis' public shareholders of the maximum value of their holdings; (g) defendants have breached or aided and abetted the breach of the fiduciary duties owed by them to plaintiff and other members of the Class; (h) defendants engaged in a plan and scheme to thwart and reject offers and proposals from third parties, including Johnson & Johnson ("J&J"), who is a major manufacturer and seller of a range of health care products; and (i) plaintiff and the other members of the Class are being and will continue to be injured by the - 5 - wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 17. Plaintiff is committed to prosecuting the action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the class and plaintiff has the same interests as the other members of the class. Plaintiff is an adequate representative of the class. SUBSTANTIVE ALLEGATIONS ----------------------- 18. On October 19, 1995, the Dow Jones News Wire reported that ------------------- J&J would commence "a $100-a-share cash tender offer for all of the outstanding stock of Cordis after Cordis rebuffed J&J's offer to negotiate a merger." The estimated value of the tender offer is $1.6 billion. 19. In connection with the tender offer, J&J announced that it had previously offered as much as $105-a-share in a stock-for-stock, tax- free transaction which was valued at $1.7 billion - or $100 million more than the tender offer. However, Cordis rejected this transaction and refused to negotiate with J&J. The $105 per share offering price represents a 22% premium over the trading price of Cordis stock on one day prior to announcement of the J&J tender offer. - 6 - 20. As further evidence of defendants' intransigence, The Wall -------- Street Journal reported on October 16, 1995, that the Individual Defendants - -------------- had adopted and implemented a Poison Pill in anticipation of the J&J tender offer. Under the Plan, which is effective immediately, shareholders are given a dividend of one share purchase right ("Right") for each common share outstanding at the close of business on October 23, 1995. 21. The adoption and implementation of the Poison Pill has the force and effect of entrenching the Individual Defendants in their corporate offices against any real or perceived threat to their control, and dramatically impairs the rights of Class members to exercise freedom of choice in a proxy contest or to avail themselves of a bona fide offer to ---- ---- purchase their shares by an acquiror, such as J&J, unfavored by incumbent management. This fundamental shift of control of the Company's destiny from the hands of its shareholders to the hands of the Individual Defendants results in a heightened fiduciary duty of the Individual Defendants to consider, in good faith, a third party bid, such as J&J, and further requires the Individual Defendants to pursue a third party's interest in acquiring the Company and to negotiate in good faith with a bidder on behalf of the Company's shareholders. 22. The purpose, intent and effect of the Poison Pill, in the face of J&J's pending offer for the Company, is - 7 - to thwart, deter, impede, and delay the acquisition of Cordis by J&J. 23. Defendants' recalcitrance to consider and promptly act upon J&J's earlier overtures and formal offer has no valid business purpose, and simply evidences their disregard for the attractive premium being offered to Cordis shareholders. By failing to meet and negotiate or offer to meet and negotiate with J&J, defendants are depriving plaintiff and the Class of the right to share in the assets and businesses of Cordis and receive the maximum value for their shares. 24. On October 20, 1995, it was reported by The Wall Street --------------- Journal that J&J had been attempting to negotiate a merger with Cordis for - ------- more than a month and had each of its acquisition overtures rebuffed by the Company. 25. J&J had initiated a series of telephone conferences and meetings with Cordis on several occasions commencing September 6, 1995. On September 12, 1995, Ralph S. Larsen ("Larsen"), Chairman of the Board of J&J, held a teleconference with a Robert Marston ("Marston"), the Company's former Chief Executive Officer, to outline the strategic advantages of a Cordis/J&J combination. Among other things, Larsen indicated that it was J&J's intent to have Cordis operated as a separate subsidiary within the J&J company. Marston did not respond to Larsen's proposal but stated that Cordis would have to consider the proposal. - 8 - 26. On September 13, 1995, representatives of J&J and Cordis spoke and after reviewing the strategic benefits of the merger, set up another meeting regarding a negotiated transaction on either September 21, 1995. However, on September 19, 1995, defendant Strauss telephoned Larsen that the Cordis Board of Directors had met and determined that it would be premature to meet with J&J until after the October 10, 1995 Annual Meeting. 27. Cordis filed certain proxy materials (the "proxy materials") with the SEC in connection with its Annual Meeting on October 10, 1995 (the "Annual Meeting"). The proxy materials are disseminated on or about September 15, 1995 to stockholders of record as of August 15, 1995. The proxy materials made no mention or disclosure of the serious merger interest expressed by J&J or the other discussions referred to above. As a result, the proxy materials were materially incomplete because of defendants' failure to disclose the existence of the J&J bona fide interest ---- ---- in completing an acquisition. 28. Cordis' proxy material related to the Company's September 15, 1995 Annual Meeting, which was held to consider, inter alia: (a) the ----- ---- election of the Company's directors, and (b) an amendment to the Company's articles of incorporation to increase the number of authorized but unissued shares which could be issued in the event of a hostile offer. The proxy materials only stated that - 9 - approval of the proposed amendments to Cordis' articles of incorporation "might deter a bidder from seeking to acquire shares of the Company on an unfriendly basis." No mention, however, was made of the fact J&J had already made repeated overtures for control of the Company prior to the October 10, 1995 meeting. At a vote taken at the Annual Meeting, the Company's shareholders approved the election of the directors but soundly defeated the proposal concerning the amendments to the articles of incorporation. 29. Despite the defendants' failure to secure a mandate from the Company's shareholders not to obstruct an acquisition offer which could maximize the value of the stockholder's investment, defendants nevertheless contacted J&J on October 11, 1995 and informed them, without shareholders' knowledge, that Cordis would remain independent. Moreover, six days later defendants caused Cordis to institute the Poison Pill. 30. Defendants continued their pattern of misrepresentation when they announced the creation of the Poison Pill on October 16, 1995. It was reported by the Dow Jones News Wire that the Company had stated that it had ------------------- not enacted the Poison Pill in response to any takeover attempt. In light of the on-going attempts by J&J, Cordis had no truthful basis to make any such representation. - 10 - COUNT I ------- Violation of Section 14 (a) of the Securities and Exchange Act of 1934 and SEC Rule 14a-9 ------------------------------------------- 31. Plaintiff repeats and realleges the allegations set forth above in paragraphs 1 through 30. 32. Section 14 (a) provides, in pertinent part, as follows: It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce . . . in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit . . . any proxy or consent or authorization in respect of any security . . . registered pursuant to section 12 of this title. 33. Rule 14a-9 is a rule promulgated by the SEC under Section 14 (a). Rule 14a-9 provides, in pertinent part, as follows: No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing such statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact necessary in order to make the statements therein not false or misleading . . . . 34. In disseminating the proxy materials in connection with October 10, 1995 shareholder meeting, defendants intentionally or with reckless disregard omitted - 11 - and misrepresented materials facts concerning the existence of takeover attempts by J&J as set forth above. 35. The Cordis securities are registered pursuant to Section 12 of the 1934 Act, as amended. 36. The proxy materials were disseminated by defendants on behalf of Cordis. Thus all defendants, who constitute the Board of Cordis participated in the violation of Section 14 (a) and Rule 14a-9. 37. As a result of the actions of defendants, plaintiff and the other members of the Class have and will be damaged in that they will have been provided with the proxy materials which contain material misrepresentations and omissions. 38. As a proximate result of the violations of Section 14 (a) and Rule 14a-9 alleged herein, plaintiff and the Class have suffered and will suffer immediate and irreparable injury. 39. Plaintiff and the Class have no adequate remedy at law. COUNT II -------- Breach of Fiduciary Duty ------------------------ 40. Plaintiff repeats and realleges the allegations set forth in paragraphs 1 through 39. 41. Defendants owe fundamental fiduciary obligations to Cordis's shareholders to take all necessary - 12 - and appropriate steps to maximize the value of their shares. In addition, the Individual Defendants have the responsibility to act independently so that the interests of Cordis's public stockholders will be protected, to seriously consider all bona fide offers for the Company, and to conduct ---- ---- fair and active bidding procedures or other mechanisms for checking the market to assure that the highest possible price is achieved. Further, the directors of Cordis must adequately ensure that no conflict of interest exists between the Individual Defendants' own interests and their fiduciary obligations to maximize stockholder value or, if such conflicts exist, to insure that all such conflicts will be resolved in the best interests of the Company's shareholders. 42. Because defendants dominate and control the business corporate affairs of Cordis and because they are in possession of private corporate information concerning Cordis' assets, businesses and future prospects, there exists an imbalance and disparity of knowledge of economic power between defendants and the public shareholders of Cordis. This discrepancy makes it grossly and inherently unfair for defendants to entrench themselves at the expense of its public shareholders. 