<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JOHNSON & JOHNSON
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW JERSEY 2834 22-1024240
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
ONE JOHNSON & JOHNSON PLAZA
NEW BRUNSWICK, NEW JERSEY 08933
TELEPHONE: (732) 524-0400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN M. ROSENBERG, ESQ.
JOHNSON & JOHNSON
ONE JOHNSON & JOHNSON PLAZA
NEW BRUNSWICK, NEW JERSEY 08933
TELEPHONE: (732) 524-0400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT A. KINDLER, ESQ. ROSLYN G. DAUM, ESQ.
CRAVATH, SWAINE & MOORE CHOATE, HALL & STEWART
WORLDWIDE PLAZA EXCHANGE PLACE
825 EIGHTH AVENUE 53 STATE STREET
NEW YORK, NY 10019 BOSTON, MA 02109
(212) 474-1000 (617) 248-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. []
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. []
- -----------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
- -----------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per share...... 1,094,458(2) N/A $90,171,616(3) $23,805.31(4)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement relates to securities of the Registrant issuable
to holders of common stock, par value $.01 per share ("Innovasive common
stock"), of Innovasive Devices, Inc., a Massachusetts corporation
("Innovasive"), in the proposed merger of a wholly owned subsidiary of the
Registrant with and into Innovasive.
(2) Based on the maximum number of shares to be issued in connection with the
merger, calculated as the product of (a) 11,271,452, the aggregate number of
shares of Innovasive common stock outstanding on January 5, 2000 (other than
shares owned by Innovasive, Raptor Acquisition Corp., a wholly owned
subsidiary of the Registrant, or the Registrant) or issuable pursuant to
outstanding options prior to the date the merger is expected to be completed
and (b) an assumed exchange ratio of 0.0971 shares of the Registrant's
common stock for each share of Innovasive common stock.
(3) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1) under the
Securities Act, the proposed maximum aggregate offering price of the
Registrant's common stock was calculated in accordance with Rule 457(c)
under the Securities Act as: (a) $8.00, the average of the high and low
prices per share of Innovasive common stock on January 5, 2000 as reported
on The Nasdaq National Market, multiplied by (b) 11,271,452, the aggregate
number of shares of Innovasive common stock outstanding as of January 5,
2000 or issuable pursuant to outstanding options prior to the date the
merger is expected to be completed.
(4) $17,277.58 of the registration fee was previously paid in connection with
Innovasive's Preliminary Proxy Statement on Schedule 14A filed with the
Commission on December 21, 1999. Pursuant to Rule 457(b), this amount is not
remitted herewith, and only the balance of $6,527.73 is required to be paid
in connection with the filing of this Registration Statement.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INNOVASIVE DEVICES, INC.
734 FOREST STREET
MARLBOROUGH, MASSACHUSETTS 01752
January 10, 2000
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders of
Innovasive Devices, Inc. to be held on Friday, February 11, 2000, at 10:00 a.m.,
local time, at the offices of Choate, Hall & Stewart, Exchange Place, 53 State
Street, Boston, Massachusetts.
At the special meeting, we will ask you to vote on the merger of Innovasive
with a subsidiary of Johnson & Johnson. In the merger, you will receive a
fraction of a share of Johnson & Johnson common stock for each share of
Innovasive common stock that you own, based upon an exchange ratio which is
calculated by dividing $8.25 by the average per share closing price of shares of
Johnson & Johnson common stock during a period of 20 trading days ending on the
third trading day before the special meeting. You will receive cash for any
fractional share of Johnson & Johnson common stock that you would be entitled to
receive in the merger.
Johnson & Johnson common stock is listed on the New York Stock Exchange
under the trading symbol "JNJ" and on January 7, 2000, its closing price was
$96 1/2 per share.
We cannot complete the merger unless the merger agreement is adopted by the
affirmative vote of a majority of the shares of Innovasive common stock
outstanding and entitled to vote at the special meeting. Only stockholders who
owned shares of Innovasive common stock at the close of business on Wednesday,
January 5, 2000 will be entitled to vote at the special meeting. Your vote is
very important.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS RELATING TO
THE MERGER" ON PAGE 11 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS BEFORE VOTING.
PLEASE REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.
AFTER CAREFUL CONSIDERATION, INNOVASIVE'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT AND DETERMINED THAT THE
MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE
ADVISABLE AND IN THE BEST INTERESTS OF INNOVASIVE AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
Richard D. Randall
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE MERGER DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OR THE JOHNSON & JOHNSON COMMON STOCK TO BE ISSUED IN
CONNECTION WITH THE MERGER, OR DETERMINED IF THE PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT/PROSPECTUS IS DATED JANUARY 10, 2000,
AND IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT JANUARY 11, 2000.
<PAGE> 3
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Johnson & Johnson and Innovasive from documents that
are not included in or delivered with this proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain those documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses and telephone numbers:
<TABLE>
<S> <C> <C>
JOHNSON & JOHNSON INNOVASIVE DEVICES, INC.
One Johnson & Johnson Plaza 734 Forest Street
New Brunswick, NJ 08933 Marlborough, MA 01752
Attention: Corporate Secretary's Office Attention: James V. Barrile
Telephone: (732) 524-2455 Telephone: (508) 460-8229 x114
</TABLE>
If you would like to request documents, please do so by Friday, February 4,
2000 in order to receive them before the special meeting.
See "Where You Can Find More Information" on page 57.
<PAGE> 4
INNOVASIVE DEVICES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 11, 2000
To the Stockholders of Innovasive Devices, Inc.:
We will hold a special meeting of the stockholders of Innovasive Devices,
Inc. on Friday, February 11, 2000, at 10:00 a.m., local time, at the offices of
Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston, Massachusetts,
for the following purpose:
To consider and vote upon a proposal to adopt the merger agreement among
Johnson & Johnson, a wholly-owned subsidiary of Johnson & Johnson, and
Innovasive. In the merger, Innovasive will become a wholly-owned subsidiary
of Johnson & Johnson, and all outstanding shares of Innovasive common stock
will be converted into the right to receive a number of shares of Johnson &
Johnson common stock based on an exchange ratio that will be calculated
shortly before the special meeting.
We will transact no other business at the special meeting except such
business as may properly be brought before the special meeting or any
adjournment of it by the Innovasive board of directors.
Only stockholders who owned shares of Innovasive common stock at the close
of business on Wednesday, January 5, 2000, the record date for the special
meeting, are entitled to notice of, and to vote at, the special meeting and any
adjournments or postponements of it.
We cannot complete the merger unless the merger agreement is adopted by the
affirmative vote of a majority of the shares of Innovasive common stock
outstanding and entitled to vote at the special meeting.
If the action proposed is approved by the stockholders of Innovasive at the
special meeting and effected by Innovasive, any stockholder (1) who files with
Innovasive before the taking of the vote on the approval of the action, written
objection to the proposed action stating that the stockholder intends to demand
payment for the stockholder's shares if the action is taken, and (2) whose
shares are not voted in favor of the action, has the right to demand in writing
from Johnson & Johnson, within twenty days after the date of mailing to the
stockholder of notice in writing that the corporate action has become effective,
payment for the stockholder's shares and an appraisal of the value thereof. The
stockholder shall have the rights and duties and shall follow the procedure set
forth in Sections 85 to 98, inclusive, of the Massachusetts Business Corporation
Law.
FOR MORE INFORMATION ABOUT THE MERGER, PLEASE REVIEW THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND THE MERGER AGREEMENT ATTACHED AS ANNEX 1.
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy and return it promptly in the enclosed
postage-paid envelope.
Please do not send any stock certificates at this time.
By Order of the Board of Directors,
Roslyn G. Daum
Clerk
Marlborough, MA
January 10, 2000
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 2
General................................................... 2
The Special Meeting....................................... 4
The Merger................................................ 4
The Companies............................................. 7
Comparative Per Share Information......................... 8
Selected Historical Consolidated Financial Data of Johnson
& Johnson.............................................. 9
Selected Historical Consolidated Financial Data of
Innovasive Devices, Inc. .............................. 10
RISK FACTORS RELATING TO THE MERGER......................... 11
THE SPECIAL MEETING......................................... 12
Date, Time and Place...................................... 12
Purpose of Special Meeting................................ 12
Record Date; Shares Entitled to Vote; Quorum.............. 12
Votes Required............................................ 12
Voting by Innovasive Directors, Executive Officers and
Certain Stockholders................................... 12
Voting of Proxies......................................... 12
Revocability of Proxies................................... 13
Solicitation of Proxies................................... 13
THE COMPANIES............................................... 14
Innovasive................................................ 14
Johnson & Johnson......................................... 14
THE MERGER.................................................. 15
Background to the Merger.................................. 15
Reasons for the Merger and the Innovasive Board of
Directors Recommendation............................... 17
Opinion of the Financial Advisor to Innovasive............ 19
Interests of Innovasive Directors and Executive Officers
in the Merger.......................................... 26
Accounting Treatment...................................... 27
Form of the Merger........................................ 27
Merger Consideration...................................... 27
Conversion of Shares; Procedures for Exchange of
Certificates; Fractional Shares........................ 28
Effective Time of the Merger.............................. 28
Stock Exchange Listing of Johnson & Johnson Common
Stock.................................................. 29
Delisting and Deregistration of Innovasive Common Stock... 29
Material United States Federal Income Tax Consequences of
the Merger............................................. 29
Regulatory Matters........................................ 30
Dissenters' Rights........................................ 30
Innovasive Employee Benefits Matters...................... 32
Effect on Awards Outstanding Under Innovasive Stock
Plans.................................................. 32
Resale of Johnson & Johnson Common Stock.................. 33
THE MERGER AGREEMENT AND STOCK OPTION AGREEMENT............. 34
The Merger Agreement...................................... 34
The Stock Option Agreement................................ 41
STOCKHOLDERS AGREEMENT...................................... 44
COMPARATIVE STOCK PRICES AND DIVIDENDS...................... 45
DESCRIPTION OF JOHNSON & JOHNSON CAPITAL STOCK.............. 46
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF JOHNSON &
JOHNSON AND INNOVASIVE.................................... 47
Capitalization............................................ 47
Number, Election, Vacancy and Removal of Directors........ 47
Amendments to Charter Documents........................... 48
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Amendments to Bylaws........................................ 48
Action by Written Consent................................. 49
Notice of Certain Stockholder Actions..................... 49
Special Stockholder Meetings.............................. 49
Stockholder Inspection Rights; Stockholder Lists.......... 50
Limitation of Personal Liability of Directors and
Officers............................................... 50
Dividends................................................. 51
Conversion................................................ 51
Rights Plan............................................... 51
Voting Rights; Required Vote for Authorization of Certain
Actions................................................ 53
Fiduciary Duty............................................ 55
LEGAL MATTERS............................................... 56
EXPERTS..................................................... 56
OTHER MATTERS............................................... 56
FUTURE STOCKHOLDER PROPOSALS................................ 56
WHERE YOU CAN FIND MORE INFORMATION......................... 57
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 59
ANNEXES
Annex 1 -- Agreement and Plan of Merger and Reorganization
Annex 2 -- Stock Option Agreement
Annex 3 -- Stockholders Agreement
Annex 4 -- Opinion of Deutsche Bank Securities Inc.
Annex 5 -- Sections 85-98 of Massachusetts Business
Corporation Law
INFORMATION NOT REQUIRED IN THE PROSPECTUS.................. II-1
</TABLE>
ii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN TO INNOVASIVE AS A RESULT OF THE MERGER?
A: If the merger is completed, Innovasive will become a wholly-owned subsidiary
of Johnson & Johnson.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete, sign and date your proxy and
return it in the enclosed return envelope as soon as possible, so that your
shares may be represented at the special meeting. If you sign and send in
your proxy and do not indicate how you want to vote, we will count your proxy
as a vote in favor of adoption of the merger agreement. Because the required
vote of Innovasive stockholders is based upon the number of outstanding
shares of Innovasive common stock, rather than upon the shares actually
voted, the failure by the holder of any such shares to submit a proxy or to
vote in person at the special meeting (including abstentions and broker
non-votes) will have the same effect as a vote against adoption of the merger
agreement.
The special meeting will take place on Friday, February 11, 2000, at 10:00
a.m., local time, at the offices of Choate, Hall & Stewart, Exchange Place,
53 State Street, Boston, Massachusetts. You may attend the special meeting
and vote your shares in person, rather than completing, signing, dating and
returning your proxy.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy bearing a later date. If you choose
either of these two methods, you must submit your notice of revocation or
your new proxy to the Clerk of Innovasive at 734 Forest Street, Marlborough,
MA 01752. Third, you can attend the special meeting and vote in person.
Attendance at the special meeting will not itself constitute revocation of a
proxy.
Q: IF MY INNOVASIVE SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY
BROKER VOTE MY SHARES FOR ME?
A: Your broker will vote your Innovasive shares only if you provide instructions
on how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, which will have the effect of a
vote against the merger agreement.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive a transmittal form with
instructions for the surrender of Innovasive common stock certificates.
Please do not send in your stock certificates with your proxy.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as quickly as possible. If approved by
the Innovasive stockholders, we expect to complete the merger during the
first calendar quarter of 2000.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should
contact:
Georgeson Shareholder Communications, Inc.
17 State Street
10th Floor
New York, NY 10004
Bankers and Brokers call collect:
(212) 440-9800
All others call toll-free:
(800) 223-2064
or
James V. Barrile
Innovasive Devices, Inc.
734 Forest Street
Marlborough, MA 01752
Telephone: (508) 460-8229 x114
1
<PAGE> 8
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important
to you. To understand the merger fully and for a more complete description of
the legal terms of the merger, you should carefully read this entire proxy
statement/prospectus and the other documents to which we have referred you. See
"Where You Can Find More Information" on page 57. We have included page
references parenthetically to direct you to a more complete description of the
topics presented in this summary.
GENERAL
WHAT INNOVASIVE STOCKHOLDERS WILL RECEIVE IN THE MERGER (PAGE 27)
In the merger, holders of Innovasive common stock will receive a fraction
of a share of Johnson & Johnson common stock based on an exchange ratio for each
share of Innovasive common stock that they own. The exchange ratio is based on
the average per share closing price of Johnson & Johnson common stock as
reported on the New York Stock Exchange Composite Tape during a valuation period
of the 20 consecutive trading days ending on the third trading day prior to the
special meeting. The exchange ratio will be equal to the number obtained by
dividing $8.25 by the average closing price.
Innovasive stockholders will receive cash for any fractional shares of
Johnson & Johnson common stock they would otherwise receive in the merger. This
amount will be calculated by multiplying the fractional share interest to which
they are entitled by the closing price of Johnson & Johnson common stock on the
last trading day immediately preceding the closing date.
Set forth below is a table showing a range of prices of Johnson & Johnson
common stock, along with entries showing the corresponding exchange ratios and
corresponding valuations of a share of Innovasive common stock.
<TABLE>
<CAPTION>
AVERAGE CLOSING VALUE OF
PRICE OF A SHARE
JOHNSON & JOHNSON EXCHANGE OF INNOVASIVE
COMMON STOCK RATIO COMMON STOCK
- ----------------- -------- -------------
<S> <C> <C>
$ 75.00 0.1100x $8.25
77.00 0.1071 8.25
79.00 0.1044 8.25
81.00 0.1019 8.25
83.00 0.0994 8.25
85.00 0.0971 8.25
87.00 0.0948 8.25
89.00 0.0927 8.25
91.00 0.0907 8.25
93.00 0.0887 8.25
95.00 0.0868 8.25
97.00 0.0851 8.25
99.00 0.0833 8.25
101.00 0.0817 8.25
103.00 0.0801 8.25
105.00 0.0786 8.25
107.00 0.0771 8.25
109.00 0.0757 8.25
111.00 0.0743 8.25
113.00 0.0730 8.25
115.00 0.0717 8.25
</TABLE>
On January 7, 2000, the last practicable trading day before the date of
this proxy statement/prospectus, Johnson & Johnson common stock closed at
$96 1/2 per share. If this were the average closing price of Johnson & Johnson
common stock during the 20 day valuation period, the exchange ratio would be
equal to 0.0855. This means an Innovasive stockholder who owns 150 shares of
Innovasive common stock would be entitled to receive 12.8 shares of Johnson &
Johnson common stock, which based on a value of Johnson & Johnson common stock
equal to the average closing price, would result in a value of $8.25 per share
of Innovasive common stock. Since cash will be paid instead of fractional shares
of Johnson & Johnson common stock, that Innovasive stockholder would receive 12
shares of Johnson & Johnson common stock and a check in an amount equal to the
fractional share multiplied by the closing price of Johnson & Johnson
2
<PAGE> 9
common stock on the last trading day immediately preceding the closing date.
The market value of Johnson & Johnson common stock on the day the merger is
completed may vary from the average closing price of Johnson & Johnson common
stock used to calculate the exchange ratio. As a result, the market value of the
shares of Johnson & Johnson common stock you receive in the merger may be more
or less than the value attributed to your shares of Innovasive common stock in
calculating the exchange ratio.
We will issue a press release before the special meeting disclosing the
exchange ratio once it has been calculated. In addition, you may obtain the
exchange ratio by calling either of the telephone numbers listed on page 1
beginning on the trading day before the special meeting.
OWNERSHIP OF JOHNSON & JOHNSON FOLLOWING THE MERGER
Based on the number of outstanding shares of Innovasive common stock on the
record date and the closing price of Johnson & Johnson common stock on January
5, 2000, we anticipate that Innovasive stockholders will receive approximately
824,241 shares of Johnson & Johnson common stock in the merger. Based on that
number and on the number of outstanding shares of Johnson & Johnson common stock
on January 5, 2000, Innovasive stockholders will own approximately 0.06% of the
outstanding shares of Johnson & Johnson common stock following the merger.
DISSENTERS' RIGHTS (PAGE 30)
Stockholders of Innovasive who do not vote in favor of the merger agreement
and the merger and who otherwise comply with the requirements of the
Massachusetts Business Corporation Law relating to dissenters' rights will be
entitled to receive an amount in cash equal to the fair value of their
Innovasive common stock. The fair value of shares of Innovasive common stock may
be more or less than the value of Johnson & Johnson common stock to be paid to
other Innovasive stockholders in the merger. Dissenting Innovasive stockholders
must precisely follow specific procedures to exercise this right, or the right
may be lost. These procedures are described in this proxy statement/prospectus,
and the relevant provisions of Massachusetts law are attached as Annex 5 hereto.
You are urged to read the provisions in their entirety.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 29)
The merger is intended to qualify as a reorganization within the meaning of
the Internal Revenue Code of 1986. It is a condition to Innovasive's obligation
to complete the merger that Innovasive receive an opinion from Choate, Hall &
Stewart stating that the merger will qualify for United States federal income
tax purposes as a reorganization within the meaning of the Internal Revenue
Code. Assuming the merger qualifies as a reorganization within the meaning of
the Internal Revenue Code, holders of Innovasive common stock will not recognize
gain or loss for United States federal income tax purposes as a result of the
exchange of their Innovasive common stock for Johnson & Johnson common stock in
the merger, except for cash received instead of fractional shares of Johnson &
Johnson common stock.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN
TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO
YOU.
INNOVASIVE BOARD OF DIRECTORS RECOMMENDATION TO STOCKHOLDERS (PAGE 19)
The Innovasive board of directors believes that the merger and the other
transactions contemplated by the merger agreement are advisable and in the best
interests of Innovasive and its stockholders and unanimously recommends that the
stockholders vote "FOR" the adoption of the merger agreement.
To review the background and reasons for the merger, as well as certain
risks related to the merger, see pages 15, 17 and 11.
OPINION OF THE FINANCIAL ADVISOR TO INNOVASIVE (PAGE 19)
In deciding to approve the merger, the Innovasive board considered the
opinion of Deutsche Bank Securities Inc., its financial advisor in connection
with the merger, that, as of November 8, 1999, and based upon and subject to
3
<PAGE> 10
certain matters described in its opinion, the exchange ratio was fair, from a
financial point of view, to the holders of Innovasive common stock. The opinion
was directed to the board of directors of Innovasive and addresses only the
fairness of the exchange ratio from a financial point of view. The opinion does
not address the merits of the underlying decision by Innovasive to engage in the
merger and does not constitute a recommendation to any stockholder as to how to
vote with respect to matters relating to the proposed merger. The full text of
the written opinion of Deutsche Bank Securities Inc., which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached as Annex 4. You are urged to read the
opinion carefully and in its entirety.
INTERESTS OF INNOVASIVE DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (PAGE 26)
In considering the recommendation of the Innovasive board of directors in
favor of the merger, Innovasive stockholders should be aware that members of the
Innovasive board and executive officers of Innovasive have interests in the
merger that are different from, or in addition to, the interests of other
Innovasive stockholders. These interests include the continuance of rights of
indemnification and the accelerated vesting of certain stock option rights.
THE SPECIAL MEETING (PAGE 12)
The special meeting of Innovasive stockholders will be held at the offices
of Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston,
Massachusetts at 10:00 a.m., local time, on February 11, 2000. At the special
meeting, Innovasive stockholders will be asked to adopt the merger agreement.
RECORD DATE; VOTING POWER (PAGE 12)
Innovasive stockholders are entitled to vote at the special meeting if they
owned shares of Innovasive common stock as of the close of business on January
5, 2000, the record date.
On the record date, there were 9,334,559 shares of Innovasive common stock
entitled to vote at the special meeting. Stockholders will have one vote at the
special meeting for each share of Innovasive common stock that they owned on the
record date.
VOTES REQUIRED (PAGE 12)
The affirmative vote of a majority of the shares of Innovasive common stock
outstanding and entitled to vote at the special meeting is required to adopt the
merger agreement.
VOTING BY INNOVASIVE DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN STOCKHOLDERS
(PAGE 12)
On the record date, directors and executive officers of Innovasive owned
and were entitled to vote 2,451,602 shares of Innovasive common stock, or
approximately 26.26% of the shares of Innovasive common stock outstanding on
that date. Each director and executive officer of Innovasive has indicated his
intention to vote, or caused to be voted, the Innovasive common stock owned by
him "FOR" adoption of the merger agreement. Certain directors, officers and
other stockholders of Innovasive have entered into stockholders agreement with
Johnson & Johnson whereby such persons have agreed to vote their shares in favor
of the merger agreement and to take certain other actions in connection
therewith. See "Stockholders Agreement" on page 44.
THE MERGER (PAGE 15)
The merger agreement is attached as Annex 1 to this proxy
statement/prospectus. Innovasive encourages you to read the merger agreement
because it is the principal document governing the merger.
CONDITIONS TO THE COMPLETION OF THE MERGER
(PAGE 34)
Johnson & Johnson and Innovasive will complete the merger only if several
conditions are satisfied or, in some cases, waived, including the following:
- the registration statement on Form S-4 has been declared effective by the
Securities and Exchange Commission and is not the subject of any stop
order or proceeding seeking a stop order
- the merger agreement has been adopted by the affirmative vote of
stockholders of Innovasive representing a majority of the shares of
Innovasive common stock outstanding and entitled to vote at the special
meeting
4
<PAGE> 11
- Innovasive has received an opinion from Choate, Hall & Stewart stating
that the merger will qualify for United States federal income tax
purposes as a reorganization within the meaning of the Internal Revenue
Code
- the parties have received all material consents for the consummation of
the merger
- the shares of Johnson & Johnson common stock to be issued to Innovasive
stockholders upon completion of the merger have been approved for listing
on the New York Stock Exchange
- the waiting period required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 has expired or has been terminated
- no restraining order, injunction or other court order or statute, rule,
regulation, legal restraint or prohibition exists that prevents the
completion of the merger, makes the merger illegal or is reasonably
likely to have a material adverse effect on Johnson & Johnson or
Innovasive
- the representations and warranties in the merger agreement which are
qualified as to materiality are true and correct, and the representations
and warranties which are not so qualified are true and correct in all
material respects
- all covenants and agreements in the merger agreement have been satisfied
in all material respects
- since the date of the merger agreement, no change, occurrence or
circumstance in the business, results of operations, liabilities, assets,
properties or financial conditions of Innovasive has had, or is
reasonably likely to have, a material adverse effect on Innovasive
In addition, Johnson & Johnson will complete the merger only if certain
additional conditions are satisfied or waived, including that there is no
pending or imminently threatened suit, action or preceding by any governmental
entity seeking to restrain or prohibit the completion of the merger, to limit
Johnson & Johnson's or Innovasive's ownership or operation of either company's
business or assets, to compel Johnson & Johnson or Innovasive to divest or hold
separate any business or assets as a result of the merger, or to prevent Johnson
& Johnson from effectively controlling Innovasive in any material respect.
TERMINATION OF THE MERGER AGREEMENT (PAGE 37)
1. Johnson & Johnson, Raptor Acquisition Corp. and Innovasive can jointly
agree to terminate the merger agreement at any time without completing the
merger.
2. Johnson & Johnson or Innovasive can terminate the merger agreement if:
- the merger has not been completed by May 8, 2000
- a final, non-appealable restraining order, injunction or other court
order or statute, rule, regulation, legal restraint or prohibition exists
that prevents the completion of the merger, makes the consummation of the
merger illegal or which otherwise is reasonably likely to have a material
adverse effect on Johnson & Johnson or Innovasive
- the holders of Innovasive common stock do not adopt the merger agreement
at the special meeting
- the other party breaches any of its representations, warranties,
covenants or agreements under the merger agreement that results in a
failure of a condition to the merger and cannot or has not cured the
breach within 30 days after receipt of notice of such breach
3. Johnson & Johnson can terminate the merger agreement if the Innovasive
board of directors or any committee of the board:
- fails to recommend or withdraws or modifies its approval or
recommendation of the merger in a manner adverse to Johnson & Johnson
- approves or recommends a proposal of a third party to acquire 20% or more
of Innovasive's assets or to acquire 20% or more of any class of
Innovasive capital stock or a merger or similar transaction involving
Innovasive or any of its subsidiaries
- fails to reconfirm its approval or recommendation of the merger after
receipt of an acquisition proposal described in the immediately preceding
bullet point within 10
5
<PAGE> 12
days after a request to do so by Johnson & Johnson
- approves or recommends that Innovasive stockholders tender their shares
into any tender offer or exchange offer that would result in any person
beneficially owning 20% or more of any class of Innovasive capital stock
4. Innovasive can terminate the merger agreement at any time prior to the
date of the special meeting in response to an unsolicited proposal to acquire
more than 50% of the Innovasive common stock or its assets on terms that the
Innovasive board of directors determines, after receipt of advice from a
financial advisor, to be more favorable to Innovasive than the merger and is
reasonably capable of being consummated.
TERMINATION FEES (PAGE 37)
Innovasive must pay Johnson & Johnson a termination fee of $2,550,000 if:
- (a) a proposal described in the second bullet point of paragraph 3 above
under "-- Termination of the Merger Agreement" has been disclosed, (b)
the merger agreement is terminated by Innovasive or Johnson & Johnson for
the first or third reason described in paragraph 2 above under
"-- Termination of the Merger Agreement," and (c) within 12 months of the
termination of the merger agreement, Innovasive enters into an
acquisition agreement or consummates any such proposal or the board of
directors approves such transaction
- Johnson & Johnson terminates the merger agreement for any reason
described in paragraph 3 above under "-- Termination of the Merger
Agreement"
- Innovasive terminates the merger agreement for the reason described in
paragraph 4 above under "-- Termination of the Merger Agreement"
THE STOCK OPTION AGREEMENT (PAGE 41)
Innovasive has granted an option to Johnson & Johnson to purchase 1,850,504
shares of Innovasive common stock at $8.25 per share if any of the events occur
that entitle Johnson & Johnson to receive the termination fee under the merger
agreement. The stock option agreement limits Johnson & Johnson's total profit
under the stock option and any termination fee it actually receives under the
merger agreement to $3,400,000.
STOCKHOLDERS AGREEMENT (PAGE 44)
Stockholders of Innovasive who held approximately 31.88% of the outstanding
shares of Innovasive common stock at January 5, 2000 have entered into a
stockholders agreement with Johnson & Johnson. Under the terms of the
stockholders agreement, these stockholders have agreed to vote all of their
shares of Innovasive common stock in favor of the merger and to take certain
actions in connection therewith.
REGULATORY MATTERS (PAGE 30)
United States antitrust laws prohibit Johnson & Johnson and Innovasive from
completing the merger until they have furnished certain information and
materials to the Antitrust Division of the Department of Justice and the Federal
Trade Commission and a required waiting period has ended. Johnson & Johnson and
Innovasive each filed the required notification and report forms with the
Antitrust Division and the Federal Trade Commission on November 24, 1999. The
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
expired at midnight on December 24, 1999.
ACCOUNTING TREATMENT (PAGE 27)
Johnson & Johnson intends to treat the merger as a purchase for accounting
and financial reporting purposes, which means that Innovasive will be treated as
a separate entity for periods prior to the closing and thereafter, as a
wholly-owned subsidiary of Johnson & Johnson.
EXPENSES (PAGE 40)
Each of Johnson & Johnson and Innovasive will bear all expenses it incurs
in connection with the merger, except that they will share equally the costs of
filing with the Securities and Exchange Commission the registration statement of
which this proxy statement/prospectus is a part, and printing and mailing this
proxy statement/ prospectus.
6
<PAGE> 13
THE COMPANIES (PAGE 14)
Innovasive Devices, Inc.
734 Forest Street
Marlborough, MA 01752
(508) 460-8229
Innovasive designs, develops, manufactures and markets proprietary tissue
repair systems which facilitate the repair of soft tissue injuries.
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
(732) 524-0400
Johnson & Johnson is engaged in the manufacture and sale of a broad range
of products in the health care field in many countries of the world. Johnson &
Johnson's primary interest, both historically and currently, has been in
products related to health and well-being. Johnson & Johnson was organized in
the State of New Jersey in 1887.
MARKET PRICES AND DIVIDEND INFORMATION (PAGE 45)
Shares of Johnson & Johnson common stock are listed on the New York Stock
Exchange. Shares of Innovasive common stock are listed on The Nasdaq National
Market. The following table presents:
- the last reported sale price of one share of Johnson & Johnson common
stock, as reported in The Wall Street Journal
- the last reported sale price of one share of Innovasive common stock, as
reported on The Nasdaq National Market
- the market value of one share of Innovasive common stock on an equivalent
per share basis
in each case as if the merger had been completed on November 8, 1999, the last
full trading day prior to the public announcement of the proposed merger, and on
January 7, 2000, the last practicable trading day prior to the date of this
proxy statement/prospectus. The equivalent price per share data for Innovasive
common stock has been determined by multiplying the last reported sale price of
one share of Johnson & Johnson common stock on each of these dates by an
exchange ratio determined using the average per share closing price of Johnson &
Johnson common stock over the 20 trading days ending with the third trading day
immediately preceding the calculation date.
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER
JOHNSON & SHARE OF
JOHNSON INNOVASIVE INNOVASIVE
COMMON COMMON COMMON
DATE STOCK STOCK STOCK
- ---- --------- ---------- ----------
<S> <C> <C> <C>
November 8, 1999..... $104 7/16 $8 15/32 $8.56
January 7, 2000...... $ 96 1/2 $8 $8.52
</TABLE>
Johnson & Johnson declares and pays regular quarterly dividends. See
"Comparative Stock Prices and Dividends" on page 45. Innovasive does not pay
dividends.
7
<PAGE> 14
THE COMPANIES (PAGE 14)
Innovasive Devices, Inc.
734 Forest Street
Marlborough, MA 01752
(508) 460-8229
Innovasive designs, develops, manufactures and markets proprietary tissue
repair systems which facilitate the repair of soft tissue injuries.
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
(732) 524-0400
Johnson & Johnson is engaged in the manufacture and sale of a broad range
of products in the health care field in many countries of the world. Johnson &
Johnson's primary interest, both historically and currently, has been in
products related to health and well-being. Johnson & Johnson was organized in
the State of New Jersey in 1887.
MARKET PRICES AND DIVIDEND INFORMATION (PAGE 45)
Shares of Johnson & Johnson common stock are listed on the New York Stock
Exchange. Shares of Innovasive common stock are listed on The Nasdaq National
Market. The following table presents:
- the last reported sale price of one share of Johnson & Johnson common
stock, as reported in The Wall Street Journal
- the last reported sale price of one share of Innovasive common stock, as
reported on The Nasdaq National Market
- the market value of one share of Innovasive common stock on an equivalent
per share basis
in each case as if the merger had been completed on November 8, 1999, the last
full trading day prior to the public announcement of the proposed merger, and on
January 7, 2000, the last practicable trading day prior to the date of this
proxy statement/prospectus. The equivalent price per share data for Innovasive
common stock has been determined by multiplying the last reported sale price of
one share of Johnson & Johnson common stock on each of these dates by an
exchange ratio determined using the average per share closing price of Johnson &
Johnson common stock over the 20 trading days ending with the third trading day
immediately preceding the calculation date.
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER
JOHNSON & SHARE OF
JOHNSON INNOVASIVE INNOVASIVE
COMMON COMMON COMMON
DATE STOCK STOCK STOCK
- ---- --------- ---------- ----------
<S> <C> <C> <C>
November 8, 1999..... 1$04 7/16 8 $15/32 $8.56
January 7, 2000...... $96 1/2 8 $ $8.52
</TABLE>
Johnson & Johnson declares and pays regular quarterly dividends. See
"Comparative Stock Prices and Dividends" on page 45. Innovasive does not pay
dividends.
8
<PAGE> 15
COMPARATIVE PER SHARE INFORMATION
The following table shows certain per share data of Johnson & Johnson and
Innovasive and also shows similar information reflecting the combination of the
two companies, which is referred to as "pro forma" information. In presenting
the comparative pro forma information, it is assumed that the companies have
been separate entities for accounting and financial reporting purposes for all
periods presented, as required by "purchase" accounting.
The comparative per share data is derived from, and should be read with,
the supplemental financial statements of Johnson & Johnson and the historical
financial statements of Innovasive that are included in the documents described
under "Where You Can Find More Information" on page 57. The supplemental
financial statements of Johnson & Johnson reflect the restatement of Johnson &
Johnson's historical financial statements to reflect its merger with Centocor,
Inc., which was accounted for using the pooling of interests method of
accounting.
The Innovasive "equivalent pro forma" data was calculated by multiplying
the corresponding pro forma combined data by an exchange ratio of 0.0820, which
would have been the exchange ratio had the special meeting been held on November
8, 1999. This data shows how each share of Innovasive common stock would have
participated in net income and book value of Johnson & Johnson if the companies
had always been combined for accounting and financial reporting purposes for all
periods presented. These amounts, however, are not intended to reflect future
per share levels of net income and book value of Johnson & Johnson. Innovasive
has not declared or paid any cash dividends during any of the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED --------------------------
------------------------------- SEPT. 27, OCT. 3,
DEC. 29, DEC. 28, JAN. 3, 1998 1999
1996 1997 1999 (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
JOHNSON & JOHNSON -- SUPPLEMENTAL
Net income per diluted share........... $ 2.05 $ 2.34 $ 2.12 $ 2.05 $ 2.41
Unaudited book value per share(1).... $ 8.23 $ 9.26 $10.13 $10.16 $11.44
Cash dividends per share............. $ 0.735 $ 0.85 $ 0.97 $ 0.72 $ 0.81
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
FISCAL YEAR ENDED DECEMBER 31, --------------------------
------------------------------- 1998 1999
1996 1997 1998 (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -----------
INNOVASIVE -- HISTORICAL
Net (loss) income per diluted
share............................. $ (0.83) $(2.33) $(0.71) $(0.55) $(0.25)
Unaudited book value per share(1).... $ 3.26 $ 2.09 $ 1.44 $ 1.59 $ 1.20
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED --------------------------
------------------------------- SEPT. 27, OCT. 3,
DEC. 29, DEC. 28, JAN. 3, 1998 1999
1996 1997 1999 (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unaudited pro forma combined net income
per diluted share:
Per Johnson & Johnson share.......... $ 2.05 $ 2.32 $ 2.11 $ 2.04 $ 2.40
Equivalent per Innovasive share...... $ 0.17 $ 0.19 $ 0.17 $ 0.17 $ 0.20
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED --------------------------
------------------------------- SEPT. 27, OCT. 3,
DEC. 29, DEC. 28, JAN. 3, 1998 1999
1996 1997 1999 (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C>
Unaudited pro forma combined book value
per share:
Per Johnson & Johnson share(1)....... $ 8.24 $ 9.26 $10.14 $10.17 $11.45
Equivalent per Innovasive share(1)... $ 0.68 $ 0.76 $ 0.83 $ 0.83 $ 0.94
</TABLE>
- ---------------
(1) Supplemental or historical book value per share is computed by dividing
shareowners' equity or stockholders' equity by the number of common shares
outstanding at the end of each period. Johnson & Johnson pro forma combined
book value per share is computed by dividing pro forma shareowners' equity
by the pro forma number of shares of Johnson & Johnson common stock that
would have been outstanding had the merger been completed as of each balance
sheet date.
9
<PAGE> 16
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INNOVASIVE DEVICES, INC.
The following selected financial information of Innovasive as of and for
the five fiscal years ended December 31, 1998 has been derived from Innovasive's
audited financial statements contained in its Annual Reports on Form 10-K for
the years then ended and is qualified in its entirety by such documents. The
financial statements for those periods were audited by PricewaterhouseCoopers
LLP, independent accountants. The financial information for Innovasive as of and
for the nine months ended September 30, 1999 and 1998 has been derived from the
unaudited consolidated financial statements contained in the Quarterly Report on
Form 10-Q for the period ended September 30, 1999 and is qualified in its
entirety by such document and, in the opinion of Innovasive's management,
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the unaudited interim
periods. The operating results for the nine months ended September 30, 1999 are
not necessarily indicative of results for the full fiscal year ending December
31, 1999. This information should be read in conjunction with management's
discussion and analysis of financial condition and results of operations of
Innovasive and the consolidated financial statements and notes thereto of
Innovasive incorporated by reference into this proxy statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
FISCAL YEAR ENDED DECEMBER 31, -------------------------
------------------------------------------------- 1998 1999
1994 1995 1996 1997 1998 (UNAUDITED) (UNAUDITED)
------- -------- ------- -------- ------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 244 $ 1,234 $ 4,353 $ 7,754 $11,911 $ 8,261 $12,608
Cost of sales....................... 465 1,000 1,611 2,232 3,339 2,313 3,679
------- -------- ------- -------- ------- ------- -------
Gross profit (loss)................. (221) 234 2,742 5,522 8,572 5,948 8,929
Selling, general and administrative
expenses.......................... 1,533 2,435 4,922 8,407 11,294 8,179 8,866
Purchased in-process research and
Development(1).................... -- -- -- 13,370 -- -- --
Research and development expenses... 1,172 1,597 2,667 3,952 4,290 3,232 2,543
------- -------- ------- -------- ------- ------- -------
Loss from operations................ (2,926) (3,798) (4,847) (20,207) (7,012) (5,463) (2,480)
Interest income..................... 34 64 785 1,053 513 423 209
------- -------- ------- -------- ------- ------- -------
Net loss............................ $(2,892) $ (3,734) $(4,062) $(19,154) $(6,499) $(5,040) $(2,271)
------- -------- ------- -------- ------- ------- -------
Basic and diluted net loss per
share............................. $ (1.79) $ (2.06) $ (0.83) $ (2.33) $ (0.71) $ (0.55) $ (0.25)
------- -------- ------- -------- ------- ------- -------
Shares used in computing basic and
diluted net loss per share........ 1,621 1,811 4,911 8,225 9,179 9,176 9,232
======= ======== ======= ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
FISCAL YEAR ENDED DECEMBER 31, -------------------------
----------------------------------------------- 1998 1999
1994 1995 1996 1997 1998 (UNAUDITED) (UNAUDITED)
------- ------- ------- ------- ------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 2,051 $ 5,052 $12,825 $ 2,916 $ 3,724 $ 5,328 $ 1,715
Working capital...................... 1,628 4,857 22,841 15,885 9,882 11,436 8,412
Total assets......................... 3,099 6,399 25,363 21,520 16,059 16,734 13,340
Mandatorily redeemable convertible
Preferred stock(2)................. 6,993 13,970 -- -- -- -- --
Stockholders' equity (deficit)....... $(4,759) $(8,501) $23,788 $19,197 $13,214 $14,603 $11,172
</TABLE>
- ----------------
(1) In June 1997, Innovasive acquired Medicine Lodge, Inc. for $14,326 and, in
connection therewith, took a charge of $13,370 for in-process research and
development.
(2) All outstanding shares of preferred stock converted into shares of common
stock upon the closing of Innovasive's initial public offering in June 1996.
10
<PAGE> 17
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INNOVASIVE DEVICES, INC.
The following selected financial information of Innovasive as of and for
the five fiscal years ended December 31, 1998 has been derived from Innovasive's
audited financial statements contained in its Annual Reports on Form 10-K for
the years then ended and is qualified in its entirety by such documents. The
financial statements for those periods were audited by PricewaterhouseCoopers
LLP, independent accountants. The financial information for Innovasive as of and
for the nine months ended September 30, 1999 and 1998 has been derived from the
unaudited consolidated financial statements contained in the Quarterly Report on
Form 10-Q for the period ended September 30, 1999 and is qualified in its
entirety by such document and, in the opinion of Innovasive's management,
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the unaudited interim
periods. The operating results for the nine months ended September 30, 1999 are
not necessarily indicative of results for the full fiscal year ending December
31, 1999. This information should be read in conjunction with management's
discussion and analysis of financial condition and results of operations of
Innovasive and the consolidated financial statements and notes thereto of
Innovasive incorporated by reference into this proxy statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
FISCAL YEAR ENDED DECEMBER 31, -------------------------
------------------------------------------------- 1998 1999
1994 1995 1996 1997 1998 (UNAUDITED) (UNAUDITED)
------- -------- ------- -------- ------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 244 $ 1,234 $ 4,353 $ 7,754 $11,911 $ 8,261 $12,608
Cost of sales....................... 465 1,000 1,611 2,232 3,339 2,313 3,679
------- -------- ------- -------- ------- ------- -------
Gross profit (loss)................. (221) 234 2,742 5,522 8,572 5,948 8,929
Selling, general and administrative
expenses.......................... 1,533 2,435 4,922 8,407 11,294 8,179 8,866
Purchased in-process research and
Development....................... -- -- -- 13,370 -- -- --
Research and development expenses... 1,172 1,597 2,667 3,952 4,290 3,232 2,543
------- -------- ------- -------- ------- ------- -------
Loss from operations................ (2,926) (3,798) (4,847) (20,207) (7,012) (5,463) (2,480)
Interest income..................... 34 64 785 1,053 513 423 209
------- -------- ------- -------- ------- ------- -------
Net loss............................ $(2,892) $ (3,734) $(4,062) $(19,154) $(6,499) $(5,040) $(2,271)
------- -------- ------- -------- ------- ------- -------
Basic and diluted net loss per
share............................. $ (1.79) $ (2.06) $ (0.83) $ (2.33) $ (0.71) $ (0.55) $ (0.25)
------- -------- ------- -------- ------- ------- -------
Shares used in computing basic and
diluted net loss per share........ 1,621 1,811 4,911 8,225 9,179 9,176 9,232
======= ======== ======= ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
FISCAL YEAR ENDED DECEMBER 31, -------------------------
----------------------------------------------- 1998 1999
1994 1995 1996 1997 1998 (UNAUDITED) (UNAUDITED)
------- ------- ------- ------- ------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 2,051 $ 5,052 $12,825 $ 2,916 $ 3,724 $ 5,328 $ 1,715
Working capital...................... 1,628 4,857 22,841 15,885 9,882 11,436 8,412
Total assets......................... 3,099 6,399 25,363 21,520 16,059 16,734 13,340
Mandatorily redeemable convertible
Preferred stock.................... 6,993 13,970 -- -- -- -- --
Stockholders' equity (deficit)....... $(4,759) $(8,501) $23,788 $19,197 $13,214 $14,603 $11,172
</TABLE>
11
<PAGE> 18
RISK FACTORS RELATING TO THE MERGER
In addition to the other information included and incorporated by reference
in this proxy statement/prospectus, Innovasive stockholders should consider
carefully the matters described below in determining whether to adopt the merger
agreement.
