EVVV EV3 (MM)

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

 

SCHEDULE 14D-9

(Rule 14d-101)

 

 

SOLICITATION/RECOMMENDATION STATEMENT UNDER

SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

ev3 Inc.

(Name of Subject Company)

 

 

ev3 Inc.

(Names of Person(s) Filing Statement)

 

 

Common Stock, par value $0.01 per share

(Title of Class of Securities)

 

 

26928A200

(CUSIP Number of Class of Securities)

 

 

 

 

Kevin M. Klemz

Senior Vice President, Secretary and Chief Legal Officer

ev3 Inc.

3033 Campus Drive

Plymouth, Minnesota 55441

(763) 398-7000

(Name, Address and Telephone Number of Person Authorized to Receive

Notice and Communications on Behalf of the Person(s) Filing Statement)

 

 

Copies To:

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

Name and Address

 

The name of the subject company is ev3 Inc., a Delaware corporation (“ev3”). ev3’s principal executive offices are located at 3033 Campus Drive, Plymouth, Minnesota 55441 and its telephone number is (763) 398-7000.

 

Securities

 

The title of the class of equity securities to which this Solicitation/Recommendation Statement on Schedule 14D-9 (together with the exhibits and annexes hereto, this “Schedule 14D-9”) relates is ev3’s common stock, par value $0.01 per share (the “Shares”). As of June 7, 2010, there were 114,792,961 Shares issued and outstanding.

 

 

Name and Address

 

ev3 is the person filing this Schedule 14D-9. ev3’s name, address and business telephone number are set forth in “Item 1. Subject Company Information — Name and Address,” which information is incorporated by reference.

 

Tender Offer

 

This Schedule 14D-9 relates to the cash tender offer by COV Delaware Corporation (“Purchaser”), a Delaware corporation and wholly-owned subsidiary of Covidien Group S.a.r.l., a Luxembourg company (“Parent”), to purchase all outstanding Shares at a purchase price of $22.50 per Share, in cash, without interest, subject to any withholding of any federal, state, local and foreign taxes, and other assessments of any nature whatsoever imposed by a taxing authority (the “Offer Price”). The tender offer is disclosed in the Tender Offer Statement on Schedule TO (together with the exhibits thereto and as amended and supplemented from time to time, the “Schedule TO”), filed by Purchaser and Parent with the Securities and Exchange Commission (the “SEC”) on June 11, 2010, and is subject to the terms and conditions set forth in the Offer to Purchase dated June 11, 2010 (and as amended and supplemented from time to time, the “Offer to Purchase”), and in the related Letter of Transmittal (the “Letter of Transmittal” which together with the Offer to Purchase constitutes the “Offer”). Copies of the Offer to Purchase and Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B) to this Schedule 14D-9, respectively, and are incorporated herein by reference.

 

The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of June 1, 2010 (the “Merger Agreement”), by and among Parent, Purchaser and ev3. The Merger Agreement provides that, among other things, subject to the satisfaction or waiver of certain conditions, following completion of the Offer, and in accordance with the Delaware General Corporation Law (the “DGCL”), Purchaser will be merged with and into ev3 (the “Merger”). Following the consummation of the Merger, ev3 will continue as the surviving corporation (the “Surviving Corporation”) and a wholly owned subsidiary of Parent. At the effective time of the Merger (the “Effective Time”), each issued and outstanding Share (other than any Shares owned by Parent or Purchaser, any Shares owned by ev3 as treasury stock, and any Shares owned by stockholders who have properly exercised their statutory rights of appraisal under Section 262 of the DGCL) will be automatically converted into the right to receive an amount in cash, without interest, equal to the same Offer Price. The Merger Agreement is summarized in Section 12 “Purpose of the Offer; the Merger Agreement; Plans for ev3” of the Offer to Purchase.

 

Pursuant to the terms of the Merger Agreement, ev3 has granted to Purchaser an option (the “Top-Up Option”), exercisable in whole but not in part on one occasion, to purchase, at a price per Share equal to the Offer Price, an aggregate number of Shares equal to the lowest number of Shares that, when added to the number of Shares owned by Purchaser, Parent and their subsidiaries, at the time of such exercise, will constitute one Share more than 90% of the outstanding Shares (assuming the issuance of the Shares pursuant to the Top-Up Option but excluding Shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered). If Purchaser, Parent and their subsidiaries own at least 75% but less than 90% of the outstanding Shares, after the Purchaser has accepted for payment all Shares validly tendered and not properly withdrawn pursuant to the Offer (the “Share Acceptance Time”) or expiration of any applicable subsequent offering period, Purchaser must exercise the Top-Up Option promptly (within one business day) after Purchaser has accepted for payment all Shares validly tendered in the Offer at the Share Acceptance Time or the expiration of a subsequent offering period, as applicable, if certain conditions

are satisfied. These conditions include that the exercise of the Top-Up Option would not require ev3 to issue more Shares than it has authorized and available for issuance, giving effect to Shares reserved for issuance under ev3’s equity plans and agreements as if such Shares were outstanding.

 

A copy of the Merger Agreement is filed as Exhibit (e)(1) to this Schedule 14D-9 and is incorporated herein by reference. The foregoing descriptions of the Merger Agreement and the Offer are qualified in their entirety by reference to the Merger Agreement, the Offer to Purchase and the Letter of Transmittal.

 

Parent formed Purchaser solely for the purpose of acquiring all outstanding Shares of ev3, and Purchaser has not engaged in any activities to date other than those incidental to the Offer and the Merger Agreement. The Offer to Purchase states that the principal executive offices of Parent are located at 3b Bld Prince Henri, L-1724, Luxembourg and its telephone number is +352 266 379 31, and the principal executive offices of Purchaser are located at 15 Hampshire Street, Mansfield, MA 02048 and its telephone number is (508) 261-8000. For purposes of this Schedule 14D-9, references to “Covidien” include Covidien plc and its subsidiaries, unless otherwise noted.

 

 

Except as disclosed in this Schedule 14D-9 or in the Information Statement of ev3 attached to this Schedule 14D-9 as Annex C and incorporated herein by reference (the “Information Statement”) or as otherwise incorporated by reference herein, as of the date of this Schedule 14D-9, to the knowledge of ev3, there is no material agreement, arrangement or understanding, or actual or potential conflict of interest between ev3 or any of its affiliates and (i) ev3’s directors, executive officers or affiliates or (ii) Purchaser, Parent or their respective directors, executive officers or affiliates. The Information Statement is being furnished to the ev3 stockholders pursuant to Section 14(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14f-1 promulgated under the Exchange Act, in connection with Parent’s right (after acquiring a majority of the Shares, determined on a fully diluted basis, pursuant to the Offer) to designate persons to the Board of Directors of ev3 (the “ev3 Board”) other than at a meeting of the ev3 stockholders.

 

Arrangements with Current Directors and Executive Officers of ev3

 

In considering the recommendation of the ev3 Board that ev3 stockholders accept the Offer and tender Shares in the Offer, as set forth in Item 4 below under the heading “Recommendation of the ev3 Board,” ev3 stockholders should be aware that ev3’s directors and executive officers may have agreements or arrangements that may provide them with interests in the Offer and Merger that differ from, or are in addition to, those of other ev3 stockholders, as applicable. The ev3 Board was aware of these agreements and arrangements as they relate to directors and executive officers during its deliberations of the merits of the Merger Agreement and in determining the recommendation set forth in this Schedule 14D-9. ev3’s directors are John K. Bakewell, Jeffrey B. Child, Richard B. Emmitt, Douglas W. Kohrs, Daniel J. Levangie, John L. Miclot, Robert J. Palmisano, Thomas E. Timbie and Elizabeth H. Weatherman. ev3’s executive officers are Robert J. Palmisano, Pascal E.R. Girin, Stacy Enxing Seng, Kevin M. Klemz, Christine R. Kowalski, Shawn McCormick, Gregory Morrison, David H. Mowry, Julie D. Tracy and Brett A. Wall.

 

The following is a discussion of all known material agreements, understandings and any actual or potential conflicts of interest between ev3 and its directors or executive officers that relate to the Offer. The following summaries are qualified in their entirety by reference to the Merger Agreement, the ev3 Inc. Third Amended and Restated 2005 Incentive Stock Plan (the “2005 Plan”), the ev3 Inc. Amended and Restated Employee Stock Purchase Plan (the “ESPP”), the Robert J. Palmisano Inducement Grant Option Agreement dated April 6, 2008 between ev3 Inc. and Robert J. Palmisano (the “Inducement Option Grant”), the Employment and Change in Control Agreement dated April 6, 2008 between ev3 Inc. and Robert J. Palmisano (the “Palmisano Employment Agreement”), the form of Change in Control Agreement among ev3 Inc., ev3 Endovascular, Inc., Micro Therapeutics, Inc. or FoxHollow Technologies, Inc. and each executive officer of ev3 Inc., other than Mr. Palmisano, Shawn McCormick and Christine R. Kowalski (the “Officer Change in Control Agreements”), the Change in Control Agreement effective January 19, 2009 among ev3 Inc., ev3 Endovascular, Inc. and Shawn McCormick (the “McCormick Change in Control Agreement”) and the Change in Control Agreement effective March 22, 2010 among ev3 Inc., ev3 Endovascular, Inc. and Christine R. Kowalski (the “Kowalski Change in Control Agreement”) and the form of Indemnification Agreement between ev3 Inc. and each of its directors and officers (the

“Indemnification Agreement”), copies of which are filed as Exhibits (e)(1), (e)(6), (e)(7), (e)(8), (e)(9), (e)(10), (e)(11), (e)(12) and (e)(13) to this Schedule 14D-9, respectively, and are incorporated herein by reference. In addition, certain agreements, arrangements or understandings between ev3 or its affiliates and certain of its directors, executive officers and affiliates are described in the Information Statement.

 

The Compensation Committee of the ev3 Board (comprised solely of “independent directors” in accordance with the requirements of Rule 14d-10(d)(2) under the Exchange Act and the instructions thereto) has approved, in accordance with the non-exclusive safe harbor provisions contained in Rule 14d-10 under the Exchange Act, among other things, each of the arrangements set forth below as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d)(2) under the Exchange Act.

 

Treatment of Shares, Stock Options, Restricted Stock and Restricted Stock Units Pursuant to the Merger Agreement

 

Treatment of Shares

 

Those of ev3’s directors and executive officers who tender the Shares they own for purchase pursuant to the Offer will receive the same cash consideration per Share on the same terms and conditions as the other ev3 stockholders. As discussed below under “Item 4. The Solicitation or Recommendation,” to the knowledge of ev3, all of ev3’s directors and executive officers currently intend to tender all of their Shares for purchase pursuant to the Offer.

 

The approximate value of the cash payments that each director and executive officer of ev3 will receive in exchange for his or her Shares in the Offer is set forth in the table below. This information is based on the number of Shares held by ev3’s directors and executive officers as of June 7, 2010, assuming the Merger is completed on July 15, 2010.

 

 

 

 

 

Treatment of Stock Options

 

If the Merger is consummated following the Offer, under the terms of the Merger Agreement, all unexercised stock options outstanding (whether or not vested and whether held by directors, executive officers or other employees) immediately prior to the Effective Time will be cancelled, and the holders thereof will receive cash (subject to any applicable withholding of taxes required by applicable law) equal to the excess, if any, of the Offer Price over the per Share exercise price of the respective options multiplied by the total number of Shares subject to vested and unvested options they hold immediately prior to the Effective Time.

 

The approximate value of the cash payments that each director and executive officer of ev3 will receive in exchange for cancellation of his or her stock options (assuming that each such director and executive officer does not otherwise exercise any outstanding and vested stock options prior to the Effective Time) is set forth in the table below. This information is based on the number of options held by ev3’s directors and executive officers as of June 7, 2010, assuming the Merger is completed on July 15, 2010.

 

Treatment of Restricted Stock

 

If the Merger is consummated following the Offer, under the terms of the Merger Agreement, all shares of restricted stock outstanding immediately prior to the Effective Time of the Merger, whether held by directors, executive officers or other employees, will vest in full and become non-forfeitable and will be cancelled and converted into a right to receive the Offer Price (subject to any applicable withholding of taxes required by applicable law).

 

The approximate value of the cash payments that each director and executive officer of ev3 will receive in exchange for cancellation of his or her shares of restricted stock is set forth in the table below. This information is based on the number of shares of restricted stock held by ev3’s directors and executive officers as of June 7, 2010, assuming the Merger is completed on July 15, 2010.

 

 

Treatment of Restricted Stock Units

 

If the Merger is consummated following the Offer, under the terms of the Merger Agreement, all restricted stock units (“RSUs”) outstanding immediately prior to the Effective Time of the Merger, whether held by directors, executive officers or other employees, will vest in full and the Shares issued thereunder will be cancelled and converted into a right to receive the Offer Price (subject to any applicable withholding of taxes required by applicable law).

