In the Matter of Medtronic Inc.

9810329
B257370

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:: Robert Pitofsky, Chairman; Sheila F. Anthony; Mozelle W. Thompson; Orson Swindle

In the Matter of
Medtronic, Inc. a corporation.

DOCKET NO. C-3879

DECISION AND ORDER

The Federal Trade Commission ("Commission") having initiated an investigation of the acquisition of all of the voting stock of Avecor Cardiovascular, Inc. ("Avecor") by Medtronic, Inc. ("Medtronic"), hereinafter sometimes referred to as "Respondent," and Respondent having been furnished with a copy of a draft complaint that the Bureau of Competition proposed to present to the Commission for its consideration, and which, if issued by the Commission, would charge Respondent with violations of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18; and

Respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by Respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that the Respondent has violated the said Acts, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following Order:

1. Respondent Medtronic, Inc. is a corporation organized, existing, and doing business under and by virtue of the laws of Minnesota, with its principal executive offices located at 7000 Central Avenue, Northeast, Minneapolis, Minnesota 55432.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the Respondents, and the proceeding is in the public interest.

ORDER

IT IS ORDERED that, as used in this order, the following definitions shall apply:

A. "Medtronic" or "Respondent" means Medtronic, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled by Medtronic, Inc, and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

B. "Avecor" means Avecor Cardiovascular, Inc., a corporation organized, existing and doing business under the laws of Minnesota with its headquarters located at 7611 Northland Drive, Minneapolis, Minnesota 55428, its directors, officers, employees, agents, representatives, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled by Avecor Cardiovascular, Inc., and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

C. "Proposed Acquisition" means the proposed acquisition by Medtronic of 100% of the voting stock of Avecor pursuant to an Agreement and Plan of Merger, dated July 12, 1998, as amended.

D. "Acquirer" means Baxter Healthcare Corporation, a corporation organized, existing and doing business under the laws of Delaware with its principal place of business located at One Baxter Parkway, Deerfield, Illinois 60015, or the entity to whom Medtronic shall divest the Avecor Pump Assets pursuant to Paragraph II. of this order, as applicable.

E. "Associated Reservoirs" means a family of venous reservoirs for use with the Avecor Blood Pump System that includes both a hard shell and a venous reservoir bag and a reservoir holder.

F. "Avecor Blood Pump Reservoirs" means the Associated Reservoirs manufactured and sold by Avecor.

G. "Avecor Blood Pump System" means the arterial pump system manufactured and sold by Avecor, used for pumping blood during cardiopulmonary bypass procedures and consisting of a pump console (controller, rotor housing, and flow meter), and associated pump disposables(pump chamber and pump tubing).

H. "Avecor Pump Assets" means all Avecor's assets, business, goodwill and rights, other than real property, as of the date this Agreement Containing Consent Order is accepted for public comment, relating to the research, development, manufacture, and sale of the Avecor Blood Pump System and the products included therein throughout the world, including, but not limited to:

1. all machinery, fixtures, equipment, and other tangible property, trade names, trademarks, brand names, formulations, inventory, Patents, trade secrets, technology, know-how, specifications, designs, drawings, processes, production information, manufacturing information, testing and quality control data, research materials, technical information, marketing and distribution information, customer lists, software, information stored on management information systems (and specifications sufficient for the Acquirer or New Acquirer to use such information) and all data, contractual rights, materials and information relating to FDA and other governmental or regulatory approvals relating to the Avecor Blood Pump System and the products included therein;

2. the MC3 License Agreement;

3. an exclusive, royalty-free, transferrable, worldwide license, in perpetuity, to Avecor's Patents, trade secrets and know-how in the field of use of making, using, exporting, importing and selling Associated Reservoirs for use in connection with the Avecor Blood Pump System and any improvements thereto, provided however, that the foregoing license shall be non-exclusive as to:

a. hard shell reservoirs and venous reservoir bags with an outlet size other than 5/8 inch; and
b. the reservoir holders;

and all as subject to the applicable provisions of the Divestiture Agreement approved by the Commission.