- ALTHOUGH THE EXCHANGE RATIO FOR JOHNSON & JOHNSON COMMON STOCK TO BE
RECEIVED IN THE MERGER WILL BE ADJUSTED IN THE EVENT OF ANY CHANGE IN THE
PRICE OF JOHNSON & JOHNSON COMMON STOCK BEFORE THE SPECIAL MEETING, IT
WILL NOT BE ADJUSTED FOR CHANGES OCCURRING AFTER THE SPECIAL
MEETING. Under the merger agreement, each share of Innovasive common
stock will be converted into the right to receive a fraction of a share
of Johnson & Johnson common stock based on an exchange ratio to be
calculated shortly before the special meeting of stockholders. Once the
exchange ratio is determined, it will be a fixed number that will not be
adjusted for any increase or decrease in the market price of Johnson &
Johnson common stock and the value of the Johnson & Johnson common stock
to be received by Innovasive stockholders in the merger will fluctuate
with changes in the Johnson & Johnson common stock price. The market
value of Johnson & Johnson common stock on the day the merger is
completed may vary from the average closing price of Johnson & Johnson
common stock used to calculate the exchange ratio. These prices may vary
because of changes in the business, operations or prospects of Johnson &
Johnson, market assessments of the likelihood that the merger will be
completed, the timing of the completion of the merger, the prospects of
post-merger operations, regulatory considerations, general market and
economic conditions and other factors. As a result, the market value of
the shares of Johnson & Johnson common stock you receive in the merger
may be more or less than the value attributed to your shares of
Innovasive common stock in calculating the exchange ratio.
- THE PRICE OF JOHNSON & JOHNSON COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE PRICE OF INNOVASIVE COMMON
STOCK. Upon completion of the merger, holders of Innovasive common stock
will become holders of Johnson & Johnson common stock. Johnson &
Johnson's business differs from that of Innovasive and Johnson &
Johnson's results of operations, as well as the price of Johnson &
Johnson common stock, may be affected by factors different from those
affecting Innovasive's results of operations and the price of Innovasive
common stock. For a discussion of Johnson & Johnson's and Innovasive's
businesses and certain factors to consider in connection with such
businesses, see Johnson & Johnson's Annual Report on Form 10-K for the
fiscal year ended January 3, 1999, and Innovasive's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, which are incorporated
by reference in this proxy statement/prospectus.
12
<PAGE> 19
THE SPECIAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of
Innovasive as of the record date as part of the solicitation of proxies by the
Innovasive board of directors for use at the special meeting.
DATE, TIME AND PLACE
We will hold the special meeting at the offices of Choate, Hall & Stewart,
Exchange Place, 53 State Street, Boston, Massachusetts, at 10:00 a.m., local
time, on February 11, 2000.
PURPOSE OF SPECIAL MEETING
At the special meeting, we are asking holders of Innovasive common stock to
adopt the merger agreement. The Innovasive board of directors has determined
that the merger and the other transactions contemplated by the merger agreement
are advisable to, and in the best interests of, Innovasive and its stockholders,
has unanimously approved and adopted the merger agreement and the merger, and
unanimously recommends that Innovasive stockholders vote "FOR" adoption of the
merger agreement.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of Innovasive common stock at the close of business
on January 5, 2000, the record date, are entitled to notice of and to vote at
the special meeting. On the record date, 9,334,559 shares of Innovasive common
stock were issued and outstanding and held by approximately 91 holders of
record. A quorum is present at the special meeting if a majority of the shares
of Innovasive common stock issued and outstanding and entitled to vote on the
record date are represented at the special meeting in person or by a properly
executed proxy. In the event that a quorum is not present at the special
meeting, it is expected that the meeting will be adjourned or postponed to
solicit additional proxies. Holders of record of Innovasive common stock on the
record date are entitled to one vote per share at the special meeting on the
proposal to adopt the merger agreement.
VOTES REQUIRED
The adoption of the merger agreement requires the affirmative vote of
stockholders holding a majority of the shares of Innovasive common stock
outstanding and entitled to vote at the special meeting. Because the required
vote of Innovasive stockholders is based upon the number of outstanding shares
of Innovasive common stock, rather than upon the shares actually voted, the
failure by the holder of any such shares to submit a proxy or to vote in person
at the special meeting (including abstentions and broker non-votes) will have
the same effect as a vote against adoption of the merger agreement.
VOTING BY INNOVASIVE DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN STOCKHOLDERS
At the close of business on the record date, directors and executive
officers of Innovasive owned and were entitled to vote 2,451,602 shares of
Innovasive common stock, which represented approximately 26.26% of the shares of
Innovasive common stock outstanding on that date. Each Innovasive director and
executive officer has indicated his intention to vote, or cause to be voted, the
Innovasive common stock owned by him "FOR" adoption of the merger agreement.
Certain directors, officers and other stockholders of Innovasive have entered
into a stockholders agreement with Johnson & Johnson whereby such persons have
agreed to vote their shares in favor of the merger and to take certain other
actions in connection therewith. See "Stockholders Agreement" on page 44.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for
the special meeting will be voted at the special meeting in the manner specified
by the holders. Properly executed proxies that do not contain voting
instructions will be voted "FOR" adoption of the merger agreement.
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<PAGE> 20
Shares of Innovasive common stock represented at the special meeting but
not voting, including shares of Innovasive common stock for which proxies have
been received but for which holders of shares have abstained will be treated as
present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of all business.
Brokers who hold shares of Innovasive common stock in street name for
customers who are the beneficial owners of such shares may not give a proxy to
vote those customers' shares in the absence of specific instructions from those
customers. These non-voted shares are referred to as broker non-votes and count
as votes against the adoption of the merger agreement.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
Innovasive does not expect that any matter other than the proposal to adopt
the merger agreement will be brought before the special meeting. If, however,
the Innovasive board of directors properly presents other matters, the persons
named as proxies will vote in accordance with their judgment.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person at the special meeting. A stockholder may
revoke a proxy at any time prior to its exercise by filing with the Clerk of
Innovasive a properly executed revocation of proxy, by submitting a properly
executed proxy to the Clerk of Innovasive bearing a later date or by appearing
at the special meeting and voting in person. Attendance at the special meeting
will not itself constitute revocation of a proxy.
SOLICITATION OF PROXIES
Innovasive will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Innovasive and its subsidiaries may solicit proxies from
stockholders by telephone or other electronic means or in person. Innovasive
will cause brokerage houses and other custodians, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of stock held of record
by such persons. Innovasive will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in doing so.
Georgeson Shareholder Communications, Inc. will assist in the solicitation
of proxies by Innovasive. Innovasive will pay Georgeson a fee of $8,500, plus
reimbursement of certain out-of-pocket expenses, and will indemnify Georgeson
against any losses arising out of its proxy soliciting services on behalf of
Innovasive.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES. A
transmittal form with instructions for the surrender of Innovasive common stock
certificates will be mailed to Innovasive stockholders shortly after completion
of the merger.
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<PAGE> 21
THE MERGER
BACKGROUND TO THE MERGER
BACKGROUND OF THE MERGER. In the spring of 1999, Innovasive's management
and board of directors began discussing the possibility of finding a strategic
business partner for purposes of:
- accelerating Innovasive's growth, particularly in international markets
- leveraging Innovasive's products through a larger sales organization
- strengthening Innovasive's product development capabilities and
- broadening Innovasive's product offerings
On July 14, 1999, at a meeting of Innovasive's board of directors, the
board decided to engage Deutsche Bank Securities Inc. ("Deutsche Banc Alex.
Brown") to:
- assist Innovasive in identifying and evaluating candidates for a
potential sale or merger
- contact potential candidates which Innovasive and Deutsche Banc Alex.
Brown believed to be appropriate for a potential sale or merger
- meet and interact with potential candidates in the context of assisting
Innovasive in evaluating and negotiating a potential sale or merger and
- provide an opinion regarding the fairness, from a financial point of
view, of the consideration to be received by Innovasive stockholders or
the exchange ratio, as appropriate, in a proposed sale or merger.
Subsequent to the July 14, 1999 meeting of Innovasive's board of directors,
Deutsche Banc Alex. Brown held discussions with nine companies regarding a
potential business combination. Innovasive entered into confidentiality
agreements with seven of the nine companies contacted during this period, and
Deutsche Banc Alex. Brown sent descriptive materials regarding Innovasive to
each of the seven companies.
Between August 4, 1999 and August 26, 1999, senior members of Innovasive's
management and representatives of Deutsche Banc Alex. Brown held due diligence
meetings and conference calls with the seven parties that had previously signed
confidentiality agreements and received descriptive materials. On August 13,
1999, Innovasive and Deutsche Banc Alex. Brown held a telephonic meeting with
Johnson & Johnson to discuss the merits of a merger, financial projections and
assumptions, and other topics relevant to Johnson & Johnson's interest in
Innovasive. During this period, several additional conversations occurred
between Innovasive, Deutsche Banc Alex. Brown and Johnson & Johnson, and
Innovasive responded to Johnson & Johnson's information requests by providing
additional materials and analyses. Also during this period, Innovasive continued
to discuss with Deutsche Banc Alex. Brown the viability of other strategic
alternatives, including remaining independent and funding operations through
internally generated cash flow or through an offering of equity securities, in
the event that an acceptable business combination could not be achieved.
On or about August 17, 1999, Deutsche Banc Alex. Brown sent letters to the
seven companies that had conducted due diligence with Innovasive, requesting
preliminary expressions of interest, including valuation and proposed
transaction structure.
Between August 26, 1999 and September 2, 1999, Innovasive received
non-binding indications of interest from five parties, including Johnson &
Johnson.
15
<PAGE> 22
THE MERGER
BACKGROUND TO THE MERGER
BACKGROUND OF THE MERGER. In the spring of 1999, Innovasive's management
and board of directors began discussing the possibility of finding a strategic
business partner for purposes of:
- accelerating Innovasive's growth, particularly in international markets
- leveraging Innovasive's products through a larger sales organization
- strengthening Innovasive's product development capabilities and
- broadening Innovasive's product offerings
On July 14, 1999, at a meeting of Innovasive's board of directors, the
board decided to engage Deutsche Banc Alex. Brown to:
- assist Innovasive in identifying and evaluating candidates for a
potential sale or merger
- contact potential candidates which Innovasive and Deutsche Banc Alex.
Brown believed to be appropriate for a potential sale or merger
- meet and interact with potential candidates in the context of assisting
Innovasive in evaluating and negotiating a potential sale or merger and
- provide an opinion regarding the fairness, from a financial point of
view, of the consideration to be received by Innovasive stockholders or
the exchange ratio, as appropriate, in a proposed sale or merger.
Subsequent to the July 14, 1999 meeting of Innovasive's board of directors,
Deutsche Banc Alex. Brown held discussions with nine companies regarding a
potential business combination. Innovasive entered into confidentiality
agreements with seven of the nine companies contacted during this period, and
Deutsche Banc Alex. Brown sent descriptive materials regarding Innovasive to
each of the seven companies.
Between August 4, 1999 and August 26, 1999, senior members of Innovasive's
management and representatives of Deutsche Banc Alex. Brown held due diligence
meetings and conference calls with the seven parties that had previously signed
confidentiality agreements and received descriptive materials. On August 13,
1999, Innovasive and Deutsche Banc Alex. Brown held a telephonic meeting with
Johnson & Johnson to discuss the merits of a merger, financial projections and
assumptions, and other topics relevant to Johnson & Johnson's interest in
Innovasive. During this period, several additional conversations occurred
between Innovasive, Deutsche Banc Alex. Brown and Johnson & Johnson, and
Innovasive responded to Johnson & Johnson's information requests by providing
additional materials and analyses. Also during this period, Innovasive continued
to discuss with Deutsche Banc Alex. Brown the viability of other strategic
alternatives, including remaining independent and funding operations through
internally generated cash flow or through an offering of equity securities, in
the event that an acceptable business combination could not be achieved.
On or about August 17, 1999, Deutsche Banc Alex. Brown sent letters to the
seven companies that had conducted due diligence with Innovasive, requesting
preliminary expressions of interest, including valuation and proposed
transaction structure.
Between August 26, 1999 and September 2, 1999, Innovasive received
non-binding indications of interest from five parties, including Johnson &
Johnson.
16
<PAGE> 23
Based on the indications received, Innovasive chose to continue discussions
with three of the five companies. Innovasive considered, among other things,
valuation, proposed structure and the likelihood of the successful consummation
of a transaction in making this decision. Between September 16, 1999 and
September 28, 1999, each of these three companies conducted additional due
diligence at the offices of Innovasive's legal advisor, Choate, Hall & Stewart,
including meetings with Innovasive management.
On or about September 30, 1999, Deutsche Banc Alex. Brown and Choate, Hall
& Stewart sent final bid letters and draft merger agreements to the three
parties that had conducted additional due diligence with Innovasive. The letters
contained a request for final bids, including valuation, form of consideration
and structure, as well as a copy of the proposed merger agreement.
During this period, Innovasive and Deutsche Banc Alex. Brown held several
additional conversations with Johnson & Johnson, including a meeting between
Innovasive and Johnson & Johnson management on October 7, 1999 to discuss
Innovasive's new products and other due diligence information. Also during this
period, one of the three remaining companies chose to withdraw its preliminary
indication of interest on the basis of valuation concerns.
On October 28, 1999, Johnson & Johnson submitted an offer to purchase
Innovasive for $7.80 per share or approximately $80 million in Johnson & Johnson
common stock. Johnson & Johnson's bid was subject to confirmatory due diligence
and certain other conditions, including that:
- the officers and directors of Innovasive and certain affiliated
stockholders enter into a stockholders agreement with Johnson & Johnson
pursuant to which such stockholders would agree to vote in favor of a
merger with Johnson & Johnson and against any other competing proposal
and
- Innovasive grant Johnson & Johnson an option to purchase 19.9% of the
outstanding shares of common stock of Innovasive under certain
circumstances
On October 29, 1999, a representative from the remaining party in the bid
process called Richard D. Randall, Innovasive's chief executive officer, and
indicated that while the company remained interested in exploring the
possibility of an acquisition of Innovasive, it would be unable to submit a
formal offer within a reasonable time frame as a result of other strategic
imperatives at such company.
On October 29, 1999, Innovasive's board of directors met telephonically
with representatives from Deutsche Banc Alex. Brown and Choate, Hall & Stewart,
to discuss the Johnson & Johnson offer and the status of the other party's bid.
Representatives from Deutsche Banc Alex. Brown described to the Innovasive board
of directors the terms of the Johnson & Johnson offer. Innovasive's board of
directors entered into extensive discussion and questioning of the
representatives of Deutsche Banc Alex. Brown and Choate, Hall & Stewart
regarding Johnson & Johnson's offer and the viability and attractiveness of
other strategic alternatives, including the status of the other party in the bid
process. Particular areas of discussion included the stockholders agreement, the
stock option agreement and the break-up fee proposed by Johnson & Johnson. In
addition, the board of directors discussed the importance of minimizing the
ability of Johnson & Johnson to terminate the merger agreement as a result of
adverse changes to Innovasive's business related to the announcement of the
merger. Based on this discussion, Innovasive's board of directors directed
management and its financial and legal advisors to conduct further negotiations
with Johnson & Johnson to attempt to improve the value and terms of the offer.
Over the next several days, management and representatives of Deutsche Banc
Alex. Brown and Choate, Hall & Stewart held numerous conference calls with
Johnson & Johnson and its advisors to discuss details of the proposed
transaction, including valuation and the terms of the merger agreement, the
stockholders agreement and the stock option agreement. Johnson & Johnson
subsequently increased its offer to $8.25 per share in Johnson & Johnson common
stock.
On November 1, 1999, Innovasive's board of directors met telephonically,
along with representatives of Innovasive senior management, Deutsche Banc Alex.
Brown and Choate, Hall & Stewart, to discuss the status of the negotiations with
Johnson & Johnson. Management and Deutsche Banc Alex. Brown advised the
Innovasive board of directors of the material elements of the most recent
discussions with Johnson &
17
<PAGE> 24
- Johnson & Johnson's intention to operate Innovasive as a wholly-owned
subsidiary, retaining the Innovasive name and organization
- the continued expansion of Innovasive, as a member of Johnson & Johnson's
family of companies, as a center of excellence for research, development
and manufacturing
- the resources available to Innovasive in relation to its competitors and
its ability to achieve its strategic goals in light of the substantial
funding requirements for research and development, the significant
expense associated with marketing products and the ongoing consolidation
in the industry in which it competes
- the terms and conditions of the merger agreement and the belief of the
Innovasive board of directors that the parties will be able to satisfy
the closing conditions
- the expected qualification of the merger as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and
- the analysis and presentation of the opinion of Deutsche Banc Alex. Brown
that, as of November 8, 1999, and based upon and subject to the various
considerations in its opinion, the exchange ratio was fair from a
financial point of view to the holders of Innovasive common stock
In the course of deliberations, the Innovasive board of directors also
considered a number of additional factors relevant to the merger, including:
- Johnson & Johnson's requirement, as a condition to proceeding on the
terms set forth in the merger agreement, that it receive the protections
afforded by the stockholders agreement, the stock option agreement and
the termination fee and no solicitation provisions contained in the
merger agreement and, with respect to those provisions, the Innovasive
board of directors weighed a number of factors including the following
factors:
- the attractiveness of the exchange ratio and the benefits of the
merger
- the fact that the grant of the stock option would preclude the use of
pooling of interests for accounting purposes by any interested third
parties
- its belief that a higher sale price could not be obtained in view of
(1) the fact that no higher binding offer had emerged in the process
run by Innovasive to solicit indications of interest in the
acquisition of Innovasive, (2) the value of $8.25 represented a
premium of 10.0% over the closing price of Innovasive one month prior
to the announcement of the transition and 158.8% over the closing
price on July 13, 1999, the day prior to the decision by the board of
directors of Innovasive to retain Deutsche Banc Alex. Brown to explore
strategic alternatives, (3) its belief that it was not possible to
achieve a higher price from Johnson & Johnson or any other party,
based on the negotiations with Johnson & Johnson and other interested
parties, (4) the opinion of Deutsche Banc Alex. Brown that, as of
November 8, 1999, and based on and subject to the various
considerations in its opinion, the exchange ratio was fair from a
financial point of view to the holders of Innovasive common stock, (5)
its belief that the exchange ratio was fair and (6) the financial
position and business prospects of Johnson & Johnson, a large,
well-capitalized merger partner
- the advice given to, and belief by, the Innovasive board of directors
that the amount of the termination fee was within the parameters of
fees agreed to in comparable transactions
- Johnson & Johnson's inability to terminate the merger agreement in the
event there were materially adverse changes to Innovasive's business
(1) directly resulting from the announcement or pending status of the
merger, (2) resulting from monetary damages or injunctions in
connection with certain pending litigation involving Innovasive, (3)
attributable to decreases in the market price of Innovasive common
stock, (4) resulting from changes in the industry in which Innovasive
competes and not specifically relating to Innovasive or (5) resulting
from changes in general economic conditions
18
<PAGE> 25
- Johnson & Johnson's intention to operate Innovasive as a wholly-owned
subsidiary, retaining the Innovasive name and organization
- the continued expansion of Innovasive, as a member of Johnson & Johnson's
family of companies, as a center of excellence for research, development
and manufacturing
- the resources available to Innovasive in relation to its competitors and
its ability to achieve its strategic goals in light of the substantial
funding requirements for research and development, the significant
expense associated with marketing products and the ongoing consolidation
in the industry in which it competes
- the terms and conditions of the merger agreement and the belief of the
Innovasive board of directors that the parties will be able to satisfy
the closing conditions
- the expected qualification of the merger as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and
- the analysis and presentation of the opinion of Deutsche Banc Alex. Brown
that, as of November 8, 1999, and based upon and subject to the various
considerations in its opinion, the exchange ratio was fair from a
financial point of view to the holders of Innovasive common stock
In the course of deliberations, the Innovasive board of directors also
considered a number of additional factors relevant to the merger, including:
- Johnson & Johnson's requirement, as a condition to proceeding on the
terms set forth in the merger agreement, that it receive the protections
afforded by the stockholders agreement, the stock option agreement and
the termination fee and no solicitation provisions contained in the
merger agreement and, with respect to those provisions, the Innovasive
board of directors weighed a number of factors including the following
factors:
- the attractiveness of the exchange ratio and the benefits of the
merger
- the fact that the grant of the stock option would preclude the use of
pooling of interests for accounting purposes by any interested third
parties
- its belief that a higher sale price could not be obtained in view of
(1) the fact that no higher binding offer had emerged in the process
run by Innovasive to solicit indications of interest in the
acquisition of Innovasive, (2) the value of $8.25 represented a
premium of 10% over the closing price of Innovasive one month prior to
the announcement of the transition and 158.8% over the closing price
on July 13, 1999, the day prior to the decision by the board of
directors of Innovasive to retain Deutsche Banc Alex. Brown to explore
strategic alternatives, (3) its belief that it was not possible to
achieve a higher price from Johnson & Johnson or any other party,
based on the negotiations with Johnson & Johnson and other interested
parties, (4) the opinion of Deutsche Banc Alex. Brown that, as of
November 8, 1999, and based on and subject to the various
considerations in its opinion, the exchange ratio was fair from a
financial point of view to the holders of Innovasive common stock, (5)
its belief that the exchange ratio was fair and (6) the financial
position and business prospects of Johnson & Johnson, a large,
well-capitalized merger partner
- the advice given to, and belief by, the Innovasive board of directors
that the amount of the termination fee was within the parameters of
fees agreed to in comparable transactions
- Johnson & Johnson's inability to terminate the merger agreement in the
event there were materially adverse changes to Innovasive's business
(1) directly resulting from the announcement or pending status of the
merger, (2) resulting from monetary damages or injunctions in
connection with certain pending litigation involving Innovasive, (3)
attributable to decreases in the market price of Innovasive common
stock, (4) resulting from changes in the industry in which Innovasive
competes and not specifically relating to Innovasive or (5) resulting
from changes in general economic conditions
19
<PAGE> 26
- information relating to the business, assets, management, competitive
position, operating performance, share trading performance and prospects
of each of Innovasive and Johnson & Johnson, including the prospects of
Innovasive if it were to continue as an independent company
- current industry, market and economic conditions
- the possibility of strategic alternatives to the merger for enhancing
long-term stockholder value, including the possibility of a private
placement of Innovasive common stock and other potential strategic
transactions
- the impact of the merger on Innovasive's customers, suppliers and
employees and
- the likelihood that the merger would be completed
The Innovasive board of directors also identified and considered a number
of potentially negative factors in its deliberations concerning the merger,
including:
- the recognition that Johnson & Johnson common stock has traded at a high
valuation, and the risk that such valuation might not be sustained in the
future
- the risk that after the merger key personnel might leave Innovasive and
- the risk that the potential benefits of the merger might not be fully
realized
The Innovasive board of directors believed that certain of these risks were
unlikely to occur, that Innovasive could avoid or mitigate others, and that,
overall, these risks were outweighed by the potential benefits of the merger.
In view of the variety of factors considered in connection with its
evaluation of the merger agreement and the merger and the stockholders agreement
and the stock option agreement, the Innovasive board of directors did not find
it practicable to and did not quantify or otherwise assign relative weight to
the specific factors considered in reaching its determination. In addition,
individual members of the Innovasive board of directors may have given different
weight to different factors.
RECOMMENDATION OF THE INNOVASIVE BOARD OF DIRECTORS. After careful
consideration, the Innovasive board of directors has unanimously approved and
adopted the merger agreement and determined that the merger and the other
transactions contemplated by the merger agreement are advisable and in the best
interests of Innovasive and its stockholders. The Innovasive board of directors
unanimously recommends that the stockholders of Innovasive vote "FOR" the
adoption of the merger agreement.
OPINION OF THE FINANCIAL ADVISOR TO INNOVASIVE
Innovasive engaged Deutsche Banc Alex. Brown to act as its exclusive
financial advisor in connection with the merger based on Deutsche Banc Alex.
Brown's long-standing relationship with Innovasive and its reputation,
experience and expertise in similar transactions. On November 8, 1999, at a
meeting of the Innovasive board of directors held to evaluate the proposed
merger, Deutsche Banc Alex. Brown rendered an oral opinion, which opinion was
confirmed by delivery of a written opinion dated November 8, 1999, to the effect
that, as of that date and based upon and subject to certain matters described in
its opinion, the exchange ratio provided for in the merger was fair, from a
financial point of view, to the holders of Innovasive common stock.
The full text of Deutsche Banc Alex. Brown's written opinion dated November
8, 1999, which describes the assumptions made, matters considered and
limitations of the review undertaken, is attached as Annex 4 to this
proxy/prospectus. DEUTSCHE BANC ALEX. BROWN'S OPINION IS DIRECTED TO THE BOARD
OF DIRECTORS OF INNOVASIVE AND ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO
FROM A FINANCIAL POINT OF VIEW. THE OPINION DOES NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISION BY INNOVASIVE TO ENGAGE IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW TO VOTE WITH RESPECT TO
MATTERS RELATING TO THE PROPOSED MERGER. The summary of Deutsche Banc Alex.
Brown's opinion described below is qualified in its entirety by reference to the
full text of its opinion.
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<PAGE> 27
In connection with Deutsche Banc Alex. Brown's role as Innovasive's
financial advisor, and in arriving at its opinion, Deutsche Banc Alex. Brown:
- reviewed publicly available financial and other information concerning
Innovasive and Johnson & Johnson and internal analyses and other
information furnished to Deutsche Banc Alex. Brown by Innovasive and
Johnson & Johnson
- held discussions with members of the senior management of Innovasive and
Johnson & Johnson regarding the business and prospects of their
respective companies and the joint prospects of a combined company
- reviewed the reported prices and trading activity for Innovasive common
stock and Johnson & Johnson common stock
- compared certain financial and stock market information for Innovasive
and Johnson & Johnson with similar information for other companies whose
securities are publicly traded
- reviewed the financial terms of recent business combinations which
Deutsche Banc Alex. Brown deemed comparable in whole or in part
- reviewed the terms of the merger agreement and
- performed other studies and analyses and considered other factors as
Deutsche Banc Alex. Brown deemed appropriate
Deutsche Banc Alex. Brown did not assume responsibility for independent
verification of, and did not independently verify, any information, whether
publicly available or furnished to it, concerning Innovasive, Johnson & Johnson
or the combined company, including, without limitation, any financial
information, forecasts or projections considered in connection with the
rendering of its opinion. For purposes of its opinion, Deutsche Banc Alex. Brown
assumed and relied upon the accuracy and completeness of all information that it
reviewed and did not conduct a physical inspection of any of the properties or
assets, or prepare or obtain any independent evaluation or appraisal of any of
the assets or liabilities, of Innovasive or Johnson & Johnson. With respect to
the financial forecasts and projections made available to Deutsche Banc Alex.
Brown and used in its analyses, Deutsche Banc Alex. Brown was advised, and
Deutsche Banc Alex. Brown assumed, that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Innovasive as to the matters covered thereby. Deutsche Banc Alex.
Brown's opinion was necessarily based on economic, market and other conditions
existing on, and the information made available to Deutsche Banc Alex. Brown as
of, the date of its opinion.
For purposes of rendering its opinion, Deutsche Banc Alex. Brown assumed
that, in all respects material to its analysis, the representations and
warranties of Innovasive, Johnson & Johnson and Raptor Acquisition Corp.
contained in the merger agreement were true and correct, Innovasive, Johnson &
Johnson and Raptor Acquisition Corp. will each perform all of the covenants and
agreements to be performed by it under the merger agreement and all conditions
to the obligations of each of Innovasive, Johnson & Johnson and Raptor
Acquisition Corp. to consummate the merger will be satisfied without any waiver.
Deutsche Banc Alex. Brown also assumed that all material governmental,
regulatory or other approvals and consents required in connection with the
consummation of the merger will be obtained and that in connection with
obtaining any necessary governmental, regulatory or other approvals and
consents, or any amendments, modifications or waivers to any agreements,
instruments or orders to which either Innovasive or Johnson & Johnson is a party
or is subject or by which it is bound, no limitations, restrictions or
conditions will be imposed or amendments, modifications or waivers made that
would have a material adverse effect on Innovasive or Johnson & Johnson or
materially reduce the contemplated benefits of the merger to Innovasive, Johnson
& Johnson or the combined company.
Innovasive informed Deutsche Banc Alex. Brown, and for purposes of
rendering its opinion Deutsche Banc Alex. Brown assumed, that the merger is
expected to qualify as a tax-free reorganization for federal income tax
purposes. Deutsche Banc Alex. Brown expressed no opinion as to the price at
which Johnson & Johnson common stock will trade at any time. No limitations were
imposed by the Innovasive
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<PAGE> 28
board of directors on Deutsche Banc Alex. Brown with respect to the
investigations made or the procedures followed by it in rendering its opinion.
The following is a summary of the material analyses performed by Deutsche
Banc Alex. Brown in connection with its opinion to the board of directors of
Innovasive dated November 8, 1999. THE FINANCIAL ANALYSES SUMMARIZED BELOW
INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND
DEUTSCHE BANC ALEX. BROWN'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER
WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE
DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA SET FORTH BELOW
WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES,
INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD
CREATE A MISLEADING OR INCOMPLETE VIEW OF DEUTSCHE BANC ALEX. BROWN'S FINANCIAL
ANALYSES.
Analysis of Selected Public Companies. Deutsche Banc Alex. Brown compared
certain financial and stock market information for Innovasive with similar
information for the following selected publicly traded companies in the
orthopedic industry:
- Biomet, Inc.
- CONMED Corporation
- Orthofix International N.V.
- Stryker Corporation
- Xomed Surgical Products, Inc.
Deutsche Banc Alex. Brown reviewed adjusted market values, calculated as
equity market value, plus debt, less cash, as multiples of latest 12 months
revenues. Deutsche Banc Alex. Brown also calculated multiples of share prices
relative to each company's projected earnings per share for calendar years 2000
and 2001. For all companies except Xomed Surgical Products, Inc., multiples were
based on closing stock prices on November 5, 1999. For Xomed Surgical Products,
Inc., Deutsche Banc Alex. Brown used the stock price four weeks prior to the
announcement of its acquisition by Medtronic, Inc. Estimated financial data for
the selected companies were based on research analysts' estimates as reported by
I/B/E/S International, Inc. ("I/B/E/S"), a market research database, and
estimated financial data for Innovasive were based both on I/B/E/S estimates and
Innovasive management estimates. This analysis indicated the following multiples
for the selected companies, as compared to the following multiples for
Innovasive implied by the exchange ratio to be paid in the merger:
<TABLE>
<CAPTION>
MULTIPLES OF
SELECTED COMPANIES MULTIPLES FOR INNOVASIVE
--------------------- IMPLIED BY
MEAN RANGE EXCHANGE RATIO
---- ------------- ------------------------
<S> <C> <C> <C>
ADJUSTED MARKET VALUE AS A MULTIPLE OF:
Latest 12 months revenues......................... 3.4x 1.7x - 5.2x 5.1x
EQUITY MARKET VALUE AS A MULTIPLE OF:
Estimated calendar year 2000 earnings per
share........................................ 22.1x 11.4x - 35.9x 150.0x
(research analysts' estimates)
Estimated calendar year 2000 earnings per
share........................................ -- -- 60.8x
(management estimates for Innovasive)
Estimated calendar year 2001 earnings per
share........................................ 18.2x 9.9x - 28.4x 17.0x
(management estimates for Innovasive)
</TABLE>
Deutsche Banc Alex. Brown also compared certain financial and stock market
information for Johnson & Johnson with similar information for the following
selected publicly held companies in the pharmaceutical and hospital
supply/medical device industries:
PHARMACEUTICAL INDUSTRY:
- Bristol-Myers Squibb Co.
- Pfizer, Inc.
- Schering Plough Corp.
- SmithKline Beecham plc
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HOSPITAL SUPPLY/MEDICAL DEVICE INDUSTRY:
- Abbott Laboratories
- Baxter International, Inc.
- Biomet, Inc.
- Guidant Corp.
- Medtronic, Inc.
- Stryker Corp.
Deutsche Banc Alex. Brown reviewed adjusted market values, calculated as
equity market value, plus debt, less cash, as multiples of latest 12 months
revenues and earnings before interest, taxes, depreciation and amortization,
commonly referred to as EBITDA. Deutsche Banc Alex. Brown also calculated
multiples of share prices relative to each company's projected earnings per
share for calendar year 2000 as well as each company's 2000 price to earnings
multiple relative to its I/B/E/S projected growth rate. For all companies,
multiples were based on closing stock prices on November 5, 1999 and estimated
financial data were based on research analysts' estimates as reported by
I/B/E/S. This analysis indicated the following multiples for the selected
companies as compared to the following multiples for Johnson & Johnson:
<TABLE>
<CAPTION>
MEAN MULTIPLES OF SELECTED
--------------------------------
HOSPITAL
SUPPLY/MEDICAL MULTIPLES FOR
PHARMACEUTICAL DEVICE JOHNSON &
COMPANIES COMPANIES JOHNSON
-------------- -------------- -------------
<S> <C> <C> <C>
ADJUSTED MARKET VALUE AS A MULTIPLE OF:
Latest 12 months revenues.......................... 8.1x 5.8x 5.6x
Latest 12 months EBITDA.......................... 26.3x 19.1x 21.6x
EQUITY MARKET VALUE AS A MULTIPLE OF:
Estimated calendar year 2000 earnings per
share......................................... 33.9x 26.9x 31.2x
Estimated calendar year 2000 P/E Multiples
relative to I/B/E/S projected growth rate..... 226.2% 162.9% 240.1%
</TABLE>
Analysis of Selected Precedent Transactions. Deutsche Banc Alex. Brown
reviewed the purchase prices and implied transaction multiples for the following
13 selected transactions in the orthopedic industry:
<TABLE>
<CAPTION>
ACQUIROR TARGET
- -------- ------
<S> <C>
Smith & Nephew plc Exogen, Inc.
Medtronic, Inc. Sofamor Danek Group
Medtronic, Inc. Midas Rex, L.P.
Stryker Corp. Howmedica
Johnson & Johnson DePuy, Inc.
DePuy, Inc. Acromed Corp.
Interpore International Cross Medical Products
Sulzer Medica Ltd. Spine-Tech, Inc.
CONMED Corp. Linvatec Corp.
DePuy Inc. Landanger-Camus
DePuy Inc. Orthopedic Technology, Inc.
Smith & Nephew plc Acufex Microsurgical, Inc.
Johnson & Johnson Mitek Surgical Products, Inc.
</TABLE>
Deutsche Banc Alex. Brown reviewed adjusted market values in the selected
transactions as a multiple of latest 12 months revenues and equity market values
as a multiple of one-year forward net income. All multiples were based on
publicly available information at the time of announcement of each
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<PAGE> 30
transaction. This analysis indicated the following multiples for the selected
transactions, as compared to the following multiples for Innovasive implied by
the exchange ratio to be paid in the merger:
<TABLE>
<CAPTION>
MULTIPLES OF SELECTED MULTIPLES FOR
TRANSACTIONS INNOVASIVE
--------------------- IMPLIED BY
MEAN RANGE EXCHANGE RATIO
---- ------------- --------------
<S> <C> <C> <C>
ADJUSTED MARKET VALUE AS A MULTIPLE OF:
Latest 12 months revenues............................... 4.2x 1.2x - 10.0x 5.1x
EQUITY MARKET VALUE AS A MULTIPLE OF:
One-year forward net income (management estimates for
Innovasive)........................................ 33.4x 21.3x - 61.9x 96.2x
</TABLE>
Discounted Cash Flow Analyses. Deutsche Banc Alex. Brown performed a
discounted cash flow analysis to estimate the present value of the unlevered,
after-tax free cash flows that Innovasive could generate during fiscal years
2000 through 2004, based on internal estimates of Innovasive management. The
range of estimated terminal values was calculated by applying terminal value
multiples ranging from 8.0x to 12.0x to Innovasive's projected 2004 EBITDA. The
present value of the cash flows and terminal values was calculated using
discount rates ranging from 20.0% to 30.0%. This analysis was based both on
internal base case estimates of Innovasive management and conservative case
estimates prepared by Innovasive management which assumed, among other things,
lower revenue growth rates and lower profit margins than the base case
estimates. This analysis yielded the following implied per share equity
reference ranges for Innovasive, as compared to the per share equity value for
Innovasive implied by the exchange ratio to be paid in the merger:
<TABLE>
<CAPTION>
IMPLIED PER SHARE EQUITY REFERENCE PER SHARE EQUITY VALUE FOR INNOVASIVE
RANGE FOR INNOVASIVE IMPLIED BY EXCHANGE RATIO
---------------------------------- -------------------------------------
<S> <C> <C>
Base case......................... $6.83 - $13.65 $8.25
Conservative case................. $4.23 - $8.21 $8.25
</TABLE>
In addition, Deutsche Banc Alex. Brown performed a discounted cash flow
analysis to estimate the present value of the unlevered, after-tax free cash
flows that Johnson & Johnson could generate during fiscal years 2000 through
2003, based on publicly available research analysts' estimates. The range of
estimated terminal values was calculated by applying terminal value multiples
ranging from 18.0x to 22.0x to Johnson & Johnson's projected 2003 EBITDA. The
present value of the cash flows and terminal values were calculated using
discount rates ranging from 10.0% to 14.0%. This analysis yielded the following
implied per share equity reference range for Johnson & Johnson, as compared to
Johnson & Johnson's price per share as of November 5, 1999:
<TABLE>
<CAPTION>
IMPLIED PER SHARE EQUITY REFERENCE RANGE FOR JOHNSON & JOHNSON PRICE PER SHARE AS OF
JOHNSON & JOHNSON NOVEMBER 5, 1999
- -------------------------------------------- -----------------------------------------
<S> <C>
$91 - $126 $105.50
</TABLE>
Premiums Analysis. Deutsche Banc Alex. Brown reviewed the premiums paid in
117 selected merger and acquisition transactions completed since January 1, 1998
and 36 merger and acquisition transactions completed since January 1, 1997 in
the health care industry, each having transaction values between $50 million and
$150 million, as well as 13 transactions completed in the orthopedic industry.
Deutsche Banc Alex. Brown analyzed the premiums in these transactions based on
the target company's stock price one day and one month prior to public
announcement of the transaction. Deutsche Banc Alex. Brown compared the premiums
for the target companies in the selected transactions to the premiums implied
for Innovasive in the merger based on the closing prices of Innovasive common
stock one day and one month prior to November 5, 1999. In addition, Deutsche
Banc Alex. Brown compared the premiums for the target companies in these
transactions to the premium implied for Innovasive in the merger based on the
closing price of Innovasive common stock on July 13, 1999, the day prior to the
decision by the board of
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<PAGE> 31
directors of Innovasive to retain Deutsche Banc Alex. Brown to explore strategic
alternatives for Innovasive. This analysis indicated the following premiums:
<TABLE>
<CAPTION>
PREMIUMS IMPLIED PREMIUM
------------------------ IN THE
MEAN RANGE TRANSACTION
---- ---------------- ---------------
<S> <C> <C> <C>
SELECTED M&A TRANSACTIONS:
One day prior..................................... 36.3% (29.1%) - 168.9% 1.5%
One month prior................................. 55.6% (40.8%) - 287.1% 10.0%
July 13, 1999................................... -- -- 158.8%
SELECTED HEALTH CARE M&A TRANSACTIONS:
One day prior................................... 29.1% (8.8%) - 216.6% 1.5%
One month prior................................. 43.1% (8.3%) - 181.0% 10.0%
July 13, 1999................................... -- -- 158.8%
SELECTED ORTHOPEDIC M&A TRANSACTIONS:
One day prior................................... 14.8% 7.9% - 27.7% 1.5%
One month prior................................. 47.9% 14.5% - 111.3% 10.0%
July 13, 1999................................... -- -- 158.8%
</TABLE>
Exchange Ratio Analysis. Deutsche Banc Alex. Brown performed an analysis
comparing an assumed exchange ratio in the merger (determined by dividing the
merger consideration ($8.25) by Johnson & Johnson's closing price on November 5,
1999) with the implied historical exchange ratios for Innovasive common stock
and Johnson & Johnson common stock. The implied historical exchange ratios were
calculated by dividing the average per share prices of Innovasive common stock
by the average per share prices of Johnson & Johnson common stock on November 5,
1999 and during the 20-day, three-month and six-month periods ended November 5,
1999. This analysis resulted in the following implied historical exchange
ratios:
<TABLE>
<CAPTION>
PERIOD ENDED ON NOVEMBER 5, 1999 IMPLIED HISTORICAL EXCHANGE RATIO ASSUMED EXCHANGE RATIO
- -------------------------------- --------------------------------- ----------------------
<S> <C> <C>
November 5, 1999............................ 0.0770x 0.0782x
20-day trading average...................... 0.0761x 0.0782x
Three-month trading average................. 0.0782x 0.0782x
Six-month trading average................... 0.0555x 0.0782x
</TABLE>
Pro Forma Merger Analysis. Deutsche Banc Alex. Brown analyzed the potential
pro forma effects of the merger on Johnson & Johnson's estimated earnings per
share for calendar years 2000 and 2001. Estimated financial data used in this
analysis were based on internal estimates of the management of Innovasive, in
the case of Innovasive, and I/B/E/S estimates, in the case of Johnson & Johnson.
The results of the pro forma merger analysis suggested that the merger could be
dilutive to Johnson & Johnson's earnings per share in calendar years 2000 and
2001 without giving effect to certain potential cost savings or synergies and
accretive to Johnson & Johnson's earnings per share in calendar years 2000 and
2001 assuming certain potential cost savings and synergies are achieved. The
actual results achieved by the combined company may vary from projected results,
and such variations may be material.
Other Factors. In rendering its opinion, Deutsche Banc Alex. Brown also
reviewed and considered, among other things:
- historical and projected financial data for Innovasive and Johnson &
Johnson
- historical stock price performance for Innovasive common stock and
Johnson & Johnson common stock and
- published research analysts' reports, including estimates as to the
projected earnings per share of Innovasive and Johnson & Johnson
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<PAGE> 32
The above summary is not a complete description of Deutsche Banc Alex.
Brown's opinion to the Innovasive board of directors or the financial analyses
performed and factors considered by Deutsche Banc Alex. Brown in connection with
its opinion. The preparation of a fairness opinion is a complex analytical
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances and, therefore, a fairness opinion is not readily
susceptible to summary description. Deutsche Banc Alex. Brown believes that its
analyses and the summary above must be considered as a whole and that selecting
portions of its analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or the narrative
description of the analyses, could create a misleading or incomplete view of the
processes underlying Deutsche Banc Alex. Brown's analyses and opinion.
In performing its analyses, Deutsche Banc Alex. Brown considered industry
performance, general business, economic, market and financial conditions and
other matters existing as of the date of its opinion, many of which are beyond
the control of Innovasive and Johnson & Johnson. No company, transaction or
business used in the analyses as a comparison is identical to Innovasive,
Johnson & Johnson or the merger, and an evaluation of the results of those
analyses is not entirely mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the acquisition, public trading or other
values of the companies, business segments or transactions analyzed.
