UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _______________)*
SOFAMOR DANEK GROUP, INC.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
834005 10 0
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(CUSIP Number)
Carol E. Malkinson, Esq.
Medtronic, Inc.
7000 Central Ave. N.E.
Minneapolis, Minnesota 55432
(612) 514-4000
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
November 1, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
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CUSIP No. 834005 10 0 Page 2 of 7 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Medtronic, Inc.
41-0793183
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Minnesota
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7 SOLE VOTING POWER
5,366,478 (1)
NUMBER OF
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SHARES 8 SHARED VOTING POWER
BENEFICIALLY 3,281,838 (1)
OWNED BY
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 5,366,478 (1)
PERSON
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WITH 10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,648,316 (includes 3,281,838 shares which are subject to the
Agreements to Facilitate Merger)(1)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.7%(1)
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14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
HC
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(1) 5,366,478 of the shares of Common Stock of Sofamor Danek Group, Inc. ("SDG")
covered by this Statement are subject to a Stock Option Agreement dated November
1, 1998 and 3,281,838 shares covered by this Statement are subject to Agreements
to Facilitate Merger dated on or after such date, and described in Item 3 of
this Statement. Nothing herein shall be deemed to be an admission by Medtronic,
Inc. ("Medtronic") as to the beneficial ownership of any shares of SDG, and
Medtronic hereby disclaims beneficial ownership of all shares of SDG which are
subject to the Stock Option Agreement or the Agreements to Facilitate Merger.
<PAGE>
Item 1. Security and Issuer
The class of equity security to which this statement relates is the Common
Stock, no par value, of Sofamor Danek Group, Inc. ("SDG"). The name and address
of the principal executive offices of the issuer of such securities are Sofamor
Danek Group, Inc., 1800 Pyramid Place, Memphis, TN 38132.
Item 2. Identity and Background
(a), (b) and (c)
Medtronic, Inc. ("Medtronic"), 7000 Central Ave. N.E., Minneapolis, Minnesota
55432, is a Minnesota corporation, principally engaged in the business of
therapeutic medical technology, specializing in implantable and interventional
therapies. Information is provided below with respect to persons who are
directors and executive officers of the reporting person.
William W. George, Chairman, Chief Executive Officer and Director, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Arthur D. Collins, Jr., President, Chief Operating Officer and Director,
Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Glen D. Nelson, M.D., Vice Chairman and Director, Medtronic, Inc., 7000 Central
Avenue N.E., Minneapolis, MN 55432;
William R. Brody, M.D., Ph.D., Director, Medtronic, Inc., President, The Johns
Hopkins University, 3400 North St. Charles St., 242 Garland Hall, Baltimore, MD
21218;
Paul W. Chellgren, Director, Medtronic, Inc., Chairman and Chief Executive
Officer, Ashland Inc., 1000 Ashland Drive, Russell, KY 41114;
Antonio M. Gotto, Jr., M.D., Director, Medtronic, Inc., Dean, Cornell University
Medical College, Medical Affairs Provost, Cornell University, Office of the
Dean, 1300 York Avenue, New York, NY 10021;
Bernadine P. Healy, M.D., Director, Medtronic, Inc., Dean, College of Medicine,
Ohio State University, 254 Meiling Hall, 370 W. 9th Avenue, Columbus, OH 43210;
Thomas E. Holloran, Director, Medtronic, Inc., Professor, Graduate School of
Business, University of St. Thomas, 1000 LaSalle Avenue - Suite 343,
Minneapolis, MN 55403-2005;
Jean-Pierre Rosso, Director, Medtronic, Inc., Chairman and Chief Executive
Officer, Case Corporation, 700 State Street, Racine, WI 53404;
Richard L. Schall, Director, Medtronic, Inc., Consultant, 4900 IDS Center, 80
South 8th Street, Minneapolis, MN 55402;
Jack W. Schuler, Director, Medtronic, Inc., Chairman, Stericycle, Inc. and
Ventana Medical Systems, Inc., 1419 Lake Cook Road, Suite 410, Deerfield, IL
60015;
Gerald W. Simonson, Director, Medtronic, Inc., President and Chief Executive
Officer, Omnetics Connector Corporation, 7260 Commerce Circle East, Fridley, MN
55432;
Gordon M. Sprenger, Director, Medtronic, Inc., Executive Officer, Allina Health
System, 5601 Smetana Drive, Minneapolis, MN 55440;
Richard A. Swalin, Ph.D., Director, Medtronic, Inc., Professor Emeritus, The
University of Arizona, 4715 East Fort Lowell Road, Tucson, AZ 85712;
Bill K. Erickson, Senior Vice President and President, Americas, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Janet S. Fiola, Senior Vice President, Human Resources, Medtronic, Inc., 7000
Central Avenue N.E., Minneapolis, MN 55432;
B. Kristine Johnson, Senior Vice President and Chief Administrative Officer,
Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
<PAGE>
Philip M. Laughlin, Senior Vice President and President, Cardiac Surgery,
Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Ronald E. Lund, Senior Vice President, General Counsel and Secretary, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Stephen H. Mahle, Senior Vice President and President, Cardiac Rhythm
Management, Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
John A. Meslow, Senior Vice President and President, Neurological, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Robert L. Ryan, Senior Vice President and Chief Financial Officer, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Barry W. Wilson, Senior Vice President and President, Europe, Middle East and
Africa, Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432.
(d) and (e)
To the knowledge of the reporting person, neither the reporting person nor any
of the persons listed above has, during the last five years, been convicted in a
criminal proceeding or was, during the last five years, a party to a civil
proceeding as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) All of the individuals referred to above are United States citizens, except
Mr. Wilson, who is a dual citizen of the United Kingdom and South Africa.
Item 3. Source and Amount of Funds or Other Consideration
This Statement relates to the execution of a certain Stock Option Agreement
dated November 1, 1998, between SDG and Medtronic (the "Stock Option
Agreement"), and to the execution of certain Agreements to Facilitate Merger
(the "Agreements to Facilitate Merger") between Medtronic and each of the
following SDG shareholders: L. D. Beard; George W. Bryan, Sr.; Yves Paul Cotrel,
M.D.; James J. Gallogly; Samuel F. Hulbert, Ph.D.; E. R. Pickard; George F.
Rapp, M.D.; Robert A. Compton; Laurence Y. Fairey; George Griffin III; Stephen
S. Phillips; and Marie-Helene Plais. The Stock Option Agreement and the
Agreements to Facilitate Merger were entered into as an inducement to Medtronic
to enter into the Agreement and Plan of Merger (the "Merger Agreement"), dated
November 1, 1998, among Medtronic, SDG and MSD Merger Corp. ("Merger
Subsidiary"), a wholly owned subsidiary of Medtronic. Pursuant to the Merger
Agreement and subject to the conditions set forth therein, Merger Subsidiary
will merge with and into SDG (the "Merger"), and each issued and outstanding
share of Common Stock of SDG will be converted into the right to receive shares
of Medtronic Common Stock, par value $.10 per share, determined pursuant to the
formula set forth in the Merger Agreement.
Pursuant to the Stock Option Agreement, SDG granted Medtronic the option to
purchase, at an exercise price of $115.00 per share, 5,366,478 shares of SDG
Common Stock, which was represented in the Stock Option Agreement to reflect at
least 19.9% of the SDG Common Stock outstanding on the date of the Stock Option
Agreement's execution. The option described in the Stock Option Agreement (the
"Option") is not exercisable until and unless the occurrence of certain events
related to the termination of the Merger Agreement under certain circumstances.
If the Option becomes exercisable, any shares purchased pursuant to the exercise
of the Option would be made with funds from Medtronic's working capital. If the
Option becomes exercisable, under certain circumstances, Medtronic can, in lieu
of exercising its Option, put such Option to SDG and receive a Cancellation
Amount from SDG in cash therefor.
<PAGE>
Pursuant to the Agreements to Facilitate Merger, each of the persons noted above
agrees to vote all of such person's SDG shares in favor of approval of the
Merger Agreement and the Merger and against any other action that would impede
or discourage the Merger. Copies of the Stock Option Agreement, the form of the
Agreement to Facilitate Merger and the Merger Agreement are included as Exhibits
to this Statement and are incorporated herein by reference. The foregoing
descriptions of such Agreements are qualified in their entirety by reference to
such Exhibits.