The approximate value of the cash payments that each director and executive officer of ev3 will receive in exchange for cancellation of his or her RSUs is set forth in the table below. This information is based on the number of stock options held by ev3’s directors and executive officers as of June 7, 2010, assuming the Merger is completed on July 15, 2010.

 

 

The following table sets forth the approximate amount of compensatory payments that each director and executive officer of ev3 is entitled to receive in connection with the consummation of the transactions contemplated by the Merger Agreement as a result of their ev3 equity interests held by each director or executive officer as of June 7, 2010, assuming the Merger is completed on July 15, 2010. The table does not include “change in control” payments to the executive officers upon completion of the Offer and payments if the executive officers are terminated in connection with the Offer. Such payments are detailed below in the section entitled “Other Payments upon a Change in Control or Termination.”

 

Treatment of Employee Stock Purchase Plan Pursuant to the Merger Agreement

 

Under the Merger Agreement, ev3’s current offering period under the ESPP will continue until June 30, 2010. After that time, no further offerings will be made under the ESPP and the ESPP will be terminated effective as of the completion of the Merger, unless the Merger Agreement is earlier terminated. A copy of the ESPP is filed as Exhibit (e)(7) to this Schedule 14D-9 and is incorporated herein by reference.

 

The following table sets forth the number of Shares expected to be purchased by ev3’s executive officers under the ESPP at the end of the current offering period on June 30, 2010, assuming: (i) the executive officers do not withdraw from the offering prior to the end of the current offering period, and (ii) a purchase price per Share of $12.58 (which is equal to 85% of the fair market value of a Share at the beginning of the current offering period):

 

 

Acceleration of Vesting of Stock Options, Restricted Stock and Restricted Stock Units Pursuant to the Terms of the Equity-Based Compensation Plans and Award Agreements

 

Each of the 2005 Plan and Inducement Option Grant contain provisions regarding acceleration of equity vesting in connection with a change in control. However, in light of the provisions of the Merger Agreement providing for the payment of cash with respect to all unvested options and RSUs and restricted stock grants that remain forfeitable, these provisions regarding acceleration of vesting would only be relevant to the extent that a termination of service of a director or termination of employment of an executive officer were to occur after completion of the Offer and prior to the Effective Time. The Purchaser’s purchase of Shares tendered in the Offer would constitute a change in control under each of the 2005 Plan and Inducement Option Grant.

 

Under the terms of the 2005 Plan, if there is a change in control of ev3, then, all conditions to the exercise of all outstanding options and all issuance or forfeiture conditions on all outstanding stock grants and stock unit grants will be deemed satisfied; provided if any such issuance or forfeiture condition relates to satisfying any performance goal and there is a target for the goal, the issuance or forfeiture condition will be deemed satisfied generally only to the extent of the stated target. A copy of the 2005 Plan is filed as Exhibit (e)(6) to this Schedule 14D-9 and is incorporated herein by reference.

 

Under the terms of the Inducement Option Grant, if there is a change in control of ev3, then the options to purchase 754,000 Shares granted to Mr. Palmisano pursuant to the Inducement Option Grant will become fully vested and immediately exercisable. A copy of the Inducement Option Grant is filed as Exhibit (e)(8) to this Schedule 14D-9 and is incorporated herein by reference.

 

Other Payments upon Change in Control or Termination

 

ev3’s executive officers participate in, or have entered into, as applicable, the various arrangements and agreements discussed below, which provide for the vesting of equity awards and the payment of compensation in connection with a “change in control” (as defined in these arrangements and agreements) of ev3, such as would occur upon the completion of the Offer (in certain instances, benefits are provided only in the event of termination without “cause” or for “good reason” following a change in control).

Payments Under Change in Control Arrangement — Robert J. Palmisano

 

Under the terms of the Palmisano Employment Agreement, in the event that, following a change in control, which as defined in such agreement would occur upon Purchaser’s purchase of Shares tendered in the Offer, ev3 terminates Mr. Palmisano’s employment without cause or Mr. Palmisano terminates his employment for good reason, Mr. Palmisano will be entitled to elect continuation coverage under COBRA for 36 months following the date of termination, the premiums for which will be paid by ev3, and health care continuation coverage for an additional 18 months following such 36-month severance period and will be entitled to receive:

 

 

As used in the Palmisano Employment Agreement, “cause” means Palmisano’s:

 

 

As used in the Palmisano Employment Agreement, “good reason” means the occurrence of the following, provided that Mr. Palmisano provides ev3 notice of the occurrence and ev3 does not correct the occurrence within 30 days and Mr. Palmisano terminates employment with ev3 within two years of the occurrence:

 

 

In addition, upon a change in control, the Palmisano Employment Agreement provides that all unvested stock options and stock awards will become fully vested and immediately exercisable.

 

The Palmisano Employment Agreement also provides that in the event any payment or benefit provided by ev3 to or for the benefit of Mr. Palmisano, either under the Palmisano Employment Agreement or otherwise, will be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), ev3 will make an additional lump sum payment to Mr. Palmisano that will be sufficient, after giving effect to all federal, state and other taxes and charges with respect to such payment, to make Mr. Palmisano whole for all taxes (including withholding taxes) imposed under Section 4999 of the Code.

This summary description of the Palmisano Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the Palmisano Employment Agreement, a copy of which is filed as Exhibit (e)(9) to this Schedule 14D-9 and is incorporated herein by reference.

 

Payments Under Change in Control Arrangements — Other Executive Officers

 

The Officer Change in Control Agreements, the McCormick Change in Control Agreement and the Kowalski Change in Control Agreement entitle each of ev3’s executive officers (other than Mr. Palmisano), upon the occurrence of a change in control, which as defined in such agreements would occur upon Purchaser’s purchase of Shares tendered in the Offer, to base pay owed to such executive officer through such date and a pro rata portion of such executive officer’s target bonus plan payment based on the number of months in the year worked prior to the change in control. Pursuant to the McCormick Change in Control Agreement, upon the occurrence of a change in control, which as defined in such agreement would occur upon Purchaser’s purchase of Shares tendered in the Offer, the remaining unvested portion of the signing and retention bonus paid to Mr. McCormick on his hire date, which is $73,333, will vest and no longer be subject to repayment. In addition, under all of such agreements if the executive officer’s employment is terminated by ev3 for any reason other than for cause and other than the executive officer’s death or is terminated by the executive for good reason and the termination of employment occurs within 24 months of the change in control or prior to the change in control if the termination was either a condition of the change in control or was at the request or insistence of a person related to the change in control, then the executive officer would be entitled to certain additional benefits. Such benefits include:

 

 

As used in these agreements, “cause” means the executive officer’s:

 

 

As used in these agreements, “good reason” means:

 

 

To the extent any payments received by an executive officer under these agreements constitute parachute payments which result in an excise tax under Section 4999 of the Code, the executive officer is entitled to receive a gross-up payment to cover such excise tax as well as applicable taxes on such gross-up payment. This requirement to make a “gross-up” payment to an executive officer to the extent any payments received by the executive officer constitute parachute payments which result in an excise tax under Section 4999 of the Code does not apply, however, to the Change of Control Agreement entered into with Ms. Kowalski.

 

These agreements also provide that, in addition to any other indemnification obligations that ev3 may have, if, following a change in control of ev3, the executive officer incurs damages, costs or expenses (including, without limitation, judgments, fines and reasonable attorneys’ fees) as a result of the executive’s service to ev3 or status as an officer of ev3, ev3 will indemnify the executive officer to the fullest extent permitted by law, except to the extent that such damages, costs or expenses arose as a result of the executive officer’s gross negligence or willful misconduct.

 

This summary description of the Officer Change in Control Agreements, the McCormick Change in Control Agreement and the Kowalski Change in Control Agreement does not purport to be complete and is qualified in its entirety by reference to the form of Officer Change in Control Agreement, the McCormick Change in Control Agreement and the Kowalski Change in Control Agreement, copies of which are filed as Exhibits (e)(10), (e)(11) and (e)(12), respectively, to this Schedule 14D-9 and are incorporated herein by reference.

 

Potential Maximum Payments to Executive Officers

 

The following table describes the potential maximum payments to each of ev3’s executive officers who was employed by ev3 on June 7, 2010 upon the occurrence of a change in control. These calculations are based on the assumption that the change in control event occurred on July 15, 2010 and are equal to the pro rata portion of such executive officer’s target bonus plan payment based on the number of months in the year worked prior to the change in control assuming performance milestones were satisfied at target. The following table does not include any accrued and unpaid base salary to which the executives also would be entitled and does not include payments made for outstanding Shares, stock options, restricted stock or RSUs, which will be made pursuant to the Merger Agreement.

 

 

 

 

The following table describes the potential maximum payments to each of ev3’s executive officers who was employed by ev3 on June 7, 2010 (i) in the event of their termination without cause upon the occurrence of the Offer or Merger or (ii) within 24 months following Purchaser’s purchase of Shares tendered in the Offer, their involuntary termination or termination by them with good reason. These calculations are based on the assumption that the change in control and termination event occurred on July 15, 2010. The following table does not include any accrued and unpaid base salary to which the executives also would be entitled and does not include payments made for outstanding Shares, stock options, shares of restricted stock or RSUs that will be made regardless of the

executive officer’s termination pursuant to the Merger Agreement and are described earlier under the heading “Treatment of Shares, Stock Options, Restricted Stock and Restricted Stock Units Pursuant to the Merger Agreement.”

 

 

 

 

Employment Agreements Following the Merger

 

As of the date of this Schedule 14D-9, Parent and Purchaser have informed ev3 that no members of ev3’s current management have entered into any agreement, arrangement or understanding with Parent, Purchaser or their affiliates regarding employment with the Surviving Corporation. Parent has informed ev3 that it currently intends to retain certain members of ev3’s management team following the Effective Time. As part of these retention efforts, Parent may enter into employment or consultancy compensation, severance or other employee or consultant benefits arrangements with ev3’s executive officers and certain other key employees; however, there can be no assurance that any parties will reach an agreement. These matters are subject to negotiation and discussion and no terms or conditions have been finalized. Any new arrangements are currently expected to be entered into at or prior to the Effective Time and would not become effective until the Effective Time.

 

Effect of Merger Agreement on Employee Benefits

 

For the period commencing at the Effective Time and ending on the earlier of twelve (12) months following the Effective Time and the date on which the employment of an ev3 employee who continues his or her employment with the entity surviving the Merger terminates, the Merger Agreement provides that the entity surviving the Merger will provide each such employee with an annual rate of base salary not materially less than the annual rate of base salary provided to such employee immediately prior to the Effective Time; and equity compensation and an opportunity to earn bonus compensation that are comparable to the equity and bonus opportunities that are provided to similarly situated employees of Parent and its subsidiaries.

 

For the period commencing at the Effective Time and ending on the earlier of 12 months following the Effective Time and the date on which the employment of an ev3 employee who continues his or her employment with the entity surviving the Merger terminates, the Merger Agreement provides that the entity surviving the Merger will provide each such ev3 employee with employee benefits that are substantially comparable in the aggregate to those benefits that were provided to such ev3 employee immediately prior to the Effective Time (excluding, for this purpose, any equity compensation or bonus arrangements that were made available to such employee prior to the Effective Time). However, the Merger Agreement provides that neither Parent nor the entity surviving the Merger will be under any obligation to retain any ev3 employee or group of ev3 employees or to retain any ev3 benefit plan, other than as required by law.

 

Parent or the entity surviving the Merger or its subsidiaries will recognize all service of employees of ev3 with ev3 (including service with any predecessor employer of ev3, to the extent service with such predecessor employer

is recognized by ev3) prior to the completion of the Merger for vesting, eligibility purposes or determination of level of benefits (but not for purposes of accrual of benefits under any defined benefit pension plan) with respect to any employee benefit plan, program or policy maintained by Parent or any of its subsidiaries (other than vesting under any stock option or other equity compensation arrangement), including any paid time off, vacation and severance pay arrangements in which any employee of ev3 will participate following completion of the Merger, unless such recognition of service would result in a duplication of benefits or to the extent that such service was not recognized under the corresponding ev3 employee benefit plan.

 

Director and Officer Exculpation, Indemnification and Insurance

 

Section 102(b)(7) of the DGCL permits a Delaware corporation to include a provision in its certificate of incorporation that its directors will not be liable to the corporation or its stockholders for monetary damages for breaches of fiduciary duty. ev3’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate”), includes such a provision. Such provision, however, does not preclude the personal liability of directors for monetary damages (i) for breaches of the duty of loyalty, (ii) for acts or omissions not in good faith, involving intentional misconduct, or involving knowing violation of the law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which a director derives an improper personal benefit.