43. The Individual Defendants have breached their fiduciary and other common law duties owed to plaintiff and other members of the Class in that they have - 13 - not and are not exercising independent business judgment and have acted and are acting to the detriment of the Class. 44. In connection with the conduct described herein, the Individual Defendants breached their fiduciary duties by, among other things: a. rejecting the J&J proposal without fully informing themselves about or intentionally ignoring the future prospects of a combined Cordis/J&J company, or the intrinsic worth of Cordis; b. failing and refusing to meet with representatives of J&J; and c. erecting defensive measures such as Cordis' Poison Pill plan, which was designed to make it prohibitively expensive for an unapproved third party from acquiring the assets or control of the Company. 45. Moreover, defendants have refused to take those steps necessary to ensure that Cordis's shareholders will receive maximum value for their shares of Cordis stock. Defendants have thus refused to seriously consider the pending offer, and have failed to announce any active auction or open bidding procedures best calculated to maximize shareholder value in selling the Company. - 14 - 46. The Individual Defendants are acting to entrench themselves in their offices and positions and maintain their substantial salaries and perquisites, all at the expense and to the detriment of the public shareholders of Cordis. 47. By the acts, transactions and courses of conduct alleged herein, the Individual Defendants, individually and as part of a common plan and scheme in breach of their fiduciary duties and obligations, are attempting unfairly to deprive plaintiff and other members of the Class of the premium they could realize in an acquisition transaction and to ensure continuance of their positions as directors and officers, all to the detriment of Cordis' public shareholders. The Individual Defendants have been engaged in a wrongful effort to entrench themselves in their offices and positions of control and prevent the acquisition of Cordis except on terms which would further their own personal interests. 48. As a result of the actions of the Individual Defendants, plaintiff and the other members of the Class have been and will be damaged in that they have not and will not receive their fair proportion of the value of Cordis's assets and businesses and/or have been and will be prevented from obtaining a fair and adequate price for their shares of Cordis's common stock. - 15 - 49. Plaintiff seeks preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiff and the Class of their rights to realize a full and fair value for their stock at a substantial premium over the market price, by unlawfully entrenching themselves in their positions of control, and to compel defendants to carry out their fiduciary duties to maximize shareholder value. 50. Only through the exercise of this Court's equitable powers can plaintiff be fully protected from the immediate and irreparable injury which defendants' actions threaten to inflict. Defendants are precluding the shareholders' enjoyment of the full economic value of their investment by failing to proceed expeditiously and in good faith to evaluate and pursue a premium acquisition proposal which would provide consideration for all shares at a very attractive price. 51. Unless enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the members of the Class, and/or aid and abet and participate in such breaches of duty, and will prevent the sale of Cordis at a substantial premium, all to the irreparable harm of plaintiff and other members of the Class. - 16 - 52. Plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgement as follows: (a) Declaring this to be a proper class action and certifying plaintiff as a class representative; (b) Declaring that defendants have violated Section 14(a) of the 1934 Act and Rule 14a-9 promulgated thereunder; (c) Declaring the election of the Company's directors at the Annual Meeting null and void as a result of their election on materially fraudulent proxy materials, and directing the appointment of a trustee to consider and respond to J&J's offer; (d) Declaring that defendants have breached their fiduciary duties to plaintiff and the other members of the Class; (e) Ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by announcing their intention to: (i) cooperate fully with any entity or person, including J&J, having a bona fide interest in proposing any transactions ---- ---- which would maximize shareholder value, including but not limited to, a merger or acquisition of Cordis; - 17 - (ii) immediately undertake an appropriate evaluation of Cordis' worth as a merger/acquisition candidate; (iii) take all appropriate steps to enhance Cordis's value and attractiveness as a merger/acquisition candidate; (iv) take all appropriate steps to effectively expose Cordis to the marketplace in an effort to create an active auction of the Company; (v) act independently so that the interests of the Company's public shareholders will be protected; and (vi) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interest and their fiduciary obligation to maximize shareholder value or, in the event such conflicts exist, to ensure that all conflicts of interest are resolved in the best interests of the public shareholders of Cordis; (f) Ordering the Individual Defendants, jointly and severally to account to plaintiff and the Class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; (g) Ordering defendants to use the Company's Poison Pill only in such a manner to maximize shareholder value; - 18 - (h) Awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and (i) Granting such other and further relief as amy be just and proper. JURY DEMAND ----------- Plaintiff and the Class, pursuant to Fed. R. Civ. p. 38 (b), hereby demand a trial by jury on all issues contained herein. Dated: October 23, 1995 HANDZMAN CRIDEN KORGE HERTZBERG & CHAYKIN, P.A. By: /s/ Mark J. Heise --------------------------------- Michael E. Criden, F.B.N. 714356 Mark J. Heise, F.B.N. 771090 2100 First Union Financial Center 200 South Biscayne Blvd. Miami, FL 33131 (305) 579-1222 LERNER & PEARCE, P.A. Robert W. Pearce, F.B.N. 344575 2888 East Oakland Park Blvd. Fort Lauderdale, FL 33306 (305) 563-8111 Co-Liaison Attorneys for Plaintiff Of Counsel: LOWEY DANNENBERG BEMPORAD & SELINGER, P.C. 747 Third Avenue New York, New York 10017 (212) 759-1504 - 19 - EX-13 14 Exhibit 13 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION - -----------------------------------) MARY PRATT, ) Civil Action No. 95-2345 ) Plaintiff, ) CLASS ACTION COMPLAINT ) ---------------------- ) - against - ) ) CATHERINE M. BURZIK, DAVID R. ) CHALLONER, RICHARD W. FOXEN, ) DONALD F. MALIN JR., WILLIAM J. ) JURY TRIAL DEMANDED ) ------------------- RAZZOUK, ROBERT C. STRAUSS, ) JAN L. DE RUYTER VAN STEVENINCK, ) WILTON W. WEBSTER JR., PATRICIA ) K. WOOLF, ROBERT Q. MARSTON, and ) CORDIS CORP., ) Defendants. ) ) - ----------------------------------- Plaintiff, by her undersigned attorneys, for her complaint against defendants (the "Complaint"), alleges the following upon information and belief, except as to Paragraph 13 hereof, which is alleged upon personal knowledge. Plaintiff's information and belief is based upon, among other things, the investigation made by plaintiff's attorneys, which investigation included, without limitation (a) review and analysis of filings made by defendants and Johnson & Johnson and Johnson & Johnson's wholly-owned subsidiary, JNJ Acquisition Corp. (collectively, with Johnson & Johnson, "J&J"), with the Securities and Exchange Commission ("SEC"); (b) review and analysis of securities analysts' reports concerning defendant Cordis Corp. ("Cordis" or the "Company"); (c) review and analysis of press releases distributed by defendants and J&J; and (d) review and analysis of various reports concerning the Company and J&J which have appeared in newspapers, magazines and trade publications. Certain facts relevant to the causes of action alleged herein are in the exclusive custody and control of the defendants and are unavailable to plaintiff because, inter ----- alia, (a) such matters are reflected or memorialized in internal documents - ---- that are not publicly available; and (b) plaintiff has not had the opportunity to gain access to this information through discovery or by other means. NATURE OF THE ACTION -------------------- 1. This is a shareholders' class action lawsuit on behalf of the public shareholders of defendant Cordis. These shareholders are currently being deprived of the opportunity to realize the full benefits of their investment in Cordis. 2. As more fully described below, the actions of the Individual Defendants complained of herein lack any legitimate corporate or business purpose and instead have been designed with the sole or primary purpose of entrenching the Individual Defendants in office. In taking the actions complained of, the Individual Defendants were and are attempting to solidify their control over the business and affairs of Cordis by preventing any third party disfavored by senior management from acquiring all or part of Cordis or otherwise gaining control of the Company. In addition, the Individual Defendants have manipulated the corporate machinery of Cordis by fundamentally limiting the ability of Cordis's shareholders to associate freely with one - 2 - another and oppose incumbent management or affect corporate policy through the proxy process or through shareholder resolutions. 