I. "Avecor's Costs" means Avecor's cost of manufacturing such item, as determined by Generally Accepted Accounting Principles, including the actual cost of raw materials, direct labor and reasonable, actual contracted services, but excluding factory overhead used in manufacturing the item. Raw materials and direct labor are the actual cost of materials and labor consumed to manufacture the item.

J. "Contract Manufacture" means the manufacture of Avecor Blood Pump Systems and Associated Reservoirs supplied pursuant to a Divestiture Agreement by Medtronic for sale to the Acquirer or New Acquirer, as applicable.

K. "Divestiture Trustee" means the trustee(s) appointed pursuant to Paragraph IV. of this order, as applicable.

L. "FDA" means the United States Food and Drug Administration.

M. "Interim Trustee" means the trustee(s) appointed pursuant to Paragraph III. of this order, as applicable.

N. "Commercial Capability to Manufacture" means the practical ability to manufacture (including by subcontracting other than by Respondent or Avecor) the Avecor Blood Pump System and Associated Reservoirs whether or not any have actually been sold.

O. "MC3 Agreement" means the license agreement, dated January 16, 1995, as amended between Michigan Critical Care Consultants and Avecor.

P. "New Acquirer" means the entity to whom the Divestiture Trustee shall divest the Avecor Pump Assets pursuant to Paragraph IV. of this order.

Q. "Patents" means any patent and patent right, patent applications, patents of addition, re-examination, reissues, extensions, granted supplementary protection certificates, substitutions, confirmations, registrations, revalidations, revisions, additions and the like, of or to said patent and patent right and any and all continuations and continuations-in-part and divisionals.

R. "Reimbursable Costs" means the reasonable, direct, out-of-pocket expenses incurred by Avecor in providing referenced assistance.

II.

IT IS FURTHER ORDERED that:

Respondent shall divest, absolutely and in good faith, the Avecor Pump Assets as a competitively viable, on-going product line to: (1) an Acquirer, in accordance with the Asset Purchase Agreement, dated February 5, 1999; or (2) within ninety (90) days of the date on which this order becomes final and at no minimum price, to an Acquirer that receives the prior approval of the Commission and only in a manner that receives the prior approval of the Commission. The purpose of the divestiture of the Avecor Pump Assets is to ensure their continued use in the research, design, development, manufacture, marketing and sale for use in cardiopulmonary bypass procedures and to remedy the lessening of competition resulting from the Proposed Acquisition as alleged in the Commission's complaint.
Respondent's agreement with the Acquirer (hereinafter "Divestiture Agreement") shall include the following provisions, and Respondent shall commit to satisfy the following:

1. Respondent shall Contract Manufacture and deliver to the Acquirer or the New Acquirer in a timely manner and under reasonable terms and conditions, a supply of the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs, specified in the Divestiture Agreement at Avecor's Cost or such other price specified in the Divestiture Agreement with the approval of the Commission for a period not to exceed one (1) year from the date of the Divestiture; provided, however, that the one (1) year period may be extended by the Acquirer or New Acquirer with respect to the Avecor Blood Pump Reservoirs for a period not to exceed one (1) year at prices that are 15% higher than those in effect during the first year of Contract Manufacture. In the event that the Acquirer does not choose to have all of the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs Contract Manufactured because the Acquirer does not require such supply in order to manufacture or sell the Avecor Blood Pump System in a competitive manner, Respondent shall not be required to Contract Manufacture those Avecor Blood Pump Systems and Avecor Blood Pump Reservoirs the Acquirer does not require.

2. After Respondent commences delivery of the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs to the Acquirer or the New Acquirer pursuant to the Divestiture Agreement and for the term of the Contract Manufacturing arrangement for the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs, referred to in Paragraph II.B. of this order, Respondent will produce the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs only for sale to the Acquirer or the New Acquirer; provided, however Respondent is in no way limited in its production of the reservoir holder or of hard shell reservoirs and venous reservoir bags with an outlet size other than 5/8 inch.