 

Additionally, as permitted by Section 145 of the DGCL, ev3’s Certificate provides that (i) ev3 shall indemnify its directors, officers, employees and agents to the fullest extent permitted by Delaware law, (ii) ev3 shall advance expenses to such directors and may advance expenses to such officers, employees and agents, in connection with defending a proceeding and (iii) the rights conferred in the Certificate are not exclusive of any other rights under any agreement, ev3’s Third Amended and Restated Bylaws (the “Bylaws”) or otherwise. ev3’s Bylaws provide that ev3 may obtain insurance on behalf of its directors, officers, employees or agents covering liabilities for which ev3 would have the power or obligation to indemnify.

 

ev3 has entered into Indemnification Agreements with all of its directors and executive officers under which ev3 is required to indemnify them against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding if any of them may be made a party because he or she is or was one of ev3’s directors or officers. ev3 is obligated to pay these amounts only if the director or officer acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to ev3’s best interests. With respect to any criminal proceeding, ev3 is obligated to pay these amounts only if the director or officer had no reasonable cause to believe his or her conduct was unlawful. The Indemnification Agreements also set forth procedures that will apply in the event of a claim for indemnification. This summary description of the form of Indemnification Agreement does not purport to be complete and is qualified in its entirety by reference to the form of Indemnification Agreement Agreement, a copy of which is filed as Exhibit (e)(13) to this Schedule 14D-9 and is incorporated herein by reference.

 

Pursuant to the Merger Agreement, Parent has agreed to (or to cause the Surviving Corporation to) (i) indemnify and hold harmless the individuals who at any time prior to the Effective Time were directors or officers of ev3 or any of its present or former subsidiaries or served as treasurer of ev3 (the “Indemnified Parties”) to the fullest extent the Surviving Corporation is permitted by law, (ii) promptly advance expenses in connection indemnifiable claims to the Indemnified Parties to the fullest extent the Surviving Corporation is permitted by law, (iii) ensure that the certificate of incorporation and bylaws of the Surviving Corporation shall contain the provisions with respect to indemnification and advancement of expenses set forth in the certificate of incorporation and bylaws of ev3, and (iv) comply with the terms and conditions of, any agreement in effect as of the date of the Merger Agreement, between or among ev3 or any of its subsidiaries and any Indemnified Party providing for the indemnification of such Indemnified Party. Parent has also agreed to cause ev3’s current policies of directors’ and officers’ liability insurance and fiduciary liability insurance to be maintained for a period of not less than six years from the Effective Time unless, prior to the Effective Time, ev3 purchases a six-year run-off (i.e., a so-called “Reporting Tail Endorsement”) for such policies. In each case, the maximum premium shall not be in excess of 200% of the last annual premium. This summary description of the indemnification covenant in the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit (e)(1) to this Schedule 14D-9 and is incorporated herein by reference.

ev3 maintains an insurance policy providing for indemnification of its officers, directors and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and under certain stated conditions.

 

Section 16 Matters

 

Pursuant to the Merger Agreement, the ev3 Board has adopted a resolution so that the disposition of all ev3 equity securities pursuant to the Merger Agreement by any officer or director of ev3 who is a covered person for purposes of Section 16 of the Exchange Act will be an exempt transaction for purposes of Section 16 of the Exchange Act.

 

Arrangements with Affiliates

 

Holders Agreement

 

ev3 is party to a holders agreement along with certain ev3 stockholders, Warburg, Pincus Equity Partners, L.P. and certain of its affiliates (collectively, “Warburg Pincus”), and Vertical Fund I, L.P. and Vertical Fund II, L.P. (collectively, the “Vertical Funds”), and certain of ev3’s directors, former directors, executive officers and former executive officers, including Stacy Enxing Seng (the “Holders Agreement”). Pursuant to the terms of the Holders Agreement, ev3 is required to nominate and use its best efforts to have elected to the ev3 Board:

 

 

Richard B. Emmitt and Elizabeth H. Weatherman were the initial designees under the Holders Agreement. This summary description of the Holders Agreement does not purport to be complete and is qualified in its entirety by reference to the Holders Agreement, a copy of which is filed as Exhibit (e)(14) to this Schedule 14D-9 and is incorporated herein by reference.

 

Arrangements with Parent and Purchaser

 

Merger Agreement

 

The summary of the Merger Agreement contained in Section 12 “Purpose of the Offer; the Merger Agreement; Plans for ev3” of the Offer to Purchase and the description of the conditions to the Offer contained in Section 14 “Certain Conditions of the Offer” of the Offer to Purchase are incorporated by reference herein. Such summary and description are qualified in their entirety by reference to the Merger Agreement, a copy of which is filed as Exhibit (e)(1) to this Schedule 14D-9 and is incorporated herein by reference to provide information regarding its terms.

 

The Merger Agreement has been filed as an exhibit to this Schedule 14D-9 to provide holders of ev3 Shares with information regarding the terms of the Merger Agreement and is not intended to modify or supplement any factual disclosures about Parent, Purchaser or ev3 in ev3’s public reports filed with the SEC. The Merger Agreement includes customary representations, warranties and covenants of ev3, Parent and Purchaser made to each other as of specific dates and has been negotiated among the parties thereto with the principal purpose of establishing the circumstances in which Parent may have the right not to consummate the Offer, or a party may have the right to terminate the Merger Agreement if the representations and warranties of the other party prove to be untrue due to a change in circumstances or otherwise. The assertions embodied in those representations and warranties were made solely for purposes of the contract among ev3, Parent and Purchaser and may be subject to important qualifications and limitations agreed to by such parties in connection with negotiating the Merger Agreement. Moreover, some of those representations, warranties and covenants may not be accurate or complete as of any specified date, may be subject to different contractual standards of materiality or may have been used for the purpose of allocating risk among ev3, Parent and Purchaser rather than establishing matters as facts.

 

The Merger Agreement also provides that promptly upon the acceptance for purchase by Purchaser pursuant to the Offer of such number of Shares that, together with the number of Shares (if any) then owned by Parent or

Purchaser or their subsidiaries, or with respect to which Parent or Purchaser has, directly or indirectly, voting power, represents at least a majority of the then outstanding Shares on a fully diluted basis, and from time to time thereafter (subject to compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder), Purchaser will be entitled to designate such number of directors (the “Designees”), rounded up to the next whole number, on the ev3 Board as will give Purchaser representation on the ev3 Board equal to the product of (i) the total number of directors on the ev3 Board (after giving effect to any increase in the number of directors pursuant to Section 1.3 of the Merger Agreement) and (ii) the percentage that the number of Shares beneficially owned by Parent and/or Purchaser (including Shares accepted for payment and the Shares purchased upon exercise of the Top-Up Option under the Merger Agreement, if any), bears to the total number of Shares outstanding. The Merger Agreement further provides that ev3 shall promptly take all actions necessary to cause Purchaser’s designees to be elected or appointed to the ev3 Board, including increasing the size of the ev3 Board or using its reasonable best efforts to secure the resignations of incumbent directors. Additionally, the Merger Agreement provides that ev3 will cause individuals designated by Purchaser to constitute the same percentage as such individuals represent of the entire ev3 Board on the following: (i) each committee of the ev3 Board (other than any committee comprised of continuing directors established to take action under the Merger Agreement) and (ii) each board of directors and each committee (or similar body) thereof of each subsidiary of ev3.

 

Following the designation of the Designees and until the Effective Time, Parent and Purchaser have agreed to use their reasonable best efforts to cause the ev3 Board to include at least three Continuing Directors (as defined below) and to cause each committee of the ev3 Board and its subsidiaries to include at least one Continuing Director. A “Continuing Director” is a member of the ev3 Board as of the date of the Merger Agreement or a person selected by the Continuing Directors then in office, each of whom is an independent director under the rules of The Nasdaq Global Select Market. The approval of a majority of Continuing Directors (or the sole Continuing Director if there shall be only one Continuing Director) is required in order to (i) amend, modify or terminate the Merger Agreement, or agree or consent to any amendment, modification or termination of the Merger Agreement, in any case on behalf of ev3, (ii) extend the time for performance of, or waive, any of the obligations or other acts of Parent or Purchaser under the Merger Agreement, (iii) waive or exercise any of the ev3’s rights under the Merger Agreement, (iv) waive any condition to ev3’s obligations under the Merger Agreement, (v) amend ev3’s certificate of incorporation or bylaws, (vi) authorize any agreement between ev3 or any of ev3’s subsidiaries, on the one hand, and Parent, Purchaser or any of their affiliates, on the other hand, or (vii) make any other determination with respect to any action to be taken or not to be taken by or on behalf of ev3 relating to the Merger Agreement or the transactions contemplated by the Merger Agreement. The Continuing Directors shall have the authority to retain such counsel (which may include current counsel to ev3) and other advisors at the expense of ev3 as determined by the Continuing Directors and shall have the authority to institute any action on behalf of ev3 to enforce performance of the Merger Agreement or any of ev3 rights thereunder.

 

Guaranty

 

In connection with the entry into the Merger Agreement by the parties thereto, Covidien International Finance S.A., a Luxembourg corporation and the direct parent entity of Parent (“CIFSA”), executed a guaranty (the “Guaranty”). Pursuant to the Guaranty, CIFSA has agreed to guarantee the full performance and payment by Parent of its covenants, obligations and undertakings pursuant to or otherwise in connection with the Offer, the Merger, the Merger Agreement and the other transactions contemplated thereby. This summary description of the Guaranty does not purport to be complete and is qualified in its entirety by reference to the Guaranty, a copy of which is filed as Exhibit (e)(2) to this Schedule 14D-9 and is incorporated herein by reference.

 

Confidentiality Agreements

 

On April 6, 2010 and on April 28, 2010, ev3 and Tyco Healthcare Group LP d/b/a Covidien, a Delaware limited partnership and affiliate of Parent and Purchaser, entered into confidentiality agreements in connection with the consideration of a possible negotiated transaction involving ev3 (the “April 6 Confidentiality Agreement” and the “April 28 Confidentiality Agreement,” respectively, and together, the “Confidentiality Agreements”). Under the Confidentiality Agreements, the parties agreed, subject to certain exceptions, to keep confidential any non-public information concerning ev3. Under the April 28 Confidentiality Agreement, Covidien also agreed for a period of

18 months to certain “standstill” provisions for the protection of ev3 and that, subject to certain limited exceptions, for a period of one year Covidien will not solicit any employees of ev3 with whom Covidien has had contact in connection with the proposed transaction. This summary description of the Confidentiality Agreements does not purport to be complete and is qualified in its entirety by reference to the April 6 Confidentiality Agreement and April 28 Confidentiality Agreement, copies of which are filed, respectively, as Exhibit (e)(4) and Exhibit (e)(5) to this Schedule 14D-9 and are incorporated herein by reference.

 

Tender and Voting Agreement

 

In connection with the Merger Agreement, Parent and Purchaser entered into a Tender and Voting Agreement with certain entities affiliated with Warburg Pincus Equity Partners, L.P. pursuant to which, among other things, such stockholders have agreed to tender (and deliver any certificates evidencing) a number of Shares in the aggregate equal to approximately 24% of the outstanding Shares as of the date of the Tender and Voting Agreement, or cause such Shares to be tendered, into the Offer promptly following the commencement of the Offer, and in any event no later than the five business days following the commencement of the Offer. This summary description of the Tender and Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the Tender and Voting Agreement, a copy of which is filed as Exhibit (e)(3) to this Schedule 14D-9 and incorporated herein by reference.

 

 

Recommendation of the ev3 Board

 

At a meeting of the ev3 Board held on May 31, 2010, the ev3 Board unanimously: (i) determined that the Offer and the Merger are advisable, fair to and in the best interests of ev3 and its stockholders; (ii) approved the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement; and (iii) recommended that the ev3 stockholders accept the Offer and tender their Shares in the Offer and, if required by applicable law, vote for the adoption of the Merger Agreement and thereby approve the Merger and the other transactions contemplated by the Merger Agreement.

 

Based on the foregoing, the ev3 Board hereby recommends that the ev3 stockholders ACCEPT the Offer, tender their Shares in the Offer and, if required by applicable law, adopt the Merger Agreement and thereby approve the Merger and the other transactions contemplated by the Merger Agreement.

 

A copy of the joint press release issued by Covidien and ev3 announcing the transaction is filed as Exhibit (a)(5)(C) hereto and incorporated herein by reference. A copy of the letter to the ev3 stockholders communicating the ev3 Board recommendation is filed as Exhibit (a)(2) hereto and incorporated herein by reference.

 

Background and Reasons for the Recommendation

 

Background of the Transaction

 

Since ev3’s initial public offering in 2005, ev3’s management has periodically explored and assessed, and discussed with the ev3 Board, the company’s strategic alternatives. These alternatives have included, among other things, growing ev3’s business organically and independently developing and marketing its products, as well as strategic partnerships, acquisitions and dispositions, including a possible sale of the company.