The estimates contained in Deutsche Banc Alex. Brown's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than those suggested by its analyses. In addition, analyses
relating to the value of businesses or securities do not necessarily purport to
be appraisals or to reflect the prices at which businesses or securities
actually may be sold. Accordingly, Deutsche Banc Alex. Brown's analyses and
estimates are inherently subject to substantial uncertainty.
The type and amount of consideration payable in the merger was determined
through negotiation between Innovasive and Johnson & Johnson. Although Deutsche
Banc Alex. Brown provided financial advice to Innovasive during the course of
negotiations, the decision to enter into the merger was solely that of the board
of directors of Innovasive. Deutsche Banc Alex. Brown's opinion and financial
analyses were only one of many factors considered by the board of directors of
Innovasive in its evaluation of the merger and should not be viewed as
determinative of the views of the Innovasive board of directors or management
with respect to the exchange ratio or the merger.
Deutsche Banc Alex. Brown is an internationally recognized investment
banking firm and, as a customary part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, private placements and
valuations for estate, corporate and other purposes. Deutsche Banc Alex. Brown
and its predecessors and affiliates have in the past provided financial services
to Innovasive and Johnson & Johnson unrelated to the merger, for which services
Deutsche Banc Alex. Brown and its predecessors and affiliates have received
compensation.
Deutsche Banc Alex. Brown maintains a market in Innovasive common stock and
regularly publishes research reports regarding the businesses and securities of
Innovasive and Johnson & Johnson and other publicly traded companies in the
health care industry. In the ordinary course of business, Deutsche Banc Alex.
Brown and its affiliates may actively trade or hold the securities and other
instruments and obligations of Innovasive and Johnson & Johnson for their own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in those securities, instruments or obligations.
Under the terms of Deutsche Banc Alex. Brown's engagement, Innovasive has
agreed to pay Deutsche Banc Alex. Brown for its services upon completion of the
merger an aggregate financial advisory fee equal to 1.44% of the total
consideration, including liabilities assumed, payable in the merger. In
addition, Innovasive has agreed to reimburse Deutsche Banc Alex. Brown its
reasonable travel and other out-of-pocket expenses, including reasonable fees
and disbursements of counsel, and to indemnify Deutsche Banc
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<PAGE> 33
- acceleration of vesting of outstanding stock options which shall remain
exercisable for 90 days following the date of termination
Notwithstanding the foregoing, if it is determined that any payment to the
executive under the income continuation agreement or any other payment or
benefit from Innovasive would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code or would constitute an excess parachute
payment subject to disallowance of deduction under Section 280G of the Internal
Revenue Code, then the continuation of base salary shall be reduced so that the
aggregate amount of such payments shall be $1.00 less than the amount which
would subject the payments to such excise tax or disallowance of deduction.
The obligation of Innovasive or its successor to pay the income
continuation payments is conditioned on the executive's compliance with
nondisparagement, nondisclosure, noncompetition and nonsolicitation restrictions
applicable to the executive and other conditions.
OPTIONS; OTHER EQUITY BASED COMPENSATION AND EMPLOYEE BENEFITS. For a
description of the treatment in the merger of options to acquire Innovasive
stock, other equity-based compensation and employee benefits that are also
applicable to directors and executive officers of Innovasive, see "-- Innovasive
Employee Benefits Matters" and "-- Effect on Awards Outstanding Under Innovasive
Stock Plans" on page 32.
ACCOUNTING TREATMENT
Johnson & Johnson intends to treat the merger as a purchase for accounting
and financial reporting purposes, which means that Innovasive will be treated as
a separate entity for periods prior to the closing and, thereafter, as a
wholly-owned subsidiary of Johnson & Johnson.
FORM OF THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Massachusetts law, at the effective time of the merger, Raptor
Acquisition Corp., a wholly-owned subsidiary of Johnson & Johnson and a party to
the merger agreement, will merge with and into Innovasive. Innovasive will
survive the merger as a wholly-owned Massachusetts subsidiary of Johnson &
Johnson, and will continue under the name "Innovasive Devices, Inc."
MERGER CONSIDERATION
In the merger, holders of Innovasive common stock will receive a fraction
of a share of Johnson & Johnson common stock based on an exchange ratio for each
share of Innovasive common stock that they own. The exchange ratio is based on
the average closing price of Johnson & Johnson common stock as reported on the
New York Stock Exchange Composite Tape during a valuation period of the 20
consecutive trading days ending on the third trading day prior to the special
meeting of stockholders. The exchange ratio will be equal to the number obtained
by dividing $8.25 by the average closing price of Johnson & Johnson common
stock.
The market value of the Johnson & Johnson common stock on the day the
merger is completed may vary from the value of such stock based on the average
closing price. As a result, the market value of the shares of Johnson & Johnson
common stock you receive in the merger may be more or less than the value
attributed to your shares of Innovasive common stock in calculating the exchange
ratio.
Innovasive stockholders will receive cash for any fractional shares of
Johnson & Johnson common stock they would otherwise receive in the merger. This
amount will be calculated by multiplying the fractional share interest to which
they are entitled by the closing price of Johnson & Johnson common stock on the
last trading day immediately preceding the closing date of the merger as
reported in The Wall Street Journal.
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<PAGE> 34
- acceleration of vesting of outstanding stock options which shall remain
exercisable for 90 days following the date of termination
Notwithstanding the foregoing, if it is determined that any payment to the
executive under the income continuation agreement or any other payment or
benefit from Innovasive would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code or would constitute an excess parachute
payment subject to disallowance of deduction under Section 280G of the Internal
Revenue Code, then the continuation of base salary shall be reduced so that the
aggregate amount of such payments shall be $1.00 less than the amount which
would subject the payments to such excise tax or disallowance of deduction.
The obligation of Innovasive or its successor to pay the income
continuation payments is conditioned on the executive's compliance with
nondisparagement, nondisclosure, noncompetition and nonsolicitation restrictions
applicable to the executive and other conditions.
OPTIONS; OTHER EQUITY BASED COMPENSATION AND EMPLOYEE BENEFITS. For a
description of the treatment in the merger of options to acquire Innovasive
stock, other equity-based compensation and employee benefits that are also
applicable to directors and executive officers of Innovasive, see "-- Innovasive
Employee Benefits Matters" on page 32 and "-- Effect on Awards Outstanding Under
Innovasive Stock Plans" on page 32.
ACCOUNTING TREATMENT
Johnson & Johnson intends to treat the merger as a purchase for accounting
and financial reporting purposes, which means that Innovasive will be treated as
a separate entity for periods prior to the closing and, thereafter, as a
wholly-owned subsidiary of Johnson & Johnson.
FORM OF THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Massachusetts law, at the effective time of the merger, Raptor
Acquisition Corp., a wholly-owned subsidiary of Johnson & Johnson and a party to
the merger agreement, will merge with and into Innovasive. Innovasive will
survive the merger as a wholly-owned Massachusetts subsidiary of Johnson &
Johnson, and will continue under the name "Innovasive Devices, Inc."
MERGER CONSIDERATION
In the merger, holders of Innovasive common stock will receive a fraction
of a share of Johnson & Johnson common stock based on an exchange ratio for each
share of Innovasive common stock that they own. The exchange ratio is based on
the average closing price of Johnson & Johnson common stock as reported on the
New York Stock Exchange Composite Tape during a valuation period of the 20
consecutive trading days ending on the third trading day prior to the special
meeting of stockholders. The exchange ratio will be equal to the number obtained
by dividing $8.25 by the average closing price of Johnson & Johnson common
stock.
The market value of the Johnson & Johnson common stock on the day the
merger is completed may vary from the value of such stock based on the average
closing price. As a result, the market value of the shares of Johnson & Johnson
common stock you receive in the merger may be more or less than the value
attributed to your shares of Innovasive common stock in calculating the exchange
ratio.
Innovasive stockholders will receive cash for any fractional shares of
Johnson & Johnson common stock they would otherwise receive in the merger. This
amount will be calculated by multiplying the fractional share interest to which
they are entitled by the closing price of Johnson & Johnson common stock on the
last trading day immediately preceding the closing date of the merger as
reported in The Wall Street Journal.
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<PAGE> 35
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Innovasive common stock into the right to receive Johnson
& Johnson common stock will occur automatically at the effective time of the
merger. As soon as reasonably practicable after the completion of the merger,
First Chicago Trust Company of New York, the exchange agent, will send a letter
of transmittal to each former Innovasive stockholder. The transmittal letter
will contain instructions for obtaining shares of Johnson & Johnson common stock
in exchange for shares of Innovasive common stock.
INNOVASIVE STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY
After the effective time of the merger, each certificate that previously
represented shares of Innovasive common stock will no longer be outstanding,
will automatically be canceled, will cease to exist and will represent only the
right to receive the Johnson & Johnson common stock into which such shares were
converted in the merger and the right to receive cash for any fractional shares
of Johnson & Johnson common stock as described below.
Until holders of certificates previously representing Innovasive common
stock have surrendered those certificates to the exchange agent for exchange,
holders will not receive dividends or distributions on the Johnson & Johnson
common stock into which such shares have been converted with a record date after
the effective time of the merger and will not receive cash for any fractional
shares of Johnson & Johnson common stock. When holders surrender such
certificates, they will receive any unpaid dividends with a record date after
the effective time of the merger and any cash for fractional shares of Johnson &
Johnson common stock, in each case without interest.
In the event of a transfer of ownership of Innovasive common stock which is
not registered in the records of Innovasive's transfer agent, a certificate
representing the proper number of shares of Johnson & Johnson common stock may
be issued to a person other than the person in whose name the certificate so
surrendered is registered if:
- such certificate is properly endorsed or otherwise is in proper form for
transfer and
- the person requesting such exchange pays any transfer or other taxes
resulting from the issuance of shares of Johnson & Johnson common stock
to a person other than the registered holder of such certificate.
All shares of Johnson & Johnson common stock issued upon surrender of
shares of Innovasive common stock, including any cash paid instead of any
fractional shares of Johnson & Johnson common stock, will be issued in full
satisfaction of all rights relating to such shares of Innovasive common stock.
No fractional shares of Johnson & Johnson common stock will be issued to
any Innovasive stockholder upon surrender of certificates previously
representing Innovasive common stock. Each Innovasive stockholder who would
otherwise have been entitled to receive a fraction of a share of Johnson &
Johnson common stock will receive cash in an amount equal to the product
obtained by multiplying (1) the fractional share interest to which such holder
would otherwise be entitled by (2) the closing price for a share of Johnson &
Johnson common stock on the last trading day immediately preceding the closing
date of the merger as reported in The Wall Street Journal.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of the articles of merger
with the office of the Secretary of State of The Commonwealth of Massachusetts
or such later time as is agreed upon by Johnson & Johnson and Innovasive and
specified in the articles of merger. The filing of the articles of merger will
occur as promptly as practicable after satisfaction or waiver of the conditions
to the completion of the merger described in the merger agreement.
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<PAGE> 36
STOCK EXCHANGE LISTING OF JOHNSON & JOHNSON COMMON STOCK
It is a condition to the completion of the merger that Johnson & Johnson
common stock issuable to Innovasive stockholders in the merger be approved for
listing on the New York Stock Exchange, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF INNOVASIVE COMMON STOCK
If the merger is completed, Innovasive common stock will be delisted from
The Nasdaq National Market and will be deregistered under the Securities
Exchange Act of 1934.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion summarizes the anticipated material United
States federal income tax consequences of the merger to holders of Innovasive
common stock. This discussion addresses only such stockholders who hold their
Innovasive common stock as a capital asset, and does not address all of the
United States federal income tax consequences that may be relevant to particular
stockholders in light of their individual circumstances or to stockholders who
are subject to special rules, such as financial institutions, tax-exempt
organizations, insurance companies, dealers in securities or foreign currencies,
foreign holders, persons who hold such shares as a hedge against currency risk,
or as part of a constructive sale or conversion transaction, or holders who
acquired their shares upon the exercise of employee stock options or otherwise
as compensation. The following discussion is not binding on the Internal Revenue
Service. It is based upon the Internal Revenue Code, laws, regulations, rulings
and decisions in effect as of the date of this proxy statement/prospectus, all
of which are subject to change, possibly with retroactive effect. Tax
consequences under state, local and foreign laws are not addressed.
HOLDERS OF INNOVASIVE COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS TO THEIR PARTICULAR CIRCUMSTANCES.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. No ruling has
been, or will be, sought from the Internal Revenue Service as to the United
States federal income tax consequences of the merger. It is a condition to
Innovasive's obligation to complete the merger that Innovasive receive an
opinion from Choate, Hall & Stewart, special counsel to Innovasive, stating that
the merger will qualify for United States federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Such opinion will be based on customary assumptions as well as customary
representations and covenants made by Innovasive and Johnson & Johnson. If any
of these assumptions or representations is inaccurate or any of these covenants
are not complied with, then the tax consequences of the merger could differ from
those described below. An opinion of counsel represents counsel's best legal
judgment and is not binding on the Internal Revenue Service or any court and no
assurance can be given that contrary positions will not be successfully asserted
by the Internal Revenue Service or adopted by a court if the issues are
litigated.
EXCHANGE OF INNOVASIVE COMMON STOCK FOR JOHNSON & JOHNSON COMMON
STOCK. Assuming the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, holders of Innovasive common stock
who exchange their Innovasive common stock for Johnson & Johnson common stock in
the merger will not recognize gain or loss for United States federal income tax
purposes as a result of the merger, except with respect to cash, if any, that
they receive instead of a fractional share of Johnson & Johnson common stock.
Each stockholder's aggregate tax basis in the Johnson & Johnson common stock
received in the merger will be the same as his or her aggregate tax basis in the
Innovasive common stock surrendered in the merger, decreased by the amount of
any tax basis allocable to any fractional share interest for which cash is
received. The holding period of the Johnson & Johnson common stock received in
the merger by a holder of Innovasive common stock will include the holding
period of Innovasive common stock that he or she surrendered in the merger.
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<PAGE> 37
CASH INSTEAD OF FRACTIONAL SHARES. A holder of Innovasive common stock who
receives cash instead of a fractional share of Johnson & Johnson common stock
will recognize gain or loss equal to the difference between the amount of cash
received and his or her tax basis in the Johnson & Johnson common stock that is
allocable to the fractional share. That gain or loss generally will constitute
capital gain or loss.
DISSENTING SHARES. A holder of Innovasive common stock who receives cash
in respect of a dissenting share of Innovasive common stock will recognize gain
or loss equal to the difference between the amount of cash received and his or
her tax basis in the dissenting shares. That gain or loss generally will
constitute capital gain or loss.
CAPITAL GAIN OR LOSS. In the case of an individual stockholder, any
capital gain recognized in connection with the transfer of his or her Innovasive
common stock in the merger will be subject to a maximum United States federal
income tax rate of 20% if the individual has held his or her Innovasive common
stock for more than 12 months at the effective time of the merger. The
deductibility of capital losses is subject to limitations for both individuals
and corporations.
BACKUP WITHHOLDING. Certain noncorporate holders of Innovasive common
stock may be subject to backup withholding at a 31% rate on cash payments
received instead of fractional shares of Johnson & Johnson common stock or in
respect of dissenting shares of Innovasive common stock. Backup withholding will
not apply, however, to a stockholder who (1) furnishes a correct taxpayer
identification number and certifies that he or she is not subject to backup
withholding on the substitute Form W-9 or successor form included in the letter
of transmittal to be delivered to Innovasive stockholders in connection with
this proxy statement/prospectus, (2) provides a certification of foreign status
on Form W-8 or successor form or (3) is otherwise exempt from backup
withholding.
REGULATORY MATTERS
UNITED STATES ANTITRUST. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and related rules, certain transactions, including the
merger, may not be completed unless certain waiting period requirements have
been satisfied. On November 24, 1999, Johnson & Johnson and Innovasive each
filed a Notification and Report Form with the Antitrust Division of the
Department of Justice and the Federal Trade Commission. The waiting period
expired at midnight on December 24, 1999. At any time before or after the
effective time of the merger, the Antitrust Division, the Federal Trade
Commission or others could take action under the antitrust laws, including
seeking to prevent the merger, to rescind the merger or to conditionally approve
the merger upon the divestiture of substantial assets of Johnson & Johnson or
Innovasive. There can be no assurance that a challenge to the merger on
antitrust grounds will not be made or, if such a challenge is made, that it
would not be successful.
GENERAL. It is possible that any of the governmental entities with which
filings are made may seek, as conditions for granting approval of the merger,
various regulatory concessions. There can be no assurance that:
- Johnson & Johnson or Innovasive will be able to satisfy or comply with
such conditions or
- compliance or noncompliance will not have adverse consequences for
Johnson & Johnson after completion of the merger
See "The Merger Agreement and Stock Option Agreement -- The Merger
Agreement -- Conditions to the Completion of the Merger" on page 34.
DISSENTERS' RIGHTS
If the merger is consummated, dissenting stockholders will be entitled to
have the "fair value" of their shares at the effective time of the merger
(exclusive of any element of value arising from the accomplishment or
expectation of the merger) judicially determined and paid to them by complying
with the provisions of Sections 85 to 98, inclusive, of the Massachusetts
Business Corporation Law which is referred to herein as the "MBCL."
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The following is a brief summary of the MBCL which sets forth the
procedures for dissenting from the merger and demanding statutory appraisal
rights. This summary does not purport to be a complete statement of the
provisions of Massachusetts law relating to the rights of stockholders of
Innovasive to an appraisal of the value of their shares and is qualified in its
entirety by reference to Sections 85 to 98 of the MBCL, the text of which is
attached hereto as Annex 5.
Stockholders of Innovasive electing to exercise their appraisal rights
under the MBCL must file with Innovasive before the taking of the vote to
approve the merger agreement a written objection to the merger stating that they
intend to demand payment for their Innovasive common stock if the merger is
consummated, and they must not vote for adoption of the merger agreement. If a
stockholder returns a signed proxy but does not specify a vote against adoption
of the merger agreement or a direction to abstain, the proxy will be voted for
adoption of the merger agreement, which will have the effect of waiving that
stockholder's appraisal rights.
A demand for appraisal must be executed by or for the stockholder of record
as such stockholder's name appears on the stock certificate. If the stock is
owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, such demand must be executed by or for the fiduciary. If the stock is
owned of record by or for more than one person, as in a joint tenancy or tenancy
in common, such demand must be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, he or she is acting as agent for the record owner or
owners.
A stockholder who elects to exercise appraisal rights should mail or
deliver his written demand to the Clerk of Innovasive at 734 Forest Street,
Marlborough, Massachusetts 01752. The written demand for appraisal should
specify the stockholder's name and mailing address, and that the stockholder is
thereby demanding appraisal of his or her shares.
If the merger agreement is approved at the special meeting, then within 10
days after the consummation of the merger, Innovasive must provide written
notice of such event to all stockholders who have complied with the MBCL and
have not voted for adoption of the merger agreement.
Within 20 days after the date of mailing the notice of consummation of the
merger, any stockholder who has satisfied the requirements may deliver to
Innovasive a written demand for payment for his shares. Within 30 days after
expiration of such 20-day period, Innovasive may be obligated to pay to the
stockholder the fair value of his shares. If during such 30-day period
Innovasive and any demanding stockholder fail to agree as to the value of the
shares, either Innovasive or such stockholder may, within four months after the
expiration of such 30-day period, file a bill in equity in Massachusetts
Superior Court demanding a determination of the fair value of the shares of the
dissenting stockholders. If no bill is filed during the four-month period, such
stockholder will have forfeited his appraisal rights.
Upon the filing of any such bill by a stockholder, service of a copy
thereof shall be made upon Innovasive which shall, within 20 days after such
service, file in the office of the court in which the petition was filed, a duly
verified list containing the names of all stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have
not been reached by Innovasive. If the bill shall be filed by Innovasive, the
bill shall name each such person.
If a bill for an appraisal is filed in a timely fashion, after a hearing on
such bill, the court or an appointed special master will determine which
stockholders are entitled to appraisal rights and will appraise the shares owned
by such stockholders, determining the fair value of such shares as of the day
preceding the date of the special meeting, exclusive of any element of value
arising from the consummation or expectation of consummation of the merger,
together with a fair rate of interest to be paid from the date of the special
meeting, upon the amount determined to be the fair value. Such fair value may be
more or less than the value of Johnson & Johnson common stock to be paid to
other Innovasive stockholders in the merger. The costs of the appraisal
proceeding may be determined by the court and taxed against the parties as the
court deems equitable under the circumstances.
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Under Massachusetts law, the appraisal remedy is an exclusive remedy and a
stockholder who does not perfect his or her appraisal rights through compliance
with the MBCL will be bound by the terms of the merger agreement, unless the
merger agreement is unlawful or fraudulent as to such stockholder. In this
connection, however, any stockholder contemplating the exercise of the right to
demand appraisal is urged to review carefully the text of Sections 85 to 98 of
the MBCL, attached hereto as Annex 5, particularly with respect to procedural
steps required to perfect the right to appraisal. The right of appraisal may be
lost if the procedural requirements of the MBCL are not followed exactly.
Stockholders wishing to exercise their right to demand appraisal are urged
to consult legal counsel.
Stockholders considering seeking appraisal of their shares should have in
mind that the fair value of their shares determined under the MBCL could be
more, the same or less than the consideration they would receive pursuant to the
merger agreement if they did not seek appraisal of their shares.
Any stockholder who has duly demanded appraisal in compliance with the MBCL
will not, after the closing of the merger, be entitled to vote for any purpose
the shares of Innovasive common stock subject to such demand or to receive
payment of dividends or other distributions on such shares, except for dividends
or distribution payable to stockholders of record at a date prior to the closing
of the merger.
INNOVASIVE EMPLOYEE BENEFITS MATTERS
Johnson & Johnson has agreed that, for at least one year following the
effective time of the merger, it will provide, or cause to be provided, to
employees of Innovasive and its subsidiaries who continue their employment after
the merger, base salary or hourly wage rates and employee benefits which are
substantially comparable in the aggregate (disregarding any plans or
arrangements of Innovasive and its subsidiaries providing for issuance of equity
or equity-based rights) to those provided to such employees as of the date the
merger agreement was signed. Johnson & Johnson will not have any obligation to
issue, or adopt any plans or arrangements providing for the issuance of, shares
of capital stock, warrants, options, stock appreciation rights or other rights
in respect of any shares of capital stock of any entity or any securities
convertible or exchangeable into such shares pursuant to any such plans or
arrangements.
Johnson & Johnson has also agreed to recognize the service of each
Innovasive employee who continues employment through the effective time of the
merger as if such service had been performed for Johnson & Johnson for purposes
of eligibility and vesting (but not benefit accrual) under Johnson & Johnson's
defined benefit pension plan if provided by the surviving corporation for the
benefit of continuing Innovasive employees and for purposes of eligibility for
vacation under Johnson & Johnson's vacation program if so provided and Johnson &
Johnson's severance plan, but not for purposes of any other benefit plan.
EFFECT ON AWARDS OUTSTANDING UNDER INNOVASIVE STOCK PLANS
At the effective time of the merger, Johnson & Johnson will assume each
outstanding Innovasive stock option. Pursuant to the merger agreement, each
Innovasive stock option under Innovasive's stock option plans shall become fully
exercisable immediately prior to the effective time of the merger. As of the
effective time of the merger, each Innovasive stock option shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such stock option, the whole number of shares (disregarding any
fractional shares) of Johnson & Johnson common stock as the holder of such
Innovasive stock option would have been entitled to receive pursuant to the
merger had such holder exercised such option in full immediately prior to the
effective time of the merger, at a price per share (rounded up to the nearest
cent) equal to the aggregate exercise price for Innovasive common stock
otherwise purchasable pursuant to such Innovasive stock option, divided by the
number of full shares of Johnson & Johnson common stock deemed purchasable
pursuant to such Innovasive stock option in accordance with the foregoing.
The merger agreement also provides that as soon as practicable, the board
of directors of Innovasive (or, if applicable, any committee administering the
Innovasive 1996 Employee Stock Purchase Plan) will
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take or cause to be taken such actions as may be necessary (1) to terminate such
plan as of December 31, 1999, and (2) to provide that no offering periods or
payroll deductions under the plan will extend past December 31, 1999.
RESALE OF JOHNSON & JOHNSON COMMON STOCK
Johnson & Johnson common stock issued in the merger will not be subject to
any restrictions on transfer arising under the Securities Act of 1933, except
for shares issued in exchange for Innovasive restricted stock and except for
shares issued to any Innovasive stockholder who may be deemed to be an
"affiliate" of Innovasive or Johnson & Johnson for purposes of Rule 145 under
the Securities Act. It is expected that each such affiliate will agree not to
transfer any Johnson & Johnson common stock received in the merger except in
compliance with the resale provisions of Rule 144 or 145 under the Securities
Act or as otherwise permitted under the Securities Act. The merger agreement
requires Innovasive to use its best efforts to cause its affiliates to enter
into such agreements. In addition, it is a condition to the completion of the
merger that certain specified persons enter into such agreements. This proxy
statement/ prospectus does not cover resales of Johnson & Johnson common stock
received by any person upon completion of the merger, and no person is
authorized to make any use of this proxy statement/prospectus in connection with
any such resale.
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THE MERGER AGREEMENT AND STOCK OPTION AGREEMENT
The following description summarizes the material provisions of the merger
agreement and the stock option agreement. The merger agreement and the stock
option agreement, attached to this proxy statement/prospectus as Annexes 1 and
2, respectively, contain the complete terms of those agreements and stockholders
should read them carefully.
THE MERGER AGREEMENT
CONDITIONS TO THE COMPLETION OF THE MERGER. Each party's obligation to
effect the merger is subject to the satisfaction or waiver of various conditions
which include, in addition to other customary closing conditions, the following:
- the merger agreement has been adopted by the affirmative vote of
stockholders of Innovasive representing a majority of the shares of
Innovasive common stock outstanding and entitled to vote at the special
meeting
- the shares of Johnson & Johnson common stock to be issued to Innovasive
stockholders upon consummation of the merger have been approved for
listing on the New York Stock Exchange
- the waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 has expired or has been terminated
- no restraining order, injunction or other court order or statute, rule,
regulation, legal restraint or prohibition is in effect that (1) prevents
the consummation of the merger, (2) make the consummation of the merger
illegal, or (3) is reasonably likely to have a material adverse effect on
Johnson & Johnson or Innovasive
- the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, has been declared effective by the
Securities and Exchange Commission and is not the subject of any stop
order or proceedings seeking a stop order and
- Innovasive has received from Choate, Hall & Stewart, its tax counsel, an
opinion stating that the merger will qualify for United States federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code
Each party's obligation to effect the merger is further subject to the
satisfaction or waiver of the following additional conditions:
- the representations and warranties of the other party set forth in the
merger agreement that are qualified as to materiality are true and
correct, and the representations and warranties of the other party that
are not so qualified are true and correct in all material respects, in
each case as of the date of the merger agreement and as of the date on
which the merger is to be completed as though made on and as of the date
on which the merger is to be completed, or, if such representations and
warranties expressly relate to an earlier date, then as of that date
- the other party to the merger agreement has obtained all material
consents, waivers, approvals, authorizations or orders required to be
obtained, and has made all filings required to be made, for the
authorization, execution and delivery of the merger agreement and the
consummation of the merger and
- the other party to the merger agreement has performed in all material
respects all agreements and covenants required to be performed by it
under the merger agreement on or prior to the date on which the merger is
to become effective
In addition, Johnson & Johnson's obligation to effect the merger is further
subject to satisfaction or waiver of the following additional conditions:
- there is no pending or imminently threatened suit, action or proceeding
by any governmental entity, (1) challenging the acquisition by Johnson &
Johnson of any shares of Innovasive common stock,
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seeking to restrain or prohibit the consummation of the merger, or
seeking to place limitations on the ownership of shares of Innovasive
common stock, or shares of common stock of the surviving corporation, by
Johnson & Johnson or seeking to obtain from Innovasive or Johnson &
Johnson any damages that are material in relation to Innovasive, (2)
seeking to prohibit or materially limit the ownership or operation by
Innovasive or its subsidiaries, Johnson & Johnson or its subsidiaries of
any material portion of any business or of any assets of Innovasive,
Johnson & Johnson or any of Johnson & Johnson's subsidiaries, or to
compel Innovasive, Johnson & Johnson or any of Johnson & Johnson's
subsidiaries to divest or hold separate any material portion of any
business or of any assets of Innovasive or Johnson & Johnson or any of
their respective subsidiaries, as a result of the merger, or (3) seeking
to prohibit Johnson & Johnson or any of its subsidiaries from effectively
controlling in any material respect the business or operations of
Innovasive or its subsidiaries and
- since the date of the merger agreement, no change, occurrence or
circumstance in the business, results of operations, liabilities, assets,
properties or financial condition of Innovasive or its subsidiaries has
had, or is reasonably likely to have, a material adverse effect on
Innovasive
The merger agreement provides that a "material adverse effect" means any
event, change or effect that is or is reasonably likely to become materially
adverse to the financial condition, assets, liabilities, results of operations
or business of Innovasive and its subsidiaries, taken as a whole, other than any
event, change or effect relating principally to:
- decreases in the market price of Innovasive common stock
- any monetary damages directly resulting from the pending litigation
between Innovasive and Arthrex, Inc.
- any injunctions prohibiting the sale of the COR(R) System or the
Slingshot(R) System resulting from the Arthrex litigation
- changes resulting from changes in general economic conditions
- changes in the industry in which Innovasive operates and not specifically
relating to Innovasive or
- changes that are a direct result of the announcement or pending status of
the merger
Innovasive can provide no assurance that all of the conditions precedent to
the merger will be satisfied or waived by the party permitted to do so.
Innovasive cannot at this point determine whether it would resolicit proxies in
the event that it decides to waive any of the items listed above. This decision
would depend upon the facts and circumstances leading to Innovasive's decision
to complete the merger and whether Innovasive believes there has been a material
change in the terms of the merger and its effect on Innovasive and its
stockholders. In making its determination, Innovasive would consider, among
other factors, the reasons for the waiver, the effect of the waiver on the terms
of the merger, whether the requirement being waived was necessary in order to
make the transaction fair to the stockholders from a financial point of view,
the availability of alternative transactions and the prospects of Innovasive as
an independent entity. If Innovasive determines that a waiver of a condition
would materially change the terms of the merger, including the expected
qualification of the merger as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, it will resolicit proxies.
NO SOLICITATION. The merger agreement provides that Innovasive will not,
nor will it authorize or permit any of its subsidiaries, any of their respective
directors, officers, employees, representatives or agents or any investment
banker, financial advisor, attorney, accountant or other advisor or
representative retained by it or any of its subsidiaries to, directly or
indirectly:
- solicit, encourage or initiate the submission of any proposal that
constitutes, or may reasonably be expected to lead to, an acquisition
proposal, as described below
- negotiate, approve or recommend the submission of any proposal that
constitutes, or may reasonably be expected to lead to, an acquisition
proposal or
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- furnish to any person any information with respect to, or take any other
action knowingly to facilitate the making of, any proposal that
constitutes, or may reasonably be expected to lead to, an acquisition
proposal
provided, however, that if, prior to the time stockholder approval is obtained,
the Innovasive board of directors determines in good faith, after consultation
with outside counsel, that it is required to do so by its fiduciary obligations
under applicable law, Innovasive may, in response to a superior proposal, as
described below, which did not otherwise result from a breach of the merger
agreement, take the following actions subject to providing written notice of its
decision to do so to Johnson & Johnson:
- furnish under a customary confidentiality agreement information about
Innovasive to any person making a superior proposal and
- participate in discussions regarding such superior proposal
The merger agreement provides that:
- the term "acquisition proposal" means any inquiry, proposal or offer from
any person other than Johnson & Johnson relating to any direct or
indirect acquisition of 20% or more of the assets of Innovasive and its
subsidiaries, taken as a whole, or 20% or more of any class of equity
securities of Innovasive or any of its subsidiaries, any tender offer or
exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of
Innovasive or any of its subsidiaries, the issuance by Innovasive or any
of its subsidiaries of 20% or more of any class of equity securities as
consideration for the securities or assets of any person, any merger,
consolidation, dissolution, liquidation, joint venture, sale of a
substantial portion of its assets, recapitalization or other business
combination, business alliance or similar transaction involving
Innovasive or any other transaction the consummation of which would or
could reasonably be expected to prevent or materially impede, interfere
with, hinder or delay the consummation of the merger and
- the term "superior proposal" means any offer or proposal made by a third
party to consummate a tender offer, exchange offer, merger, consolidation
or similar transaction to acquire directly or indirectly, 50% of the
voting interests or equity interests in Innovasive then outstanding or
50% or more of the assets of Innovasive and its subsidiaries, taken
together (including through a merger of such third party and Innovasive),
or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution, joint venture, sale of a substantial portion of
assets, recapitalization or other business combination, business alliance
or similar transaction involving Innovasive or any of its subsidiaries in
which the other party or its stockholders will own 40% or more of the
combined voting power of the parent entity resulting from any such
transaction, in each case, that the Innovasive board of directors in its
good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation) deems to be more favorable to
Innovasive stockholders than the merger and which is reasonably capable
of being consummated
None of Innovasive, its subsidiaries, its board of directors or any
committee of the board will:
- withdraw or modify, or propose to withdraw or modify, in a manner adverse
to Johnson & Johnson, the approval or recommendation by the Innovasive
board of directors or such committee of the merger or the merger
agreement
- approve or recommend, or propose to approve or recommend, or execute or
enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, stock option agreement or other
agreement related to any acquisition proposal or
- approve or recommend, or propose to approve or recommend, any acquisition
proposal
Notwithstanding the foregoing, at any time prior to the time stockholder
approval is obtained, in response to a superior proposal that was not solicited
by Innovasive and that did not otherwise result from a breach of the provisions
of the merger agreement described above, the Innovasive board of directors may
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modify or propose to modify its approval or recommendation of the merger or the
merger agreement, or terminate the merger agreement, but, in the case of a
termination, only at a time that is after the fourth business day following
Johnson & Johnson's receipt of written notice advising Johnson & Johnson that
the Innovasive board of directors is prepared to accept a superior proposal.
Innovasive must pay a fee in the amount of $2,550,000 to Johnson & Johnson upon
such termination. See "-- Termination" and "-- Termination Fees" on page 37.
The merger agreement does not prohibit Innovasive from disclosing an
acquisition proposal or a superior proposal to Innovasive's stockholders if, in
the good faith judgment of the majority of the Innovasive board of directors,
after consultation with outside counsel, failure to so disclose would be
inconsistent with its obligations under applicable law.
TERMINATION. The merger agreement may be terminated at any time prior to
the effective time of the merger, whether before or after adoption of the merger
agreement by the stockholders of Innovasive:
1. by mutual written consent of Johnson & Johnson, Raptor Acquisition
Corp. and Innovasive
2. by Johnson & Johnson or Innovasive, if the merger has not been
completed by May 8, 2000; provided, however, that this right to terminate
the merger agreement will not be available to a party whose failure to
fulfill any obligation under the merger agreement has been a cause of or
has resulted in the failure of the merger to be completed by that date
3. by Johnson & Johnson or Innovasive, if there exists a restraining
order, injunction or other court order or statute, rule, regulation, legal
restraint or prohibition, in each case, which has become final and cannot
be appealed and which (a) prevents the completion of the merger, (b) makes
the consummation of the merger illegal or (c) which otherwise is reasonably
likely to have a material adverse effect on Innovasive or Johnson &
Johnson, provided that the party seeking to exercise such right to
terminate the merger agreement has used reasonable efforts to prevent the
entry of and to remove such legal restraint or prohibition
4. by Johnson & Johnson or Innovasive, if the Innovasive stockholders
have not adopted the merger agreement at the special meeting
5. by Johnson & Johnson or Innovasive, if the other party breaches any
of its representations, warranties, covenants or agreements under the
merger agreement that results in a failure of a condition to the merger and
such breach or failure cannot be or has not been cured within 30 days after
receipt of notice of such breach
6. by Johnson & Johnson, if the Innovasive board of directors or any
committee of the board
- fails to recommend or withdraws, modifies or changes its approval
or recommendation of the merger in a manner adverse to Johnson &
Johnson
- approves or recommends an acquisition proposal
- fails to reconfirm its approval or recommendation of the merger
after receipt of an acquisition proposal within 10 days after a
request to do so by Johnson & Johnson or
- approves or recommends that Innovasive stockholders tender their
shares into any tender offer or exchange offer that constitutes an
acquisition proposal
7. by Innovasive at any time prior to the date of the special meeting,
in response to a superior proposal that was not solicited by Innovasive and
that did not otherwise result from a breach of the provisions of the merger
agreement described above under "-- No Solicitation," if Innovasive has
complied with certain notice requirements and has paid the $2,550,000
termination fee
TERMINATION FEES. Innovasive must pay Johnson & Johnson a $2,550,000
termination fee if:
1. (a) an acquisition proposal has been disclosed, (b) the merger
agreement is terminated by Innovasive or Johnson & Johnson for either of
the reasons described under paragraph 2 or 4 above
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under "-- Termination" and (c) within 12 months of the termination of the
merger agreement, Innovasive enters into an acquisition agreement or
consummates any such proposal or the board of directors approves such
transaction
2. the merger agreement is terminated by Innovasive pursuant to its
right described in paragraph 7 under "-- Termination"
3. the merger agreement is terminated by Johnson & Johnson pursuant to
its right described in paragraph 6 under "-- Termination"
CONDUCT OF BUSINESS PENDING THE MERGER. Under the merger agreement,
Innovasive has agreed that, prior to the effective time of the merger, it will
carry on its business in the ordinary course consistent with past practice and
in compliance with applicable laws and regulations and will use reasonable
efforts to preserve intact its current business organizations, to keep available
the services of its current officers and employees and preserve its
relationships with those persons having business dealings with it. In addition,
Innovasive has agreed that, among other things and subject to certain
exceptions, neither it nor any of its subsidiaries may:
- amend or otherwise change its articles of organization or similar
documents or bylaws, except as contemplated by the agreement
- issue, sell, pledge, dispose of or encumber or grant any lien on, or
authorize the issuance, sale, pledge, disposition or encumbrance of or
granting of any lien on, any shares of the capital stock of any class or
other voting securities of Innovasive or any of its subsidiaries (other
than the sale or issuance of Innovasive common stock upon the exercise of
options granted under Innovasive stock option plans that were outstanding
on the date of the merger agreement or the rights granted under the stock
purchase plan that are outstanding prior to the approval of the merger by
Innovasive stockholders or pursuant to the stock option agreement) or any
options, warrants, convertible or exchangeable securities or other rights
of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest,
stock appreciation rights or stock based performance units) or other
voting securities or exchangeable or convertible securities of Innovasive
or any of its subsidiaries
- sell, lease, pledge, license, dispose of or encumber or subject to any
lien any of its assets or properties or any assets or properties of its
subsidiaries, except for sales of products and services in the ordinary
course of business consistent with past practice and dispositions of
obsolete or worthless assets
- except as permitted under the merger agreement, alter the price or
accelerate, amend or change the period (or permit any acceleration,
amendment or change) of exercisability of options (or restricted stock)
granted under Innovasive's benefit plans (including Innovasive stock
option plans) or authorize cash payments in exchange for any options
granted under any such plans
- declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned
subsidiary of Innovasive may declare and pay a dividend to Innovasive
- split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock
- amend the terms of, purchase, repurchase, redeem or otherwise acquire, or
permit any subsidiary to repurchase, redeem or otherwise acquire, any of
its securities or any securities of its subsidiaries, or propose to do
any of the foregoing
- sell, transfer, license, sublicense or otherwise dispose of any
Innovasive intellectual property rights or amend or modify in any manner
any existing agreements other than nonexclusive licenses in the ordinary
course of business consistent with past practice or amendments or
modifications that are not, individually or in the aggregate, reasonably
likely to have a material adverse effect
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- acquire or agree to acquire (by merger, consolidation, acquisition of
stock or assets or in any other manner) any corporation, partnership or
other business organization or division
- create or incur any indebtedness for borrowed money or issue any debt
securities or warrants or other rights to acquire any debt securities,
assume, guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any person
- enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having similar economic effect
- make any loans, advances or capital contributions to, or investments in,
any other person, other than to or in any direct or indirect wholly owned
subsidiary of Innovasive
- enter into, amend, terminate or modify any material contract of
Innovasive
- enter into any new material line of business
- acquire or agree to acquire any assets which are material, individually
or in the aggregate, to Innovasive and its subsidiaries
- incur or commit to any capital expenditures other than capital
expenditures incurred or committed to in the ordinary course of business
consistent with past practice and which, together with all such
expenditures incurred or committed to during any applicable period, are
not in excess of the amounts set forth in Innovasive's 1999 capital
expenditure budget and $50,000 in any month commencing January 1, 2000
- take any action which would make or is reasonably likely to result in any
of the representations or warranties of Innovasive contained in the
merger agreement or the stock option agreement qualified as to
materiality becoming untrue, or any representations or warranties that
are not so qualified becoming untrue in any material respect or any
conditions to the merger set forth in the merger agreement not being
satisfied, or cause Innovasive not to perform in all material respects
its covenants under the merger agreement
- enter into any contracts, agreements, arrangements or understandings
relating to distribution, sale or marketing by third parties of
Innovasive's or its subsidiaries' products or products licensed by
Innovasive or its subsidiaries
- adopt, enter into, terminate or amend in any material respect any
collective bargaining agreement or benefit plan or any other agreement,
plan or policy involving Innovasive or its subsidiaries, and one or more
of its directors, officers or employees
- increase in any manner the compensation, bonus or fringe or other
benefits of, or pay any bonus to, any current or former officer, director
or employee, except for normal increases of cash compensation or cash
bonuses in the ordinary course of business consistent with past practice
or pursuant to existing written agreements
- pay any benefit or amount not required under any benefit plan or
arrangement of Innovasive or its subsidiaries as in effect on November 8,
1999
- increase in any manner the severance or termination pay of any current or
former director, officer or employee
- enter into or amend any employment, deferred compensation, consulting,
severance, termination or indemnification agreement, arrangement or
understanding with any current or former employee, officer or director
- grant any equity awards under any bonus, incentive, performance or other
compensation plan or arrangement or benefit plan
- amend or modify any stock option
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- take any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract or
arrangement or benefit plan
- take any action to accelerate the vesting of payment of any compensation
or benefit under any benefit plan
- materially change any actuarial or other assumption used to calculate
funding obligations with respect to any pension plan or change the manner
in which contributions to any pension plan are made or the basis on which
such contributions are determined
- pay, discharge, settle or satisfy any claims, liabilities, obligations or
litigation, other than the payment, discharge, settlement or satisfaction
in the ordinary course of business consistent with past practice of
liabilities reflected or reserved against in the financial statements of
Innovasive, waive or assign any claims or rights of substantial value, or
waive any benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which Innovasive or
any of its subsidiaries is a party or of which it is a beneficiary
- except as required by generally accepted accounting principles, make any
change in accounting methods, principles or practices
- make any material tax election or settle or compromise any material tax
liability or
- authorize any of, or commit or agree to take any of, the foregoing
actions
AMENDMENT; EXTENSION AND WAIVER. Subject to applicable law:
- the merger agreement may be amended by mutual consent of the parties in
writing at any time, except that after the merger agreement has been
adopted by the stockholders of Innovasive, no amendment may be entered
into which requires further approval by Innovasive stockholders unless
such further approval is obtained and
- at any time prior to the effective time of the merger, a party may, by
written instrument signed on behalf of such party, extend the time for
performance of the obligations of any other party to the merger
agreement, waive inaccuracies in representations and warranties of any
other party contained in the merger agreement or in any related document
and waive compliance by any other party with any agreements or conditions
in the merger agreement
EXPENSES. Whether or not the merger is completed, all fees and expenses
incurred in connection with the merger, the merger agreement and the stock
option agreement will be paid by the party incurring such fees or expenses,
except as otherwise provided in the merger agreement and the stock option
agreement and except that Johnson & Johnson and Innovasive will share equally
the expenses incurred in connection with filing, printing and mailing this proxy
statement/prospectus and the registration statement of which it is a part.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties relating to, among other things:
- corporate organization and similar corporate matters of Johnson &
Johnson, Raptor Acquisition Corp. and Innovasive
- capital structure of Innovasive
- obligations with respect to capital stock of Innovasive
- authorization, execution, delivery, performance and enforceability of,
and required consents, approvals, orders and authorizations of
governmental authorities relating to, the merger agreement, the stock
option agreement and related matters of Johnson & Johnson, Raptor
Acquisition Corp. and Innovasive
- documents filed by each of Johnson & Johnson and Innovasive with the
Securities and Exchange Commission and the accuracy of information
contained in such documents
41
<PAGE> 48
- accuracy of information supplied by each of Johnson & Johnson and
Innovasive in connection with this proxy statement/prospectus and the
registration statement of which it is a part
- absence of material changes or events concerning Innovasive
- matters relating to the intellectual property of Innovasive
- compliance with applicable laws by Innovasive
- absence of changes in benefit plans of Innovasive
- matters relating to the Employee Retirement Income Security Act for
Innovasive
- absence of excess parachute payments to any officer, director or employee
of Innovasive or its affiliates
- matters concerning Innovasive stock options
- title to Innovasive's properties and Innovasive's compliance with the
terms of its leases
- filing of tax returns and payment of taxes by Innovasive
- board approval by Innovasive
- satisfaction of certain state takeover statutes' requirements for
Innovasive
- required stockholder vote of Innovasive
- absence of actions by Johnson & Johnson that would prevent the merger
from qualifying as a tax-free reorganization for federal tax purposes
- applicability of the rights agreement between Innovasive and BankBoston,
N.A.