3. Respondent shall make representations and warranties that the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs supplied pursuant to the Divestiture Agreement meet the FDA approved specifications. Respondent shall agree to indemnify, defend and hold the Acquirer or the New Acquirer harmless from any and all suits, claims, actions, demands, liabilities, expenses or losses resulting from the failure of the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs supplied to the Acquirer or New Acquirer pursuant to the Divestiture Agreement by Respondent to meet FDA specifications. This obligation shall be contingent upon the Acquirer or the New Acquirer giving Respondent prompt, adequate notice of such claim, cooperating fully in the defense of such claim, and permitting Respondent to assume the sole control of all phases of the defense and/or settlement of such claim, including the selection of counsel; provided, however, any such defense and/or settlement shall be consistent with the obligations assumed by Respondent under this order. This obligation shall not require Respondent to be liable for any negligent act or omission of the Acquirer or the New Acquirer or for any representations and warranties, express or implied, made by the Acquirer or the New Acquirer that exceed the representations and warranties made by Respondent to the Acquirer or the New Acquirer.

4. Respondent shall make representations and warranties that Respondent will hold harmless and indemnify the Acquirer or New Acquirer for any liabilities or loss of profits resulting from the failure by Respondent to deliver the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs in a timely manner as required by the Divestiture Agreement unless Respondent can demonstrate that its failure was entirely beyond the control of Respondent and in no part the result of negligence or willful misconduct on Respondent's part.

5. During the term of the Contract Manufacturing between Respondent and the Acquirer or the New Acquirer, upon request by the Acquirer, New Acquirer or the Interim Trustee, Respondent shall make available to the Interim Trustee all records that relate to the manufacture of the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs.

6. Upon reasonable notice and request from the Acquirer or the New Acquirer to Respondent, Respondent shall use all commercially reasonable efforts to provide in a timely manner: (a) assistance and advice to enable the Acquirer or the New Acquirer (or the Designees of the Acquirer or New Acquirer) to obtain all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs; (b) assistance to the Acquirer or New Acquirer (or the Designee thereof) as is necessary to enable the Acquirer or New Acquirer (or the Designee thereof) to obtain the Commercial Capability to Manufacture the Avecor Blood Pump System and the Associated Reservoirs; and (c) consultation with knowledgeable employees of Respondent and training, at the request of and at the facility of the Acquirer's or the New Acquirer's choosing, until the Acquirer or New Acquirer (or the Designee thereof) receives certification from the FDA or abandons its efforts for certification from the FDA and until the Acquirer or the New Acquirer has the Commercial Capability to Manufacture the Avecor Blood Pump System and the Associated Reservoirs or abandons its efforts to obtain the Commercial Capability to Manufacture such products, reasonably sufficient to satisfy the management of the Acquirer or New Acquirer that its personnel (or the Designee's personnel) are adequately trained in the manufacture of the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs. Such assistance shall include on-site inspections of the Northland Plant (or inspections of whatever facility to which Respondent may have transferred the manufacture of the Avecor Blood Pump System or the Avecor Blood Pump Reservoirs), at the Acquirer's or New Acquirer's request, which is the specified source of supply of the Contract Manufacturing. Respondent may require reimbursement from the Acquirer or New Acquirer for all its Reimbursable Costs incurred in providing the services required by this Paragraph II.B.6.

7. The Divestiture Agreement shall require the Acquirer or the New Acquirer to submit to the Commission within 10 days of signing the Divestiture Agreement a certification attesting to the good faith intention of the Acquirer or the New Acquirer, including a plan by the Acquirer or the New Acquirer, to obtain in an expeditious manner all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and to obtain the Commercial Capability to Manufacture such products.

8. The Divestiture Agreement shall require the Acquirer or the New Acquirer to submit to the Commission and Interim Trustee periodic verified written reports, setting forth in detail the efforts of the Acquirer or the New Acquirer to sell the Avecor Blood Pump System and Avecor Blood Pump Reservoirs obtained pursuant to the Divestiture Agreement and to obtain all FDA approvals necessary to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and the efforts of the Acquirer or the New Acquirer to obtain the Commercial Capability to Manufacture such products. The Divestiture Agreement shall require the first such report to be submitted 60 days from the date the Divestiture Agreement is accepted for public comment by the Commission and every 60 days thereafter until all necessary FDA approvals are obtained by the Acquirer or the New Acquirer to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and until the Acquirer or the New Acquirer has obtained the Commercial Capability to Manufacture such products. The Divestiture Agreement shall also require the Acquirer or the New Acquirer to report to the Commission and the Interim Trustee within ten (10) days of its ceasing the sale in the United States of the Avecor Blood Pump System and the Avecor Blood Pump Reservoirs obtained pursuant to the Divestiture Agreement for any time period exceeding sixty (60) days or abandoning its efforts to obtain all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs or to obtain the Commercial Capability to Manufacture such products. The Acquirer or New Acquirer shall provide the Interim Trustee access to all records and all facilities that relate to its efforts, pursuant to the Divestiture Agreement, to sell or manufacture the Avecor Blood Pump System and the Associated Reservoirs or obtain FDA approvals.