3. On October 19, 1995, J&J commenced an all-cash tender offer for all outstanding shares of Cordis common stock at a price of $100 per share (the "Cash Offer"). That price represented a 16% premium over the trading price of the Company's shares before the Cash Offer was announced and in excess of a 61% premium over the price at which Cordis common stock had traded on July 17, 1995, the day before market rumors of a pending acquisition by J&J caused Cordis's shares to jump $10-3/4, to $72-3/4. At the time the Cash Offer was announced, J&J expressed its willingness to conduct a negotiated stock acquisition with the Company on a tax-free basis at a price of $105 (the "Stock Offer" and, collectively with the Cash Offer, the "Offers"), a 22% premium over Cordis's closing price the day before J&J announced its desire to acquire the Company. The Stock Offer would also permit Cordis shareholders to realize substantial benefits from the synergies which will be generated as a result of the combination of the well-matched businesses of Cordis and J&J. 4. At the same time J&J announced the Cash Offer, it announced its intention to conduct a consent solicitation to remove and replace Cordis's incumbent directors with other candidates and to pursue other measures intended to facilitate a sale of the Company. J&J has now made filings with the SEC which are necessary to commence a consent solicitation. - 3 - 5. Instead of taking all reasonable steps to assure the maximization of shareholder value, including the implementation of bidding mechanisms to foster a fair auction of the Company to the highest bidder or the exploration of strategic alternatives which will return greater or comparable short-term and long-term value to plaintiff and the Class, the Individual Defendants, the directors of Cordis, have wrongfully refused to consider a bona fide offer for the Company at a price substantially in ---- ---- excess of the market price of Cordis common stock prior to the announcement of the Offers. Defendants' conduct is in abrogation of their fundamental fiduciary duties to the public stockholders of Cordis to seek to maximize the value of the Company's stock. 6. The conduct complained of herein is designed by the Individual Defendants and other members of Cordis senior management to entrench the officers and directors of Cordis in the management and control of the Company and to advance their own personal interests at the expense of Cordis's public shareholders. Indeed, defendants' present conduct represents the culmination of an entire series of steps which the Individual Defendants have taken to deter and ultimately thwart any efforts to acquire the Company which they have not initiated or approved. In furtherance of these efforts, the Individual Defendants have adopted and utilized, among other defensive weapons, a stockholder rights plan, known in the parlance of the financial marketplace as a "poison pill," which is designed to deter - 4 - unsolicited acquisition offers by creating severe economic penalties for any person attempting to effect a business combination with Cordis without the approval of the Individual Defendants. Cordis's poison pill (the "Poison Pill") was adopted on Tuesday, October 17, 1995, just two days before J&J launched the Cash Offer. Cordis misleadingly represented at that time that the Poison Pill was not adopted in response to any known or expected takeover efforts, although the Company had just refused to meet with J&J regarding the latter's serious expression of interest in effectuating an acquisition of Cordis. 7. The Individual Defendants' preconceived plan and scheme to thwart a fair and open auction that would maximize shareholder value is intended to entrench themselves in office and to protect and advance their own financial interests at the expense of the Company and its public shareholders. These actions effectively increase and consolidate the Individual Defendants' control and power over the management of Cordis and perpetuate their employment and receipt of substantial salaries and other valuable consideration and remuneration from Cordis at the expense of the Company's shareholders. 8. Plaintiff also brings this action pursuant to Section 14(a) of the Williams Act and Rule 14a-9 promulgated thereunder seeking a determination that the election of directors at Cordis's annual meeting held on October 10, 1995 (the "Annual Meeting"), was invalid and void because the proxy statement disseminated in connection therewith (the "Proxy Statement") - 5 - misrepresented and omitted material facts in breach of the Cordis directors' full disclosure obligations under federal and state law. The Court should, inter alia, order a new annual meeting to be held forthwith ----- ---- after full disclosure of all material facts. 9. Among other remedies, preliminary and permanent injunctive relief are sought to protect Cordis public shareholders from the imminent breach of duties owed to them by the Individual Defendants. JURISDICTION AND VENUE ---------------------- 10. The claims asserted herein arise pursuant to Section 14(a) of the Exchange Act, 15 U.S.C. Sec. 78n(a), the rules and regulations promulgated by the SEC thereunder and under applicable state law. 11. This Court has subject matter jurisdiction over this action pursuant to Section 27 of the Exchange Act, 15 U.S.C. Sec. 78aa, and 28 U.S.C. Sec.Sec. 1331(a) and 1367(a). 12. Venue is appropriate in this District pursuant to 28 U.S.C. Sec. 1391(b) and (c). Defendant Cordis is incorporated in the State of Florida and certain of the acts and occurrences underlying this Complaint have occurred in this District. PARTIES ------- 13. Plaintiff Mary Pratt is and has been at all relevant times an owner of Cordis common stock who has been damaged and is threatened with further injury by the wrongful actions of the defendants as set forth herein. Plaintiff brings - 6 - this action as a class action on behalf of the public shareholders of Cordis. 14. (a) Defendant Cordis is a Florida corporation with its principal executive office located at 14201 Northwest 60th Avenue, Miami Lakes, Florida 33014. (b) The Company and its subsidiaries are engaged in the design, manufacture and sale of medical devices and systems for the cardiology, electrophysiology, radiology, interventional neuroradiology and neuroscience markets. Cordis is the world's third-largest balloon- angioplasty manufacturer. (c) As of August 15, 1995, the Company had 16,392,697 shares outstanding. Those shares are actively traded on the over-the- counter NASDAQ market. 15. (a) Defendants Catherine M. Burzik, David R. Challoner, Richard W. Foxen, Donald F. Malin Jr., William J. Razzouk, Robert C. Strauss, Jan L. de Ruyter van Steveninck, Wilton W. Webster Jr. and Patricia K. Woolf are the present members of the Board of Directors of Cordis (the "Board"). Together with Robert Marston, who stepped down from the Cordis Board on October 10, 1995, they are referred to herein as the "Individual Defendants." (b) Defendant Strauss also serves as the Company's Chief Executive Officer and President. He has served as the Company's Chairman of the Board since October 10, 1995, when Marston left that post. In the year ended June 30, 1995, defendant Strauss received $490,185 in salary, bonus and other - 7 - annual compensation from Cordis. Strauss was also granted 25,000 shares of Cordis common stock and received payouts valued at $563,477 (50% of which was in Cordis stock and 50% of which was in cash) pursuant to the Company's 1991 Performance Unit Award Plan. (c) Defendant Marston received $75,000 in compensation from the Company in 1994. (d) Each of the other Individual Defendants also receives substantial annual compensation from defendant Cordis. In derogation of their fiduciary duties to the Company's stockholders, each has personal and financial interests in thwarting any threat to the incumbency and control exercised by Cordis' senior management and members of its Board. Each non- management director, other than defendant Marston, receives an annual fee of $20,000, among other substantial benefits and perquisites of office. Each of those Individual Defendants also receives a fee of $1250 for each Board meeting attended and $750 for each committee meeting attended. Committee chairmen are paid $1000 for each committee meeting attended. Board members also receive 2000 shares of Cordis common stock annually. (e) As of August 22, 1995, Cordis' directors and officers owned beneficially 1,584,751 shares, or 9.67% of the Company's common stock. 16. By virtue of their positions as directors and/or officers of Cordis and their exercise of control over the business and corporate affairs of Cordis, the Individual - 8 - Defendants have, and at all relevant times had, the power to control and influence, and did control and influence and cause Cordis to engage in the practices complained of herein. The Individual Defendants owed and owe Cordis and its stockholders fiduciary obligations and were and are required to: use their ability to control and manage Cordis in a fair, just and equitable manner; act in furtherance of the best interests of Cordis and its stockholders to maximize stockholder value; govern Cordis in such a manner as to heed the expressed views of its public shareholders; refrain from abusing their positions of control; and refrain from advancing their own interests at the expense of Cordis and its stockholders. 17. By virtue of the acts and conduct alleged herein, the Individual Defendants, who control the actions of Cordis, are breaching their fiduciary duties to the public shareholders of the Company. 18. The Individual Defendants are sued individually and as co- conspirators and (as to non-Exchange Act claims) aiders and abettors, as well as in their capacity as officers and/or directors of Cordis, and the liability of each arises from the fact that they have engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. - 9 - CLASS ACTION ALLEGATIONS ------------------------ 19. Plaintiff brings this action for declaratory, injunctive and other relief on his own behalf and as a class action on behalf of all common stockholders of Cordis (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) and their successors in interest, who are being specially injured and deprived of the opportunity to maximize the value of their Cordis shares by the wrongful acts of the Individual Defendants described herein (the "Class") and whose franchise and ownership rights have been impaired by the unlawful actions complained of herein. 20. This action is properly maintainable as a class action for the following reasons: (a) The Class is so numerous that joinder of all members is impracticable. As of August 15, 1995, the Company had 16,392,697 shares outstanding held by hundreds, if not thousands, of shareholders of record and beneficial owners scattered throughout the United States. (b) The parties defending against the Class have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate the final injunctive and declaratory relief requested herein. Plaintiff and the Class have a common and undivided interest in obtaining the injunctive and declaratory relief requested herein. - 10 - (c) There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual Class member. These common questions include, inter alia, the following: ----- ---- (i) whether the Individual Defendants have breached the fiduciary and other common law duties owed by them to plaintiff and other members of the Class by, inter alia, failing and refusing to attempt ----- ---- in good faith to maximize shareholder value in the contemplated acquisition of Cordis by a third party; (ii) whether defendants are wrongfully impeding takeover attempts at the expense of Cordis's public stockholders; (iii) whether defendants have engaged and are continuing to engage in a plan and scheme to entrench themselves in their positions of control within Cordis at the expense of Cordis's public stockholders; (iv) whether the election of directors at the Company's October 10, 1995 Annual Meeting was invalid; (v) whether plaintiff and the other members of the Class would be irreparably damaged were the Individual Defendants not enjoined from continuing in the conduct described in this Complaint; and (vi) whether plaintiff and the other members of the Class are being or will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper rendering and/or measure of damages. - 11 - 21. The claims of plaintiff are typical of the claims of other members of the Class and plaintiff has the same interests as the other members of the Class. Plaintiff is an adequate representative of the Class and has retained counsel experienced in class and shareholder litigation. Plaintiff will fairly and adequately protect the interests of the Class. 