<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 001-12229
DEPUY, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 35-1989795
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
700 ORTHOPAEDIC DRIVE, WARSAW, INDIANA 46581-0988
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (219) 267-8143
</TABLE>
Indicate by check [X] whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes--X No
______
The number of shares of Common Stock, par value $.01 per share,
outstanding as of August 13, 1997 was 98,580,000.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEPUY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1997 1996*
----------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 124,421 $209,387
Short-term investments 5,389 4,640
Accounts receivable, net of allowances of
$15,250 (1997) and $8,534 (1996) 152,927 126,465
Inventories at lower of cost or market 164,473 151,406
Deferred income taxes 46,446 29,366
Prepaid expenses and other current assets 31,761 25,455
---------- --------
Total current assets 525,417 546,719
---------- --------
NONCURRENT ASSETS
Goodwill, net of accumulated amortization of
$72,346 (1997) and $78,373 (1996) 339,974 238,233
Other intangible assets, net of accumulated amortization of
$2,777 (1997) and $698 (1996) 4,986 1,894
Deferred income taxes 24,000 18,348
Investment in affiliate 3,004 2,648
Other assets 9,087 10,934
---------- --------
381,051 272,057
Property, plant and equipment, net 101,652 89,601
---------- --------
Total assets $1,008,120 $908,377
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt payable to affiliates $ 19,013 $ 30,295
Short-term debt 28,170 31,413
Accounts payable 31,694 30,515
Accounts payable to affiliates, net 605 709
Income taxes payable 37,152 17,384
Accrued royalties 21,256 18,580
Accrued employee compensation 22,965 18,237
Other accrued expenses 52,144 30,468
---------- --------
Total current liabilities 212,999 177,601
---------- --------
NONCURRENT LIABILITIES
Long-term debt payable to affiliates 907 15,413
Long-term debt 9,639 4,754
Long-term employee benefits 19,112 17,141
Noncurrent deferred income tax liability 19,652 18,925
Other noncurrent liabilities 20,084 401
---------- --------
Total noncurrent liabilities 69,394 56,634
---------- --------
CONTINGENCIES (NOTE 7)
MINORITY INTEREST 5,362 3,514
---------- --------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 130,000,000 shares authorized,
shares outstanding of 98,580,000 986 986
Additional paid-in capital 674,671 675,144
Retained earnings 80,569 17,108
Net unrealized appreciation on securities 365 360
Minimum pension liability adjustment (236) (236)
Cumulative translation adjustment (35,990) (22,734)
---------- --------
Total shareholders' equity 720,365 670,628
---------- --------
Total liabilities and shareholders' equity $1,008,120 $908,377
========== ========
</TABLE>
*The balance sheet of December 31, 1996, has been derived from the audited
financial statements at that date.
See accompanying notes to these Consolidated Financial Statements.
<PAGE>
DEPUY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $204,744 $175,935 $392,586 $349,014
Cost of sales 67,439 53,098 123,440 106,516
-------- -------- -------- --------
Gross profit 137,305 122,837 269,146 242,498
-------- -------- -------- --------
Selling, general and administrative expenses 76,634 64,971 146,165 128,228
Research and development expenses 7,809 4,969 13,641 10,004
Goodwill amortization 4,412 3,537 7,591 6,592
Special items, net 7,551 - 8,459 -
-------- -------- -------- --------
Operating income 40,899 49,360 93,290 97,674
-------- -------- -------- --------
Interest expense, affiliate 236 1,303 684 2,473
Interest expense, other 1,346 420 2,090 976
Other income, net (835) (1,762) (3,157) (2,327)
-------- -------- -------- --------
Income before taxes, minority interest
and equity in earnings of unconsolidated
affiliate 40,152 49,399 93,673 96,552
-------- -------- -------- --------
Provisions for income taxes 7,617 21,179 29,928 41,359
Minority interest 595 552 968 822
Equity in earnings of unconsolidated affiliate 556 568 984 1,230
-------- -------- -------- --------
Net income $ 32,496 $ 28,236 $ 63,761 $ 55,601
======== ======== ======== ========
Net income per share (pro forma for 1996) $0.33 $0.32 $0.65 $0.62
======== ======== ======== ========
Weighted average number of shares outstanding
(pro forma for 1996) 98,580 90,000 98,580 90,000
======== ======== ======== ========
</TABLE>
See accompanying notes to these Consolidated Financial Statements
2
<PAGE>
DEPUY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 63,761 $ 55,601
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,891 13,865
Gain on sale of assets (32,122) -
Deferred income taxes (22,091) (2,325)
Other, net 1,233 760
Changes in operating assets and liabilities, net of
effects of acquisitions and dispositions:
Accounts receivable (5,136) (16,355)
Inventories 6,996 (12,821)
Amounts payable to or receivable from affiliates, net (1,159) 22,335
Prepaid expenses and other current assets 4,058 (10,202)
Other noncurrent assets 8,274 (886)
Accounts payable (5,395) (448)
Accrued employee compensation and other 12,157 5,875
Other current and noncurrent liabilities 14,501 1,665
Income taxes payable 14,720 7,438
--------- --------
Net cash provided by operating activities 76,688 64,502
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (12,331) (13,132)
Business acquisitions, net of cash acquired (144,417) (51,851)
Purchases of short-term investments (749) -
Proceeds from sale of assets 45,517 -
--------- --------
Net cash used for investing activities (111,980) (64,983)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of short-term debt (27,637) (13,519)
Proceeds from issuance of short-term debt 4,388 1,092
Payments of long-term debt (28,493) (18,996)
Proceeds from issuance of long-term debt 3,870 -
Advances from affiliate - 34,991
Dividends paid to affiliate (300) (3,770)
--------- --------
Net cash used for financing activities (48,172) (202)
--------- --------
Effect of exchange rate changes on cash (1,502) (1,483)
--------- --------
Decrease in cash and cash equivalents (84,966) (2,166)
Cash and cash equivalents at beginning of period 209,387 46,909
--------- --------
Cash and cash equivalents at end of period $ 124,421 $ 44,743
========= ========
</TABLE>
See accompanying notes to these Consolidated Financial Statements
3
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DEPUY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of DePuy,
Inc. (the "Company") have been prepared in accordance with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments necessary for a fair presentation of the results of operations for
the periods reported have been included. The results of operations for any
interim period are not necessarily indicative of the results to be expected for
the full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's 1996 Annual Report on
Form 10-K and the Company's Registration Statement on Form S-1 (Registration
Statement No. 333-09345) filed with the Securities and Exchange Commission.
Certain reclassifications have been made to prior periods to conform to the
classifications adopted in 1997.
NOTE 2 - ORGANIZATION / ACQUISITIONS
DePuy, Inc. (the "Company") was formed as the result of a worldwide
reorganization completed by its parent, Corange Limited ("Parent"), to realign
its worldwide orthopaedic operations into a stand-alone entity in order to sell
shares of the realigned entity to the public through an Initial Public Offering.
Prior to the public offering, various actions were taken to form the Company
including (i) the consolidation of the worldwide operations of DePuy under
Corange U.S. Holdings, Inc., an Indiana corporation ("CUSHI"), (ii) the transfer
of Boehringer Mannheim Corporation ("BMC") out of the CUSHI consolidated group,
and (iii) the merging of CUSHI downstream into DePuy, Inc., which was created on
July 26, 1996 for purposes of becoming the holding company for the DePuy
worldwide operations, with DePuy, Inc. as the surviving company in the merger,
the effect of which was to reincorporate CUSHI in Delaware under the name
"DePuy, Inc." None of these actions involved outside minority shareholders.
Accordingly, the consolidation of the entities was accounted for on a
predecessor basis.
Pursuant to a registration statement filed with the Securities and Exchange
Commission that became effective on October 30, 1996, the Company issued,
through an Initial Public Offering, 7,780,000 shares of its common stock at
$17.50 per share which generated net proceeds after expenses, discounts and
commissions of approximately $126,000. In November 1996, an additional 800,000
shares were sold pursuant to an underwriter's over allotment provision
generating net proceeds of approximately $13,000. The Company plans to use the
net proceeds from the sale of shares of its common stock primarily to finance
the expansion of the Company's business, provided suitable acquisitions can be
identified and negotiated.
The Company's primary business is the development, manufacture and sale of
orthopaedic joint implants (primarily hips, knees and shoulders), spinal
implants, related surgical instruments, trauma products and sports medicine soft
goods.
4
<PAGE>
DEPUY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On March 11, 1996, the Company acquired all of the outstanding shares of common
stock of Orthopedic Technology, Inc. ("DePuy OrthoTech"), a manufacturer of
orthopaedic products, primarily for the sports medicine market, for $46,300. At
March 31, 1996, $36,055 had been paid in cash with the remaining $10,245
recorded as an accrued liability. This liability was subsequently paid upon
tender of the outstanding shares. For the year ended September 30, 1995, DePuy
OrthoTech reported net sales of $18,400 and net income of $600 (unaudited). The
purchase method of accounting was applied to this acquisition and a total of
$41,551 was allocated to goodwill. The acquisition was funded by available
internal resources. The operating results of DePuy OrthoTech have been included
in the consolidated statements of income from the date of acquisition and are
not material to consolidated net sales or consolidated net income.
On April 2, 1997, the Company purchased 89.6% of the shares of Landanger-Camus
("Landanger") or 1,939,452 shares which were held by members of the Landanger
family and certain minority shareholders. The purchase was followed by a tender
offer whereby the Company offered to purchase the remaining 10.4% of the shares,
which were owned by the public. The total purchase price, including acquisition
costs, approximates $150,000 (translated at the February 28, 1997 exchange rate
of FF5.7/U.S.$). Landanger, headquartered in France, is a manufacturer of hip
implants and a distributor of orthopaedic devices and supplies. For the year
ended August 31, 1996, Landanger reported sales of $99,500 and net income of
$8,000 (unaudited and translated at the average exchange rate of 5.0 for the
fiscal year).
NOTE 3 - SPECIAL ITEMS
Effective March 28, 1997, the Company entered into an agreement to sell the
pharmaceutical business of DePuy International Limited. The pharmaceutical and
related businesses achieved 1996 sales of approximately $14,000, principally
from infection control and skin treatment products sold to hospitals in the
United Kingdom. The transaction was completed through a management buy-out and
resulted in a one-time, pre-tax gain of $8,000. In addition, the Company
recognized special charges totaling $8,900 during the first quarter of 1997,
primarily related to the cost of instrumentation sets in connection with
reorganizing various distribution channels to increase implant sales.
Effective May 29, 1997, the Company entered into an agreement to sell the
healthcare business of DePuy International Limited. The healthcare and related
businesses achieved 1996 sales of approximately $17,000 principally from
incontinence care products sold to hospitals in the United Kingdom. The
transaction resulted in a one-time gain of $26,900. In addition, the Company
recognized special charges totaling $34,500 during the second quarter of 1997,
consisting of a $17,400 charge to recognize minimum obligations to former
distributors, $7,900 provision for impairment in value of assets primarily
related to foreign operations, $5,200 provision for integration and
reorganization expenses within existing DePuy entities as a consequence of the
Landanger acquisition, and $4,000 provision for purchased research and
development.
5
<PAGE>
DEPUY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - CAPITALIZATION AND UNAUDITED PRO FORMA NET INCOME PER SHARE
Prior to the reorganization and Initial Public Offering described in Note 2, the
total equity of the Company was recorded as shareholder's net investment. As a
result of the reorganization and Initial Public Offering, which was effective
October 30, 1996, the Company recorded the par value of the 98,580,000 shares
outstanding as $986 of common stock. In addition, certain identifiable
components of equity including cumulative translation adjustment, net unrealized
appreciation on securities and minimum pension liability adjustment, were
capitalized separately as of the date of the offering. The remaining equity of
the Company totaling $675,144 was recorded as additional paid-in capital
resulting in the liquidation of the shareholder's net investment balance.
Retained earnings of $17,108 at December 31, 1996, represents the net income of
the Company subsequent to the effective date of the Initial Public Offering.
NOTE 5 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1997 1996
-------- ------------
<S> <C> <C>
Finished products $134,239 $122,035
Work in process 11,349 10,392
Raw materials 18,885 18,979
-------- --------
$164,473 $151,406
======== ========
</TABLE>
NOTE 6 - INCOME TAXES
The difference between the Company's effective and statutory tax rates is
primarily attributable to the tax-free gain realized on the sale of the stock of
the healthcare business during the second quarter of 1997 as described in Note 3
and to the lower tax rate applied to the gain realized on the sale of assets of
the pharmaceutical business during the first quarter of 1997. In addition, the
effective tax rate is impacted by state income taxes, nondeductible goodwill,
and the effect of international operations.
6
<PAGE>
NOTE 7 - CONTINGENCIES
The Company is subject to a number of investigations, lawsuits and claims during
the normal course of business. Management does not expect that resulting
liabilities beyond provisions already recorded will have a materially adverse
effect on the Company's consolidated financial position, results of operations
or cash flows. The loss provisions recorded have not been reduced for any
material amounts of anticipated insurance recoveries.
NOTE 8 - ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share". This Statement,
which must be adopted in 1997, specifies the computation, presentation and
disclosure requirements for earnings per share for entities with publicly held
common stock or potential common stock. The Company does not believe that the
adoption of this standard will have a material effect on its results of
operations.
7
<PAGE>
DEPUY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes the selected financial information expressed as a
percentage of net sales for each reporting period:
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
------------------------ ------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 32.9 30.2 31.4 30.5
------ ------ ------ ------
Gross profit 67.1 69.8 68.6 69.5
------ ------ ------ ------
Selling, general & administrative expense 37.4 36.9 37.2 36.7
Research and development 3.8 2.8 3.5 2.9
Goodwill amortization 2.2 2.0 1.9 1.9
Special items, net 3.7 - 2.2 -
------ ------ ------ ------
Operating income 20.0 28.1 23.8 28.0
------ ------ ------ ------
Interest expense 0.8 1.0 0.7 1.0
Other income (0.4) (1.0) (0.8) (0.7)
------- ------- ------- -------
Income before taxes, minority interest and
equity in earnings of unconsolidated affiliate 19.6 28.1 23.9 27.7
------- ------- ------- -------
Provisions for income taxes 3.7 12.1 7.6 11.9
Minority interest 0.3 0.3 0.3 0.2
Equity in earnings of unconsolidated affiliate 0.3 0.3 0.2 0.3
------- ------ ------- -------
Net income 15.9% 16.0% 16.2% 15.9%
======= ======= ======= =======
The following table summarizes sales by product line and geographical location:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- --------------------------------
1997 1996 1997 1996
------ ------ ------ ------
Reconstructive products $145.6 $119.8 $272.8 $242.2
Spinal implants 15.1 11.1 29.0 19.5
Trauma products 14.8 13.3 30.0 26.6
Sports medicine 12.4 12.8 24.7 21.8
Other products 16.8 18.9 36.1 38.9
------ ------ ------ ------
Total sales $204.7 $175.9 $392.6 $349.0
====== ====== ====== ======
U.S. sourced sales $107.9 $100.4 $217.2 $199.3
International sourced sales 96.8 75.5 175.4 149.7
------- ------ ------ ------
Total sales $204.7 $175.9 $392.6 $349.0
======= ====== ====== ======
Sales to customers located in the United States $ 99.9 $ 94.9 $200.8 $186.2
Sales to customers located outside the United States 104.8 81.0 191.8 162.8
------- ------ ------ ------
Total sales $204.7 $175.9 $392.6 $349.0
======= ======= ====== ======
</TABLE>
8
<PAGE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net sales were $392.6 million for the six months ended June 30, 1997,
representing an increase of $43.6 million, or 12% over the same period in the
prior year. Continued penetration of the spinal implant market caused total
sales to increase by 3%. The acquisitions of DePuy OrthoTech in March 1996 and
Landanger in April 1997 resulted in additional sales growth of 7%. The effects
of foreign exchange rates in 1997 compared with 1996 and the sale of the
pharmaceutical and healthcare businesses resulted in an unfavorable impact on
sales of 2% and 1%, respectively. The remaining 5% increase primarily related to
the growth in sales of joint reconstructive products.
The components of the worldwide sales improvement were as follows:
Acquisitions 7%
Volume and product mix 7%
Net pricing changes 1%
Effect of foreign exchange rates -2%
Divestitures -1%
U.S. sourced sales to unaffiliated customers rose $17.9 million, or
approximately 9%. This growth was primarily attributable to the acquisition of
DePuy OrthoTech in March 1996 and to increased sales of spinal and joint
reconstructive implants.
International sourced sales to unaffiliated customers rose $25.7 million, or
17%. This increase in sales was primarily attributable to the acquisition of
Landanger in April 1997 resulting in international sales growth of 13%. The
continued expansion in the European and Asia/Pacific regions also caused sales
to grow by 5% and 4%, respectively, during the six months ended June 30, 1997,
exclusive of the effects of foreign exchange. The negative effect of foreign
exchange rates caused the increase in international sales to be 5% less than it
otherwise would have been during such six-month period.
The Company's gross profit for the six months ended June 30, 1997 was $269.1
million, or 68.6% of sales, as compared to 69.5% of sales for the prior six-
month period. During the second quarter of the year, certain one-time inventory
adjustments related to discontinued, obsolete and excess products were recorded
resulting in a 1.5% decrease in gross margin. This decrease was partially
offset by various manufacturing efficiencies obtained through cost controls.
Selling, general and administrative expense totaled $146.2 million for the first
six months of 1997, or 37.2% of sales, as compared to 36.7% in the first six
months of the prior year. The primary reasons for this increase as a percent of
sales were the high general and administrative expenses attributable to the
Landanger acquisition and to additional costs incurred for the expansion of the
Company's business in the spinal and international markets.
Research and development expense increased to $13.6 million, or 3.5% of sales
during the first six months of 1997 as compared to 2.9% reported in the same
period in 1996. This increase was largely due to the acquisition of Landanger.
The Company continues to make investments in technological advancements in order
to remain competitive in the orthopaedic market and to provide its customers
with the latest technology available.
9
<PAGE>
Goodwill amortization totaled $7.6 million for the first six months of the year,
representing a $1.0 million increase compared to the same period in the prior
year. This increase primarily related to the recording of additional goodwill
related to the acquisitions of DePuy OrthoTech in March 1996 and Landanger in
April 1997.
Special items, net reported during the first six months of 1997 includes an $8.0
million gain on the sale of the pharmaceutical business of DePuy International
Limited, effective March 28, 1997, and a $26.9 million gain on the sale of the
healthcare business of DePuy International Limited, effective May 29, 1997,
described in Note 3 to the financial statements. These gains were partially
offset by special charges totaling $43.4 million including:
. $8.9 million of costs incurred to reorganize the distribution channels
of the Company,
. a $17.4 million charge to recognize minimum obligations to former
distributors,
. a $7.9 million provision for impairment in value of assets primarily
related to foreign operations,
. a $5.2 million provision for integration and reorganization expenses
within existing DePuy entities as a consequence of the Landanger
acquisition, and
. a $4.0 million provision for purchased research and development, as
described in Note 3 to the financial statements.
Interest expense was $2.8 million through June 30, 1997, representing a $.7
million decrease over the same period in the prior year, primarily due to lower
average debt balances and slightly lower interest rates.
Other income, net totaled $3.2 million for the first six months of the year as
compared to $2.3 million reported in the prior year, representing an increase of
$.9 million. This increase mainly resulted from higher interest income,
partially offset by foreign currency losses.
The effective income tax rate for the period was 31.9% as compared to 42.8%
reported in the same period of the prior year. The 10.9% decrease in the rate
was primarily the result of the tax-free gain realized on the sale of the
healthcare business and a lower tax rate applied to the gain realized on the
sale of the pharmaceutical business.
Net income for the six months ended June 30, 1997 was $63.8 million, or 16.2% of
sales, representing a 15% increase over the same period in the prior year. This
increase was attributable to a 10% increase in operating profit, excluding
special items and one-time inventory adjustments and to a lower effective income
tax rate.
Quarter Ended June 30, 1997 Compared to Quarter Ended June 30, 1996
Net sales were $204.7 million for the quarter ended June 30, 1997, representing
an increase of $28.8 million, or 16% over the same period in the prior year.
Continued penetration of the spinal implant market caused total sales to
increase by 2%. The acquisition of Landanger in April 1997 resulted in
additional sales growth of 11%. The effects of foreign exchange rates in the
second quarter of 1997 compared with the same quarter in 1996 resulted in an
unfavorable sales impact of 3%. The remaining 6% increase related primarily to
the growth in sales of joint reconstructive products.