9. The Divestiture Agreement shall provide that the Commission may terminate the Divestiture Agreement if the Acquirer or the New Acquirer: (a) voluntarily ceases for sixty (60) days or more the sale of, or otherwise fails to pursue good faith efforts to sell, the Avecor Blood Pump System in the United States prior to obtaining all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and to obtaining the Commercial Capability to Manufacture such products; (b) fails to pursue good faith efforts to obtain all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs in the United States; or (c) fails to obtain all necessary FDA approvals of its own to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and to obtain the Commercial Capability to Manufacture such products within one (1) year from the date the Commission approves the Divestiture Agreement between Respondent and the Acquirer or the New Acquirer; provided, however, that the one (1) year period may be extended by the Commission in three (3) month increments for a period not to exceed an additional one (1) year if it appears that such FDA approvals are likely to be obtained or the Acquirer or the New Acquirer is likely to obtain the Commercial Capability to Manufacture such products within such extended time period.

10. The Divestiture Agreement shall provide that if it is terminated, the Avecor Blood Pump Assets shall revert back to Medtronic and the Avecor Pump Assets shall be divested by the Divestiture Trustee to a New Acquirer pursuant to the provisions of Paragraph IV. of this order.

During the pendency of any patent dispute that: (1) challenges or seeks to render invalid any of the patents divested or licensed pursuant to Paragraph II.A.; and (2) could affect the manufacture or sale of the Avecor Blood Pump System and Associated Reservoirs, Respondent shall cooperate, at its own expense, in the defense of rights it has transferred to the Acquirer or New Acquirer.
By the time the Divestiture Agreement between Respondent and the Acquirer or New Acquirer of the Avecor Pump Assets is signed, Respondent shall provide the Acquirer or New Acquirer with a complete list of all employees who were then engaged (or were engaged at any time subsequent to July 12, 1998, the date of the Proposed Acquisition agreement) in the research, development, manufacture or marketing of the Avecor Blood Pump System or the Avecor Blood Pump Reservoirs and shall supplement that list on the date this order is accepted for public comment with the names of any additional employees who then meet these definitions. Such list(s) shall state each such individual's name, position, address, business telephone number, or if no business telephone number exists, a home telephone number, if available and with the consent of the employee, and a description of the duties and work performed by the individual in connection with the Avecor Pump Assets. Respondent shall provide the Acquirer or New Acquirer the opportunity to enter into employment contracts with such individuals provided that such contracts are contingent upon the Commission's approval of the Divestiture Agreement.
Within no more than five (5) business days after the Respondent and the Acquirer or New Acquirer have signed the Divestiture Agreement and subject to the consent of the employees, Respondent shall provide the Acquirer or New Acquirer with an opportunity to inspect the personnel files and other documentation relating to the individuals identified in Paragraph II.D. of this order to the extent possible under applicable laws. For a period of two (2) months following the divestiture, Respondent shall provide the Acquirer or New Acquirer with a further opportunity to interview such individuals and negotiate employment contracts with them.
Respondent shall provide all employees identified in Paragraph II.D. of this order with reasonable financial incentives to continue in their employment positions pending divestiture of the Avecor Pump Assets in order that such employees may be in a position to accept employment with the Acquirer or New Acquirer at the time of the divestiture. Such incentives shall include continuation of all employee benefits offered by Respondent until the date of the divestiture, and vesting of all pension benefits (as permitted by law) for each such employee who accepts an offer of employment from the Acquirer or New Acquirer within one hundred and eighty (180) days after the Divestiture Agreement is accepted for pubic comment by the Commission. In addition, Respondent shall not enforce any confidentiality or non-compete restrictions relating to the Avecor Pump Assets that apply to any employee identified in Paragraph II.D. who accepts employment with any Acquirer or New Acquirer, but Respondent may enforce all other rights thereunder relating to any other products or services.
For a period of one(1) year commencing on the date of the individual's employment by the Acquirer or New Acquirer, Respondent shall not solicit for employment any of the individuals identified in Paragraph II.D. of this order who accept employment with the Acquirer or New Acquirer, unless such individual has been separated from employment by the Acquirer or New Acquirer against that individual's wishes.
Prior to divestiture, Respondent shall not transfer, without consent of the Acquirer or New Acquirer, any of the individuals identified in Paragraph II.D. of this order to any other position.
Nothing in Paragraphs II.D. through II.H. shall apply with respect to Anthony Badolato, William Haworth and Al Seck.
While the obligations imposed by Paragraphs II., III. or IV. of this order are in effect, Respondent shall take such actions as are necessary: (1) to maintain all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Avecor Blood Pump Reservoir; (2) to maintain the viability and marketability of the Avecor Pump Assets consistent with general practices in the medical devices industry, as well as all tangible assets, including Respondent's facilities, used to manufacture and sell the Avecor Blood Pump System and the Avecor Blood Pump Reservoir; and (3) to prevent the destruction, removal, wasting, deterioration or impairment of the Avecor Pump Assets and the Northland Plant, except for ordinary wear and tear