 

In early November 2009, Robert J. Palmisano, ev3’s President and Chief Executive Officer, received a telephone call from a representative from Piper Jaffray & Co. (“Piper Jaffray”) indicating that Richard J. Meelia, Chairman, Chief Executive Officer and President of Covidien plc, requested an in-person meeting to discuss exploring a potential transaction with ev3. The meeting was originally scheduled for November 23, 2009, but was re-scheduled and took place on December 21, 2009.

 

At the meeting on December 21, 2009, Mr. Palmisano and a representative from Piper Jaffray met in Mansfield, Massachusetts with several members of Covidien’s executive management team, including Mr. Meelia, Charles J. Dockendorff, Executive Vice President and Chief Financial Officer of Covidien plc, José E. Almeida, Senior Vice President and President, Medical Devices of Covidien plc, Amy A. Wendell, Senior Vice President,

Strategy and Business Development of Covidien plc, and Joe Woody, President, Vascular Therapies of Covidien plc. At this meeting, Mr. Palmisano made a presentation concerning ev3’s business. It was decided that the two companies would meet again during JPMorgan’s Annual Healthcare Conference in San Francisco, California, to be held on January 11, 2010.

 

On January 11, 2010, Mr. Palmisano and Shawn McCormick, Senior Vice President and Chief Financial Officer of ev3, met with Ms. Wendell and Mr. Woody in San Francisco, California during JPMorgan’s Annual Healthcare Conference. At this meeting, Ms. Wendell and Mr. Woody indicated that Covidien was interested in exploring a potential transaction with ev3. Mr. Palmisano responded that ev3 was not for sale but that the ev3 Board would consider any serious proposals. Ms. Wendell indicated that Covidien would follow up with a request for additional information.

 

On January 14, 2010, Mr. McCormick received an e-mail from Ms. Wendell requesting additional information regarding ev3 and its business.

 

On January 20, 2010, Mr. Palmisano, Mr. McCormick and Kevin M. Klemz, ev3’s Senior Vice President, Secretary and Chief Legal Officer, informed Daniel J. Levangie, ev3’s Chairman of the Board, and Elizabeth H. Weatherman, Managing Director, Warburg Pincus LLC and a director of ev3, of their recent contacts and meetings with representatives of Covidien.

 

On January 21, 2010, Mr. McCormick telephoned Ms. Wendell and shared with her certain publicly available information concerning ev3 and stated that ev3 would not provide Covidien with any non-public information about ev3 or its business until Covidien had signed a confidentiality agreement. During this conversation, Ms. Wendell told Mr. McCormick that Covidien’s management had discussed the acquisition of ev3 by Covidien with the board of directors of Covidien plc and that due in part to the recent increase in ev3’s Share price Covidien no longer viewed a potential transaction with ev3 as feasible.

 

On February 8, 2010, Ms. Wendell confirmed during a telephone conversation with Mr. McCormick that due to the recent increase in ev3’s Share price Covidien no longer viewed a potential transaction with ev3 as feasible.

 

On February 10, 2010, the ev3 Board held a regular meeting during which the directors discussed numerous business development opportunities in each of ev3’s two business segments, peripheral vascular and neurovascular. The potential business development opportunities discussed included acquisitions of certain tuck-in products or technologies that might optimize or extend ev3’s product portfolio and more transformational acquisitions. The ev3 Board directed ev3’s management to continue its exploration of potential acquisitions. In order to assist ev3’s management in exploring any particular potential acquisition or other business development opportunities that might arise between regular board meetings, the ev3 Board formed a special committee consisting of Mr. Levangie, Mr. Palmisano and Ms. Weatherman. The ev3 Board also determined that prior to seriously pursuing a transformational acquisition that might in the short-term materially affect ev3’s operating results and financial condition, ev3 should determine whether any other strategic alternatives were available, including a possible sale of the company. The ev3 Board asked ev3’s management to engage J.P. Morgan Securities Inc. (“JPMorgan”) to gauge whether any third parties might be interested in a business combination with ev3 either before or after the completion by ev3 of one or more acquisitions, one of which might be a transformational acquisition.

 

On February 12, 2010, Mr. Palmisano and Mr. McCormick contacted a representative of JPMorgan and requested that JPMorgan contact third parties that might be interested in a business combination with ev3.

 

During the next five weeks, at the direction of the ev3 Board, representatives of JPMorgan contacted nine companies that JPMorgan and ev3 believed to have a good strategic fit with ev3, a complementary product portfolio or leveragable sales, marketing or distribution capabilities, that could afford to acquire ev3 and that might be interested in exploring a potential business combination with ev3, including Covidien.

 

On March 16, 2010, the ev3 Board held a special telephonic meeting, also attended by members of ev3’s senior management and representatives of JPMorgan, the purpose of which was to update the ev3 Board on the business development activities being pursued by ev3’s management and the results of JPMorgan’s contacts with companies that might potentially be interested in acquiring ev3. A representative of JPMorgan summarized the discussions with the nine companies contacted by JPMorgan. The representatives of JPMorgan provided a process update and

preliminary financial analyses for one of two acquisitions ev3 was evaluating. The ev3 Board discussed with JPMorgan the anticipated level of interest in ev3 from financial buyers. Factors discussed included the type of analysis that a financial buyer would engage in as it considered acquiring ev3, including the anticipated purchase price as a multiple of ev3’s historical and projected EBITDA, the amount of debt that would be available to fund the purchase price, the cost of capital and the amount of equity contribution that would be required. Following this discussion, the ev3 Board concluded that the process should move forward without approaching potential financial buyers. The ev3 Board discussed continuing as a stand-alone entity and consummating one or more acquisitions, and compared this strategy with accepting an acquisition proposal from a third party. The ev3 Board directed JPMorgan to continue discussions with the four companies that had indicated a possible interest in acquiring ev3 and any other companies that express an interest in acquiring ev3. The ev3 Board also directed ev3’s management to continue discussions regarding two potential acquisition targets.

 

Following the March 16, 2010 ev3 Board meeting, JPMorgan contacted Covidien and the three other companies that had indicated an interest in acquiring ev3 (referred to herein as Company A, Company B and Company C), and informed them that upon entering into a confidentiality agreement, ev3 would share non-public information regarding ev3 and its business and would arrange meetings with ev3’s management. Each of these companies, including Covidien, indicated an interest in receiving more information about ev3 and its business.

 

On March 18, 2010, Covidien requested follow-up information on ev3.

 

On March 25, 2010, ev3 entered into a confidentiality agreement with Company A.

 

On March 25, 2010, Company B informed JPMorgan that it was no longer interested in pursuing a potential business combination with ev3.

 

On March 26, 2010, the special committee of the ev3 Board held a special telephonic meeting to receive an update from JPMorgan on its contact with potential acquirers of ev3 and an update on one of the two potential acquisition transactions being pursued by ev3’s management. In addition to all three special committee members, four other ev3 Board members were in attendance at the meeting along with several members of ev3’s senior management and representatives of JPMorgan. ev3’s management reported that ev3 had entered into a written confidentiality agreement with Company A and that meetings with Covidien, Company A and Company C were anticipated to take place over the next few weeks. A representative of JPMorgan provided a summary of JPMorgan’s discussions with each of these companies. The special committee directed JPMorgan to continue discussions with these and any other third parties that were potentially interested in acquiring ev3.

 

On April 5, 2010, representatives of Company A attended a presentation by ev3’s management in Minneapolis, Minnesota. The following ev3 executives were in attendance at the meeting: Mr. Palmisano, Mr. McCormick, Stacy Enxing Seng, ev3’s Executive Vice President and President, Worldwide Peripheral Vascular, and David A. Mowry, ev3’s Senior Vice President and President, Worldwide Neurovascular.

 

On April 6, 2010, ev3 and Covidien entered into a confidentiality agreement and representatives of Covidien and Morgan Stanley, Covidien’s financial advisor, attended a presentation by ev3’s management in Minneapolis, Minnesota. The following ev3 executives were in attendance at the meeting: Mr. Palmisano, Mr. McCormick, Ms. Enxing Seng and Mr. Mowry.

 

On April 8, 2010, the ev3 Board held a special telephonic meeting, also attended by ev3’s senior management and representatives of JPMorgan. The purpose of the meeting was to receive an update from JPMorgan on the strategic alternatives process and an update on the two potential acquisition transactions being pursued by ev3’s management. Representatives of JPMorgan summarized the status of the strategic alternatives process and at the direction of the ev3 Board prepared to send process letters to interested parties asking for written preliminary non-binding indications of interest by April 16, 2010.

 

On April 9, 2010, JPMorgan met with senior management of Company C in New York to update them on the process and to discuss Company C’s interest in acquiring ev3. Company C expressed continued interest and requested a meeting with ev3’s management.

 

On April 13, 2010, JPMorgan sent process letters to Covidien and Company A requesting written preliminary, non-binding indications of interest by April 16, 2010.

On April 15, 2010, ev3 and JPMorgan entered into an engagement letter pursuant to which JPMorgan agreed to act as ev3’s financial advisor in connection with a possible sale transaction.

 

On April 15, 2010, Company A indicated to JPMorgan that it was not interested in pursuing a potential business combination with ev3 at that time.

 

On April 16, 2010, JPMorgan received a written preliminary, non-binding indication of interest from Covidien to acquire all of the outstanding capital stock of ev3 for $20.00 to $21.00 per Share in cash, subject to completion of Covidien’s due diligence investigation of ev3. The proposal stated that the final valuation would be refined based on Covidien’s second round due diligence and that Covidien expected the definitive documentation not to contain a financing condition. Covidien requested four weeks to complete its due diligence process. JPMorgan reported to the ev3 Board that it had not received any other indications of interest.

 

On April 19, 2010, ev3 entered into a confidentiality agreement with Company C.

 

On April 21, 2010, representatives of Company C attended a presentation by ev3’s management in Minneapolis, Minnesota. The following ev3 executives were in attendance at the meeting: Mr. Palmisano, Mr. McCormick, Pascal E.R. Girin, ev3’s Executive Vice President and Chief Operating Officer, Ms. Enxing Seng, Mr. Mowry and Mr. Klemz.

 

During the period between April 22, 2010 and April 28, 2010, Company C requested follow-up information on ev3. On April 28, 2010, JPMorgan sent a process letter to Company C.

 

On April 22, 2010, the ev3 Board held a regular meeting, also attended by members of ev3’s senior management and representatives of JPMorgan. Mr. Palmisano provided an update on the status of the strategic alternatives process and the two potential acquisition transactions that ev3’s management was also pursuing. A representative of JPMorgan reported that ev3 had received a written preliminary, non-binding indication of interest from Covidien but that it had not received any other indications of interest. The representative of JPMorgan summarized recent discussions with Covidien, Company A, Company B and Company C and reviewed JPMorgan’s process for determining whether other third parties might have an interest in acquiring ev3. Representatives of JPMorgan also informed the ev3 Board that Company A had indicated that it was not interested in pursuing a business combination with ev3. The ev3 Board weighed continuing as a stand-alone entity and continuing to pursue one or more acquisitions compared to being acquired by Covidien or another third party. Mr. Klemz reviewed the fiduciary duties of the ev3 Board in connection with their consideration of the various strategic alternatives. The ev3 Board decided to continue the process of soliciting the interest of other third parties in acquiring ev3 and directed JPMorgan to contact Company B and another one of the nine original companies contacted in February (such company referred to as Company D) again. The ev3 Board expanded the authority of the special committee to review and evaluate a possible business combination, negotiate with the other party and its advisors and other representatives regarding the potential structure and terms of a possible transaction and make a recommendation to the full ev3 Board concerning a possible transaction. The ev3 Board directed JPMorgan to contact Covidien’s financial advisor, Morgan Stanley, and state that if Covidien wanted to continue to participate in the process it would need to increase its bid to over $21.00 per Share and agree to a standstill provision.

 

On April 23, 2010, a representative of JPMorgan contacted a representative of Morgan Stanley and stated that if Covidien wanted to proceed to the next phase of the process it would need to indicate a willingness to submit a bid that was in excess of $21.00 per Share and enter into another confidentiality agreement with ev3 that contained a standstill provision.

 

On April 27, 2010, a representative of Morgan Stanley contacted a representative of JPMorgan and signaled Covidien’s willingness to submit a bid in excess of $21.00 per Share. Covidien requested a detailed in-person diligence meeting between Covidien and members of ev3’s senior management.

 

On April 27, 2010, JPMorgan contacted Company B and Company D and indicated to them that ev3 was moving into a second round of the strategic alternatives process. Company D indicated that they would consider the acquisition internally and would follow up with a response. Company B confirmed that they were not interested in moving forward with an acquisition of ev3.