10
<PAGE>
The components of the worldwide sales improvement were as follows:
Acquisitions 11%
Volume and product mix 8%
Net pricing changes 2%
Effect of foreign exchange rates - 3%
Divestiture - 2%
U.S. sourced sales to unaffiliated customers rose $7.5 million, or approximately
7%. This growth was primarily attributable to increased sales of spinal and
joint reconstructive implants.
International sourced sales to unaffiliated customers rose $21.3 million, or
28%. The majority of this increase resulted from sales growth related to the
acquisition of Landanger of 26%. In addition, continued expansion in the
European and Asia/Pacific regions caused sales to grow by 4% and 5%,
respectively, during the three months ended June 30, 1997, exclusive of the
effects of foreign exchange. The effect of foreign exchange rates resulted in
an unfavorable impact on international sourced sales of 7% for the quarter.
The Company's gross profit for the three months ended June 30, 1997 was $137.3
million, or 67.1% of sales, as compared to 69.8% of sales for the same quarter
in the prior year. The decrease in gross margin as a percent of sales resulted
from one-time inventory adjustments related to discontinued, obsolete and excess
products resulting in a 2.8% decrease in margin.
Selling, general and administrative expense totaled $76.6 million for the second
quarter of 1997, or 37.4% of sales, as compared to 36.9% in the same period of
the prior year. The primary reason for this increase as a percent of sales was
the higher general and administrative expenses attributable to the Landanger
acquisition and the cost for the expansion of the Company's business in the
spinal and international markets.
Research and development expense increased to $7.8 million or 3.8% of sales
during the second quarter of 1997 as compared to $5.0 million, or 2.8% of sales
during the same period in 1996 as a result of higher expenses related to the
Landanger acquisition and to the timing of expenditures. The Company continues
to make investments in technological advancements in order to remain competitive
in the orthopaedic market and to provide its customers with the latest
technology available.
Goodwill amortization totaled $4.4 million for the three months ended June 30,
1997, compared to $3.5 million in the prior year. The $.9 million increase
related to the recording of additional goodwill for the Landanger acquisition.
Special items, net reported during the second quarter of 1997 includes a $26.9
million gain on the sale of the healthcare business of DePuy International
Limited, effective May 29, 1997, described in Note 3 to the financial
statements. This gain was partially offset by special charges totaling $34.5
million primarily resulting from:
. a $17.4 million charge to recognize minimum obligations to former
distributors,
. a $7.9 million provision for impairment in value of assets primarily
related to foreign operations,
11
<PAGE>
. a $5.2 million provision for integration and reorganization expenses
within existing DePuy entities as a consequence of the Landanger
acquisition, and
. a $4.0 million provision for purchased research and development.
Interest expense was $1.6 million for the quarter, representing a $.1 million
decrease from the prior year.
Other income, net totaled $.8 million for the second quarter of the year as
compared to $1.8 million reported in the prior year, representing a decrease of
$1.0 million. This decrease mainly resulted from increased foreign currency
losses, partially offset by higher interest income.
The effective income tax rate for the period was 19.0% compared to 42.9%
reported in the same period of the prior year. The 23.9% decrease was primarily
the result of the tax-free gain realized on the sale of the healthcare business.
Excluding the special items, the effective income tax rate for the period was
42.5%, slightly lower than the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the reorganization described in Note 2 to the financial statements, the
Company's cash flow in the United States was pooled with that of Corange's other
U.S. operations. Effective with the Company becoming a public company, all cash
generated is now maintained in its own accounts and is available for use by the
Company. In addition to the net proceeds received from the Initial Public
Offering effective October 30, 1996, cash generated from operations is the
principal source of funding available and provides adequate liquidity to meet
the Company's operational needs. Cash and cash equivalents totaled $124.4
million at June 30, 1997, compared with $209.4 million at December 31, 1996. The
decrease is primarily due to the Company temporarily financing the Landanger
acquisition with existing cash.
Working capital at June 30, 1997, was $312.4 million, representing a $56.7
million decrease from December 31, 1996. The annualized inventory turnover ratio
for the six months ended June 30, 1997 and June 30, 1996 was 1.7. The annualized
accounts receivable turnover rate was 5.9 for the first two quarters of 1997,
increasing slightly from 5.6 in the same period in 1996.
Operating activities generated $76.7 million of cash in the first six months of
1997 as compared to $64.5 million in the same period in the prior year. Cash
flows resulted from the timing of tax payments and changes in working capital,
partially offset by receipt of payment during the first six months of 1996 of an
affiliate receivable outstanding at December 31, 1995. In addition, the special
items discussed in Note 3 affected several line items, such as other current and
noncurrent liabilities and gain on sale of assets.
Cash flows used for investing activities totaled $112.0 million through the
second quarter of 1997 including $144.4 million paid in consideration for the
acquisition of Landanger (net of cash received), capital expenditures of $12.3
million and purchases of short-term investments of $.8 million, partially offset
by proceeds received from the sale of the pharmaceutical and healthcare
businesses of DePuy International of $45.5 million. In the first six months of
1996, cash flows used for investing activities of $65.0 million included $45.9
million consideration paid for the acquisition of DePuy OrthoTech in March, 1996
(net of cash received), $6.0 million of deferred payments made in 1996 related
to the acquisitions of ACE Medical Company in March 1994 and of CMW Laboratories
in November 1994, and $13.1 million for capital expenditures.
Cash flows used for financing activities were $48.2 million in 1997 and included
a net decrease in debt of $47.9 million and dividends of $.3 million. During the
first six months of 1996, cash flows used for financing activities totaled $.2
million resulting from a net decrease in debt of $31.4 million and dividends of
$3.8 million paid to another affiliate, partially
12
<PAGE>
offset by $35.0 million of advances received from an affiliate as part of the
centralized cash management system described above (funds used for the DePuy
OrthoTech acquisition).
The Company anticipates that it will pay dividends annually, provided that funds
are legally available therefore and subject to the discretion of the Board of
Directors. Capital expenditures are expected to be approximately $27 million in
1997, primarily consisting of purchases of machinery and equipment. In addition
to these funding requirements, the Company expects to continue to evaluate
potential acquisitions to expand its business.
The Company has historically been able to fund its capital and operating needs
through its cash flow from operations and expects to be able to continue to do
so in the future. The Company believes that with its current cash position and
its ability to obtain additional cash, either through the issuance of additional
shares of common stock or utilization of credit lines, it has the ability to
fund its acquisition strategy.
FACTORS AFFECTING FUTURE PERFORMANCE
The orthopaedic industry is experiencing a period of significant transition as a
result of health care reform. While cost containment issues have existed for
several years outside of the United States, these are relatively recent
phenomena in the U.S. orthopaedic market. Trends in the U.S. market, which have
had an impact on the Company, include the increased movement toward the
provision of health care through managed care and significant emphasis on cost
control.
The advent of managed care in the orthopaedic products industry has meant
greater attention to tradeoffs of patient need and product cost, so-called
demand matching, where patients are evaluated as to their age, need for
mobility, and other parameters, and are then matched with a replacement product
that is cost effective in light of such evaluation. From about the middle of
1995 onward, this has led to an increase in unit sales of lower-priced, cemented
products, which now constitutes an increasing share of the Company's overall
unit sales. In addition, price discounting has become more prevalent in the
industry resulting in reduced margins for products sold to buying groups under
preferred supplier arrangements.
The shift in product mix and trends toward industry discounting have had an
impact on the Company's sales with respect to hip replacement systems and, to a
lesser extent, knee replacement systems. Although it is uncertain how these
issues will affect future performance, the Company experienced a reduction in
the rate at which prices were declining during the last year and a reduction in
the shift to lower-priced cemented products.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Not Applicable
ITEM 2 - CHANGES IN SECURITIES
Not Applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 1, 1997, the Company held its annual meeting of stockholders, at
which meeting the stockholders elected Messrs. Richard A. Gilleland and
M.L. Lowenkron as directors for three years terms. The votes were
91,041,561 shares for, 0 shares against and 6,440 shares abstaining.
Messrs. Richard C. Bolesky, Gerald C. Hanes, Robert Volz, James A. Lent and
Anthony Williams continued as directors of the Company.
In addition to the election of directors, the stockholders took the
following actions:
(1) approved the Company's 1996 Equity Incentive Plan with a vote of
86,854,910 shares in favor, 2,875,775 shares opposed, with 19,162 shares
abstaining and 1,298,154 shares broker non-votes;
(2) approved the Company's Employee Stock Option/Purchase Plan with a vote
of 89,044,381 shares in favor, 691,751 shares opposed, with 13,715 shares
abstaining and 1,298,154 shares broker non-votes;
(3) approved the Company's Senior Executive Incentive Compensation Plan and
the performance goals set forth therein under which incentive compensation is to
be paid to executive officers of the Company pursuant to the Plan with a vote of
90,893,724 shares in favor, 132,112 shares opposed, with 22,165 shares
abstaining and 0 broker non-votes; and
(4) confirmed the appointment of Price Waterhouse LLP as auditor for the
Company for the year ended December 31, 1997 with a vote of 91,037,259 shares in
favor, 6,205 shares opposed, with 4,537 shares abstaining and 0 broker
non-votes.
ITEM 5 - OTHER INFORMATION
Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Share Purchase Agreement dated February 28, 1997 between DePuy,
Inc. and Patrick Landanger, Maryvonne Guibert, Michel Colombier,
Renee Landanger, Louis Landanger, Martine Bonnaventure and Guy
Bonnaventure (English Translation)*
2.2 Indemnification Agreement dated April 1, 1997 between DePuy
Orthopedie S.A. and Patrick Landanger, Eric Landanger, Maryvonne
Guibert (English Translation)*
14
<PAGE>
2.3 Partial Trademark Assignment and Trademark Coexistence Agreement
dated April 1, 1997 between Landanger-Camus, and Landanger
S.A.R.L. and Patrick Landanger, Eric Landanger, Maryvonne
Guibert, Renee Landanger and Louis Landanger (English
Translation)*
* Does not include certain schedules and similar attachments. A list
briefly identifying the contents of all omitted schedules has been provided
in the relevant Exhibit. The Company will furnish supplementally to the
Securities and Exchange Commission upon request a copy of any omitted
schedule.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the three-month period ended June 30, 1997, the Company filed a Form
8-K, dated April 4, 1997, reporting under "Item 5. Other Events" the
Company's press release of April 2, 1997 relating to the Company's
acquisition of Landanger-Camus.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1997 DEPUY, INC.
By: /s/ Steven L. Artusi
-----------------------------------------
Steven L. Artusi
Senior Vice President,
General Counsel and Secretary
Date: August 14, 1997 By: /s/ Thomas J. Oberhausen
-------------------------------------------
Thomas J. Oberhausen
Senior Vice President and
Chief Financial and
Accounting Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ------------- ----------------------------------------- --------
<S> <C> <C>
2.1 Share Purchase Agreement dated February
28, 1997 between DePuy, Inc. and Patrick
Landanger, Maryvonne Guibert, Michel
Colombier, Renee Landanger, Louis
Landanger, Martine Bonnaventure and Guy
Bonnaventure (English Translation)*
2.2 Indemnification Agreement dated April 1,
1997 between DePuy Orthopedie S.A. and
Patrick Landanger, Eric Landanger,
Maryvonne Guibert (English Translation)*
2.3 Partial Trademark Assignment and
Trademark Coexistence Agreement dated
April 1, 1997 between Landanger-Camus,
and Landanger S.A.R.L. and Patrick
Landanger, Eric Landanger, Maryvonne
Guibert, Renee Landanger and Louis
Landanger (English Translation)*
27.1 Financial Data Schedule
</TABLE>
* Does not include certain schedules and similar attachments. A list briefly
identifying the contents of all omitted schedules has been provided in the
relevant Exhibit. The Company will furnish supplementally to the Securities and
Exchange Commission upon request a copy of any omitted schedule.
<PAGE>
On behalf of the Registrant, the undersigned hereby certifies that the
following exhibit provides a fair and accurate English translation of the
material contained in the original, the official language of which is French.
DEPUY, INC.
By: /s/ Steven L. Artusi
---------------------
Steven L. Artusi
Senior Vice President, General Counsel
and Secretary
By: /s/ Thomas J. Oberhausen
------------------------
Thomas J. Oberhausen
Senior Vice President and Chief
Financial and Accounting Officer
<PAGE>
EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
DATED 28 FEBRUARY 1997
BETWEEN
DEPUY, INC.
AND
PATRICK LANDANGER
ERIC LANDANGER
MARYVONNE GUIBERT
MICHEL COLOMBIER
RENEE LANDANGER
LOUIS LANDANGER
MARTINE BONNAVENTURE
GUY BONNAVENTURE
COUDERT FRERES
52, AVENUE DES CHAMPS-ELYSEES
75008 PARIS
FRANCE
<PAGE>
SHARE PURCHASE AGREEMENT
BETWEEN :
- - DePuy, Inc., a corporation incorporated and existing under the laws of
Delaware, United States of America, having its principal office at 700
Orthopaedic Drive, Warsaw, IN 46581-0988, United States of America,
represented by James Lent, duly authorized for the purposes hereof,
(hereinafter referred to as the "Purchaser"),
ON THE ONE HAND,
AND :
- - Mr. Patrick Landanger, a French citizen domiciled at 85, quai d'Orsay,
75007 Paris, France;
- - Mr. Eric Landanger, a French citizen domiciled at 15, rue des Acacias,
52000 Jonchery, France; and
- - Ms. Maryvonne Guibert, a French citizen domiciled at 9, boulevard Gambetta,
52000 Chaumont, France;
(hereinafter referred to individually as a "Majority Shareholder" and
collectively as the "Majority Shareholders"), and
- - Mr. Michel Colombier, a French citizen domiciled at 512, chemin
Viralamande, 69140 Rillieux La Pape, France;
- - Mrs. Renee Landanger, a French citizen domiciled at 10, rue de Dijon, 52000
Chaumont, France;
- - Mr. Louis Landanger, a French citizen domiciled at 10, rue de Dijon, 52000
Chaumont, France;
- - Mrs. Martine Bonnaventure, a French citizen domiciled at 260, avenue du
Stade, 45770 Saran, France; and
- - Mr. Guy Bonnaventure, a French citizen domiciled at 260, avenue du Stade,
45770 Saran, France
(hereinafter referred to individually as a "Minority Shareholder", and
collectively as the "Minority Shareholders"),
(the Majority Shareholders and the Minority Shareholders being hereinafter
referred to individually as a "Seller", and collectively as the "Sellers"),
ON THE OTHER HAND,
(hereinafter referred to individually as a "Party", and collectively as the
"Parties").
<PAGE>
2
WITNESSETH
WHEREAS, the Majority Shareholders own two hundred and nine thousand six hundred
and sixty-seven (209,667) shares representing one hundred percent (100%) of the
shares and voting rights in 3L, a societe anonyme with a capital of 209,667,000
French Francs divided into 209,667 shares with a par value of 1,000 French
Francs each, having its registered office at Z.I. "La Vendue", rue du Val, 52000
Chaumont, France, and registered with the Registry of Commerce and Companies of
Chaumont under number B 393 985 411 (hereinafter referred to as "3L");
WHEREAS, the Sellers own eight hundred and five thousand nine hundred and
twenty-four (805,924) shares representing thirty-seven point two five percent
(37.25%) of the shares and voting rights in Landanger-Camus, a societe anonyme
with a capital of 21,636,700 French Francs divided into 2,163,670 shares with a
par value of 10 French Francs each, having its registered office at Z.I. "La
Vendue", rue du Val, 52000 Chaumont, France, and registered with the Registry of
Commerce and Companies of Chaumont under number B 347 558 371 (hereinafter
referred to as "Landanger-Camus");
WHEREAS, 3L owns one million one hundred and thirty-three thousand five hundred
and twenty-nine (1,133,529) shares representing fifty-two point thirty-nine
percent (52.39%) of the shares and voting rights in Landanger-Camus;
WHEREAS, the Sellers and 3L together own one million nine hundred and thirty-
nine thousand four hundred and fifty-three (1,939,453) shares representing
ninety percent (90%) of the shares and voting rights in Landanger-Camus;
WHEREAS, nine point three six percent (9.36%) of the Landanger-Camus shares are
publicly traded on the Second Market (Second Marche) of the Paris Stock
Exchange;
WHEREAS, the Sellers wish to sell their direct and indirect controlling stake in
Landanger-Camus via the sale of all of the shares and voting rights they hold in
3L and the shares and voting rights they hold in Landanger-Camus; and
WHEREAS, the Purchaser wishes to purchase all of the shares and voting rights in
3L and all of the shares and voting rights held by the Sellers in Landanger-
Camus;
NOW, THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, the Purchaser and the Sellers hereby agree as
follows :
<PAGE>
3
SECTION 1
DEFINITIONS
The following terms will have the meanings as set forth in the following
Sections:
<TABLE>
<CAPTION>
<S> <C> <C>
- - "Additional Price" Section 2.2.4
- - "Closing" Section 3.1
- - "Closing Date" Section 3.1
- - "Determination Date" Section 2.2.2(d)
- - "Escrow Agreement" Section 2.2.2(a)
- - "Group" Section 2.1.1
- - "Indemnification Agreement" Section 5.1.1
- - "Landanger-Camus" Recitals
- - "Landanger-Camus Group" Section 2.2.2
- - "Landanger-Camus Shares" Section 2.1.1
- - "Majority Shareholder / Majority Shareholders" Page 1
- - "Majority Shareholders' Group" Section 7.1
- - "Minority Shareholder / Minority Shareholders" Page 1
- - "Notional Price" Section 2.2.2(b)
- - "Party" / "Parties" Page 1
- - "Purchaser" Page 1
- - "Purchaser's Group" Section 2.1.1
- - "Seller" / "Sellers" Page 1
- - "Shares" Section 2.1.2
- - "Subsidiaries" Section 3.2(e)
- - "TIPS" Section 2.2.4
- - "3L" Recitals
- - "3L Shares" Section 2.1.1
- - "X%" Section 2.2
</TABLE>
SECTION 2
PURCHASE AND SALE OF SHARES
SECTION 2.1 - PURCHASE AND SALE OF SHARES
- -----------------------------------------
2.1.1 Subject to satisfaction of the conditions precedent set forth in Section
4 below and in accordance with the terms hereof:
(i) the Majority Shareholders will sell to the Purchaser, or to any
company belonging to the Group (as such term is defined in the last
paragraph of this Section 2.1.1) of the Purchaser (hereinafter
referred to as the "Purchaser's Group"), on the Closing Date (as
such term is defined in Section 3.1 below), two hundred and nine
thousand six hundred and sixty-seven (209,667) shares representing
one hundred percent (100%) of the shares and voting rights in 3L
(hereinafter referred to as the "3L Shares"); and
(ii) the Sellers will sell to the Purchaser, or to any company belonging
to the Purchaser's Group, on the Closing Date, eight hundred and
five thousand nine hundred and twenty-four (805,924) shares
representing all of the shares
<PAGE>
4
and voting rights held by the Sellers in Landanger-Camus
(hereinafter referred to as the "Landanger-Camus Shares").
For purposes hereof, a "Group" is composed of all companies and entities
which are directly or indirectly controlled by the Purchaser, or which
directly or indirectly control the Purchaser, or which are under the
direct or indirect control of the same ultimate company or entity as the
Purchaser.
2.1.2 Subject to satisfaction of the conditions precedent set forth in Section
4 below and in accordance with the terms hereof, the Purchaser will
purchase, or will cause any company belonging to the Purchaser's Group to
purchase, from the Majority Shareholders and the Sellers on the Closing
Date :
(i) the 3L Shares; and
(ii) the Landanger-Camus Shares.
The 3L Shares and the Landanger-Camus Shares are collectively referred to herein
as the "Shares".
SECTION 2.2 - PURCHASE PRICE
- ----------------------------
The price to be paid by the Purchaser to the Sellers for the Shares will be
determined as follows.
For purposes of the calculations contained in this Section, the percentage of
the total number of shares and voting rights in Landanger-Camus held by 3L and
the Sellers as of the Closing Date is hereinafter referred to as "X%".
2.2.1 The value of 100% of the shares and voting rights in Landanger-Camus has
been fixed at seven hundred and seventy-seven (777) million French
Francs.