- compliance by Innovasive with applicable regulatory and governmental
requirements
- engagement and payment of fees of brokers, investment bankers, finders
and financial advisors of each of Johnson & Johnson and Innovasive
- receipt of a fairness opinion by Innovasive from its financial advisor
- pending or threatened material litigation of Innovasive
- maintenance by Innovasive of insurance
- certain contracts of Innovasive
- certain environmental matters of Innovasive and
- organization and operations of Raptor Acquisition Corp.
ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION. The merger
agreement provides that the articles of incorporation and bylaws of Raptor
Acquisition Corp., as in effect immediately prior to the completion of the
merger, will be the articles of incorporation and bylaws of the surviving
corporation until changed or amended. For a summary of certain provisions of the
current Innovasive articles of organization, bylaws and the associated rights of
Innovasive stockholders, see "Comparison of Rights of Common Stockholders of
Johnson & Johnson and Innovasive" on page 47.
THE STOCK OPTION AGREEMENT
GENERAL. Immediately following the execution and delivery of the merger
agreement, Johnson & Johnson and Innovasive entered into a stock option
agreement under which Innovasive granted Johnson & Johnson an option to purchase
up to 1,850,504 shares of Innovasive common stock at a price per share of $8.25.
42
<PAGE> 49
EXERCISE OF THE OPTION. Except as described below, the option is
exercisable at any time after the occurrence of any event entitling Johnson &
Johnson to receive the termination fee under the merger agreement. The right to
purchase shares under the stock option agreement will expire upon the earliest
to occur of:
- the completion of the merger
- 12 months after the first occurrence of any event entitling Johnson &
Johnson to receive the termination fee or
- termination of the merger agreement, unless the termination entitles
Johnson & Johnson to receive a termination fee, in which case the option
will not terminate until the later of (1) 12 months following the time
such termination fee becomes payable or (2) the expiration of the period
during which Johnson & Johnson has such right to receive a termination
fee
Any purchase of shares upon the exercise of the option is subject to
compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
obtaining or making of any governmental or regulatory consents, approvals,
orders, notifications, filings or authorizations, the failure of which to have
obtained or made would make the issuance of shares subject to the option
illegal. In the event that any such governmental or regulatory action has not
yet been obtained or made at the time the option is exercisable, which prohibits
the exercise of the entire option, the option may be exercised for a lesser
amount of shares than may be then acquired without such governmental or
regulatory action. If Johnson & Johnson receives official notice that such
governmental or regulatory action will not be issued or granted or it is not
granted within six months after a partial exercise in accordance with the
preceding sentence, then Johnson & Johnson may exercise its right to receive
cash for any remaining shares subject to the option.
ADJUSTMENTS TO NUMBER AND TYPE OF SHARES. The number and type of
securities subject to the option and the purchase price will be adjusted for any
change in Innovasive common stock by reason of a stock dividend, split-up,
merger, recapitalization, combination, exchange of shares or similar
transaction, such that Johnson & Johnson will receive, upon exercise of the
option, the number and type of securities that Johnson & Johnson would have
received if the option had been exercised immediately prior to the occurrence of
such event, or the record date of such event. The number of shares of Innovasive
common stock subject to the option will also be adjusted in the event Innovasive
issues additional shares of common stock or the number of outstanding shares of
Innovasive common stock is reduced, such that the number of shares of Innovasive
common stock subject to the option represents the same percentage of the
aggregate number of shares of Innovasive common stock then outstanding, without
giving effect to shares subject to or issued under the option. In the event that
Johnson & Johnson, its subsidiaries or any of their retirement or pension plans
owns any shares of Innovasive common stock that, when aggregated with the number
of shares of Innovasive common stock subject to the option, would exceed 19.9%
of the number of shares of Innovasive common stock then issued and outstanding,
then the number of shares of Innovasive common stock subject to the option will
be adjusted so that, when aggregated with the shares of Innovasive common stock
owned by Johnson & Johnson, its subsidiaries or any of their retirement or
pension plans, it equals 19.9% of the number of shares of Innovasive common
stock then issued and outstanding.
If Innovasive agrees to consolidate with or merge into any person other
than Johnson & Johnson or one of its subsidiaries, to permit any person other
than Johnson & Johnson or one of its subsidiaries to merge into Innovasive, or
to sell or otherwise transfer all or substantially all of its assets to any
person other than Johnson & Johnson or one of its subsidiaries, the option will,
upon the completion of such transaction, be converted into or exchanged for an
option to acquire the number and class of shares or other securities or property
Johnson & Johnson would have received for Innovasive common stock if the option
had been exercised immediately prior to such consolidation, merger, sale or
transfer, or the record date of such event.
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<PAGE> 50
STOCKHOLDERS AGREEMENT
The following description summarizes the material provisions of the
stockholders agreement. The stockholders agreement attached as Annex 3 to this
proxy statement/prospectus contains the complete terms of that agreement and
stockholders should read it carefully.
In connection with the execution of the merger agreement, certain of the
directors and holders of Innovasive common stock, who together hold
approximately 31.88% of the outstanding Innovasive common stock at January 5,
2000, each agreed to vote all shares of Innovasive common stock held by such
holders in favor of the merger agreement, the merger and the other transactions
contemplated by the merger agreement.
Each of the parties to the stockholders agreement also agreed to vote
against the following actions:
- any business combination or similar transaction involving more than 20%
of the assets or capital stock of Innovasive or any of its subsidiaries
and
- any amendment to Innovasive articles of organization or bylaws or any
other proposed action or transaction that would, or could reasonably be
expected to, prevent, materially impede or interfere with the completion
of the merger or the transactions contemplated by the merger agreement,
dilute in any material respect the benefits to Johnson & Johnson of the
merger and the other transactions contemplated by the merger agreement or
change in any manner the voting rights of any class or shares of
Innovasive common stock
In connection with the stockholders agreement, each stockholder agreed not
to:
- sell, transfer, pledge, assign or otherwise dispose of (or enter into any
agreement to do so) his shares of Innovasive common stock except that
such stockholder can transfer his shares of Innovasive common stock (1)
in connection with a statutory merger to the extent required by
applicable law or (2) under certain other circumstances after the merger
agreement is terminated if the transferee enters into an agreement that
is substantially identical to the stockholders agreement, in each case,
if such stockholder has otherwise complied with his obligations under the
stockholders agreement
- enter into voting arrangements or agreements
- solicit, initiate, encourage, negotiate, approve, recommend, provide
information regarding or take any other action to facilitate any
inquiries, expression of interest, proposals or offers of any business
combination or similar transactions involving any purchase of more than
20% of the assets or capital stock of Innovasive or any of its
subsidiaries or a merger or similar transaction involving Innovasive or
any of its subsidiaries or
- exercise any rights of appraisal or dissent
Each of the parties to the stockholders agreement has irrevocably granted
to, and appointed Steven M. Rosenberg, Johnson & Johnson's assistant general
counsel, in his capacity as the designee of Johnson & Johnson, such party's
proxy and attorney-in-fact to vote, or grant a consent with respect to, his
Innovasive common stock in favor of the merger agreement and the merger and the
other transactions contemplated thereby and against certain alternative
transactions.
The stockholders agreement generally terminates 12 months after the
termination of the merger agreement. If, however, the merger agreement is
terminated pursuant to certain narrowly proscribed provisions contained therein,
the stockholders agreement will terminate either three months or 10 days after
the date on which the merger agreement terminates, depending on the reason for
the termination.
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<PAGE> 51
COMPARATIVE STOCK PRICES AND DIVIDENDS
Johnson & Johnson common stock is listed for trading on the New York Stock
Exchange under the trading symbol "JNJ" and Innovasive common stock is quoted on
The Nasdaq National Market under the trading symbol "IDEA." The following table
sets forth, for the periods indicated, dividends and the high and low sales
prices per share of Johnson & Johnson common stock and of Innovasive common
stock as reported in The Wall Street Journal. Johnson & Johnson's per share data
has been restated to account for Johnson & Johnson's two-for-one stock split
effective on May 21, 1996. For current price information, stockholders are urged
to consult publicly available sources.
<TABLE>
<CAPTION>
JOHNSON & JOHNSON INNOVASIVE
COMMON STOCK COMMON STOCK
------------------------ ------------------------
DIVIDENDS DIVIDENDS
CALENDAR PERIOD HIGH LOW DECLARED HIGH LOW DECLARED
- --------------- ---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter.............................. $ 50 1/4 $41 5/8 $0.16500 -- -- --
Second Quarter........................... 50 3/4 42 7/8 0.19000 -- -- --
Third Quarter............................ 53 3/8 44 1/8 0.19000 12 1/2 8 --
Fourth Quarter........................... 54 47 1/8 0.19000 9 1/2 6 7/8 --
1997
First Quarter............................ 62 3/4 48 5/8 0.19000 12 3/8 7 3/4 --
Second Quarter........................... 66 7/8 51 1/8 0.22000 12 5/8 9 1/4 --
Third Quarter............................ 65 7/8 55 1/8 0.22000 11 7/8 7 7/8 --
Fourth Quarter........................... 67 5/16 52 5/8 0.22000 10 1/16 7 1/2 --
1998
First Quarter............................ 76 1/2 63 3/8 0.22000 11 8 --
Second Quarter........................... 77 7/8 67 0.25000 10 5/8 8 5/8 --
Third Quarter............................ 80 3/4 68 1/4 0.25000 9 1/2 5 1/4 --
Fourth Quarter........................... 89 3/4 72 5/8 0.25000 5 2 3/8 --
1999
First Quarter............................ 94 5/16 77 0.25000 4 5/16 3 1/4 --
Second Quarter........................... 103 87 13/16 0.28000 3 13/16 2 5/8 --
Third Quarter............................ 105 7/8 90 0.28000 8 5/16 3 --
Fourth Quarter........................... 106 7/8 90 1/8 0.28000 8 9/16 7 1/8 --
2000
First Quarter (through January 7,
2000)................................. 96 15/16 88 3/4 0.28000 8 1/16 7 15/16 --
</TABLE>
The following table sets forth the high and low sales prices per share of
Johnson & Johnson common stock and of Innovasive common stock as reported in The
Wall Street Journal on November 8, 1999, the last full trading day prior to the
public announcement of the proposed merger, and on January 7, 2000, the last
practicable trading day before the date of this proxy statement/prospectus:
<TABLE>
<CAPTION>
JOHNSON & INNOVASIVE
JOHNSON COMMON
COMMON STOCK STOCK
------------ -----------
HIGH LOW HIGH LOW
---- ---- ---- ---
<S> <C> <C> <C> <C>
November 8, 1999............................................ $105 7/8 $103 15/16 $8 1/2 $8
January 7, 2000............................................. 96 15/16 93 5/8 8 1/32 8
</TABLE>
45
<PAGE> 52
DESCRIPTION OF JOHNSON & JOHNSON CAPITAL STOCK
The following summary of the capital stock of Johnson & Johnson is subject
in all respects to applicable New Jersey law, the Johnson & Johnson restated
certificate of incorporation, as amended, and the Johnson & Johnson bylaws. See
"Comparison of Rights of Common Stockholders of Johnson & Johnson and
Innovasive" on page 47 and "Where You Can Find More Information" on page 57.
The total authorized shares of capital stock of Johnson & Johnson consist
of (1) 2,160,000,000 shares of common stock, $1.00 par value per share, and (2)
2,000,000 shares of preferred stock, without par value. At the close of business
on January 5, 2000, approximately 1,389,581,235 shares of Johnson & Johnson
common stock were issued and outstanding and no shares of Johnson & Johnson
preferred stock were issued and outstanding.
The Johnson & Johnson board of directors is authorized to provide for the
issuance from time to time of Johnson & Johnson preferred stock in series and,
as to each series, to fix the designation, the dividend rate and the
preferences, if any, which dividends on that series will have compared to any
other class or series of capital stock of Johnson & Johnson, the voting rights,
if any, the voluntary and involuntary liquidation prices, the conversion or
exchange privileges, if any, applicable to that series and the redemption price
or prices and the other terms of redemption, if any, applicable to that series.
Cumulative dividends, dividend preferences and conversion, exchange and
redemption provisions, to the extent that some or all of these features may be
present when shares of Johnson & Johnson preferred stock are issued, could have
an adverse effect on the availability of earnings for distribution to the
holders of Johnson & Johnson common stock or for other corporate purposes.
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<PAGE> 53
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF JOHNSON & JOHNSON AND INNOVASIVE
Johnson & Johnson is a New Jersey corporation subject to the provisions of
the New Jersey Business Corporation Act (NJBCA). Innovasive is a Massachusetts
corporation subject to the provisions of the Massachusetts Business Corporation
Law (MBCL). Innovasive stockholders, whose rights are currently governed by the
Innovasive articles of organization, the Innovasive bylaws and the MBCL, will,
upon completion of the merger, become stockholders of Johnson & Johnson and
their rights will be governed by the Johnson & Johnson restated certificate of
incorporation, as amended, the Johnson & Johnson bylaws and the NJBCA.
The following description summarizes the material differences which may
affect the rights of stockholders of Johnson & Johnson and Innovasive but does
not purport to be a complete statement of all those differences, or a complete
description of the specific provisions referred to in this summary. The
identification of specific differences is not intended to indicate that other
equally or more significant differences do not exist. Stockholders should read
carefully the relevant provisions of the NJBCA, the MBCL, the Johnson & Johnson
restated certificate of incorporation, the Johnson & Johnson bylaws, the
Innovasive articles of organization and the Innovasive bylaws.
CAPITALIZATION
JOHNSON & JOHNSON. Johnson & Johnson's authorized capital stock is
described above under "Description of Johnson & Johnson Capital Stock."
INNOVASIVE. The total authorized shares of capital stock of Innovasive
consist of (1) 15,000,000 shares of common stock, $.0001 par value per share,
and (2) 1,000,000 shares of preferred stock, $.01 par value per share. On the
close of business on January 5, 2000, approximately 9,334,559 shares of
Innovasive common stock were issued and outstanding and no shares of Innovasive
preferred stock were issued and outstanding.
Innovasive has the authority to issue its preferred stock from time to time
in one or more series. Innovasive's board of directors may determine the
preferences, voting powers, qualifications and special/or relative rights or
privileges of any series of preferred stock.
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
JOHNSON & JOHNSON. The Johnson & Johnson restated certificate of
incorporation, as amended, and the Johnson & Johnson bylaws provide that the
total number of Johnson & Johnson directors will be not less than nine or more
than 18 as determined by the Johnson & Johnson board of directors from time to
time. Johnson & Johnson currently has 14 directors. All directors are elected at
each annual meeting of stockholders to serve until the next annual meeting. The
Johnson & Johnson bylaws do not provide for cumulative voting in the election of
directors. The Johnson & Johnson bylaws provide that vacancies on the Johnson &
Johnson board of directors will be filled by appointment made by a majority vote
of the remaining directors. The Johnson & Johnson restated certificate of
incorporation, as amended, and the Johnson & Johnson bylaws provide that
directors may be removed, with cause, by a majority vote of the stockholders.
INNOVASIVE. The Innovasive bylaws provide that the board of directors of
Innovasive will consist of not less than three directors. The exact number of
directors will be determined from time to time by the existing board of
directors. Innovasive currently has seven directors. No decrease in the number
of Innovasive directors can shorten the term of a director. Directors are
divided into three classes as nearly equal in number as possible with staggered
terms. Innovasive directors in each class have a term continuing until the third
annual meeting following their election and until their successors are elected
and qualified. Vacancies on the Innovasive board of directors are filled by
appointment made by a majority vote of the remaining directors for the class in
which the vacancy occurs. The bylaws also provide that directors may be removed
only for cause by vote of stockholders representing a majority of the Innovasive
47
<PAGE> 54
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF JOHNSON & JOHNSON AND INNOVASIVE
Johnson & Johnson is a New Jersey corporation subject to the provisions of
the New Jersey Business Corporation Act (NJBCA). Innovasive is a Massachusetts
corporation subject to the provisions of the Massachusetts Business Corporation
Law (MBCL). Innovasive stockholders, whose rights are currently governed by the
Innovasive articles of organization, the Innovasive bylaws and the MBCL, will,
upon completion of the merger, become stockholders of Johnson & Johnson and
their rights will be governed by the Johnson & Johnson restated certificate of
incorporation, as amended, the Johnson & Johnson bylaws and the NJBCA.
The following description summarizes the material differences which may
affect the rights of stockholders of Johnson & Johnson and Innovasive but does
not purport to be a complete statement of all those differences, or a complete
description of the specific provisions referred to in this summary. The
identification of specific differences is not intended to indicate that other
equally or more significant differences do not exist. Stockholders should read
carefully the relevant provisions of the NJBCA, the MBCL, the Johnson & Johnson
restated certificate of incorporation, the Johnson & Johnson bylaws, the
Innovasive articles of organization and the Innovasive bylaws.
CAPITALIZATION
JOHNSON & JOHNSON. Johnson & Johnson's authorized capital stock is
described above under "Description of Johnson & Johnson Capital Stock."
INNOVASIVE. The total authorized shares of capital stock of Innovasive
consist of (1) 15,000,000 shares of common stock, $.0001 par value per share,
and (2) 1,000,000 shares of preferred stock, $.01 par value per share. On the
close of business on January 5, 2000, approximately -- shares of Innovasive
common stock were issued and outstanding and no shares of Innovasive preferred
stock were issued and outstanding.
Innovasive has the authority to issue its preferred stock from time to time
in one or more series. Innovasive's board of directors may determine the
preferences, voting powers, qualifications and special/or relative rights or
privileges of any series of preferred stock.
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
JOHNSON & JOHNSON. The Johnson & Johnson restated certificate of
incorporation, as amended, and the Johnson & Johnson bylaws provide that the
total number of Johnson & Johnson directors will be not less than nine or more
than 18 as determined by the Johnson & Johnson board of directors from time to
time. Johnson & Johnson currently has 14 directors. All directors are elected at
each annual meeting of stockholders to serve until the next annual meeting. The
Johnson & Johnson bylaws do not provide for cumulative voting in the election of
directors. The Johnson & Johnson bylaws provide that vacancies on the Johnson &
Johnson board of directors will be filled by appointment made by a majority vote
of the remaining directors. The Johnson & Johnson restated certificate of
incorporation, as amended, and the Johnson & Johnson bylaws provide that
directors may be removed, with cause, by a majority vote of the stockholders.
INNOVASIVE. The Innovasive bylaws provide that the board of directors of
Innovasive will consist of not less than three directors. The exact number of
directors will be determined from time to time by the existing board of
directors. Innovasive currently has seven directors. No decrease in the number
of Innovasive directors can shorten the term of a director. Directors are
divided into three classes as nearly equal in number as possible with staggered
terms. Innovasive directors in each class have a term continuing until the third
annual meeting following their election and until their successors are elected
and qualified. Vacancies on the Innovasive board of directors are filled by
appointment made by a majority vote of the remaining directors for the class in
which the vacancy occurs. The bylaws also provide that directors may be removed
only for cause by vote of stockholders representing a majority of the Innovasive
48
<PAGE> 55
shares issued and outstanding and entitled to vote for the election of
directors. Additionally, any director may be removed for cause by a majority
vote of the board of directors.
AMENDMENTS TO CHARTER DOCUMENTS
JOHNSON & JOHNSON. Under the NJBCA, a proposed amendment to a
corporation's certificate of incorporation requires approval by its board of
directors and an affirmative vote of a majority of the votes cast by the holders
of shares entitled to vote on the amendment, unless a specific provision of the
NJBCA or the corporation's certificate of incorporation provides otherwise. The
Johnson & Johnson restated certificate of incorporation, as amended, provides
that if any class or series of shares is entitled to vote thereon as a class,
the affirmative vote of a majority of the votes cast in each class is required.
The Johnson & Johnson restated certificate of incorporation, as amended, also
provides that the affirmative vote of the holders of not less than 80% of the
votes entitled to be cast by the holders of all then outstanding shares of
voting stock, voting together as a single class, and the affirmative vote of a
majority of the combined votes entitled to be cast by "disinterested
stockholders" voting together as a single class is required to amend, repeal or
adopt provisions inconsistent with Article Eight of the Johnson & Johnson
restated certificate of incorporation, as amended, which relates to business
combinations with interested parties, unless the amendment, repeal or adoption
is unanimously recommended by the Johnson & Johnson board of directors if none
of its directors are affiliates or associates of any interested stockholder.
INNOVASIVE. Under the MBCL, a proposed amendment to a corporation's
articles of organization effecting any one of the following must be approved by
vote of stockholders representing a majority of each class outstanding and
entitled to vote thereon: (1) an increase or reduction of capital stock of any
class; (2) a change in par value of any shares or class; (3) a change in
corporate name; or (4) certain other changes involving authorized shares. All
other changes must be approved by vote of stockholders representing two-thirds
of each class of stock outstanding and entitled to vote thereon, at a meeting
called for the purpose of voting on the proposed amendment, unless the articles
of organization of the corporation provide for a vote of a lesser proportion but
not less than a majority of each class of stock outstanding and entitled to vote
thereon. If any amendment requiring a two-thirds vote would adversely affect the
rights of any class or series of stock (as defined in the MBCL), a two-thirds
vote of such class voting separately, or a two-thirds vote of such series,
voting together with any other series of the same class adversely affected in
the same manner, is also necessary to authorize such amendment.
AMENDMENTS TO BYLAWS
JOHNSON & JOHNSON. Pursuant to NJBCA, the Johnson & Johnson restated
certificate of incorporation and the Johnson & Johnson bylaws, the Johnson &
Johnson bylaws generally may be amended or repealed in whole or in part by the
stockholders at a regular or special meeting of the stockholders or by the
Johnson & Johnson board of directors at a regular or special meeting of the
board of directors, if notice of the proposed amendment is contained in the
notice of such meeting, except that a bylaw adopted or amended by the Johnson &
Johnson board of directors may be superseded by stockholder action and that
stockholder action may preempt any further action by the Johnson & Johnson board
of directors with respect to that bylaw provision.
INNOVASIVE. Pursuant to the MBCL, the Innovasive articles of organization
and the Innovasive bylaws, the bylaws of Innovasive may be amended or repealed
at any special or annual meeting of Innovasive stockholders by the affirmative
vote of a majority of the shares of capital stock of Innovasive then issued,
outstanding and entitled to vote. Additionally, Innovasive's board of directors
may amend or repeal the bylaws at a regular or special meeting of the Innovasive
board of directors. Any bylaws amended or repealed by the Innovasive board of
directors may be amended or repealed by Innovasive's stockholders.
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<PAGE> 56
ACTION BY WRITTEN CONSENT
JOHNSON & JOHNSON. The NJBCA, the Johnson & Johnson restated certificate
of incorporation, as amended, and the Johnson & Johnson bylaws are silent
regarding the ability of stockholders to act by written consent with respect to
actions required or permitted to be taken by the Johnson & Johnson stockholders
at a duly called annual or special meeting.
INNOVASIVE. Under the MBCL and Innovasive's bylaws, any action required or
permitted to be taken at any meeting of Innovasive's stockholders may be taken
without a meeting only if all stockholders entitled to vote on the matter
consent to the action in writing.
NOTICE OF CERTAIN STOCKHOLDER ACTIONS
JOHNSON & JOHNSON. The Johnson & Johnson restated certificate of
incorporation, as amended, the Johnson & Johnson bylaws and the NJBCA do not
contain any provision relating to notice of stockholder actions.
INNOVASIVE. Under the MBCL and Innovasive's bylaws, a written notice of
the purposes, place, date and hour of all meetings of stockholders will be given
to each stockholder entitled to vote at the meeting at least seven days before
the meeting or, in the case of a proposed sale, lease or exchange of all or
substantially all of Innovasive's properties and assets or any consolidation or
merger to which Innovasive will be a party, at least twenty days prior to the
date of the meeting. Pursuant to Innovasive's bylaws, the only matters that will
be considered and acted upon at a meeting of the stockholders will be brought
before the meeting:
- through the notice of meeting
- by Innovasive's board of directors or
- by any record stockholder entitled to vote at the meeting
A record stockholder must give written notice to Innovasive's Clerk that
the stockholder intends to have a matter considered at a stockholders meeting no
later than twenty days prior to the meeting. The notice must contain a brief
description of the matter to be considered and must identify any beneficial
owners of Innovasive's shares who support the proposal or on whose behalf the
proposal is being made. The person presiding at the meeting will have the
discretion to determine whether a matter was properly brought before a meeting
and whether the procedures contained in the bylaws were complied with.
SPECIAL STOCKHOLDER MEETINGS
JOHNSON & JOHNSON. Under the Johnson & Johnson bylaws, a special meeting
of the stockholders may be called at any time by the chairman of the board of
directors, a vice-chairman of the board of directors, the chairman of the
executive committee, a vice-chairman of the executive committee, the president
or by a majority of board of directors, and may be held on the business day and
place stated in the notice of the meeting.
In addition, the NJBCA provides that holders of not less than 10% of all
shares entitled to vote at a meeting may apply to the Superior Court to request
that a special meeting of the stockholders be called for good cause shown. At
such a meeting, the stockholders present in person or by proxy will constitute a
quorum for the transaction of business described in such order. Pursuant to the
NJBCA, any action required or permitted to be taken at a meeting of the Johnson
& Johnson stockholders generally may be taken without a meeting if all the
stockholders entitled to vote thereon consent thereto in writing.
INNOVASIVE. Innovasive's bylaws and the MBCL provide that special meetings
of the stockholders may be called at any time by the president or by the board
of directors and must be called by Innovasive's Clerk upon written application
of one or more stockholders who hold at least forty percent (40%) of
Innovasive's capital stock entitled to vote at the meeting.
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STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
JOHNSON & JOHNSON. Under the NJBCA, a stockholder who has been a
stockholder for at least six months or who holds, or is authorized in writing by
holders of, at least five percent of the outstanding shares of any class or
series of stock of a corporation upon at least five days' written demand has the
right for any proper purpose to inspect in person or by agent or attorney the
minutes of the proceedings of the corporation's stockholders and its record of
stockholders. Irrespective of the period such stockholder has held his or her
stock or the amount of stock such stockholder holds, a court may, upon proof of
proper purpose, compel production for examination by the stockholder of the
books and records of account, minutes and record of stockholders of Johnson &
Johnson.
INNOVASIVE. The MBCL requires that every domestic corporation maintain in
Massachusetts, and make available for inspection by its stockholders, the
original or attested copies of the corporation's articles of organization,
bylaws, records of all meetings of incorporators and stockholders, and the stock
and transfer records listing the names of all stockholders and their record
addresses and the amount of stock held by each. The MBCL further provides that
if any officer or agent of a corporation having charge of such corporate records
refuses or neglects to exhibit them in legible form or to produce for
examination a list of stockholder names, record addresses and amount of stock
held by each, such officer or agent of the corporation will be liable to any
stockholder for actual damages sustained by reason of such refusal or neglect.
In an action for damages or a proceeding in equity under the foregoing
provision, however, it is a defense to such action that the actual purpose and
reason for the inspection being sought is to secure a list of stockholders or
other information for the purpose of selling the list or other information or of
using them for purposes other than in the interest of the person seeking them,
as a stockholder, relative to the affairs of the corporation. The foregoing
rights relating to inspection are deemed to include the right to copy materials
and to be represented by agent or counsel in exercising these rights. In
addition to the rights of inspection provided by the MBCL, a stockholder of a
Massachusetts corporation has a common law right to inspect additional documents
which, if such request is refused by the corporation, may be obtained by
petitioning a court for the appropriate order. In petitioning a court for such
an order, the granting of which is discretionary, the stockholder has the burden
of demonstrating (1) that such holder is acting in good faith and for the
purposes of advancing the interests of the corporation and protecting such
holder's own interest as a stockholder and (2) that the requested documents are
relevant to those purposes.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
JOHNSON & JOHNSON. Under the NJBCA, a corporation may indemnify a director
or officer against his or her expenses and liabilities in connection with any
proceeding involving the director or officer by reason of his or her being or
having been a director or officer, other than a proceeding by or in the right of
the corporation, if:
- the director or officer acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation and
- with respect to any criminal proceeding, the director or officer had no
reasonable cause to believe his or her conduct was unlawful.
The Johnson & Johnson restated certificate of incorporation, as amended,
provides that, to the full extent permitted under the NJBCA, no director or
officer of Johnson & Johnson will be personally liable to Johnson & Johnson or
its stockholders for damages for breach of any duty owed to Johnson & Johnson or
its stockholders.
The Johnson & Johnson bylaws provide that to the full extent permitted
under the NJBCA, Johnson & Johnson will indemnify any person who was or is
involved in any manner in any threatened, pending or completed investigation,
claim, action, suit or proceeding, whether civil, criminal, administrative,
arbitrative, legislative or investigative, or who is threatened with being so
involved, by reason of the fact that he or she is or was a director or officer
of Johnson & Johnson or, while serving as a director or
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officer of Johnson & Johnson, is or was at the request of Johnson & Johnson also
serving as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expenses
(including attorneys' fees), judgments, fines, penalties, excise taxes and
amounts paid in settlement actually and reasonably incurred in connection with
such proceeding.
Johnson & Johnson enters into indemnification agreements with its directors
and officers and enters into insurance agreements on its own behalf.
INNOVASIVE. Under the MBCL and Innovasive's articles of organization,
Innovasive may indemnify a director, officer, employee or other agent of
Innovasive against his or her expenses and liabilities incurred in connection
with any proceeding involving the indemnified person in his or her capacity as a
director, officer, employee or other agent of Innovasive. No indemnification
will be provided if the director, officer, employee or other agent is
adjudicated not to have acted in good faith in the reasonable belief that his or
her actions were in Innovasive's best interests.
Additionally, Innovasive's articles of organization provide that:
- expenses incurred by a director or officer in defending an action may be
paid from time to time by Innovasive in advance of the final disposition
of the action, if the director or officer agrees to repay the disbursed
amounts if it is determined that indemnification of the expenses was not
appropriate and
- any matter disposed of by settlement, will not be covered by
indemnification unless the settlement is approved as in the best
interests of Innovasive by:
- a vote of a majority of Innovasive's disinterested directors
- a vote of a person or persons to whom the question is referred to by
the disinterested directors
- a vote of holders of a majority of Innovasive's outstanding stock
entitled to vote for directors or
- a vote of a person or persons to whom the question is referred to by a
majority of Innovasive's stockholders
DIVIDENDS
JOHNSON & JOHNSON. The Johnson & Johnson restated certificate of
incorporation, as amended, provides that the Johnson & Johnson board of
directors may from time to time declare dividends on its outstanding shares in
accordance with the NJBCA.
INNOVASIVE. Innovasive's articles of organization provide that
Innovasive's board of directors may from time to time declare dividends on its
outstanding shares of common stock, subject to the prior rights to dividends of
holders of all classes of stock outstanding at the time the dividend is
declared, in accordance with the MBCL.
CONVERSION
JOHNSON & JOHNSON. Holders of Johnson & Johnson common stock have no
rights to convert their shares into any other securities.
INNOVASIVE. Holders of Innovasive common stock have no rights to convert
their shares into any other securities.
RIGHTS PLAN
JOHNSON & JOHNSON. Johnson & Johnson does not have a rights plan. The
NJBCA, however, endorses share rights or options issued by New Jersey
corporations that, among other things, include conditions precluding holders of
a specified percentage of outstanding shares of a corporation from exercising
such share rights or options or which invalidate the share rights or options
beneficially owned by such holders and their transferees.
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INNOVASIVE. Innovasive is a party to a rights agreement which is designed
to deter
- partial and two-tier tender offers
- stock accumulation programs and
- other coercive tactics which might be used to gain control of Innovasive
without giving the Innovasive board of directors the opportunity to
negotiate on behalf of its stockholders
Under the rights agreement, one stock purchase right was distributed to the
holders of each share of Innovasive common stock outstanding on January 15,
1999. One right has been issued for each share of common stock issued since that
date.
Each right entitles the holder to purchase from Innovasive one
one-thousandth of a share of Innovasive's series a junior preferred stock at a
price of $28 per one one-thousandth of a share under certain circumstances. That
purchase price may be adjusted under the terms of the rights agreement.
Prior to the distribution date, the rights will be evidenced by the
certificates for the associated common stock, no separate rights certificates
will be issued and the rights will not be exercisable.
Following a distribution date, the rights will trade separately from the
common stock and be evidenced by separate rights certificates.
A distribution date will occur on the earlier of
- the tenth business day following the date of a public announcement that a
person has acquired beneficial ownership of fifteen percent (15%) or more
of the outstanding shares of Innovasive common stock or
- the tenth business day following commencement of a tender offer or
exchange offer that would result in any person owning fifteen percent
(15%) or more of the outstanding common stock
Until a right is exercised, its holder will have no rights as a stockholder
of Innovasive solely as a result of holding the rights. The rights will expire
January 14, 2009 unless they are exercised in connection with a transaction of
the type described below or unless Innovasive exchanges or redeems them earlier
in the manner described below. Innovasive may decide to extend the rights
agreement beyond January 14, 2009.
If at any time following a distribution date
- Innovasive is acquired in a merger or other business combination
transaction or
- Fifty percent (50%) or more of its assets or earning power are sold
each holder of a right will be entitled to receive common stock of the acquiring
or surviving company having a value equal to two times the exercise price of the
right. This common stock may be obtained by the holder of the right by
exercising that right at its then current exercise price.
If any person, other than Innovasive and its affiliates, becomes the
beneficial owner of fifteen percent (15%) or more of the outstanding shares of
common stock, each holder of a right will be entitled to receive common stock,
or, in certain circumstances, cash, property or other securities of Innovasive,
having a value equal to two times the exercise price of the right. This common
stock, cash, property or other securities may be obtained by the holder of the
right by exercising the right at its then current exercise price. After any of
the transactions referred to in this paragraph occurs, any rights that are, or
under circumstances specified in the rights agreement were, beneficially owned
by any acquiring person will immediately become void. Rights may not be
exercised in connection with a tender or exchange offer for all outstanding
shares of common stock at a price and on terms which a majority of the board of
directors determines to be fair on the basis of criteria set forth in the rights
agreement.
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The rights agreement provides that the purchase price payable, and the
number of shares of common stock or other securities or property issuable, upon
exercise of the rights will be adjusted to prevent dilution.
After an acquiring person acquires beneficial ownership of fifteen percent
(15%) or more of the outstanding common stock and before that acquiring person
acquires fifty percent (50%) or more of the outstanding common stock, the board
of directors of Innovasive may exchange the rights, partially or completely, at
an exchange ratio of one share of common stock per right. This exchange ratio
may be adjusted in particular situations. Rights owned by that acquiring person
which have become void may not be exchanged.
Within ten days (10) after an acquiring person has acquired beneficial
ownership of fifteen percent (15%) or more of the outstanding common stock,
Innovasive may redeem the rights in whole at a price of $.01 per right. A
partial redemption of rights in that situation is not permitted. Immediately
after the board of directors orders redemption of the rights, the rights will
terminate and the only entitlement of the holders of rights will be to receive
the redemption price.
The rights agreement was amended on November 8, 1999 so that it became
inapplicable to the merger and the other transactions contemplated by the merger
agreement, the stock option agreement and the stockholders agreement.
VOTING RIGHTS; REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
JOHNSON & JOHNSON. Each holder of Johnson & Johnson common stock is
entitled to one vote for each share held of record and may not cumulate votes
for the election of directors.
Merger or Consolidation. Under the NJBCA, the consummation of a merger or
consolidation of a New Jersey corporation organized prior to January 1, 1969,
such as Johnson & Johnson, requires the approval of such corporation's board of
directors and the affirmative vote of two-thirds of the votes cast by the
holders of shares of the corporation entitled to vote thereon; provided that no
such approval and vote are required if such corporation is the surviving
corporation and
- such corporation's certificate of incorporation is not amended
- the stockholders of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold
the same number of shares, with identical designations, preferences,
limitations, and rights, immediately after and
- the number of voting shares and participation shares outstanding after
the merger will not exceed by 40% the total number of voting or
participating shares of the surviving corporation before the merger
Similarly, a sale of all or substantially all of such corporation's assets other
than in the ordinary course of business, or a voluntary dissolution of such
corporation, requires the approval of such corporation's board of directors and
the affirmative vote of two-thirds of the votes cast by the holders of shares of
such corporation entitled to vote thereon.
Business Combinations. Under the NJBCA, no New Jersey corporation may
engage in any "business combination" with any interested stockholder (generally,
a 10% or greater stockholder) for a period of five years following such
interested stockholder's stock acquisition, unless such business combination is
approved by the board of directors of such corporation prior to the stock
acquisition.
Under the NJBCA, "business combination" includes:
- any merger or consolidation of a resident domestic corporation or one of
its subsidiaries:
- with an interested stockholder or
- with any corporation which is, or would be after such merger or
consolidation, an affiliate or associate of an interested stockholder
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- any transfer or other disposition to or with an interested stockholder or
any affiliate or associate of an interested stockholder of at least 10%
of (1) the assets, (2) the outstanding shares or (3) the earning power or
income on a consolidated basis, of such resident domestic corporation and
- other specified self-dealing transactions between such resident domestic
corporation and an interested stockholder or any affiliate or associate
thereof
In addition, no resident domestic corporation may engage, at any time, in
any business combination with any interested stockholder of such corporation
other than:
- a business combination approved by the board of directors of such
corporation prior to the stock acquisition
- a business combination approved by the affirmative vote of the holders of
two-thirds of the voting stock not beneficially owned by such interested
stockholder at a meeting called for such purpose or
- a business combination in which the interested stockholder meets certain
fair price criteria
In addition to the requirement under the NJBCA regarding business
combinations with an interested stockholder, the Johnson & Johnson restated
certificate of incorporation prohibits Johnson & Johnson from engaging in any
"business combination" with any interested stockholder (generally, a 10% or
greater stockholder) without (1) the affirmative vote of at least 80% of the
holders of Johnson & Johnson voting stock, voting together as a single class,
and (2) the affirmative vote of a majority of the combined votes entitled to be
cast by "disinterested stockholders" (as defined in the Johnson & Johnson
restated certificate of incorporation), voting together as a single class;
provided that any business combination will require only the approval required
under the NJBCA if, among other things, such business combination has been
approved at any time by a majority of the "continuing directors" (as defined in
the Johnson & Johnson restated certificate of incorporation) and certain fair
price requirements are met.
The Johnson & Johnson restated certificate of incorporation defines
"business combination" to include:
- any merger or consolidation of Johnson & Johnson
- with an interested stockholder or
- with any other corporation which is, or after such merger or
consolidation would be, an affiliate or associate of an interested
stockholder
- any transfer or other disposition to or with any interested stockholder
or any affiliate or associate of an interested stockholder of any assets
or securities of Johnson & Johnson or any of its subsidiaries having an
aggregate fair market value of 5% of the total assets of Johnson &
Johnson and its subsidiaries
- the adoption of a plan of liquidation of Johnson & Johnson proposed by an
interested stockholder or any affiliate or associate of an interested
stockholder and
- any transaction which increases the capital stock beneficially owned by
an interested stockholder or any affiliate or associate of an interested
stockholder
INNOVASIVE. Each holder of Innovasive common stock is entitled to one vote
for each share held of record and may not cumulate votes for the election of
directors.
Merger or Consolidation. Under the MBCL, the consummation of a merger or
consolidation of a Massachusetts corporation requires the affirmative vote of
holders of two-thirds of the shares of each class of stock outstanding and
entitled to vote thereon, except that (1) the articles or organization may
provide for a vote of a lesser proportion but not less than a majority of each
class and (2), unless required by the corporation's articles of organization, an
agreement providing for a merger need not be submitted to the stockholders of a
corporation surviving a merger that is approved by a vote of its directors if
(a) the agreement of merger does not change the name, the amount of shares
authorized of any class of stock or
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INNOVASIVE. Under the MBCL, the director of a Massachusetts corporation,
in discharging his or her duties to the corporation and in determining what he
or she reasonably believes to be in the best interest of the corporation, may
consider
- the effects of the action on the corporation's employees, suppliers,
creditors and customers
- the effects of the action on the economy of the state, region and nation
- community and societal considerations and
- the long-term and short-term interests of the corporation and its
stockholders, including the possibility that these interests may be best
served by the continued independence of the corporation
LEGAL MATTERS
The legality of Johnson & Johnson common stock offered by this proxy
statement/prospectus will be passed upon for Johnson & Johnson by Joseph S.
Orban, Esq., Associate General Counsel of Johnson & Johnson. Mr. Orban is paid a
salary by Johnson & Johnson, is a participant in various employee benefit plans
offered to employees of Johnson & Johnson generally and owns and has options to
purchase shares of Johnson & Johnson common stock. Cravath, Swaine & Moore, New
York, New York, from time to time acts as counsel for Johnson & Johnson and its
subsidiaries.
Certain United States federal income tax consequences of the merger will be
passed upon for Innovasive by its special counsel Choate, Hall & Stewart,
Boston, Massachusetts.
EXPERTS
The supplemental consolidated financial statements as of January 3, 1999
and December 28, 1997 and for each of the three fiscal years in the period ended
January 3, 1999 of Johnson & Johnson and subsidiaries incorporated in this proxy
statement/prospectus by reference to the Johnson & Johnson Current Report on
Form 8-K filed on December 14, 1999, and the historical consolidated financial
statements and financial statement schedule of Johnson & Johnson and
subsidiaries as of January 3, 1999 and December 28, 1997, and for each of the
three fiscal years in the period ended January 3, 1999, which report is included
in the Johnson & Johnson Annual Report to Shareowners, which is incorporated by
reference in its Annual Report on Form 10-K for the fiscal year ended January 3,
1999, which has also been incorporated by reference in this proxy
statement/prospectus, have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements and financial statement schedule as of December
31, 1998 and 1997, and for each of the three fiscal years in the period ended
December 31, 1998 of Innovasive Devices, Inc. and subsidiary incorporated in
this proxy statement/prospectus by reference to the Innovasive Devices, Inc.