On April 28, 2010, Covidien and ev3 entered into a revised confidentiality agreement containing a standstill provision.

 

On April 28, 2010, Covidien and its representatives and advisors were given access to ev3’s secure online electronic data room. During the period from April 28, 2010 through May 31, 2010, representatives and advisors of Covidien reviewed the materials in ev3’s electronic data room and engaged in business and legal due diligence discussions by telephone with various representatives and advisors of ev3, and submitted a number of requests for additional due diligence information.

 

On April 30, 2010, Company C indicated to JPMorgan that it was not interested in pursuing a transaction with ev3 at that time.

 

On April 30, 2010, the special committee of the ev3 Board met to receive an update on the strategic alternatives process. In addition to all three special committee members, four other ev3 Board members were in attendance as well as several members of ev3’s senior management and representatives of JPMorgan. The representatives of JPMorgan provided a detailed overview of the anticipated process and timeline going forward.

 

On May 5, 2010, representatives of Covidien’s various functional groups, including legal, intellectual property, clinical, regulatory, research and development, financial, tax and accounting, attended a due diligence session in Minneapolis, Minnesota presented by ev3’s management and other ev3 personnel.

 

On May 6, 2010, the special committee of the ev3 Board met to receive an update on the strategic alternatives process. In addition to all three special committee members, five other ev3 Board members were in attendance as well as several members of ev3’s senior management and representatives of JPMorgan. Members of ev3’s management reported on the due diligence meeting with Covidien representatives. Representatives of JPMorgan provided an update regarding the process and suggested next steps. The special committee directed ev3’s management to continue moving forward with the process.

 

On May 14, 2010, JPMorgan sent Covidien a written process letter setting forth guidelines with respect to timing and procedures for submitting a definitive proposal to acquire ev3. Pursuant to the terms of the letter, a best and final proposal was to be submitted in writing by 5:00 p.m., Pacific Daylight Time, on May 27, 2010. A draft Merger Agreement was provided to Covidien with the process letter. On May 17, 2010, JPMorgan sent Covidien draft disclosure schedules.

 

On May 20, 2010, the special committee of the ev3 Board met to receive an update on the strategic alternatives process and the two potential acquisition transactions that ev3’s management was also pursuing. In addition to all three special committee members, two other ev3 Board members were in attendance as well as several members of ev3’s senior management and representatives of JPMorgan. JPMorgan provided an update on a webex conference call held on May 19, 2010 between ev3’s senior management, representatives from JPMorgan and senior management and board members from one of the two potential acquisition candidates ev3 was pursuing.

 

On May 25, 2010, ev3 formally retained Piper Jaffray as an outside financial advisor to render a second fairness opinion to the ev3 Board in connection with a transaction with Covidien because of the size and significance of the transaction.

 

On May 25, 2010, JPMorgan contacted Company D and asked for an update on their interest in an acquisition of ev3 given their lack of formal response. Company D stated that they may discuss internally, however its lack of response should be considered an indication of no interest in an acquisition of ev3.

 

On May 26, 2010, representatives of outside counsel to Covidien, Ropes & Gray LLP (“Ropes & Gray”), contacted counsel to ev3, Willkie Farr & Gallagher LLP (“Willkie”) and Oppenheimer Wolff & Donnelly LLP (“Oppenheimer”), to discuss certain issues relating to the Merger Agreement.

 

On May 27, 2010, Mr. Palmisano received a telephone call from Mr. Meelia, who stated that Covidien had a strong strategic interest in acquiring ev3. Mr. Meelia also indicated that Covidien considered the transaction as a high strategic priority and would be ready to move forward expeditiously to complete a transaction.

 

Later in the day on May 27, 2010, ev3 received a final non-binding proposal from Covidien to acquire 100% of the outstanding capital stock of ev3 for $22.50 per Share in cash, subject to the terms and conditions of a definitive

Merger Agreement among Parent, the Purchaser and ev3. The proposal stated that the offer was contingent upon ev3 having at the time of execution of an acquisition agreement: (i) no more than 113,181,212 outstanding Shares; (ii) a net cash position of at least $111.0 million; and (iii) no more than 9,869,501 outstanding options and restricted stock awards (other than additional awards permitted under the terms of the Merger Agreement). The offer was accompanied by Covidien’s comments to the draft of the Merger Agreement and a third-party financing commitment from Morgan Stanley Senior Funding, Inc. which, together with available cash, would provide Covidien sufficient cash to consummate the transaction. The proposal indicated that all required corporate approvals for Covidien and its subsidiaries had been obtained to execute the Merger Agreement other than Parent approving an executed Merger Agreement as the sole shareholder of the Purchaser. The offer was conditioned on Covidien receiving on or before 5:00 p.m. (Boston time) on June 2, 2010, a copy of the Merger Agreement executed by ev3. No other proposals were received by the May 27, 2010 deadline.

 

On the morning of May 28, 2010, the ev3 Board convened a special telephonic meeting to consider the offer from Covidien. All of the ev3 Board members were in attendance as well as several members of ev3’s senior management, representatives of JPMorgan and Piper Jaffray and representatives of Willkie and Oppenheimer. Before the ev3 Board convened, the directors received various materials, including a memorandum summarizing the fiduciary duties of the ev3 Board in connection with their consideration of a potential transaction with Covidien, a copy of a non-binding proposed draft of the Merger Agreement, a financing commitment letter submitted by Covidien, a memorandum summarizing certain material terms of the Merger Agreement, presentations by both JPMorgan and Piper Jaffray and ten-year financial projections prepared by ev3’s management summarized in this Item 4 under the heading “Projected Financial Information.” A representative of Willkie reviewed the fiduciary duties of the ev3 Board in connection with their consideration of a potential transaction with Covidien. A representative of JPMorgan summarized the process undertaken by JPMorgan to solicit the interest of third parties in exploring an acquisition of ev3. JPMorgan presented materials and reviewed for the directors the type of analysis that JPMorgan believed a financial buyer would be likely to engage in as it considered acquiring ev3 at a price in excess of that offered by Covidien. Following this discussion, the ev3 Board concluded that the likelihood that a financial buyer would be interested in acquiring ev3 was low in light of the anticipated purchase price as a multiple of ev3’s historical and projected EBITDA, the amount of debt that would be available to fund the purchase price, the cost of capital and the amount of equity contribution that would be required. The ev3 Board discussed whether the cash consideration proposed by Covidien would provide the ev3 stockholders with greater value than if ev3 remained independent. The ev3 Board also discussed the terms of Covidien’s draft of the Merger Agreement and instructed Willkie and Oppenheimer to negotiate the agreement with Ropes & Gray. The ev3 Board directed JPMorgan to contact Covidien’s financial advisor and present a counter-proposal of $23.00 per Share subject to Covidien’s willingness to negotiate some of its proposed changes to the Merger Agreement submitted to ev3 and execute and announce the Merger Agreement before the market opened on Tuesday, June 1, 2010.

 

A representative of JPMorgan contacted a representative of Morgan Stanley and communicated ev3’s counter-proposal of $23.00 per Share. The representative of Morgan Stanley indicated that he would communicate the counter-proposal to Covidien. Later on May 28, 2010, the representative of Morgan Stanley contacted the representative of JPMorgan and communicated Covidien’s willingness to negotiate the Merger Agreement and execute and announce the Merger Agreement before the market opened on Tuesday, June 1, 2010, but that Covidien rejected the $23.00 per Share counter-proposal, clarifying that $22.50 per Share represented Covidien’s best and final offer.

 

The ev3 Board reconvened its special telephonic meeting to receive an update from JPMorgan. All of the ev3 Board members were in attendance as well as several members of ev3’s senior management and representatives of JPMorgan, Willkie and Oppenheimer. The ev3 Board directed JPMorgan to communicate to Morgan Stanley ev3’s willingness to accept the original $22.50 per Share offer, subject to Covidien’s willingness to negotiate some of its proposed changes to the Merger Agreement and execute and announce the Merger Agreement before the market opened on Tuesday, June 1, 2010.

 

From May 28, 2010 to May 31, 2010, representatives from Covidien and Ropes & Gray and representatives of ev3 and Willkie and Oppenheimer negotiated the terms and conditions of the Merger Agreement including, in particular, the parties to the Merger Agreement, the circumstances in which the Offer must be extended by Covidien and the Top-Up Option exercised, the conditions to the consummation of the Offer, the circumstances in which ev3

could consider unsolicited acquisition proposals made by third parties as well as the terms upon which ev3 might be required to pay a fee upon termination of the Merger Agreement and the amount of any such termination fee, the remedies available to either party in the event of termination or breach of the Merger Agreement, the definition of material adverse effect and qualifications to ev3’s representations and warranties and certain provisions intended to protect certain employee benefits. These parties also negotiated the terms of the commitment letter relating to the availability of financing to CIFSA at the closing of the Offer, the terms of the Tender and Voting Agreement related to the Offer and Merger that Covidien was seeking from Warburg, Pincus Private Equity Partners LP, Warburg, Pincus Netherlands Equity Partners I, C.V., and Warburg, Pincus Netherlands Equity Partners III, C.V. and the terms of the Guaranty pursuant to which CIFSA would guarantee the obligations of Parent pursuant to the Merger Agreement.

 

On May 31, 2010, the ev3 Board convened a special telephonic meeting with ev3’s senior management, and representatives of Willkie, Oppenheimer, JPMorgan and Piper Jaffray. All of the directors were present. Before the ev3 Board convened, the directors received various materials relating to their review of the proposed transaction, including a copy of the final draft of the Merger Agreement, a memorandum summarizing the material terms of the Merger Agreement and changes from the draft first distributed to Covidien, draft proposed resolutions approving the transaction to be considered by the ev3 Board and presentations by JPMorgan and Piper Jaffray. Representatives of Willkie reviewed again the fiduciary duties of the ev3 Board in connection with their consideration of a potential transaction with Covidien and gave an update of the status of negotiation of the Merger Agreement and the resolution of the issues discussed at the May 28, 2010 ev3 Board meeting. Representatives of each of JPMorgan and Piper Jaffray reviewed with the ev3 Board their respective financial analyses of the proposed merger. At the conclusion of each of their respective presentations, each of JPMorgan and Piper Jaffray rendered to the ev3 Board its oral opinion (each of which opinions was subsequently confirmed in writing) as described under “— Opinions of Financial Advisors to the ev3 Board” to the effect that, as of the date of their respective opinions, and subject to and based on the factors, assumptions, limitations and qualifications set forth in each opinion, the consideration to be paid to the holders of Shares (other than Purchaser and any of its affiliates) pursuant to the Offer or the Merger, as applicable, was fair, from a financial point of view, to such holders. The full text of each of the written opinions of each of JPMorgan and Piper Jaffray, which sets forth the assumptions and limitations, matters considered and procedures followed with respect to its respective opinion, is attached to this Schedule 14D-9 as Annex A and B, respectively. Representatives of Oppenheimer reviewed resolutions approving the Offer, Merger and the Merger Agreement and the related agreements with the ev3 Board. In the course of its deliberations, the ev3 Board considered a number of factors, including those described more fully below under “Reasons for the Recommendation of the ev3 Board.” The ev3 Board also discussed certain of the risks and other countervailing factors related to entering into the Merger Agreement that previously had been identified and discussed by ev3’s senior management and the ev3 Board, which are also described more fully below under “Reasons for the Recommendation of the ev3 Board.” Following this discussion, the ev3 Board unanimously: (i) determined that the Offer and the Merger are advisable, fair to and in the best interests of ev3 and its stockholders; (ii) approved the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement; and (iii) recommended that the ev3 stockholders accept the Offer and tender their Shares in the Offer and, if required by applicable law, vote for the adoption of the Merger Agreement and thereby approve the Merger and the other transactions contemplated by the Merger Agreement.

 

Following such approval, the compensation committee of the ev3 Board met and considered and unanimously approved all amounts payable to any officer, director or employee of ev3 or any of ev3’s subsidiaries pursuant to any arrangement, understanding or agreement, and each amendment or supplement thereto or modification thereof, as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Exchange Act Rule 14d-10(d)(2).

 

Thereafter, Covidien and its representatives and advisors and ev3 and its representatives and advisors finalized the Guaranty, Tender and Voting Agreement and commitment letter.

 

Early in the morning on June 1, 2010, Parent, Purchaser and ev3 executed the Merger Agreement. In addition, on that date, the Guaranty, the commitment letter and the Tender and Voting Agreement were executed and delivered by the parties thereto.

On June 1, 2010 before the opening of the market, Covidien and ev3 issued a joint press release announcing the transaction.

 

On June 11, 2010, the Purchaser commenced the Offer.