2.2.2 By no later than thirty (30) days following signature of this Share
Purchase Agreement, the Sellers will provide the Purchaser with the
unaudited consolidated balance sheet (bilan) of the companies listed in
Exhibit 2.2.2(a) hereto (the "Landanger-Camus Group") as of 28 February
1997, drawn up in accordance with the same consistently applied
accounting principles, policies and methods as those used for the
financial statements as of 31 August 1996 (copies of such financial
statements as of 31 August 1996, including the consolidated balance
sheet, being attached hereto as Exhibit 2.2.2).
(a) Any negative difference - net of any tax deduction arising from the
items generating such difference, provided that such tax deduction
has not yet been recorded - in the consolidated net asset value of
the Landanger-Camus Group (such as same is defined in Exhibit
2.2.2(c) hereto) as of 28 February 1997 pursuant to the unaudited
consolidated balance sheet of the Landanger-Camus Group, as compared
to 31 August 1996, will be deducted from the 777 million French Franc
amount described in Section 2.2.1 above and shall be transferred to
an escrow account to be opened by the Closing Date.
The terms and conditions of functioning of this escrow account are as
set forth in Exhibit 2.2.2(b) hereto, and will be reiterated in a
contract
<PAGE>
5
(hereinafter referred to as the "Escrow Agreement") to be executed at
the latest on the Closing Date. It will in particular be provided in
the Escrow Agreement that the costs of such escrow account will be
borne in equal parts among the Sellers on the one hand, and the
Purchaser on the other hand.
The amount resulting from the difference between 777 million French
Francs and the above negative difference, if any, will constitute the
notional price for 100% of the shares and voting rights in Landanger-
Camus (hereinafter referred to as the "Notional Price"). It is hereby
agreed that (i) the loss, if any, resulting from the transfer of the
Surgical Instruments Activity contemplated in Section 4.4 below will
not be taken into account for purposes of calculating such difference;
and (ii) that the dividend declared out of the profits achieved by
Landanger-Camus as of 31 August 1996 will be taken into account for
such purpose.
(b) By no later than thirty (30) days following receipt of the unaudited
consolidated balance sheet of the Landanger-Camus Group from the
Sellers, the Purchaser shall deliver to the Sellers the unaudited
consolidated balance sheet of the Landanger-Camus Group as of 28
February 1997, audited by the accountants appointed by the Purchaser,
the Purchaser to bear the cost of such audit.
(c) Within fifteen (15) days following receipt of the consolidated balance
sheet of the Landanger-Camus Group as of 28 February 1997, as audited
by the Purchaser's accountants, the Sellers shall notify in writing
either (i) their acceptance of the calculation made by the Purchaser's
accountants, or (ii) that they dispute such calculation. If they
dispute one or several items contained therein, then the Paris Office
of Ernst & Young shall be retained by the Purchaser and the Sellers to
conduct an additional review of the consolidated balance sheet of the
Landanger-Camus Group as of 28 February 1997.
No later than fifteen (15) days after the engagement of Ernst & Young
(as evidenced by its written acceptance), the Purchaser and the
Sellers shall submit briefs to Ernst & Young setting forth their
respective positions regarding the items in dispute, should they deem
it necessary.
Ernst & Young shall render its decision resolving the items in dispute
and determining the consolidated net asset value within thirty (30)
days after its engagement. The Purchaser and the Sellers shall be
bound by such determination which shall be final.
The fees and expenses of Ernst & Young shall be shared equally by the
Purchaser and the Sellers.
(d) The sums escrowed shall be released within fifteen (15) days from
either (i) the final determination by Ernst & Young referred to in
Section 2.2.2(c) above, or (ii) the Sellers' notification of their
acceptance of the calculation by the accountants appointed by the
Purchaser as referred to in Section 2.2.2(c) above, in accordance
with the following rules:
- Should either (i) accountants named by the Purchaser (in the event
the Sellers accept their calculation), or (ii) Ernst & Young (in
the
<PAGE>
6
contrary event) confirm a negative difference in the consolidated
net asset value of the Landanger-Camus Group up to the amount
determined pursuant to the unaudited consolidated balance sheet of
the Landanger-Camus Group, the amount of such negative difference
shall be returned to the Purchaser, the balance of the sums
escrowed being paid to the Sellers.
- Should either (i) the accountants named by the Purchaser (in the
event the Sellers accept their calculation), or (ii) Ernst & Young
(in the contrary event) rebut the existence of a negative
difference in the consolidated net asset value of the Landanger-
Camus Group , the whole amount of the sums escrowed shall be paid
to the Sellers.
- Should either (i) the accountants named by the Purchaser (in the
event the Sellers accept their calculation), or (ii) Ernst &
Young (in the contrary event) find the existence of a negative
difference with the consolidated net asset value of the
Landanger-Camus Group in excess of that determined pursuant to
the unaudited consolidated balance sheet of the Landanger-Camus
Group, the whole amount of the sums escrowed shall be returned to
the Purchaser, and the Sellers shall refund to the Purchaser the
part of the Notional Price paid pursuant to Section 2.2.3 hereto
which corresponds to the balance of the negative difference not
covered by the sums escrowed, and which will be paid from the
escrow account mentioned in the first paragraph of Section 2.2.4.
In the event that the decrease in the TIPS is implemented before
(i) the date of final determination by Ernst & Young referred to
in Section 2.2(c) above, or (ii) the Sellers' acceptance of the
calculation by the accountants appointed by the Purchaser as
referred to in Section 2.2(c) above (the "Determination Date"),
then the portion of the Additional Price determined pursuant to
Section 2.2.4(b) below which should have been paid to the Sellers
will be escrowed until the Determination Date and the balance of
the negative difference which was not covered by the sum escrowed
pursuant to Section 2.2(a) above will be paid out of the sums
escrowed pursuant to this Section.
2.2.3 At the Closing, the Purchaser will pay to the Sellers X% of the Notional
Price.
2.2.4 If, at the Closing, the decrease in the Tarif Interministeriel des
Prestations Sanitaires (hereinafter referred to as the "TIPS") which will
regulate the prices of hip implants on the French market listed in
Exhibit 2.2.4 hereto is not implemented, the Purchaser will transfer to
the escrow account described in Section 3.3 below 48 million French
Francs (hereinafter referred to as the "Additional Price").
(a) The terms and conditions of such escrow account are set forth in
Exhibit 2.2.2(b) hereto.
(b) A portion of the Additional Price will be paid to the Sellers from the
escrow account following implementation of the decrease in the TIPS
after the
<PAGE>
7
Closing, pursuant to the terms set forth in Section 2.2.4(c) below,
the amount of such portion to be calculated pursuant to the average
percentage decrease in the TIPS as set forth below :
<TABLE>
<CAPTION>
AVERAGE PERCENTAGE OF DECREASE PORTION OF THE ADDITIONAL PRICE
IN THE TIPS TO BE PAID TO THE SELLERS
(IN MILLIONS OF FRENCH FRANCS)
- -----------------------------------------------------------------
<C> <S>
From 0% to 5% 48 x X%
6% 40 x X%
7% 32 x X%
8% 24 x X%
9% 16 x X%
10% 8 x X%
11% and over 0 x X%
- -----------------------------------------------------------------
</TABLE>
The average percentage decrease in the TIPS, if any, will be equal to
the percentage of reduction in (i) the hypothetical value of the
aggregate sales of Landanger-Camus for each of the hip implants listed
in Exhibit 2.2.4 hereto with respect to the three (3) month period
from 1 September to and including 30 November 1996 which would have
resulted had the TIPS decrease been in effect during such three-month
period, compared to (ii) the actual value of the aggregate sales for
each such hip implants listed in Exhibit 2.2.4 hereto with respect to
such three (3) month period.
Only one reduction in the TIPS, whether implemented before or after
the Closing, will be taken into account (and only if within the time
limit set forth in Section 2.2.4(c) below).
The portion of the Additional Price not paid to the Sellers pursuant
to the provisions hereinabove will be repaid to the Purchaser at the
same time as the portion of the Additional Price owed to the Sellers
is paid to them.
(c) Subject to the provision contained in the last paragraph of Section
2.2.2(d) above, the disbursement of the funds escrowed pursuant to
this Section 2.2.4 will take place by the tenth (10th) business day
following the implementation of the decrease in the TIPS; provided,
however, if such decrease is not implemented within nine (9) months of
the Closing Date, the escrow created by this Section 2.2.4 will be
terminated, and the amount escrowed will be paid to the Sellers within
the two (2) week period following expiry of such nine (9) month
period.
2.2.5 Subject to the provision contained in the last paragraph of Section
2.2.2(d) above, if the decrease in the TIPS is implemented before
Closing, a portion of the Additional Price determined pursuant to Section
2.2.4(b) above will be paid directly by the Purchaser to the Sellers at
the Closing at the same time and to the same bank account as the sum
determined pursuant to Section 2.2.3 above.
2.2.6 All sums to be paid pursuant to this Section 2 will be paid in cash (en
numeraire), in French Francs. All sums due to the Sellers and/or the
Purchaser from the escrow account will be paid inclusive of interest
earned thereon.
<PAGE>
8
2.2.7 All sums to be paid pursuant to this Section 2 to the Sellers will be
paid to the accounts mentioned in Section 3.3(b). The Sellers will decide
amongst themselves how such sums will be allocated between them. The
Sellers hereby release the Purchaser from any liability or responsibility
of any nature whatsoever relating to such allocation or, when payment is
made by the Purchaser, the receipt by each of them of their respective
portion of the price.
SECTION 3
CLOSING
SECTION 3.1 - CLOSING - CLOSING DATE
- ------------------------------------
Subject to the terms and conditions of this Share Purchase Agreement, and
subject to satisfaction of all of the conditions precedent set forth in Section
4 below, the sale and purchase of the Shares contemplated hereby will take place
at a closing (hereinafter referred to as the "Closing") will take place on 1
April 1997 at the offices of Coudert Freres, 52, avenue des Champs-Elysees,
75008 Paris, France, or at such other place and/or date as the Parties may agree
(the day on which the Closing takes place being hereinafter referred to as the
"Closing Date").
MISSING MATERIAL
- ----------------
SECTION 3.2 - DOCUMENTS TO BE DELIVERED BY THE SELLERS AT CLOSING
- -----------------------------------------------------------------
At the Closing, the Sellers will deliver or will cause to be delivered to the
Purchaser:
(a) all clearances and authorizations required from the Sellers for the sale of
the Shares;
(b) duly signed share transfer forms (ordres de mouvement) for the Shares in
favor of the Purchaser or any company of the Purchaser's Group and, more
generally, all documents required to carry out such transfers.
(c) the share transfer register (registre des mouvements de titres) and the
individual shareholders' accounts (comptes d'actionnaires) of 3L on which
the transfer of the shares in 3L to the Purchaser will be recorded
immediately, as well as any other documentation evidencing due completion
of the transfer of the Landanger-Camus Shares;
(d) the registers containing the minutes of the meetings of the shareholders of
3L and Landanger-Camus, the Board of Directors (conseil d'administration)
of 3L, the Directorate (directoire) and Supervisory Board (conseil de
surveillance) of Landanger-Camus, and the corresponding corporate bodies of
the Subsidiaries (as such term is defined in Section 3.2(e) below) in which
3L and/or Landanger-Camus have a majority shareholding;
(e) resignation letters signed by the managers ("gerants") and members of the
Board of Directors, Directorate and Supervisory Board (as the case may be)
of 3L and Landanger-Camus, as well as by all of the members of similar
corporate bodies of the companies (hereinafter referred to as the
"Subsidiaries"), all of the above members and companies being listed in
Exhibit 3.2(e) hereto, such resignations to take effect upon appointment of
the resigning persons' successors, as well as
<PAGE>
9
evidence of transfer of their shares in such companies to the majority
shareholders thereof;
(f) resignation letters, with effect as of the Closing Date at the latest,
signed by those shareholders (except for Michel Colombier and Maryvonne
Guibert, whose employment will continue) having employment contracts with
3L, Landanger-Camus or any of the Subsidiaries, including those listed in
Exhibit 3.2(f) hereto;
(g) resignation letters from the statutory auditors of 3L, Landanger-Camus and
the Subsidiaries, such resignations to take effect upon appointment of the
replacement statutory auditors;
(h) receipt in respect of the payment by the Purchaser of the portion of the
price for the Shares paid as of the Closing Date;
(i) an executed copy of the Escrow Agreement;
(j) all documents evidencing satisfactory completion of the operations
described in Sections 4.3, 4.4 and 4.6;
(k) execution copies of agreements implementing the principles set forth in
Section 6 below, and copies of the relevant registration certificates
issued by the Institut National de la Propriete Industrielle; and
(l) a lease for a two (2) year term as from Closing and terminable with a three
(3) month notice period from the lessee, for the premises located Z.A.E. de
Findrol, 74250 Fillinges and used by Landanger-Camus for its operation as
of the date hereof, the financial terms of such lease to be the same as
those of the current lease.
SECTION 3.3 - DOCUMENTS DELIVERED BY THE PURCHASER AT CLOSING
- -------------------------------------------------------------
At Closing, the Purchaser will deliver or cause to be delivered to the Sellers:
(a) all clearances and authorizations required from the Purchaser for the
purchase of the Shares;
(b) evidence of a wire transfer to the order of the Sellers in the amount of
the portion of the price to be paid for the Shares as of the Closing Date,
pursuant to Section 2, to the following account opened with Banque Paribas;
(c) evidence of a wire transfer in the amount set forth in Section 2.2.4 above
to the following escrow account with Banque Paribas, if necessary; and
(d) executed copies of the agreements referred to in Sections 3.2(i) and (k)
above.
SECTION 3.4 - OTHER FORMALITIES AT CLOSING
- ------------------------------------------
All deliveries of documents to be made or actions to be taken at Closing will be
deemed to have taken place simultaneously on the Closing Date.
<PAGE>
10
SECTION 4
CONDITIONS PRECEDENT
The sale and the purchase of the Shares are subject to the following conditions
precedent :
SECTION 4.1 - SHAREHOLDINGS IN 3L, LANDANGER-CAMUS AND THE SUBSIDIARIES
- -----------------------------------------------------------------------
4.1.1 The Majority Shareholders hold two hundred and nine thousand six hundred
and sixty-seven (209,667) shares in 3L, representing one hundred percent
(100%) of the shares and voting rights in such company, as well as seven
hundred and sixty-nine thousand two hundred and seventy-four (769,274)
shares in Landanger-Camus, representing thirty-five point fifty-five
percent (35.55%) of the shares and voting rights in such company.
4.1.2 3L holds at least one million one hundred and thirty-three thousand five
hundred and twenty-nine (1,133,529) shares in Landanger-Camus,
representing fifty-two point thirty-nine percent (52.39%) of the shares
and voting rights in such company.
4.1.3 3L and/or Landanger-Camus hold, directly and indirectly, the number of
shares and voting rights in the Subsidiaries representing the percentage
thereof set forth in Exhibit 4.1.3 hereto.
SECTION 4.2 - PRIOR ADMINISTRATIVE AUTHORIZATIONS AND CLEARANCES
- ----------------------------------------------------------------
All governmental, administrative and other approvals, authorizations and
clearances, whether national or supranational, required to complete the
transactions contemplated herein have been obtained. In particular :
(a) the Treasury Department (Tresor) of the Ministry of Finance and Economy has
not challenged the acquisition of the Shares; and
(b) in the event that prior to the Closing, the Purchaser has notified the
acquisition of the Shares to the Minister of Finance and Economy pursuant
to the Ordonnance of 1 December 1986 on French merger control, such
acquisition has not been referred by the Minister to the Competition
Council.
(c) Others, including any notification to, authorization by or clearance from,
any authorities in the United States of America or in any country in which
3L, Landanger-Camus or any of the Subsidiaries are active, as may be
required.
SECTION 4.3 - GEYSER S.A. AND AED SOFT
- --------------------------------------
4.3.1 All of the four thousand five hundred and sixty-four (4,564) shares held
by Landanger-Camus in Geyser S.A., and all of the seven hundred (700)
shares held by Landanger-Camus in AED Soft will have validly been
transferred, pursuant to applicable laws and regulations, to one or more
third parties in such manner that neither the Purchaser, 3L, Landanger-
Camus nor any of the Subsidiaries will incur any liability whatsoever,
including without limitation any present or contingent tax liabilities,
resulting from such transfer or relating to Geyser S.A. and AED Soft.
<PAGE>
11
4.3.2 All outstanding repurchase obligations of Landanger-Camus with respect to
the outstanding shares of Geyser S.A. will have been assumed by a third
party in such manner that neither the Purchaser, 3L, Landanger-Camus nor
any of the Subsidiaries will incur any obligation or liability with
respect thereto, including without limitation any present or contingent
tax liabilities. This will apply (without limitation) to the put options
(promesses d'achat ) currently or formerly held by the following persons,
for the following number of shares in Geyser S.A. :
<TABLE>
<CAPTION>
<S> <C> <C>
- Mr. Boileau 5 shares
- Ms. Rolland 5 shares
- Mr. Rolland 5 shares
- Mr. Roetynck 550 shares
- Ms. Brouard 550 shares
- Mr. Ognier 1,830 shares
</TABLE>
4.3.3 Purchaser acknowledges that the rights (though an exclusive worldwide
(except France), free, irrevocable license) under a patent concerning the
use of the procedure for producing bone substitute materials
("SUPERCRIT") held by Boots, a Swiss company, are not included among the
rights of the Medinov Subsidiary (but only insofar as such rights apply
to applications for human bone).
SECTION 4.4 - SURGICAL INSTRUMENTS ACTIVITY
- -------------------------------------------
The general surgical instruments activity carried out by Landanger-Camus
(consisting in products used in general surgery and the corresponding
sterilization boxes, but excluding all trauma products and all orthopedic
ancillary instruments), together with, pursuant to Article L.122-12 of the
French Labor Code, the employees of Landanger-Camus assigned to such surgical
instruments activity (and all obligations and liabilities in respect of such
employees) as same are listed in Exhibit 4.4 hereto, will have been transferred,
pursuant to applicable laws and regulations, to a single third party company,
and the shares received by Landanger-Camus in consideration for such activity
will have been sold to any of the Sellers for a price equal to the value of the
activity as determined by the court-appointed auditor, in such way that neither
the Purchaser, 3L, Landanger-Camus nor any of the Subsidiaries will incur any
liability, including without limitation any present or contingent tax
liabilities, resulting from the transfer of such activity, the transfer or non-
transfer of the employees of Landanger-Camus within the framework of the
transfer of the activity, and more generally, connected with such activity prior
or subsequent to its transfer.
SECTION 4.5 - TRADENAMES - TRADEMARKS
- -------------------------------------
The agreements implementing the principles set forth in Section 6 below
will have been executed, and all steps connected therewith will have been
taken.
SECTION 4.6 - GUARANTY
- ----------------------
The Majority Shareholders and Michel Colombier will have put in place the
Guaranty referred to in Section 4.2.2 of the Indemnification Agreement, and
will have provided the Purchaser with a certified copy thereof.
SECTION 4.7 - INDEMNIFICATION AGREEMENT
- ---------------------------------------
<PAGE>
12
An Indemnification Agreement, based substantially on the model attached
hereto as Exhibit 4.7 but subject to further negotiation, will have been
executed.
SECTION 4.8 - CONSEQUENCES OF NON-FULFILLMENT OF CONDITIONS PRECEDENT
- ---------------------------------------------------------------------
If any of the conditions precedent set forth in Sections 4.1 to 4.7 above
have not been satisfied by 1 April 1997 at the latest, the Purchaser may decide
(i) not to purchase the Shares, without incurring any liability of any nature
whatsoever, or (ii) to waive such condition(s) precedent.
SECTION 5
COVENANTS
SECTION 5.1 - SELLERS' COVENANTS
- --------------------------------
5.1.1 Disclosure
----------
The Sellers undertake that, without prejudice to any of the Purchaser's
rights hereunder, they will disclose forthwith in writing to the
Purchaser any matter or development which may arise or become known to
the Sellers after the date hereof which is inconsistent with any of the
representations and warranties set out in the Indemnification Agreement
(the "Indemnification Agreement") to be signed by the Closing Date, or
which might make any of them inaccurate or misleading, or which would be
likely to result in one of the obligations or conditions set forth herein
not being satisfied or fulfilled on time or which might delay or prevent
the Closing.
5.1.2 Free Access
-----------
As from the date hereof and subject to the giving of reasonable prior
notice, the Sellers will cause 3L, Landanger-Camus, the Subsidiaries,
their employees, officers, representatives and advisers to give the
Purchaser and its employees, officers, representatives and advisors free
access, under the best possible conditions during normal business hours,
to the premises, accounts, records, employees and advisors of 3L,
Landanger-Camus and the Subsidiaries. As from the date hereof, the
Sellers will provide all necessary assistance to ensure that the
transition period inherent to the transfer of ownership and control of
the Shares and the integration of 3L, Landanger-Camus and the
Subsidiaries into the Purchaser's group takes place in the best possible
conditions, and so that the Purchaser may monitor compliance by the
Sellers of all of their obligations, covenants, representations and
warranties referred to in this Share Purchase Agreement and in the
Indemnification Agreement.