III.

IT IS FURTHER ORDERED that:

A. At any time after Respondent signs the Agreement Containing Consent Order in this matter, the Commission may appoint an Interim Trustee to ensure that Respondent and the Acquirer or New Acquirer expeditiously perform their respective responsibilities as required by this order and the Divestiture Agreement approved by the Commission. Respondent shall consent to the following terms and conditions regarding the powers, duties, authorities, and responsibilities of the Interim Trustee appointed pursuant to this Paragraph III.:

1. The Commission shall select the Interim Trustee, subject to the consent of Respondent, which consent shall not be unreasonably withheld. If Respondent has not opposed, in writing, including the reasons for opposing, the selection of any proposed trustee within ten (10) days after notice by the staff of the Commission to Respondent of the identity of any proposed trustee, Respondent shall be deemed to have consented to the selection of the proposed trustee.

2. The Interim Trustee shall have the power and authority to monitor Respondent's compliance with the terms of this order and with the terms of the Divestiture Agreement with the Acquirer or New Acquirer.

3. Within ten (10) days after appointment of the Interim Trustee, Respondent shall execute a trust agreement (in the form attached) that, subject to the prior approval of the Commission, confers on the Interim Trustee all the rights and powers necessary to permit the Interim Trustee to monitor Respondent's compliance with the terms of this order and with the Divestiture Agreement with the Acquirer or New Acquirer, and to monitor the compliance of the Acquirer or New Acquirer under the Divestiture Agreement.

4. The Interim Trustee shall serve for two (2) years from the date the Respondent and the Acquirer have signed the Divestiture Agreement, or in the event that there is a New Acquirer pursuant to the provisions of Paragraph IV. of this order, the Interim Trustee shall serve for two (2) years from date the Respondent and the New Acquirer have signed the Divestiture Agreement; provided however, that the term shall end earlier if the Interim Trustee has reported that the Acquirer or New Acquirer has received all necessary FDA approvals and has obtained the Commercial Capability to Manufacture the Avecor Blood Pump System and the Associated Reservoirs and the Commission has accepted that report.

5. The Interim Trustee shall have full and complete access to Respondent's personnel, books, records, documents, facilities and technical information relating to the research, design, development, manufacture, importation, marketing, distribution and sale of the Avecor Blood Pump System and the Avecor Blood Pump Reservoir, or to any other relevant information, as the Interim Trustee may reasonably request, including, but not limited to, all documents and records kept in the normal course of business that relate to the manufacture of the Avecor Blood Pump System and the Avecor Blood Pump Reservoir. Respondent shall cooperate with any reasonable request of the Interim Trustee. Respondent shall take no action to interfere with or impede the Interim Trustee's ability to monitor Respondent's compliance with Paragraphs II., III. and IV. of this order and the Divestiture Agreement between Respondent and the Acquirer or New Acquirer.