 

Reasons for the Recommendation of the ev3 Board

 

In evaluating the Merger Agreement and the other transactions contemplated thereby, including the Offer and the Merger, the ev3 Board consulted with ev3’s senior management, outside legal counsel and financial advisors (including, consultation with outside legal counsel regarding the ev3 Board’s fiduciary duties, legal due diligence matters, and the terms of the Merger Agreement and related agreements ), and in recommending that the ev3 stockholders accept the Offer, tender their Shares to Purchaser pursuant to the Offer and, if required by the DGCL, vote their Shares in favor of the adoption and approval of the Merger Agreement in accordance with the applicable provisions of the DGCL, the ev3 Board considered the following material factors:

 

ev3’s Financial Condition and Prospects

 

 

 

Review of Strategic Alternatives

 

 

Solicitation Process

 

 

 

Negotiations with Covidien

 

 

Full and Fair Value

 

 

Premium to Current and Historical Trading Prices

 

 

 

Future Stock Price Performance

 

 

Loss of Opportunity

 

 

Certainty of Value and Complete Liquidity

 

 

Tender Offer Structure and Timing of Completion

 

 

Extension of Offer

 

 

Opinions of ev3’s Financial Advisors

 

 

Conditions to Consummation of the Offer and the Merger; Likelihood of Closing

 

 

Tender and Voting Agreement

 

 

Terms of Merger Agreement

 

 

Grant of Top-Up Option

 

 

Regulatory Approvals

 

 

Appraisal Rights

 

 

The ev3 Board has also considered a variety of risks and other potentially negative factors in its deliberations concerning the Offer, the Merger and the Merger Agreement and the other transactions contemplated thereby. These factors included the following:

 

No Stockholder Participation in Future Growth or Earnings

 

 

Completion of Transaction Uncertainty

 

 

Adverse Effect of Unconsummated Transaction

 

 

Tax Treatment

 

 

Lack of Solicitation of Potential Financial Buyers

 

 

Restrictions on Company’s Conduct of Business

 

 

No-Shop Restrictions

 

 

Discouragement of Superior Proposals

 

 

 

Time, Effort and Costs

 

 

Potential Conflicts of Interest

 

 

No Meaningful Stockholder Vote on Merger by Stockholders other than Parent after Completion of the Offer

 

 

Control of ev3 Board by Parent after Completion of Offer

 

 

The ev3 Board based its ultimate decision on its business judgment that the benefits of the Offer and the Merger to the ev3 stockholders outweigh the negative considerations. The ev3 Board determined that the Offer and the Merger represent the best reasonably available alternative to enhance stockholder value with limited risk of non-completion. Other than as described under “Background of the Transaction,” the ev3 Board did not consider any other firm offers made for ev3 during the last two years as there were no such offers of which the ev3 Board was aware.

 

The foregoing discussion of the information and factors considered by the ev3 Board is not intended to be exhaustive, but includes the material information, factors and analyses considered by the ev3 Board in reaching its conclusions and recommendation in relation to the Offer, the Merger, the Merger Agreement and the transaction proposed thereby. In light of the variety of factors and amount of information that the ev3 Board considered, the members of the ev3 Board did not find it practicable to provide specific assessment of, quantify or otherwise assign any relative weights to, the factors considered in determining its recommendation. However, the recommendation of the ev3 Board was made after considering the totality of the information and factors involved. Individual members of the ev3 Board may have given different weight to different factors in light of their knowledge of the business, financial condition and prospects of ev3, taking into account the advice of ev3’s financial and legal advisors. In addition, in arriving at its recommendation, the directors of ev3 were aware of the interests of certain directors and officers of ev3 as described under “Past Contracts, Transactions, Negotiations and Agreements” in Item 3 of this Schedule 14D-9.

 

Opinions of Financial Advisors to the ev3 Board

 

JPMorgan

 

Pursuant to an engagement letter dated April 15, 2010, ev3 retained JPMorgan as ev3’s financial advisor in connection with the Offer and Merger.

 

At the meeting of the ev3 Board on May 31, 2010, JPMorgan rendered its oral opinion to the ev3 Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the $22.50 per Share consideration to be paid to holders of Shares in the Offer and Merger was fair, from a financial point of view, to such stockholders. JPMorgan has confirmed its May 31, 2010 oral opinion by delivering its written opinion to the ev3 Board, dated May 31, 2010, that, as of such date, the $22.50 per Share consideration to be paid to holders of Shares in the Offer and Merger was fair, from a financial point of view, to such stockholders. No limitations were imposed by the ev3 Board upon JPMorgan with respect to the investigations made or procedures followed by it in rendering its opinions.

 

The full text of the written opinion of JPMorgan dated May 31, 2010, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex A hereto and is incorporated herein by reference. ev3 stockholders are urged to read the opinion in its entirety. JPMorgan’s written opinion was addressed to the ev3 Board, was directed only to the fairness, from a financial point of view, of the consideration to be paid to the holders of Shares in the Offer and Merger and does not constitute a recommendation to any of the ev3 stockholders as to whether such stockholder should tender its shares in the Offer or how such stockholder should vote with respect to the Merger Agreement or any other matter. All

summaries of the opinion of JPMorgan set forth in this Schedule 14D-9 are qualified in their entirety by reference to the full text of such opinion.

 

In arriving at its opinions, JPMorgan, among other things:

 

 

JPMorgan also held discussions with certain members of ev3’s management with respect to certain aspects of the Offer and Merger, and the past and current business operations of ev3, the financial condition and future prospects and operations of ev3, and certain other matters JPMorgan believed necessary or appropriate to its inquiry.

 

In giving its opinion, JPMorgan relied upon and assumed, without assuming responsibility or liability for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to or discussed with JPMorgan by ev3 or otherwise reviewed by or for JPMorgan. JPMorgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did JPMorgan evaluate the solvency of ev3 or Covidien under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to it by ev3, JPMorgan assumed and was advised by ev3’s management that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by ev3’s management as to the expected future results of operations and financial condition of ev3 to which such analyses or forecasts relate. JPMorgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. JPMorgan also assumed that the Offer and Merger will be consummated as described in the Merger Agreement, and that the definitive Merger Agreement would not differ in any material respect from the draft thereof provided to JPMorgan. JPMorgan also assumed that the representations and warranties made by ev3 and Covidien in the Merger Agreement and the related agreements were and will be true in all respects material to JPMorgan’s analysis. JPMorgan relied as to all legal, regulatory and tax matters relevant to the rendering of its opinion upon the advice of advisors to ev3. JPMorgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Offer and Merger will be obtained without any adverse effect on ev3 or on the contemplated benefits of the Offer and Merger.

 

The projections furnished to JPMorgan for ev3 were prepared by ev3’s management. ev3 does not publicly disclose internal management projections of the type provided to JPMorgan in connection with JPMorgan’s analysis of the Offer and Merger, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of ev3’s management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections.

 

JPMorgan’s opinion is based on economic, market and other conditions as in effect on, and the information made available to JPMorgan as of, the date of such opinion. Subsequent developments may affect JPMorgan’s opinion, and JPMorgan does not have any obligation to update, revise, or reaffirm such opinion. JPMorgan’s opinion is limited to the fairness, from a financial point of view, of the consideration to be paid to the holders of

Shares in the Offer and Merger, and JPMorgan has expressed no opinion as to the fairness of the Offer and Merger to any person or entity, or as to the fairness of any consideration paid in connection with the Offer and Merger to the holders of any other class of securities, creditors or other constituencies of ev3 or as to the underlying decision by ev3 to engage in the Offer and Merger. JPMorgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of any party to the Offer and Merger, or any class of such persons relative to the consideration to be paid to the holders of Shares or with respect to the fairness of any such compensation. JPMorgan expressed no opinion as to the price at which the Shares will trade at any future time, whether before or after the closing of the Offer and Merger.

 

In accordance with customary investment banking practice, JPMorgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by JPMorgan in connection with providing its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand JPMorgan’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of JPMorgan’s financial analyses. All market data used by JPMorgan in its analyses was as of May 27, 2010 or May 28, 2010.

 

For purposes of its analyses, JPMorgan calculated (i) ev3’s equity value implied by the Offer and Merger to be approximately $2.7 billion, based on approximately 119 million Shares outstanding as of May 28, 2010, calculated using the treasury stock method and the Offer Price, and (ii) ev3’s firm value (for the purposes of this analysis implied firm value equates to implied equity value less cash, plus debt) to be approximately $2.6 billion.

 

Public Trading Multiples.   Using publicly available information, JPMorgan compared selected financial data of ev3 with similar data for selected publicly traded companies engaged in businesses which JPMorgan judged to be analogous to ev3. The companies selected by JPMorgan were the following:

 

 

These companies were selected, among other reasons, because they share similar business characteristics to ev3 based on operational characteristics and financial metrics. For each comparable company, JPMorgan calculated the firm value to revenue multiples, firm value to earnings before interest, taxes, depreciation and amortization, or EBITDA, multiples and price to earnings multiples. For purposes of this analysis, a company’s firm value was calculated as the diluted equity value using the treasury stock method based on options outstanding as of that company’s latest SEC filing prior to May 27, 2010, plus the value of such company’s indebtedness and minority interests and preferred stock as of that company’s latest SEC filing prior to May 27, 2010, minus such company’s cash, cash equivalents and marketable securities as of the company’s latest SEC filing prior to May 27, 2010.

 

In its analysis, JPMorgan derived and compared multiples for ev3 and the selected companies, calculated as follows:

 

 

 

This analysis indicated the following:

 

 

Based on the results of this analysis and other factors which it considered appropriate, JPMorgan applied a Firm Value/2010 Revenue multiple range of 2.75x to 4.35x to ev3’s 2010 Revenue, a Firm Value/2011 EBITDA multiple range of 10.0x to 17.5x to ev3’s 2011 EBITDA and a 2011 P/E multiple range of 20.0x to 30.0x to ev3’s 2011 EPS and then calculated ev3’s implied equity value per share. In performing these calculations, JPMorgan used two sets of financial forecasts: (i) “Street,” based on consensus estimates of Wall Street analysts; and (ii) “Management,” based on projections provided by ev3. In both sets of forecasts, as well as those of the selected companies, EBITDA and EPS excluded projected expense related to contingent consideration and extraordinary items. In the Management forecasts, EPS was adjusted using a 10% tax rate after utilization of NOLs.

 

This analysis showed the following:

 

 

All values presented were rounded to the nearest $0.05. In each case, JPMorgan compared the implied equity values per share to the per share consideration of $22.50 in cash to be paid to the holders of Shares in the Offer and Merger and the $18.92 per share closing price of the Shares as of May 28, 2010.

 

Selected Transaction Analysis.   Using publicly available information, JPMorgan reviewed the following precedent transactions involving businesses which JPMorgan judged to be analogous to ev3’s business. These transactions were selected, among other reasons, because the businesses involved in these transactions share similar business characteristics to ev3 based on operational characteristics and financial metrics. The transactions considered and the date each transaction was announced are as follows:

 

 

Using publicly available estimates, JPMorgan reviewed the transaction values as a multiple of (i) the target company’s revenue for the twelve-month period immediately preceding announcement of the transaction (“LTM

Revenue”) , which is referred to below as “Firm Value/LTM Revenue,” (ii) to the extent available, the target company’s revenue for the twelve-month period immediately following the announcement of the transaction (“FTM Revenue”) , which is referred to below as “Firm Value/FTM Revenue,” and (iii) to the extent available, the target company’s EBITDA for the twelve-month period immediately preceding announcement of the transaction (“LTM EBITDA”) , which is referred to below as “Firm Value/LTM EBITDA.”

 

This analysis indicated the following:

 

 

Based on the results of this analysis and other factors that JPMorgan considered appropriate, JPMorgan applied a Firm Value/LTM Revenue multiple range of 2.40x to 5.75x to ev3’s LTM Revenue, a Firm Value/FTM Revenue multiple range of 2.25x to 4.85x to ev3’s FTM Revenue, and a Firm Value/LTM EBITDA multiple range of 15.5x to 28.5x to ev3’s LTM EBITDA from the “Street” financial projections described above.

 

This analysis showed the following:

 

 

All values presented were rounded to the nearest $0.05. In each case, JPMorgan compared the implied equity values per share to the per share consideration of $22.50 in cash to be paid to the holders of Shares in the Offer and Merger and the $18.92 per share closing price of the Shares as of May 28, 2010.