In addition, the Sellers agree that the Purchaser and its employees,
officers, representatives and advisors will have the right, as from the
date hereof, to meet with executives ("cadres") of 3L, Landanger-Camus
and the Subsidiaries, and that the Sellers will co-operate, and will
cause all persons (including its employees, officers, representatives and
advisors) or entities belonging to or working for any company of the
Sellers group to co-operate, so as to assist and facilitate the contacts
by the Purchaser of such persons.
<PAGE>
13
5.1.3 Cooperation
-----------
The Sellers undertake, and will cause their representatives and advisors,
as well as 3L, Landanger-Camus and the Subsidiaries and their employees,
officers, representatives and advisors, to fully cooperate with and
assist the Purchaser, its employees, officers, representatives and
advisors in order to prepare for and to realize the transfer of ownership
and control of 3L and Landanger-Camus as provided in this Share Purchase
Agreement.
In particular, they will fully cooperate with the Purchaser, its
employees, officers, representatives and advisors with respect to the
determination of the purchase price for the Shares pursuant to Section 2
above and to all obligations, procedures, public tender offers and as
well as any squeeze-out which would take place under the regulations of
the Paris Stock Exchange in connection with or as a result of the
purchase of the Shares by the Purchaser.
Moreover, as of the Closing, they will take all necessary steps to
adequately inform all customers and licensors of completion of the
transactions contemplated herein.
5.1.4 No Dividends
------------
The Sellers will cause 3L and Landanger-Camus not to pay any dividend or
interim dividend (acompte sur dividendes) to its shareholders as from the
date hereof.
SECTION 5.2 - PURCHASER'S COVENANTS
- -----------------------------------
5.2.1 Disclosure
----------
The Purchaser undertakes that, without prejudice to any of the Sellers'
rights hereunder, it will disclose forthwith in writing to the Sellers
any matter or development which may arise or become known to the
Purchaser after the date hereof which is inconsistent with any of the
representations and warranties of the Purchaser to be set out in the
Indemnification Agreement or which might make any of them inaccurate or
misleading, or which would be likely to result in one of the obligations
or conditions set forth herein not being satisfied or fulfilled on time
or which might delay or prevent the Closing.
5.2.2 The Purchaser will submit to the Sellers :
----------------------------------------
(a) the final draft declaration to the Treasury Department of the
Ministry of Finance (Tresor) pursuant to the regulations governing
foreign investments in France;
(b) should the Purchaser decide to notify the acquisition of the Shares
pursuant to the Ordonnance of 1 December 1986 on French merger
control, the final draft of the notification to the Minister of the
Economy; and
(c) any notification to, authorization by or clearance from, any
authorities in the United States of America or in any country in
which 3L, Landanger-Camus or any of the Subsidiaries are active.
<PAGE>
14
SECTION 5.3 - CONDUCT OF BUSINESS PRIOR TO THE CLOSING
- ------------------------------------------------------
During the period from the date of execution hereof to the Closing, the Sellers
will cause 3L, Landanger-Camus and the Subsidiaries to conduct their businesses
with due care and only in the ordinary course of business, to maintain the
integrity of their assets and, in particular, their prospects and business
relationships, and to not increase their liabilities other than in the ordinary
course of business and in no event by more than one million (1,000,000) French
Francs. Without in any respect limiting the generality of the foregoing, prior
to the Closing, the Sellers will ensure, in particular, that 3L, Landanger-Camus
and the Subsidiaries will not, without the Purchaser's prior written consent :
(a) sell, transfer or otherwise dispose of any of their assets, except for :
(i) sales of inventory in the ordinary course of business;
(ii) the operations provided for in Sections 4.3 and 4.4 above; and
(iii) the transfer [to Landanger-Camus of the shares of the SCIs ORTHOTIM
and GAM owning the premises located in Villeurbanne;
(b) mortgage, pledge or encumber, or grant any privilege or guarantee,
affecting any of their assets;
(c) increase the remuneration or employment benefits of any of their employees,
officers, representatives or advisors;
(d) initiate any collective or individual termination of employment agreements,
other than for faute grave or faute lourde;
(e) conclude any new employment agreement, or terminate or modify, in any
manner whatsoever, any employment agreements in force as of the date
hereof, with the exception of those entered into between any shareholders
and Landanger-Camus, 3L or any of the Subsidiaries, which must be
terminated at the latest on the Closing Date, except for Michel Colombier's
contract and Maryvonne Guibert's contract;
(f) modify, terminate or cancel any contracts by which they are bound under
circumstances which would affect their business relations, prospects,
relationship with developers and licensors or the operations contemplated
in this Share Purchase Agreement;
(g) enter into or renew any material contract with respect to their assets or
business, except in the ordinary course of business or as contemplated
under this Share Purchase Agreement;
(h) maintain levels of inventory of their products inconsistent with their past
practices, subject to usual seasonal variations and customer demands;
(i) operate credit control, cash collection and payment inconsistent with
recent past practice;
(j) pay any obligation or liability relating to or in respect of their
business, other than current liabilities in the ordinary course of their
business, or waive, release or settle any rights or claims of 3L,
Landanger-Camus or the Subsidiaries relating to or in
<PAGE>
15
respect of their businesses exceeding two hundred and fifty thousand (250,000)
French Francs in the aggregate;
(k) authorize or propose any of the foregoing, or enter into any agreement,
commitment or undertaking, written or oral, to do any of the foregoing; or
(l) incur any capital expenditure in excess of fifty thousand (50,000) French
Francs for a single investment, or one hundred thousand (100,000) French
Francs per company in the aggregate.
SECTION 5.4 - FURTHER ACTION
- ----------------------------
The Sellers and the Purchaser will make all reasonable efforts to take, or cause
to be taken, all appropriate action as may be required to carry out the
provisions hereof and consummate and make effective the transactions described
herein. In the event that at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Share Purchase
Agreement, each Party will take such further action at its own cost (including
the execution and delivery of such further instruments and documents) as the
other Party may reasonably request.
SECTION 6
TRADEMARKS - TRADENAMES - CORPORATE NAME
SECTION 6.1
- -----------
Landanger-Camus and the Subsidiaries, for their activities as of the Closing
Date :
(a) are hereby granted the exclusive right to use the names "Landanger" and
"Landanger-Camus";
(b) have been, or will be by the Closing Date at the latest, registered as the
exclusive owners of such names with the Institut National de la Propriete
Industrielle in France, and with similar organizations in other countries
where these companies carry out their respective activities as of the
Closing Date; and
(c) will retain the exclusive possibility to be registered as the owners of
such names for such activities in any other countries.
SECTION 6.2
- -----------
Only in respect of the activities indicated in Sections 4.3 and 4.4 above, the
Sellers, or the corporate entity created to carry out such activities :
(a) are hereby granted the exclusive right to use the name "Landanger";
(b) have been, or will be by the Closing Date at the latest, registered as the
exclusive owners of such names with the Institut National de la Propriete
Industrielle in France, and with similar organizations in any other
countries in which the activities described in Sections 4.3 and 4.4 above
are carried out as of the Closing Date; and
<PAGE>
16
(c) will retain the exclusive possibility to be registered as the owners of
such names for the activities described in Sections 4.3 and 4.4 above in
any other countries.
SECTION 6.3
- -----------
Landanger-Camus is hereby definitively granted the exclusive right to use the
patronymic "Landanger-Camus" as its corporate name.
SECTION 6.4
- -----------
For any activities other than those carried out by 3L, Landanger-Camus and the
Subsidiaries as of the Closing Date and the activities described in Sections 4.3
and 4.4 above, neither Party will have the possibility to use the names
"Landanger" and "Landanger-Camus" and to be registered as the owner of same
without the prior written consent thereto of the other Party.
All necessary steps, and in particular contractual steps, will be taken at the
latest by the Closing in order to validly implement the above.
SECTION 7
NON COMPETITION
SECTION 7.1
- -----------
The Majority Shareholders and Michel Colombier hereby undertake, for each of
them and on behalf of each of the companies in which they will retain a direct
or indirect interest (hereinafter referred to as the "Majority Shareholders'
Group"), that neither the Majority Shareholders nor any company of the Majority
Shareholders' Group nor Michel Colombier will carry on with, or assist in the
carrying-on with, or be involved in, directly or indirectly, whether alone or
with any other individual or entity, whether for their own account or for that
of any other person, firm or company, the manufacture, sale, marketing, research
or development of orthopaedic devices or, more generally, compete in any manner
whatsoever with any activity carried out, or products manufactured and/or sold,
by 3L, Landanger-Camus or the Subsidiaries as of the Closing Date.
This non-compete obligation will not apply to (i) the activities described in
Sections 4.3 and 4.4 above, (ii) the acquisition, use and sale of Kirchner and
Steiman surgical pins, or to (iii) passive investments in public companies, a
minority part of activity thereof could compete with the activities carried out
by 3L, Landanger-Camus or the Subsidiaries.
This non-compete obligation will apply in France for a period of four (4) years
from the Closing Date, and for a period of one (1) year from the Closing Date in
Germany, Switzerland, Spain, Italy, The Netherlands, Belgium, the Scandinavian
countries, the United Kingdom, the United States of America, India, China and
Austria.
The restrictions contained in this Section 7 are considered to be reasonable by
the Parties. In the event any restriction is found to be void, but would be
valid if a part of it were deleted or the period or geographical area of
application reduced, such restriction will apply with such modification as may
be required to render such restriction valid and effective.
<PAGE>
17
SECTION 7.2
- -----------
The Majority Shareholders and Michel Colombier undertake to not directly or
indirectly offer or effectively entrust to any individual in the employ of 3L,
Landanger-Camus or any of the Subsidiaries on the Closing Date, any job, task or
mission of any nature whatsoever, whether or not remunerated, nor to respond
positively to any request of such nature made by an individual in the employ of
3L, Landanger-Camus or any of the Subsidiaries on the Closing Date.
This undertaking will apply for two (2) years as from the Closing Date.
SECTION 8
TERMINATION OF THE SHARE PURCHASE AGREEMENT
SECTION 8.1 - TERMINATION BY MUTUAL AGREEMENT
- ---------------------------------------------
This Share Purchase Agreement may be terminated, and the transactions
contemplated herein abandoned, for any reason and at any time prior to the
Closing with the mutual written consent of the Purchaser and the Sellers. This
Share Purchase Agreement will be terminated automatically if the Closing has not
taken place by 30 April 1997, unless the Parties decide to extend in writing
such deadline.
SECTION 8.2 - TERMINATION BY THE PURCHASER
- ------------------------------------------
This Share Purchase Agreement may be terminated by the Purchaser, and the
transactions contemplated herein abandoned, in case of non-fulfillment of the
conditions set forth in Sections 4.1 to 4.7 by 30 April 1997 at the latest.
SECTION 8.3 - SURVIVAL UPON TERMINATION
- ---------------------------------------
Upon its termination pursuant to this Section 8, this Share Purchase Agreement
will become null and void, with no liability for any Party hereto, provided,
however, that in the event of the cause of such termination being a default on
the part of any Party, the Purchaser or the Sellers, as the case may be, will
retain all of their rights to claim damages and remedies arising as a result of
such default, and breach, and further provided, however, that upon any
termination pursuant to this Section 8, Sections 9.1 (Confidentiality), 9.2
(Expenses - Taxes), 9.4 (Public Announcements) and 9.12 (Governing Law -
Disputes) hereof will survive such termination.
<PAGE>
18
SECTION 9
GENERAL PROVISIONS
SECTION 9.1 - CONFIDENTIALITY
- -----------------------------
(a) All information and documents provided to either Party within the framework
of the transaction contemplated herein is deemed to be confidential in
nature, irrespective of whether or not the transaction is consummated. Any
analyses, compilations, studies or other documents prepared by either
Party, its employees, officers, representatives or advisors within the
framework of said transaction will be kept confidential by such Party.
Neither Party will use or disclose, and represents that its employees,
officers, representatives and advisors will not use or disclose, such
information during a period of five (5) years from the date hereof, except
to the extent such information :
- was known to the receiving Party prior to receipt thereof from the other
Party, and was not subject to a confidentiality commitment; or
- is or becomes generally known to the public; or
- is received by the receiving Party from a source not subject to a
confidentiality commitment; or
- has been or is gathered or obtained by the receiving Party independently
from the confidential information disclosed by the other Party.
(b) In particular, the Parties undertake to keep the contents of this Share
Purchase Agreement and the Indemnification Agreement confidential, subject
to disclosure as may be required pursuant to (i) proceedings conforming
with the provisions of Section 9.12 hereof, (ii) any tax audit, (iii)
French or United States securities regulation requirements, (iv)
competition and labor law requirements in France or in any country in which
3L, Landanger-Camus or the Subsidiaries conduct their respective
activities, (v) any other requirement of a public authority, or (vi) a
press release issued pursuant to Section 9.4 below.
SECTION 9.2 - EXPENSES - TAXES
- ------------------------------
Except as otherwise specified in this Share Purchase Agreement, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection herewith and the
transactions contemplated herein, will be borne by the Party incurring such
costs and expenses, irrespective of whether or not the Closing takes place. The
Purchaser will pay the registration taxes (droits d'enregistrement) and stamp
duties (droits de timbre) due in connection herewith.
All expenses and taxes resulting from the operations described in Sections 4.3,
4.4 and 4.6 will be borne exclusively by the Sellers, irrespective of whether or
not the Closing takes place.
<PAGE>
19
SECTION 9.3 - NOTICES
- ---------------------
All notices, claims, demands and other communications hereunder will be made in
writing, given or made by delivery in person, by courier service, registered
mail (postage prepaid, return receipt requested), telecopy, telegram or telex,
to the respective Parties at the following addresses (or at such other addresses
as may be specified in a notice given in accordance with this Section 9.3) :
(a) If to the Purchaser :
DePuy, Inc.
P.O. Box 988
700 Orthopaedic Drive
Warsaw
Indiana 46581-0988
U.S.A.
Telecopy : (00-1) 219 269 5675
Attention : Legal Department
DePuy International Ltd.
St. Anthony's Road
Leeds
Yorkshire LS11 8DT
U.K.
Telecopy : (00-44) 113 272 4192
Attention : Legal Department
with a copy to :
Coudert Brothers
1114 Avenue of the Americas
New York, N.Y. 10036-7703
U.S.A.
Telecopy : (00-1) 626 4120
Attention : Jeffrey Cohen
and to :
Coudert Freres,
52, Avenue des Champs-Elysees
75008 Paris
France
Telecopy : (00-33) 1 53 83 60 60
Attention : Olivier de Precigout
(b) If to the Sellers :
Mr. Patrick Landanger
5, avenue Pol Antoine
52000 Chaumont
France
Telecopy : (00-33) _______________
<PAGE>
20
Mr. Eric Landanger
15, rue des Acacias
52000 Jonchery
France
Telecopy : (00-33) _______________
Ms. Maryvonne Guibert
9, boulevard Gambetta
52000 Chaumont
France
Telecopy : (00-33) _______________
Mr. Michel Colombier
512, chemin Viralamande
69140 Rillieux La Pape
France
Telecopy : (00-33) _______________
Mrs. Renee Landanger
10, rue de Dijon
52000 Chaumont
France
Telecopy : (00-33) ___________________
Mr. Louis Landanger
10, rue de Dijon
52000 Chaumont
France
Telecopy : (00-33) ______________
Mrs. Martine Bonnaventure
260, avenue du Stade
45770 Saran
France
Telecopy : (00-33) ___________________
Mr. Guy Bonnaventure
260, avenue du Stade
45770 Saran
France
Telecopy : (00-33) __________________
with a copy to :
Desfilis, Juchs & Associes
49 bis, Avenue F.D. Roosevelt
75508 Paris
France
Telecopy : (00-33) 1 45 63 29 68
Attention : Maitre J.L. Desfilis
<PAGE>
21
A notice will be deemed to have been duly made or given :
(a) in the case of personal delivery, by the giving of a receipt of delivery of
such notice from the addressee, or from any person working at its above-
mentioned address,
(b) in the case of a registered letter or a courier delivery, upon first
presentation of such notice at the address of the addressee; and
(c) in the case of a transmission by telecopy, telegram or telex, upon the
existence of proof of transmission, confirmed by registered letter with
return receipt requested sent at the latest on the first business day
following the date of such transmission.
SECTION 9.4 - PUBLIC ANNOUNCEMENTS
- ----------------------------------
Neither Party hereto will make, or cause to be made, any press releases or
public announcements in respect of this Share Purchase Agreement, the
Indemnification Agreement or the transactions contemplated hereby and thereby
without prior approval of the other Party, and the Parties will cooperate as to
the timing and contents of any such announcement. Nothing in this Section 9.4
will prevent a Party from supplying any information as may be required by any
public authority or as will be required by law, but such Party will furnish
notice thereof to the other Party as soon as practicable given the
circumstances.
SECTION 9.5 - SEVERABILITY
- --------------------------
If any term or other provision of this Share Purchase Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Share Purchase Agreement will,
nevertheless, remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties will
negotiate in good faith to modify this Share Purchase Agreement so as to effect
the original intent of the Parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 9.6 - LANGUAGES
- -----------------------
This Share Purchase Agreement is entered into and executed in the French and
English languages. In the event of any disputes concerning the construction or
meaning of this Share Purchase Agreement, the French version will prevail.
SECTION 9.7 - ENTIRE AGREEMENT
- ------------------------------
Except as provided in the Indemnification Agreement, this Share Purchase
Agreement constitutes the entire agreement of the Parties hereto with respect to
the subject matter hereof, and supersedes all agreements and undertakings, both
written and oral, between the Sellers and the Purchaser, or any of the companies
of the group to which each Party belongs, prior to the date hereof with respect
to the subject matter herein.
<PAGE>
22
SECTION 9.8 - WAIVERS, MODIFICATIONS OR AMENDMENTS
- --------------------------------------------------
No waiver, modification or amendment of any provision of this Share Purchase
Agreement will be valid, or of any force or effect, unless made in writing and
signed by each of the Parties hereto, and specifying with particularity the
nature and extent of such waiver, modification or amendment. Any such waiver,
modification or amendment will in no event be construed to be a general waiver,
abandonment, modification or amendment of any of the provisions of this Share
Purchase Agreement, but the same will be strictly limited and restricted to the
extent and occasion specified in such writing or writings signed by the Parties.
SECTION 9.9 - SECTION HEADINGS - EXHIBITS
- -----------------------------------------
The table of contents to this Share Purchase Agreement and the headings of
particular Sections herein are inserted only for convenience and are in no way
to be construed as part of this Share Purchase Agreement or as a limitation of
the scope of the particular Sections to which they refer.
Each Exhibit to this Share Purchase Agreement constitutes an integral part
hereof; and all references to this Share Purchase Agreement will include all
Exhibits hereto.
SECTION 9.10 - ASSIGNMENT - SUCCESSORS AND ASSIGNS
- --------------------------------------------------
Neither this Share Purchase Agreement nor any rights, liabilities or obligations
hereunder may be assigned without the express written consent of the other Party
hereto (which consent will be given or refused at the discretion of each of the
Parties), although the Purchaser will be entitled to assign all of its rights
and undertakings hereunder to any company belonging to the Purchaser's Group as
specified in Section 2.1 above, the Purchaser remaining liable for performance
of the obligations of assignee herein and in the Indemnification Agreement.
This Share Purchase Agreement will be binding upon and inure to the benefit of
successors and permitted assigns of the Parties hereto.
SECTION 9.11 - SPECIFIC PERFORMANCE
- -----------------------------------
The Parties hereto agree that they will be entitled to specific performance of
the terms hereof, insofar as permitted under French law.
SECTION 9.12 - GOVERNING LAW - DISPUTES
- ---------------------------------------
This Share Purchase Agreement will be governed by, and construed in accordance
with, French law.
<PAGE>
23
All disputes arising in connection with this Share Purchase Agreement will be
settled by the competent Paris courts.
Executed in ten (10) original counterparts,
In Paris,
On 28 February 1997
FOR THE SELLERS : FOR THE PURCHASER :
/s/ Patrick Landanger /s/ James Lent
- --------------------- --------------
Patrick Landanger DePuy, Inc.