Annual Report on Form 10-K have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Innovasive board of
directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement/prospectus.
FUTURE STOCKHOLDER PROPOSALS
Due to the contemplated consummation of the merger, Innovasive does not
currently expect to hold a 2000 annual meeting of stockholders because
Innovasive will be a wholly-owned subsidiary of Johnson &
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Johnson. In the event the merger is not consummated, Innovasive must receive any
proposal which a stockholder wishes to submit to the 2000 annual meeting of
stockholders not less than 120 days prior to May 11, 2000, if the proposal is to
be considered by the Innovasive board for inclusion in the proxy material for
that meeting. Also, in the case of stockholder proposals which are not included
in the proxy statement, the Securities and Exchange Commission's rules specify
that certain requirements contained in the Innovasive bylaws must be followed.
The Innovasive bylaws require any stockholder wishing to make a nomination for
directors, or wishing to introduce a proposal or other business, at the 2000
annual meeting to give Innovasive advance written notice thereof not less than
20 days prior to the 2000 annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Johnson & Johnson and Innovasive file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that Johnson & Johnson and Innovasive file with the Securities and Exchange
Commission at the Securities and Exchange Commission's public reference rooms at
the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet World Wide Web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov". Reports, proxy
statements and other information concerning Johnson & Johnson may also be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005. Reports, proxy statements and other information pertaining
to Innovasive may also be inspected at the offices of The Nasdaq Stock Market,
which is located at 1735 K Street, N.W., Washington, D.C. 20006.
Johnson & Johnson filed a registration statement on Form S-4 on January 10,
2000 to register with the Securities and Exchange Commission the Johnson &
Johnson common stock to be issued to Innovasive stockholders in the merger. This
proxy statement/prospectus is a part of that registration statement and
constitutes a prospectus of Johnson & Johnson in addition to being a proxy
statement of Innovasive. As allowed by Securities and Exchange Commission rules,
this proxy statement/prospectus does not contain all the information you can
find in Johnson & Johnson's registration statement or the exhibits to the
registration statement.
The Securities and Exchange Commission allows Johnson & Johnson and
Innovasive to "incorporate by reference" information into this proxy
statement/prospectus, which means that the companies can disclose important
information to you by referring you to other documents filed separately with the
Securities and Exchange Commission. The information incorporated by reference is
considered part of this proxy statement/prospectus, except for any information
superseded by information contained directly in this proxy statement/prospectus
or in later filed documents incorporated by reference in this proxy
statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Johnson & Johnson and Innovasive have previously filed with the
Securities and Exchange Commission. These documents contain important business
and financial information about Johnson & Johnson and Innovasive that is not
included in or delivered with this proxy statement/prospectus.
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stockholder wishes to submit to the 2000 annual meeting of stockholders not less
than 120 days prior to May 11, 2000, if the proposal is to be considered by the
Innovasive board for inclusion in the proxy material for that meeting. Also, in
the case of stockholder proposals which are not included in the proxy statement,
the Securities and Exchange Commission's rules specify that certain requirements
contained in the Innovasive bylaws must be followed. The Innovasive bylaws
require any stockholder wishing to make a nomination for directors, or wishing
to introduce a proposal or other business, at the 2000 annual meeting to give
Innovasive advance written notice thereof not less than 20 days prior to the
2000 annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Johnson & Johnson and Innovasive file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that Johnson & Johnson and Innovasive file with the Securities and Exchange
Commission at the Securities and Exchange Commission's public reference rooms at
the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet World Wide Web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov." Reports, proxy
statements and other information concerning Johnson & Johnson may also be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005. Reports, proxy statements and other information pertaining
to Innovasive may also be inspected at the offices of The Nasdaq Stock Market,
which is located at 1735 K Street, N.W., Washington, D.C. 20006.
Johnson & Johnson filed a registration statement on Form S-4 on January 10,
2000 to register with the Securities and Exchange Commission the Johnson &
Johnson common stock to be issued to Innovasive stockholders in the merger. This
proxy statement/prospectus is a part of that registration statement and
constitutes a prospectus of Johnson & Johnson in addition to being a proxy
statement of Innovasive. As allowed by Securities and Exchange Commission rules,
this proxy statement/prospectus does not contain all the information you can
find in Johnson & Johnson's registration statement or the exhibits to the
registration statement.
The Securities and Exchange Commission allows Johnson & Johnson and
Innovasive to "incorporate by reference" information into this proxy
statement/prospectus, which means that the companies can disclose important
information to you by referring you to other documents filed separately with the
Securities and Exchange Commission. The information incorporated by reference is
considered part of this proxy statement/prospectus, except for any information
superseded by information contained directly in this proxy statement/prospectus
or in later filed documents incorporated by reference in this proxy
statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Johnson & Johnson and Innovasive have previously filed with the
Securities and Exchange Commission. These documents contain important business
and financial information about Johnson & Johnson and Innovasive that is not
included in or delivered with this proxy statement/prospectus.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for stock of
Johnson & Johnson and Innovasive and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to the
future business prospects, revenues and income, in each case relating to Johnson
& Johnson and Innovasive, wherever they occur in this proxy
statement/prospectus, are necessarily estimates reflecting the best judgment of
the senior management of Johnson & Johnson (with regard to matters relating to
Johnson & Johnson) and Innovasive (with regard to matters relating to
Innovasive) and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the forward-looking
statements. Such forward-looking statements should, therefore, be considered in
light of various important factors, including those set forth in this proxy
statement/prospectus. Important factors that could cause actual results to
differ materially from estimates or projections contained in the forward-looking
statements include without limitation:
- competitive factors, including technological advances achieved and
patents attained by competitors and generic competition as patents on
Johnson & Johnson's and Innovasive's products expire
- government laws and regulations affecting domestic and foreign
operations, including those relating to trade, monetary and fiscal
policies, taxes, price controls, regulatory approval of new products and
licensing
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
January 3, 1999 of Johnson & Johnson, including any amendments, and the Annual
Report on Form 10-K for the year ended December 31, 1998 of Innovasive,
including any amendments. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this proxy
statement/ prospectus. Neither Johnson & Johnson nor Innovasive undertakes any
obligation to publicly update or release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of unanticipated events.
The foregoing list sets forth some, but not all, of the factors that could
impact upon Johnson & Johnson's and Innovasive's ability to achieve results
described in any forward-looking statements. Investors are cautioned not to
place undue reliance on such statements that speak only as of the date made.
Investors also should understand that it is not possible to predict or identify
all such factors and that this list should not be considered a complete
statement of all potential risks and uncertainties. Investors should also
realize that if underlying assumptions prove inaccurate or unknown risks or
uncertainties materialize, actual results could vary materially from Johnson &
Johnson's and Innovasive's projections. Johnson & Johnson and Innovasive
undertake no obligation to update any forward-looking statements as a result of
future events or developments.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for stock of
Johnson & Johnson and Innovasive and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to the
future business prospects, revenues and income, in each case relating to Johnson
& Johnson and Innovasive, wherever they occur in this proxy
statement/prospectus, are necessarily estimates reflecting the best judgment of
the senior management of Johnson & Johnson (with regard to matters relating to
Johnson & Johnson) and Innovasive (with regard to matters relating to
Innovasive) and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the forward-looking
statements. Such forward-looking statements should, therefore, be considered in
light of various important factors, including those set forth in this proxy
statement/prospectus. Important factors that could cause actual results to
differ materially from estimates or projections contained in the forward-looking
statements include without limitation:
- competitive factors, including technological advances achieved and
patents attained by competitors and generic competition as patents on
Johnson & Johnson's and Innovasive's products expire
- government laws and regulations affecting domestic and foreign
operations, including those relating to trade, monetary and fiscal
policies, taxes, price controls, regulatory approval of new products and
licensing
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
January 3, 1999 of Johnson & Johnson, including any amendments, and the Annual
Report on Form 10-K for the year ended December 31, 1998 of Innovasive,
including any amendments. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this proxy
statement/ prospectus. Neither Johnson & Johnson nor Innovasive undertakes any
obligation to publicly update or release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of unanticipated events.
The foregoing list sets forth some, but not all, of the factors that could
impact upon Johnson & Johnson's and Innovasive's ability to achieve results
described in any forward-looking statements. Investors are cautioned not to
place undue reliance on such statements that speak only as of the date made.
Investors also should understand that it is not possible to predict or identify
all such factors and that this list should not be considered a complete
statement of all potential risks and uncertainties. Investors should also
realize that if underlying assumptions prove inaccurate or unknown risks or
uncertainties materialize, actual results could vary materially from Johnson &
Johnson 's and Innovasive's projections. Johnson & Johnson and Innovasive
undertake no obligation to update any forward-looking statements as a result of
future events or developments.
60
ANNEX 1
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
BY AND AMONG
JOHNSON & JOHNSON,
RAPTOR ACQUISITION CORP.,
AND
INNOVASIVE DEVICES, INC.
DATED AS OF NOVEMBER 8, 1999
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I
THE MERGER
SECTION 1.01 Merger; Effective Time...................................... A-1
SECTION 1.02 Closing..................................................... A-1
SECTION 1.03 Effect of the Merger........................................ A-2
SECTION 1.04 Articles of Organization; By-Laws........................... A-2
SECTION 1.05 Directors and Officers...................................... A-2
SECTION 1.06 Effect on Capital Stock..................................... A-2
SECTION 1.07 Exchange of Certificates.................................... A-3
SECTION 1.08 Dissenting Shares........................................... A-4
SECTION 1.09 Stock Transfer Books........................................ A-5
SECTION 1.10 No Further Ownership Rights in TARGET Common Stock.......... A-5
SECTION 1.11 Lost, Stolen or Destroyed Certificates...................... A-5
SECTION 1.12 Investment of Exchange Fund................................. A-5
SECTION 1.13 Termination of Exchange Fund................................ A-5
SECTION 1.14 Tax Consequences............................................ A-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
SECTION 2.01 Organization and Qualification; Subsidiaries................ A-6
SECTION 2.02 TARGET Capital Structure.................................... A-6
SECTION 2.03 Obligations With Respect to Capital Stock................... A-7
SECTION 2.04 Authority; No Conflicts..................................... A-7
SECTION 2.05 SEC Filings; TARGET Financial Statements.................... A-8
SECTION 2.06 Absence of Certain Changes or Events........................ A-9
SECTION 2.07 Taxes....................................................... A-10
SECTION 2.08 Absence of Liens and Encumbrances........................... A-10
SECTION 2.09 Intellectual Property....................................... A-11
SECTION 2.10 Agreements, Contracts and Commitments....................... A-11
SECTION 2.11 Governmental Authorization.................................. A-12
SECTION 2.12 Litigation.................................................. A-12
SECTION 2.13 Insurance................................................... A-12
SECTION 2.14 ERISA Compliance; Excess Parachute Payments................. A-12
SECTION 2.15 Registration Statements; Proxy Statements/Prospectus........ A-14
SECTION 2.16 Fairness Opinion............................................ A-15
SECTION 2.17 Brokers' and Finders' Fees.................................. A-15
SECTION 2.18 Environmental Matters....................................... A-15
SECTION 2.19 Year 2000 Compliance........................................ A-15
SECTION 2.20 Rights Plan................................................. A-16
SECTION 2.21 Board Approval.............................................. A-16
SECTION 2.22 Vote Required............................................... A-16
</TABLE>
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<TABLE>
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 3.01 Organization and Qualification.............................. A-16
SECTION 3.02 Authority; No Conflicts..................................... A-17
SECTION 3.03 SEC Filings; PARENT Financial Statements.................... A-17
SECTION 3.04 Taxes....................................................... A-18
SECTION 3.05 Registration Statements; Proxy Statements/Prospectus........ A-18
SECTION 3.06 Brokers' and Finders' Fees.................................. A-18
SECTION 3.07 Operation of SUB............................................ A-18
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01 Conduct of Business by TARGET Pending the Merger............ A-18
SECTION 4.02 Certain Tax Matters......................................... A-20
SECTION 4.03 No Solicitation by TARGET................................... A-21
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Proxy Statement/Prospectus; Registration Statement.......... A-22
SECTION 5.02 Stockholders Meeting........................................ A-23
SECTION 5.03 Access to Information; Confidentiality...................... A-23
SECTION 5.04 Consents; Approvals......................................... A-24
SECTION 5.05 Stock Options............................................... A-24
SECTION 5.06 TARGET Employee Stock Purchase Plan......................... A-25
SECTION 5.07 Notification of Certain Matters............................. A-25
SECTION 5.08 Further Action; Tax Treatment............................... A-25
SECTION 5.09 Public Announcements........................................ A-25
SECTION 5.10 Listing of Common Stock..................................... A-26
SECTION 5.11 Accountant's Comfort Letters................................ A-26
SECTION 5.12 Indemnification; Directors' and Officers' Insurance......... A-26
SECTION 5.13 Rights Agreement............................................ A-26
SECTION 5.14 Affiliate Agreements........................................ A-27
SECTION 5.15 HSR Act Filings............................................. A-27
SECTION 5.16 Stockholder Litigation...................................... A-27
SECTION 5.17 Employee Matters............................................ A-27
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01 Conditions to Obligation of Each Party to Effect the
Merger...................................................... A-28
SECTION 6.02 Additional Conditions to Obligation of PARENT and SUB....... A-28
SECTION 6.03 Additional Conditions to Obligation of TARGET............... A-29
SECTION 6.04 Frustration of Closing Conditions........................... A-29
</TABLE>
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<TABLE>
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ARTICLE VII
TERMINATION
SECTION 7.01 Termination................................................. A-29
SECTION 7.02 Effect of Termination....................................... A-30
SECTION 7.03 Fees and Expenses........................................... A-30
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 Effectiveness of Representations, Warranties and Agreements;
Knowledge, Etc.............................................. A-31
SECTION 8.02 Notices..................................................... A-31
SECTION 8.03 Interpretation.............................................. A-32
SECTION 8.04 Certain Definitions......................................... A-32
SECTION 8.05 Amendment................................................... A-33
SECTION 8.06 Waiver...................................................... A-33
SECTION 8.07 Severability................................................ A-33
SECTION 8.08 Entire Agreement............................................ A-33
SECTION 8.09 Assignment.................................................. A-34
SECTION 8.10 Parties in Interest......................................... A-34
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative....... A-34
SECTION 8.12 Governing Law............................................... A-34
SECTION 8.13 Specific Performance........................................ A-34
SECTION 8.14 Counterparts................................................ A-34
</TABLE>
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of November 8,
1999 (this "Agreement"), among JOHNSON & JOHNSON, a New Jersey corporation
("PARENT"), RAPTOR ACQUISITION CORP., a Massachusetts corporation and a
wholly-owned subsidiary of PARENT ("SUB") and INNOVASIVE DEVICES, INC., a
Massachusetts corporation ("TARGET").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of PARENT and TARGET have determined that
it is advisable and in the best interests of their respective stockholders for
PARENT and TARGET to enter into a strategic business combination upon the terms
and subject to the conditions set forth herein, whereby each issued and
outstanding share of common stock, par value $.0001, of TARGET ("TARGET Common
Stock"), other than TARGET Common Stock owned by PARENT, SUB or TARGET, will be
converted into the right to receive common stock, par value $1.00 per share, of
PARENT ("PARENT Common Stock");
WHEREAS, in furtherance of such combination, the Board of Directors of
TARGET has approved the merger (the "Merger") of SUB with and into TARGET,
pursuant to which TARGET will become a wholly-owned subsidiary of PARENT, the
Merger to be in accordance with the applicable provisions of the Massachusetts
General Laws (the "MGL") and upon the terms and subject to the conditions set
forth herein;
WHEREAS, simultaneously with the execution and delivery of this Agreement,
PARENT and TARGET are entering into a stock option agreement (the "Option
Agreement"), pursuant to which TARGET will grant PARENT the option to purchase
shares of TARGET Common Stock, upon the terms and subject to the conditions set
forth therein;
WHEREAS, simultaneously with the execution and delivery of this Agreement,
PARENT and certain stockholders of TARGET are entering into an agreement (the
"Stockholders Agreement"), pursuant to which such stockholders will agree to
vote to approve this Agreement and to take certain other actions in furtherance
of the Merger, upon the terms and subject to the conditions set forth therein;
and
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended the (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, PARENT, SUB and TARGET hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 Merger; Effective Time. At the Effective Time (as defined
below), and subject to and upon the terms and conditions of this Agreement and
the MGL, (i) SUB shall be merged with and into TARGET, (ii) the separate
existence of SUB shall cease, and (iii) TARGET shall be the surviving
corporation and a wholly owned subsidiary of PARENT (the "Surviving
Corporation"). As promptly as practicable after the satisfaction or waiver, as
the case may be, of the conditions set forth in Article VI, TARGET, SUB and
PARENT shall cause the Merger to be consummated by filing articles of merger as
contemplated by Section 78 of Chapter 156B of the MGL (the "Certificate of
Merger"), together with any required related instruments, with the Secretary of
State of The Commonwealth of Massachusetts, in such form as required by, and
executed in accordance with the applicable provisions of, the MGL (the time of
filing of the articles of merger being referred to herein as the "Effective
Time").
SECTION 1.02 Closing. Unless this Agreement shall have been terminated
pursuant to Section 7.01, and subject to the satisfaction or waiver of all the
conditions set forth in Article VI, the
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consummation of the Merger (the "Closing") shall take place as promptly as
practicable (and in any event within two business days) (the "Closing Date")
after satisfaction or waiver of the conditions set forth in Article VI, (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions) at the offices of
Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston, Massachusetts,
unless another date or place is agreed to in writing by TARGET, PARENT and SUB.
SECTION 1.03 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the MGL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of SUB shall vest in the Surviving Corporation, and all debts,
liabilities and duties of SUB shall become the debts, liabilities and duties of
the Surviving Corporation. As a result of the Merger, the outstanding shares of
capital stock of SUB and TARGET shall be converted or cancelled in the manner
provided in Section 1.06 of this Agreement; the separate corporate existence of
SUB shall cease; and TARGET shall be the surviving corporation in the Merger.
SECTION 1.04 Articles of Organization; By-Laws.
(a) Articles of Organization. The Articles of Organization of SUB, as in
effect immediately prior to the Effective Time, shall be the Articles of
Organization of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law. The name of the Surviving Corporation
shall continue to be Innovasive Devices, Inc.
(b) By-Laws. The By-Laws of SUB, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.05 Directors and Officers. (a) The directors of SUB immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
(b) The officers of TARGET immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(c) PARENT hereby acknowledges that (i) certain officers of TARGET are
parties to Income Continuation Agreements, copies of which are attached hereto
as Exhibit 1.04(c), and (ii) TARGET's obligations under such Income Continuation
Agreements shall survive the Closing and be assumed by PARENT.
SECTION 1.06 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of PARENT, SUB or TARGET or the
holders of any securities issued by any of them:
(a) Capital Stock of SUB. Each issued and outstanding share of the
capital stock of SUB shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, $.0001 par value per
share, of the Surviving Corporation, which shares shall be the only shares
of capital stock of the Surviving Corporation outstanding immediately
following such conversion.
(b) Conversion of TARGET Common Stock. Each share of TARGET Common
Stock, together with the associated right (the "Rights") to purchase shares
of TARGET Common Stock pursuant to the Rights Agreement dated as of January
14, 1999 ("TARGET Rights Plan") (collectively, a "Share") issued and
outstanding immediately prior to the Effective Time (excluding any Shares
to be cancelled pursuant to Section 1.06(c) and any Dissenting Shares as
defined in Section 1.08) shall be converted, subject to Sections 1.06(d),
1.06(e) and 1.07(f), into that number (the "Exchange Ratio") of validly
issued, fully paid and nonassessable shares of PARENT Common Stock equal to
the amount (rounded to the fourth decimal place) obtained by dividing $8.25
by the Average Closing Price (as defined below) (the "Merger
Consideration"). The "Average Closing
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Price" shall be an amount equal to the average per share closing price of
PARENT Common Stock, as reported on the New York Stock Exchange ("NYSE")
Composite Tape for the 20 consecutive trading days ending on the third
trading day prior to the TARGET Stockholders' Meeting (as defined below).
At the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate which immediately prior to the Effective Time
represented any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any cash
in lieu of fractional shares of PARENT Common Stock in accordance with
Section 1.07, without interest.
(c) Cancellation of TARGET Common Stock. Each Share held in treasury
of TARGET and each Share owned by PARENT or SUB immediately prior to the
Effective Time (the "Cancelled Shares") shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be
outstanding and be cancelled and retired without payment of any
consideration therefor.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any subdivision, combination, stock
dividend (including any dividend or distribution of securities convertible
into PARENT Common Stock or TARGET Common Stock), reorganization,
recapitalization or similar capital change with respect to PARENT Common
Stock occurring after the date hereof and prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of PARENT Common Stock
shall be issued upon surrender or exchange of Certificates (as defined
below), but in lieu thereof each holder of TARGET Common Stock who would
otherwise be entitled to a fraction of a share of PARENT Common Stock
(after aggregating all fractional shares of PARENT Common Stock to be
received by such holder and providing for any amounts or shares to be
withheld pursuant to Section 1.07(f), it being the intention of the parties
that no holder of TARGET Common Stock will receive cash in an amount equal
to or greater than the cash value of one full share of PARENT Common Stock)
shall receive from PARENT an amount of cash (rounded to the nearest cent),
without interest, equal to the product of (i) such fraction, multiplied by
(ii) the closing price of PARENT Common Stock on the NYSE on the last
trading date immediately preceding the Closing Date (as reported in the
Wall Street Journal).
SECTION 1.07 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, PARENT shall supply, or
shall cause to be supplied, to or for the account of a bank or trust company to
be designated by PARENT (the "Exchange Agent"), in trust for the benefit of the
holders of TARGET Common Stock (other than Cancelled Shares), for exchange in
accordance with this Section 1.07, certificates evidencing the PARENT Common
Stock issuable pursuant to Section 1.06 in exchange for outstanding Shares and
all cash required to be paid pursuant to Sections 1.06(e) and 1.07(c) (the
"Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, PARENT shall instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding Shares, other than Cancelled Shares (the
"Certificates"), (i) a letter of transmittal, which letter shall specify, among
other conditions, that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and shall be in such form as PARENT may reasonably specify,
and (ii) instructions to effect the surrender of the Certificates in exchange
for the certificates evidencing the Merger Consideration (the "PARENT
Certificates") and, in lieu of any fractional shares thereof, cash. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary documents as
may be reasonably required by PARENT or the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) PARENT
Certificates evidencing that whole number of shares of PARENT Common Stock which
such holder has the right to receive in respect of the Shares formerly evidenced
by such Certificate in accordance with Section 1.06, (B) any dividends or other
distributions to which such holder is entitled pursuant to Section 1.07(c), and
(C) cash in lieu of any fractional shares of PARENT Common Stock to
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which such holder is entitled pursuant to Section 1.06(e) and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of TARGET as
of the Effective Time, PARENT Common Stock and cash may be issued and paid in
accordance with this Article I to a transferee if the Certificate evidencing
such Shares is presented to the Exchange Agent, accompanied by all documents
required by law to evidence and effect such transfer pursuant to this Section
1.07(b) and by evidence that any applicable stock transfer taxes have been paid.
Until so surrendered, each Certificate shall be deemed from and after the
Effective Time, for all corporate purposes, only the right upon such surrender
to receive the Merger Consideration and the right to receive an amount in cash
in lieu of the issuance of any fractional shares in accordance with Section
1.06(e). No interest shall be paid or will accrue on any cash payable to holders
of Certificates pursuant to the provisions of this Article I.
(c) Distributions With Respect to Unexchanged TARGET Common Stock. No
dividends or other distributions with respect to PARENT Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the PARENT Common Stock such holder is
entitled to receive until such holder shall surrender such Certificate. Subject
to applicable law, following the surrender of any such Certificate, there shall
be paid to the record holder of the certificates representing whole shares of
PARENT Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of PARENT Common Stock.
(d) Transfers of Ownership. If any certificate evidencing shares of PARENT
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange shall have paid to PARENT, or any agent designated by PARENT, any
transfer or other taxes required by reason of the issuance of a certificate for
shares of PARENT Common Stock in any name other than that of the registered
holder of the Certificate surrendered.
(e) No Liability. None of PARENT, SUB, TARGET or the Exchange Agent shall
have any liability to any holder of TARGET Common Stock in respect of any shares
of PARENT Common Stock, any dividends or distributions with respect thereto, any
cash in lieu of the issuance of any fractional shares of PARENT Common Stock or
any cash delivered to the Exchange Agent which are delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificate shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration, any dividends or distributions payable to the holder pursuant to
Section 1.07(c) or any cash payable to the holder of such Certificate pursuant
to Section 1.06(e), would otherwise escheat to or become the property of any
Governmental Entity (as defined below)), any Merger Consideration, dividends or
distributions or cash shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(f) Withholding Rights. Each of PARENT, the Surviving Corporation and the
Exchange Agent shall be entitled to deduct and withhold from the Merger
Consideration, any dividends or distributions payable pursuant to Section
1.07(c) or any cash payable pursuant to Section 1.06(e) otherwise payable to any
holder of TARGET Common Stock such amounts as PARENT, the Surviving Corporation
or the Exchange Agent may be required to deduct and withhold with respect to any
provision of Federal, state, local or foreign tax laws. To the extent that
amounts are so withheld by PARENT, the Surviving Corporation or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of TARGET Common Stock in
respect of which such deduction and withholding was made by PARENT, the
Surviving Corporation or the Exchange Agent.
SECTION 1.08 Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, any shares of TARGET Common Stock issued and
outstanding immediately prior to the
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Effective time and which are held by a holder who has properly perfected its
rights of appraisal for such shares in accordance with the MGL ("Dissenting
Shares"), shall not be converted into or represent a right to receive the Merger
Consideration but the holder thereof shall only be entitled to such rights as
are granted by the MGL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
or otherwise) such holder's rights of appraisal, then, as of the later of the
Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration, without interest thereon in the manner provided in Section
1.06(b).
SECTION 1.09 Stock Transfer Books. At the Effective Time, the stock
transfer books of TARGET shall be closed, and there shall be no further
registration of transfers of TARGET Common Stock on the records of TARGET.
SECTION 1.10 No Further Ownership Rights in TARGET Common Stock. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof (including any cash paid pursuant to this
Article I) shall be deemed to have been delivered and paid in full satisfaction
of all rights pertaining to such Shares, and there shall be no further
registration of transfers on the records of the Surviving Corporation of Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article I.
SECTION 1.11 Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed (a "Lost Certificate"),
the Exchange Agent shall, upon the making of an affidavit of that fact by the
registered owner thereof, deliver to such owner such Merger Consideration as may
be required pursuant to Section 1.06, any dividends or distributions payable
pursuant to Section 1.07(c) or any cash payable pursuant to Section 1.06(e);
provided, however, that PARENT may, in its sole discretion and as a condition
precedent to the delivery thereof, require the registered owner of such Lost
Certificate to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against PARENT or the Exchange
Agent with respect to the Lost Certificate.
SECTION 1.12 Investment of Exchange Fund. The Exchange Agent, if so
directed by PARENT, shall invest any cash included in the Exchange Fund, in
obligations of the United States government or any agent or instrumentality
thereof, or in obligations that are qualified or insured by the United States
government or any agency or instrumentality thereof. Any interest and other
income resulting from such investments shall be paid to PARENT. In the event of
any realized loss on any investment of cash in the Exchange Fund, PARENT shall
promptly thereafter deposit in such Exchange Fund cash in an amount necessary to
make up such loss.
SECTION 1.13 Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to PARENT, upon demand, and
any holders of the Certificates who have not theretofore complied with this
Article shall thereafter look only to PARENT for, and PARENT shall remain liable
for, payment of their claim for the Merger Consideration, any cash in lieu of
fractional shares of PARENT Common Stock and any dividends or distributions with
respect to PARENT Common Stock.
SECTION 1.14 Tax Consequences. It is intended by PARENT and TARGET that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Code. PARENT and TARGET hereby adopt this Agreement as a "Plan of
Reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
TARGET hereby represents and warrants to PARENT and SUB as follows:
SECTION 2.01 Organization and Qualification; Subsidiaries.
Each of TARGET and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all the requisite corporate power and authority to own, lease
and operate its property and to carry on its business as now being conducted,
and is duly qualified to do business and in good standing in each jurisdiction
in which such qualification is required by virtue of the nature of the
activities conducted by it or the ownership or leasing of its properties or
assets, except to the extent that the failure to be so qualified and in good
standing is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect (as hereinafter defined) on TARGET. Schedule 2.01
contains a true and complete list of all TARGET subsidiaries and the
jurisdiction of incorporation of each subsidiary. TARGET owns, directly or
indirectly through one or more subsidiaries, 100% of the capital stock of each
of its subsidiaries and there are no securities exchangeable into or exercisable
for any capital stock of any such subsidiary issued, reserved for issuance or
outstanding. Except as set forth in Schedule 2.01, TARGET does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any interest in, any corporation,
partnership, joint venture or other business association or entity. TARGET has
delivered or made available to PARENT a true and correct copy of the Articles of
Organization and By-Laws of TARGET and similar governing instruments of each of
its subsidiaries, each as amended to the date hereof. All of the outstanding
shares of capital stock of, or other equity interests in, each subsidiary of
TARGET have been validly issued, are fully paid and nonassessable and are owned
by TARGET or a wholly-owned subsidiary of TARGET free and clear of all claims,
liens, charges, mortgages, encumbrances, pledges, security interests or other
restrictions of any kind or nature whatsoever ("Liens"). In this Agreement, the
term "Material Adverse Effect" used in reference to TARGET or any of its
subsidiaries means any event, change or effect, that is or is reasonably likely
to become materially adverse to the financial condition, assets, liabilities,
results of operations or business of TARGET and its subsidiaries, taken as a
whole, other than any event, change or effect relating principally to (i)
decreases in the market price of TARGET Common Stock, (ii) changes resulting
from changes in general economic conditions, (iii) changes in the industry in
which TARGET operates (including legal and regulatory changes) and not
specifically relating to TARGET, (iv) any monetary damages directly resulting
from the pending litigation between TARGET and Arthrex, Inc., (v) any
injunctions prohibiting the sale of the COR(R) System or the Slingshot(R) System
resulting from the Arthrex litigation or (vi) changes that are a direct result
of the announcement or pending status of the Merger (including, without
limitation, any reduction or termination of orders received by TARGET employees,
distributors or resellers or the cessation of employment by TARGET employees or
termination of TARGET distributors, in each case, to the extent directly
resulting from the announcement or pending status of the Merger).
SECTION 2.02 TARGET Capital Structure. (i) The authorized capital stock
of TARGET consists of 15,000,000 shares of Common Stock, $.0001 par value, of
which there were 9,299,017 shares issued and outstanding as of November 8, 1999
and 1,000,000 shares of Preferred Stock, $.01 par value ("TARGET Preferred
Stock"). No shares of TARGET Preferred Stock are issued and outstanding as of
the date hereof. As of the date hereof, 25,000 shares of TARGET Preferred Stock
have been designated Series A Junior Preferred Stock, all of which have been
reserved for issuance under TARGET Rights Plan. As of November 8, 1999, no
shares of TARGET Common Stock were held by TARGET in treasury. All outstanding
shares of capital stock of TARGET are duly authorized, validly issued, fully
paid and non-assessable and are not subject to any preemptive rights. As of
November 8, 1999, TARGET had reserved 608,390 shares of TARGET Common Stock for
issuance to employees, consultants and directors pursuant to TARGET's 1992 Stock
Option Plan (the "1992 Option Plan"), under which options were outstanding for
568,384 shares of TARGET Common Stock as of November 8, 1999. As of November 8,
1999, TARGET had reserved 1,413,722 shares of TARGET Common Stock for issuance
to employees,
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consultants and directors pursuant to TARGET's 1996 Omnibus Stock Plan (the
"Omnibus Plan"), under which options were outstanding for 1,292,837 shares of
TARGET Common Stock as of November 8, 1999. As of November 8, 1999, TARGET had
reserved 150,000 shares of TARGET Common Stock for issuance to non-employee
Directors of TARGET pursuant to TARGET's 1996 Non-Employee Director Stock Plan
(the "Director Plan"), under which options were outstanding for 95,000 shares of
TARGET Common Stock as of November 8, 1999. As of November 8, 1999, TARGET had
reserved 150,000 shares of TARGET Common Stock for issuance pursuant to TARGET's
1996 Employee Stock Purchase Plan. For the six month offering period ending
December 31, 1999, if all current participants continue to contribute at current
levels (assuming the purchase price of such shares to be 85% of the fair market
value of TARGET Common Stock on the first day of such offering period), there
would be an aggregate of approximately 40,000 shares issuable pursuant to
TARGET's 1996 Employee Stock Purchase Plan, and, in any event, no more than
50,000 shares issuable for such offering period. All shares of TARGET Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid, nonassessable and not
subject to any preemptive rights.
(ii) No bonds, debentures, notes or other indebtedness of TARGET having the
right to vote (or convertible into or exchangeable for securities having the
right to vote), whether currently or upon the occurrence of an event, on any
matters on which stockholders of TARGET or its subsidiaries may vote, are issued
or outstanding or subject to issuance.
SECTION 2.03 Obligations With Respect to Capital Stock. Except as set
forth in Section 2.02 or as set forth on Schedule 2.03, there are no shares of
capital stock or other voting securities of TARGET, or any security exchangeable
into, convertible for or exercisable for such securities, issued, reserved for
issuance or outstanding. Except for securities TARGET owns, directly or
indirectly through one or more subsidiaries, there are no shares of capital
stock or other voting securities of any class of any subsidiary of TARGET, or
any securities convertible into or exchangeable for or exercisable for such
securities, issued, reserved for issuance or outstanding. Except as set forth in
Section 2.02 or as set forth on Schedule 2.03, there are no options, warrants,
securities, calls, rights, commitments or agreements of any character to which
TARGET or any of its subsidiaries is a party or by which it is bound obligating
TARGET or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities or securities convertible or exchangeable into or exercisable for
capital stock or voting securities of TARGET or any of its subsidiaries or
obligating TARGET or any of its subsidiaries to issue, grant, extend, accelerate
the vesting of or enter into any such option, warrant, security, call, right,
commitment or agreement. Except in connection with the Option Agreement, there
are no outstanding stock appreciation rights or rights to receive shares of
TARGET Common Stock on a deferred basis granted under any stock option or stock
purchase plan of TARGET or otherwise. There are no outstanding obligations of
TARGET or any of its subsidiaries to repurchase, redeem or otherwise acquire any
security of TARGET or any of its subsidiaries and, to the knowledge of TARGET,
except in connection with the Stockholders Agreement, there are no irrevocable
proxies with respect to shares of capital stock of TARGET or any of its
subsidiaries.
SECTION 2.04 Authority; No Conflicts.
(a) TARGET has all requisite corporate power and authority to enter into
this Agreement and, subject to obtaining, in the case of this Agreement, the
Required Stockholder Approval (as defined in Section 2.22), to consummate the
transactions contemplated by this Agreement and the Option Agreement. The
execution and delivery of this Agreement and the Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of TARGET, subject, in
the case of this Agreement, to obtaining the Required Stockholder Approval. This
Agreement and the Option Agreement have been duly executed and delivered by
TARGET and constitute the legal, valid and binding obligation of TARGET,
enforceable in accordance with their terms.
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(b) Except as set forth in Schedule 2.04(b), the execution and delivery of
this Agreement and the Option Agreement by TARGET do not, and the consummation
of the Merger and the other transactions contemplated hereby and by the Option
Agreement will not conflict with, or result in any breach or violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, amendment, cancellation or acceleration of any
obligation or the loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person under, or result
in the creation of any Lien on any asset or property of TARGET or any of its
subsidiaries under (i) any provision of the Articles of Organization or By-Laws
of TARGET or its subsidiaries, or (ii) any loan or credit agreement, mortgage,
bond, note indenture, lease, contract, benefit plan or other agreement,
obligation or instrument to which TARGET or any of its subsidiaries is a party
or by which TARGET or any of its subsidiaries or the assets or properties of
TARGET or any of its subsidiaries is bound except for any such conflict,
violation, default, right, creation loss, increased, additional, accelerated
rights, entitlement or Liens which is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, or to
prevent or materially impede, interfere with, hinder or delay the consummation
of the transactions contemplated hereby, or (iii) any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to TARGET, any of its subsidiaries or their respective
properties or assets, except for any such breach, conflict, violation, default,
right, creation or loss which is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on TARGET or to prevent or
materially impede, interefere with, hinder or delay the consummation of the
transactions contemplated hereby.
(c) Except as set forth in Schedule 2.04(c), no consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic foreign or supranational, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other governmental
or quasi-governmental authority ("Governmental Entity"), is required by or with
respect to TARGET or any of its subsidiaries in connection with the execution
and delivery of this Agreement or the Option Agreement or the consummation of
the Merger or the other transactions contemplated hereby or by the Option
Agreement, except (i) in connection, or in compliance, with the provisions of
the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR
Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and state
securities or "blue sky" laws; (ii) the filing of the articles of merger with
the Massachusetts Secretary of State and appropriate documents with the relevant
authorities of other states in which TARGET is qualified to do business; (iii)
in compliance with applicable requirements, if any, of the Nasdaq National
Market System; and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings, the failure of which to be obtained or
made is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET or to prevent or materially impede, interfere
with, hinder or delay the consummation of the transactions contemplated hereby.
SECTION 2.05 SEC Filings; TARGET Financial Statements.
(a) TARGET has filed all forms, reports, schedules, statements and other
documents required to be filed with the Securities and Exchange Commission (the
"SEC") since June 30, 1996. All such required forms, reports, schedules,
statements and other documents, including all exhibits thereto and all other
information incorporated therein, are referred to herein as the "TARGET SEC
Reports". The TARGET SEC Reports (i) as of their respective dates, complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such TARGET SEC Reports, and (ii) except to the extent
that information contained in any TARGET SEC Report has been revised or
superseded by a later-filed TARGET SEC Report, do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in TARGET SEC Reports, (i) complies as to
form in all material respects with the published
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rules and regulations of the SEC with respect thereto, (ii) has been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated therein or in
the notes thereto) and (iii) fairly presents in all material respects the
consolidated financial position of TARGET and its subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
cash flows for the periods indicated, except that the unaudited financial
statements of TARGET do not include footnote disclosure of the type associated
with audited financial statements and were subject to normal and recurring
year-end audit adjustments described therein.
(c) As of the date hereof, there are no material amendments or
modifications to any agreements, documents or other instruments which previously
had been filed by TARGET with the SEC pursuant to the Securities Act or the
Exchange Act.
SECTION 2.06 Absence of Certain Changes or Events. Except as disclosed in
TARGET SEC Reports filed and publicly available prior to the date of this
Agreement or as disclosed on Schedule 2.06, since December 31, 1998 each of
TARGET and its subsidiaries has conducted their businesses only in the ordinary
course, and since such date none of the following has occurred:
(i) TARGET or its subsidiaries has incurred any liabilities or
obligations (other than the Option Agreement) of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally
accepted accounting principles to be reflected on a consolidated balance
sheet of TARGET and its subsidiaries (including the notes thereto) or which
has had or which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET;
(ii) any event, change or effect that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse
Effect on TARGET;
(iii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
capital stock of TARGET or its subsidiaries or any repurchase, redemption
or other acquisition by TARGET of any capital stock of TARGET or its
subsidiaries;
(iv) any adjustment, split, combination or reclassification of any
capital stock of TARGET or its subsidiaries or any issuance or
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of TARGET or its
subsidiaries;
(v) any material change in financial or tax accounting methods,
principles or practices by TARGET or any subsidiary of TARGET, except
insofar as may have been required by a change in generally accepted
accounting principles;
(vi) any material elections with respect to Taxes (as defined in
Section 2.07) by TARGET or any of its subsidiaries or any settlement or
compromise by TARGET or any of its subsidiaries of any material Tax
liability or refund;
(vii) any granting by TARGET or any of its subsidiaries to any current
or former director, executive officer or other key employee of TARGET or
any of its subsidiaries of any increase in compensation, bonus or other
benefits, except for normal increases in cash compensation in the ordinary
course of business consistent with past practice or as was required under
employment agreements in effect prior to the date hereof, any granting by
TARGET or any of its subsidiaries to any such current or former director,
executive officer or other key employee of any increase in severance or
termination pay, except as was required under any employment, severance or
termination agreements in effect as of the date hereof, any entry by TARGET
or any of its subsidiaries into, or any adoption or amendment of, any
collective bargaining agreement or TARGET Benefit Plan, or any amendment
to, or modification of, any stock option other than an Amendment to
TARGET's 1992 Stock Option Plan dated as of November 8, 1999, granting to
option holders, at the discretion of the TARGET Board, the right to execute
a cash-less exercise of options; or
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(viii) any damage, destruction or loss, whether or not covered by
insurance, that has had or is reasonably likely to have a Material Adverse
Effect on TARGET.
There are no collective bargaining or other labor union agreements to which
TARGET or its subsidiaries is a party or by which it is bound. Since December
31, 1998, neither TARGET nor any of its subsidiaries has encountered any labor
union organizing activity, nor had any actual or threatened employee strikes,
work stoppages, slowdowns or lockouts.
SECTION 2.07 Taxes.
(a) Except as set forth on Schedule 2.07(a) each of TARGET and each of its
subsidiaries (i) has timely filed all Tax Returns (as defined below) which it
was required to file (after giving effect to any filing extension granted by a
Governmental Entity) and all such Tax Returns are true, accurate and complete in
all material respects, and (ii) has timely paid all Taxes (as defined below)
required to be paid by it, except, in each case, where the failure to file (or
timely file) such Tax Returns or pay such Taxes is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET. To
TARGET's knowledge, the most recent financial statements contained in TARGET SEC
Reports reflect an adequate reserve for all current Taxes payable by TARGET and
each of its subsidiaries (in addition to any reserve for deferred Taxes to
reflect timing differences between book and Tax income) for all taxable periods
and portions thereof through the date of such financial statements. To TARGET's
knowledge, and except as set forth on Schedule 2.07(a), no deficiencies for any
Taxes have been proposed, asserted or assessed against TARGET or its
subsidiaries and no requests for waivers of the time to assess any such Taxes
are pending. The federal income Tax Returns of TARGET and each of its
subsidiaries that is consolidated in such Tax Returns have not been audited by
the Internal Revenue Service or have been closed by virtue of the expiration of
the relevant statute of limitations for all years through September 15, 1995.
Except as set forth on Schedule 2.07(a), all material assessments for Taxes due
with respect to such completed and settled examinations or any concluded
litigation have been fully paid. Neither TARGET nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (a) in the
two years prior to the date of this Agreement or (b) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger. Neither TARGET nor any of its subsidiaries has taken any action or knows
of any fact that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Schedule
2.07(a) lists all (A) Tax sharing arrangements, (B) all Tax Returns currently
under audit (the "Audits") and (C) agreements for extensions with Governmental
Entities to which TARGET or any of the subsidiaries is a party.
(b) For purposes of this Agreement, "Taxes" means all (i) federal, state,
local and foreign income, property, sales, use, franchise, employment,
withholding, excise and other taxes, tariffs and governmental charges of any
nature whatsoever, together with any interest, penalties or additions to Tax
with respect thereto; (ii) liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, and (iii) liability for the payment of any amounts as
a result of being a party to any Tax sharing agreement or as a result of any
express or implied obligation to indemnify any other person with respect to the
payment of any amounts of the type described in clause (i) or (ii).