 

Discounted Cash Flow Analysis.   JPMorgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per Share. JPMorgan calculated the unlevered free cash flows that ev3 is expected to generate during calendar years 2010 through 2019, based upon management projections. For purposes of this analysis, unlevered free cash flows were calculated from management projections as operating income, less taxes assuming a 36% tax rate through 2012 and a 33% tax rate thereafter, plus depreciation and amortization expense, including non-cash contingent consideration accounting expense related to the Chestnut Medical acquisition milestone payment, less capital expenditures, less change in net working capital (excluding cash and cash equivalents), less an assumed $75 million contingent payment to Chestnut Medical in 2011. JPMorgan then calculated the terminal value assuming a constant operating margin as of December 31, 2019 by applying, based upon JPMorgan’s judgment and experience, a range of perpetual revenue growth rates from 2.0% to 4.0%. JPMorgan also calculated projected annual tax savings during calendar years 2010 through 2019 based on projected annual usage of net operating loss (“NOL”) carryfowards to offset projected tax liabilities. The unlevered free cash flows from March 31, 2010 through December 31, 2019, the range of terminal values and the projected annual tax savings were then discounted to present values using a range of discount rates from 10.5% to 12.0% and added together in order to derive the implied firm value of ev3. The discount rate range was chosen by JPMorgan based upon an analysis of the weighted-average cost of capital of ev3 conducted by JPMorgan and applied using the mid-year convention for discounting. In calculating the estimated diluted equity value per share, JPMorgan adjusted the calculated firm value for ev3’s cash and total debt as of March 31, 2010 and divided by the fully diluted shares outstanding of ev3. Based on the foregoing, this analysis indicated an implied equity value per Share of $18.50 to $25.60. All values presented were rounded to the nearest $0.05. In each case, JPMorgan compared implied equity values per share to the per share consideration of $22.50 in cash to be paid to the holders of Shares in the Offer and Merger and the $18.92 per share closing price of the Shares as of May 28, 2010.

 

Historical Share Price Analysis.   JPMorgan reviewed the price performance of the Shares during various periods ending on May 28, 2010 on a standalone basis and also in relation to the S&P 500 and a composite index consisting of the publicly traded companies listed under “Public Trading Multiples” above. JPMorgan also noted

that the per share consideration of $22.50 in cash to be paid to the holders of Shares in the Offer and Merger represented:

 

 

JPMorgan noted that historical stock trading analyses are not valuation methodologies but were presented merely for informational purposes.

 

General

 

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by JPMorgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. JPMorgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. In arriving at its opinion, JPMorgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, JPMorgan considered the totality of the factors and analyses performed in determining its opinion. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by JPMorgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, JPMorgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. None of the selected companies reviewed as described in the above summary is identical to ev3, and none of the selected transactions reviewed was identical to the Offer and Merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of JPMorgan’s analysis, may be considered similar to those of ev3. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of JPMorgan’s analysis, may be considered similar to the Offer and Merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to ev3 and the transactions compared to the Offer and Merger.

 

As a part of its investment banking business, JPMorgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. JPMorgan was selected to advise ev3 with respect to the Offer and Merger and to deliver an opinion to the ev3 Board with respect to the Offer and Merger on the basis of such experience and its familiarity with ev3.

 

Under the terms of a letter agreement, dated April 15, 2010, ev3 memorialized its engagement of JPMorgan to act as ev3’s financial advisor in connection with the Offer and Merger. Pursuant to the terms of the letter agreement, at an Offer Price of $22.50, JPMorgan will receive fees equal to approximately $21.8 million, $2,000,000 of which is payable upon delivery of JPMorgan’s opinion and the remainder of which is payable upon consummation of the Offer. In addition, ev3 agreed to reimburse JPMorgan for its reasonable expenses incurred in connection with its services, including reasonable fees and disbursements of outside counsel and other professional advisors, and to indemnify JPMorgan from and against certain liabilities, including liabilities arising under federal securities laws.

 

In addition, JPMorgan and its affiliates have in the past provided a variety of investment banking and commercial banking services to ev3, Covidien and their respective affiliates, and may continue to do so in the future. During the two years preceding the date of the opinion, such services for ev3 included acting as financial

advisor to ev3 in connection with its acquisition of Chestnut Medical Technologies, Inc. During the two years preceding the date of this letter, JPMorgan and its affiliates have had commercial or investment banking relationships with Covidien, for which JPMorgan and its affiliates have received customary compensation. Such services during such period have included acting as financial advisor to Covidien in connection with its acquisition of Aspect Medical Systems, Inc. and acting as financial advisor to Covidien in connection with its acquisition of VNUS Medical Technologies, Inc. In the ordinary course of JPMorgan’s businesses, JPMorgan and its affiliates may actively trade the debt and equity securities of ev3 or Covidien for its own account or for the accounts of customers and, accordingly, JPMorgan may at any time hold long or short positions in such securities.

 

Piper Jaffray

 

Pursuant to an engagement letter dated May 25, 2010, ev3 retained Piper Jaffray to deliver its opinion as to the fairness, from a financial point of view, to the holders of Shares of the consideration to be received in the Offer and the Merger. At a meeting of the ev3 Board on May 31, 2010, Piper Jaffray issued its oral opinion to the ev3 Board, later confirmed in a written opinion of the same date, that based upon and subject to the assumptions, procedures, considerations and limitations set forth in the written opinion and based upon such other factors as Piper Jaffray considered relevant, that the consideration of $22.50 per Share, in cash, to be paid in connection with the Offer and Merger is fair, from a financial point of view, to the holders of Shares (other than Parent and its affiliates, if any) as of the date of the opinion.

 

The full text of the Piper Jaffray written opinion dated May 31, 2010, confirming its oral opinion issued to the ev3 Board on May 31, 2010, sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached as Annex B to this Schedule 14D-9 and is incorporated in its entirety herein by reference. You are urged to read the Piper Jaffray opinion in its entirety, and this summary is qualified by reference to the written opinion. The Piper Jaffray opinion addresses only the fairness, from a financial point of view and as of the date of the opinion, of the purchase price to the holders of Shares, other than Parent and its affiliates, if any. Piper Jaffray’s opinion was directed solely to the ev3 Board in connection with its consideration of the Offer and Merger and was not intended to be, and does not constitute, a recommendation to any ev3 stockholder as to how such stockholder should act or tender their Shares in the Offer or how any such stockholder should vote at the stockholders’ meeting, if any, held in connection with the Merger or any other matter. The Piper Jaffray opinion was approved for issuance by the Piper Jaffray Opinion Committee.

 

In connection with rendering the opinion described above and performing its financial analyses, Piper Jaffray, among other things:

 

 

In addition, Piper Jaffray conducted such other inquiries, examinations and analyses, and considered such other financial, economic and market criteria as Piper Jaffray deemed necessary in arriving at its opinion.

 

The following is a summary of the material financial analyses performed by Piper Jaffray in connection with the preparation of its fairness opinion, which was reviewed with, and formally delivered to, the ev3 Board at a meeting held on May 31, 2010. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, this summary does not purport to be a complete description of the analyses performed by Piper Jaffray or of its presentation to the ev3 Board on May 31, 2010.

 

This summary includes information presented in tabular format, which tables must be read together with the text of each analysis summary and considered as a whole in order to fully understand the financial analyses presented by Piper Jaffray. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below, and the results of those analyses, should not be taken as any indication of the relative importance or weight given to these analyses by Piper Jaffray or the ev3 Board. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before May 28, 2010, and is not necessarily indicative of current market conditions.

 

For purposes of its analyses, Piper Jaffray calculated (i) ev3’s equity value implied by the Offer and Merger to be approximately $2.7 billion, based on approximately 119 million Shares outstanding as of May 28, 2010, calculated using the treasury stock method and the Offer Price, and (ii) ev3’s enterprise value (“EV”) (for the purposes of this analysis, implied EV equates to implied equity value, plus debt, less cash) to be approximately $2.6 billion.

 

Financial Analyses

 

Selected Public Companies Analysis.

 

Piper Jaffray reviewed selected historical financial data of ev3 and estimated financial data of ev3 that were prepared by ev3’s management as its internal forecasts for calendar years 2010 and 2011 and compared them to corresponding financial data, where applicable, for (i) public companies in the medical device industry with a primary focus on vascular products and (ii) public companies in the medical device industry which Piper Jaffray believed were comparable to ev3’s financial profile. Piper Jaffray selected companies based on information obtained by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

 

 

 

 

 

Based on these criteria, Piper Jaffray identified and analyzed the following selected companies:

 

 

 

 

For the selected public companies analysis, Piper Jaffray compared valuation multiples for ev3 derived from the consideration to be received in the Offer and Merger and ev3’s LTM revenue and LTM EBITDA (calculated throughout as earnings before interest, taxes, depreciation and amortization, stock-based compensation and non-cash contingent consideration accounting expense related to the Chestnut Medical acquisition milestone payment set forth in ev3’s historical and projected financial statements), as well as ev3’s projected 2010 and 2011 revenue, EBITDA and earnings, on the one hand, to valuation multiples for the selected public companies derived from their closing prices per share on May 28, 2010 and LTM revenue and LTM EBITDA, as well as projected 2010 and 2011 revenues, EBITDA and earnings, on the other hand.

 

Selected Vascular Public Companies.

 

 

 

 

 

The selected vascular public companies analysis showed that, based on the estimates and assumptions used in the analysis, the implied valuation multiples of ev3 based on the Offer Price were within or above the range of valuation multiples of the selected vascular public companies when comparing (i) the ratio of EV to LTM revenue and projected 2010 and 2011 revenue, (ii) the ratio of EV to LTM EBITDA and projected 2010 and 2011 EBITDA, and (iii) the price-to-earnings ratio based on projected 2010 and 2011 earnings.

 

Selected Financial Profile Public Companies.

 

 

 

 

The selected financial profile public companies analysis showed that, based on the estimates and assumptions used in the analysis, the implied valuation multiples of ev3 based on the Offer Price were within or above the range of valuation multiples of the selected financial profile public companies when comparing (i) the ratio of EV to LTM revenue and projected 2010 and 2011 revenue, (ii) the ratio of EV to LTM EBITDA and projected 2010 and 2011 EBITDA, and (iii) the price-to-earnings ratio based on projected 2010 and 2011 earnings.

 

No company utilized in the selected public companies analysis is identical to ev3. In evaluating the selected public companies, Piper Jaffray made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters.

Selected M&A Transaction Analysis

 

Piper Jaffray reviewed (i) merger and acquisition transactions involving target companies in the medical device industry with a primary focus on vascular products that it deemed comparable to ev3 and (ii) merger and acquisition transactions involving target companies in the medical device industry and which Piper Jaffray believed were comparable to ev3’s financial profile. Piper Jaffray selected these transactions based on information obtained by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

 

 

 

 

 

Based on these criteria, the following transactions had target companies that were medical device companies with a primary focus on vascular products that were deemed comparable to ev3:

 

Also, based on these criteria, the following transactions had target companies that were medical device companies that were deemed comparable to ev3’s financial profile:

 

 

Piper Jaffray calculated the ratio of EV to historical revenue for the LTM preceding each transaction and the ratio of EV to projected revenue for the FTM following each transaction. Piper Jaffray also calculated the ratio of EV to historical EBITDA for the LTM preceding each transaction and the ratio of EV to projected EBITDA for the FTM following each transaction. Piper Jaffray then compared the results of these calculations with similar calculations for ev3 based on the Offer Price.

 

Selected Vascular M&A Transactions.

 

The analysis indicated the following multiples:

 

 

 

 

 

The selected vascular transactions analysis showed that, based on the estimates and assumptions used in the analysis, the implied valuation multiples of ev3 based on the Offer Price were within or above the range of valuation multiples of the selected vascular transactions when comparing the ratio of EV to (i) historical revenue for the LTM, (ii) projected revenue for the FTM, (iii) historical EBITDA for the LTM, and (iv) projected EBITDA for the FTM.

 

Selected Financial Profile M&A Transactions.

 

The analysis indicated the following multiples:

 

 

 

 

The selected financial profile M&A transactions analysis showed that, based on the estimates and assumptions used in the analysis, the implied valuation multiples of ev3 based on the consideration to be received in the Offer and the Merger were within the range of valuation multiples of the selected financial profile M&A transactions when comparing the ratio of EV to (i) historical revenue for the LTM, (ii) projected revenue for the FTM, (iii) historical EBITDA for the LTM, and (iv) projected EBITDA for the FTM.

 

A selected M&A transaction analysis generates an implied value of a company based on publicly available financial terms of selected change of control transactions involving companies that share certain characteristics with the company being valued. However, no company or transaction utilized in the selected M&A transaction analysis is identical to ev3 or the Offer and the Merger, respectively.

 

Premiums Paid Analysis

 

Piper Jaffray reviewed publicly available information for selected completed or pending M&A transactions to determine the premiums paid in the transactions over recent trading prices of the target companies prior to

announcement of the transaction. Piper Jaffray selected these transactions from the Securities Data Corporation database where the target was a public medical device company and applied, among others, the following criteria:

 

 

Piper Jaffray performed its analysis on 58 transactions that satisfied the criteria, and the table below shows a comparison of premiums paid in these transactions to the premium that would be paid to ev3’s stockholders based on the Offer Price.