22. A class action is superior to other available methods for the fair and efficient adjudication of this action, and no unusual difficulties are likely to be encountered in the management of this action as a class action. The likelihood of individual class members prosecuting separate claims is remote as a result of the substantial expense such an individual litigation would entail. SUBSTANTIVE ALLEGATIONS ----------------------- A. The Substantial Benefit of a J&J/Cordis Merger ---------------------------------------------- 23. J&J, like Cordis, has built a substantial position in recent years in the coronary care device business. In particular, J&J has achieved great success in marketing its coronary stent, a wire-mesh cylinder which is implanted in coronary arteries to keep them open. 24. As Cowen & Co. analyst Dan Lemaitre stated in the October 20, 1995 edition of The Wall Street Journal, a combination of Cordis and ----------------------- J&J consequently "makes terrific sense from a strategic point of view." J&J's stents are implanted in artery walls following the treatment of those arteries with angioplasty balloons, the largest source of Cordis's revenues. - 12 - Once the angioplasty balloons are threaded into clogged arteries to reopen them, stents are inserted to improve circulation through the arteries on a long-term basis. Without the insertion of a stent, the arteries of approximately 40% of angioplasty patients clog again. Among the products manufactured by Cordis is a high-pressure angioplasty balloon that is used to implant artery stents, including those manufactured by J&J. 25. Despite the dramatic success it has experienced with its stent business (the product, which was introduced only a year ago, is expected to produce $450 million in sales for J&J this year), J&J has been unable to broaden its line of cardiovascular products. J&J consequently views Cordis as a natural fit with its stent business. A combination of the two companies would, as The Wall Street Journal reported on October 20, ----------------------- "create a powerful competitor in the coronary-artery market" by enabling the combined entity to market itself as a one-stop shop for coronary-artery products. Such streamlined marketing is becoming an increasingly significant factor in achieving success in the medical device market as hospitals seek to cut costs by limiting the number of suppliers with which they do business. By combining J&J's stent products with Cordis's other coronary devices, the combined entity will also achieve increased pricing flexibility by packaging the two companies' complementary products. 26. A combination of the two companies would further benefit Cordis by enabling the Company to improve its ability to - 13 - quickly introduce new products to the market, an obvious necessity in the fast-changing medical device business. As a Southeast Research Partners analyst stated in a January 24, 1995 Reuters report, "It's been hard for [Cordis] to ramp up the manufacturing, training and introduction of new products into the market as fast as they would like." J&J's massive manufacturing and distribution networks will enable the Company to overcome these current shortcomings. 27. J&J's proposed Stock Merger would permit the Company's shareholders to share in the future benefits of this business combination as the holders of J&J common stock. The Cash Offer, while it offers Cordis shareholders a substantial premium over the pre-announcement market price of their Cordis shares, does not present shareholders with that opportunity to share in the future appreciation of the combined entity's value. J&J's proposed Stock Offer also offers Cordis shareholders an opportunity to collect a substantial premium on a tax-free basis. In contrast, if the Board maintains its current stonewalling tactics, J&J has announced its intention to proceed with and seek to implement the lower priced, taxable Cash Offer. B. J&J's Attempts to Acquire Cordis in a Negotiated Transaction --------------------------------- 28. In light of the substantial synergies that will be generated by a combination of J&J and Cordis, J&J has persistently and actively pursued a negotiated business combination with Cordis. Beginning in 1992, representatives of a J&J subsidiary have engaged in intermittent discussions with, - 14 - among other representatives of Cordis, defendant Strauss, regarding potential business ventures. 29. More recently, on September 5, 1995, Ralph Larsen, J&J's Chairman and CEO, telephoned defendant Marston, to express J&J's interest in pursuing a negotiated acquisition of Cordis. Later the same day, Larsen was contacted by defendant Foxen and the two discussed a potential acquisition of Cordis. Foxen agreed at that time that he and Marston would meet with Larsen on September 12, 1995, in New York City. 30. Larsen and Robert N. Wilson, Vice Chairman of J&J, met with defendants Marston and Foxen on September 12, 1995. At that time, the J&J representatives outlined J&J's desire to acquire Cordis in a tax-free, stock-for-stock merger. 31. The next day, Larsen was contacted by defendant Marston, who requested that Larsen contact defendant Strauss. During that conversation, Strauss, after first expressing reluctance to meet with Larsen prior to the Company's Annual Meeting, agreed to convene such a meeting on September 21 or 22, 1995. 32. On September 15, 1995, Larsen called Strauss and a meeting between J&J and Cordis was scheduled for September 21, 1995. On September 19, 1995, however, Strauss telephoned Larsen and informed him that during the course of a telephonic meeting of the Board it had been decided that no meeting with J&J should be held until after the Company's Annual Meeting, which was scheduled for October 10, 1995. When Larsen inquired as to the - 15 - reason for the delay, Strauss responded that the Board felt it required time to do an evaluation of the Company. C. Cordis's Annual Meeting ----------------------- 33. On or about September 15, 1995, the Individual Defendants caused a Proxy Statement to be sent to Cordis's shareholders in connection with the Company's annual shareholder meeting. The Annual Meeting was held in the Company's offices on October 10, 1995. At that meeting, each of the Individual Defendants was elected or re-elected to the Cordis Board. In addition, at that meeting, the directors obtained shareholder approval to appoint the account firm of Deloitte & Touche as the Company's auditor. 34. The Company further sought approval at the Annual Meeting of the Board's decision to amend the Company's Restated Articles of Incorporation to increase the number of authorized shares of Cordis common stock from 50,000,000 to 150,000,000. Among the reasons cited by the Individual Defendants for adopting that amendment was a desire to facilitate the adoption of "a new shareholders rights plan to replace the Shareholders Rights Plan which currently expires in September 1996 . . ." The Individual Defendants represented in the Proxy Statement that "[t]he Company is not presently engaged in any negotiations with respect to the use of any shares of the additional authorized Common Stock, nor are there currently any commitments, arrangements, understandings or plans with respect to the issuance of such shares." - 16 - 35. The Proxy Statement further stated that the newly-issued shares could operate as an anti-takeover defensive mechanism that: could also be used to block an unsolicited acquisition through the issuance of large blocks of stock to persons or entities considered by the Company's officers and directors to be opposed to such an acquisition, which might be deemed to have an anti-takeover effect (i.e., might impede the ---- completion of a merger, tender offer or other takeover attempt). In fact, the mere existence of such a block of authorized but unissued shares, and the Board's ability to issue such shares without shareholder approval, might deter a bidder from seeking to acquire shares of the Company on an unfriendly basis. While the authorization of additional shares of Common Stock might have such effects, the Board of Directors of the Company does not intend or view the proposed increase in authorized Common Stock as an anti- takeover measure, nor is the Company aware of any proposed ---------------------------------------- transactions of this type. [Emphasis added.] ------------------------- 36. The Proxy Statement was consequently materially inaccurate, false and misleading. Cordis had been approached by J&J concerning a proposed acquisition well in advance of the date of the Annual Meeting, yet endeavored to conceal this fact from Cordis's shareholders in order to facilitate defendants' entrenchment efforts. Defendants thus wrongly acted and conspired to conceal any disclosure of J&J's overtures when they were seeking shareholder approval of potent new anti-takeover defensive mechanisms and also seeking election or re-election to the Board. 37. Furthermore, the Proxy Statement was false and misleading in that, among other things: (i) it failed to disclose the Individual Defendant's actual entrenchment motives in connection with their proposals; and (ii) it failed to disclose - 17 - that the proposals were made in an attempt to thwart immediate takeover interest. 