By : James Lent
Title : Chairman of the Board
and Chief Executive Officer
/s/ Eric Landanger
- ------------------
Eric Landanger
/s/ Maryvonne Guibert
- ---------------------
Maryvonne Guibert
/s/ Michel Columbier
- --------------------
Michel Colombier
/s/ Mrs. Renee Landanger
- ------------------------
Mrs. Renee Landanger
/s/ Mr. Louis Landanger
- -----------------------
Mr. Louis Landanger
/s/ Mrs. Martine Bonnaventure
- -----------------------------
Mrs. Martine Bonnaventure
/s/ Mr. Guy Bonnaventure
- ------------------------
Mr. Guy Bonnaventure
<PAGE>
24
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1 DEFINITIONS......................................................... 3
SECTION 2 PURCHASE AND SALE OF SHARES......................................... 3
Section 2.1 - Purchase and Sale of Shares................................ 3
Section 2.2 - Purchase Price............................................. 4
SECTION 3 CLOSING............................................................. 8
Section 3.1 - Closing - Closing Date..................................... 8
Section 3.2 - Documents to be Delivered by the Sellers at Closing........ 8
Section 3.3 - Documents Delivered by the Purchaser at Closing............ 9
Section 3.4 - Other Formalities at Closing............................... 9
SECTION 4 CONDITIONS PRECEDENT................................................ 10
Section 4.1 - Shareholdings in 3L, Landanger-Camus and the Subsidiaries.. 10
Section 4.2 - Prior Administrative Authorizations and Clearances......... 10
Section 4.3 - Geyser S.A. and AED Soft................................... 10
Section 4.4 - Surgical Instruments Activity.............................. 11
Section 4.5 - Tradenames - Trademarks.................................... 11
Section 4.6 - Guaranty................................................... 11
Section 4.7 - Indemnification Agreement.................................. 11
Section 4.8 - Consequences of Non-Fulfillment of Conditions Precedent.... 12
SECTION 5 COVENANTS........................................................... 12
Section 5.1 - Sellers' Covenants......................................... 12
5.1.1 Disclosure................................................. 12
5.1.2 Free Access................................................ 12
5.1.3 Cooperation................................................ 13
5.1.4 No Dividends............................................... 13
Section 5.2 - Purchaser's Covenants...................................... 13
5.2.1 Disclosure................................................. 13
5.2.2 The Purchaser will submit to the Sellers:.................. 13
Section 5.3 - Conduct of Business Prior to the Closing................... 14
Section 5.4 - Further Action............................................. 15
SECTION 6 TRADEMARKS - TRADENAMES - CORPORATE NAME............................ 15
Section 6.1.............................................................. 15
Section 6.2.............................................................. 15
Section 6.3.............................................................. 16
Section 6.4.............................................................. 16
SECTION 7 NON COMPETITION..................................................... 16
</TABLE>
<PAGE>
25
<TABLE>
<S> <C>
Section 7.1.......................................... 16
Section 7.2......................................... 17
SECTION 8TERMINATION OF THE SHARE PURCHASE AGREEMENT..... 17
Section 8.1 - Termination by Mutual Agreement....... 17
Section 8.2 - Termination by the Purchaser.......... 17
Section 8.3 - Survival Upon Termination............. 17
SECTION 9GENERAL PROVISIONS.............................. 17
Section 9.1 - Confidentiality....................... 18
Section 9.2 - Expenses - Taxes...................... 18
Section 9.3 - Notices 19
Section 9.4 - Public Announcements.................. 21
Section 9.6 - Languages 21
Section 9.7 - Entire Agreement...................... 21
Section 9.8 - Waivers, Modifications or Amendments.. 22
Section 9.9 - Section Headings - Exhibits........... 22
Section 9.10 - Assignment - Successors and Assigns.. 22
Section 9.11 - Specific Performance................. 22
Section 9.12 - Governing Law - Disputes............. 22
</TABLE>
<PAGE>
LIST OF EXCLUDED SCHEDULES
--------------------------
Exhibit 2.2.2.A List of companies included in the scope of consolidation
Exhibit 2.2.2 Landanger-Camus consolidated financial statements year ended
31st August 1996
Exhibit 2.2.2 (b) Conditions of opening and operation of the escrow accounts
Exhibit 2.2.2 (c) Definition of net asset value
Exhibit 2.2.4 Comparative study of hip implants sales made by Landanger-
Landos S.A. and Medinov-A.M.P. S.A. towards private clinics
only and during the period from September 1st, 1996 to
November 30, 1996
Exhibit 3.2.E List of managers and members
Exhibit 3.2.F List of sellers beneficially of an employment agreement with
3L, Landanger-Camus or one of its subsidiaries
Exhibit 4.1.3 Direct or indirect interests held by 3L and/or Landanger-
Camus
Exhibit 4.4 List of salaried employees transferred to the company
Landanger SARL (in the course of formation)
Exhibit 4.7 Form of Indemnification Agreement
<PAGE>
On behalf of the Registrant, the undersigned hereby certifies that the
following exhibit provides a fair and accurate English translation of the
material contained in the original, the official language of which is French.
DEPUY, INC.
By: /s/ Steven L. Artusi
---------------------
Steven L. Artusi
Senior Vice President, General Counsel
and Secretary
By: /s/ Thomas J. Oberhausen
------------------------
Thomas J. Oberhausen
Senior Vice President and Chief
Financial and Accounting Officer
<PAGE>
Exhibit 2.2
===========================
INDEMNIFICATION AGREEMENT
===========================
DATED APRIL 1, 1997
BETWEEN
DEPUY ORTHOPEDIE S.A.
AND
PATRICK LANDANGER
ERIC LANDANGER
MARYVONNE GUIBERT
COUDERT FRERES
52, AVENUE DES CHAMPS-ELYSEES
75008 PARIS
FRANCE
<PAGE>
INDEMNIFICATION AGREEMENT
BETWEEN :
- - DePuy Orthopedie S.A., a limited liability company with a capital of
FRF4,430,000, having its registered office at 2 rue du Bois Sauvage, 91000
Evry, represented by Bruce de Grange, "Director General", duly authorized
for the purposes hereof,
(hereinafter referred to as the "Beneficiary"),
ON THE ONE HAND,
AND :
- - Mr. Patrick Landanger, a French citizen domiciled at 85, quai d'Orsay,
75007 Paris, France;
- - Mr. Eric Landanger, a French citizen domiciled at 15, rue des Acacias,
52000 Jonchery, France; and
- - Ms. Maryvonne Guibert, a French citizen domiciled at 9, boulevard
Gambetta, 52000 Chaumont, France;
(hereinafter referred to individually as a "Guarantor", and collectively
as the "Guarantors"),
ON THE OTHER HAND,
hereinafter referred to individually as a "Party", and collectively as the
"Parties".
<PAGE>
-2-
WITNESSETH
WHEREAS, the Majority Shareholders own two hundred thousand six hundred and
sixty seven (209,667) shares representing one hundred percent (100%) of the
shares and voting rights in 3L, a societe anonyme with a capital of 209,667,000
French Francs divided into 209,667 shares with a par value of 1,000 French
Francs each, having its registered office at Z.I. "La Vendue", rue du Val, 52000
Chaumont, France, and registered with the Registry of Commerce and Companies of
Chaumont under number B 393 985 411 (hereinafter referred to as "3L");
WHEREAS, at the date of signature of the Share Purchase Agreement (as this term
is defined below), the Sellers owned eight hundred and five thousand nine
hundred and twenty-four (805,924) shares representing thirty-seven point twenty
five percent (37.25%) of the shares and voting rights in Landanger-Camus, a
societe anonyme with a capital of 21,636,700 French Francs divided into
2,163,670 shares with a par value of 10 French Francs each, having its
registered office at Z.I. "La Vendue", rue du Val, 52000 Chaumont, France, and
registered with the Registry of Commerce and Companies of Chaumont under number
B 347 558 371 (hereinafter referred to as "Landanger-Camus");
WHEREAS, at the date of signature of the Share Purchase Agreement, 3L owned one
million one hundred and thirty-three thousand five hundred and twenty-nine
(1,133,529) shares representing fifty-two point thirty-nine percent (52.39%) of
the shares and voting rights in Landanger-Camus;
WHEREAS, at the date of signature of the Share Purchase Agreement (as this term
is defined below), the Sellers and 3L together owned one million nine hundred
and thirty-nine thousand four hundred and fifty-three (1,939,453) shares
representing eighty-nine point sixty-four percent (89.64%) of the shares and
voting rights in Landanger-Camus;
WHEREAS, at the date of signature of the Share Purchase Agreement (as this term
is defined below), nine point thirty six percent (9.36%) of the Landanger-Camus
shares were publicly traded on the Second Market (Second Marche) of the Paris
Stock Exchange;
WHEREAS, under a share purchase agreement signed on 28 February 1997
(hereinafter referred to as the "Share Purchase Agreement"), the Sellers have
agreed to sell to the Purchaser their direct and indirect controlling stake in
Landanger-Camus via the sale of all of the shares and voting rights they hold in
3L, and the shares and voting rights they hold in Landanger-Camus, subject to
satisfaction of several conditions precedent contained therein;
WHEREAS, the Share Purchase Agreement was executed, and the transactions
contemplated therein will be completed subject to conditions precedent, and in
consideration of the mutual representations and warranties of the Parties.
WHEREAS, pursuant to Section 9.10 of the Share Purchase Agreement, the Purchaser
assigned all its rights and obligations thereunder to the Beneficiary.
<PAGE>
-3-
NOW, THEREFORE, the Parties have agreed on the terms contained herein, and that
this Indemnification Agreement will be interpreted and construed in light of the
terms of the Share Purchase Agreement.
SECTION 1 - DEFINITIONS
The following terms will have the meanings as set forth in the following
Sections. All terms contained herein beginning with a capital letter and not
contained in the list set forth below are defined in the Share Purchase
Agreement, and will have the meanings set forth therein.
"Contracts" Section 2.12.1
"Environmental Law" Section 2.9.1
"Financial Statements" Section 2.4.1
"Guarantor" / "Guarantors" Page 1
"Guaranty" Section 4.2.2
"Indemnified Claims" Section 4.4.1
"Indemnitee" Section 4.4.1
"Indemnitor" Section 4.4.1
"Intellectual Property" Section 2.8.1
"Landanger-Camus" Recitals
"Loss" / "Losses" Section 4.2.1
"Minority Shareholdings" Section 2.1.4(a)
"Party" / "Parties" Page 1
"Parties' Losses" Section 4.4.1
"Permits" Section 2.2.3
"Personal Property" Section 2.11.2
"Plans" Section 2.14.1
"Beneficiary" Page 1
"Real Property" Section 2.10.1
"Share Purchase Agreement" Recitals
"Subsidiaries" Section 2.1.3(a)
"Taxes" Section 2.15.1
"3L" Recitals
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
The Guarantors hereby jointly and severally (solidairement) make the following
representations and warranties to the Beneficiary. Unless specifically provided
otherwise, these representations and warranties are made as of the date hereof.
SECTION 2.1 - SHAREHOLDINGS
- ---------------------------
2.1.1 Shares in 3L
------------
(a) The share capital of 3L amounts to 209,667,000 French Francs, divided
into 209,667 3L Shares having a par value of 1,000 French Francs each,
validly issued, subscribed to and paid up in their entirety. Each 3L
share carries a voting right, and a right to share in the profits.
<PAGE>
-4-
(b) The Majority Shareholders have full and valid title to all of the 3L
Shares, free of any encumbrances, pledges, liens, claims or rights of
any third party, and have full authority and capacity to sell all of
the 3L Shares to the Beneficiary.
(c) 3L has not issued any securities (valeurs mobilieres) other than those
referred to in sub-section 2.1.1(a) above. There is no option, right
or obligation to subscribe to, acquire, sell, pledge or grant any
right over the 3L Shares. No other voting rights have been granted.
(d) With the exception of the shares held in Landanger-Camus, 3L does not
own any shares or securities of, nor does it have any direct or
indirect interests or shareholdings in, any corporation, company,
partnership, business entity, joint venture or any other enterprise,
or any commitment or obligation to purchase any such interests or
shareholdings, or any other assets other than the shares held in
Landanger-Camus and the cash necessary to face the liabilities of 3L
existing as of the Closing Date.
2.1.2 Shares in Landanger-Camus
-------------------------
(a) The share capital of Landanger-Camus amounts to 21,636,700 French
Francs, divided into 2,163,670 Landanger-Camus Shares having a par
value of 10 French Francs each, validly issued, subscribed to and paid
up in their entirety. Each of the above shares carries a voting right,
and a right to share in the profits.
The above shares are traded on the Second Market (second marche) of
the Paris Stock Exchange.
201,670 of the above shares are identifiable bearer shares (actions au
porteur identifiable), and 1,961,992 are registered shares (actions
nominatives).
(b) The Sellers and 3L have full and valid title to one million nine
hundred and thirty-nine thousand four hundred and fifty-three
(1,939,453) Landanger-Camus Shares representing eighty-nine point
sixty-four percent (89.64%) of the shares and voting rights in
Landanger-Camus, free of any encumbrances, pledges, liens, claims or
rights of any third party. The Sellers have full authority to sell all
of the Landanger-Camus Shares to the Beneficiary.
(c) Landanger-Camus has not issued any securities (valeurs mobilieres)
other than those referred to in sub-section 2.1.2(a) above. There is
no option, right or obligation to subscribe to, acquire, sell, pledge
or grant any right over any Landanger-Camus Shares. No other voting
rights have been granted.
(d) Except as provided in Sections 2.1.3 and 2.1.4 below, Landanger-Camus
does not own any shares or securities of, nor does it have any direct
or indirect interests or shareholdings in, any corporation, company,
partnership, business entity, joint venture or any other enterprise.
<PAGE>
-5-
2.1.3 Shares in the Subsidiaries
--------------------------
(a) Landanger-Camus has a direct or indirect majority shareholding in, or
effective control over, the companies listed in Exhibit 2.1.3(a)
hereto (hereinafter referred to as the "Subsidiaries"). The
shareholdings of third-party shareholders in the Subsidiaries are also
described in such Exhibit.
(b) Landanger-Camus has full and valid title to its shareholdings in the
Subsidiaries, free of any encumbrances, pledges, liens, claims or
right of any third party, and there is no agreement, law, regulation
or any other factor which would result in all or part of such
shareholdings being lost, transferred, removed, pledged or blocked as
a result of the purchase of the Shares by the Beneficiary.
(c) The Subsidiaries have not issued any securities (valeurs mobilieres)
with the exception of those indicated in Exhibit 2.1.3(c) hereto.
There is no option, right or obligation to subscribe to, acquire,
sell, pledge or grant any right over, the Sellers' shareholdings in
the Subsidiaries.
(d) Except as shown in Exhibit 2.1.3(d) hereto, the Subsidiaries do not
own any shares or securities of, nor do they have any direct or
indirect interests or shareholdings in, any corporation, company,
partnership, business entity, joint venture or any other enterprise.
2.1.4 Minority Shareholdings
----------------------
(a) Landanger-Camus and the Subsidiaries have minority shareholdings in
the companies listed in Exhibits 2.1.4(a) and 2.1.3(d)
hereto(hereinafter referred to as the "Minority Shareholdings").
(b) Landanger-Camus has full and valid title to the Minority
Shareholdings, free from any encumbrances, pledges, liens, claims or
right of any third party, and there is no agreement, law, regulation
or any other factor which would result in all or part of such Minority
Shareholdings being lost, transferred, removed, pledged or blocked as
a result of the purchase of the Shares by the Beneficiary.
(c) The companies in which Landanger-Camus and the Subsidiaries own
Minority Shareholdings have not issued any securities (valeurs
mobilieres) with the exception of those indicated in Exhibits 2.1.4(c)
and 2.1.3(d) hereto. To the best knowledge of the Guarantors, there is
no option, right or obligation to subscribe to, acquire, sell, pledge
or grant any right over, the Minority Shareholdings.
(d) Except as shown in Exhibits 2.1.4(d) and 2.1.3(d) hereto, (i) the
companies in which Landanger-Camus and the Subsidiaries own a Minority
Shareholding of 33% or more do not own any shares or securities of,
nor do they have any direct or indirect interests or shareholdings in,
any corporation, company, partnership, business entity, joint venture
or any other enterprise, and (ii) to the best knowledge of the
Guarantors, the companies in which Landanger-Camus and the
Subsidiaries own a Minority Shareholding of less than 33% do not own
any shares or securities of, nor do they have any direct or
<PAGE>
-6-
indirect interests or shareholdings in, any corporation, company,
partnership, business entity, joint venture or any other enterprise.
SECTION 2.2 - ORGANIZATION
- --------------------------
2.2.1 3L and Landanger-Camus are societes anonymes validly organized under
the laws of France. The Subsidiaries and the companies in which
Landanger-Camus and the Subsidiaries have Minority Shareholdings are
companies of the form described in Exhibits 2.2.1 and 2.1.3(d) hereto,
and are validly organized under the laws of the countries in which
they are incorporated.
2.2.2 None of 3L, Landanger-Camus, the Subsidiaries or the companies in
which Landanger-Camus holds Minority Shareholdings are, nor never have
been, insolvent. Nor have they ever suspended their payments or been
subject to any judicial recovery or liquidation proceedings.
2.2.3 3L, Landanger-Camus, the Subsidiaries and the companies in which
Landanger-Camus holds Minority Shareholdings are duly qualified to
carry out their respective activities, and do so in accordance with
applicable laws and regulations, as well as with their respective
corporate purposes. In particular, they have obtained from all
relevant public authorities all authorizations, permits, approvals
for, and made all notifications required in connection with, the
conduct, ownership and operation of their respective activities and
assets (hereinafter referred to as the "Permits"). They are in full
compliance with all of the Permits, each of which is valid.
2.2.4 No legal or administrative proceeding to revoke, cancel or not renew
any Permit is pending or threatened and, except as disclosed in
Exhibit 2.2.4 hereto, no Permit is scheduled to expire within the
three (3) year period following the Closing Date.
2.2.5 Except as disclosed in Exhibit 2.2.5 hereto, 3L, Landanger-Camus, the
Subsidiaries and the companies in which Landanger-Camus holds Minority
Shareholdings have good and valid title to all of their respective
assets, free and clear of any encumbrances, pledges, liens, claims or
rights of any third party. The sale of the Shares by the Sellers will
not adversely affect such title.
SECTION 2.3 - AUTHORITY - NO CONFLICTS - NO APPROVALS
- -----------------------------------------------------
2.3.1 The Sellers have full authority and capacity to execute the Share
Purchase Agreement and the Indemnification Agreement, and to perform
same.
2.3.2 All prior authorizations, clearances or approvals of any kind
whatsoever from any corporate body of 3L, Landanger-Camus or the
Subsidiaries, or from any third party, including public or
administrative authorities, whether national or supranational,
including those mentioned in Section 4 of the Share Purchase
Agreement, required for execution of the Share Purchase Agreement and
of this Indemnification Agreement, and the performance by the Sellers
and the
<PAGE>
-7-
Guarantors of their respective obligations under such agreements, have
been validly obtained.
2.3.3 The Share Purchase Agreement and this Indemnification Agreement have
been duly executed by the Sellers and the Guarantors, and constitute
the legal, valid and binding obligation of the Sellers and the
Guarantors, enforceable against them in accordance with the terms of
such agreements.
SECTION 2.4 - FINANCIAL STATEMENTS
- ----------------------------------
2.4.1 The consolidated financial statements of Landanger-Camus as of 31
August 1996 have been signed off by the statutory auditors of
Landanger-Camus without qualification, and the financial statements of
3L and the Subsidiaries as of the close of their respective last
financial year have been signed off by the statutory auditors of each
of these companies. The above-mentioned financial statements of 3L,
Landanger-Camus and the Subsidiaries have been approved by the
shareholders of these companies within the time period required
therefor by applicable laws.
True and complete copies of the above-mentioned financial statements
(hereinafter referred to as the "Financial Statements") and of the
legally-required reports of 3L, Landanger-Camus and the Subsidiaries'
respective statutory auditors are attached hereto as Exhibit 2.4.1.
2.4.2 The Financial Statements :
(i) are correct and give in all respects a true and fair view of the
assets, liabilities and financial situation of the relevant
company as of their respective dates or in respect of the
periods covered thereby;
(ii) give a true and fair view of the results of the operations and
shareholders' equity of the relevant company; and
(iii) have been prepared in a careful, diligent and professional
manner, and in accordance with applicable rules and Generally
Accepted Accounting Principles.