Item 4. Purpose of Transaction
The purpose of the transactions described in Item 3 is to facilitate approval
and consummation of the Merger. Other than in connection with the Merger
described above, Medtronic has no plans or proposals which relate to or would
result in any of the matters listed in paragraphs (a) through (j) of Item 4 of
Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) and (b) As a result of the Stock Option Agreement, Medtronic may be deemed
to be the beneficial owner of 5,366,478 shares of Common Stock of SDG, and as a
result of the Agreements to Facilitate Merger, Medtronic may be deemed to be the
beneficial owner of 3,281,838 shares of Common stock of SDG which represent the
shares beneficially owned by the individuals executing such Agreements,
including the shares purchasable upon exercise of options held by such
individuals that are currently exercisable or become exercisable within sixty
days. Such 8,648,316 shares covered by the Stock Option Agreement and Agreements
to Facilitate Merger would represent approximately 26.7% of the shares of SDG
(based on the number of shares of SDG Common Stock outstanding on November 1,
1998, as represented to Medtronic by SDG plus the 5,366,478 shares subject to
the Stock Option Agreement). Nothing herein, however, shall be deemed to be an
admission by Medtronic that it beneficially owns any of the shares covered by
the Stock Option Agreement or the Agreements to Facilitate Merger, and Medtronic
hereby disclaims beneficial ownership of all shares covered by such Agreements.
To the knowledge of the reporting person, no other person named in Item 2
beneficially owns any SDG shares.
(c) To the knowledge of the reporting person, the only transactions in the
Common Stock of SDG by any person named in paragraph (a) above during the past
60 days are the Stock Option Agreement and Agreements to Facilitate Merger
reported in Item 3 above.
(d) No other person (other than the SDG shareholders who have signed an
Agreement to Facilitate Merger in the case of the shares covered by such
shareholders' Agreement to Facilitate Merger) is known to have the right to
receive or the power to direct the receipt of dividends from, or the proceeds of
the sale of, the subject securities.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
See Item 3 for a description of the Stock Option Agreement, Agreements to
Facilitate Merger and Merger Agreement.
<PAGE>
Item 7. Material to Be Filed as Exhibits
Exhibit A - Stock Option Agreement
Exhibit B - Form of Agreement to Facilitate Merger
Exhibit C - Agreement and Plan of Merger
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 10, 1998
MEDTRONIC, INC.
By: /s/ Robert L. Ryan
Its: Senior Vice President and Chief Financial
Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description
A Stock Option Agreement
B Form of Agreement to Facilitate Merger
C Agreement and Plan of Merger
STOCK OPTION AGREEMENT
THIS AGREEMENT is dated as of November 1, 1998, between Medtronic,
Inc., a Minnesota corporation ("Grantee"), and Sofamor Danek Group, Inc., an
Indiana corporation ("Issuer").
RECITALS
A. Grantee, Issuer, and MSD Merger Corp., an Indiana corporation and
wholly-owned subsidiary of Grantee ("Merger Subsidiary"), have entered into an
Agreement and Plan of Merger (the "Merger Agreement") which provides, among
other things, that, upon the terms and subject to the conditions thereof, Merger
Subsidiary will be merged with and into Issuer (the "Merger").
B. As a condition to its willingness to enter into the Merger
Agreement, Grantee has required that Issuer enter into this Agreement, which
provides, among other things, that Issuer grant to Grantee an option to purchase
shares of Issuer's Common Stock, no par value ("Issuer Common Stock"), upon the
terms and subject to the conditions provided for herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this Agreement and the Merger Agreement, the parties
agree as follows:
1. Grant of Option. Subject to the terms and conditions of this
Agreement, Issuer hereby grants to Grantee an irrevocable option (the "Option")
to purchase 5,366,478 shares of Issuer Common Stock (the "Option Shares"), in
the manner set forth below, at an exercise price of $115 per share of Issuer
Common Stock, subject to adjustment as provided below (the "Option Price").
Issuer represents that the Option Shares represent at least 19.9% of the number
of shares of Issuer Common Stock outstanding on the date hereof. Capitalized
terms used herein but not defined herein shall have the meanings set forth in
the Merger Agreement.
2. Exercise of option.
(a) Subject to the terms and conditions of this Agreement,
Grantee or its designee (which shall be a wholly-owned subsidiary of
Grantee) may, prior to the Expiration Date (as defined in Section 11),
exercise the option, in whole or in part, at any time or from time to
time on or after the occurrence of an Exercise Event (as defined
below). As used herein, an "Exercise Event" shall mean any event or
circumstance the occurrence of which results in the fee specified in
Section 7.2(a) of the Merger Agreement becoming payable to Grantee,
after demand by Grantee, or the additional $40 Million fee specified in
Section 7.2(b) of the Merger Agreement becoming payable to Grantee,
after demand by Grantee.
(b) In the event Grantee wishes to exercise the Option at such
time as the Option is exercisable, Grantee shall deliver written notice
(the "Exercise Notice") to Issuer specifying its intention to exercise
the Option, the total number of Option Shares it wishes to purchase,
and a date and time for the closing of such purchase (a "Closing") not
less than three nor more than 30 business days after the later of (i)
the date such Exercise Notice is given and (ii) the expiration or
termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). When this Option is exercisable, Grantee, in lieu of
exercising the Option, shall have the right at any time thereafter
prior to the Expiration Date to request in writing that Issuer pay, and
promptly (but in any event not more than ten business days) after
Grantee makes such request, Issuer shall, subject to Section 2(c)
below, pay to Grantee by certified check, official bank check or wire
transfer pursuant to Grantee's instructions, in cancellation of the
option, an amount in cash (the "Cancellation Amount") equal to (i) the
lesser of
<PAGE>
(x) the excess, if any, over the Option Price of the
greater of (A) the last sale price of a share of Issuer Common
Stock as reported on the New York Stock Exchange on the last
trading day prior to the date of the Exercise Notice, (B) the
highest price per share of Issuer Common Stock offered to be
paid or paid in connection with any Alternative Transaction
and (C) in the case of any Alternative Transaction structured
as an asset acquisition, the highest aggregate consideration
offered to be paid or paid in any such transaction or proposed
transaction, divided by the number of shares of Issuer Common
Stock then outstanding, and
(y) $105 Million divided by the initial number of
Option Shares,
multiplied by (ii) the number of Option Shares then covered by the
Option; provided, however, that if, prior to payment of the
Cancellation Amount, Grantee has been paid by Issuer a termination fee
described in Section 7.2 (a) or (b)of the Merger Agreement (the
"Termination Fee"), then the Cancellation Amount shall be reduced (but
not below zero) to the extent necessary so that the sum of the
Termination Fee and the Cancellation Amount shall not exceed $105
Million. If all or a portion of the price per share of Issuer Common
Stock offered, paid, or payable or the aggregate consideration offered,
paid, or payable for the assets of Issuer, each as contemplated by the
preceding sentence, consists of noncash consideration, such price or
aggregate consideration shall be the cash consideration, if any, plus
the fair market value of the noncash consideration as mutually
determined by the investment bankers of Issuer and the investment
bankers of Grantee. In no event shall (i) the Cancellation Amount
exceed $105 Million or (ii) the sum of the Termination Fee paid plus
the Cancellation Amount exceed $105 Million.
(c) Following exercise of the Option by Grantee, in the event
that Grantee thereafter at any time sells, pledges, or otherwise
disposes of (including, without limitation, by merger or exchange) any
of the Option Shares (a "Sale"), then any Termination Fee due and
payable by Issuer following such time shall be reduced to the extent
necessary so that the sum of
(x) the Termination Fee and
(y) the amount received (whether in cash, loan
proceeds, securities, or otherwise) by Grantee in such Sale
less the exercise price of such Option Shares sold in the Sale
(the "Option Share Profit")
shall not exceed $105 Million. If Issuer has paid to Grantee the
Termination Fee prior to the Sale, then Grantee shall remit to Issuer,
within ten business days after completion of any sale, the excess, if
any, of the Option Share Profit which, when added to the Termination
Fee already paid, exceeds $105 Million.
3. Payment of Option Price and Delivery of Certificate. Any Closings
under Section 2 of this Agreement shall be held at the principal executive
offices of Issuer, or at such other place as Issuer and Grantee may agree. At
any Closing hereunder, (a) Grantee or its designee will make payment to Issuer
of the aggregate price for the Option Shares being so purchased by delivery of a
certified check, official bank check, or wire transfer of funds pursuant to
Issuer's instructions payable to Issuer in an amount equal to the product
obtained by multiplying the Option Price by the number of Option Shares to be
purchased, and (b) upon receipt of such payment Issuer will deliver to Grantee
or its designee (which shall be a wholly-owned subsidiary of Grantee) a
certificate or certificates representing the number of validly issued, fully
paid, and nonassessable Option Shares so purchased, in the denominations and
registered in such names (which shall be Grantee or a wholly-owned subsidiary of
Grantee) designated in writing to Issuer by Grantee.