38. When faced with an explicit choice between being permitted to decide for themselves the merits of a potential value-maximizing transaction or granting control to the Board to decide independently to utilize a large number of newly-authorized shares to thwart a takeover in any manner it saw fit, the Company's shareholders soundly rejected this proposal at the Annual Meeting. The Individual Defendants were, however, elected (or re-elected) to their positions on Cordis's Board based upon the false representations made in the Proxy Statement. Cordis further received approval of Deloitte & Touche as the Company's auditors at the Annual Meeting. D. J&J's Acquisition Proposal -------------------------- 39. Despite Strauss's indication that he would meet with representatives of J&J to discuss a possible acquisition following the Company's Annual Meeting, the Individual Defendants continued to stonewall J&J. The day after the Annual Meeting, Strauss telephoned Larsen and informed him that the Board had met and decided that the Company should remain independent and that Strauss should not meet with J&J. When Larsen inquired as to how such a decision had been made before the Board had the opportunity to be informed of the specific terms of J&J's proposal, the strategic reasons for a business combination and the benefits to the Company's shareholders, employees and customers, Strauss simply repeated that he would not meet with - 18 - Larsen. Nevertheless, Larsen expressed to Strauss J&J's continued interest in pursuing a negotiated transaction at that time and urged Strauss and Cordis to reconsider their apparently intractable position. 40. Given the Individual Defendants' refusal to so much as meet with J&J to discuss a possible transaction, J&J decided to commence the Cash Offer on October 19, 1995. Pursuant to the Cash Offer, J&J has offered to purchase all outstanding shares of Cordis common stock, together with all associated rights, at a price of $100 per share, net to the seller in cash. 41. In conjunction with its announcement of the Cash Offer, J&J also announced that, if Cordis does not promptly agree to the Stock Offer, J&J intends to solicit written consents from Cordis's shareholders to remove and replace the Individual Defendants as directors of the Company. J&J has commenced the procedures necessary to obtain SEC approval of such a consent solicitation. 42. In an October 19, 1995 letter to Strauss informing him of the commencement of the Cash Offer, however, J&J expressed its continued willingness to negotiate a value-maximizing transaction with Cordis. Specifically, the letter informed Strauss that J&J remained willing to consummate the Stock Offer -- a negotiated, tax-free, stock-for-stock transaction with Cordis at a price of $105 per Cordis share. 43. The Offers are fully financed and are not subject to any condition with respect to financing. - 19 - 44. Following the announcement of the Offers, the Individual Defendants responded with a terse announcement that the Company had "no definitive comment" and stated that the Board "will evaluate and react" to the proposals. 45. The widespread belief among market experts is that J&J would be willing to improve upon its already attractive proposal. For example, on October 19, 1995, Reuters report quoted Piper Jaffray analyst Archie Smith as stating, "There's no question in my mind that this is just a starting point." Similarly, Dow Jones News Service quoted Sam Navarro, an analyst with UBS Securities, as stating, "I wouldn't be surprised if [$105] was a starting point." 46. The belief that J&J or some other acquiror would be willing to improve upon the substantial premium presented by J&J's tax-free $105 proposed merger price is so widespread among investors that, within two days after the announcement of the Offer, Cordis's market price soared to $109.625, well above the currently-proposed price of the Stock Offer. 47. Even without a further price increase, the Stock Offer represents an extremely attractive opportunity to Cordis shareholders. As Larsen pointed out in his letter to defendant Strauss on October 19, 1995, the $105 proposal represents a premium of approximately 70% over the market price of Cordis common stock prior to July 18, 1995, the day rumors of an acquisition of Cordis by J&J were first reported on wire services. That price is also a 16% premium over the trading - 20 - price of the Company's shares immediately before the Cash Offer was announced. E. Defendants' Entrenchment Maneuvers ---------------------------------- 48. Cordis and the Individual Defendants have indicated no willingness to negotiate with J&J for a higher price and have failed to implement any bidding or other market check mechanism designed to elicit a superior offer. 49. Indeed, it is reported that Cordis has retained the services of the New York law firm Simpson Thacher & Bartlett and the investment bank Morgan Stanley Group to assist in Cordis's takeover defense. 50. Cordis's failure to open meaningful negotiations with J&J, coupled with the reported meetings with lawyers and advisors proficient in anti-takeover defensive strategies, indicate that the Cordis Board is not acting loyally and diligently in the bast interests of Cordis's shareholders, but rather is taking steps to entrench existing management and the existing Board. 1. The Poison Pill --------------- 51. In fact, just six days after the Annual Meeting and the shareholders' clear rejection of intensified defensive measures, defendants --------- swiftly moved to impede a transaction with J&J, or any other potentially value-maximizing transaction, by adopting a new, enhanced Poison Pill shareholder rights plan. The Poison Pill supplanted a previous shareholder rights plan - 21 - that Cordis had implemented on September 12, 1986, and was scheduled to expire in 1996. 52. Despite the fact that defendants acknowledged in the Proxy Statement that the proposal to expand the number of authorized shares of the Company was designed, in part, to facilitate the adoption of a new shareholder rights plan, no mention was made in the Proxy Statement of the material facts that the Company presently intended to adopt, and had plans in place to implement a new, reinforced Poison Pill, which would expand upon the anti-takeover effect of the existing shareholder rights plan, and would be put in place irrespective of the result of the shareholder referendum on the adoption of new defensive measures. 53. Pursuant to the Poison Pill, defendants redeemed the rights issued in connection with the Company's 1986 shareholder rights agreement and increased their ability to fend off unsolicited offers for control of the Company. 54. The Poison Pill was implemented by declaring a dividend of one capital stock purchase right per share to the Company's shareholders of record as of October 23, 1995. In the event an outside entity, such as J&J, acquires a 15% or greater interest in Cordis, the rights will become exercisable and holders of the rights, other than the acquiring entity, will be entitled to apply the exercise price to the purchase of common shares of the Company at one-half of the then-current market price. - 22 - 55. The Poison Pill represents a significant enhancement of the defensive measures available to the Company under its 1986 shareholder rights plan. First, the trigger point of the Poison Pill has been set at 15%. Under the replaced plan, the shareholder rights were issued ten days after a person or group acquired a 20% interest in the Company or announced a tender offer for 30% or more of the Company's stock. 56. Moreover, the replaced plan was only a "flip over" poison pill, i.e., it permitted Cordis shareholders to purchase common stock of ---- the acquiror equal to twice the value of the exercise price of the right. Such plans do not prevent acquirors from obtaining a controlling, but less than 100%, interest in a company because the flip-over provision does not become operative unless the acquiror attempts to obtain all of the Company's common stock by means of a merger or other similar transaction. 57. Once J&J or some other acquiror obtained a 50% interest in Cordis, it would have been simple for the acquiror to dismantle the replaced poison pill by means of a consent solicitation or some other method. 58. The new Poison Pill, in addition to this flip-over provision, provides for a "flip-in" mechanism to enhance the Individual Defendants' ability to repel unsolicited acquisition efforts. The flip-in provision provides for Cordis shareholders to purchase shares of Cordis at one-half the market price in the event J&J or some other acquiror obtains a 15% interest in the - 23 - Company. A merger or similar transaction with an outside entity need not be implemented for such a provision to be operative. 59. In practice, the Poison Pill makes it prohibitively expensive to acquire control of Cordis without the consent of the Individual Defendants, irrespective of the interests of Cordis's shareholders. In some circumstances, such poison pill plans may deter unfair offers. Here, however, where a bidder has made an acquisition offer at a substantial premium over market price, negotiations with the bidder regarding redemption of the poison pill and a possible higher acquisition price should be initiated without delay by the Board, which owes the Company's public shareholders unwavering duties of care and loyalty and an enhanced duty to seek to maximize shareholder value. Those duties prohibit the directors from unjustifiably and uncompromisingly seeking to block any proposed transaction which may reward shareholders with maximum value for their holdings. Defendants have thwarted the will of Cordis' shareholders in adopting the Poison Pill within days of the defeat of their proposal at the Annual Meeting to increase the number of authorized shares. 60. Given the nature and value of the Offers, the Board should utilize the Poison Pill only to facilitate thorough negotiations with J&J and other potential acquirors of the Company and to employ leverage to obtain a value-maximizing transaction for the Company. To this point, the Poison Pill has been utilized only to advance the selfish interests of the Board - 24 - and Cordis's executives in entrenching themselves in office at the expense of the Company's public stockholders. 61. The Individual Defendants' failure to utilize the Poison Pill in a manner designed to maximize shareholder value violates the fiduciary duties they owe to Cordis stockholders because the Individual Defendants' conduct will deny plaintiff and the Class the opportunity to weigh a bona fide offer for control of Cordis at a price well in excess of --------- the Company's preannouncement market price. Plaintiff and the Class will suffer irreparable injury if defendants are permitted to continue this pattern of misconduct. 