2.4.3 Without limiting the generality of the foregoing, the accounts
receivable, loans, advances, and any other sums owed to 3L, Landanger-
Camus or the Subsidiaries as recorded in the Financial Statements and
not paid or settled as of the Closing Date, or incurred since the
close of the Financial Statements and not paid or settled as of the
Closing Date :
(i) are valid;
(ii) are not subject to any dispute, set-off or counterclaim; and
(iii) are collectible.
Except as otherwise disclosed in Exhibit 2.4.3 hereto, none of such
assets are subject to any prior assignment, lien or security interest.
<PAGE>
-8-
2.4.4 Accounts receivable owed by Geyser S.A. to 3L, Landanger-Camus and/or
the Subsidiaries will be paid by Geyser S.A. by 31, May 1997 at the
latest. Any such account receivable not paid by 15 July, 1997 will
bear interests at a rate equal to the French legal interest rate
(published in the French Official Journal) plus three (3) points per
year. For any such accounts receivable owed by Geyser S.A. and not
paid by 31 May 1997, 3L, Landanger-Camus or the Subsidiaries will send
to Geyser S.A. a formal notice by registered mail with return receipt
requested. If such account receivable is not paid by Geyser S.A.
within eight (8) days from the sending of such formal notice, and even
if Geyser S.A. disputes the validity or amount of such account
receivable, the Guarantors will indemnify the Beneficiary for the full
amount of such account receivable and interest thereon, within thirty
(30) days from receipt by the Guarantors of a notice from the
Beneficiary stating that Geyser S.A. has not paid such account
receivable together with a copy of the formal notice initially sent by
3L, Landanger-Camus or the Subsidiaries to Geyser S.A.,
notwithstanding any provision to the contrary in this Indemnification
Agreement and particularly in Section 4.2.3(a) hereto or in other
agreements.
2.4.5 Except as disclosed in Exhibit 2.4.5 hereto, there is no potential
liability or liabilities which could result from any court judgment,
out-of-court settlement, administrative decision, binding order, event
or factor of whatever nature, (i) in an amount, individually or in the
aggregate, in excess of one (1) million French Francs and (ii) which
was not recorded in the Financial Statements, or which has been
revealed since such date not in the ordinary course of business and
consistent with recent past practice.
2.4.6 The excess of debt over cash of Landanger-Camus (to be calculated
pursuant to Exhibit 2.4.6 hereto) on a consolidated basis is not
greater than as of 31 August 1996 (as set forth in Exhibit 2.4.6)
subject to differences only due to seasonal fluctuations, i.e. to
facts, operations or transactions that occur regularly every year at
the same time period of the year and provided they have occurred in
the ordinary course of business and are consistent with recent
practice.
SECTION 2.5 - GEYSER S.A. - AED SOFT - SURGICAL INSTRUMENTS ACTIVITY
- --------------------------------------------------------------------
2.5.1 The operations described in Sections 4.3 and 4.4 of the Share Purchase
Agreement have been completed in their entirety, in accordance with
all applicable laws and regulations, without any infringement of any
obligations or commitments, whether legal, contractual or other, and
none of the Beneficiary, 3L, Landanger-Camus or any of the
Subsidiaries will incur any liabilities whatsoever, including without
limitation any tax liabilities, resulting therefrom.
<PAGE>
-9-
2.5.2 All amounts owed as of the Closing Date, or which might fall due
thereafter, for whatever reason to 3L, Landanger-Camus or any of the
Subsidiaries, by Geyser S.A., or AED Soft or regarding the surgical
instruments activity (as such term is described in Section 4.4 of the
Share Purchase Agreement) are listed in Exhibit 2.5.2 hereto. Such
sums will be entirely, timely and validly paid by such companies, or
by the entity which will carry out the Surgical Instrument Activity,
subject to section 2.4.4 regarding the amounts owed by Geyser S.A. to
3L, Landanger-Camus or the Subsidiaries.
SECTION 2.6 - CONDUCT OF BUSINESS PRIOR TO THE CLOSING
- ------------------------------------------------------
During the period from the date of execution of the Share Purchase Agreement to
the Closing, 3L, Landanger-Camus and the Subsidiaries have carried out their
respective businesses with due care and only in the ordinary course of business,
have maintained the integrity of their assets and, in particular, their
prospects and business relationships, and have not increased their liabilities
other than in the ordinary course of business and in no event by more than one
million (1,000,000) French Francs. Without in any respect limiting the
generality of the foregoing, prior to the Closing, 3L, Landanger-Camus and the
Subsidiaries have not, without the Beneficiary's prior written consent :
(a) sold, transferred or otherwise disposed of any of their assets, except
for:
(i) sales of inventory in the ordinary course of business;
(ii) the operations provided for in Sections 4.3 and 4.4 of the Share
Purchase Agreement; and
(iii) the transfer to Landanger-Camus of the shares of the SCIs
ORTHOTIM and GAM respectively Lessee under a financing lease
(preneur a credit bail) and owning the premises located in
Villeurbanne;
(b) mortgaged, pledged or encumbered, or granted any privilege or
guarantee affecting, any of their assets;
(c) increased the remuneration or employment benefits of any of their
employees, officers, representatives or advisors;
(d) initiated any collective or individual termination of employment
agreements, other than for faute grave or faute lourde;
(e) concluded any new employment agreement, or terminated or modified, in
any manner whatsoever, any employment agreements in force as of the
date hereof, with the exception of those entered into between any
shareholders and Landanger-Camus, 3L or any of the Subsidiaries, which
must be terminated at the latest on the Closing Date (except for
Michel Colombier's contract and Maryvonne Guibert's contract, in
accordance with Section 2.13.5 below);
(f) modified, terminated or canceled any contracts by which they are bound
under circumstances which would affect their business relations,
prospects,
<PAGE>
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relationship with developers and licensors or the operations
contemplated in the Share Purchase Agreement;
(g) entered into or renewed any Material contract with respect to their
assets or business, except in the ordinary course of business or as
contemplated under the Share Purchase Agreement; a contract is deemed
"Material" when it has a direct or indirect impact of thirty thousand
(30,000) French Francs or more;
(h) maintained levels of inventory of their products inconsistent with
their past practices, subject to usual seasonal variations and
customer demands;
(i) operated credit control, cash collection and payment inconsistent with
recent past practice;
(j) paid any obligation or liability relating to or in respect of their
business, other than current liabilities in the ordinary course of
their business, or waived, released or settled any rights or claims of
3L, Landanger-Camus or the Subsidiaries relating to or in respect of
their businesses exceeding two hundred and fifty thousand (250,000)
French Francs in the aggregate per company;
(k) authorized or proposed any of the foregoing, or entered into any
agreement, commitment or undertaking, written or oral, to do any of
the foregoing; or
(l) incurred any capital expenditure in excess of fifty thousand (50,000)
French Francs for a single investment, or one hundred thousand
(100,000) French Francs in the aggregate per company;
SECTION 2.7 - LITIGATION AND COMPLIANCE
- ---------------------------------------
2.7.1 Except as otherwise disclosed in Exhibit 2.7.1 hereto, there is no
pending or threatened action, claim, suit, arbitration or proceeding
against 3L, Landanger-Camus or any of the Subsidiaries.
2.7.2 3L, Landanger-Camus and the Subsidiaries have conducted, and continue
to conduct their respective businesses in all Material respects in
compliance with applicable laws and regulations (including, without
limitation, all applicable tax, social security, criminal, customs,
labor, consumer protection, competition, zoning and product
regulations); non compliance is deemed "Material" when it has a direct
or indirect impact of thirty thousand (30,000) French Francs or more.
2.7.3 Except as otherwise disclosed in Exhibit 2.7.3 hereto, none of 3L,
Landanger-Camus or any of the Subsidiaries have received: (i) any
notification from any public authority of any violation of any such
laws or regulations, or (ii) any notification or correspondence
relating to any inquiry implying any such violation.
2.7.4 There is no court judgment, out-of-court settlement, administrative
decision, binding order, event or factor of whatever nature, nor any
risk of same, which could result in a prohibition to manufacture, sell
or otherwise deal with
<PAGE>
-11-
a product which is Material to the activities of 3L, Landanger-Camus
and the Subsidiaries; a product is deemed "Material" to the activities
of 3L, Landanger-Camus and the Subsidiaries when sales of such product
are above thirty thousand (30,000) French Francs per year.
2.7.5 Notwithstanding the generality of the above provisions, there is no
action against any of 3L, Landanger-Camus or the Subsidiaries, or any
of their employees, corporate officers (mandataires sociaux) or
shareholders, nor to the best knowledge of the Guarantors any risk of
same, nor any potential liability for any of 3L, Landanger-Camus or
the Subsidiaries, relating to: (i) a violation of Article L.365-1 of
the French Public Health Code, with the exception of the action
currently pending against an officer of Medinov AMP and/or (ii) a
violation of Articles L. 209-1 and following of the French Public
Health Code (Huriet Law) and/or (iii) any criminal offense.
2.7.6 Notwithstanding the generality of the above provisions, there is no
action against any of 3L, Landanger-Camus or the Subsidiaries, nor any
risk of same, nor any potential liability for any of 3L, Landanger-
Camus or the Subsidiaries resulting from any breach of the stock
exchange regulations.
SECTION 2.8 - INTELLECTUAL PROPERTY
- -----------------------------------
2.8.1 3L, Landanger-Camus and the Subsidiaries own all French and foreign
intellectual property rights (including droits d'auteurs), copyrights,
drawings, logos, patents and patent applications, manufacturing and
trade secrets, manufacturing marks, trademarks or service marks,
inventions, know-how, and licenses or sublicenses relating thereto
which they use in the conduct of their respective activities
(hereinafter referred to as the "Intellectual Property") as same is
listed in Exhibit 2.8.1.A hereto, except for: (i) those which are in
the public domain, and (ii) the intellectual property right owned and
licensed by third parties, as same is specifically identified in said
Exhibit 2.8.1.B hereto.
2.8.2 Exhibit 2.8.1.A lists the respective commercial names pertaining to
said Intellectual Property when applicable.
2.8.3 In respect of all Intellectual Property which is registered as of the
date hereof, all the applications submitted have been duly filed
and/or registered and/or issued, and/or renewed when applicable, are
valid and in full force and effect, and in compliance with all
applicable laws and regulations and all annual renewal fees relating
thereto have been paid.
2.8.4 Except as otherwise disclosed in Exhibit 2.8.4 hereto and to the best
knowledge of the Guarantors, none of the Intellectual Property
infringes or otherwise violates any right of any third party in any
country, and more generally, there are no known or threatened claims
of infringement of any intellectual property rights of any third
party. No claims or demands by any other person pertaining to any of
the Intellectual Property have been made or are threatened.
<PAGE>
-12-
2.8.5 To the best knowledge of the Guarantors, none of the Intellectual
Property is subject to any infringement or other violation by a third
party, under any form, and in any country.
SECTION 2.9 - ENVIRONMENTAL CONDITIONS
- --------------------------------------
2.9.1 None of 3L, Landanger-Camus nor any of the Subsidiaries has been or is
in breach of any environmental laws, regulations or injunctions
(hereinafter referred to as the "Environmental Law"). In particular,
there are no substances present on or under the premises used by any
of them, or in connection with the conduct and operation of their
respective activities which constitute a breach of any Environmental
Law.
2.9.2 None of 3L, Landanger-Camus nor any of the Subsidiaries is subject to
any liabilities (including liabilities for cleaning up and/or
remediation, and/or costs for personal injury or property damage) as a
result of any Material breach of any Environmental Law; a breach is
deemed "Material" when it has a direct or indirect impact of thirty
thousand (30,000) French Francs or more.
2.9.3 No expenditures are required in connection with the activities of any
of 3L, Landanger-Camus or any of the Subsidiaries, as same are
presently conducted, in order to comply with any Environmental Law.
SECTION 2.10 - REAL PROPERTY
- ----------------------------
2.10.1 Exhibit 2.10.1.A hereto lists (together with a map) each parcel of
real property owned by 3L, Landanger-Camus and the Subsidiaries
(hereinafter referred to as the "Real Property"). 3L, Landanger-Camus
and the Subsidiaries have full and valid title to all Real Property,
free from any mortgages, liens, pledges or other encumbrances.
Exhibit 2.10.1.B hereto lists each parcel of real property leased by
3L, Landanger-Camus and the Subsidiaries (hereinafter referred to as
the "Leased Real Property") stating for each parcel: (i) the address
of the parcel, (ii) the name and address of the owner, (iii) the type
of lease, (iv) date of entry into force and the term of the lease and
(v) the amount of the rent.
3L, Landanger-Camus and the Subsidiaries have full and valid deeds to
lease all the Leased Real Property, free from any encumbrances.
2.10.2 All documents necessary to prove the title of 3L, Landanger-Camus and
the Subsidiaries to the Real Property and the existence of valid
leases to the benefit of 3L, Landanger-Camus and the Subsidiaries for
the Leased Real Property are in the possession of the relevant
company.
<PAGE>
-13-
2.10.3 To the best knowledge of the Guarantors, the Real Property and the
Leased Real Property is free from defects, in a good state of repair,
and in good working order, and is capable of being properly used in
connection with the respective activities of 3L, Landanger-Camus and
the Subsidiaries.
2.10.4 With the exception of the real property located at Fillinge and
described in Exhibit 2.10.4 hereto, no third party owns any real
property required in connection with the conduct of the respective
activities of 3L, Landanger-Camus and the Subsidiaries. The commercial
lease currently in effect for the real property located at Fillinge
will be terminated as from the Closing Date at no cost to 3L,
Landanger-Camus or the Subsidiaries and a short-term lease with a term
of two years as from the Closing Date and terminable at any time with
a three (3) month notice period from the lessee will be entered into
by the Closing Date.
SECTION 2.11 - PERSONAL PROPERTY
- --------------------------------
2.11.1 As of the date of close of the Financial Statements, 3L, Landanger-
Camus and the Subsidiaries had full and valid title to, free and clear
from any charges, liens, pledges or other encumbrances, all of the
personal tangible and intangible property as reflected in the
Financial Statements.
2.11.2 On the Closing Date, 3L, Landanger-Camus and the Subsidiaries will
have full and valid title to, free and clear from any charges, liens,
pledges or other encumbrances, such personal property, as well as to
all personal tangible and intangible property acquired in the ordinary
course of business as defined in Section 2.6 hereof, with the
exception of personal tangible and intangible property which have been
disposed of since the date of close of the Financial Statements in the
ordinary course of business (the resulting personal property on the
Closing Date is hereinafter referred to collectively as the "Personal
Property").
2.11.3 The Personal Property is free and clear from any charges, liens,
pledges or other encumbrances, from defects, is in a good state of
repair and in good working order, and is capable of being properly
used in connection with the respective activities of 3L, Landanger-
Camus and the Subsidiaries, except as disclosed in Exhibit 2.11.3
hereto.
2.11.4 No third party owns any other personal property, whether tangible or
intangible, required for the conduct of the respective activities of
3L, Landanger-Camus or the Subsidiaries except as disclosed in Exhibit
2.11.4 hereto.
SECTION 2.12 - MATERIAL CONTRACTS
- ---------------------------------
2.12.1 All Material outstanding contracts, purchase orders, licenses and sub-
licenses (both domestic and foreign), leases (whether for real or
personal property), loan agreements, agreements regarding subsidies
granted to 3L, Landanger-Camus or the Subsidiaries, mortgages and
other undertakings of any kind, whether written or oral, to which 3L,
Landanger-Camus or any of the
<PAGE>
-14-
Subsidiaries is a party, or to which any of the assets, liabilities or
activities of any of these companies is subject (hereinafter referred
to as the "Contracts"), are valid, binding and in full force and
effect, comply with all applicable laws and regulations, have been
concluded on an arm's length basis; contracts, purchase orders,
licenses and sub-licenses, leases, loan agreements, agreements
regarding subsidies are deemed "Material" when they have a direct or
indirect impact of thirty thousand (30,000) French Francs or more.
2.12.2 All Contracts with a duration of more than one year or involving the
payment or receipt of sums in excess of 300,000 French Francs per year
are listed in Exhibit 2.12.2 hereto.
2.12.3 Except as otherwise disclosed in Exhibit 2.12.3 hereto, none of 3L,
Landanger-Camus or any of the Subsidiaries are in default under any of
the Contracts, or is aware of any default committed by any contracting
party thereto.
2.12.4 All consents or approvals from any contracting party to any of the
Contracts required for the sale of the Shares by the Sellers and/or
the Purchase of the Shares by the Beneficiary have been validly
obtained.
2.12.5 The transfer to the Beneficiary of title to the Shares will not,
directly or indirectly, conflict in any way with the provisions, or
result in a breach, suspension, amendment or termination, of any of
the Contracts (including without limitation product licence agreements
with product developers, agreements regarding Intellectual Property
rights, loan agreements and agreements regarding subsidies granted to
3L, Landanger-Camus or the Subsidiaries) or give to the other
contracting third party a right to terminate or amend same.
2.12.6 None of 3L, Landanger-Camus or any of the Subsidiaries have received a
notification of the intent of any contracting third party to terminate
or to not renew any of the Contracts.
2.12.7 Without limiting the generality of the foregoing, none of 3L,
Landanger-Camus or the Subsidiaries is a party to any Contract which
is unrelated to their respective activities.
SECTION 2.13 - LABOR MATTERS
- ----------------------------
2.13.1 Exhibit 2.13.1 hereto sets forth the number of employees, categorized
by activity or country, working as of the Closing Date at the sites of
3L, Landanger-Camus and the Subsidiaries.
2.13.2 3L, Landanger-Camus and the Subsidiaries comply in all Material
respects with applicable labor and social security laws and
regulations; non-compliance is deemed "Material" when it has a direct
or indirect impact of thirty thousand (30,000) French Francs or more.
<PAGE>
-15-
2.13.3 Except as otherwise disclosed in Exhibit 2.13.3 hereto, no corporate
officer (mandataire social), employee or agent of 3L, Landanger-Camus
or the Subsidiaries has any rights exceeding the statutory
requirements (including those existing in collective bargaining
agreements which apply to the company concerned), including in case of
termination of their functions.
2.13.4 No trade union or labor disputes or work stoppages involving 3L,
Landanger- Camus or the Subsidiaries are pending or, to the best
knowledge of the Guarantors, threatened, except as disclosed in
Exhibit 2.13.4 hereto.
2.13.5 Except as disclosed in Exhibit 2.13.5 hereto, none of the Sellers will
have an employment agreement with 3L, Landanger-Camus or any of the
Subsidiaries as of the Closing Date. If any of the Sellers had
employment agreements prior to the Closing, same will be terminated
(except as disclosed in Exhibit 2.13.5 hereto) at no cost to 3L,
Landanger-Camus or the Subsidiaries.
SECTION 2.14 - EMPLOYEE BENEFIT MATTERS
- ---------------------------------------
2.14.1 Exhibit 2.14.1 hereto lists all benefit plans, profit-sharing plans
(whether mandatory or voluntary), company savings plans, stock option
plans, retiree, medical or life insurance plans, and retirement and
severance agreements for the benefit of any officer or employee of 3L,
Landanger-Camus and the Subsidiaries (hereinafter collectively
referred to as the "Plans"). Each of the Plans complies in all
Material respects with all applicable laws; non-compliance is deemed
"Material" when it has a direct or indirect impact of thirty thousand
(30,000) French Francs or more.
2.14.2 Adequate reserves have been recorded in the accounts of 3L, Landanger-
Camus and the Subsidiaries in order to cover all the benefits and
advantages provided for in the Plans.
2.14.3 Entitlements to paid vacation accrued as of the respective dates of
the Financial Statements but unused are adequately provided for in the
Financial Statements.
SECTION 2.15 - TAXES AND SOCIAL SECURITY CHARGES
- ------------------------------------------------
2.15.1 For purposes of this Indemnification Agreement, the term "Taxes" will
include all forms of taxation and other public duties, whether in
France or elsewhere, including but not limited to income tax (impot
sur le revenu), corporation income tax (impot sur les societes),
capital gains tax (impot sur les plus-values), value added tax (taxe
sur la valeur ajoutee), business tax (taxe professionnelle), other
local taxes (autres impots locaux), registration duties (droits
d'enregistrement), customs and excise duties (droits de douanes),
stamp duties (droit de timbre), social security and pension
institutions (URSSAF), payments into voluntary or mandatory private
health care schemes, unemployment contributions (ASSEDIC), any other
governmental past or present local taxes, duties or social charges,
any other contributions to public, semi-public or private bodies
organisms, as well as any interest or penalties incurred in connection
with any of the foregoing.