6. The Interim Trustee shall serve, without bond or other security, at the expense of Respondent, on such reasonable and customary terms and conditions as the Commission may set. The Interim Trustee shall have authority to employ, at the expense of Respondent, such consultants, accountants, attorneys and other representatives and assistants as are reasonably necessary to carry out the Interim Trustee's duties and responsibilities. The Interim Trustee shall account for all expenses incurred, including fees for his or her services, subject to the approval of the Commission.

7. Respondent shall indemnify the Interim Trustee and hold the Interim Trustee harmless against any losses, claims, damages, liabilities or expenses arising out of, or in connection with, the performance of the Interim Trustee's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparations for, or defense of, any claim whether or not resulting in any liability, except to the extent that such liabilities, losses, damages, claims, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the Interim Trustee.

8. If the Commission determines that the Interim Trustee has ceased to act or failed to act diligently, the Commission may appoint a substitute trustee in the same manner as provided in Paragraph III.A.1. of this order.

9. The Commission may on its own initiative or at the request of the Interim Trustee issue such additional orders or directions as may be necessary or appropriate to assure compliance with the requirements of this order and the Divestiture Agreement with the Acquirer or New Acquirer.

10. The Interim Trustee shall evaluate reports submitted to it by the Acquirer or the New Acquirer with respect to the efforts of the Acquirer or the New Acquirer to obtain all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and to obtain the Commercial Capability to Manufacture such products. The Interim Trustee shall report in writing, concerning compliance by Respondent and the Acquirer or New Acquirer with the provisions of Paragraphs II. and III. to the Commission within ten (10) days from the date the Divestiture Agreement is approved and every sixty (60) days thereafter until the Acquirer or New Acquirer obtains, or abandons efforts to obtain, all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and to obtain the Commercial Capability to Manufacture such products. Such reports shall include at least the following:

a. whether Respondent has supplied The Avecor Blood Pump System and the Avecor Blood Pump Reservoir in conformity with the requirements of Paragraph II.B. of this order;

b. whether Respondent has given the Interim Trustee access to records pursuant to Paragraph II.B.5. of this order;

c. whether the Acquirer or New Acquirer has given the Interim Trustee reports and access pursuant to Paragraph II.B.8. of this order;

d. whether the Acquirer or New Acquirer is making good faith efforts to sell the Avecor Blood Pump System and the Associated Reservoirs, to obtain all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs, and to obtain the Commercial Capability to Manufacture such products and whether these actions meet the projections of the business plan of the Acquirer or New Acquirer as required by Paragraphs II.B.7. and II.B.8. of this order;

e. if six (6) months have elapsed from the date of approval of the Divestiture Agreement and the Acquirer or New Acquirer has not obtained all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System the Associated Reservoirs, and the Commercial Capability to Manufacture such products, whether such approvals and such Capability are likely to be obtained if the Commission extends the one (1) year period specified in Paragraph II.B.9. of this order; and

f. whether Respondent has maintained the Avecor Pump Assets as required in Paragraph II.J. of this order.

B. If the Commission terminates the Divestiture Agreement pursuant to Paragraph II.B.9. of this order, the Commission may direct the Divestiture Trustee to seek a New Acquirer, as provided for in Paragraph IV. of this order.

IV.