2. Florida Anti-Takeover Defenses ------------------------------ 62. In addition to the newly-implemented Poison Pill, Cordis has a number of defenses available for use against hostile bids under applicable Florida corporation law. These defenses include a provision of Florida corporation law (FBCA S 607.0902), entitled "Control-Share Acquisitions." 63. The Control-Share Acquisitions statute applies to any corporation (an "Issuing Pubic Corporation") that has not opted out of the statue's coverage that (i) has 100 or more shareholders (ii) has its principal place of business, its principal office, or substantial assets within Florida; and (iii) has either (a) more that 10 percent of its shareholders resident in Florida, (b) more than 10 percent of its shares owned by residents of Florida, or (c) 1,000 shareholders resident in - 25 - Florida. While it is permissible for corporations to opt-out of this provision, Cordis has not exercised that option. 64. The Control-Share Acquisitions statute provides that shares in a corporation that are purchased in a control share acquisition have voting rights only to the extent authorized by a majority of shareholders other than holders of interested shares (defined to include shares which are beneficially owned by an acquiring person, any officer of the issuing corporation or any employee of the corporation who is also a director). A control share acquisition is defined, inter alia, as the acquisition of ---------- beneficial ownership of shares with a majority or more of all voting power. A control share acquisition does not include an acquisition which has been approved by the board of directors of the Issuing Public Corporation. 65. In proactive, the effect of the Control-Share Acquisitions statute is that shares acquired in an unsolicited tender offer only carry voting rights to the extent authorized by a majority of holders of shares other than those already acquired in the tender offer. Moreover, the shareholder vote on the resolution regarding the voting rights to be accorded the acquiror's control shares is not required to be taken until the next scheduled special or annual meeting of shareholders, unless the acquiring person delivers a control share acquisition statement to the Issuing Public Corporation, requests a special meeting of shareholders for the specific purpose of determining - 26 - control share voting rights, and agrees to pay the Issuing Public Corporation's expenses for the special meeting. In that event, the directors of the Issuing Public Corporation may wait for up to 50 days after receipt of the demand by the acquiring person before holding the special meeting. 66. Given the nature and value to Cordis's shareholders of the Offers, the Board should be permitted to rely upon the protections offered by the Control-Share Acquisition statute only to the extent that such reliance facilitates the thorough negotiation of a value-maximizing transaction wit J&J or another potential acquiror or increases the Company's leverage in conducting such negotiations. To date, the Individual Defendants have given no indication that they intend to limit their reliance upon the statute to such uses or purposes. 67. The Individual Defendants' failure to utilize the Control- Shares Acquisition statute in a manner designed to maximize shareholder value violates the fiduciary duties they owe to Cordis stockholders because the Individual Defendants' conduct will deny plaintiff and the Class the opportunity to weigh a bona fide offer for control of Cordis at a price --------- well in excess of the Company's pre-announcement market price. Plaintiff and the Class will suffer irreparable injury if defendants are permitted to continue this pattern of misconduct. 68. Another provision of Florida corporation law (FBCA 607.0901), provides additional protection for the Board against an unsolicited takeover attempt. That statute, entitled - 27 - "Affiliated Transactions," applies, inter alia, to any Florida ---------- corporation, such as Cordis, that has not opted-out of the statute's coverage. 69. The Affiliated Transactions statute was designed to impede coercive and inadequate tender offers and to assure that shareholders in hostile takeovers would receive a fair, non-coercive proposal in any second-step merger. The statute provides that if a person acquires more than ten percent of a corporation's voting shares (thereby becoming an "Interested Shareholder"), such Interested Shareholder may not engage in an "Affiliated Transaction" (defined to include a merger or consolidation) with that corporation, subject to certain exceptions. Section 607.0901 does not prohibit and Affiliated Transaction under various circumstances, --- including any instance in which the Affiliated Transaction has been approved by a majority of the Disinterested Directors (as defined therein). 70. Given the nature and value to Cordis's shareholders of the Offers, the Board should be permitted to rely upon the protection offered by the Affiliated Transactions statute only to the extent that such reliance facilitates the thorough negotiation of a value-maximizing transaction with J&J or another potential acquiror or increases the Company's leverage in negotiating such a transaction. To date, the Individual Defendants have given no indication of an intention to limit their reliance upon the statute to such uses or purposes. - 28 - 71. The Individual Defendant's failure to utilize the Affiliated Transactions statute in a manner designed to maximize shareholder value violates the fiduciary duties they owe to Cordis stockholders because the Individual Defendants' conduct will deny plaintiff and the Class the opportunity to weigh a bona fide offer for control of Cordis at a price --------- well in excess of the Company's pre-announcement market price. Plaintiff and the Class will suffer irreparable injury if defendants are permitted to continue this pattern of misconduct. F. Irreparable Injury ------------------ 72. Despite the tremendous value presented by the Offers to Cordis's shareholders, the Individual Defendants, by virtue of tactics which are solely or primarily designed to entrench themselves in office and their failure to announce an immediate and receptive response, are acting in derogation of the fiduciary duties they owe to Cordis's shareholders to maximize shareholder value and act loyally and diligently in the best interests of the Company's stockholders. 73. The defendants' unwillingness to seriously consider J&J's Offers stems from their desires to entrench themselves in their positions of dominance and control of the Company and to continue to reap the very generous economic benefits which are contingent upon their continued dominance and control of Cordis and its officers, contrary to the expressed will of the majority of Cordis shareholders. Instead of proceeding with alacrity and diligence to negotiate further a - 29 - potential acquisition by J&J or another entity or to develop other value- maximizing alternatives, the Board is proceeding on a course of resistance and is refusing to implement strategies designed to maximize shareholder value. 74. The preliminary and permanent injunctive relief requested herein is therefore necessary to prevent the Company's stockholders from suffering irreparable injury as a result of the Individual Defendants' intransigence. There is no adequate remedy at law for the following injuries with which Cordis's shareholders are currently threatened: (a) Cordis's stockholders may be deprived of any opportunity to receive the benefits of J&J's premium Offers; (b) Cordis's stockholders may be deprived of the opportunity to choose for themselves whether to receive the benefits of J&J's Offers or to remain stockholders of an independent Cordis; and (c) Cordis's stockholders will deprived of the opportunity to receive the maximum value possible for their Cordis stock as a result of the Individual Defendants' refusal to negotiate with J&J or seek alternatives in order to maximize short-term and long-term value. G. Declaratory Relief ------------------ 75. The Court may grant the declaratory relief sought herein pursuant to 28 U.S.C. Sec. 2201 and Fed. R. Civ. P. 57. Cordis's expressed unwillingness even to meet to consider or discuss a combination or merger with J&J demonstrates that there - 30 - is a substantial controversy between plaintiff, class members and defendants. The adverse legal interests of the parties are real and immediate. The granting of the requested declaratory relief will serve the public interest by affording relief from uncertainty and by avoiding delay and will conserve judicial resources by avoiding piecemeal litigation. FIRST CLAIM ----------- 76. Plaintiff repeats and realleges each allegation contained in paragraphs 1 through 75 as if fully set forth herein. 77. This claim alleges violations of fiduciary and other common law duties on the part of the Individual Defendants. 78. The Individual Defendants owe fundamental fiduciary obligations to the Company's shareholders to take all necessary and appropriate steps to maximize the value of Cordis common stock. In addition, the Individual Defendants are obligated to act independently so that the interest of Cordis public stockholders will be protected, to consider seriously all bona fide offers for the Company, and to conduct --------- fair and active bidding procedures or other mechanisms for checking the market to assure that the highest value available to Cordis shareholders is achieved. Further, the directors of the Company must adequately ensure that no conflict of interest exists between defendants' own interests and their fiduciary obligations to maximize stockholder value or, if such conflicts exists, to ensure that all - 31 - such conflicts are resolved in the best interests of the Company's public stockholders. 79. Cordis represents a highly attractive acquisition candidate. Defendants' conduct has deprived and will continue to deprive the Company's public shareholders of the very substantial control premium now being offered and which further exposure of the Company to the market could provide. 80. The Individual Defendants have breached the fiduciary and other common law duties they owe to plaintiff and other members of the Class in that they have not and are not exercising independent business judgment and have acted and are acting to the detriment of the Class in order to benefit themselves and other members of Cordis's senior management and Board. 