<PAGE>
-16-
2.15.2 Until the Closing Date :
(a) all of the Tax returns required to be filed with respect to 3L,
Landanger-Camus and the Subsidiaries have been timely filed;
(b) all such returns are or will be correct and complete in all Material
respects; non-compliance is deemed "Material" when it has a direct or
indirect impact of thirty thousand (30,000) French Francs or more.
(c) no adjustment relating to such returns has been proposed or imposed by
any tax or social security authority;
(d) there have not been actions or proceedings for the assessment or
collection of Taxes pending or, to the best knowledge of the
Guarantors, threatened against 3L, Landanger-Camus or any of the
Subsidiaries, except as otherwise disclosed in Exhibit 2.15.2(d)
hereto;
(e) all Taxes shown on such returns or otherwise due have been timely and
properly paid, or adequate reserves have been provided on the
Financial Statements to pay same;
(f) any Taxes falling due by the Closing Date have been timely and
properly paid by 3L, Landanger-Camus and the Subsidiaries; and
(g) all reserves and liabilities for Tax have been adequately and
correctly accounted for in the accounts of 3L, Landanger-Camus and the
Subsidiaries;
(h) there have not been nor will be disallowed transfer prices for
intragroup services and assets and no disguised profit distributions
and similar operations.
SECTION 2.16 - UNDISCLOSED LIABILITIES
- ---------------------------------------
With the exception of the liabilities shown in the Financial Statements or which
have been incurred by 3L, Landanger-Camus or the Subsidiaries in the ordinary
course of business as described in Section 2.6 hereof since the date of close of
the Financial Statements, none of 3L, Landanger-Camus or any of the Subsidiaries
have any liabilities of whatever nature, whether certain, contingent, future or
otherwise.
None of 3L, Landanger-Camus or any of the Subsidiaries have granted any warranty
to, or stands surety for, any third party for any reason whatsoever.
No shareholder of 3L, Landanger-Camus or any of the Subsidiaries has any right
against 3L, Landanger-Camus or any of the Subsidiaries.
SECTION 2.17 - DIVIDENDS - RECAPITALIZATION AND PURCHASE OF SHARES
- ------------------------------------------------------------------
2.17.1 The dividend declared out of the profits of Landanger-Camus for the
financial year ended on 31 August 1996 has not exceeded seven million
five hundred
<PAGE>
-17-
and seventy two thousand eight hundred and forty five (7,572,845)
French Francs. No precompte tax (tax for previous deduction) is due in
connection with this dividend. No dividend has been paid out of the
profits of 3L and the Subsidiaries for their respective last financial
year.
2.17.2 Since the close of the financial year covered by the Financial
Statements, none of 3L, Landanger-Camus or the Subsidiaries have :
(a) authorized the issue or have issued any securities other than those
reflected in the Financial Statements; or
(b) directly or indirectly redeemed or purchased any of their shares or
securities, or agreed to take any such action.
SECTION 2.18 - INSURANCE
- ------------------------
2.18.1 3L, Landanger-Camus and the Subsidiaries maintain insurance of the
type and covering amounts appropriate for the ownership and operation
of their assets, and the conduct of their respective activities.
2.18.2 Exhibit 2.18.2 hereto lists all pending events, claims, disputes and
litigations involving insurance policies relating to 3L, Landanger-
Camus or the Subsidiaries as well as all the insurance policies
relating to 3L, Landanger-Camus or the subsidiaries. There are no
other pending claims under the insurance policies from which 3L,
Landanger-Camus and the Subsidiaries currently benefit.
2.18.3 None of 3L, Landanger-Camus or the Subsidiaries are in Material breach
or default of, and no event has occurred which will constitute such a
breach or default or permit termination or modification of, any such
insurance policy; a breach is deemed "Material" when it has a direct
or indirect impact of thirty thousand (30,000) French Francs or more.
To the best knowledge of the Guarantors, all insurance premiums due on
or before the Closing Date have been paid in full by 3L, Landanger-
Camus and the Subsidiaries.
SECTION 2.19 - INTERESTED PARTIES
- ---------------------------------
2.19.1 None of the Sellers, or any shareholder, corporate officer (mandataire
social) or employee of 3L, Landanger-Camus or the Subsidiaries, or any
individual related to any such persons, or any affiliate or other
legal entity or enterprise directly or indirectly affiliated or
associated with any of such persons :
(i) has directly or indirectly entered into any oral or written
agreement with 3L, Landanger-Camus or any of the Subsidiaries,
with the exception of the employment agreements for employees of
such companies, including but not limited to those involving the
payment of any fee, commission, pension, life annuity or any
other sum whatsoever, except as otherwise disclosed in Exhibit
2.19.1(i) hereto; or
(ii) has any right, or has claims in respect thereof, directly or
indirectly, in whole or in part, over any of the Real Property,
the Leased Real
<PAGE>
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Property, the Personal Property, or the Intellectual Property used by
3L, Landanger-Camus and the Subsidiaries, except as otherwise
disclosed in Exhibit 2.19.1(ii) hereto.
2.19.2 Any outstanding shareholders' loans and current accounts (comptes
courants d'actionnaire) of 3L, Landanger-Camus or the Subsidiaries
will have been paid or reimbursed prior to the Closing Date.
SECTION 2.20 - PRODUCT LIABILITY
- --------------------------------
All products manufactured and/or sold by 3L, Landanger-Camus and the
Subsidiaries comply in all Material respects with all applicable rules,
regulations, purchase orders and standards; non-compliance is deemed "Material"
when it has a direct or indirect impact of thirty thousand (30,000) French
Francs or more. There have not been any recalls or required adaptation or
modification of such products prior to the Closing Date, except as disclosed in
Exhibit 2.20 hereto.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE BENEFICIARY
The Beneficiary hereby represents and warrants as follows :
SECTION 3.1 - ORGANIZATION
- --------------------------
The Purchaser is a corporation validly organized under the laws of the State of
Delaware, United States of America. The Beneficiary, to whom the Purchaser has
assigned its rights and obligations under the Share Purchase Agreement, is a
corporation validly organized under the laws of France.
SECTION 3.2 - AUTHORITY - NO CONFLICTS - NO APPROVALS
- -----------------------------------------------------
The Beneficiary has full authority and capacity to execute the Share Purchase
Agreement and the Indemnification Agreement, and to perform same.
The execution of the Share Purchase Agreement and the Indemnification Agreement
and the performance by the Beneficiary of its obligations under such agreements
have been authorized by the Beneficiary's Board of Directors and do not require
any prior authorization, clearance or approval of any kind whatsoever from any
third party, including public or administrative authorities, whether national or
supranational, other than those set forth in Section 4.2 of the Share Purchase
Agreement. The Share Purchase Agreement and the Indemnification Agreement have
been duly executed by the Purchaser and the Beneficiary, and constitute the
Beneficiary's legal, valid and binding obligation enforceable against them in
accordance with the terms of such Agreements. There is no litigation which
would prevent the Beneficiary from performing its obligations under the Share
Purchase Agreement and the Indemnification Agreement.
<PAGE>
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SECTION 4 - INDEMNIFICATION
SECTION 4.1 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
- --------------------------------------------------------
4.1.1 The representations and warranties of the Guarantors and the
Beneficiary contained in this Indemnification Agreement and the
Exhibits hereto are valid as of the date of signature of the Share
Purchase Agreement and will remain in force from the date of signature
of the Share Purchase Agreement until the Closing Date, and for a
further period of three (3) years following the Closing Date.
Notwithstanding the foregoing, the representations and warranties
pertaining to tax and social security matters will remain in force
until expiry of a sixty (60) day period following expiry of the
applicable statute of limitations.
Any claim to be made pursuant hereto will therefore have to be made
within the above-mentioned period.
4.1.2 No claim may be made pursuant hereto on the basis of any
representation or warranty which has expired pursuant to sub-section
4.1.1 above.
SECTION 4.2 - REFUND OF PART OF THE PRICE BY THE GUARANTORS
- -----------------------------------------------------------
4.2.1 Except as otherwise limited, the Guarantors will jointly and severally
(solidairement) refund a part of the price paid by the Beneficiary for
the Shares, such refunded sums being equal to any and all losses,
liabilities, damages, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees and
expenses (hereinafter referred to as a "Loss" or "Losses") suffered
directly or indirectly by the Beneficiary, 3L, Landanger-Camus and/or
the Subsidiaries arising out of or resulting from any inaccuracy in or
breach of any representation or warranty made by the Guarantors in
this Indemnification Agreement, it being understood, however, that no
Loss shall be deemed to have occurred if it has been sufficiently and
adequately reserved in the unaudited consolidated balance sheet of the
Landanger-Camus Group as of 28 February 1997 to be delivered to the
Purchaser or Beneficiary pursuant to Section 2.2.2 of the Share
Purchase Agreement. Moreover, the following is expressly specified:
(a) any sum paid by the Guarantors to the Beneficiary pursuant to this
Section is deemed to be a refund (remboursement) of part of the
purchase price paid by the Beneficiary for the Shares pursuant to the
Share Purchase Agreement.
(b) any Loss caused by a third party claim, and for which a final decision
is made in accordance with the stipulations of this Indemnification
Agreement that the Beneficiary must be refunded by the Guarantors in
respect of such Loss, will include interest at a rate equal to the
Paris Interbank Offered Rate-one year plus 1.5 point on the amount of
any payment made by 3L, Landanger-Camus or the Subsidiaries as a
result of a third party claim, as from the date on which a payment was
made, or a Loss was suffered, by 3L, Landanger-
<PAGE>
-20-
Camus or the Subsidiaries as a result of such third party claim, until
the date on which such Loss is refunded by the Guarantors; and
(c) in the event of a claim by the Beneficiary pursuant to its right to be
refunded, the Guarantors may in no way claim that they are relieved in
whole or in part (including by way of a reduction of the amount
recoverable and/or another concept of mitigation of damages) of any or
all of their obligation to refund based on the fact that the
Beneficiary was or should have been aware of the situation, whether by
virtue of : (x) investigations conducted by or on behalf of the
Beneficiary, (y) information provided to the Beneficiary prior to the
date hereof other than as expressly provided otherwise in this
Indemnification Agreement, or (z) any other information which the
Beneficiary may have received at any time relating to the subject
claim.
4.2.2 At Closing, the Guarantors will provide the Beneficiary with a first
demand bank guaranty (garantie bancaire a premiere demande)
(hereinafter referred to as the "Guaranty") given by Paribas
Luxembourg, the purpose of which is to guarantee the payment(s) to be
made by the Guarantors to the Beneficiary pursuant to this
Indemnification Agreement. The amount of the Guaranty will be
sufficient to cover:
(a) during the year from the Closing Date to the date of the first
anniversary thereof : ten percent (10%) of the price for the Shares
paid to the Guarantors pursuant to Section 2.2 of the Share Purchase
Agreement, provided that if after the Closing, the Beneficiary pays a
portion or the total of the Additional Price pursuant to Section 2.2.4
of the Share Purchase Agreement, the amount of the Guaranty will be
increased to cover 10% of the Additional Price paid to the Guarantors;
(b) during the year from the first anniversary of the Closing Date to the
date of the second anniversary thereof: six percent (6%) of the price
for the Shares and the Additional Price paid to the Guarantors
pursuant to Section 2.2 of the Share Purchase Agreement;
(c) during the year from the second anniversary of the Closing Date to the
date of the third anniversary thereof: three percent (3%) of the price
for the Shares and the Additional Price paid to the Guarantors
pursuant to Section 2.2 of the Share Purchase Agreement.
The functioning of the Guaranty and the related escrow account is
described in the "Irrevocable first demand guarantees n 97/03/0014
and 97/03/0015" and the related Escrow Agreement signed this day
between the Beneficiary, the Guarantors and the Banque Paribas
Luxembourg S.A.
<PAGE>
-21-
4.2.3 The Guarantors' obligation to refund the Beneficiary in accordance
with this Indemnification Agreement will be subject to the following
limitations:
(a) The Guarantors will not be obligated to refund to the Beneficiary a
portion of the price in accordance with the provisions of this Section
4:
(i) in respect of any single Loss in an amount not exceeding fifty
thousand (50,000) French Francs, it being understood that if
there is more than one single Loss of the same nature or having
the same cause, the amounts of each of such single Losses will be
added together to form one and the same single Loss, this for
purposes of calculating whether or not the threshold of fifty
thousand (50,000) French Francs is reached and assessing whether
or not a reduction in the price is due; or
(ii) if the aggregate amount of all single Losses is under seven
million (7,000,000) French Francs. The provisions under Section
2.4.4 hereto will not be taken into account for calculating this
amount.
(b) The aggregate amount of the refund paid by the Guarantors to the
Beneficiary pursuant to the terms of this Indemnification Agreement
will not exceed the purchase price paid by the Beneficiary for the
Shares, as stipulated in Section 2.2 of the Share Purchase Agreement;
(c) Any proceeds actually recovered by 3L, Landanger-Camus or any of the
Subsidiaries, as the case may be, in respect of any Loss, in
particular under any insurance policy or indemnification agreement or
guarantee, as well as the net amount of any tax impact favorable to
3L, Landanger-Camus or any of the Subsidiaries as a result of a Loss,
will reduce the amount of such Loss; and
INSERT "INSERT 1"
(d) Any amount recovered by the Beneficiary or 3L, Landanger-Camus or the
Subsidiaries from third parties with respect to a Loss which has given
rise to a refund by the Guarantors will be promptly repaid to the
Guarantors.
SECTION 4.3 - INDEMNIFICATION BY THE BENEFICIARY
- ------------------------------------------------
Except as otherwise limited herein, the Beneficiary will indemnify the
Guarantors in respect of any and all liabilities, damages, costs and expenses
(including reasonable attorneys' fees and expenses) suffered by them arising out
of or resulting from any inaccuracy in, or breach of, any representation or
warranty made by the Beneficiary contained in this Indemnification Agreement.
SECTION 4.4 - GENERAL INDEMNIFICATION PROVISIONS
- ------------------------------------------------
4.4.1 For the purposes of this Section 4.4: (i) the term "Indemnitee" will
refer to the person or persons refunded in respect of part of the
purchase price or indemnified, or entitled to be refunded or
indemnified, or claiming to be entitled to be refunded or indemnified,
pursuant to the provisions of Sections
<PAGE>
INSERT 1
The amount of the Loss will be reduced by any reserve which no longer appears in
the accounts ("the surplus reserve"), and further provided that the surplus
reserve and the Loss belong to the same category of accounts being defined as
the same accounts with three figures as the same appear in the Plan comptable
general.
<PAGE>
-22-
4.2 or 4.3, as the case may be, (ii) the term "Indemnitor" will refer
to the person or persons having the obligation to refund or indemnify
pursuant to such provisions, and (iii) the term "Parties' Losses" will
refer to the Losses of either Party hereto, 3L, Landanger-Camus or the
Subsidiaries, as the case may be. The obligations and liabilities of
an Indemnitor under this Section 4 with respect to Losses subject to
the refund or indemnification provided for in this Article
(hereinafter referred to as the "Indemnified Claims") will be governed
by and contingent upon the following additional terms and conditions,
it being understood that the refund or indemnification will only be
available hereunder if the following terms and conditions are
followed.
4.4.2 An Indemnitee will give the Indemnitor notice of any matter that may
give rise to a right to a refund or indemnification under this
Indemnification Agreement within thirty (30) days after being made
aware thereof and, together with such notice, the Indemnitee will
provide to the Indemnitor all information in its possession with
respect to the claim and will provide such further information and
assistance as may be reasonably requested by the Indemnitor.
When the Beneficiary is the Indemnitee within the meaning given to
such term in this Section, the Beneficiary must also notify the Banque
Paribas Luxembourg S.A. in conformity with the irrevocable first
demand guarantees mentioned in Section 4.2.2 of this Agreement, such
obligation remaining valid until expiry of said guarantees.
The Indemnitor will be entitled to assume and control the defense of
such Indemnified Claim at its expenses and through counsel of its
choice by notifying the Indemnitee of its intention to do so within
fifteen (15) days of receipt of such notice from the Indemnitee.
The Indemnitee will cooperate with the Indemnitor in such defense, and
make available to it all such witnesses, records, materials and
information in its possession or under its control relating thereto as
is reasonably required by the Indemnitor, and will transmit without
delay to the Indemnitor any information, notification, court or
arbitration decision or proposal to settle relating thereto which it
receives.
Similarly, in the event the Indemnitee is conducting the defense
against any Indemnified Claim, the Indemnitor will cooperate with the
Indemnitee in such defense and make available to it at Indemnitor's
expense all such witnesses, records, materials and information in its
possession or under its control relating thereto as is reasonably
required by the Indemnitee.
In any event, the Party conducting the defense against any Indemnified
Claim will keep the other party reasonably informed of the development
of such Indemnified Claim.
4.4.3 No Indemnified Claim may be settled by the Indemnitor or the
Indemnitee without the written consent of the Indemnitee or, as the
case may be, the Indemnitor, which consent will not be unreasonably
withheld or delayed.
<PAGE>
-23-
4.4.4 Subject to the previous sections, in no event will the Beneficiary be
prevented from settling any claim by a third party on the grounds that
a pending dispute exists between the Beneficiary and the Guarantors on
any other claim.
4.4.5 For purposes of this Section 4, a final decision shall be made with
the consequence that the Indemnitee will be entitled to be refunded or
indemnified by the Indemnitor upon a decision, judgment, decree or
other order by any court of competent jurisdiction, which decision,
judgment, decree or other order has become final with respect to the
Indemnitee (i.e., all allowable appeals have been exhausted by either
-----
party to the action or the time period within which such appeal may be
filed has expired).
SECTION 5 - GENERAL PROVISIONS
SECTION 5.1 - CONFIDENTIALITY
- -----------------------------
5.1.1 All information and documents provided to either Party within the
framework of the transaction contemplated herein is deemed to be
confidential in nature, irrespective of whether or not the transaction
is consummated. Any analyses, compilations, studies or other documents
prepared by either Party, its employees, officers, representatives or
advisors within the framework of said transaction will be kept
confidential by such Party. Neither Party will use or disclose, and
represents that its employees, officers, representatives and advisors
will not use or disclose, such information during a period of five (5)
years from the date hereof, except to the extent such information :
(i) was known to the receiving Party prior to receipt thereof from
the other Party, and was not subject to a confidentiality
commitment; or
(ii) is or becomes generally known to the public; or
(iii) is received by the receiving Party from a source not subject to
a confidentiality commitment; or
(iv) has been or is gathered or obtained by the receiving Party
independently from the confidential information disclosed by the
other Party.
5.1.2 In particular, the Parties undertake to keep the contents of this
Indemnification Agreement and of the Share Purchase Agreement
confidential, subject to disclosure as may be required pursuant to:
(i) proceedings conforming with the provisions of Section 5.12 hereof,
(ii) any tax audit, (iii) French or United States securities
regulation requirements, (iv) competition and labor law requirements
in France or in any country in which 3L, Landanger-Camus or the
Subsidiaries conduct their respective activities, (v) any other
requirement of a public authority, or (vi) a press release issued
pursuant to Section 5.4 below.
<PAGE>
-24-
SECTION 5.2 - EXPENSES - TAXES
- ------------------------------
Except as otherwise specified in this Indemnification Agreement, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection herewith and the
transactions contemplated herein, will be borne by the Party incurring such
costs and expenses, irrespective of whether or not the Closing takes place. The
Beneficiary will pay the registration taxes (droits d'enregistrement) and stamp
duties (droits de timbre) due in connection herewith.
All expenses and taxes resulting from the operations described in Sections 4.3,
4.4 and 4.6 of the Share Purchase Agreement will be borne by the Sellers,
irrespective of whether or not the Closing takes place.
SECTION 5.3 - NOTICES
- ---------------------
All notices, claims, demands and other communications hereunder will be made in
writing, given or made by delivery in person, by courier service, registered
mail (postage prepared, return receipt requested), telecopy, telegram or telex,
to the respective Parties at the following addresses (or at such other addresses
as may be specified in a notice given in accordance with this Section 5.3):
(a) If to the Beneficiary:
DePuy Orthopedie S.A.
2 rue du Bois Sauvage
91000 Evry
Telecopy: 01 60 78 17 73
Attention: Bruce de la Grange
DePuy, Inc.
P.O. Box 988
700 Orthopaedic Drive
Warsaw
Indiana 46581-0988
U.S.A.
Telecopy: (00-1) 219 269 5675
Attention: Legal Department
DePuy International Ltd.