<PAGE>
4. Registration and Listing of Option Shares.
(a) Issuer agrees to use its reasonable best efforts to (i)
effect as promptly as possible upon the request of Grantee and (ii)
cause to become and remain effective for a period not in excess of six
months from the day such registration statement first becomes effective
(or such shorter period as may be necessary to effect the distribution
of such shares) the registration under the 1933 Act, and any applicable
state securities laws, of all or any part of the Option Shares as may
be specified in such request; provided, however, that (i) Grantee shall
have the right to select the managing underwriter for any such offering
after consultation with Issuer, which managing underwriter shall be
reasonably acceptable to Issuer, (ii) Grantee shall not be entitled to
more than two effective registration statements hereunder, and (iii)
Grantee shall not be entitled to request such a registration statement
within a period of one year after the effective date of a registration
statement in which Grantee was entitled to include all or a portion of
the Option Shares.
(b) In addition to such demand registrations, if Issuer
proposes to effect a registration of Issuer Common Stock for its own
account or for the account of any other shareholder of Issuer (other
than in connection with (i) employee stock option plans or similar
arrangements or (ii) corporate acquisitions), Issuer will give prompt
written notice to all holders of Options or Option Shares of its
intention to do so and shall use its reasonable best efforts to include
therein all Option Shares requested by Grantee to be so included. No
registration effected under this Section 4(b) shall relieve Issuer of
its obligations to effect demand registrations under Section 4(a)
hereof.
(c) Registrations effected under this Section 4 shall be
effected at Issuer's expense, including the fees and expenses of
counsel to the holder of Options or Option Shares, but excluding
underwriting discounts and commissions to brokers or dealers. In
connection with each registration under this Section 4, Issuer shall
indemnify and hold each holder of Options or Option Shares
participating in such offering (a "Holder"), its underwriters, and each
of their respective affiliates harmless against any and all losses,
claims, damage, liabilities, and expenses (including, without
limitation, investigation expenses and fees and disbursements of
counsel and accountants), joint or several, to which such Holder, its
underwriters, and each of their respective affiliates may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages, liabilities, or expenses (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (including any prospectus therein), or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
other than such losses, claims, damages, liabilities, or expenses (or
actions in respect thereof) that arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in written information furnished by a Holder to Issuer
expressly for use in such registration statement.
(d) In connection with any registration statement pursuant to
this Section 4, each Holder agrees to furnish Issuer with such
information concerning itself and the proposed sale or distribution as
shall reasonably be required in order to ensure compliance with the
requirements of the 1933 Act. In addition, Grantee shall indemnify and
hold Issuer, its underwriters and each of their respective affiliates
harmless against any and all losses, claims, damages, liabilities, and
expenses (including, without limitation, investigation expenses and
fees and disbursements of counsel and accountants), joint or several,
to which Issuer, its underwriters, and each of their respective
affiliates may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages, liabilities, or expenses (or actions
in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in written
information furnished by any Holder to Issuer expressly for use in such
registration statement.
<PAGE>
(e) Upon the issuance of Option Shares hereunder, Issuer will
use its reasonable best efforts promptly to list such Option Shares
with the New York Stock Exchange or on such national or other exchange
on which the shares of Issuer Common Stock are at the time listed.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Indiana and has
requisite corporate power and authority to enter into and perform this
Agreement.
(b) The execution and delivery of this Agreement by Issuer and
the consummation by Issuer of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Issuer,
and no other corporate proceedings on the part of Issuer are necessary
to authorize this Agreement or to consummate the transactions
contemplated hereby. The Board of Directors of Issuer has duly approved
the issuance and sale of the Option Shares, upon the terms and subject
to the conditions contained in this Agreement, and the consummation of
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Issuer and, assuming this Agreement
has been duly and validly authorized, executed, and delivered by
Grantee, constitutes a valid and binding obligation of Issuer
enforceable against Issuer in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting or relating to creditors, rights generally; the
availability of injunctive relief and other equitable remedies; and
limitations imposed by law on indemnification for liability under
federal securities laws.
(c) Issuer has taken all necessary action to authorize and
reserve for issuance and to permit it to issue, and at all times from
the date of this Agreement through the date of expiration of the Option
will have reserved for issuance upon exercise of the Option, such
number of authorized shares of Issuer Common Stock as is equal to the
number of Option Shares (or such other amount as may be required
pursuant to Section 10 hereof), each of which, upon issuance pursuant
to this Agreement and when paid for as provided herein, will be validly
issued, fully paid, and nonassessable, and shall be delivered free and
clear of all claims, liens, charges, encumbrances, and security
interests and not subject to any preemptive rights.
(d) The execution, delivery, and performance of this Agreement
by Issuer and the consummation by it of the transactions contemplated
hereby except as required by the HSR Act (if applicable), and, with
respect to Section 4, compliance with the provisions of the 1933 Act
and any applicable state securities laws, do not require the consent,
waiver, approval, license, or authorization of or result in the
acceleration of any obligation under, or constitute a default under,
any term, condition, or provision of any charter or bylaw, or any
indenture, mortgage, lien, lease, agreement, contract, instrument,
order, judgment, ordinance, regulation, or decree or any restriction to
which Issuer or any property of Issuer or its subsidiaries is bound,
except where the failure to obtain such consents, waivers, approvals,
licenses, or authorizations or where such acceleration or defaults
could not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.
<PAGE>
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Minnesota and has
requisite corporate power and authority to enter into and perform this
Agreement.
(b) The execution and delivery of this Agreement by Grantee
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Grantee, and
no other corporate proceedings on the part of Grantee are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered
by Grantee and, assuming this Agreement has been duly executed and
delivered by Issuer, constitutes a valid and binding obligation of
Grantee enforceable against Grantee in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting or relating to creditors' rights generally; the
availability of injunctive relief and other equitable remedies; and
limitations imposed by law on indemnification for liability under
federal securities laws.
(c) Grantee or its designee is acquiring the Option and it
will acquire the Option Shares issuable upon the exercise thereof for
its own account and not with a view to the distribution or resale
thereof in any manner not in accordance with applicable law.
7. Covenants of Grantee. Grantee agrees not to transfer or otherwise
dispose of the Option or the Option Shares, or any interest therein, except in
compliance with the 1933 Act and any applicable state securities law. Grantee
further agrees to the placement of the following legend on the certificates
representing the Option Shares (in addition to any legend required under
applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER EITHER (1) THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR (2) ANY APPLICABLE STATE LAW GOVERNING
THE OFFER AND SALE OF SECURITIES. NO TRANSFER OR OTHER
DISPOSITION OF THESE SHARES, OR OF ANY INTEREST THEREIN, MAY
BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND SUCH OTHER STATE LAWS OR PURSUANT TO
EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH OTHER STATE
LAWS, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
8. Reasonable Best Efforts. Grantee and Issuer shall take, or cause to
be taken, all reasonable action to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
reasonable best efforts to obtain any necessary consents of third parties and
governmental agencies and the filing by Grantee and Issuer promptly after the
date hereof of any required HSR Act notification forms and the documents
required to comply with the HSR Act.
9. Certain Conditions. The obligation of Issuer to issue Option Shares
under this Agreement upon exercise of the Option shall be subject to the
satisfaction or waiver of the following conditions:
(a) any waiting periods applicable to the acquisition of the
Option Shares by Grantee pursuant to this Agreement under the HSR Act
shall have expired or been terminated;
(b) the representations and warranties of Grantee made in
Section 6 of this Agreement shall be true and correct in all material
respects as of the date of the Closing for the issuance of such Option
Shares; and
<PAGE>
(c) no order, decree, or injunction entered by any court of
competent jurisdiction or governmental, regulatory, or administrative
agency or commission in the United States shall be in effect that
prohibits the exercise of the option or acquisition of Option Shares
pursuant to this Agreement.
10. Adjustments Upon Changes in Capitalization. In the event of any
change in the number of issued and outstanding shares of Issuer Common Stock by
reason of any stock dividend, stock split, recapitalization, merger, rights
offering, share exchange, or other change in the corporate or capital structure
of Issuer, Grantee shall receive, upon exercise of the Option, the stock or
other securities, cash, or property to which Grantee would have been entitled if
Grantee had exercised the Option and had been a holder of record of shares of
Issuer Common Stock on the record date fixed for determination of holders of
shares of Issuer Common Stock entitled to receive such stock or other
securities, cash, or property at the same aggregate price as the aggregate
Option Price of the Option Shares.