 

 

 

 

This premiums paid analysis showed that, based on the estimates and assumptions used in the analysis, the premiums over the market prices at the selected dates for the shares implied by the Offer Price were within the range of premiums paid in the selected M&A transactions.

 

Discounted Cash Flow Analysis

 

Using a discounted cash flows analysis, Piper Jaffray calculated an estimated range of theoretical values for ev3 based on the net present value of (i) projected free cash flows from March 31, 2010 to December 31, 2019, discounted back to March 31, 2010, based on management projections, and (ii) a terminal value at calendar year end 2019 based upon perpetuity growth rates, discounted back to March 31, 2010. The free cash flows for each year were calculated from the management projections as: operating income (adjusted to add back non-cash contingent consideration accounting expense related to the Chestnut Medical acquisition milestone payment set forth in ev3’s historical and projected financial statements) less taxes (36% through 2012, and 33% thereafter), plus depreciation and amortization, plus stock-based compensation, less capital expenditures (including an additional annual $2 million purchase of patents and licenses), less the change in net working capital (excluding cash and cash equivalents), less an assumed $37.5 million of cash to be paid to Chestnut shareholders in 2011 as part of a milestone payment. Piper Jaffray calculated the range of net present values based on discount rates ranging from 11.0% to 14.0%, based on a weighted average cost of capital analysis, which was adjusted upward to account for comparable market capitalizations of peer companies and inherent business risk relative to ev3, a discount rate of 10.0% on net operating loss carry forwards, an assumed tax rate of 36% through 2012 and 33% from 2013 to 2019, and perpetuity growth rates ranging from 2.5% to 3.5% applied to the projected calendar year 2019 free cash flow. This analysis resulted in implied per share values of ev3’s common stock ranging from a low of $16.51 per share to a high of $24.71 per share. Piper Jaffray observed that the Offer Price was within the range of values derived from this analysis.

Miscellaneous

 

The summary set forth above does not contain a complete description of the analyses performed by Piper Jaffray, but does summarize the material analyses performed by Piper Jaffray in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Piper Jaffray believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Jaffray opinion. In arriving at its opinion, Piper Jaffray considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper Jaffray made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Piper Jaffray’s view of the actual value of ev3.

 

No company or transaction used in the above analyses as a comparison is directly comparable to ev3 or the Offer and the Merger and the other transactions contemplated by the Merger Agreement. Accordingly, an analysis of the results of the comparisons is not mathematical; rather, it involves complex considerations and judgments about differences in the companies and transactions to which ev3 and the Offer and the Merger were compared and other factors that could affect the public trading value or transaction value of the companies involved.

 

Piper Jaffray performed its analyses solely for purposes of providing its opinion to the ev3 Board. In performing its analyses, Piper Jaffray made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Certain of the analyses performed by Piper Jaffray are based upon forecasts of future results furnished to Piper Jaffray by ev3’s management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These forecasts are inherently subject to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Piper Jaffray does not assume responsibility if future results are materially different from forecasted results.

 

Piper Jaffray’s opinion was one of many factors taken into consideration by the ev3 Board in making the determination to approve the Merger Agreement. Piper Jaffray was not requested to, and did not, (i) participate in negotiations with respect to the Merger Agreement, (ii) solicit any expressions of interest from any other parties with respect to any business combination with ev3 or any other alternative transaction or (iii) advise the ev3 Board or any other party with respect to alternatives to the Offer and the Merger. In addition, Piper Jaffray was not requested to and did not provide advice regarding the structure, the consideration to be received in the Offer and the Merger, any other aspect of the transaction, or to provide services other than the delivery of an opinion as to the fairness, from a financial point of view, to the holders of Shares of the Offer Price.

 

Piper Jaffray relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or otherwise made available, to Piper Jaffray or discussed with or reviewed by Piper Jaffray. Piper Jaffray further relied upon the assurances of ev3’s management that the financial information provided to Piper Jaffray was prepared on a reasonable basis in accordance with industry practice, and that ev3’s management was not aware of any information or facts that would make any information provided to Piper Jaffray incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of Piper Jaffray’s opinion, Piper Jaffray assumed that with respect to financial forecasts, estimates and other forward-looking information reviewed by Piper Jaffray, that such information was reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of ev3’s management as to the expected future results of operations and financial condition of ev3. Piper Jaffray expressed no opinion as to any such financial forecasts, estimates or forward-looking information or the assumptions on which they were based. Piper Jaffray relied, with ev3’s consent, on advice of the outside counsel and the independent registered public accounting firm to ev3, and on the assumptions of ev3’s management, as to all accounting, legal, tax and financial reporting matters with respect to ev3 and the Merger Agreement.

In arriving at its opinion, Piper Jaffray assumed that the executed Merger Agreement was in all material respects identical to the last draft reviewed by Piper Jaffray. Piper Jaffray relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the Merger Agreement and all other related documents and instruments that are referred to therein were true and correct, (ii) each party to such agreements would fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the Offer and the Merger would be consummated pursuant to the terms of the Merger Agreement without amendments thereto and (iv) all conditions to the consummation of the Offer and the Merger would be satisfied without waiver by any party of any conditions or obligations thereunder. Additionally, Piper Jaffray assumed that all the necessary regulatory approvals and consents required for the Offer and the Merger would be obtained in a manner that would not adversely affect ev3 or the contemplated benefits of the Offer and the Merger.

 

In arriving at its opinion, Piper Jaffray did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of ev3, and was not furnished or provided with any such appraisals or valuations, nor did Piper Jaffray evaluate the solvency of ev3 under any state or federal law relating to bankruptcy, insolvency or similar matters. The analyses performed by Piper Jaffray in connection with its opinion were going concern analyses. Piper Jaffray expressed no opinion regarding the liquidation value of ev3 or any other entity. Without limiting the generality of the foregoing, Piper Jaffray undertook no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which ev3 or any of its affiliates was a party or may be subject, and at the direction of ev3 and with its consent, Piper Jaffray’s opinion made no assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes or damages arising out of any such matters. Piper Jaffray also assumed that neither ev3 nor Parent is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the Offer and the Merger.

 

Piper Jaffray’s opinion was necessarily based upon the information available to it and facts and circumstances as they existed and were subject to evaluation on the date of its opinion. Events occurring after the date of its opinion could materially affect the assumptions used in preparing its opinion. Piper Jaffray did not express any opinion as to the price at which shares of ev3 common stock may trade following announcement of the Offer and the Merger or at any future time. Piper Jaffray did not undertake to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date of its opinion and does not have any obligation to update, revise or reaffirm its opinion.

 

Piper Jaffray’s opinion addressed solely the fairness, from a financial point of view, to holders of Shares of the Offer Price, as set forth in the Merger Agreement, and did not address any other terms or agreement relating to the Offer and the Merger or any other terms of the Merger Agreement. Piper Jaffray was not requested to opine as to, and its opinion does not address, the basic business decision to proceed with or effect the Offer and the Merger, the merits of the Offer and the Merger relative to any alternative transaction or business strategy that may be available to ev3, Parent’s ability to fund the aggregate consideration payable in the Offer and the Merger pursuant to the Merger Agreement or any other terms contemplated by the Merger Agreement. Furthermore, Piper Jaffray expressed no opinion with respect to the amount or nature of the compensation to any officer, director or employee, or any class of such persons, relative to the compensation to be received by holders of ev3 common stock in the Offer and the Merger or with respect to the fairness of any such compensation.

 

As a part of its investment banking business, Piper Jaffray is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. The ev3 Board selected Piper Jaffray to render its fairness opinion in connection with the transactions contemplated by the Merger Agreement on the basis of such experience and its familiarity with ev3.

 

Piper Jaffray received a fee of $1,000,000 for providing its fairness opinion. The opinion fee was not contingent upon the consummation of the Offer and the Merger or the conclusions reached in Piper Jaffray’s opinion. ev3 has also agreed to indemnify Piper Jaffray against certain liabilities and reimburse Piper Jaffray for certain expenses in connection with its services. Piper Jaffray has, in the past, but not in the past two years, provided financial advisory and financing services to ev3 and Parent and/or its affiliates and may continue to do so and has received, and may receive, fees for the rendering of such services. In addition, in the ordinary course of its business, Piper Jaffray and its affiliates may actively trade securities of ev3 and Parent for its own account or the account of its

customers and, accordingly, may at any time hold a long or short position in such securities. Piper Jaffray may also, in the future, provide investment banking and financial advisory services to ev3, Parent or entities that are affiliated with ev3 or Parent, for which Piper Jaffray would expect to receive compensation.

 

Consistent with applicable legal and regulatory requirements, Piper Jaffray has adopted policies and procedures to establish and maintain the independence of Piper Jaffray’s research department and personnel. As a result, Piper Jaffray’s research analysts may hold opinions, make statements or investment recommendations and/or publish research reports with respect to the merger and other participants in the merger that differ from the opinions of Piper Jaffray’s investment banking personnel.

 

Projected Financial Information

 

ev3 does not as a matter of course make public projections as to future performance, earnings or other results beyond the current fiscal year due to the unpredictability of the underlying assumptions and estimates. However, ev3 provided to potential bidders, including Covidien, in connection with their due diligence review ev3 management’s internal non-public five-year standalone financial forecasts regarding ev3’s anticipated future operations (the “Five-Year Projections”). ev3 also provided to the ev3 Board and JPMorgan and Piper Jaffray for use in connection with the rendering of their fairness opinions to the ev3 Board and performing their related financial analysis, as described under the heading “Opinions of Financial Advisors to the ev3 Board” in this Item 4 of this Schedule 14D-9, ev3 management’s internal non-public ten-year standalone financial forecasts regarding ev3’s anticipated future operations (the “Ten-Year Projections” and collectively, with the Five-Year Projections, the “Projections”). The Five-Year Projections were substantially equivalent to the Ten-Year Projections except that the Ten-Year Projections reflected ev3 management’s internal nonpublic standalone financial forecasts regarding ev3’s anticipated future operations for the five years beyond December 31, 2014.

 

The Projections have been prepared by, and are the responsibility of ev3’s management. The Projections were not prepared with a view toward public disclosure; and, accordingly, do not necessarily comply with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or generally accepted accounting principles (“GAAP”). Ernst & Young LLP, ev3’s independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to the Projections and does not express an opinion or any form of assurance related thereto. The summary of the Projections is not being included in this Schedule 14D-9 to influence an ev3 stockholder’s decision whether to tender Shares in the Offer, but is being included because the Projections were made available by ev3 to Covidien and the ev3 Board and used by JPMorgan and Piper Jaffray in connection with the rendering of their fairness opinions to the ev3 Board and performing their related financial analysis, as described under the heading “Opinions of Financial Advisors to the ev3 Board” in this Item 4 of this Schedule 14D-9.

 

The Projections while presented with numerical specificity necessarily were based on numerous variables and assumptions that are inherently uncertain and many of which are beyond the control of ev3’s management. Because the Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year. The assumptions upon which the Projections were based necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond ev3’s control. The Projections also reflect assumptions as to certain business decisions that are subject to change. Important factors that may affect actual results and result in the Projections not being achieved include, but are not limited to, the timing of regulatory approvals and introduction of new products, market acceptance of new products, success of clinical testing, availability of third party reimbursement, impact of competitive products and pricing, the effect of regulatory actions, the effect of global economic conditions, fluctuations in foreign currency exchange rates, the cost and effect of changes in tax and other legislation and other risk factors described in ev3’s annual report on Form 10-K for the year ended December 31, 2009, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, the Projections may be affected by ev3’s ability to achieve strategic goals, objectives and targets over the applicable period.

 

Accordingly, there can be no assurance that the Projections will be realized, and actual results may vary materially from those shown. The inclusion of the Projections in this Schedule 14D-9 should not be regarded as an

indication that ev3 or any of its affiliates, advisors or representatives considered or consider the Projections to be predictive of actual future events, and the Projections should not be relied upon as such. Neither ev3 nor any of its affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from the Projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing after the date the Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Projections are shown to be in error. ev3 does not intend to make publicly available any update or other revision to the Projections, except as otherwise required by law. Neither ev3 nor any of its affiliates, advisors, officers, directors or representatives has made or makes any representation to any ev3 stockholder or other person regarding the ultimate performance of ev3 compared to the information contained in the Projections or that the Projections will be achieved. ev3 has made no representation to Covidien, in the Merger Agreement or otherwise, concerning the Projections.

 

In light of the foregoing factors and the uncertainties inherent in the Projections, ev3 stockholders are cautioned not to place undue, if any, reliance on the Projections.

 

The following is a summary of the Projections:

 

Projected Financial Information
(dollars in millions, except per share information)