St. Anthony's Road
Leeds
Yorkshire LS11 8DT
U.K.
Telecopy: (00-44) 113 272 4192
Attention: Legal Department
with a copy to:
Coudert Brothers
1114 Avenue of the Americas
<PAGE>
-25-
New York, N.Y. 10036-7703
U.S.A.
Telecopy: (00-1) 626 4120
Attention: Jeffrey Cohen
and to:
Coudert Freres,
52, Avenue des Champs-Elysees
75008 Paris
France
Telecopy: (00-33) 1 53 83 60 60
Attention: Olivier de Precigout
(b) If to the Guarantors:
Mr. Patrick Landanger
85, quai d'Orsay
75007 Paris
France
Mr. Eric Landanger
15, rue des Acacias
52000 Jonchery
France
Ms. Maryvonne Guibert
9, boulevard Gambetta
52000 Chaumont
France
with a copy to:
Desfilis, Juchs & Associes
49 bis, Avenue F.D. Roosevelt
75508 Paris
France
Telecopy: (00-33) 1 45 63 29 68
Attention: Maitre J.L. Desfilis
A notice will be deemed to have been duly made or given:
(a) in the case of personal delivery, by the giving of a receipt of delivery of
such notice from the addressee, or from any person working at its above-
mentioned address,
(b) in the case of a registered letter or a courier delivery, upon first
presentation of such notice at the address of the addressee; and
<PAGE>
-26-
(c) in the case of a transmission by telecopy, telegram or telex, upon the
existence of proof of transmission, confirmed by registered letter
with return receipt requested sent at the latest on the first business
day following the date of such transmission.
SECTION 5.4 - PUBLIC ANNOUNCEMENTS
- ----------------------------------
Neither Party hereto will make, or cause to be made, any press releases or
public announcements in respect of this Indemnification Agreement, the Share
Purchase Agreement or the transactions contemplated hereby and thereby without
prior approval of the other Party, and the Parties will cooperate as to the
timing and contents of any such announcement. Nothing in this Section 5.4 will
prevent a Party from supplying any information as may be required by any public
authority or as will be required by law, but such Party will furnish notice
thereof to the other Party as soon as practicable given the circumstances.
SECTION 5.5 - SEVERABILITY
- --------------------------
If any term or other provision of this Indemnification Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Indemnification Agreement will,
nevertheless, remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties will
negotiate in good faith to modify this Indemnification Agreement so as to effect
the original intent of the Parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 5.6 - LANGUAGES
- -----------------------
This Indemnification Agreement is entered into and executed in the French and
English languages. In the event of any disputes concerning the construction or
meaning of this Indemnification Agreement, the French version will prevail.
SECTION 5.7 - ENTIRE AGREEMENT
- ------------------------------
Except as provided in the Share Purchase Agreement, this Indemnification
Agreement constitutes the entire agreement of the Parties hereto with respect to
the subject matter hereof, and supersedes all agreements and undertakings, both
written and oral, between the Guarantors and the Beneficiary, or any of the
companies of the group to which each Party belongs, prior to the date hereof
with respect to the subject matter herein.
SECTION 5.8 - WAIVERS, MODIFICATIONS OR AMENDMENTS
- --------------------------------------------------
<PAGE>
-27-
No waiver, modification or amendment of any provision of this Indemnification
Agreement will be valid, or of any force or effect, unless made in writing and
signed by each of the Parties hereto, and specifying with particularity the
nature and extent of such waiver, modification or amendment. Any such waiver,
modification or amendment will in no event be construed to be a general waiver,
abandonment, modification or amendment of any of the provisions of this
Indemnification Agreement, but the same will be strictly limited and restricted
to the extent and occasion specified in such writing or writings signed by the
Parties.
SECTION 5.9 - SECTION HEADINGS - EXHIBITS
- -----------------------------------------
The table of contents to this Indemnification Agreement and the headings of
particular sections herein are inserted only for convenience and are in no way
to be construed as part of this Indemnification Agreement or as a limitation of
the scope of the particular sections to which they refer.
Each Exhibit to this Indemnification Agreement constitutes an integral part
hereof; and all references to this Indemnification Agreement will include all
Exhibits hereto.
SECTION 5.10 - ASSIGNMENT - SUCCESSORS AND ASSIGNS
- --------------------------------------------------
Neither this Indemnification Agreement nor any rights, liabilities or
obligations hereunder may be assigned without the express written consent of the
other Party hereto (which consent will be given or refused at the discretion of
each of the Parties), although the Beneficiary will be entitled to assign all of
its rights and undertakings hereunder to any company belonging to the
Beneficiary's Group, as specified in Section 2.1 of the Share Purchase
Agreement, the Beneficiary remaining liable for performance of the obligations
of assignee herein and in the Share Purchase Agreement. This Indemnification
Agreement will be binding upon and inure to the benefit of successors and
permitted assigns of the Parties hereto.
SECTION 5.11 - SPECIFIC PERFORMANCE
- -----------------------------------
The Parties hereto agree that they will be entitled to specific performance of
the terms hereof, insofar as permitted under French law.
SECTION 5.12 - GOVERNING LAW - DISPUTES
- ---------------------------------------
This Indemnification Agreement will be governed by, and construed in accordance
with, French law.
<PAGE>
-28-
All disputes arising in connection with this Indemnification Agreement will be
settled by the competent Paris courts.
Executed in five (5) original counterparts,
In Paris,
On April 1, 1997
FOR THE GUARANTORS: FOR THE BENEFICIARY:
Patrick Landanger Bruce de la Grange
- ----------------- ------------------
Patrick Landanger DePuy Orthopedie S.A.
By : Bruce de la Grange
Title : Directeur General
Eric Landanger
- --------------
Eric Landanger
Maryvonne Guibert
- -----------------
Maryvonne Guibert
<PAGE>
LIST OF EXCLUDED SCHEDULES
Exhibit 2.1.3(a) List of direct or indirect majority-owned subsidiaries
Exhibit 2.1.3(c) Share issuances by subsidiaries
Exhibit 2.1.3(d) Subsidiary holdings
Exhibit 2.1.4(a) List of minority shareholdings
Exhibit 2.1.4(c) Shares issuances by minority shareholdings
Exhibit 2.1.4(d) Holdings by minority shareholdings
Exhibit 2.2.1 Organization of subsidiaries and minority shareholdings
Exhibit 2.2.4 Permits
Exhibit 2.2.5 Title to assets
Exhibit 2.4.1 Financial statements
Exhibit 2.4.3 Liens
Exhibit 2.4.5 Contingent liabilities
Exhibit 2.4.6 Calculation of debt over cash
Exhibit 2.5.2 Debts due by Geyser S.A. to Landanger-Camus and its
subsidiaries
Exhibit 2.7.1 Litigation
Exhibit 2.7.3 Compliance with governmental regulations
Exhibit 2.8.1.A Patents and trademarks
Exhibit 2.8.1.B Patent and trademark licenses
Exhibit 2.8.4 Infringement
Exhibit 2.10.1.A Real property
Exhibit 2.10.1.B Leased real property
<PAGE>
Exhibit 2.10.4 Fillinge real property
Exhibit 2.11.3 Personal property liens
Exhibit 2.11.4 Third party personal property interests
Exhibit 2.12.2 Contracts
Exhibit 2.12.3 Administrative Proceedings
Exhibit 2.12.5 Patents
Exhibit 2.13.1 Employees
Exhibit 2.13.3 Employee compensation
Exhibit 2.13.4 Labor relations
Exhibit 2.13.5 Employment agreements
Exhibit 2.14.1 Employee benefit plans
Exhibit 2.15.2(d) Tax assessments
Exhibit 2.18.2 Insurance claims
Exhibit 2.19.1(i) Related party transactions
Exhibit 2.19.1(ii) Related party rights in assets
Exhibit 2.20 Product liability
<PAGE>
On behalf of the Registrant, the undersigned hereby certifies that the
following exhibit provides a fair and accurate English translation of the
material contained in the original, the official language of which is French.
DEPUY, INC.
By: /s/ Steven L. Artusi
---------------------
Steven L. Artusi
Senior Vice President, General Counsel
and Secretary
By: /s/ Thomas J. Oberhausen
------------------------
Thomas J. Oberhausen
Senior Vice President and Chief
Financial and Accounting Officer
<PAGE>
EXHIBIT 2.3
PARTIAL TRADEMARK ASSIGNMENT
AND TRADEMARK COEXISTENCE AGREEMENT
BETWEEN:
- - Landanger-Camus, a joint stock company with a capital of FF 21,636,700,
registered with the Commercial Registry of Chaumont under the number B 347
558 371, having its registered office at Z.I. "La Vendue," rue de Val,
52000 Chaumont, represented by Patrick Landanger, President of the
Directory, duly authorized for the purposes hereof,
(hereinafter referred to as "the Assignor"),
ON THE ONE HAND,
AND:
- - Landanger S.A.R.L., a limited liability company with a capital of FF
1,100,000, having its registered office at 9 boulevard Marechal de Lattre
de Tassigny, 52000 Chaumont, in the process of being registered with the
Commercial Registry of Chaumont.
(hereinafter referred to as "the Assignee"),
and
- - Mr. Patrick Landanger, a French citizen domiciled at 85, quai d'Orsay,
75007 Paris, France;
- - Mr. Eric Landanger, a French citizen domiciled at 15, rue des Acacias,
52000 Jonchery, France; and
- - Ms. Maryvonne Guibert, a French citizen domiciled at 9, boulevard
Gambetta, 52000 Chaumont, France;
- - Mrs. Renee Landanger, a French citizen domiciled at 10, rue de Dijon,
52000 Chaumont, France;
- - Mr. Louis Landanger, a French citizen domiciled at 10, rue de Dijon, 52000
Chaumont, France;
(hereinafter referred to as "the Landanger Family")
ON THE OTHER HAND,
<PAGE>
-2-
WITNESSETH
- ----------
1. Under a share purchase agreement signed on 28 February 1997 (hereinafter
referred to as the "Share Purchase Agreement"), Patrick Landanger, Eric
Landanger, Maryvonne Guibert, Michel Colombier, Renee Landanger, Louis
Landanger, Martine Bonnaventure and Guy Bonnaventure (hereinafter referred to as
the "Sellers") have agreed to sell to DePuy, Inc., a corporation incorporated
and existing under the laws of Delaware, United States of America, having its
principal office at 700 Orthopaedic Drive, Warsaw, IN 46581-0988, United States
of America, who itself has transferred all of its rights and obligations under
the Share Purchase Agreement to DePuy Orthopedie S.A., a limited liability
corporation with a capital of FF 4,430,000, having its registered office at 2,
rue du Bois Sauvage, 91000 Evry (hereinafter referred to as the "Purchaser")
their direct and indirect controlling stake in Landanger-Camus via the sale of
all of the shares and voting rights they hold in 3L, and the shares and voting
rights they hold in Landanger-Camus, subject to satisfaction of several
conditions precedent contained in the Share Purchase Agreement.
Pursuant to the Share Purchase Agreement, the Purchaser has acquired in
particular the indirect control of Landanger-Landos, a subsidiary of Landanger-
Camus.
2. One of the conditions precedent provided under the Share Purchase Agreement
is stated in Section 4.4 of said Agreement, which states that the general
surgical instruments activity carried out by Landanger-Camus (consisting in
products used in general surgery and the corresponding sterilization boxes, but
excluding all trauma products and all orthopedic ancillary instruments) will
have been transferred, pursuant to applicable laws and regulations, to a single
third party company, and the shares received by Landanger-Camus in consideration
for such activity will have been sold to any of the Sellers.
3. The transfer of the activity described above in paragraph 2 has been
implemented by a Mix Contribution Agreement dated March 20, 1997 to the benefit
of Landanger S.A.R.L.
4. Article 6 of the Share Purchase Agreement states:
"Section 6.1
Landanger-Camus and the Subsidiaries, for their activities as of the
Closing Date :
(a) are hereby granted the exclusive right to use the names "Landanger"
and "Landanger-Camus";
(b) have been, or will be by the Closing Date at the latest, registered as
the exclusive owners of such name with the Institut National de la
Propriete Industrielle in France, and with similar organizations in
other countries where these companies carry out their respective
activities as of the Closing Date; and
(c) will retain the exclusive possibility to be registered as the owners
of such names for such activities in any other countries.
<PAGE>
-3-
Section 6.2
-----------
Only in respect of the activities indicated in Sections 4.3 and 4.4 above,
the Sellers, or the corporate entity created to carry out such activities :
(a) are hereby granted the exclusive right to use the name "Landanger";
(b) have been, or will be by the Closing Date at the latest, registered as
the exclusive owners of such name with the Institut National de la
Propriete Industrielle in France, and with similar organizations in
any other countries in which the activities described in Sections 4.3
and 4.4 above are carried out as of the Closing Date; and
(c) will retain the exclusive possibility to be registered as the owners
of such names for the activities described in Sections 4.3 and 4.4
above in any other countries.
Section 6.3
-----------
Landanger-Camus is hereby definitively granted the exclusive right to use
the patronymic "Landanger-Camus" as its corporate name.
Section 6.4
-----------
For any activities other than those carried out by 3L, Landanger-Camus and
the Subsidiaries as of the Closing Date and the activities described in
Sections 4.3 and 4.4 above, neither Party will have the possibility to use
the names "Landanger" and "Landanger-Camus" and to be registered as the
owner of same without the prior written consent thereto of the other Party.
All necessary steps, and in particular contractual steps, will be taken at
the latest by the Closing in order to validly implement the above."
5. In addition, Section 3.2 of the Share Purchase Agreement provides that at
the Closing, the Sellers will deliver or will cause to be delivered to the
Purchaser executed copies of agreements implementing the principles set forth in
Section 6 of the Share Purchase Agreement, and copies of the relevant
registration certificates issued by the National Institute of Industrial
Property.
6. The Sellers wish to use the name Landanger only for the general surgical
instruments activity described in Article 4.4 of the Share Purchase Agreement.
<PAGE>
-4-
7. In order to implement the agreement provided under the Share Purchase
Agreement, the parties hereto agree, in the terms described below, upon a
partial assignment of the trademark "Landanger", of which the Assignor is the
holder. Such partial assignment is made together with a coexistence agreement
of the two "Landanger" trademarks resulting from the assignment and of the
commercial names "Landanger", in order to avoid risks of confusion, the
Assignor and the Assignee having close respective fields of activity. This
Partial Trademark Assignment and Trademark Coexistence Agreement will be
interpreted and construed in light of the terms of the Share Purchase Agreement.
ARTICLE 1 - DEFINITION
----------
1.1 All terms contained herein beginning with a capital letter and not defined
below are defined in the Share Purchase Agreement, and will have the meaning set
forth therein.
1.2 "Trademark" designates:
(i) the French nominal trademark LANDANGER filed at the INPI under number
845 160 on March 17, 1987, registered under number 1399097 in classes 10,
11, 9, 12, 20, 35, 37, 42, and published in the BOPI 1987 volume 34 page 78
and renewed on January 27, 1997 pursuant to filing number 000944. The
Trademark is filed for the goods and services listed in the registration
certificate attached hereto (Exhibit 1) ; and
(ii) the foreign nominal trademarks LANDANGER, in the countries a list of
which is annexed hereto (Exhibit 2).
ARTICLE 2 - ASSIGNMENT
----------
2.1 The Assignor assigns to the Assignee, who accepts, the ownership
of the Trademark only for the products and services listed in Exhibit 3 and only
for such products and services corresponding to the surgical and sterilisation
instruments business transferred by Landanger-Landos to Landanger S.A.R.L. and
mentioned in Section 4.4 of the Share Purchase Agreement, as exercised as of the
Closing Date.
2.2 Landanger-Camus retains the full and entire ownership of the
Trademark for goods and services corresponding to its activities and the
activities of its Subsidiarie s.
2.3 Landanger S.A.R.L. and the Landanger Family will not in any
manner whatsoever, directly or indirectly, and particularly by way of any other
entity which they may create, use the Trademark for:
(i) the manufacturing, sale, marketing, research or development of
orthopaedic devices ;
(ii) any products or services competing in any manner whatsoever with
any products or services manufactured, sold or offered by 3L,
Landanger-Camus or the Subsidiaries ; and
<PAGE>
-5-
(iii) more generally, for any products or services manufactured, sold
or offered other than within the exercise of the general surgical
instruments business mentioned in Section 4.4 of the Share
Purchase Agreement.
2.4 The formalities regarding this partial assignment of the
Trademark in France and in all other countries where the Landanger S.A.R.L.
exercises its activities will be carried out by Landanger S.A.R.L. at its
expense.
ARTICLE 3 - THE COEXISTENCE OF TRADEMARKS
-----------------------------
3.1 The Assignor and Assignee agree to accept as necessary for the
implementation of the agreements referred to above, the coexistence of their
respective LANDANGER nominal trademarks, without this coexistence agreement
broadening the scope of the assignment as defined in Article 2 and according to
the following conditions:
- the packaging of goods bearing the nominal trademark LANDANGER
belonging to the parties should be such that they might not be
confused with one another;
- the Trademark belonging to the Assignee as a result of this
assignment will always be used with a different logotype than
that usually used by the Assignor for the Trademark, except for
the existing inventory as of the date hereof.
3.2 Landanger S.A.R.L. and the Landanger Family accept the
coexistence of their nominal trademark LANDANGER for the goods and services
listed above in section 2.1, with the exclusive right of Landanger-Camus to use
the name and/or the trademark LANDANGER-CAMUS for all the activities exercised
by Landanger-Camus or the Subsidiaries.
3.3 Landanger S.A.R.L. and the Landanger Family accept the
coexistence of their nominal trademark LANDANGER for the goods and services
listed above in section 2.1, with the exclusive right of Landanger-Landos to use
the name and/or the trademark LANDANGER-LANDOS for all the activities exercised
by Landanger-Landos.
ARTICLE 4- PRICE
-----
The present assignment is free of charge for the reasons stated
in the preamble.
ARTICLE 5- GUARANTEES
----------
The Assignor does not grant any guarantees other than those
resulting from the Trademark's material existence, as it has been filed,
registered and renewed under the control of the Landanger Family.
<PAGE>
-6-
In the event that the Trademark would be declared void or lost by
a court decision, Landanger S.A.R.L. and the Landanger would not have any right
to any compensation of any kind whatsoever.
ARTICLE 6 - GOVERNING LAW
-------------
This agreement is governed by French law.
ARTICLE 7 - JURISDICTION
------------
All disputes arising from the present agreement will be settled
by the competent Paris courts.
ARTICLE 8 - PUBLICATION
-----------
All powers are given to the holder of an original copy of this
document to secure or carry out all formalities, registration, publication, and
filing everywhere and in all administrative agencies when necessary.
Executed in Paris,
in four (8) counterparts, one of which for the National Institute of Industrial
Property ("Institut National de Propriete Industrielle").
On April 1st, 1997
Landanger-Camus Landanger S.A.R.L.
- ------------------------- ----------------------------
Landanger-Camus Landanger S.A.R.L.
Patrick Landanger Eric Landanger
- --------------------------- ------------------------
Patrick Landanger Eric Landanger
Maryvonne Guibert Renee Landanger
- --------------------------- -------------------------
Maryvonne Guibert Renee Landanger
Louis Landanger
- -------------------------
Louis Landanger
<PAGE>
LIST OF EXCLUDED SCHEDULES
Exhibit 1 Registration certificate of French nominal trademark LANDANGER
Exhibit 2 List of countries of foreign nominal trademark LANDANGER
Exhibit 3 Products and Services
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND AS OF JUNE 30,
1997, FOR THE THREE MONTHS IN THE PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1997
AND FOR THE SIX MONTHS IN THE PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 124,421
<SECURITIES> 5,389
<RECEIVABLES> 152,927
<ALLOWANCES> 15,250
<INVENTORY> 164,473
<CURRENT-ASSETS> 525,417
<PP&E> 101,652
<DEPRECIATION> 112,857
<TOTAL-ASSETS> 1,008,120
<CURRENT-LIABILITIES> 212,999
<BONDS> 0
0
0
<COMMON> 986
<OTHER-SE> 719,379
<TOTAL-LIABILITY-AND-EQUITY> 1,008,120
<SALES> 392,586
<TOTAL-REVENUES> 392,586
<CGS> 123,440
<TOTAL-COSTS> 123,440
<OTHER-EXPENSES> 29,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,774
<INCOME-PRETAX> 93,673
<INCOME-TAX> 29,928
<INCOME-CONTINUING> 63,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,761
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