11. Expiration. The Option shall expire at the earlier of (a) the
Effective Time (as defined in the Merger Agreement), (b) if exercisable pursuant
to Section 2 hereof, the later of one year after termination of the Merger
Agreement in accordance with the terms thereof or 90 days after an Exercise
Event, or (c) termination of the Merger Agreement in accordance with the terms
thereof in circumstances under which neither the fee specified in Section 7.2(a)
thereof nor the fee specified in Section 7.2(b) thereof can in any circumstances
become payable (such expiration date is referred to as the "Expiration Date").
12. General Provisions.
(a) Survival. All of the representations, warranties, and
covenants contained herein shall survive each Closing and shall be
deemed to have been made as of the date hereof and as of the date of
each Closing.
(b) Further Assurances. If Grantee exercises the Option, or
any portion thereof, in accordance with the terms of this Agreement,
Issuer and Grantee will execute and deliver all such further documents
and instruments and use their reasonable best efforts to take all such
further action as may be necessary in order to consummate the
transactions contemplated thereby.
(c) Severability. It is the desire and intent of the parties
that the provisions of this Agreement be enforced to the fullest extent
permissible under the law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, in the event
that any provision of this Agreement would be held in any jurisdiction
to be invalid, prohibited, or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not be invalid, prohibited, or unenforceable
in such jurisdiction, it shall, as to such jurisdiction, be so narrowly
drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any
other jurisdiction.
(d) Assignment. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that Issuer shall not be entitled to
assign or otherwise transfer any of its rights or obligations
hereunder, and Grantee shall not be entitled to assign or otherwise
transfer any of its rights or obligations hereunder.
<PAGE>
(e) Specific Performance. The parties agree and acknowledge
that in the event of a breach of any provision of this Agreement, the
aggrieved party would be without an adequate remedy at law. The parties
therefore agree that in the event of a breach of any provision of this
Agreement, the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as
well as to obtain damages for breach of this Agreement. By seeking or
obtaining any such relief, the aggrieved party will not be precluded
from seeking or obtaining any other relief to which it may be entitled.
(f) Amendments. This Agreement may not be modified, amended,
altered, or supplemented except upon the execution and delivery of a
written agreement executed by Grantee and Issuer.
(g) Notices. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be deemed
given if delivered personally, telecopied, sent by
nationally-recognized overnight courier or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the
other party at the following addresses (or such other address for a
party as shall be specified by like notice):
If to Grantee:
Medtronic, Inc.
7000 Central Avenue, N.E.
Minneapolis, MN 55432
<PAGE>
with separate copies thereof addressed to:
Attention: General Counsel
FAX: (612) 572-5459
and
Attention: Vice President and Chief Development Officer
FAX: (612) 572-5404
If to Issuer:
Sofamor Danek Group, Inc.
1800 Pyramid Place
Memphis, TN 38132
FAX: (901) 344-1576
Attention: Stephen S. Phillips, Executive Vice President and
General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
FAX: (212) 848-7179
Attention: Creighton O'M. Condon, Esq.
(h) Headings. 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.
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana
applicable to contracts made and to be performed therein.
(k) Jurisdiction and Venue. Each of Issuer and Grantee hereby
agrees that any proceeding relating to this Agreement shall be brought
in a state court of Indiana. Each of Issuer and Grantee hereby consents
to personal jurisdiction in any such action brought in any such Indiana
court, consents to service of process by registered mail made upon such
party and such party's agent, and waives any objection to venue in any
such Indiana court or to any claim that any such Indiana court is an
inconvenient forum.
(l) Entire Agreement. This Agreement, the Confidentiality
Agreement, and the Merger Agreement and any documents and instruments
referred to herein and therein constitute the entire agreement between
the parties hereto and thereto with respect to the subject matter
hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect
to the subject matter hereof and thereof. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
successors and permitted assigns of the parties hereto. Nothing in this
Agreement shall be construed to give any person other than the parties
to this Agreement or their respective successors or permitted assigns
any legal or equitable right, remedy, or claim under or in respect of
this Agreement or any provision contained herein.
(m) Expenses. Except as otherwise provided in this Agreement
or the Merger Agreement, each party shall pay its own expenses incurred
in connection with this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
MEDTRONIC, INC.
By: /s/ William W. George
William W. George, Chairman
and Chief Executive Officer
SOFAMOR DANEK GROUP, INC.
By: /s/ E. R. Pickard
E.R. Pickard, Chairman
and Chief Executive Officer
Exhibit B
AGREEMENT TO FACILITATE MERGER
DATE: November ___, 1998
PARTIES:
Medtronic, Inc., (hereinafter "Parent")
a Minnesota corporation
and
----------------------------,
an individual officer and/or director
of Sofamor Danek Group, Inc. (hereinafter "Shareholder")
RECITALS:
A. Shareholder is the legal or beneficial owner of shares of Common
Stock of Sofamor Danek Group, Inc., an Indiana corporation (the "Company"), and
the holder of options, warrants, or other rights to acquire shares of Company
Common Stock.
B. Parent, the Company, and a wholly-owned subsidiary of Parent are
entering, or have entered, into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which it is proposed that Parent's subsidiary will merge
with and into the Company (the "Merger") and as a result of which the
outstanding shares of Company Common Stock shall be converted into Parent Common
Stock.
C. Shareholder deems it to be in Shareholder's best interest and in the
best interests of the Company and all other shareholders of the Company that the
Merger Agreement be approved, ratified, and confirmed by the shareholders of the
Company, and it is a condition to Parent's obligations under the Merger
Agreement that Individual enter into this Agreement.
D. It is understood and acknowledged by the Shareholder that Parent's
execution of the Merger Agreement is being done in reliance, in part, upon the
contemporaneous or prompt subsequent execution and delivery of this Agreement,
that Parent will incur substantial expenses proceeding toward consummation of
the Merger as contemplated by the Merger Agreement, and that such expenses will
be undertaken, in part, in reliance upon and as a result of the agreements and
undertakings of Shareholder set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and in order to
induce Parent to execute the Merger Agreement and to proceed as contemplated by
the Merger Agreement toward the consummation of the Merger, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
AGREEMENTS:
1. Vote in Favor of Merger. During the period commencing on the date
hereof and terminating upon the earlier of the effective time of the Merger and
the termination of the Merger Agreement in accordance with its terms,
Shareholder, solely in his or her capacity as a shareholder of the Company
agrees to vote (or caused to be voted) all shares of Company Common Stock
presently beneficially owned by Shareholder, and all shares of Company Common
Stock with respect to which Shareholder in the future acquires beneficial
<PAGE>
ownership, at any meeting of the shareholders of the Company, and in any action
by written consent of the shareholders of the Company, (i) in favor of the
approval, consent, and ratification of the Merger Agreement and the Merger, and
(ii) against any action that would materially impede, interfere, or discourage
the Merger, and, other than the Merger and the transactions contemplated by the
Merger Agreement, against any merger, consolidation or other business
combination involving the Company, against any recapitalization, reorganization,
dissolution or liquidation of the Company and against any extraordinary
corporate transaction involving a disposition of a substantial portion of the
assets of the Company, and against any action that would result in any material
breach of representation, warranty, covenant, or agreement of the Company under
the Merger Agreement. To the extent inconsistent with the foregoing provisions
of this Section 1, Shareholder hereby revokes any and all previous proxies with
respect to any shares of Company Common Stock that Shareholder owns or has the
right to vote. Nothing in this Agreement shall be deemed to restrict or limit
Shareholder's right to act in his capacity as an officer or director of the
Company consistent with his fiduciary obligations in such capacity.
2. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Parent that Shareholder has the legal capacity to
enter into and perform all of Shareholder's obligations under this Agreement.
The execution, delivery, and performance of this Agreement by Shareholder will
not violate any other agreement to which Shareholder is a party, including,
without limitation, any voting agreement, shareholders agreement, or voting
trust. This Agreement has been duly executed and delivered by Shareholder and
constitutes a legal, valid, and binding agreement of Shareholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws, now or hereafter in effect.