81. Moreover, the Individual Defendants have refused to take those steps necessary to ensure that the Company's shareholders will receive maximum value for their shares of Cordis stock. Defendants have refused to consider seriously the J&J Offers and have failed to announce any active auction or open bidding procedures best calculated to maximize shareholder value in selling the Company. 82. The Individual Defendants are acting to entrench themselves in their offices and positions and maintain their substantial salaries and perquisites, all at the expense and to the detriment of the public shareholders of Cordis. - 32 - 83. By virtue of the acts and conduct alleged herein, the Individual Defendants, who control the actions of the Company, have carried out a preconceived plan and scheme to place their own personal interests ahead of the interests of the shareholders of Cordis and thereby entrench themselves in their offices and positions within the Company. The Individual Defendants have violated their fiduciary duties owed to plaintiff and the Class in that they have not and are not exercising independent business judgment and have acted and are acting to the detriment of the Company's public shareholders for their own personal benefit. 84. As a result of the actions of the Individual Defendants, plaintiff and other members of the Class have been and will be damaged in that they have not and will not receive their fair proportion of the value of Cordis's assets and businesses and/or have been and will be prevented from obtaining a fair and adequate price for their shares of Cordis common stock. 85. Plaintiff seeks preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiff and the Class of their rights to realize a full and fair value for their stock at a substantial premium over the market price and to compel defendants to carry out their fiduciary duties to maximize shareholder value. - 33 - 86. Only through the exercise of this Court's equitable powers can plaintiff and class members be fully protected from the immediate and irreparable injury which the defendants' actions threaten to inflict. 87. Unless enjoined by the Court, defendants will continue to breach the fiduciary duties they owe to plaintiff and the members of the Class, and/or to aid and abet and participate in such breaches of duty, and will prevent the sale or Cordis at a substantial premium, all to the irreparable harm of plaintiff and the other members of the Class. 88. Plaintiff and the Class have no adequate remedy at law. SECOND CLAIM ------------ 89. Plaintiff repeats and realleges each allegation contained in paragraphs 1 through 88 as if fully set forth herein. 90. This claim alleges violations of fiduciary and other common law duties on the part of the Individual Defendants. 91. As the directors of a corporation faced with a bona fide --------- offer for the sale of control of the corporation, the Individual Defendants have a duty to act on an informed basis to secure the best value reasonably available to Cordis's public stockholders and their conduct in that regard is subject to enhanced scrutiny. 92. As a result of the acts and conduct described above, the Individual Defendants are not fully informing - 34 - themselves, are not acting in good faith and have deliberately and/or recklessly breached their fiduciary and other common law duties which they owe to plaintiff and the other members of the Class, have engaged in unfair dealing for their own benefit and to the detriment of the Class, and have pursued a course of conduct designed to prevent an acquisition of the Company. Among other things, the Poison Pill, the Individual Defendants' refusal to negotiate in good faith with J&J or any other potential acquiror and the Individual Defendants' refusal to remove the Offers from the restrictions presented by Sections 607.0901 and 607.0902 of the Florida corporation law have the effect of entrenching the Individual Defendants in their corporate offices against any real or perceived threat to their control and impair the rights of class members to exercise freedom of choice in a proxy contest or to avail themselves of a bona fide offer to purchase their --------- shares by an acquiror not favored by incumbent management. 93. To the extent that the conduct of the Individual Defendants is based upon what they perceive to be a threat that J&J or any other third party will acquire control over Cordis, the Individual Defendants have a heightened fiduciary duty to act in the best interest of the Company's public stockholders and to act reasonably with regard to any perceived threat. They have recklessly and in bad faith violated such duties. 94. By virtue of the acts and conduct alleged herein, the Individual Defendants, who control the actions of the - 35 - Company, are carrying out a preconceived plan and scheme to entrench themselves in office, to thwart a fair and open auction of the Company that would maximize shareholder value, and to protect their own financial interest at the expense of plaintiff and other members of the Class. Such actions are grossly disproportionate to any real or apparent threat to Cordis or its shareholders. As a result of the steps taken by defendants to thwart a takeover and entrench their positions, plaintiff and the Class have been and will continue to be damaged. 95. The Individual Defendants have at all times been fiduciaries of the members of the Class. As set forth herein, they have breached and are continuing to breach their fiduciary duties to Cordis's shareholders in order to entrench themselves in office and to continue receiving their compensation, fees and other benefits of office. 96. The conduct of the Individual Defendants in refusing to negotiate with J&J or any other potential acquiror of Cordis while steadfastly maintaining the preemptive Poison Pill and the anti-takeover defenses available under 607.0901 and 607.0902 in place constitutes a violation of that duty. The Individual Defendants have not undertaken reasonable efforts to identify and ascertain the risk, if any, presented by J&J's Offers. Furthermore, the preemptive defensive tactics adopted by defendants in response to the Offers are not reasonable in relation to any threat which may be presented to Cordis and its stockholders. - 36 - 97. By reason of the foregoing, the Individual Defendants have violated their fiduciary duties to plaintiff and the Class by failing to ensure that the defensive tactics they adopt are reasonable under the circumstances and are designed not to interfere with the goal of maximizing shareholder value. 98. As a result of the actions of the Individual Defendants, plaintiff and other members of the Class have been and will be damaged in that they have not and will not receive their fair proportion of the value of Cordis's assets and businesses and/or have been and will be prevented from obtaining a fair and adequate price for their shares of Cordis common stock. Defendants are unlawfully manipulating the corporate machinery of Cordis for their own benefit. 99. Plaintiff seeks preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiff and the Class of their rights to realize a full and fair value for their stock at a substantial premium over the market price and to compel defendants to carry out their fiduciary duties to maximize shareholder value and not adopt or employ draconian anti- takeover measures. 100. Only through the exercise of this Court's equitable powers can plaitiff and class members be fully protected from the immediate and irreparable injury which the defendants' actions threaten to inflict. - 37 - 101. Unless enjoined by the Court, defendants will continue to breach the fiduciary duties they owe to plaintiff and the members of the Class, and/or to aid and abet and participate in such breaches of duty, and will continue to entrench themselves in office, all to the irreparable harm of plaintiff and the other members of the Class, and in defiance of the wishes of Cordis shareholders. 102. Plaintiff and the Class have no adequate remedy at law. THIRD CLAIM ----------- 103. Plaintiff repeats and realleges each allegation contained in paragraphs 1 through 102 as if fully set forth herein. 104. This claim arises under Section 14(a) of the Exchange Act, Rule 14a-9 promulated thereunder and related common law. 105. Section 14(a) and Rule 14a-9 require proxy statements to fully and fairly disclose all information necessary for a shareholder to make an informed decision regarding how to vote his or her shares. Specifically, Rule 14a-9 prohibits the use of false or misleading statements or omissions of material fact in the solicitation of proxies. Florida law similarly requires complete candor when directors solicit the votes or approval of a company's shareholders. 106. Cordis and the Individual Defendants disseminated a Proxy Statement date September 15, 1995, to Cordis - 38 - stockholders of record on August 15, 1995, in connection with Cordis's October 10, 1995 Annual Meeting. All of the members of the Board (the Individual Defendants herein) were nominated for election or re-election to the Board at the Annual Meeting. The accounting firm Deloitte & Touche was also proposed to shareholders as the Company's auditors. Furthermore, an amendment to the Company's Restated Articles of Incorporation to increase the number of authorized shares of Cordis common stock from 50,000,000 to 150,000,000 was also proposed at the meeting. 107. At the Annual Meeting, all of the members of the Board received the requisite majority vote for election to the Board and Deloitte & Touche was approved as the Company's auditor. The anti-takeover amendment to the Company's Restated Articles of Incorporation was, however, defeated. 108. In the Proxy Statement, defendants represented, among other things, that "[t]he Company is not presently engaged in any negotiations with respect to the use of any shares of the additional authorized Common Stock, nor are there currently any commitments, arrangements, understandings or Plans with respect to the issuance of such shares." Defendants also represented that they were not "aware of any proposed transactions" which would involve any actual or potential change of control over Cordis. 109. These statements were materially false and incomplete and omitted to state material facts necessary to make the statements made not misleading. Well in advance of the - 39 - Annual Meeting, J&J had approached Cordis to negotiate a friendly acquisition of the Company. In fact, either before or within one day of Annual Meeting, the Board decided to undertake all steps necessary to prevent an acquisition of the Company by J&J, friendly or otherwise. 