IT IS FURTHER ORDERED that:

A. If Respondent fails to divest absolutely and in good faith, and with the Commission's prior approval, the Avecor Pump Assets and to comply with the requirements of Paragraph II. of this order, or if the Acquirer abandons its efforts or fails to obtain all necessary regulatory approvals and the Commercial Capability to Manufacture the Avecor Blood Pump System and the Associated Reservoirs in the manner set out in Paragraph II.B.9., then any executed Divestiture Agreement between Respondent and the Acquirer shall be terminated and the Commission may appoint a Divestiture Trustee to divest the Avecor Pump Assets and execute a new Divestiture Agreement that satisfies the requirements of Paragraph II. of this order. The Divestiture Trustee may be the same person as the Interim Trustee and will have the authority and responsibility to divest the Avecor Pump Assets absolutely and in good faith, and with the Commission's prior approval. Neither the decision of the Commission to appoint the Divestiture Trustee, nor the decision of the Commission not to appoint the Divestiture Trustee, to divest any of the assets under this Paragraph IV.A. shall preclude the Commission or the Attorney General from seeking civil penalties or any other relief available to it, including a court-appointed trustee, pursuant to § 5(l) of the Federal Trade Commission Act, or any other statute enforced by the Commission, for any failure by the Respondent to comply with this order.

B. If a Divestiture Trustee is appointed by the Commission or a court pursuant to Paragraph IV.A. to divest the Avecor Pump Assets to a New Acquirer, Respondent shall consent to the following terms and conditions regarding the Divestiture Trustee's powers, duties, authority, and responsibilities:

1. The Commission shall select the Divestiture Trustee, subject to the consent of Respondent, which consent shall not be unreasonably withheld. If Respondent has not opposed, in writing, including the reasons for opposing, the selection of any proposed Divestiture Trustee within ten (10) days after notice by the staff of the Commission to Respondent of the identity of any proposed Divestiture Trustee, Respondent shall be deemed to have consented to the selection of the proposed Divestiture Trustee.

2. Subject to the prior approval of the Commission, the Divestiture Trustee shall have the exclusive power and authority to divest the Avecor Pump Assets to a New Acquirer pursuant to the terms of this order and to enter into a Divestiture Agreement with the New Acquirer pursuant to the terms of this order, which Divestiture Agreement shall be subject to the prior approval of the Commission.

3. Within ten (10) days after appointment of the Divestiture Trustee, Respondent shall execute a (or amend the existing) trust agreement that, subject to the prior approval of the Commission and, in the case of a court-appointed trustee, of the court, transfers to the Divestiture Trustee all rights and powers necessary to permit the Divestiture Trustee to divest the Avecor Pump Assets to a New Acquirer and to enter into a Divestiture Agreement with the New Acquirer.

4. The Divestiture Trustee shall have twelve (12) months from the date the Commission approves the trust agreement described in Paragraph IV.B.3. of this order to divest the Avecor Pump Assets and to enter into a Divestiture Agreement with the New Acquirer that satisfies the requirements of Paragraph II. of this order. If, however, at the end of the applicable twelve (12) month period, the Divestiture Trustee has submitted to the Commission a plan of divestiture or believes that divestiture can be achieved within a reasonable time, such divestiture period may be extended by the Commission, or, in the case of a court-appointed trustee, by the court; provided, however, the Commission may extend such divestiture period only two (2) times.

5. The Divestiture Trustee shall have full and complete access to the personnel, books, records and facilities of Respondent related to the manufacture, distribution, or sale of the Avecor Pump Assets or to any other relevant information, as the Divestiture Trustee may request. Respondent shall develop such financial or other information as the Divestiture Trustee may request and shall cooperate with the Divestiture Trustee. Respondent shall take no action to interfere with or impede the Divestiture Trustee's accomplishment of his or her responsibilities.

6. The Divestiture Trustee shall use reasonable efforts to negotiate the most favorable price and terms available in each contract that is submitted to the Commission, subject to Respondent's absolute and unconditional obligation to divest at no minimum price and the Divestiture Trustee's obligation to expeditiously accomplish the remedial purpose of the order; to assure that Respondent enters into a Divestiture Agreement that complies with the provisions of Paragraph II.B.; to assure that Respondent complies with the remaining provisions of Paragraph IV. of this order; and to assure that the New Acquirer obtains all necessary FDA approvals to manufacture and sell the Avecor Blood Pump System and the Associated Reservoirs and the Commercial Capability to Manufacture such products. The divestiture shall be made to, and the Divestiture Agreement executed with, the New Acquirer in the manner set forth in Paragraph II. of this order; provided, however, if the Divestiture Trustee receives bona fide offers from more than one acquiring entity, and if the Commission determines to approve more than one (1) such acquiring entity, the Divestiture Trustee shall divest to the acquiring entity selected by Respondent from among those approved by the Commission.