3. Successors and Assigns. This Agreement shall be binding upon any
permitted purchasers, donees, pledgees, and other transferees of Company Common
stock legally or beneficially owned by Shareholder. During the period commencing
on the date hereof and terminating upon the earlier of the effective time of the
Merger and the termination of the Merger Agreement in accordance with its terms,
Shareholder agrees not to make any sales, gifts, transfers, pledges, or other
dispositions of Company Common Stock without first making any such transferee or
pledgee fully aware of the obligations under this Agreement and obtaining such
transferee's or pledgee's written agreement to comply with the terms hereof.
4. Injunctive Relief. Shareholder agrees that in the event of
Shareholder's breach of any provision of this Agreement, Parent may be without
an adequate remedy at law. Shareholder therefore agrees that in the event of
Shareholder's breach of any provision of this Agreement, Parent may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement. By seeking
or obtaining any such relief, Parent will not be precluded from seeking or
obtaining any other relief to which it may be entitled.
5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same document.
6. Further Assurances. Shareholder shall execute and deliver such
additional documents and take such further action as may be necessary or
desirable to consummate the transactions contemplated by this Agreement.
7. Third-Party Beneficiaries. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy, or claim under or by reason of this Agreement
or any provision contained herein.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota (regardless of the laws that
might otherwise govern under applicable Minnesota principles of conflicts of
laws).
<PAGE>
9. Effectiveness. If this Agreement is executed by Shareholder prior to
the approval of the Merger Agreement by the Company's Board of Directors, then
this Agreement shall be subject to, and shall become effective only upon, the
approval of the Merger Agreement by the Company's Board of Directors and the
execution and delivery of the Merger Agreement by the Company, Parent and
Parent's subsidiary. This Agreement shall terminate upon termination of the
Merger Agreement in accordance with its terms.
IN WITNESS WHEREOF, Parent has caused this Agreement to Facilitate
Merger to be executed by its duly authorized officer, and Shareholder has
executed this Agreement, as of the date and year first above written.
MEDTRONIC, INC.
By:_________________________________
Its:______________________________
_________________________________
[Signature]
_________________________________
[Print Name]
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDTRONIC, INC.,
MSD MERGER CORP.,
AND
SOFAMOR DANEK GROUP, INC.
November 1, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 THE MERGER; CONVERSION OF SHARES...................................1
1.1 The Merger......................................................1
1.2 Effective Time..................................................2
1.3 Conversion of Shares............................................2
1.4 No Dissenters'Rights............................................3
1.5 Exchange of Company Common Stock................................3
1.6 Exchange of Merger Subsidiary Common Stock......................6
1.7 Stock Options...................................................6
1.8 Capitalization Changes..........................................7
1.9 Articles of Incorporation of the Surviving Corporation..........7
1.10 Bylaws of the Surviving Corporation............................8
1.11 Directors and Officers of the Surviving Corporation............8
ARTICLE 2 CLOSING............................................................8
2.1 Time and Place..................................................8
2.2 Filings at the Closing..........................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................8
3.1 Organization....................................................9
3.2 Authorization...................................................9
3.3 Capitalization.................................................10
3.4 Reports and Financial Statements...............................11
3.5 Absence of Undisclosed Liabilities.............................11
3.6 Consents and Approvals.........................................12
3.7 Compliance with Laws...........................................13
3.8 Litigation.....................................................13
3.9 Absence of Material Adverse Changes............................13
3.10 Officers, Directors and Employees.............................13
3.11 Taxes.........................................................14
3.12 Contracts.....................................................15
3.13 Intellectual Property Rights..................................15
3.14 Benefit Plans.................................................16
3.15 Minute Books..................................................17
3.16 No Finders....................................................17
3.17 Proxy Statement...............................................18
3.18 Fairness Opinion..............................................18
3.19 State Takeover Laws...........................................18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY....19
4.1 Organization...................................................19
4.2 Authorization..................................................19
4.3 Capitalization.................................................20
4.4 Consents and Approvals.........................................20
4.5 Reports; Financial Statements; Absence of Changes..............21
4.6 Registration Statement.........................................21
4.7 No Finders.....................................................22
4.8 Absence of Undisclosed Liabilities.............................22
4.9 Compliance with Laws...........................................22
4.10 Litigation....................................................22
4.11 Absence of Material Adverse Changes...........................22
4.12 Reorganization................................................23
ARTICLE 5 COVENANTS.........................................................23
5.1 Conduct of Business of the Company.............................23
5.2 Conduct of Business of Parent..................................26
5.3 No Solicitation................................................27
5.4 Access and Information.........................................28
5.5 Approval of Shareholders; Proxy Statement; Registration
Statement....................................................28
5.6 Consents.......................................................30
5.7 Affiliates'Letters.............................................31
5.8 Expenses.......................................................31
5.9 Further Actions................................................31
5.10 Regulatory Approvals..........................................32
5.11 Certain Notifications.........................................32
5.12 Voting of Shares..............................................33
5.13 Stock Option Agreement........................................33
5.14 NYSE Listing Application......................................33
5.15 Indemnification...............................................33
5.16 Letters of the Company's and Parent's Accountants.............34
5.17 Subsidiary Shares.............................................35
5.18 Benefit Plans and Employee Matters............................35
5.19. Obligations of Merger Subsidiary.............................36
5.20 Plan of Reorganization........................................36
5.21 Pooling.......................................................36
ARTICLE 6 CLOSING CONDITIONS................................................36
6.1 Conditions to Obligations of Parent, Merger Subsidiary,
and the Company..............................................36
6.2 Conditions to Obligations of Parent and Merger Subsidiary......37
6.3 Conditions to Obligations of the Company.......................38
ARTICLE 7 TERMINATION AND ABANDONMENT.......................................39
7.1 Termination....................................................39
7.2 Effect of Termination..........................................41
ARTICLE 8 MISCELLANEOUS.....................................................43
8.1 Amendment and Modification.....................................43
8.2 Waiver of Compliance; Consents.................................43
8.3 Investigation; Survival of Representations and Warranties......43
8.4 Notices........................................................44
8.5 Assignment.....................................................44
8.6 Governing Law..................................................45
8.7 Counterparts...................................................45
8.8 Knowledge......................................................45
8.9 Interpretation.................................................45
8.10 Publicity.....................................................45
8.11 Entire Agreement..............................................45
8.12 Severability..................................................46
8.13 Specific Performance..........................................46
8.14 Section 3.1 of Company Disclosure Schedule....................46
EXHIBITS:
Exhibit A: Form of Plan of Merger
Exhibit B: Form of Affiliate's Letter
Exhibit C: Form of Agreement to Facilitate Merger
Exhibit D: Form of Stock Option Agreement
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is dated as of November 1, 1998, by and among Medtronic,
Inc., a Minnesota corporation ("Parent"), MSD Merger Corp., an Indiana
corporation and wholly-owned subsidiary of Parent ("Merger Subsidiary"), and
Sofamor Danek Group, Inc., an Indiana corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Merger Subsidiary, and the
Company have approved the merger of Merger Subsidiary with and into the Company
(the "Merger") upon the terms and subject to the conditions set forth herein;
and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be recorded as a "pooling of interests" within the meaning of Accounting
Principles Board Opinion No. 16, and the rules and regulations of the Securities
and Exchange Commission (the "SEC"); and
WHEREAS, as a condition to, and upon or immediately following the
execution of, this Agreement, Parent and the Company are entering into the Stock
Option Agreement described in Section 5.13 hereof; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants, and agreements contained herein,
the parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), Merger
Subsidiary shall be merged with and into the Company in accordance with the
provisions of the Indiana Business Corporation Law (the "IBCL"), whereupon the
separate corporate existence of Merger Subsidiary shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation"). From
and after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers, and franchises and be subject to all the
restrictions, disabilities, and duties of the Company and Merger Subsidiary, all
as more fully described in the IBCL.
1.2 Effective Time. As soon as practicable after each of the
conditions set forth in Article 6 has been satisfied or waived on the Closing
Date (as defined in Section 2.1), the Company and Merger Subsidiary will file,
or cause to be filed, with the Secretary of State of the State of Indiana
Articles of Merger for the Merger, which Articles shall be in the form required
by and executed in accordance with the applicable provisions of the IBCL and
shall include as a part thereof a plan of merger (the "Plan of Merger")
substantially in the form attached hereto as Exhibit A. The Merger shall become
effective at the time such filing is made or, if agreed to by Parent and the
Company, such later time or date set forth in the Articles of Merger (the
"Effective Time").