(c) For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements, schedules, attachments or other information
and any amended Tax Return required to be supplied to a taxing authority in
connection with Taxes.
SECTION 2.08 Absence of Liens and Encumbrances. Each of TARGET and its
subsidiaries has good, valid, and marketable title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its properties and
assets (whether real, personal or mixed, and whether tangible or intangible),
necessary for the conduct of its business, free and clear of all Liens and other
encumbrances, except such
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Liens and other encumbrances that are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
SECTION 2.09 Intellectual Property.
(i) TARGET and its subsidiaries own, or are validly licensed or otherwise
have the right to use, all United States and foreign patents, patent rights,
trademarks, trademark rights, service marks, service mark rights, trade names,
copyrights, software, trade secrets and knowhow that are material to the
business of TARGET and its subsidiaries (collectively the "Intellectual Property
Rights"). Schedule 2.09(i) contains a complete and accurate list of all United
States and foreign issued patents, patent applications, registered trademarks,
trademark applications, registered service marks and service mark applications
included in the Intellectual Property. The Intellectual Property Rights owned by
TARGET or its subsidiaries are free and clear of any Liens, charges or other
encumbrances (including without limitation any legal or equitable claims of
others), except as disclosed on Schedule 2.09(i). The status of TARGET's and its
subsidiaries' U.S. patents and corresponding foreign cases is described on
Schedule 2.09(i). Except as disclosed on Schedule 2.09(i), TARGET has not filed
patent applications in any other jurisdictions and none of TARGET or any of its
subsidiaries has filed for copyright registrations in the United States or in
any other jurisdiction.
(ii) Except as set forth on Schedule 2.09(ii), to TARGET's knowledge,
neither TARGET nor any of its subsidiaries has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any patent, trademark,
service mark, trade name, copyright, brand name, logo, symbol or other
intellectual property or proprietary information of any other person. Except as
set forth on Schedule 2.09(ii), neither TARGET nor any of its subsidiaries has
received any written charge, complaint, claim, demand or notice alleging any
such interference, infringement, misappropriation or other conflict (including
any claim that TARGET or any such subsidiary must license or refrain from using
any such intellectual property or other proprietary information of any other
person) which has not been settled or otherwise fully resolved, nor is there any
action pending or, to the knowledge of TARGET, threatened against TARGET or any
subsidiary thereof claiming that TARGET or such subsidiary has, whether
directly, contributorily or by inducement, interfered with, infringed, or
misappropriated or come into conflict with any other intellectual property.
(iii) To TARGET's knowledge, except as set forth on Schedule 2.09(iii), no
other person has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any of the Intellectual Property Rights of TARGET or any
of its subsidiaries. Except as set forth on Schedule 2.09(iii), neither TARGET
nor any subsidiary thereof has sent or otherwise communicated to another person
any written charge, complaint, claim, demand or notice of, nor does TARGET have
any knowledge of, any present, impending or threatened interference with,
infringement upon, misappropriation or other conflict with any of its
Intellectual Property Rights.
(iv) Except as set forth on Schedule 2.09(iv), as the business of TARGET
and its subsidiaries is presently conducted and without giving effect to any
changes with respect thereto that may be made by PARENT, to TARGET's knowledge,
PARENT's use of the Intellectual Property Rights which are material to the
conduct of the business of TARGET and its subsidiaries taken as a whole will not
interfere with, infringe upon, misappropriate or otherwise come into conflict
with the intellectual property rights of any other person.
(v) To the knowledge of TARGET, all of the Intellectual Property Rights are
currently protectable. TARGET and its subsidiaries have taken reasonable
measures to protect the secrecy, confidentiality and value of TARGET
Intellectual Property Rights.
SECTION 2.10 Agreements, Contracts and Commitments. Except as set forth
on Schedule 2.10 or in the exhibits to the TARGET SEC Reports filed and publicly
available prior to the date of this Agreement, neither TARGET nor any of its
subsidiaries is a party to nor is it or its assets bound by (a) any agreement,
indenture, loan agreement, bond, note, mortgage or other instrument relating to
the borrowing of money by TARGET or any of its subsidiaries or the guarantee by
TARGET or any of its
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subsidiaries of any such obligation or (b) any other contract, commitment,
obligation or agreement or amendment thereto that, in each of clauses (a) and
(b), (i) should be or should have been filed as an exhibit to a Form 10-K filed
or to be filed by TARGET with the SEC, (ii) places any material restrictions on
the right of TARGET or any of its subsidiaries to engage in any business
activity currently conducted, or (iii) is otherwise material to the financial
condition, results of operations, business assets or properties of TARGET and
its subsidiaries (collectively, "TARGET Material Contracts"). Neither TARGET nor
any of its subsidiaries is in breach or violation of or in default under (nor
does there exist any condition which upon the passage of time or the giving of
notice or both would cause such a breach or violation of or default under) any
lease, permit, concession, franchise, license or any other contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, except for breaches, violations or defaults
that are not, individually or in the aggregate, reasonably likely to result in a
Material Adverse Effect on TARGET. Except as set forth on Schedule 2.10, neither
TARGET nor any of its subsidiaries is a party to or otherwise bound by any
agreement or covenant not to compete or by any agreement or covenant restricting
in any material respect the development, marketing or distribution of TARGET's
or its subsidiaries' products or services.
SECTION 2.11 Governmental Authorization. Each of TARGET and its
subsidiaries holds all permits, licenses, variances, exemptions, certificates,
franchise, filings, authorizations, notices, orders and approvals of all
Governmental Entities which are necessary for it to own, lease or operate their
assets or properties and to carry on the operation of its business as currently
conducted ("TARGET Permits") except where the absence of such TARGET Permits is
not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on TARGET. Neither TARGET nor any of its subsidiaries is in
violation of the terms of TARGET Permits, except for defaults or violations
which are not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on TARGET. The businesses of TARGET and its subsidiaries
are not being conducted in violation of any law, ordinance, statute, rule,
judgment, order, decree or regulation of any Governmental Entity, except for
violations which are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on TARGET. No material investigation or review by
any Governmental Entity with respect to TARGET or any of its subsidiaries is
pending or, to the knowledge of TARGET, threatened. Neither TARGET nor any of
its subsidiaries has received any written communication during the past three
years that alleges that TARGET or any of its subsidiaries is not in compliance
in any material respect with any law, ordinance, statute, rule, judgment, order,
decree or regulation of any Government Entity. The Merger will not cause the
revocation or cancellation of any material TARGET Permit.
SECTION 2.12 Litigation. Except as disclosed on Schedule 2.12 or in
TARGET SEC Reports publicly available and filed prior to the date of this
Agreement, there are no suits, actions, arbitrations, demands, claims or
proceedings pending, or, to the knowledge of TARGET, threatened against TARGET
or any of its subsidiaries or any of their respective directors, officers or
employees in their capacities as such or any properties or rights of TARGET or
its subsidiaries (collectively, "TARGET Legal Proceedings") or any material
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against TARGET or any of its subsidiaries, or to the
knowledge of TARGET, investigation by any Governmental Entity involving TARGET
or any of its subsidiaries.
SECTION 2.13 Insurance. TARGET and each of its subsidiaries maintains in
full force and effect insurance on its assets and its business and operations
against loss or damage, risks, hazards and liabilities, in the amounts indicated
on Schedule 2.13. Schedule 2.13 also includes, to Target's knowledge, all loss
experiences of TARGET relating to (i) all product liability claims, (ii) all
individual loss experiences in excess of $10,000, and (iii) all loss experiences
by category in excess of $50,000, in each case, since January 1, 1995.
SECTION 2.14 ERISA Compliance; Excess Parachute Payments.
(a) Schedule 2.14(a) contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") (sometimes referred to herein as "TARGET
Pension Plans"), "employee welfare benefit plans" (as
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defined in Section 3(1) of ERISA) and any other bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, thrift, savings, stock bonus,
restricted stock, cafeteria, paid time off, perquisite, fringe benefit,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding), or
any employment, consulting, indemnification, severance or termination agreement
or arrangement, that is maintained, or contributed to, by TARGET or any of its
subsidiaries or any other person or entity that, together with TARGET, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(the Company and each such other person or entity, a "Commonly Controlled
Entity"), or to which TARGET or any of its subsidiaries or other Commonly
Controlled Entity is a party, for the benefit of any current or former
employees, officers or directors of TARGET or any of its subsidiaries
(collectively with the employee pension benefit plans and the employee welfare
benefit plans, "TARGET Benefit Plans"). TARGET has delivered to PARENT true,
complete and correct copies of (i) each TARGET Benefit Plan (or, in the case of
any unwritten TARGET Benefit Plan, a description thereof), (ii) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each TARGET Benefit Plan (if any such report was required), (iii) the most
recent summary plan description for each TARGET Benefit Plan for which such
summary plan description is required and (iv) each trust agreement and group
annuity contract relating to any TARGET Benefit Plan. Each TARGET Benefit Plan
has been administered in all material respects in accordance with its terms.
TARGET and all the TARGET Benefit Plans are all in compliance in all material
respects with applicable provisions of ERISA and the Code.
(b) All TARGET Pension Plans intended to be tax-qualified have received
favorable determination letters from the Internal Revenue Service with respect
to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), to the effect that such
TARGET Pension Plans are qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code and no such determination
letter has been revoked nor, to the knowledge of TARGET, has revocation been
threatened, nor have any such TARGET Pension Plans been amended since the date
of its most recent determination letter or application therefor in any respect
that would adversely affect its qualification or materially increase its costs.
All TARGET Pension Plans required to have been approved by any foreign
Governmental Entity have been so approved and no such approval has been revoked
nor, to the knowledge of TARGET, has revocation been threatened, nor has any
event occurred since the date of its most recent approval or application
therefor that is reasonably likely to materially affect its approval or
materially increase its cost. There is no material pending or, to the knowledge
of TARGET, threatened litigation relating to TARGET Benefit Plans.
(c) No TARGET Pension Plan, other than any TARGET Pension Plan that is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a
"TARGET Multiemployer Pension Plan"), had, as of the respective last annual
valuation date for each such TARGET Pension Plan, any "unfunded benefit
liabilities" (as such term is defined in Section 4001(1)(18) of ERISA), based on
actuarial assumptions that have been furnished to PARENT, there has been no
material adverse change in the financial condition of any TARGET Pension Plan
since its last such annual valuation date. Neither the Company nor any Commonly
Controlled Entity has (1) maintained, contributed or been obligated to
contribute to any TARGET Benefit Plan that is subject to Title IV of ERISA or
(2) has any unsatisfied liability under Title IV of ERISA. None of TARGET, any
of its subsidiaries, any officer of TARGET or any of its subsidiaries or any of
TARGET Benefit Plans which are subject to ERISA, including TARGET Pension Plans,
any trusts created thereunder or any trustee or administrator thereof, has
engaged in a "prohibited transaction" (as such term is defined in Section 406 of
ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject TARGET, any of its subsidiaries or any officer
of TARGET or any of its subsidiaries to the tax or penalty on prohibited
transactions imposed by such Section 4975 or to any liability under Section
502(i) or 502(1) of ERISA. None of such TARGET Benefit Plans and trusts has been
terminated, nor has there been any "reportable event" (as that term is defined
in Section 4043 of ERISA) for which the 30-day reporting requirement has not
been waived with respect to any TARGET Benefit Plan during the last five years,
and no notice of a reportable event will be required to be filed in connection
with the transactions contemplated hereby. All material contributions
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and premiums required to be made under the terms of any TARGET Benefit Plan as
of the date hereof have been timely made or have been reflected on the most
recent consolidated balance sheet filed or incorporated by reference in the
TARGET SEC Reports. Neither any TARGET Pension Plan nor any single-employer plan
of an ERISA Affiliate has an "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived.
(d) With respect to any TARGET Benefit Plan that is an employee welfare
benefit plan, (i) no such TARGET Benefit Plan is unfunded or funded through a
"welfare benefit fund" (as such term is defined in Section 419(e) of the Code),
(ii) each such TARGET Benefit Plan that is a "group health plan" (as such term
is defined in Section 5000(b)(1) of the Code), complies with the applicable
requirements of Section 4980B(f) of the Code and (iii) there are no
understandings, agreements or undertakings, written or oral, that is reasonably
likely to prevent each such TARGET Benefit Plan (including any such Plan
covering retirees or other former employees) from being amended or terminated
without material liability to TARGET and its subsidiaries on or at any time
after the Effective Time. Neither TARGET nor any of its subsidiaries has any
obligations for retiree health and life benefits under any TARGET Benefit Plan.
(e) Except as disclosed on Schedule 2.14(e), the consummation of the Merger
or any of the transactions contemplated hereby will not (x) entitled any
employee, officer or director of TARGET or any of its subsidiaries to severance
pay, (y) accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any of TARGET Benefit Plans or (z) result in any breach or
violation of, or a default under, any of TARGET Benefit Plans.
(f) The consummation of the Merger or any of the transactions contemplated
hereby (including as a result of termination of employment prior to or following
the Effective Time) will not result in any of PARENT, TARGET or the Surviving
Corporation being obligated to make a payment or provide a benefit to any
employee, officer or director of TARGET or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) that is reasonably likely to be characterized as an
"excess parachute payment" (as defined in Section 280G(b)(1) of the Code), and
no disqualified individual is entitled to receive any additional payment from
TARGET or any of its subsidiaries or any other person (a "Parachute Gross-Up
Payment") in the event that the excise tax under Section 4999 of the Code is
imposed on such disqualified individual. The Board of Directors of TARGET has
not granted to any officer, director or employee of TARGET or any of its
subsidiaries any right to receive any Parachute Gross-Up Payment. Schedule
2.14(f) sets forth the "base amount" (as such term is defined in Section
280G(b)(3) of the Code) for each disqualified individual whose TARGET Stock
Options will vest pursuant to their terms in connection with this Agreement or
the Merger.
(g) Schedule 2.14(g) lists all TARGET Stock Options outstanding as of the
date hereof, showing for each such TARGET Stock Option: (1) the number of shares
of TARGET Common Stock issuable; (2) the number of vested shares; (3) the date
of expiration and (4) the exercise price.
SECTION 2.15 Registration Statements; Proxy Statements/Prospectus. The
information supplied by TARGET for inclusion in the Registration Statement on
Form S-4 (or such other or successor form as shall be appropriate) pursuant to
which the shares of PARENT Common Stock to be issued in the Merger will be
registered with the SEC (including any amendments or supplements thereto, the
"Registration Statement"), shall not at the time the Registration Statement is
filed with the SEC, at any time it is amended or supplemented, and at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by TARGET for inclusion in the proxy statement/prospectus
to be sent to the stockholders of TARGET in connection with the meeting of
TARGET stockholders to consider the Merger (the "TARGET Stockholders' Meeting")
(such proxy statement/prospectus as amended or supplemented is referred to
herein as the "Proxy Statement") shall not, on the date the Proxy Statement is
first mailed to TARGET stockholders, at the time of the TARGET Stockholders'
Meeting or at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in
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order to make the statements therein, in light of the circumstances under which
they are made, not false or misleading. The Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. If at any time prior to the Effective Time any
event relating to TARGET or any of its affiliates, officers or directors should
be discovered by TARGET which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, TARGET shall
promptly inform PARENT. Notwithstanding the foregoing, TARGET makes no
representation or warranty with respect to any information supplied by PARENT or
SUB which is contained in any of the foregoing documents.
SECTION 2.16 Fairness Opinion. The Board of Directors of TARGET has
received a written opinion from Deutsche Bank Securities, Inc. ("Deutsche Banc
Alex. Brown"), dated the date hereof and in customary form, that the Exchange
Ratio is fair to holders of TARGET Common Stock from a financial point of view,
a signed copy of which opinion will promptly be delivered to PARENT. The amounts
payable to Deutsche Bank Alex. Brown and to any other advisors (including
attorneys and accountants) of TARGET in connection with this Agreement, the
Merger and the other transactions contemplated hereby will not exceed the
amounts set forth on Schedule 2.16.
SECTION 2.17 Brokers' and Finders' Fees. Neither TARGET nor any of its
subsidiaries has incurred, nor will incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or the Option Agreement or any transaction
contemplated hereby or thereby, except for a fee due to Deutsche Banc Alex.
Brown at the Effective Time whose fees and expenses will be paid by TARGET in
accordance with TARGET's agreement with such firm.
SECTION 2.18 Environmental Matters. Except as disclosed in TARGET SEC
Reports or as set forth on Schedule 2.18, TARGET and each of its subsidiaries
(i) have obtained all material applicable permits, licenses and other
authorization which are required under Federal, state or local laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes ("Hazardous Materials")
into ambient air, surface water, ground water or land or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively "Environmental Laws")
by TARGET or its subsidiaries, except where failure to obtain such applicable
permits, licenses and other authorization is not reasonably likely to have a
Material Adverse Effect on TARGET; (ii) are in compliance with all material
terms and conditions of such required permits, licenses and authorizations under
Environmental Laws, and also are in substantial compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder, except where failure to comply with
such applicable terms and conditions is not reasonably likely to have a Material
Adverse Effect on TARGET; and (iii) as of the date hereof, are not aware of nor
have received notice of any event, condition, circumstance, activity, practice,
incident, action or plan (including any releases or discharges of Hazardous
Materials) which could interfere with or prevent continued compliance with or
which could give rise to any claim, action, suit or proceeding, based on status
as an owner or operator of real property or resulting from TARGET's or any of
its subsidiary's manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge or release into the
environment, of any Hazardous Material.
SECTION 2.19 Year 2000 Compliance. The computer software operated by
TARGET and its subsidiaries which is material to the conduct of the business of
TARGET and its subsidiaries is Year 2000 Compliant (as defined below). As used
herein, "Year 2000 Compliant" means that neither the performance nor
functionality of the operating systems for the computers used by TARGET and its
subsidiaries for all software applications that run on such computers is
affected by dates prior to, during, spanning or after January 1, 2000 and shall
include (a) accurately processing (including calculating, comparing and
sequencing) date and time data from, into and between the years 1999 and 2000
and leap year calculations, (b) functioning without error interruption or
decreased performance relating to such date
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and time date, (c) accurately processing such date and time data when used in
combination with other technology, if the other technology properly exchanges
date and time data, (d) accurate date and time data century recognition, (e)
calculations that accurately use the same century and multi-century formulae and
date and time values, (f) date and time interface values which reflect the
correct century and (g) processing, storing, receiving and outputting all date
and time date in a format that accurately indicates the century of the date and
time data.
SECTION 2.20 Rights Plan. The TARGET Board has taken all actions
necessary to ensure that (i) the Rights Plan will be inapplicable to PARENT and
its subsidiaries and that neither PARENT nor SUB will become an "Acquiring
Person" in connection with the execution or delivery of this Agreement, the
Option Agreement or the Stockholders Agreement, and (ii) the consummation of the
transactions contemplated hereby or thereby will not trigger or otherwise affect
any rights or obligations under the Rights Plan, including causing the
occurrence of a "Distribution Date" or a "Stock Acquisition Date", as such terms
are defined in the Rights Plan.
SECTION 2.21 Board Approval. The TARGET Board, by resolutions duly
adopted at a meeting duly called and held and not subsequently rescinded or
modified in any way (the "Board Approval"), has duly (i) determined that the
Merger and the other transactions contemplated hereby are advisable and in the
best interests of TARGET's stockholders, (ii) adopted and approved this
Agreement, the Stockholders Agreement and the Option Agreement and the
transactions contemplated hereby and thereby and (iii) recommended that the
stockholders of TARGET adopt and approve this Agreement. The Board Approval
constitutes approval of this Agreement, the Stockholders Agreement, the Option
Agreement and the Merger for purposes of Chapter 110F of the MGL and represents
all the action necessary to ensure that such Chapter 110F does not apply to
PARENT or any of its affiliates in connection with the Merger and the other
transactions contemplated by this Agreement(including the Option Agreement and
the Stockholders Agreement and the transactions contemplated thereby). No other
state takeover statute or similar statute or regulation applies to this
Agreement, the Option Agreement, the Stockholders Agreement or the transactions
contemplated hereby and thereby.
SECTION 2.22 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of TARGET Common Stock entitled to vote (the
"Required Stockholder Approval") is the only vote or approval of the holders of
any class or series of TARGET capital stock necessary to adopt this Agreement
and approve the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
PARENT and SUB represent and warrant to TARGET as follows:
SECTION 3.01 Organization and Qualification. Each of PARENT and SUB is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all the requisite corporate power
and authority to own, lease and operate its property and to carry on its
business as now being conducted, and is duly qualified to do business and in
good standing in each jurisdiction in which such qualification is required by
virtue of the nature of the activities conducted by it or the ownership or
leasing of its properties or assets, except to the extent that the failure to be
so qualified and in good standing is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect (as hereinafter defined) on
PARENT. In this Agreement, the term "Material Adverse Effect" used in reference
to PARENT or any of its subsidiaries means any event, change or effect,
individually or in the aggregate, that is or is reasonably likely to become
materially adverse to the financial condition, assets, liabilities, results of
operations or business of PARENT and its subsidiaries, taken as a whole, other
than any event, change or effect relating principally to (i) decreases in the
market price of PARENT Common Stock, (ii) changes resulting from changes in
general economic conditions, (iii) changes in the industry in which PARENT
operates (including legal and regulatory changes) and not specifically relating
to PARENT or (iv) changes that are a direct result of the announcement or
pending
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status of the Merger (including, without limitation, any reduction or
termination of orders received by PARENT employees, distributors or resellers or
the cessation of employment by PARENT employees or termination of PARENT
distributors).
SECTION 3.02 Authority; No Conflicts.
(a) PARENT and SUB have all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement and the Option Agreement. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of PARENT and SUB. This Agreement and the Option
Agreement have been duly executed and delivered by PARENT and SUB and constitute
the legal, valid and binding obligations of PARENT and SUB, enforceable against
each of them in accordance with its terms.
(b) The execution and delivery of this Agreement and the Option Agreement
by PARENT and SUB do not, and the consummation of the Merger and other
transactions contemplated hereby and by the Option Agreement will not, conflict
with, or result in any breach or violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation or the loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights of entitlement of any person under, or result in the creation of any Lien
on any asset or property of PARENT or SUB under (i) any provision of the
Restated Certificate of Incorporation or By-Laws of PARENT or the Articles or
Organization or By-Laws of SUB, or (ii) any loan or credit agreement, mortgage,
bond, note, indenture, lease, contract, benefit plan or other agreement,
obligation or instrument to which PARENT or SUB or the assets or properties of
PARENT or SUB is bound, except for any such conflict, breach, violation,
default, right, creation, loss, increased additional, accelerated rights,
entitlements or Liens which is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PARENT, or to prevent or materially
impede, interfere with, hinder or delay the consummation of the transactions
contemplated hereby, or (iii) any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to PARENT, SUB or their respective properties or assets, except for any such
conflict, violation, default, right or loss which is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PARENT.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with any
respect to PARENT or SUB in connection with the execution and delivery of this
Agreement or the Option Agreement or the consummation of the Merger or the other
transactions contemplated hereby and thereby, except (i) in connection, or in
compliance, with the provisions of the HSR Act, Securities Act and the Exchange
Act and state securities or "blue sky" laws; (ii) the filing of the articles of
merger with the Massachusetts Secretary of State and appropriate documents with
the relevant authorities of other states in which TARGET is qualified to do
business; (iii) in compliance with applicable requirements, if any, of NYSE or
the Nasdaq National Market System; and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations and filings, the failure of
which to be obtained or made is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PARENT or to prevent or
materially impede, interfere with, hinder or delay the consummation of the
transactions contemplated hereby.
SECTION 3.03 SEC Filings; PARENT Financial Statements.
(a) PARENT has timely filed all forms, reports and documents required to be
filed with the SEC since December 31, 1998. All such required forms, reports and
documents are referred to herein as the "PARENT SEC Reports". As of their
respective dates, PARENT SEC Reports (i) complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such TARGET
SEC Reports, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
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SECTION 3.04 Taxes. Neither PARENT nor any of its subsidiaries has taken
any action or knows of any fact that is reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 3.05 Registration Statements; Proxy Statements/Prospectus. The
information supplied by PARENT or SUB for inclusion in the Registration
Statement shall not, at the time the Registration Statement is filed with the
SEC, at any time it is amended or supplemented, and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements included therein not misleading. The information supplied by PARENT
and SUB for inclusion in the Proxy Statement shall not, on the date the Proxy
Statement is first mailed to stockholders, at the time of TARGET Stockholders'
Meeting or at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading. The Proxy
Statement will comply (with respect to information relating to PARENT or SUB) as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. If at any time prior to the Effective Time any
event relating to PARENT, SUB or any of their respective affiliates, officers or
directors should be discovered by PARENT or SUB which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
PARENT or SUB will promptly inform TARGET. Notwithstanding the foregoing, PARENT
and SUB make no representation or warranty with respect to any information
supplied by TARGET which is contained in any of the foregoing documents.
SECTION 3.06 Brokers' and Finders' Fees. Neither PARENT nor SUB has
incurred, nor will incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
SECTION 3.07 Operation of SUB. SUB is a direct, wholly-owned subsidiary
of PARENT, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01 Conduct of Business by TARGET Pending the Merger. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, unless PARENT shall
otherwise agree in writing, TARGET shall conduct its business and shall cause
the businesses of its subsidiaries to be conducted only in the ordinary course
of business and in a manner consistent with past practice, and in material
compliance with all applicable laws and regulations and use all reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them with the intention that its goodwill
and ongoing business shall be unimpaired at the Effective Time. Without limiting
the generality of the foregoing, TARGET shall not, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time do, or propose to do, any of the following
without the prior written consent of PARENT:
(a) amend or otherwise change its articles of organization or similar
documents or By-Laws, except as contemplated by Section 5.14 with respect
to TARGET's Rights Plan.
(b) issue, sell, pledge, dispose of or encumber or grant any Lien on,
or authorize the issuance, sale, pledge, disposition or encumbrance of or
granting of any Lien on, any shares of the capital stock of any class or
other voting securities of TARGET or any of its subsidiaries (other than
the sale or issuance of TARGET Common Stock upon the exercise of Options
granted under TARGET Stock Option Plans that are outstanding on the date
hereof or pursuant to the rights granted under the Stock Purchase Plan that
are outstanding prior to the termination of the Offering Period in
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accordance with Section 5.06 hereof or pursuant to the Option Agreement) or
any options, warrants, convertible or exchangeable securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest,
stock appreciation rights or stock based performance units) or other voting
securities or exchangeable or convertible securities of TARGET or any of
its subsidiaries;
(c) sell, lease, pledge, license, dispose of or encumber or subject to
any Lien any of its assets or properties or any assets or properties of its
subsidiaries, except as disclosed on Schedule 4.01(c) or for (i) sales of
products and services in the ordinary course of business consistent with
past practice or (ii) dispositions of obsolete or worthless assets;
(d) except as is contemplated by Section 5.05 and Section 5.06, alter
the price or accelerate, amend or change the period (or permit any
acceleration, amendment or change) of exercisability of options (or
restricted stock) granted under TARGET Benefit Plans (including TARGET
Stock Option Plans) or authorize cash payments in exchange for any options
granted under any of such plans;
(e) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock, except that a wholly owned
subsidiary of TARGET may declare and pay a dividend to TARGET, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or (iii) amend the terms
of, purchase, repurchase, redeem or otherwise acquire, or permit any
subsidiary to repurchase, redeem or otherwise acquire, any of its
securities or any securities of its subsidiaries, or propose to do any of
the foregoing;
(f) sell, transfer, license, sublicense or otherwise dispose of any
TARGET Intellectual Property Rights or amend or modify in any manner any
existing agreements with respect to any TARGET Intellectual Property
Rights, other than nonexclusive licenses in the ordinary course of business
consistent with past practice or amendments or modifications that is not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on TARGET.
(g) (i) acquire or agree to acquire (by merger, consolidation, or
acquisition of stock or assets or in any other manner) any corporation,
partnership or other business organization or division thereof; (ii) except
as set forth on Schedule 4.01(g), create or incur any indebtedness for
borrowed money or issue any debt securities or warrants or other rights to
acquire any debt securities, assume, guarantee or endorse or otherwise as
an accommodation become responsible for, the obligations of any person;
(iii) enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing; (iv) make
any loans, advances or capital contributions to, or investments in, any
other person, other than to or in any direct or indirect wholly owned
subsidiary of TARGET; (iv) enter into, amend, terminate or modify any
TARGET Material Contract; (v) enter into or amend any contract, agreement,
commitment or arrangement to effect any of the matters prohibited by this
Section 4.01; (vi) enter into any new material line of business; (vii)
acquire or agree to acquire any assets which are material, individually or
in the aggregate, to TARGET and its subsidiaries; or (viii) incur or commit
to any capital expenditures other than capital expenditures incurred or
committed to in the ordinary course of business consistent with past
practice and which, together with all such expenditures incurred or
committed to during any applicable period, are not in excess of (i) the
respective amounts by category or in the aggregate set forth in TARGET's
1999 capital expenditure budget previously provided to PARENT and (ii)
$50,000 in any month commencing January 1, 2000;
(h) except as otherwise contemplated by this Agreement or as required
to comply with applicable law, (A) adopt, enter into, terminate or amend in
any material respect (I) any collective bargaining agreement or Benefit
Plan or (II) any other agreement, plan or policy involving TARGET or its
subsidiaries, and one or more of its current or former directors, officers
or employees, (B) increase in any manner the compensation, bonus or fringe
or other benefits of, or pay any bonus
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to, any current or former officer, director of employee (except for normal
increases of cash compensation or cash bonuses in the ordinary course of
business consistent with past practice or existing written agreements), (C)
pay any benefit or amount not required under any Benefit Plan or any other
benefit plan or arrangement of TARGET or its subsidiaries as in effect on
the date of this Agreement, (D) increase in any manner the severance or
termination pay of any current or former director, officer or employee, (E)
enter into or amend any employment, deferred compensation, consulting,
severance, termination or indemnification agreement, arrangement or
understanding with any current or former employee, officer or director, (F)
grant any equity awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant of
stock options, "phantom" stock, stock appreciation rights, "phantom" stock
rights stock based or stock related awards, performance units or restricted
stock or the removal of existing restrictions in any Benefit Plans or
agreements or awards made thereunder), except pursuant to TARGET Stock
Option Plans, (G) amend or modify any Stock Option, (H) take any action to
fund or in any other way secure the payment of compensation or benefits
under any employee plan, agreement, contract or arrangement or Benefit
Plan, (I) take any action to accelerate the vesting of payment of any
compensation or benefit under any Benefit Plan or (J) materially change any
actuarial or other assumption used to calculate funding obligations with
respect to any Pension Plan or change the manner in which contributions to
any Pension Plan are made or the basis on which such contributions are
determined;
(i) take any action to change accounting policies, methods, practices
or procedures (including, without limitation, procedures with respect to
revenue recognition, payments of accounts payable and collection of
accounts receivable);
(j) make any material Tax election or settle or compromise any
material Federal, state, or local Tax liability or agree to an extension of
a statute of limitations;
(k) (i) pay, discharge, settle or satisfy any claims, liabilities,
litigation or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements of TARGET or incurred in the ordinary course of business and
consistent with past practice (ii) waive, release, grant or transfer any
rights of material value or (iii) waive the benefits of, agree to modify in
any manner, terminate, release any person from or fail to enforce any
confidentiality, standstill or similar agreement to which TARGET or any
subsidiary of TARGET is a party or of which TARGET or any subsidiary of
TARGET is a beneficiary; or
(l) take any action which (i) would make or is reasonably likely to
result in (x) any of the representations or warranties of TARGET contained
in this Agreement or the Option Agreement qualified as to materiality
becoming untrue, (y) any representations or warranties that are not so
qualified becoming untrue in any material respect or (z) any conditions to
the Merger set forth in Article 6 not being satisfied, or (ii) cause TARGET
not to perform in all material respects its covenants hereunder.
(m) enter into any contracts, agreements, arrangements or
understandings relating to distribution, sale or marketing by third parties
of TARGET's or its subsidiaries' products or products licensed by TARGET or
its subsidiaries;
(n) authorize any of, or commit, resolve or agree to take any of, the
actions prohibited by paragraphs (a) through (m) of this Section 4.01.
SECTION 4.02 Certain Tax Matters.
From the date hereof until the Effective Time, (i) TARGET and each of its
subsidiaries will file all material Tax Returns ("Post-Signing Returns")
required to be filed by it (after taking into account any extensions); (ii)
TARGET and each of its subsidiaries will timely pay all material Taxes due and
payable as reflected on such Post-Signing Returns that are so filed; (iii)
TARGET and each of its subsidiaries will
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make provision for all material Taxes payable by TARGET or such subsidiary for a
period that ends before or includes to the Effective Time for which no
Post-Signing Return is due prior to the Effective Time; and (iv) TARGET will
promptly notify PARENT of any action, suit, proceeding, claim or audit pending
against or with respect to TARGET or any of its subsidiaries in respect of any
Tax where there is a reasonable possibility of a determination or decision which
is reasonably likely to have a Material Adverse Effect on TARGET's Tax
liabilities or Tax attributes.
SECTION 4.03 No Solicitation by TARGET.
(a) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement in accordance with its terms or
the Effective Time, TARGET shall not, and shall not authorize or permit any of
its subsidiaries or any of its or their officers, directors, employees,
representatives or agents or any investment banker, financial advisor, attorney,
accountant or other advisor or representative retained by it or its
subsidiaries, to directly or indirectly (i) solicit, encourage or initiate the
submission of any proposal that constitutes, or may reasonably be expected to
lead to an Acquisition Proposal (as defined below), (ii) negotiate, approve or
recommend any proposal that constitutes, or may reasonably be expected to lead
to, an Acquisition Proposal, or (iii) furnish to any person any information with
respect to, or take any other action knowingly to facilitate the making of any
proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal; provided, however, that if at any time after the date
hereof and ending on the date the Required Stockholder Approval is obtained (the
"Applicable Period"), to the extent required by the fiduciary obligations of the
TARGET Board, determined in good faith and after consultation with outside
counsel, TARGET and its representatives may in response to a Superior Proposal
(as defined below) which did not otherwise result from a breach of this Section
4.03(a), and subject to TARGET providing prior written notice to PARENT of its
decision to take such action and complying with Section 4.03(d), (A) furnish
information with respect to TARGET to the person making such Superior Proposal
pursuant to a customary confidentiality agreement and (B) participate in
discussions with such person regarding such Superior Proposal.
(b) For purposes of this Agreement, the term "Acquisition Proposal" means
any inquiry, proposal or offer (other than this Agreement or any other inquiry,
proposal or offer made by PARENT or SUB) from any person relating to a merger,
consolidation, dissolution, liquidation, joint venture, sale of a substantial
portion of assets, recapitalization or other business combination, business
alliance or similar transaction involving TARGET or any of its subsidiaries, or
the issuance by TARGET, or any of its subsidiaries of 20% or more of any class
of equity securities as consideration for the assets or securities of another
person, or any proposal or offer to acquire in any manner, directly or
indirectly, 20% or more of the assets of TARGET and its subsidiaries, taken as a
whole, or any class of equity securities of TARGET or any of its subsidiaries or
any tender offer or exchange offer that if consummated would result in any
person beneficially owning 20% or more of any class of equity securities of
TARGET or any of its subsidiaries, or any other transaction the consummation of
which would or could reasonably be expected to prevent or materially impede,
interfere with, hinder or delay the consummation of the Merger and the other
transactions contemplated hereby; and as used herein, the term "Superior
Proposal" means (i) any offer or proposal made by a third party to consummate a
tender offer, exchange offer, merger, consolidation or similar transaction which
would result in such third party owning, directly or indirectly, 50% of the
voting interests or equity interests in TARGET then outstanding or 50% or more
of the assets of TARGET and its subsidiaries, taken together (including through
a merger of such third party and TARGET), or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution, joint venture, sale of
a substantial portion of assets, recapitalization or other business combination,
business alliance or similar transaction involving TARGET or any of its
subsidiaries in which the other party thereto or its stockholders will own 40%
or more of the combined voting power of the parent entity resulting from any
such transaction and (ii) otherwise on terms which the TARGET Board determines
in its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation), taking into account the person making the
proposal and the legal, financial, regulatory and other aspects of the proposal,
(x) would be more favorable than the Merger to TARGET's stockholders, and (y) is
reasonably capable of being completed.
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(c) None of TARGET, any of its subsidiaries, the TARGET Board or any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to PARENT or SUB, the approval or recommendation by
the TARGET Board or any committee thereof of this Agreement or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal, or (iii) approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other agreement relating
to any Acquisition Proposal (each an "Acquisition Agreement") or propose or
agree to do any of the foregoing. Notwithstanding the foregoing, during the
Applicable Period, in response to a Superior Proposal which did not result from
a breach of Section 4.03(a), to the extent required by the fiduciary obligations
of the TARGET Board, determined in good faith and after consultation with
outside counsel, the TARGET Board may, after complying with Section 4.03(d), (x)
modify or propose to modify, in a manner adverse to PARENT and SUB, the approval
or recommendation of the Merger or this Agreement by the TARGET Board and/or (y)
terminate this Agreement (and concurrently with such termination cause TARGET to
enter into any Acquisition Agreement with respect to any Superior Proposal), but
in the case of clause (y), only at a time that is during the Applicable Period
and is after the fourth business day (or the second calendar day in the case of
an amendment to a Superior Proposal) following PARENT's receipt of written
notice advising it that the TARGET Board is prepared to accept a Superior
Proposal (or any amendment thereto), specifying the material terms and
conditions of such Superior Proposal (or any amendment thereto) and identifying
the person making such Superior Proposal (or any amendment thereto).
(d) TARGET shall promptly (and in any event within 24 hours) notify PARENT
after receipt of any Acquisition Proposal or any inquiry with respect to or that
is reasonably likely to lead to any Acquisition Proposal or any request for
information relating to TARGET or any of its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of TARGET
or any of its subsidiaries by any person in connection with an Acquisition
Proposal. TARGET shall inform PARENT of the identity of the person making any
such Acquisition Proposal, request or inquiry, and, in each case, the terms and
conditions and status and details thereof (including amendments or a proposed
amendment).
(e) TARGET shall immediately cease any existing discussions or negotiations
with any parties (other than with PARENT and SUB) conducted heretofore with
respect to any Acquisition Proposal.
(f) Nothing contained in this Section 4.03 shall prohibit TARGET from
taking and disclosing to its stockholders a position contemplated by Rule 14d-9
or 14e-2 promulgated under the Exchange Act or from making any disclosure to
TARGET's stockholders if, in the good faith judgment of the TARGET Board, after
consultation with outside counsel, failure so to disclose would be inconsistent
with its obligations under applicable law; provided, however, that, subject to
Section 4.03(c), neither TARGET nor TARGET's Board nor any committee thereof
shall withdraw, or propose to withdraw, its position with respect to this
Agreement or the Merger or approve or recommend, or propose to approve or
recommend, an Acquisition Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Proxy Statement/Prospectus; Registration Statement. As
promptly as practicable after the date of this Agreement, PARENT and TARGET
shall prepare and file with the SEC the Proxy Statement and other proxy
materials related thereto and PARENT shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. TARGET and PARENT shall cause the Registration Statement and the
Proxy Statement to comply in all material respects with the Securities Act, the
Exchange Act and the rules and regulations thereunder. Each of TARGET and PARENT
shall use reasonable efforts to have or cause the Registration Statement to
become effective (including clearing the Proxy Statement with the SEC) as
promptly as practicable after such filing, and shall take all actions required
under any applicable federal or state securities laws (other
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than, in the case of PARENT, qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general consent to service of
process) in connection with the issuance of shares of PARENT Common Stock
pursuant to the Merger. Without limiting the generality of the foregoing, each
of TARGET and PARENT agrees to use all reasonable efforts, after consulting with
the other party, to respond promptly to any comments made by the SEC with
respect to the Proxy Statement (including each preliminary version thereof) and
the Registration Statement (including each amendment and supplement thereto).
Each of TARGET and PARENT shall, and shall cause its respective representatives
to, fully cooperate with the other party and its respective representatives in
the preparation of the Proxy Statement and the Registration Statement, and
shall, upon request, furnish the other party with all information concerning it
and its affiliates, directors, officers and stockholders as the other may
reasonably request in connection with the preparation, filing, and distribution
of the Proxy Statement and the Registration Statement. Subject to Section
4.03(c), the Proxy Statement shall include the determination and recommendation
of the Board of Directors of TARGET that its respective stockholders vote in
favor of the approval and adoption of this Agreement and the Merger. As promptly
as practicable after the Registration Statement shall have become effective,
TARGET shall cause the Proxy Statement to be mailed to its respective
stockholders. Thereafter, TARGET and PARENT shall each notify the other as
promptly as practicable upon becoming aware of any event or circumstance which
should be described in an amendment of, or a supplement to, the Proxy Statement
or the Registration Statement, and TARGET and PARENT shall each notify the other
as promptly as practicable after the receipt by it of any written or oral
comments of the SEC on, or of any written or oral request by the SEC for
amendments or supplements to, the Proxy Statement or the Registration Statement
or requests for additional information, and shall promptly supply the other with
copies of all correspondence between it or any of its representatives and the
SEC with respect to any of the foregoing filings. No filing of, or amendment or
supplement to, the Registration Statement will be made by PARENT, or the Proxy
Statement by TARGET, without providing the other party the opportunity to review
and comment thereon. If at any time prior to the Effective Time any information
relation to TARGET or PARENT, or any of their respective affiliates, officers or
directors, should be discovered by TARGET or PARENT which should be set forth in
an amendment or supplement to any of the Registration Statement or the Proxy
Statement, so that any of such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of TARGET.
SECTION 5.02 Stockholders Meeting. TARGET shall establish a record date,
duly call, give notice of, convene and hold the TARGET Stockholders' Meeting as
promptly as practicable to obtain the Required Stockholder Approval, and TARGET
shall use reasonable efforts to hold the TARGET Stockholder Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective. Subject to Section 4.03(c), TARGET will, through the TARGET Board,
recommend to its stockholders adoption of this Agreement. TARGET shall use
reasonable efforts to solicit from its stockholders proxies in favor of the
approval of the Merger, and take all other action necessary or advisable to
secure the vote or consent of stockholders required by the MGL to obtain such
approvals.
SECTION 5.03 Access to Information; Confidentiality. Upon reasonable
notice TARGET shall (and shall cause its subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of PARENT,
reasonable access, during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
TARGET shall (and shall cause its subsidiaries to) furnish promptly to PARENT
all information concerning its business, properties and personnel as PARENT may
reasonably request, (including allowing PARENT to perform a Phase I
Environmental study prior to the Closing Date) and TARGET shall make available
to PARENT the appropriate individuals (including attorneys, accountants and
other professionals) for discussion of its business, properties and personnel as
PARENT may reasonably request. PARENT shall keep such information confidential
in accordance with the terms of the Confidentiality Agreement dated July 26,
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1999 between PARENT and TARGET. TARGET shall enforce and take all reasonably
necessary actions to enforce any confidentiality, standstill or other similar
agreement to which it is a party.