7. The Divestiture Trustee shall serve, without bond or other security, at the expense of Respondent, on such reasonable and customary terms and conditions as the Commission or a court may set. The Divestiture Trustee shall have the authority to employ, at the expense of Respondent, such consultants, accountants, attorneys, investment bankers, business brokers, appraisers, and other representatives and assistants as are necessary to carry out the Divestiture Trustee's duties and responsibilities. The Divestiture Trustee shall account for all monies derived from the divestiture and all expenses incurred. After approval by the Commission and, in the case of a court-appointed trustee, by the court, of the account of the trustee, including fees for his or her services, all remaining monies shall be paid at the direction of Respondent. The Divestiture Trustee's compensation shall be based at least in significant part on a commission arrangement contingent on the Divestiture Trustee's locating a New Acquirer and assuring compliance with this order.

8. Respondent shall indemnify the Divestiture Trustee and hold the Divestiture Trustee harmless against any losses, claims, damages, liabilities, or expenses arising out of, or in connection with, the performance of the Divestiture Trustee's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation for, or defense of, any claim, whether or not resulting in any liability, except to the extent that such liabilities, losses, damages, claims, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the Divestiture Trustee.

9. If the Commission determines that the Divestiture Trustee has ceased to act or failed to act diligently, the Commission may appoint a substitute trustee in the same manner as provided in Paragraph IV. of this order.

10. The Commission or, in the case of a court-appointed trustee, the court, may on its own initiative or at the request of the Divestiture Trustee issue such additional orders or directions as may be necessary or appropriate to comply with the terms of this order.

11. The Divestiture Trustee shall have no obligation or authority to operate or maintain the Avecor Pump Assets.

12. The Divestiture Trustee shall report in writing to Respondent and the Commission every two (2) months concerning his or her efforts to divest the relevant assets and Respondent's compliance with the terms of this order.

IT IS FURTHER ORDERED that:

A. Within sixty (60) days of the date this order becomes final and every ninety (90) days thereafter until Respondent has fully complied with the provisions of Paragraphs II. through IV. of this order, Respondent shall submit to the Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with these Paragraphs of this order; provided, however, that Respondent shall not be obligated to continue to submit such reports regarding its compliance with its obligations under Paragraphs II.C, II.F. (the last sentence only), II.G. and IV.B.8. of this order once Respondent has complied with the other provisions of Paragraphs II. through IV. Respondent shall include in its compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with these Paragraphs of this order, including a description of all substantive contacts or negotiations for accomplishing the divestitures and entering into the Divestiture Agreements required by this order, including the identity of all parties contacted. Respondent shall include in its compliance reports copies of all written communications to and from such parties, all internal memoranda, and all reports and recommendations concerning the Divestiture Agreements required by Paragraph II. of this order, subject to any legally recognized privilege.

B. One (1) year from the date this order becomes final and annually thereafter until Respondent has complied with all of the terms of this order, and at such other times as the Commission may require, Respondent shall file a verified written report with the Commission setting forth in detail the manner and form in which it has complied and is complying with this order.

VI.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this order, and subject to any legally recognized privilege, upon written request and on reasonable notice to Respondent, Respondent shall permit any duly authorized representatives of the Commission:

A. Access, during office hours and in the presence of counsel, to any facilities and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda and other records and documents in the possession or under the control of Respondent, relating to any matters contained in this consent order; and

B. Upon five (5) days' notice to Respondent, and without restraint or interference from Respondent, to interview officers or employees of Respondent, who may have counsel present, regarding such matters.

VII.

IT IS FURTHER ORDERED that Respondent shall notify the Commission at least thirty (30) days prior to any change in Respondent such as dissolution, assignment or sale resulting in the emergence of a successor, the creation or dissolution of subsidiaries or any other change that may affect compliance obligations arising out of the order.

VIII.

IT IS FURTHER ORDERED that this order shall terminate on June 3, 2009.

By the Commission.
Donald S. Clark
Secretary
SEAL:

ISSUED: June 3, 1999