<PAGE>
1.3 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Parent, Merger
Subsidiary or any holder of any share of capital stock of the Company or Merger
Subsidiary:
(a) Each share of common stock of the Company, no par value
("Company Common Stock"), issued and outstanding immediately prior
thereto (except for shares referred to in Section 1.3(b) hereof) shall
be converted, subject to Section 1.5(f), into the right to receive a
number of shares (carried out to five decimal places and rounded up if
the sixth decimal place is 5 or greater) (the "Conversion Ratio") of
common stock of Parent, par value $.10 per share (the "Parent Common
Stock"), based on the average (rounded to the nearest full cent, with
the cents rounded up if the third decimal place is 5 or more) of the
daily closing sale prices of a share of Parent Common Stock as reported
on the New York Stock Exchange ("NYSE") Composite Tape, as reported in
The Wall Street Journal (the "Parent Average Stock Price"), for the
fifteen consecutive NYSE trading days ending on and including the NYSE
trading day that is two NYSE trading days prior to the Company
Shareholders Meeting (as defined in Section 5.5) (the "Determination
Period"), determined as follows:
(i) if the Parent Average Stock Price for the
Determination Period is greater than $56.97 and less
than $69.63, then the Conversion Ratio shall equal
$115 divided by the Parent Average Stock Price for
the Determination Period;
(ii) if the Parent Average Stock Price for the
Determination Period is equal to or less than $56.97,
then the Conversion Ratio shall equal 2.01861; or
(iii) if the Parent Average Stock Price for the
Determination Period is equal to or greater than
$69.63, then the Conversion Ratio shall equal
1.65159.
An appropriate adjustment to the Conversion Ratio shall be
made in the event that, prior to the Effective Time, the outstanding
shares of Company Common Stock, without new consideration, are changed
into or exchanged for a different kind of shares or securities through
a reorganization, reclassification, stock dividend, stock combination,
or other like change in the Company's capitalization. Notwithstanding
the foregoing, nothing in this section shall be deemed to constitute
authorization or permission for or consent from Parent or Merger
Subsidiary to any reorganization, reclassification, stock dividend,
stock combination, or other like change in capitalization.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is held in the treasury of
the Company or is then owned beneficially or of record by Parent,
Merger Subsidiary, or any direct or indirect subsidiary of Parent or
the Company shall be canceled in accordance with applicable laws
without payment of any consideration therefor and without any
conversion thereof.
(c) Each share of any other class of capital stock of the
Company (other than Company Common Stock) shall be canceled without
payment of any consideration therefor and without any conversion
thereof.
<PAGE>
(d) Each share of common stock of Merger Subsidiary, par value
$.01 per share ("Merger Subsidiary Common Stock"), issued and
outstanding immediately prior to the Effective Time shall be converted
into one share of the common stock of the Surviving Corporation, par
value $.01 per share ("Surviving Corporation Common Stock").
1.4 No Dissenters' Rights. The parties acknowledge that, pursuant to
Section 23-1-44-8 of the IBCL, no holders of Company Common Stock shall have
dissenter's rights in connection with the Merger.
1.5 Exchange of Company Common Stock.
(a) At or prior to the Effective Time, Parent shall cause
Parent's stock transfer agent or such other person as Parent may
appoint and is reasonably satisfactory to the Company to act as
exchange agent (the "Exchange Agent") hereunder. As promptly as
practicable after the Effective Time, Parent shall cause the Exchange
Agent to mail to each holder of record (other than Parent, Merger
Subsidiary, the Company, or any subsidiary of Parent or the Company) of
a certificate or certificates that immediately prior to the Effective
Time represented outstanding shares of Company Common Stock ("Company
Certificates") a form letter of transmittal (which shall specify that
delivery shall be effective, and risk of loss and title to the Company
Certificate(s) shall pass, only upon delivery of the Company
Certificate(s) to the Exchange Agent) and instructions for such
holder's use in effecting the surrender of the Company Certificates in
exchange for certificates representing shares of Parent Common Stock
and cash in lieu of any fractional shares.
(b) As soon as practicable after the Effective Time, the
Exchange Agent shall distribute to holders of shares of Company Common
Stock, upon surrender to the Exchange Agent of one or more Company
Certificates for cancellation, together with a duly-executed letter of
transmittal, (i) one or more certificates representing the number of
whole shares of Parent Common Stock into which the shares represented
by the Company Certificate(s) shall have been converted pursuant to
Section 1.3(a), (ii) a bank check in the amount of cash into which the
shares represented by the Company Certificate(s) shall have been
converted pursuant to Section 1.5(f) (relating to fractional shares),
and (iii) any dividends or other distributions to which such holder is
entitled pursuant to Section 1.5(c), and the Company Certificate(s) so
surrendered shall be canceled. In the event of a transfer of ownership
of Company Common Stock that is not registered in the transfer records
of the Company, it shall be a condition to the issuance of shares of
Parent Common Stock that the Company Certificate(s) so surrendered
shall be properly endorsed or be otherwise in proper form for transfer
and that such transferee shall (i) pay to the Exchange Agent any
transfer or other taxes required or (ii) establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(c) Holders of Company Common Stock will be entitled to any
dividends or other distributions pertaining to the Parent Common Stock
received in exchange therefor that become payable to persons who are
holders of record of Parent Common Stock as of a record date that
follows the Effective Time, but only after they have surrendered their
Company Certificates for exchange. Subject to the effect, if any, of
applicable law, the Exchange Agent shall receive, hold, and remit any
such dividends or other distributions to each such record holder
entitled thereto, without interest, at the time that such Company
Certificates are surrendered to the Exchange Agent for exchange.
Holders of Company Common Stock will not be entitled, however, to
dividends or other distributions that become payable before or after
the Effective Time to persons who were holders of record of Parent
Common Stock as of a record date that is prior to the Effective Time.
<PAGE>
(d) All shares of Parent Common Stock issued upon the
surrender for exchange of Company Common Stock in accordance with the
terms hereof (including any cash paid for fractional shares pursuant to
Section 1.5(f) hereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common
Stock.
(e) After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Company Certificates representing such shares are presented to the
Surviving Corporation, they shall be canceled and exchanged as provided
in this Article 1. As of the Effective Time, the holders of Company
Certificates representing shares of Company Common Stock shall cease to
have any rights as shareholders of the Company, except such rights, if
any, as they may have pursuant to the IBCL or this Agreement. Except as
provided above, until such Company Certificates are surrendered for
exchange, each such Company Certificate shall, after the Effective
Time, represent for all purposes only the right to receive the number
of whole shares of Parent Common Stock into which the shares of Company
Common Stock shall have been converted pursuant to the Merger as
provided in Section 1.3(a) hereof, the right to receive the cash value
of any fraction of a share of Parent Common Stock as provided in
Section 1.5(f) hereof and the right to receive any dividends or
distributions as provided in Section 1.5(c).
(f) No fractional shares of Parent Common Stock and no
certificates or scrip therefor, or other evidence of ownership thereof,
shall be issued upon the surrender for exchange of Company
Certificates, no dividend or other distribution of Parent shall relate
to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any rights of a shareholder of
Parent. All fractional shares of Parent Common Stock to which a holder
of Company Common Stock immediately prior to the Effective Time would
otherwise be entitled, at the Effective Time, shall be aggregated if
and to the extent multiple Company Certificates of such holder are
submitted together to the Exchange Agent. If a fractional share results
from such aggregation, then (in lieu of such fractional share) the
Exchange Agent shall pay to each holder of shares of Company Common
Stock who otherwise would be entitled to receive such fractional share
of Parent Common Stock an amount of cash (without interest) determined
by multiplying (i) the Parent Average Stock Price by (ii) the
fractional share of Parent Common Stock to which such holder would
otherwise be entitled. Parent will make available to the Exchange Agent
any cash necessary for this purpose.
(g) In the event any Company Certificates shall have been
lost, stolen, or destroyed, the Exchange Agent shall issue in exchange
for such lost, stolen, or destroyed Company Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares
of Parent Common Stock, cash for fractional shares, if any, and
dividends or other distributions, if any, as may be required pursuant
to this Article 1; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed Company
Certificate to deliver a bond in such sum as Parent may direct as
indemnity against any claim that may be made against Parent or the
Exchange Agent with respect to such Company Certificate alleged to have
been lost, stolen, or destroyed.
<PAGE>
(h) Each person entitled to receive shares of Parent Common
Stock pursuant to this Article 1 shall receive together with such
shares the number of Parent preferred share purchase rights (pursuant
to the Rights Agreement dated as of June 27, 1991, between Parent and
Norwest Bank Minnesota, N.A., the "Parent Rights Plan") per share of
Parent Common Stock equal to the number of Parent preferred share
purchase rights associated with one share of Parent Common Stock at the
Effective Time.