SECTION 5.04 Consents; Approvals. TARGET and PARENT shall each use
reasonable efforts to obtain all consents, waivers, approvals, authorizations or
orders (including, without limitation, all United States and foreign
governmental and regulatory rulings and approvals), and TARGET and PARENT shall
make all filings (including, without limitation, all filings with United States
and foreign governmental or regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement, the Option Agreement
and the Stockholders Agreement by TARGET and PARENT and the consummation by them
of the transactions contemplated hereby. TARGET and PARENT shall furnish all
information required to be included in the Proxy Statement and the Registration
Statement, or for any application or other filing to be made pursuant to the
rules and regulations of any United States or foreign governmental body in
connection with the transactions contemplated by this Agreement. In connection
with and without limiting the foregoing, TARGET and the TARGET Board shall (1)
take all action necessary to ensure that no takeover statute or similar statute
or regulation is or becomes applicable to this Agreement, the Option Agreement,
the Stockholders Agreement, the Merger or any of the other transactions
contemplated hereby or thereby, and (2) if any other state takeover statute or
similar statute becomes applicable to this Agreement, the Merger or any other
transactions contemplated by this Agreement, TARGET shall take all reasonable
action to ensure that the Merger and the other transactions contemplated by this
Agreement, the Option Agreement and the Stockholders Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement, the Option Agreement and the Stockholders Agreement and otherwise to
minimize the effect of such statute or regulation on this Agreement, the Option
Agreement, the Stockholders Agreement, the Merger and the other transactions
contemplated hereby and thereby. Nothing in this Agreement shall be deemed to
require PARENT to agree to, or proffer to, divest or hold separate any assets or
any portion of any business of PARENT, TARGET or any of their respective
subsidiaries.
SECTION 5.05 Stock Options.
(a) TARGET shall take all actions necessary to provide that, effective as
of the date hereof, no further options to purchase TARGET Common Stock, whether
vested or unvested (each a "TARGET Stock Option"), may be granted under TARGET's
1992 Option Plan, the Director Plan and Omnibus Plan (collectively, "TARGET
Option Plans").
(b) Prior to the Effective Time, TARGET shall take all actions necessary to
provide that all discretionary limitations imposed with respect to the exercise
of any TARGET Stock Option be waived immediately prior to the Effective Time so
that all such TARGET Stock Options shall be exercisable in full.
(c) As of the Effective Time, each TARGET Stock Option shall be deemed to
constitute a fully vested option to acquire, on the same terms and conditions as
were applicable under such TARGET Stock Option immediately prior to the
Effective Time, the whole number (disregarding any fractional shares) of PARENT
Common Stock as the holder of such TARGET Stock Option would have been entitled
to receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time, at a price per share (rounded up to the
nearest cent) equal to (x) the aggregate exercise price for TARGET Common Stock
otherwise purchasable pursuant to such TARGET Stock Option, divided by (y) the
number of full shares of PARENT Common Stock deemed purchasable pursuant to such
TARGET Stock Option in accordance with the foregoing; provided, that references
in any TARGET Stock Option to TARGET, the board of directors of TARGET or any
committee thereof, and any TARGET Stock Option Plan shall, commencing at the
Effective Time, unless inconsistent with the context, be to PARENT, the board of
directors of PARENT or a committee thereof. The adjustments provided in this
Section 5.05(c) with respect to TARGET Stock Options to which Section 421(a) of
the Code applies shall be and are intended to be effected in a manner which is
consistent with Section 424(a) of the Code. At or prior to the Effective Time,
TARGET shall make all necessary arrangements with respect to TARGET Stock Option
Plans to permit the assumption of any unexercised TARGET Stock
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Options by PARENT pursuant to this Section 5.05(c). Except as otherwise
expressly provided in this Section 5.05 and to the extent required under the
respective terms of TARGET Stock Options, all restrictions or limitations on
transfer with respect to TARGET Stock Options, to the extent that such
restrictions or limitations shall not have already lapsed, and all other terms
thereof, shall remain in full force and effect with respect to such options
after giving effect to the Merger and the assumption by PARENT as set forth
above.
(d) As soon as practicable after the Effective Time, PARENT shall deliver
to each holder of an outstanding TARGET Stock Option an appropriate notice
setting forth such holder's rights pursuant to the respective TARGET Stock
Option Plans and the agreement evidencing the grant of such TARGET Stock Option
and that such TARGET Stock Option shall be assumed by PARENT and continue in
effect on the same terms and conditions subject to the adjustments required by
this Section 5.05 after giving effect to the Merger. PARENT shall comply with
the terms of all such TARGET Stock Options and ensure, to the extent required
by, and subject to the provisions of, any such TARGET Stock Option Plan that
TARGET Stock Options which qualified for special tax treatment immediately prior
to the Effective Time (after giving effect to the acceleration of vesting
contemplated by Section 5.05(b)), continue to so qualify after the Effective
Time. PARENT shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of PARENT Common Stock for delivery pursuant to the
terms set forth in this Section 5.05.
(e) PARENT shall use reasonable efforts after the Effective Time to
maintain the effectiveness of a registration statement under the Securities Act
with respect to the issuance by PARENT of shares of PARENT Common Stock which
may be issued pursuant to TARGET Stock Options as provided for above in this
Section 5.05.
SECTION 5.06 TARGET Employee Stock Purchase Plan. As soon as practicable
following the date of this Agreement, the TARGET Board (or, if appropriate, any
committee administering the TARGET 1996 Employee Stock Purchase Plan (the "1996
ESPP")) shall take or cause to be taken such actions as may be necessary to
provide that the 1996 ESPP shall terminate as of December 31, 1999 and in
connection therewith there shall be no Offering Periods that extend past such
date and payroll deductions shall cease under the 1996 ESPP as of such date.
SECTION 5.07 Notification of Certain Matters. TARGET shall give prompt
notice to PARENT, and PARENT shall give prompt notice to TARGET, of (i) the
occurrence or non-occurrence of any event which is reasonably likely to cause
any representation or warranty made by the respective parties in this Agreement
or the Option Agreement which is qualified as to materiality to be untrue or
inaccurate in any respect or any representation or warranty not so qualified to
be untrue or inaccurate in any material respect, and (ii) any failure of TARGET
or PARENT, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder or pursuant to the
Option Agreement; provided, however, that the delivery of any notice pursuant to
this Section 5.07 shall not limit or otherwise affect the remedies available
hereunder or under the Option Agreement to the party receiving such notice.
SECTION 5.08 Further Action; Tax Treatment. Upon the terms and subject to
the conditions hereof (including, without limitation, the last sentence of
Section 5.04), each of the parties hereto shall use reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement. Both
PARENT and TARGET shall each use reasonable efforts to cause the Merger to
qualify, and will not (either before or after consummation of the Merger) take
any actions which could prevent the Merger from qualifying, as a reorganization
within the meaning of Section 368(a) of the Code.
SECTION 5.09 Public Announcements. PARENT and TARGET shall consult with
each other before issuing any press release or other public statement with
respect to the Merger, this Agreement, the Option Agreement, or the Stockholders
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably
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withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement as may upon
the advice of counsel be required by law if it has used reasonable efforts to
consult first with the other party.
SECTION 5.10 Listing of Common Stock. PARENT shall use reasonable efforts
to cause the shares of PARENT Common Stock to be issued in the Merger to be
approved for quotation on the NYSE prior to the Effective Time. TARGET shall use
its reasonable efforts to cause the shares of TARGET Common Stock to be issued
pursuant to the Option Agreement to be approved for quotation on the Nasdaq
National Market System as promptly as practicable after the date hereof, and in
any event prior to the earlier of (x) the Closing Date or (y) termination of
this Agreement under circumstances where the Option issued pursuant to the
Option Agreement is or may become exercisable by PARENT.
SECTION 5.11 Accountant's Comfort Letters. TARGET and PARENT shall each
use reasonable efforts to cause PricewaterhouseCoopers to deliver to PARENT or
TARGET, as the case may be, a letter covering such matters as may be requested
by PARENT or TARGET, in form and substance reasonably satisfactory to PARENT
with respect to such matters as are customarily addressed in certified public
accountant's "comfort" letters with respect to a registration statement on Form
S-4.
SECTION 5.12 Indemnification; Directors' and Officers' Insurance.
(a) All rights to indemnification now existing in favor of the present or
former directors or officers of TARGET or any of its subsidiaries as provided in
TARGET's Articles of Organization and By-Laws or any indemnification agreement
such directors or officers and TARGET (in each case as in effect as of the date
hereof) shall, with respect to matters occurring prior to the Effective Time, be
assumed by the Surviving Corporation, without further action, and shall survive
the Merger and continue in full force and effect in accordance with their terms.
(b) In the event that the Surviving Corporation or any of its successors or
assigns, (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, PARENT shall cause proper provision
to be made so that the successors and assigns of the Surviving Corporation shall
expressly assume the obligations set forth in this Section 5.12. In the event
the Surviving Corporation transfers any material portion of its assets, in a
single transaction or in a series of transactions, PARENT will either guarantee
the indemnification obligations referred to in Section 5.12(a) or take such
other action to insure that the ability of the Surviving Corporation, legal and
financial, to satisfy such indemnification obligations will not be diminished in
any material respect.
(c) Until the fifth anniversary of the Effective Time, PARENT shall
maintain in effect with respect to matters occurring prior to the Effective
Time, the policy of directors' and officers' liability insurance currently
maintained by TARGET on behalf of its officers and directors and those of its
subsidiaries (a copy of which has been heretofore delivered to PARENT), on terms
with respect to such coverage and amount no less favorable than those of such
policy in effect on the date hereof; provided that PARENT may substitute
therefor policies of PARENT containing terms with respect to coverage and amount
no less favorable to such directors and officers.
Notwithstanding anything to the contrary contained in this Agreement, the
provisions of this Section 5.12 shall survive the Effective Time and are
intended to be for the benefit of, and shall be enforceable by, each present and
former director and officer of TARGET.
SECTION 5.13 Rights Agreement. The Board of Directors of TARGET shall
take all necessary action with respect to the Rights Agreement so that none of
the execution, delivery or performance of this Agreement, the exchange of shares
of TARGET Common Stock of shares of PARENT Common Stock in accordance with the
terms of this Agreement, the Option Agreement, the Stockholders Agreement, or
the transactions contemplated hereby or thereby will cause PARENT or SUB to be
deemed an "Acquiring Person" (as defined in the Rights Agreement) or give rise
to the application of Section 13 of the Rights Agreement or cause the occurrence
of a "Distribution Date" or a "Stock Acquisition Date", as such terms
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are defined in the Rights Plan. The TARGET Board shall take all further action
requested in writing by PARENT in order to render the Rights inapplicable to
this Agreement, the Option Agreement and the Stockholders Agreement and the
transactions contemplated hereby and thereby, except TARGET shall not be
obligated to terminate the Rights Plan or redeem the Rights prior to the
Effective Time. Except as requested in writing by PARENT, the TARGET Board shall
not (i) amend TARGET's Rights Plan or (ii) take any action with respect to, or
make any determination under, TARGET's Rights Plan (including a redemption of
the Rights) including any action to facilitate an Acquisition Proposal; provided
that any such action may be taken simultaneously with entering into an agreement
pursuant to Section 4.03(c).
SECTION 5.14 Affiliate Agreements. As soon as practicable after the date
hereof, TARGET shall deliver to PARENT a letter (the "Affiliate Letter")
identifying all persons who are, or may be deemed to be, at the time of the
TARGET Stockholders' Meeting, "affiliates" of TARGET for purposes of Rule 145
under the Securities Act. TARGET shall use its best efforts to cause each person
who is identified as an "affiliate" in the Affiliate Letter to deliver to
PARENT, prior to the Effective Time, a written agreement relating thereto (an
"Affiliate Agreement") in form reasonably satisfactory to PARENT.
SECTION 5.15 HSR Act Filings. To the extent required in connection with
the transactions contemplated by this Agreement, each of PARENT and TARGET shall
promptly make or cause to be made any and all required filings under the HSR Act
and will request early termination of the waiting period required under the HSR
Act. The parties agree to cooperate and promptly respond to any inquiries or
investigations initiated by the Federal Trade Commission or the Department of
Justice in connection with any such filings.
SECTION 5.16 Stockholder Litigation. TARGET shall give PARENT the
reasonable opportunity to participate in the defense of any stockholder
litigation arising in connection with the transactions contemplated hereby or
arising out of this Agreement, the Option Agreement, or the Stockholders
Agreement against TARGET and its directors.
SECTION 5.17 Employee Matters.
(a) For a period of not less than one year after the Effective Time,
employees of TARGET and its subsidiaries who continue their employment after the
Effective Time will be provided base salary or hourly wage rates and employee
benefits which are substantially comparable in the aggregate to those provided
for such employees as of the date hereof. Neither the PARENT nor the Surviving
Corporation will have any obligation to issue, or adopt any plans or
arrangements providing for the issuance of, shares of capital stock, warrants,
options, stock appreciation rights or other rights in respect of any shares of
capital stock of any entity or any securities convertible or exchangeable into
such shares pursuant to any such plans or arrangements. Any plans or
arrangements of TARGET and its subsidiaries providing for such issuance shall be
disregarded in determining whether employee benefits are substantially
comparable in the aggregate.
(b) PARENT will cause the Surviving Corporation to recognize the service of
each employee who continues employment through the Effective Time as if such
service had been performed with PARENT for purposes of eligibility and vesting
(but not benefit accrual) under PARENT's defined benefit pension plan if
provided by the Surviving Corporation for the benefit of continuing employees
and for purposes of eligibility for vacation under PARENT's vacation program if
so provided and PARENT's severance plan, but not for purposes of any other
Benefit Plan.
(c) Nothing contained herein shall be construed as requiring PARENT or the
Surviving Corporation to continue any specific plans or to continue the
employment of any specific person.
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ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver at or prior to the Closing Date of the
following conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose and no similar proceeding in respect of the Proxy
Statement shall have been initiated or threatened by the SEC.
(b) Stockholder Approval. The Required Stockholder Approval shall
have been obtained.
(c) No Injunctions or Restraints; Illegality. No action has been
taken, or any statute, rule, regulation or order enacted, entered or
enforced or deemed applicable to the Merger, and no temporary restraining
order or preliminary or permanent injunction or other order issued by any
Governmental Entity or other legal restraint or prohibition (each, an
"Injunction") (i) preventing the consummation of the Merger, (ii) making
the consummation of the Merger illegal, or (iii) which otherwise is
reasonably likely to have a Material Adverse Effect on TARGET or PARENT;
nor shall any proceeding brought by any Governmental Entity seeking any of
the foregoing be pending.
(d) Tax Opinions. TARGET shall have received a written opinion of
Choate, Hall & Stewart in form and substance reasonably satisfactory to
TARGET to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code. In rendering such
opinion, such counsel shall be entitled to rely upon (and PARENT, SUB and
TARGET shall make) customary representations substantially in the form
attached hereto in Exhibit 6.01(d).
(e) NYSE Listing. The shares of PARENT Common Stock issuable to
TARGET's stockholders as contemplated by this Agreement shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(f) HSR Act. The waiting period (or any extension thereof) under the
HSR Act applicable to the transactions contemplated by this Agreement shall
have expired or been terminated.
SECTION 6.02 Additional Conditions to Obligation of PARENT and SUB. The
obligation of PARENT and SUB to effect the Merger are also subject to the
satisfaction or waiver at or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of TARGET contained in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of TARGET contained in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case, as of the
date of this Agreement and as of the Closing Date as though made on the
Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date, in which case, as of such earlier
date. PARENT and SUB shall have received a certificate to such effect at
the Closing signed by the President and Chief Financial Officer of TARGET.
(b) Agreements and Covenants. TARGET shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by TARGET on or prior to the
Effective Time, and PARENT and SUB shall have received a certificate to
such effect signed by the President and Chief Financial Officer of TARGET.
(c) No Governmental Litigation. There shall not be pending or
imminently threatened any suit, action or proceeding by any Governmental
Entity, (i) challenging the acquisition by PARENT or SUB of any shares of
TARGET Common Stock, seeking to restrain or prohibit the consummation of
the Merger, or seeking to place limitations on the ownership of shares of
TARGET Common Stock
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(or shares of common stock of the Surviving Corporation) by PARENT or SUB
or seeking to obtain from TARGET, PARENT or SUB any damages that are
material in relation to TARGET, (ii) seeking to prohibit or materially
limit the ownership or operation by TARGET or its subsidiaries, PARENT or
any of PARENT's subsidiaries of any material portion of business or of any
assets of TARGET, PARENT or any of PARENT's subsidiaries, or to compel
TARGET, PARENT or any of PARENT's subsidiaries to divest or hold separate
any material portion of any business or of any assets of TARGET, PARENT or
any of their respective subsidiaries, as a result of the Merger, or (iii)
seeking to prohibit PARENT or any of its subsidiaries from effectively
controlling in any material respect the business or operations of TARGET or
its subsidiaries.
(d) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by TARGET for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by TARGET.
(e) Material Adverse Change. Since the date of this Agreement, there
shall have been no change, occurrence or circumstance in the business,
results of operations, liabilities, assets, properties or financial
condition of TARGET or any subsidiary of TARGET that has had or is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
SECTION 6.03 Additional Conditions to Obligation of TARGET. The
obligation of TARGET to effect the Merger is also subject to the satisfaction or
waiver at or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of PARENT and SUB contained in this Agreement that are qualified
as to materiality shall be true and correct, and the representations and
warranties of PARENT and SUB contained in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case,
as of the date of this Agreement and as of the Closing Date as though made
on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date, in which case as of such
earlier date. PARENT and SUB shall have received a certificate to such
effect at the Closing signed by the President and Chief Financial Officer
of PARENT and SUB.
(b) Agreements and Covenants. PARENT and SUB shall have performed or
complied in all respects with all agreements and covenants required by this
Agreement to be performed or complied with by PARENT or SUB on or prior to
the Effective Time, and TARGET shall have received a certificate to such
effect signed by the President and Chief Financial Officer of PARENT and
SUB.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by PARENT or SUB for the authorization, execution and delivery
of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by PARENT and SUB.
SECTION 6.04 Frustration of Closing Conditions. TARGET, PARENT and SUB,
as the case may be, may not rely on the failure of any condition set forth in
Sections 6.01, 6.02 or 6.03 to be satisfied if such party was the principal
cause of the failure of such condition to be satisfied.
ARTICLE VII
TERMINATION
SECTION 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of TARGET:
(a) by mutual written consent of PARENT, SUB and TARGET; or
(b) by either PARENT or TARGET if the Merger shall not have been
consummated by May 8, 2000 (the "Outside Date"), provided that the right to
terminate this Agreement under this
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Section 7.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date; or
(c) by either PARENT or TARGET if an Injunction having any of the
effects set forth in Section 6.01(c) shall be in effect and shall have
become a non-appealable final order, decree or ruling provided that the
party seeking to terminate this Agreement pursuant to this Section 7.01(c)
shall have used reasonable efforts to prevent the entry of and to remove
such Injunction; or
(d) by either PARENT or TARGET, if, at the TARGET Stockholders'
Meeting (including any adjournment or postponement thereof), the Required
Stockholder Approval shall not have been obtained; or
(e) (i) by PARENT if TARGET breaches or fails to perform in any
respect any of its representations, warranties or covenants contained in
this Agreement and such breach or failure to perform (x) would give rise to
the failure of a condition set forth in Section 6.02(a) or Section 6.02(b)
and (y) cannot be or has not been cured within 30 days after the giving of
written notice to TARGET of such breach or failure to perform or (ii) by
TARGET if PARENT breaches or fails to perform in any respect any of its
representations, warranties or covenants contained in this Agreement and
such breach or failure to perform (1) would give rise to the failure of a
condition set forth in Section 6.03(a) or Section 6.03(b) and (2) cannot be
or has not been cured within 30 days after the giving of written notice to
PARENT of such breach or failure to perform; or
(f) by PARENT, if (i) the TARGET Board or any committee thereof shall
fail to recommend the Merger or shall withdraw, modify or change its
approval or recommendation of this Agreement or the Merger in a manner
adverse to PARENT or shall have resolved to do any of the foregoing; (ii)
after the receipt by TARGET of an Acquisition Proposal, PARENT requests in
writing that the TARGET Board reconfirm its approval or recommendation of
this Agreement or the Merger to the stockholders of TARGET and the TARGET
Board fails to do so within 10 business days after its receipt of PARENT's
request; (iii) the TARGET Board shall have approved or recommended to the
stockholders of TARGET an Acquisition Transaction; or (iv) the TARGET Board
approves or recommends that the stockholders of TARGET tender their shares
of TARGET Common Stock into any tender or exchange offer that is an
Acquisition Proposal or is related thereto.
(g) by TARGET in accordance with the terms of Section 4.03(c);
provided, however, that any termination pursuant to this Section 7.01(g)
shall not be effective unless TARGET shall have fully complied with the
provisions of Section 4.03 and paid TARGET Fee described in Section 7.03(b)
and the expenses to be paid by it in accordance with Section 7.03(a).
SECTION 7.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders except (i) as set forth in
Section 7.03 and Section 8.01 hereof, and (ii) nothing herein shall relieve any
party from liability for any breach hereof.
SECTION 7.03 Fees and Expenses.
(a) Except as set forth in this Section 7.03, all fees and expenses,
including all stock transfer, real estate transfer, documentary, stamp,
recording and other similar Taxes (including interest, penalties and additions
to such Taxes) ("Transfer Taxes"), incurred in connection with this Agreement
and the Option Agreement and the transactions contemplated hereby and thereby
shall be paid by the party incurring such expenses provided, however, that
PARENT and TARGET shall share equally all fees and expenses, other than
attorneys' fees, incurred in relation to the printing of the Proxy Statement
(including any preliminary materials related thereto) and the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto. The parties hereto shall cooperate with each other in
preparing, executing and filing any Tax Returns with respect to Transfer Taxes.
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(b) TARGET shall pay PARENT a fee of $2,550,000 ("TARGET Fee"), (1) upon
the termination of this Agreement pursuant to Sections 7.01(f) or 7.01(g) or (2)
if (x) TARGET or PARENT shall terminate this Agreement pursuant to Sections
7.01(b) or 7.01(d), (y) prior to such termination an Acquisition Proposal shall
have been made or any person shall have announced an intention to make an
Acquisition Proposal and (z) within 12 months of such termination TARGET or its
subsidiaries either consummates a transaction which, if proposed, would
constitute an Acquisition Proposal or enters into an Acquisition Agreement with
respect to such a transaction or the TARGET Board approves such a transaction.
(c) The fees payable pursuant to Section 7.03(b) shall be paid promptly,
but in no event later than the occurrence of the event giving rise to such fees.
All payments under this Section 7.03 shall be made by wire transfer of
immediately available funds to an account designated by the party entitled to
receive payment.
(d) TARGET acknowledges that the agreements contained in this Section 7.03
are an integral part of the transactions contemplated hereby, and that, without
these agreements, PARENT would not enter into this Agreement. If TARGET fails
promptly to pay any amounts due to PARENT pursuant to Section 7.03(a) or
7.03(b), and, in order to obtain such payment, PARENT commences a suit which
results in a judgment against TARGET, TARGET shall pay to PARENT its costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest at the rate on six-month U.S. Treasury obligations plus
300 basis points in effect on the date such payment was required to be made.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 Effectiveness of Representations, Warranties and Agreements;
Knowledge, Etc. Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except for those covenants and
agreements contained herein that by their terms apply or are to be performed in
whole or in part after the Effective Time or this Article 8. The Confidentiality
Agreement shall survive termination of this Agreement as therein provided.
SECTION 8.02 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered to the parties at the following addresses (or
at such other address for a party as shall be specified by like changes
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of address or sent by electronic transmission, with confirmation received, to
the telecopy number specified below:
(a) If to PARENT or SUB:
c/o Ethicon, Inc.
U.S. Route #22
Somerville, New Jersey 08876
Fax No. (908) 218-3492
Attention: Howard Zauberman
With copies to:
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
Fax No. (732) 524-2788
Attention: Office of General Counsel
and
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax No. (212) 474-3700
Attention: Robert Kindler, Esq.
(b) If to TARGET:
Innovasive Devices, Inc.
734 Forest Street
Marlborough, Massachusetts 01752
Fax No. (508) 460-6661
Attention: Richard D. Randall
With a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Fax No. (617) 248-4000
Attention: Roslyn G. Daum, Esq.
SECTION 8.03 Interpretation. When a reference in this Agreement is made
to Sections or Schedules, such reference shall be to a Section or Schedule to
this Agreement unless otherwise indicated. The table of contents, glossary of
defined terms and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The term "or" is not exclusive.
SECTION 8.04 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in
Boston are required or authorized to be closed;
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(c) "control" (including the terms "controlled by" and "under common
control") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
or policies of a person, whether through the ownership of stock, as trustee
or executor, by contract or credit arrangement or otherwise;
(d) "indebtedness" means, with respect to any person, without
duplication, (i) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (ii) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such
person, (iv) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and
supplies incurred in the ordinary course of such person's business), (v)
all capitalized lease obligations of such person and (vi) all guarantees
and arrangements having the economic effect of a guarantee of such person
of any indebtedness of any other person;
(e) "knowledge" of TARGET means the knowledge after due inquiry of the
officers of TARGET and any of its subsidiaries but specifically excluding
Phil Heitlinger.
(f) "person" means an individual, limited liability company,
corporation, partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act);
and
(g) "subsidiary" or "subsidiaries" of TARGET, PARENT, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which TARGET, the Surviving Corporation,
PARENT or such other person (whether incorporated or unincorporated), as
the case may be, (i) of which such party or any other subsidiary is a
general partner or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions
with respect to such organization is directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or by
such party and one or more of its subsidiaries.
SECTION 8.05 Amendment. This Agreement may be amended by the mutual
consent of the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that after approval of the Merger by the stockholders of
TARGET, no amendment may be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by TARGET, PARENT and SUB.
SECTION 8.06 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto, (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, and (c) waive compliance with any of the agreements
or conditions contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
SECTION 8.07 Severability. If any term or other provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall 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 hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the greatest extent possible.
SECTION 8.08 Entire Agreement. This Agreement and the Option Agreement
constitute the entire agreement and supersede all prior agreements and
undertakings (other than the Confidentiality
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Agreement), both written and oral, among the parties, or any of them, through
the date hereof with respect to the subject matter hereof and thereof.
SECTION 8.09 Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the written consent of the parties hereto;
except that PARENT may assign all or any of their rights hereunder to any
affiliate provided that no such assignment shall relieve the assigning party of
its obligations hereunder.
SECTION 8.10 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement (other than Section 5.12), express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of The Commonwealth of
Massachusetts, without regard to the choice of law provisions thereof provided,
however, that the laws of the respective states of incorporation of each of the
parties hereto shall govern the relative rights, obligations, powers, duties and
other internal affairs of such party and its Board of Directors.
SECTION 8.13 Specific Performance. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in The
Commonwealth of Massachusetts or in any state court located in The Commonwealth
of Massachusetts, the foregoing being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(i) consents to submit itself to the personal jurisdiction of any Federal court
located in The Commonwealth of Massachusetts or any state court located in The
Commonwealth of Massachusetts in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (iii) agrees that it will
not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal court sitting
in The Commonwealth of Massachusetts or a state court located in The
Commonwealth of Massachusetts.
SECTION 8.14 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when delivered (including by facsimile transmission) shall be deemed to
be an original but all of which taken together shall constitute one and the same
agreement.
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IN WITNESS WHEREOF, PARENT, SUB and TARGET have caused this Agreement to be
executed under seal as of the date first written above by their respective
officers thereunto duly authorized.
JOHNSON & JOHNSON
By: /s/ ROBERT J. DARRETTA
------------------------------------
Name: Robert J. Darretta
Title: Vice President Finance,
and
Chief Financial Officer
INNOVASIVE DEVICES, INC.
By: /s/ RICHARD D. RANDALL
------------------------------------
Name: Richard D. Randall
Title: President and Chief
Executive Officer
RAPTOR ACQUISITION CORP.
By: /s/ HOWARD ZAUBERMAN
------------------------------------
Name: Howard Zauberman
Title: President
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ANNEX 2
STOCK OPTION AGREEMENT dated as of November 8, 1999 (the "Agreement"), by
and between INNOVASIVE DEVICES, INC., a Massachusetts corporation ("Issuer"),
and JOHNSON & JOHNSON, a New Jersey corporation ("Grantee").
RECITALS
A. Grantee, Raptor Acquisition Corp., a wholly owned subsidiary of Grantee
("Sub"), and Issuer have entered into an Agreement and Plan of Merger and
Reorganization dated as of the date hereof (the "Merger Agreement"; defined
terms used but not defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, the merger of Sub with and into
Issuer, with Issuer as the surviving corporation in the Merger; and
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement and the Stockholders Agreement, Grantee has requested that
Issuer agree, and Issuer has agreed, to grant Grantee the Option (as defined
below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 1,850,504 (as adjusted as set forth herein) shares (the "Option Shares")
of Common Stock, par value $.0001 per share ("Issuer Common Stock"), of Issuer
at a purchase price of $8.25 per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with respect
to any or all of the Option Shares at any time or times, subject to the
provisions of Section 2(c), after the occurrence of any event as a result of
which the Grantee is entitled to receive the Termination Fee pursuant to Section
7.03(b) of the Merger Agreement (a "Purchase Event"); provided, however, that
(i) except as provided in the last sentence of this Section 2(a), the Option
will terminate and be of no further force and effect upon the earliest to occur
of (A) the Effective Time, (B) 12 months after the first occurrence of a
Purchase Event, and (C) termination of the Merger Agreement in accordance with
its terms prior to the occurrence of a Purchase Event, unless, in the case of
clause (C), Grantee has the right to receive a Termination Fee following such
termination upon the occurrence of certain events described in Section 7.03(b)
of the Merger Agreement, in which case the Option will not terminate until the
later of (x) 12 months following the time such Termination Fee becomes payable
and (y) the expiration of the period in which the Grantee has such right to
receive a Termination Fee, and (ii) any purchase of Option Shares upon exercise
of the Option will be subject to compliance with the HSR Act and the obtaining
or making of any consents, approvals, orders, notifications, filings or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option, (A) if
all necessary Regulatory Approvals have been applied for but have not been
obtained prior to the termination of the Option, such termination shall be
extended to the date that is the fifth business day after receipt of such
Regulatory Approvals, and (B) Grantee will be entitled to purchase the Option
Shares if it has exercised the Option in accordance with the terms hereof prior
to the termination of the Option and the termination of the Option will not
affect any rights hereunder which by their terms do not terminate or expire
prior to or as of such termination.
(b) In the event that Grantee is entitled to and wishes to exercise the
Option, it will send to Issuer a written notice (an "Exercise Notice"; the date
of which being herein referred to as the "Notice Date") to that effect which
Exercise Notice also specifies the number of Option Shares, if any, Grantee
wishes to purchase pursuant to this Section 2(b), the number of Option Shares,
if any, with respect to which Grantee wishes to exercise its Cash-Out Right (as
defined herein) pursuant to Section 6(c), the denominations of the certificate
or certificates evidencing the Option Shares which Grantee wishes to purchase
pursuant to this Section 2(b) and a date (an "Option Closing Date"), subject to
the following
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sentence, not earlier than three business days nor later than 20 business days
from the Notice Date for the closing of such purchase (an "Option Closing"). Any
Option Closing will be at an agreed location and time in New York, New York on
the applicable Option Closing Date or at such later date as may be necessary so
as to comply with the first sentence of Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or making
certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance at any time prior to the termination
of the Option, or if the Option has terminated, within 5 business days following
receipt of such Regulatory Approvals. Issuer agrees to use its reasonable
efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory
Approval required for the purchase of any Option Shares will not be issued or
granted or (ii) such Regulatory Approval has not been issued or granted within
six months of the date of the Exercise Notice, Grantee shall have the right to
exercise its Cash-Out Right pursuant to Section 6(c) with respect to the Option
Shares for which such Regulatory Approval will not be issued or granted or has
not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
Grantee will pay to Issuer in immediately available funds by wire transfer to a
bank account designated in writing by Issuer an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased at such Option
Closing.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all Liens. If
at the time of issuance of Option Shares pursuant to an exercise of the Option
hereunder, Issuer shall have issued any securities similar to rights under a
shareholder rights plan, then each Option Share issued pursuant to such exercise
will also represent such a corresponding right with terms substantially the same
as and at least as favorable to Grantee as are provided under any such
shareholder rights plan then in effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF NOVEMBER 8,
1999, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY AT
ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option Shares have been registered
pursuant to the Securities Act, such Option Shares have been sold in reliance on
and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act
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and (ii) the reference to restrictions pursuant to this Agreement in the above
legend will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
4. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act and other
Regulatory Approvals that are necessary, to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Option Shares
upon the exercise of the Option terminates, shall have reserved for
issuance, upon exercise of the Option, shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 6 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including
all additional shares of Issuer Common Stock or other securities which may
be issuable upon exercise of the Option or any other securities which may
be issued pursuant to Section 6, upon issuance pursuant hereto, will be
duly and validly issued, fully paid and nonassessable, and will be
delivered free and clear of all Liens, including without limitation any
preemptive rights of any shareholder of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be transferred or
otherwise disposed of except in a transaction registered, or exempt from
registration, under the Securities Act.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the event of any
change in Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares, or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price thereof, will be adjusted appropriately, and proper provision will be made
in the agreements governing such transaction, so that Grantee will receive upon
exercise of the Option the number and class of shares or other securities or
property that Grantee would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event or the record date
therefor, as applicable. Subject to Section 1, and without limiting the parties'
relative rights and obligations under the Merger Agreement, if any additional
shares of Issuer Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the first sentence of this Section 6(a))
or if the number of outstanding shares of Issuer Common Stock is reduced, the
number of shares of Issuer Common Stock subject to the Option will be adjusted
so that, after such issuance, it equals the same percentage of the aggregate
number of shares of Issuer Common Stock issued and outstanding after giving
effect to such issuance as immediately prior to such issuance, in each case
without giving effect to any shares subject to or issued pursuant to the Option.
In the event that Grantee, its Subsidiaries or any of their respective pension
or retirement plans (including, if applicable, the related trust) owns on the
date hereof or acquires after the date hereof any shares of Issuer Common Stock
("Owned Issuer Common Stock") that, when aggregated with the number of shares of
Issuer Common Stock subject to the Option, would exceed 19.9% of the number of
shares of Issuer Common Stock then issued and outstanding, then the number of
shares of Issuer Common Stock subject to the Option will be adjusted so that,
when aggregated with the shares of Owned Issuer Common Stock, it equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into or consummate any other Acquisition Proposal with
any person, other than Grantee or one of its Subsidiaries, and Issuer will not
be the continuing or surviving corporation in such consolidation or merger, (ii)
to permit any person, other
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than Grantee or one of its subsidiaries, to merge into Issuer and Issuer will be
the continuing or surviving corporation, but in connection with such merger, the
shares of Issuer Common Stock outstanding immediately prior to the consummation
of such merger will be changed into or exchanged for stock or other securities
of Issuer or any other person or cash or any other property, or the shares of
Issuer Common Stock outstanding immediately prior to the consummation of such
merger will, after such merger, represent less than 50% of the outstanding
voting securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Issuer
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing at the time the Company
consummates any Acquisition Proposal and ending on the termination of the Option
in accordance with Section 2, Grantee sends to Issuer an Exercise Notice
indicating Grantee's election to exercise its right (the "Cash-Out Right")
pursuant to this Section 6(c), then Issuer shall pay to Grantee, on the Option
Closing Date, in exchange for the cancellation of the Option with respect to
such number of Option Shares as Grantee specifies in the Exercise Notice, an
amount in cash equal to such number of Option Shares multiplied by the
difference between (i) the average closing price, for the 10 trading days
commencing on the 12th trading day immediately preceding the Notice Date, per
share of Issuer Common Stock as reported on The Nasdaq National Market (or, if
not listed on The Nasdaq National Market, as reported on any other national
securities exchange or national securities quotation system on which the Issuer
Common Stock is listed or quoted, as reported in The Wall Street Journal
(Northeast edition), or, if not reported thereby, any other authoritative
source) (the "Closing Price") and (ii) the Purchase Price. Notwithstanding the
termination of the Option, Grantee will be entitled to exercise its rights under
this Section 6(c) if it has exercised such rights in accordance with the terms
hereof prior to the termination of the Option.
7. Profit Limitations. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Total Option Profit (as hereinafter defined)
exceed in the aggregate $3,400,000 minus any Termination Fee actually received
by Grantee pursuant to the terms of the Merger Agreement (such amount, the
"Profit Limit") and, if any payment to be made to Grantee otherwise would cause
such aggregate amount to be exceeded, the Grantee, at its sole election, shall
either (i) reduce the number of shares of Issuer Common Stock subject to this
Option, (ii) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (iii) pay cash to Issuer or (iv) any combination thereof,
so that the Total Option Profit shall not exceed the Profit Limit after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares of Issuer Common Stock as would, as of
the date of exercise, result in a Notional Total Option Profit (as hereinafter
defined) which would exceed in the aggregate the Profit Limit and, if it
otherwise would exceed such amount, the Grantee, at its sole election, shall on
or prior to the date of exercise either (i) reduce the number of shares of
Issuer Common Stock subject to such exercise, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee, (iii) pay cash to
Issuer or (iv) any combination thereof, so that the Notional Total Option Profit
shall not exceed the Profit Limit after taking into account the foregoing
actions, provided that this paragraph (b) shall not be construed as to restrict
any exercise of the Option that is not prohibited hereby on any subsequent date.
(c) As used herein, the term "Total Option Profit" shall mean the aggregate
amount (before taxes) of the following: (i) any amount received by Grantee
pursuant to the Cash-Out Right and (ii)(x) the net consideration, if any,
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, valuing any non-cash
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consideration at its fair market value (as defined below), less (y) the Exercise
Price and any cash paid by Grantee to Issuer pursuant to Section 7(a)(iii) or
Section 7(b)(iii), as the case may be.
(d) As used herein, the term "Notional Total Option Profit" with respect to
any number of shares of Issuer Common Stock as to which Grantee may propose to
exercise the Option shall be the aggregate of (i) the Total Option Profit
determined under paragraph (c) above with respect to prior exercises and (ii)
Total Option Profit with respect to such number of Option Shares as to which
Grantee proposes to exercise and all other Option Shares held by Grantee and its
affiliates as of such date, assuming that all such shares were sold for cash at
the closing market price for Issuer Common Stock as of the close of business on
the preceding trading day (less customary brokerage commissions or underwriting
discounts).
(e) As used herein, the "fair market value" of any non-cash consideration
consisting of:
(i) securities listed on a national securities exchange or traded on
the Nasdaq National Market shall be equal to the average closing price per
share of such security as reported on such exchange or the Nasdaq National
Market for the five trading days after the date of determination; and
(ii) consideration which is other than cash or securities of the form
specified in clause (i) above shall be determined by a nationally
recognized independent investment banking firm mutually agreed upon by the
parties within five business days of the event requiring selection of such
banking firm, provided that if the parties are unable to agree within two
business days after the date of such event as to the investment banking
firm, then the parties shall each select one firm, and those firms shall
select a third nationally recognized independent investment banking firm,
which third firm shall make such determination.
8. Registration Rights. Issuer will, if requested by Grantee at any time
and from time to time within three years of the exercise of the Option, as
promptly as practicable (but in no event later than 90 days after receipt of
such request) prepare and file up to three registration statements under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares of securities that have been acquired by
or are issuable to Grantee upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Grantee, including a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision, and Issuer will use its best efforts to qualify such shares
or other securities under any applicable state securities laws. Grantee agrees
to use reasonable efforts to cause, and to cause any underwriters of any sale or
other disposition to cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely distributed basis so that upon
consummation thereof no purchaser or transferee will own beneficially more than
4.9% of the then-outstanding voting power of Issuer. Issuer will use reasonable
efforts to cause each such registration statement to become effective, to obtain
all consents or waivers of other parties which are required therefor, and to
keep such registration statement effective for such period not in excess of 180
calendar days from the day such registration statement first becomes effective
as may be reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to maintain
its effectiveness may be suspended for up to 90 calendar days in the aggregate
if the Board of Directors of Issuer shall have determined that the filing of
such registration statement or the maintenance of its effectiveness would
require premature disclosure of material nonpublic information that would
materially and adversely affect Issuer or otherwise interfere with or adversely
affect any pending or proposed offering of securities of Issuer or any other
material transaction involving Issuer. Any registration statement prepared and
filed under this Section 8, and any sale covered thereby, will be at Issuer's
expense except for underwriting discounts or commissions, brokers' fees and the
fees and disbursements of Grantee's counsel related thereto. Grantee will
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section 8, Issuer effects a
registration under the Securities Act of Issuer Common Stock for its own account
or for any other stockholders of Issuer (other than on Form S-4 or Form S-8, or
any successor form), it will allow Grantee the right to participate in such
registration, and such participation will not affect the obligation of Issuer to
effect demand registration statements for Grantee under this Section 8; provided
that, if the managing underwriters of such offering
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advise Issuer in writing that in their opinion the number of shares of Issuer
Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, Issuer will include only the shares
requested to be included therein by Grantee that may be included therein without
adversely affecting the success of the offering. In connection with any
registration pursuant to this Section 8, Issuer and Grantee will provide each
other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification, and contribution in connection with such
registration.
9. Transfers. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) in an underwritten public offering as provided
in Section 8 or (ii) to any purchaser or transferee who would not, to the
knowledge of Grantee immediately following such sale, assignment, transfer or
disposal, beneficially own more than 4.9% of the then-outstanding voting power
of the Issuer; provided, however, that Grantee shall be permitted to sell any
Option Shares if such sale is made pursuant to a tender or exchange offer.
10. Listing. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on The Nasdaq National Market (or
any other national securities exchange or national securities quotation system),
Issuer, upon the request of Grantee, will promptly file an application to list
the shares of Issuer Common Stock or other securities to be acquired upon
exercise of the Option on The Nasdaq National Market (or any such other national
securities exchange or national securities quotation system) and will use
reasonable efforts to obtain approval of such listing as promptly as
practicable.
11. Loss or Mutilation. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in this
Agreement or in the Merger Agreement, each of the parties hereto will bear and
pay all costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
(b) Amendment. This Agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement, the
Merger Agreement (including the documents and instruments attached thereto as
exhibits or schedules or delivered in connection therewith), the Shareholders
Agreement and the Confidentiality Agreement (i) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement, and
(ii) except as provided in Section 8.10 of the Merger Agreement, are not
intended to confer upon any person other than the parties any rights or
remedies.
(e) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof; provided, however, that the laws of the respective states of
incorporation of each of the parties hereto shall govern the relative rights,
obligations, powers, duties and other internal affairs of such party and its
Board of Directors.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
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(g) Assignment. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Issuer or Grantee without
the prior written consent of the other, except that Parent may assign, in its
sole discretion, any of or all its rights, interests and obligations under this
Agreement to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of any of its obligations hereunder. Any
assignment or delegation in violation of the preceding sentence will be void.
Subject to the first and second sentences of this Section 12(g), this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) Enforcement. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the Commonwealth of Massachusetts or
in any state court located in the Commonwealth of Massachusetts, the foregoing
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (i) consents to submit itself to
the personal jurisdiction of any Federal court located in the Commonwealth of
Massachusetts or any state court located in the Commonwealth of Massachusetts in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (iii) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal court sitting in the Commonwealth of Massachusetts or a
state court located in the Commonwealth of Massachusetts.
(j) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
JOHNSON & JOHNSON,
By: /s/ ROBERT J. DARRETTA
------------------------------------
Name: Robert J. Darretta
Title: Vice President Finance,
and
Chief Financial Officer
INNOVASIVE DEVICES, INC.,
By: /s/ RICHARD D. RANDALL
------------------------------------
Name: Richard D. Randall
Title: President and Chief
Executive Officer
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ANNEX 3
STOCKHOLDERS AGREEMENT dated as of November 8, 1999 (this "Agreement"),
between JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), and the
stockholders listed on Schedule A attached hereto (each, a "Stockholder").