110. The Proxy Statement also stated that one effect of the proposed amendment to the Company's Restated Articles of Incorporation would be to facilitate the Company's adoption of a new shareholder rights plan. Despite that statement, however, the Proxy Statement failed to disclose that the Individual Defendants were then actively considering the adoption of one Poison Pill, a measure designed to provide the Individual Defendants with additional weapons with which to thwart J&J's efforts to obtain control of Cordis, and were implementing the necessary procedures to immediately adopt a replacement (and reinforced) Poison Pill. 111. Within six days of the Annual Meeting, defendants had adopted the new Poison Pill, despite the disapproving vote at the Annual Meeting. Defendants' misleading disclosures were consequently an integral component of their efforts to entrench themselves in office, and thwart J&J's (undisclosed) expression of interest in the Company, as well as the wishes of Cordis' stockholders. 112. Under the circumstances, defendants were obligated to disclose the material facts that J&J was in the midst of efforts to acquire Cordis and that defendants planned to adopt - 40 - the Poison Pill to impede and thwart those efforts, particularly in light of defendants' misleading statement that they were aware of no acquisition proposals for the Company. 113. Less than two weeks after the meeting, these material facts were belatedly disclosed for the first time in connection with J&J's tender offer materials with respect to its unsolicited takeover effort. If Cordis's stockholders had been apprised of these material facts by defendants in a timely manner, they could have been motivated to vote against the election of the Individual Defendants as directors and clearly conveyed to Cordis's Board that entrenchment tactics, self-dealing and refusal to entertain premium offers are neither fair nor acceptable to the public stockholders. Such facts would, at a minimum, have assumed clear- cut significance in the deliberations of Cordis's shareholders. 114. Because of defendants' defective disclosure, the election of directors and other matters voted on at the 1995 Annual Meeting were not properly voted upon in accordance with applicable federal and state law. Accordingly, the election of directors at the 1995 Annual Meeting should be invalidated and the approval of Deloitte & Touche as the Company's auditors should be similarly revoked. - 41 - 115. Plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) Declaring this to be a proper class action and certifying plaintiff as the class representative; (b) Ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by announcing their intentions to: (i) cooperate fully with any entity or person, including J&J, having a bona fide interest in proposing any transaction ---- ---- which would maximize shareholder value, including but not limited to, a buy-out or takeover of the Company; (ii) immediately undertake an appropriate evaluation of Cordis's worth as a merger or acquisition candidate; (iii) take all appropriate steps necessary to enhance the Company's value and attractiveness as a merger/acquisition candidate; (iv) take all appropriate steps necessary to effectively expose Cordis to the marketplace in an effort to create an active auction for control of the Company; (v) act independently so that the interests of the Company's public shareholders will be protected; and (vi) adequately ensure that no conflicts of interest exist between the Independent Defendants' own interests and their fiduciary obligation to maximize shareholder value or, - 42 - in the event such conflicts exist, to ensure that all conflicts of interest are resolved in the best interests of the public shareholders of Cordis; (c) Declaring that the Individual Defendants and each of them have violated their fiduciary duties to the Class; (d) Enjoining defendants from erecting any unlawful barriers to the acquisition of the Company by any third party which would make Cordis less attractive as an acquisition candidate; (e) Enjoining defendants from abusing the corporate machinery of the Company for the purpose of entrenching themselves in office; (f) Ordering the Individual Defendants to take steps to facilitate a premium acquisition by utilizing the Poison Pill exclusively in a manner designed to maximize shareholder value; (g) Ordering the Individual Defendants to take steps to facilitate a premium acquisition by utilizing the Poison Pill and Sec. 607.0901 and 607.0902 exclusively in a manner designed to maximize shareholder value; (h) Voiding the election of directors at the October 10, 1995 Annual Meeting, invalidating all other matters considered at that meeting, and directing that defendants issue appropriate disclosures with respect to all such matters; (i) Ordering the Individual Defendants, jointly and severally to account to plaintiff and the Class for all - 43 - damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; (j) Alternatively, awarding plaintiff and the Class compensatory damages; (k) Awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and (l) Granting such other and further relief as may be just and proper. JURY DEMAND ----------- Plaintiff hereby demands a trial by jury. Dated: October 24, 1995 BURT & PUCILLO By: /s/ Michael J. Pucillo ------------------------- Michael J. Pucillo Florida Bar No. 261033 Wendy H. Zoberman Florida Bar No. 434670 222 Lakeview Avenue Suite 300 East West Palm Beach, FL 33401 (407) 835-9400 MILBERG WEISS BERSHAD HYNES & LERACH By: /s/ David J. Bershad ------------------------- David J. Bershad Steven G. Schulman James P. Bonner One Pennsylvania Plaza New York, New York 10119 (212) 594-5300 - 44 - STULL STULL & BRODY Jules Brody 6 East 45th Street New York, New York 10017 (212) 687-7230 WEISS & YOURMAN Joseph Weiss 319 Fifth Avenue New York, New York 10016 (212) 532-4171 - 45 - EX-14 15 Exhibit 14 October 31, 1995 Board of Directors Cordis Corporation 5200 Blue Lagoon Drive Miami, FL 33126 Members of the Board of Directors: On October 20, 1995, JNJ Acquisition Corp., a wholly owned subsidiary of Johnson & Johnson ("J&J"), commenced a tender offer to purchase for cash all outstanding shares of common stock, par value $1.00 per share, together with certain associated rights (collectively, the "Common Stock") of Cordis Corporation ("Cordis" or the "Company") at a price of $100.00 per share, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated as of October 19, 1995 and the related Letter of Transmittal (which, together constitute the "J&J Offer"). The J&J Offer is subject to, among other things, (a) there being validly tendered and not withdrawn that number of shares of Common Stock that would represent a majority of all outstanding shares of Common Stock on a fully diluted basis, (b) redemption or invalidation of the rights associated with the Company's Rights Agreement, and (c) J&J having received all necessary governmental, regulatory and other approvals and consents for the proposed transaction, including pursuant to the Florida Business Corporation Act. The terms of the J&J Offer are more fully set forth in the Schedule 14D-1, as amended to date (the "Schedule 14D-1"), filed by J&J with the Securities and Exchange Commission on October 19, 1995. You have asked for our opinion as to whether the consideration to be received by the holders of Common Stock other than J&J and its affiliates pursuant to the J&J Offer is adequate from a financial point of view to such holders. For purposes of the opinion set forth herein, we have: (i) analyzed certain publicly available financial statements and other information of the Company; (ii) analyzed those financial statements and certain other information of J&J which are publicly available; (iii) analyzed certain internal financial statements and other financial and operating data concerning the Company prepared by the management of the Company; (iv) analyzed certain financial projections prepared by the management of the Company; (v) discussed the past and current operations and financial condition and the prospects of the Company with senior executives of the Company; (vi) reviewed the reported prices and trading activity for the Common Stock; (vii) compared the financial performance of the Company and the prices and trading activity of the Common Stock with that of certain other comparable publicly-traded companies and their securities; (viii) reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions; (ix) responded to inquiries from certain third parties concerning a possible transaction involving the Company; (x) reviewed the Offer to Purchase, the Schedule 14D-1 and certain related documents; and (xi) performed such other analyses and examinations and considered such other factors as we have deemed appropriate. We have assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by us for the purposes of this opinion. With respect to the financial projections, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgements of the Company's management and others as to the future financial performance of the Company. In addition, we have not made an independent evaluation or appraisal of the assets of the Company, nor have we been furnished with any such appraisals. Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. We note that, while we have responded to inquiries from certain third parties concerning a possible transaction involving the Company, we were not authorized to, and we did not, solicit indications of interest from third parties with respect to engaging in an acquisition or other possible transaction involving the Company. It is understood that this letter is for the information of the Board of Directors of the Company and may not be used for any other purpose without our prior written consent. This opinion is not intended to be and shall not constitute a recommendation to any stockholder of the Company as to whether to tender shares of Common Stock pursuant to the J&J Offer. We have acted as financial advisor to the Board of Directors of the Company in connection with this matter and will receive a fee for our services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have provided financial advisory services to the Company and J&J and have received fees for the rendering of these services. Based on the foregoing, we are of the opinion on the date hereof that the consideration to be received by the holders of Common Stock other than J&J and its affiliates pursuant to the J&J Offer is inadequate from a financial point of view to such holders. Very truly yours, MORGAN STANLEY & CO. INCORPORATED By: /s/ Peter N. Crnkovich ------------------------------------- Peter N. Crnkovich Managing Director -----END PRIVACY-ENHANCED MESSAGE-----