1.6 Exchange of Merger Subsidiary Common Stock. From and after the
Effective Time, each outstanding certificate previously representing shares of
Merger Subsidiary Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the number of shares of Surviving Corporation
Common Stock into which such shares of Merger Subsidiary Common Stock shall have
been converted. Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a stock certificate or certificates representing such
shares of Surviving Corporation Common Stock in exchange for the certificate or
certificates that formerly represented shares of Merger Subsidiary Common Stock,
which shall be canceled.
1.7 Stock Options.
(a) Except as provided in (b) below with respect to the
Company's Employee Stock Purchase Plan, each option to purchase shares
of Company Common Stock that is outstanding at the Effective Time,
whether or not exercisable and whether or not vested (a "Company
Option") shall, by virtue of the Merger and without any action on the
part of the Company or the holder thereof, be assumed by Parent in such
manner that Parent (i) is a corporation "assuming a stock option in a
transaction to which Section 424(a) applies" within the meaning of
Section 424 of the Code and the regulations thereunder or (ii) to the
extent that Section 424 of the Code does not apply to any such Company
Option, would be such a corporation were Section 424 of the Code
applicable to such Company Option. Prior to the Effective Time, the
Company's Board of Directors and Compensation Committee thereof shall
adopt resolutions preventing the value of any outstanding Company
Options, stock appreciation rights, restricted stock, performance units
or other stock based awards from being paid in cash to the holders
thereof. From and after the Effective Time, all references to the
Company in the Company Options shall be deemed to refer to Parent. The
Company Options assumed by Parent shall be exercisable upon the same
terms and conditions as under the Company Options (including provisions
regarding vesting and the acceleration thereof, and if and to the
extent caused by and in accordance with the current terms of a Company
Option, such Company Option shall vest fully as of the date on which
the Merger is approved by the Company's shareholders) except that (i)
such Company Options shall entitle the holder to purchase from Parent
the number of shares of Parent Common Stock (rounded down to the
nearest whole number of such shares) that equals the product of the
Conversion Ratio multiplied by the number of shares of Company Common
Stock subject to such Company Option immediately prior to the Effective
Time, and (ii) the option exercise price per share of Parent Common
Stock shall be an amount (rounded up to the nearest full cent) equal to
the option exercise price per share of Company Common Stock in effect
immediately prior to the Effective Time divided by the Conversion
Ratio. Prior to the Effective Time, the Board of Directors of the
Parent shall, for purposes of Rule 16b-3(d)(1) promulgated under
Section 16 of the 1934 Act, specifically approve (i) the assumption by
Parent of the Company Options and (ii) the issuance of Parent Common
Stock in the Merger to directors, officers and shareholders of the
Company subject to Section 16 of the 1934 Act. As promptly as
practicable after the Effective Time, Parent shall issue to each holder
of a Company Option a written instrument informing such holder of the
assumption by Parent of such Company Option. As soon as reasonably
practicable after the Effective Time (and in any event no later than
five business days after the Effective Time), Parent shall file a
registration statement on Form S-8 (or any successor form) with respect
to such shares of Parent Common Stock and shall use its best efforts to
maintain such registration statement (or any successor form), including
the current status of any related prospectus or prospectuses, for so
<PAGE>
long as the Company Options remain outstanding. In addition, Parent
shall use all reasonable efforts to cause the shares of Parent Common
Stock subject to Company Options to be listed on the NYSE and such
other exchanges as Parent shall determine. Parent shall take all
corporate action necessary to reserve for issuance a sufficient number
of shares of Parent Common Stock for delivery upon exercise of Company
Options pursuant to the terms set forth in this Section 1.7.
(b) The current phase in process as of the date of this
Agreement under the Company's Employee Stock Purchase Plan shall
continue and shares shall be issued to participants thereunder as
provided under, and subject to the terms and conditions of, such Plan;
provided, however, that if the Effective Time occurs prior to the
originally scheduled expiration of such current phase, then immediately
prior to the Effective Time, the current phase under the Company's
Employee Stock Purchase Plan shall be ended, and each participant shall
be deemed to have purchased immediately prior to the Effective Time, to
the extent of payroll deductions accumulated by such participant as of
such phase end, the number of whole shares of Company Common Stock at a
per share price determined pursuant to the provisions of the Company's
Employee Stock Purchase Plan, and each participant shall receive a cash
payment equal to the balance, if any, of such accumulated payroll
deductions remaining after such purchase of such shares. As of the
Effective Time, each participant shall receive by virtue of the Merger,
for each share of Company Common Stock such participant has so
purchased under the Employee Stock Purchase Plan, such number of shares
of Parent Common Stock equal to the Conversion Ratio. No phases under
the Company's Employee Stock Purchase Plan that are subsequent to the
phase in process as of the date of this Agreement shall be commenced,
and, the Company's Employee Stock Purchase Plan and all purchase rights
thereunder shall terminate effective as of the Effective Time.
1.8 Capitalization Changes. If, between the date of this Agreement and
the Effective Time, the outstanding shares of Parent Common Stock shall have
been changed into a different number of shares or a different class by reason of
any reclassification, subdivision, recapitalization, split-up, combination,
exchange of shares, or stock dividend, the Conversion Ratio and all per-share
price amounts and calculations set forth in this Agreement shall be
appropriately adjusted to reflect such reclassification, subdivision,
recapitalization, split-up, combination, exchange of shares or stock dividend.
1.9 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be amended and restated in their entity to read as set
forth on Exhibit A-1 attached to the Plan of Merger.
1.10 Bylaws of the Surviving Corporation. The Bylaws of Merger
Subsidiary, as in effect immediately prior to the Effective Time, shall, subject
to Section 5.15, be the Bylaws of the Surviving Corporation until thereafter
amended in accordance with applicable law.
1.11 Directors and Officers of the Surviving Corporation. The directors
and officers of Merger Subsidiary immediately prior to the Effective Time shall
be the directors and officers, respectively, of the Surviving Corporation until
their respective successors shall be duly elected and qualified.
<PAGE>
ARTICLE 2
CLOSING
2.1 Time and Place. Subject to the satisfaction or waiver of the
provisions of Article 6, the closing of the Merger (the "Closing") shall take
place at 1:00 p.m., local time, on the day the Merger is approved by the
shareholders of the Company at the Company Shareholders Meeting (as defined in
Section 5.5 hereof), or as soon thereafter as, and in any event no later than
the second business day after, all conditions to Closing have been satisfied or
waived, or on such other date and/or at such other time as Parent and the
Company may mutually agree. The date on which the Closing actually occurs is
herein referred to as the "Closing Date." The Closing shall take place at the
corporate headquarters offices of Parent, or at such other place or in such
other manner (e.g., by telecopy exchange of signature pages with originals to
follow by overnight delivery) as the parties hereto may agree.
2.2 Filings at the Closing. At the Closing, subject to the provisions
of Article 6, Parent, Merger Subsidiary, and the Company shall cause Articles of
Merger to be filed in accordance with the provisions of Section 23-1-40-5 of the
IBCL, and take any and all other lawful actions and do any and all other lawful
things necessary to cause the Merger to become effective.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as set forth in a document of even date herewith and
concurrently delivered herewith, referring specifically to the representations
and warranties in this Agreement which identifies by section number to which
such disclosure relates (the "Company Disclosure Schedule") or (ii) as
specifically described through express disclosure of current, specific facts set
forth in the Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 1997 or in any other filing by the Company with the SEC (as defined
in Section 3.4) filed after the date of filing such Form 10-K and prior to the
date hereof to the extent the relevancy of such disclosure to such particular
representation and warranty is readily apparent, the Company hereby makes the
following representations and warranties to Parent and Merger Subsidiary:
3.1 Organization. The Company and each subsidiary of the Company
(referred to herein as a "Subsidiary") is a corporation duly organized, validly
existing, and in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power and authority to own, lease,
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such corporate power and authority would not, individually or in the
aggregate, have a Company Material Adverse Effect (as defined below). The
Company and each Subsidiary is duly qualified and in good standing to do
business in each jurisdiction in which the property owned, leased, or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing could
not reasonably be expected to have a Company Material Adverse Effect (as defined
below). "Company Material Adverse Effect" means an effect that, individually or
in the aggregate with other effects, is or would reasonably at the time of such
effect be expected to be materially adverse: (i) to the business, results of
operation, or financial condition of the Company and its Subsidiaries,
considered as a whole; or (ii) to the Company's ability to perform any of its
material obligations under this Agreement or to consummate the Merger, except in
each case as provided in Section 3.1 of the Company Disclosure Schedule but
subject to Section 8.14 hereof and except in each case for any such effects
resulting from or arising out of (i) this Agreement or the transactions
contemplated by this Agreement or the announcement hereof, (ii) any occurrence
or condition affecting the medical device industry generally, or (iii) any
changes in general economic, regulatory or political conditions. The
jurisdictions in which the Company and each Subsidiary are incorporated are
listed in the Company Disclosure Schedule. The Company has heretofore delivered
or made available to Parent or its advisers complete and accurate copies of the
Articles of Incorporation and Bylaws of the Company, as currently in effect, and
of the organizational documents and agreements defining the rights of the
Company or any Subsidiary with respect to any material joint ventures,
partnerships or other business in which the Company owns a less-than-100%
interest. Neither the Company nor any Subsidiary, directly or indirectly, owns
or controls or has any equity, partnership, or other ownership interest in any
corporation, partnership, joint venture, or other business association or entity
that is material to the Company and its Subsidiaries, considered as a whole.