WHEREAS Parent, Raptor Acquisition Corp., a Massachusetts corporation and a
wholly owned subsidiary of Parent ("Sub"), and Innovasive Devices, Inc., a
Massachusetts corporation (the "Company"), propose to enter into an Agreement
and Plan of Merger and Reorganization dated as of the date hereof (as the same
may be amended or supplemented, the "Merger Agreement"; defined terms used but
not defined herein have the meanings set forth in the Merger Agreement),
providing for, among other things, the merger of Sub with and into the Company,
upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS each Stockholder owns, beneficially and of record, the number of
shares of capital stock of the Company set forth opposite the Stockholder's name
on Schedule A attached hereto (such shares of capital stock of the Company,
together with any other shares of capital stock of the Company acquired by such
Stockholder after the date hereof and during the term of this Agreement
(including through the exercise of any stock options, warrants convertible or
exchangeable securities or similar instruments), being collectively referred to
herein as the "Subject Shares"); and
WHEREAS as a condition to its willingness to enter into the Merger
Agreement and the Option Agreement, Parent has requested that each Stockholder
enter into this Agreement.
NOW, THEREFORE, to induce Parent to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
hereto agree as follows:
1. Agreement to Vote Shares. Until the termination of this Agreement in
accordance with Section 11, each Stockholder severally and not jointly, agrees
as follows: (a) At any meeting of the stockholders of the Company called to vote
upon the Merger or the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including by
written consent) with respect to the Merger or the Merger Agreement is sought,
each Stockholder shall, including by executing a written consent solicitation if
requested by Parent, vote (or cause to be voted) such Stockholder's Subject
Shares in favor of the adoption and approval of the Merger Agreement, the
approval of the terms thereof and of the Merger and each of the other
transactions contemplated by the Merger Agreement;
(b) At any meeting of the stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which such Stockholder's vote,
consent or other approval is sought, such Stockholder shall vote (or cause to be
voted) the Subject Shares of such Stockholder against, and shall not consent to
(and shall cause not to be consented to), any of the following (or any agreement
to enter into or effect any of the following): (i) any Acquisition Proposal or
transaction or occurrence which if publicly proposed and offered to the Company
and its Stockholders (or any of them) would be the subject of a Acquisition
Proposal (collectively, "Alternative Transactions") or (ii) any amendment of the
Company's Articles of Organization or Bylaws or other proposal, action or
transaction would or could reasonably be expected to prevent or materially
impede, interfere with, hinder or delay the consummation of the Merger or any of
the other transactions contemplated by the Merger Agreement or to dilute in any
material respect the benefits to Parent of the Merger and the other transactions
contemplated by the Merger Agreement, or change in any manner the voting rights
of any class of shares of capital stock of the Company (collectively,
"Frustrating Transactions"). Such Stockholder shall not commit or agree to take
any action inconsistent with the foregoing.
2. Grant of Irrevocable Proxy. Until the termination of this Agreement in
accordance with Section 11, each Stockholder severally and not jointly, agrees
as follows: (a) Each Stockholder hereby irrevocably grants to, and appoints,
Steven Rosenberg and any other individual who shall hereafter be designated by
Parent, and each of them, such Stockholder's proxy and attorney-in-fact (with
full power of
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substitution), for and in the name, place and stead of the Stockholder, to vote,
or cause to be voted, such Stockholder's Subject Shares, or grant a consent or
approval in respect of such Subject Shares, at any meeting of stockholders of
the Company or at any adjournment or postponement thereof or in any other
circumstances upon which their vote, consent or other approval is sought, (i) in
favor of the Merger, the adoption and approval of the Merger Agreement and the
approval of the transactions contemplated by the Merger Agreement and (ii)
against any Alternative Transaction or Frustrating Transaction;
(b) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Subject Shares are not irrevocable, and that all
such proxies are hereby revoked;
(c) Each Stockholder hereby affirms that the irrevocable proxy set forth in
this Section 2 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Stockholder under this Agreement. Such Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. Such Stockholder hereby ratifies and confirms
all that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof.
3. No Other Grant of Proxy. Each Stockholder will not, directly or
indirectly, grant any proxies or powers of attorney with respect to his Subject
Shares to any person other than as set forth in Section 2.
4. Transfers. Other than in accordance with this Agreement, each
Stockholder will not, nor will such Stockholder permit any entity under such
Stockholder's control to, sell, transfer, pledge, assign or otherwise dispose of
(including by gift) (collectively, "Transfer"), or consent to any Transfer of,
any Subject Shares or any interest therein or enter into any contract, option or
other agreement or arrangement (including any profit sharing or other derivative
arrangement) with respect to the Transfer of, any Subject Shares or any interest
therein to any person. Notwithstanding the foregoing, and provided that such
Stockholder has not breached his or its obligations under this Agreement
(including, without limitation, Section 1), (i) such Stockholder may exchange
his or its Subject Shares in connection with a statutory merger to the extent
required by applicable law and (ii) such Stockholder may Transfer his or its
Subject Shares prior to the end of the Relevant Period (as defined below) if the
Merger Agreement is terminated pursuant to Section 7.01(b) or 7.01(d) of the
Merger Agreement and an Acquisition Proposal has been made prior to such
termination, if (x) such Acquisition Proposal has been unconditionally withdrawn
or (y) such Acquisition Proposal has been voted against by a majority of the
Company's stockholders and prior to any such Transfer the transferee of such
Subject Shares enters into a stockholder agreement with Parent on terms
substantially identical to the terms of this Agreement.
5. No Voting Trusts. Such Stockholder agrees that it will not enter into
any voting arrangement, whether by proxy, voting agreement or otherwise, trust
or other arrangement or agreement with respect to the voting of the Subject
Shares (and if entered into or executed, such voting trust or other arrangement
or agreement shall not be effective), or agree, in any manner, to vote the
Subject Shares for or against any proposal in connection with any Alternative
Transaction or Frustrating Transaction or otherwise with respect to the Subject
Shares. Such Stockholder agrees that it will take no action to reduce or
eliminate the voting of any of its Subject Shares.
6. No Solicitation. (a) Each Stockholder shall not, nor shall he or it
permit any of his or its officers, directors, employees, representatives or
agents or any of his or its investment banker, financial advisor, attorney,
accountant or other advisor or representative to directly or indirectly (i)
solicit, encourage or initiate the submission of any proposal that constitutes,
or may reasonably be expected to lead to an Acquisition Proposal, (ii)
negotiate, approve or recommend and proposal that constitutes, or may reasonably
be expected to lead to an Acquisition Proposal or (iii) furnish to any person
any information with respect to, or take any other action knowingly to
facilitate any proposal that constitutes, or may reasonably be expected to lead
to an Acquisition Proposal.
(b) Each Stockholder agrees to notify Parent promptly and to provide all
details requested by Parent if such Stockholder shall be approached or
solicited, directly or indirectly, by any person with respect to an Acquisition
Proposal.
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7. Affiliate Agreement. If, at the time the Merger Agreement is submitted
for approval to the stockholders of the Company, a Stockholder is an "affiliate"
of the Company for purposes of Rule 145 under the Securities Act, such
Stockholder shall deliver to Parent at least 30 days prior to the Closing a
written agreement relating thereto and reasonably satisfactory to Parent.
8. Representations and Warranties of the Stockholder. Each Stockholder
hereby severally and not jointly represents and warrants to Parent in respect of
himself or itself as follows:
(a) Authority. Each Stockholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by each
Stockholder and, assuming due execution and delivery by Parent, constitutes a
valid and binding obligation of such Stockholder enforceable against such
Stockholder in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, or result in any
violation or breach of, or default (with or without notice or lapse of time or
both) under any provision of, any trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to each Stockholder or to such
Stockholder's property or assets. If the Stockholder is a corporation,
partnership, limited liability company or other business organization, this
Agreement and the transactions contemplated hereby will not result in a
violation or breach of, or default under, its Articles of Incorporation or
Bylaws or similar governing instruments. Except for termination of the waiting
periods (or extensions thereof), if any, under the HSR Act or informational
filings with the SEC, no consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to each Stockholder in connection with the execution and
delivery of this Agreement or the consummation by each Stockholder of the
transactions contemplated hereby.
(b) The Subject Shares. As of the date hereof and at Closing each
Stockholder has, and will have, good and marketable title to the Subject Shares,
free and clear of all Liens, except as set forth on Schedule 8(b) hereof (which
in no way affects the ability of the Stockholder to vote his or its Subject
Shares). The Subject Shares are not subject to any voting trust agreement or
other contract, agreement, arrangement, commitment or understanding restricting
or otherwise relating to the voting, dividend rights or disposition of the
Subject Shares. Each Stockholder has sole power with respect to the matters set
forth in this Agreement, with no limitations, qualifications or restrictions on
such rights.
9. Representations and Warranties of Parent. Parent hereby represents and
warrants to each Stockholder that Parent has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent, and
the consummation of the transactions contemplated hereby, has been duly
authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and, assuming due
execution and delivery by each Stockholder, constitutes a valid and binding
obligation of Parent enforceable against Parent in accordance with its terms.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under any provision of, any trust agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Parent or to
its property or assets. Except for termination of the waiting periods (or
extensions thereof), if any, under the HSR Act or informational filings with the
SEC, no consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Parent in connection with the execution and delivery of this
Agreement or the consummation by Parent of the transactions contemplated hereby.
10. Enforcement. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not
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performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in The
Commonwealth of Massachusetts or in any state court located in The Commonwealth
of Massachusetts, the foregoing being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(i) consents to submit itself to the personal jurisdiction of any Federal court
located in The Commonwealth of Massachusetts or any state court located in The
Commonwealth of Massachusetts in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (iii) agrees that it will
not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal court sitting
in The Commonwealth of Massachusetts or a state court located in The
Commonwealth of Massachusetts.
11. Term and Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall survive the termination of the Merger Agreement
and shall terminate 12 months (the "Period") after the termination of the Merger
Agreement; provided, however, that if the Merger Agreement is terminated
pursuant to Section 7.01(a), Section 7.01(b) (unless an Acquisition Proposal has
been made prior to such termination), Section 7.01(c), or Section 7.01(e)(ii) of
the Merger Agreement or is terminated by Parent pursuant to Section 7.01(d)
(unless an Acquisition Proposal has been made prior to such termination) of the
Merger Agreement, then this Agreement shall terminate 10 days after the date on
which the Merger Agreement terminates pursuant to such Section of the Merger
Agreement; provided further, that if the Merger Agreement is terminated pursuant
to Section 7.01(b) or 7.01(d) of the Merger Agreement and an Acquisition
Proposal has been made prior to such termination, this Agreement shall terminate
three months (the "Relevant Period") after the date of the termination of the
Merger Agreement pursuant to such Section if (x) such Acquisition Proposal has
been unconditionally withdrawn or (y) such Acquisition Proposal has been voted
against by a majority of the Company's stockholders, unless, in each case, the
person making such proposal subsequently makes another Acquisition Proposal (in
which case this Agreement will remain applicable to any such subsequent
Acquisition Proposal for the whole Period).
12. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Subject Shares and shall
be binding upon any person to which legal or beneficial ownership of such
Subject Shares shall pass, whether by operation of law or otherwise, including
such Stockholder's heirs, guardians, administrators or successors. In the event
of any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of the Company affecting the Subject
Shares, or the acquisition of additional shares of the Company's capital stock
by the Stockholder, the number of Subject Shares listed on Schedule A beside the
name of a Stockholder shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of the Company's
capital stock issued to or acquired by the Stockholder.
13. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes (or
shall be deemed to have made) any agreement or understanding herein in his or
her capacity as such director or officer. Without limiting the generality of the
foregoing, each Stockholder signs solely in his capacity as the record and/or
beneficial owner, as applicable, of a Stockholder's Subject Shares and nothing
herein shall limit or affect any actions taken by such Stockholder (or a
designee of such Stockholder) in his or its capacity as an officer or director
of the Company in exercising his rights under the Merger Agreement.
14. Entire Agreement; No Third Party Beneficiaries; Amendment;
Waiver. This Agreement (including the documents and instruments referred to
herein) (i) constitutes the entire agreement and supersedes all prior agreements
and understandings, written or oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder. This Agreement may not
be amended, supplemented or modified, and no provisions hereof may be modified
or waived, except by an instrument in writing signed by each party to be
charged. No waiver of any provisions hereof by any party shall be deemed a
waiver of any other
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provisions hereof by any such party, nor shall any such waiver be deemed a
continuing waiver of any provision hereof by such party.
15. Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be in writing and shall be deemed
to have been duly given if mailed, by first class or registered mail, three
business days after deposit in the United States Mail, or if telexed or
telecopied, sent by telegram, or delivered by hand or reputable overnight
courier, when confirmation is received, in each case as follows:
If to a Stockholder, to the address listed on Schedule A hereto;
If to Parent, in accordance with Section 8.02 of the Merger Agreement;
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
16. Miscellaneous. (a) When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
(b) This Agreement shall be governed by, and construed in accordance with,
the laws of The Commonwealth of Massachusetts regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws; provided,
however, that the laws of the respective states of incorporation of each of the
parties hereto (if such party is a corporation, partnership, limited liability
company or other business organization) shall govern the relative rights,
obligations, powers, duties and other internal affairs of such party and its
board of directors.
(c) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner and to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
(d) This Agreement may be executed in one or more counterparts (including
by way of facsimile) all of which shall be considered one and the same
agreement, and shall become effective when one or more of the counterparts have
been signed by each of the parties and delivered to the other parties, it being
understood that each party need not sign the same counterpart.
(e) This Agreement shall not be assigned by a Stockholder, on the one hand,
without the prior written consent of Parent, or by Parent, on the other hand,
without the prior written consent of each Stockholder, except that Parent may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Parent; provided that notwithstanding such assignment, Parent shall remain
liable for performance of its obligations hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(f) Each Stockholder shall use its reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the Merger
Agreement. Each Shareholder will, from time to time, execute and deliver, or
cause to be executed and delivered, such additional or further consents,
documents and other instruments as Parent may request for the purpose of
effectuating the matters covered by this Agreement, including the grant of the
proxies set forth in Section 2.
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(g) Each Stockholder shall not, and shall not authorize or permit any of
its subsidiaries or affiliates (other than the Company) or any of its or their
directors, officers, employees, partners, investment bankers, attorneys or other
advisors or representatives to, issue any press release or make any other public
statement with respect to the Merger Agreement, this Agreement, the Merger or
any of the other transactions contemplated by the Merger Agreement or this
Agreement without the prior written consent of Parent, except as may be required
by applicable law.
(h) Each Stockholder hereby waives any rights of appraisal, or rights to
dissent from the Merger, that such Stockholder may have.
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.
JOHNSON & JOHNSON
By: /s/ ROBERT J. DARRETTA
------------------------------------
Name: Robert J. Darretta
Title: Vice President, Finance
and
Chief Financial Officer
STOCKHOLDERS:
By: /s/ JAMES V. BARRILE
------------------------------------
Name: James V. Barrile
By: /s/ ALAN CHERVITZ
------------------------------------
Name: Alan Chervitz
By: /s/ JOSEPH A. CIFFOLILLO
------------------------------------
Name: Joseph A. Ciffolillo
By: /s/ T. WADE FALLIN
------------------------------------
Name: T. Wade Fallin
By: /s/ DAVID FOSTER
------------------------------------
Name: David Foster
By: /s/ E. MARLOWE GOBLE
------------------------------------
Name: E. Marlowe Goble
By: /s/ ROBERT MOMSEN
------------------------------------
Name: Robert Momsen
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By: /s/ HOWARD PALEFSKY
----------------------------------
Name: Howard Palefsky
By: /s/ RICHARD D. RANDALL
------------------------------------
Name: Richard D. Randall
INTERWEST PARTNERS
By: /s/ ROBERT MOMSEN
------------------------------------
Name: Robert Momsen
Title: General Partner
COHESION TECHNOLOGIES
By: /s/ DAVID FOSTER
------------------------------------
Name: David Foster
Title: Chief Executive Officer
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SCHEDULE A
TO STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
STOCKHOLDERS SHARES OWNED VESTED OPTIONS
- ------------ ------------ --------------
<S> <C> <C>
James V. Barrile............................................ 172,778 30,361
Alan Chervitz............................................... 307,087 15,250
Joseph A. Ciffolillo........................................ 79,650
T. Wade Fallin.............................................. 103,869 16,750
E. Marlowe Goble............................................ 888,839
Howard Palefsky............................................. 10,000
Richard D. Randall.......................................... 36,384 313,139
Interwest Partners.......................................... 524,727
Cohesion Technologies....................................... 843,936
</TABLE>
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ANNEX 4
November 8, 1999
Board of Directors
Innovasive Devices, Inc.
734 Forest St.
Marlborough, MA 01752
Members of the Board:
Deutsche Bank Securities Inc. ("Deutsche Banc Alex. Brown") has acted as
financial advisor to Innovasive Devices, Inc. ("Innovasive Devices") in
connection with the proposed transaction involving Innovasive Devices and
Johnson & Johnson ("Johnson & Johnson") pursuant to an Agreement and Plan of
Merger and Reorganization, dated as of November 8, 1999 (the "Agreement"), by
and among Johnson & Johnson, Raptor Acquisition Corp., a wholly owned subsidiary
of Johnson & Johnson ("Merger Subsidiary"), and Innovasive Devices, which
provides, among other things, for the merger of Merger Subsidiary with and into
Innovasive Devices (the "Merger"). As set forth more fully in the Agreement, as
a result of the Merger, each outstanding share of the common stock, par value
$0.0001 per share, of Innovasive Devices (the "Innovasive Common Stock") will be
converted into the right to receive that number of shares of the common stock,
par value $1.00 per share, of Johnson & Johnson (the "Johnson & Johnson Common
Stock") equal to the Exchange Ratio (as defined below). The Agreement provides
that the Exchange Ratio will be that number of shares (rounded to the fourth
decimal place) of Johnson & Johnson Common Stock obtained by dividing $8.25 by
the average per share closing price of Johnson & Johnson Common Stock as
reported on the New York Stock Exchange Composite Tape for the twenty (20)
consecutive trading days ending on the third trading day prior to the Innovasive
Devices stockholders meeting in respect of the Merger.
You have requested Deutsche Banc Alex. Brown's opinion as to the fairness,
from a financial point of view, of the Exchange Ratio to the holders of
Innovasive Common Stock.
In connection with Deutsche Banc Alex. Brown's role as financial advisor to
Innovasive Devices, and in arriving at its opinion, Deutsche Banc Alex. Brown
has reviewed certain publicly available financial and other information
concerning Innovasive Devices and Johnson & Johnson and certain internal
analyses and other information furnished by Innovasive Devices and Johnson &
Johnson. Deutsche Banc Alex. Brown has also held discussions with members of the
senior management of Innovasive Devices and Johnson & Johnson regarding the
business and prospects of their respective companies and the joint prospects of
a combined company. In addition, Deutsche Banc Alex. Brown has (i) reviewed the
reported prices and trading activity for Innovasive Common Stock and Johnson &
Johnson Common Stock, (ii) compared certain financial and stock market
information for Innovasive Devices and Johnson & Johnson with similar
information for certain other companies whose securities are publicly traded,
(iii) reviewed the financial terms of certain recent business combinations which
it deemed comparable in whole or in part, (iv) reviewed the terms of the
Agreement, and (v) performed such other studies and analyses and considered such
other factors as it deemed appropriate.
Deutsche Banc Alex. Brown has not assumed responsibility for independent
verification of, and has not independently verified, any information, whether
publicly available or furnished to it, concerning Innovasive Devices, Johnson &
Johnson or the combined company, including, without limitation, any financial
information, forecasts or projections considered in connection with the
rendering of its opinion. Accordingly, for purposes of its opinion, Deutsche
Banc Alex. Brown has assumed and relied upon the accuracy and completeness of
all such information and Deutsche Banc Alex. Brown has not conducted a physical
inspection of any of the properties or assets, and has not prepared or obtained
any independent evaluation or appraisal of any of the assets or liabilities, of
Innovasive Devices or Johnson & Johnson. With respect to the financial forecasts
and projections made available to Deutsche Banc Alex. Brown and used in its
analyses, Deutsche Banc Alex. Brown has been advised and has assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Innovasive Devices as to the
matters covered thereby. Deutsche Banc Alex. Brown's opinion is necessarily
based upon economic, market and other conditions as in effect on, and the
information made available to it as of, the date hereof.
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Board of Directors
Innovasive Devices, Inc.
November 8, 1999
Page 2
For purposes of rendering its opinion, Deutsche Banc Alex. Brown has
assumed that, in all respects material to its analysis, the representations and
warranties of Innovasive Devices, Johnson & Johnson and Merger Subsidiary
contained in the Agreement are true and correct, Innovasive Devices, Johnson &
Johnson and Merger Subsidiary will each perform all of the covenants and
agreements to be performed by it under the Agreement and all conditions to the
obligations of each of Innovasive Devices, Johnson & Johnson and Merger
Subsidiary to consummate the Merger will be satisfied without any waiver
thereof. Deutsche Banc Alex. Brown has also assumed that all material
governmental, regulatory or other approvals and consents required in connection
with the consummation of the Merger will be obtained and that in connection with
obtaining any necessary governmental, regulatory or other approvals and
consents, or any amendments, modifications or waivers to any agreements,
instruments or orders to which either Innovasive Devices or Johnson & Johnson is
a party or is subject or by which it is bound, no limitations, restrictions or
conditions will be imposed or amendments, modifications or waivers made that
would have a material adverse effect on Innovasive Devices or Johnson & Johnson
or materially reduce the contemplated benefits of the Merger to Innovasive
Devices, Johnson & Johnson or the combined company. In addition, you have
informed Deutsche Banc Alex. Brown, and accordingly for purposes of rendering
its opinion Deutsche Banc Alex. Brown has assumed, that the Merger is expected
to qualify as a tax-free reorganization for federal income tax purposes.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Innovasive Devices and is not a recommendation to any stockholder
as to how such stockholder should vote with respect to matters relating to the
proposed Merger. Deutsche Banc Alex. Brown is expressing no opinion as to the
price at which the Johnson & Johnson Common Stock will trade at any time. This
opinion is limited to the fairness, from a financial point of view, of the
Exchange Ratio to the holders of Innovasive Common Stock, and Deutsche Banc
Alex. Brown expresses no opinion as to the merits of the underlying decision by
Innovasive Devices to engage in the Merger.
Deutsche Banc Alex. Brown, as a customary part of its investment banking
business, is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, private
placements and valuations for estate, corporate and other purposes. We have
acted as financial advisor to Innovasive Devices in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger and a portion of which is payable
upon delivery of this opinion. Deutsche Banc Alex. Brown and its predecessors
and affiliates have in the past provided financial services to Innovasive
Devices and Johnson & Johnson unrelated to the proposed Merger, for which
services Deutsche Banc Alex. Brown and its predecessors and affiliates have
received compensation. Deutsche Banc Alex. Brown maintains a market in
Innovasive Common Stock and regularly publishes research reports regarding the
businesses and securities of Innovasive Devices and Johnson & Johnson and other
publicly traded companies in the health care industry. In the ordinary course of
business, Deutsche Banc Alex. Brown and its affiliates also may actively trade
or hold the securities and other instruments and obligations of Innovasive
Devices and Johnson & Johnson for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities, instruments or obligations.
Based upon and subject to the foregoing, it is Deutsche Banc Alex. Brown's
opinion that, as of the date of this letter, the Exchange Ratio is fair, from a
financial point of view, to the holders of Innovasive Common Stock.
Very truly yours,
By: /s/ DEUTSCHE BANK SECURITIES
INC.
------------------------------------
DEUTSCHE BANK SECURITIES INC.
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<PAGE> 122
ANNEX 5
SECTIONS 85-98 OF MASSACHUSETTS BUSINESS CORPORATION LAW
SEC. 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SEC. 86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SEC. 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in
writing from the corporation (or, in the case of a consolidation or merger,
the name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in writing
that the corporate action has become effective, payment for his shares and
an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of
the General Laws of Massachusetts."
SEC. 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the
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meeting of the corporation of which he is a stockholder has become effective.
The giving of such notice shall not be deemed to create any rights in any
stockholder receiving the same to demand payment for his stock. The notice shall
be sent by registered or certified mail, addressed to the stockholder at his
last known address as it appears in the records of the corporation.
SEC. 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
SEC. 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SEC. 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
SEC. 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
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SEC. 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
SEC. 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SEC. 95. COSTS; INTEREST
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
SEC. 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation, or
in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to
and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
SEC. 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SEC. 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
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<PAGE> 125
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The New Jersey Business Corporation Act (the "NJBCA") provides that a New
Jersey corporation has the power to indemnify a director or officer against his
or her expenses and liabilities in connection with any proceeding involving the
director or officer by reason of his or her being or having been such a director
or officer, other than a proceeding by or in the right of the corporation, if
such director or officer acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation; and with respect to any criminal proceeding, such director or
officer had no reasonable cause to believe his or her conduct was unlawful.
The indemnification and advancement of expenses shall not exclude any other
rights, including the right to be indemnified against liabilities and expenses
incurred in proceedings by or in the right of the corporation, to which a
director or officer may be entitled under a certificate of incorporation,
by-law, agreement, vote of shareholders, or otherwise; provided, that no
indemnification shall be made to or on behalf of a director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his or her acts or omissions (a) were in breach of his or her
duty of loyalty to the corporation or its shareholders, (b) were not in good
faith or involved a knowing violation of law or (c) resulted in receipt by the
director or officer of an improper personal benefit.
The Registrant's Restated Certificate of Incorporation provides that, to
the full extent that the laws of the State of New Jersey permit the limitation
or elimination of the liability of directors or officers, no director or officer
of the Registrant shall be personally liable to the Registrant or its
stockholders for damages for breach of any duty owed to the Registrant or its
stockholders.
The By-laws of the Registrant provide that to the full extent permitted by
the laws of the State of New Jersey, the Registrant shall indemnify any person
(an "Indemnitee") who was or is involved in any manner (including, without
limitation, as a party or witness) in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative, arbitrative, legislative or investigative (including, without
limitation, any action, suit or proceeding by or in the right of the Registrant
to procure a judgment in its favor) (a "Proceeding"), or who is threatened with
being so involved, by reason of the fact that he or she is or was a director or
officer of the Registrant or, while serving as a director or officer of the
Registrant, is or was at the request of the Registrant also serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including, without limitation, any employee
benefit plan), against all expenses (including attorneys' fees), judgments,
fines, penalties, excise taxes and amounts paid in settlement actually and
reasonably incurred by the Indemnitee in connection with such Proceeding,
provided that, there shall be no indemnification under such By-laws with respect
to any settlement or other nonadjudicated disposition of any threatened or
pending Proceeding unless the Registrant has given its prior consent to such
settlement or disposition. The right of indemnification created by the By-laws
shall be a contract right enforceable by an Indemnitee against the Registrant,
and it shall not be exclusive of any other rights to which an Indemnitee may
otherwise be entitled. The indemnification provisions of the By-laws shall inure
to the benefit of the heirs and legal representatives of an Indemnitee and shall
be applicable to Proceedings commenced or continuing after the adoption of the
By-laws, whether arising from acts or omissions occurring before or after such
adoption. No amendment, alteration, change, addition or repeal of or to the
By-laws shall deprive any Indemnitee of any rights under the By-laws with
respect to any act or omission of such Indemnitee occurring prior to such
amendment, alteration, change, addition or repeal.
The Registrant enters into indemnification agreements with its directors
and officers and enters into insurance agreements on its own behalf. The
indemnification agreements provide that the Registrant agrees to hold harmless
and indemnify its directors and officers to the fullest extent authorized or
permitted by the NJBCA, or any other applicable law, or by any amendment thereof
or other statutory provisions authorizing or permitting such indemnification
that is adopted after the date hereof. Without limiting the
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<PAGE> 126
generality of the foregoing, the Registrant agrees to hold harmless and
indemnify its directors and officers to the fullest extent permitted by
applicable law against any and all expenses, judgments, fines, and amounts paid
in settlement actually and reasonably incurred by its directors and officers in
connection with the defense of any present or future threatened, pending, or
completed claim, action, suit, or proceeding by reason of the fact that they
were, are, shall be, or shall have been a director or officer of the Registrant,
or are or were serving, shall serve, or shall have served, at the request of the
Registrant, as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not applicable.
(c) Opinion of Deutsche Bank Securities Inc. (included as Annex 4 to the
proxy statement/prospectus which is a part of this Registration Statement).
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of
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<PAGE> 127
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New Brunswick, New Jersey on the
tenth day of January, 2000.
JOHNSON & JOHNSON,
By: /s/ R. S. LARSEN
------------------------------------
Name R. S. Larsen
Title: Chairman and Chief
Executive Officer
II-4
<PAGE> 129
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
J. S. Orban and S. M. Rosenberg, and each of them, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement and all documents
relating thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing necessary or
advisable to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R. S. LARSEN Chairman, Board of Directors, January 10, 2000
--------------------------------------------------- Chief Executive Officer and
Director (Principal Executive
Officer)
/s/ R. J. DARRETTA Vice President, Finance January 7, 2000
--------------------------------------------------- (Principal Financial Officer)
(R. J. Darretta)
/s/ C. E. LOCKETT Controller (Principal January 10, 2000
--------------------------------------------------- Accounting Officer)
(C. E. Lockett)
/s/ G. N. BURROW Director January 6, 2000
---------------------------------------------------
(G. N. Burrow)
Director
---------------------------------------------------
(J. G. Cooney)
/s/ J. G. CULLEN Director January 10, 2000
---------------------------------------------------
(J. G. Cullen)
/s/ M. J. FOLKMAN Director January 10, 2000
---------------------------------------------------
(M. J. Folkman)
/s/ A. D. JORDAN Director January 5, 2000
---------------------------------------------------
(A. D. Jordan)
/s/ A. G. LANGBO Director January 10, 2000
---------------------------------------------------
(A. G. Langbo)
</TABLE>
II-5
<PAGE> 130
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Director
---------------------------------------------------
(J. S. Mayo)
/s/ L. F. MULLIN Director January 7, 2000
---------------------------------------------------
(L. F. Mullin)
/s/ P. J. RIZZO Director January 6, 2000
---------------------------------------------------
(P. J. Rizzo)
/s/ H. B. SCHACHT Director January 10, 2000
---------------------------------------------------
(H. B. Schacht)
/s/ M. F. SINGER Director January 7, 2000
---------------------------------------------------
(M. F. Singer)
/s/ J. N. SNOW Director January 10, 2000
---------------------------------------------------
(J. W. Snow)
/s/ R. N. WILSON Director January 10, 2000
---------------------------------------------------
(R. N. Wilson)
</TABLE>
II-6
<PAGE> 131
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
<C> <S>
2.1 Agreement and Plan of Merger and Reorganization dated as of
November 8, 1999, among Johnson & Johnson, Raptor
Acquisition Corp. and Innovasive Devices, Inc. (included as
Annex 1 to the proxy statement/prospectus which is a part of
this Registration Statement).
4.1* Provisions of the Restated Certificate of Incorporation of
Johnson & Johnson dated May 21, 1996, that define the rights
of security holders of Johnson & Johnson (incorporated by
reference to Exhibit 3 to Johnson & Johnson's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1996).
4.2* Provisions of the Bylaws of Johnson & Johnson, as amended
effective April 23, 1999, that define the rights of security
holders of Johnson & Johnson (incorporated by reference to
Exhibit 3 to Johnson & Johnson's Quarterly Report on Form
10-Q for the quarterly period ended July 4, 1999).
5.1 Opinion of Joseph S. Orban, Esq., Associate General Counsel
of Johnson & Johnson, regarding the legality of the
securities being issued.
8.1 Opinion of Choate, Hall & Stewart regarding certain tax
matters.
9.1 Stockholders Agreement dated as of November 8, 1999, between
Johnson & Johnson and certain stockholders of Innovasive
Devices, Inc. (included as Annex 3 to the proxy
statement/prospectus which is a part of this Registration
Statement).
10.1 Stock Option Agreement dated as of November 8, 1999, between
Innovasive Devices, Inc., and Johnson & Johnson (included as
Annex 2 to the proxy statement/prospectus which is a part of
this Registration Statement).
23.1 Consent of Independent Accountants.
23.2 Consent of Independent Accountants.
23.3 Consent of Joseph S. Orban, Esq., Associate General Counsel
of Johnson & Johnson (included in Exhibit 5.1).
23.4 Consent of Choate, Hall & Stewart (included in Exhibit 8.1).
23.5 Consent of Deutsche Bank Securities Inc.
24.1 Power of Attorney (included on the signature page of this
Registration Statement).
99.1 Form of Proxy Card of Innovasive Devices, Inc.
99.2 Opinion of Deutsche Bank Securities Inc. (included as Annex
4 to the proxy statement/prospectus which is a part of this
Registration Statement).
</TABLE>
- ---------------
* Incorporated by reference.
<PAGE> 1
Exhibit 5.1
[Letterhead of Johnson & Johnson]
January 10, 2000
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Dear Ladies and Gentlemen:
I am Associate General Counsel of Johnson & Johnson, a New Jersey
corporation (the "Company"), and I am familiar with the Registration Statement
on Form S-4 (the "Registration Statement") being filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
relating to the proposed issuance of shares of the Company's Common Stock, par
value $1.00 per share ("Common Stock"), in connection with the merger of Raptor
Acquisition Corp., a Massachusetts corporation and a wholly owned subsidiary of
the Company ("Merger Sub"), into Innovasive Devices, Inc., a Massachusetts
corporation ("Innovasive"), pursuant to the terms of the Agreement and Plan of
Merger and Reorganization dated as of November 8, 1999 (the "Merger Agreement")
among the Company, Merger Sub and Innovasive.
I have reviewed the Company's Restated Certificate of Incorporation and
By-laws and such other corporate records of the Company and documents and
certificates of public officials and others as I have deemed necessary as a
basis for the opinion hereinafter expressed.
Based on the foregoing and having regard for such legal considerations as I
deem relevant, I am of the opinion that the shares of Common Stock covered by
the Registration Statement when delivered in exchange for shares of Innovasive
common stock pursuant to the Merger Agreement will be duly authorized, validly
issued, fully paid and nonassessable.
I hereby consent to the use of my name under the caption "Legal Matters" in
the Proxy Statement/Prospectus constituting a part of the Registration Statement
and to the use of this opinion as an Exhibit to the Registration Statement.
Very truly yours,
/s/ Joseph S. Orban
--------------------------------------
Name: Joseph S. Orban
Title: Associate General Counsel
<PAGE> 1
EXHIBIT 8.1
[CHOATE, HALL & STEWART LETTERHEAD]
January 10, 2000
Innovasive Devices, Inc.
734 Forest Street
Marlborough, MA 01752
Dear Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of
a registration statement (the "Registration Statement") on Form S-4, which
includes the Joint Proxy Statement and Prospectus relating to the Agreement and
Plan of Merger dated November 8, 1999 (the "Merger Agreement"), pursuant to
which Raptor Acquisition, Inc., ("Sub"), a Massachusetts corporation and a
wholly-owned subsidiary of Johnson & Johnson, a New Jersey corporation, will be
merged (the "Merger") with and into Innovasive Devices, Inc. ("Innovasive"), a
Massachusetts corporation, with Innovasive surviving the Merger. Except as
otherwise provided, capitalized terms not defined herein have the meanings set
forth in the Merger Agreement and the exhibits thereto. All section references,
unless otherwise indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
The opinions set forth below are based upon the Code, judicial
decisions, and administrative regulations and published rulings and other
pronouncements, all as in effect and existing on the date hereof. The law
expressed in the Code and in such decisions, regulations, and rulings is subject
to change at any time (and any such change could have retroactive effect), and
future legislative, judicial, or administrative actions could affect the
opinions expressed herein. We assume no obligation to inform you of such
changes.
The opinions set forth below are not binding on the Internal Revenue
Service or the courts and there can be no assurance that the Internal Revenue
Service or courts would agree with our conclusions. No ruling has been or will
be requested from the Internal Revenue Service concerning the U.S. federal
income tax consequences of the Merger. Our opinion is based on the facts and
assumptions stated herein. Any variation or differences in the facts recited
herein for any reason might affect the conclusions stated herein in an adverse
manner or make them inapplicable.
<PAGE> 2
Innovasive Devices, Inc.
January 10, 2000
Page 2
We have formed our opinions after review of, and in reliance upon, the
Merger Agreement, including all exhibits and attachments thereto, and the
Registration Statement. We have assumed that all documents presented to us as
originals are authentic, that all signatures are genuine, and that all copies of
documents fully conform to authentic original documents. We have further assumed
that all facts, representations, and warranties set forth in the Merger
Agreement (including exhibits thereto), and Registration Statement are true and
accurate and will continue to be true and accurate at the Effective Time, that
all conditions and covenants to closing set forth in the Merger Agreement and
pertinent to these opinions will be met and will not be waived, and that all
other documents provided for in the Merger Agreement will be properly executed
and delivered prior to the Effective Time. We have assumed that any
representation or statement made "to the best of knowledge" or similarly
qualified is correct without such qualification. We have also assumed that all
representations provided to us by Johnson & Johnson, Sub and Innovasive in the
attached certificates are true and accurate and will continue to be true and
accurate at the Effective Time.
Our opinions are limited to the specific federal income tax matters
described below. No other opinions should be inferred. In particular, these
opinions do not address any issues relating to any state, local, or foreign
taxes. Except as specifically stated below, these opinions also do not address
the tax consequences of the Merger for any taxpayer other than Innovasive and
its shareholders, including Johnson & Johnson and the stockholders thereof.
Based on and subject to the foregoing, we are of the opinion that as of
the Effective Time for federal income tax purposes:
1. The Merger will qualify as a "reorganization" within the
meaning of section 368(a)(1)(A) and 368(a)(2)(E);
2. No gain or loss will be recognized by Innovasive as a result
of the Merger;
3. No gain or loss will be recognized by an Innovasive
shareholder on the receipt of solely Johnson & Johnson common
stock in exchange for Innovasive common stock in the Merger;
4. The basis of the shares of Johnson & Johnson common stock
received by an Innovasive stockholder in exchange for
Innovasive common stock in the Merger will equal the basis of
the Innovasive common stock surrendered in exchange therefor
(excluding any basis allocable to a fractional share of
Johnson & Johnson common stock for which cash is received);
5. The holding period for the shares of Johnson & Johnson common
stock received in exchange for the shares of Innovasive common
stock in the Merger will include the holding period of the
Innovasive common stock exchanged for Johnson & Johnson
<PAGE> 3
Innovasive Devices, Inc.
January 10, 2000
Page 3
common stock, provided that the Innovasive common stock was
held as a capital asset by the stockholder at the Effective
Time; and
6. To the extent it addresses matters of law or legal
conclusions, the discussion of federal income tax consequences
concerning Innovasive and its shareholders set forth in the
Registration Statement is accurate in all material respects,
subject to the limitations and qualifications set forth in the
Registration Statement and this letter.
These opinions are intended solely for the benefit of Innovasive and
its stockholders and not for the benefit of any other person or entity, and may
not be made available to or relied upon by any other person or entity without
our prior written consent. We hereby consent to the inclusion of a copy of this
opinion letter as an Exhibit to the Registration Statement and to all references
to us and to this opinion letter in the Registration Statement.
Very truly yours,
/s/ CHOATE, HALL & STEWART
--------------------------
CHOATE, HALL & STEWART
KAG
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Johnson & Johnson of our report dated January 25,
1999, except as to the pooling of interests with Centocor, Inc. which is as of
October 6, 1999, relating to our audit of the supplemental consolidated
financial statements of Johnson & Johnson and subsidiaries as of January 3,
1999 and December 28, 1997, and for each of the three fiscal years in the
period ended January 3, 1999, which report appears in the Current Report on
Form 8-K of Johnson & Johnson filed on December 14, 1999. We also consent to
the incorporation by reference in such Registration Statement of our report
dated January 25, 1999 relating to our audit of the consolidated financial
statements and financial statement schedule of Johnson & Johnson and
subsidiaries as of January 3, 1999 and December 28, 1997, and for each of the
three fiscal years in the period ended January 3, 1999, which report is included
in the Johnson & Johnson 1998 Annual Report to Shareowners, which is
incorporated by reference in its Annual Report on Form 10-K for the fiscal
year ended January 3, 1999. We also consent to the references to us under the
headings "Experts" and "Selected Historical Consolidated Financial Data" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
New York, New York
January 10, 2000
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Innovasive Devices, Inc.
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Johnson & Johnson of our report dated February 18,
1999 relating to the financial statements and financial statement schedule
appearing in Innovasive Devices, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1998. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
------------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 10, 2000
<PAGE> 1
Exhibit 23.5
CONSENT
of
Deutsche Bank Securities Inc.
We hereby consent to (i) the inclusion of our opinion letter, dated November 8,
1999, to the Board of Directors of Innovasive Devices, Inc. ("Innovasive") as
Annex 4 to the Joint Proxy Statement/Prospectus forming part of this
Registration Statement on Form S-4, and (ii) references made to our firm and
such opinion in such Joint Proxy Statement/Prospectus. In giving such consent,
we do not admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as Amended, and the
Rules and Regulations promulgated thereunder, and we do not admit that we are
experts with respect to any part of the Registration Statement within the
meaning of the term "expert" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder
DEUTSCHE BANK SECURITIES INC.
By: /s/ Donald Munoz
-----------------------
Name: Donald Munoz
----------------------
Title: Vice President
---------------------
January 7, 2000
<PAGE> 1
EXHIBIT 99.1
INNOVASIVE DEVICES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 11, 2000
The undersigned stockholder of Innovasive Devices, Inc. ("Innovasive"),
revoking all prior proxies, hereby appoints Joseph S. Orban and Steven M.
Rosenberg, or any of them acting singly, proxies, with full power of
substitution, to vote all shares of capital stock of Innovasive which the
undersigned is entitled to vote at the special meeting of stockholders to be
held on Friday, February 11, 2000 at 10:00 a.m., local time, at the offices of
Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston, Massachusetts,
upon matters set forth in the Notice of Special Meeting of Stockholders dated
January 10, 2000 and the related proxy statement/prospectus, copies of which
have been received by the undersigned, and in their discretion upon any
adjournment of the meeting or upon any other business that may properly be
brought before the meeting by the Innovasive board of directors. Attendance of
the undersigned at the meeting or any adjourned session thereof will not be
deemed to revoke this proxy unless the undersigned shall affirmatively indicate
the intention of the undersigned to vote the shares represented hereby in person
prior to the exercise of this proxy.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INNOVASIVE
DEVICES, INC. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE.
(Continued on reverse side)
(Please fill in the appropriate boxes on the other side)
<PAGE> 2
(Continued from other side)
INNOVASIVE DEVICES, INC.
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
To adopt the Agreement and Plan of Merger and Reorganization dated as of
November 8, 1999, among Johnson & Johnson, Raptor Acquisition Corp. and
Innovasive Devices, Inc.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO THE PROPOSAL SET FORTH ABOVE, WILL BE VOTED
FOR THE PROPOSAL.
DATED: , 2000
Signature of Shareholder(s)
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Please promptly complete, date and sign this proxy and mail it in the
enclosed envelope to assure representation of your shares. No postage need be
affixed if mailed in the United States. PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON
THE STOCK CERTIFICATE.
If the stockholder is a corporation, please sign full corporate name by
president or other authorized officer and, if a partnership, please sign the
full partnership name by an authorized partner or other persons.
Mark here if you plan to attend the meeting [ ]