<PAGE>
3.2 Authorization. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to obtaining the
necessary approval of its shareholders, to consummate the transactions
contemplated hereby. The execution and delivery by the Company of this Agreement
and the other agreements contemplated hereby to which the Company is a party,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and validly authorized and approved by the Company's Board of
Directors, no other corporate proceedings on the part of the Company or any
Subsidiary are necessary to authorize this Agreement, and, subject to obtaining
the approval of the Company's shareholders, no other corporate action on the
part of the Company or any Subsidiary is necessary to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and, assuming due execution and delivery
by the other parties hereto, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency, and the
relief of debtors and rules of law governing specific performance, injunctive
relief, or other equitable remedies.
3.3 Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 150,000,000 shares of Company Common Stock, no
par value, of which 26,967,228 shares are issued and outstanding and 4,023,180
shares are held in the Company's treasury, and (ii) 5,000,000 shares of Company
Preferred Stock, no par value, none of which are issued or outstanding. All
issued and outstanding shares of capital stock of each Subsidiary are owned,
beneficially and of record, by the Company, free and clear of any mortgage,
pledge, security interest, encumbrance, lien or other charge of any kind
("Lien"). All issued and outstanding shares of Company Common Stock have been
validly issued, are fully paid and nonassessable, and have not been issued in
violation of and are not currently subject to any preemptive rights. Except for
options to purchase an aggregate of 5,473,619 shares of Company Common Stock
granted pursuant to the Company's 1993 Long-Term Incentive Plan, Non-Qualified
Stock Option Plan, Non-Employee Director's Stock Option Plan, Incentive Stock
Option Plan, Non-Qualified Stock Option Plan for Distributors and Consultants
and the Option Agreement dated July 8, 1992 between the Company and George Bryan
(collectively, the "Company Option Plans") listed, together with their
respective exercise prices, in the Company Disclosure Schedule, and except for
the rights to purchase under the Company's Employee Stock Purchase Plan shares
of Company Common Stock (estimated to be approximately 3,000 shares with respect
to the quarterly phases commenced July 1 and October 1, 1998, at per share
prices equal to the market prices on the last day of the respective quarterly
phase thereof based on the current contribution rates of the participants and
assuming the current Plan phase in process as of the date of this Agreement is
ended on December 31, 1998 for this purpose), as of the date of this Agreement
there are not any outstanding or authorized subscriptions, options, warrants,
calls, rights, convertible securities, commitments, restrictions, arrangements,
or any other agreements of any character to which the Company or any Subsidiary
is a party that, directly or indirectly, (i) obligate the Company or any
Subsidiary to issue any shares of capital stock or any securities convertible
into, or exercisable or exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock, (ii) call for or relate to the sale, pledge,
transfer, or other disposition or encumbrance by the Company or any Subsidiary
of any shares of its capital stock, or (iii) to the knowledge of the Company,
relate to the voting or control of such capital stock. The Company Disclosure
Schedule sets forth a complete and accurate list of all stock options, warrants,
and other rights to acquire Company Common Stock, including the name of the
holder, the date of grant, acquisition price, number of shares, exercisability
schedule, and, in the case of options, the type of option under the Code. No
consent of holders or participants under the Company Option Plans or the
Company's Employee Stock Purchase Plan is required to carry out the provisions
of Section 1.7. All actions, if any, required on the part of the Company under
the Company Option Plans or Employee Stock Purchase Plan to allow for the
treatment of Company Options and the Employee Stock Purchase Plan as is provided
in Section 1.7, has been, or prior to the Closing will be, validly taken by the
Company, and the Company will not from and after the date hereof allow any
increase in the rate of a participant's contributions to the Employee Stock
Purchase Plan or any enrollments (other than new hires, if required by such
Plan) or re-enrollments in such Plan (other than re-enrollments without any
increases in historical contribution rates, if permitted by such Plan).
<PAGE>
3.4 Reports and Financial Statements. The Company has filed all forms,
reports, registration statements, and documents required to be filed by it with
the Securities and Exchange Commission ("SEC") since January 1, 1995 (such
forms, reports, registration statements, and documents, together with any
amendments thereto, are referred to as the "Company SEC Filings"). As of their
respective dates, the Company SEC Filings (i) complied as to form in all
material respects with the applicable requirements of the Securities Act of 1933
and the rules and regulations thereunder (the "1933 Act") and the Securities
Exchange Act of 1934 and the rules and regulations thereunder (the "1934 Act"),
as the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The audited financial statements and unaudited
interim financial statements included or incorporated by reference in the
Company SEC Filings, including but not limited to the Company's audited
financial statements at and for the year ended December 31, 1997 (the "Company
1997 Financials"), (i) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC), (ii) complied as of
their respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, and (iii) fairly present in all material respects the consolidated
financial position of the Company as of the dates thereof and the income, cash
flows, and changes in shareholders' equity for the periods involved (subject, in
the case of unaudited statements, to normal and recurring year-end adjustments
which were not and are not expected, individually or in the aggregate, to have a
Company Material Adverse Effect). The statements of earnings included in the
audited or unaudited interim financial statements in the Company SEC Filings do
not contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business required to be disclosed separately in
accordance with GAAP, except as expressly specified in the applicable statement
of operations or notes thereto.
3.5 Absence of Undisclosed Liabilities. To the best of the Company's
knowledge, neither the Company nor any Subsidiary has any liabilities or
obligations of any nature (whether absolute, accrued, contingent, or otherwise)
except (a) liabilities or obligations that are accrued or reserved against in
the audited consolidated balance sheet of the Company as of December 31, 1997
contained in the Company 1997 Financials (the "Company Audited Balance Sheet")
or in the unaudited consolidated balance sheet of the Company as of June 30,
1998 contained in the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998 (the "Company Interim Balance Sheet") or referred to
in the notes thereto, and (b) liabilities or obligations that could not
reasonably be expected to have a Company Material Adverse Effect.
3.6 Consents and Approvals. Except for (i) any applicable requirements
of the 1933 Act, the 1934 Act, state securities laws, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the regulations thereunder (the "HSR
Act"), and the antitrust, competition, foreign investment, or similar laws of
any foreign countries or supranational commissions or boards that require
pre-merger notifications or filings with respect to the Merger (collectively,
"Foreign Merger Laws"), (ii) approval by the Company's shareholders, (iii) the
filing and recordation of appropriate merger documents as required by the IBCL,
and (iv) compliance with Chapter 44 (Sections 23-1-44-1 et. seq.) of the IBCL,
the execution and delivery by the Company of this Agreement and the other
agreements contemplated hereby to which the Company is a party and the
consummation by the Company of the transactions contemplated hereby and thereby
<PAGE>
will not: (a) violate any provision of the Articles of Incorporation or Bylaws
of the Company or any Subsidiary; (b) violate any statute, rule, regulation,
order, or decree of any federal, state, local, or foreign governmental or
regulatory body or authority (including, but not limited to, the Food and Drug
Administration (the "FDA") or any nongovernmental self-regulatory agency) by
which the Company or any Subsidiary or any of their respective properties or
assets may be bound; (c) require any filing with or permit, consent, or approval
of any federal, state, local, or foreign governmental or regulatory body or
authority (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency); or (d) result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
under, result in the loss of any material benefit under, or give rise to any
right of termination, cancellation, increased payments, or acceleration under,
or result in the creation of any Lien (as defined in Section 3.3) on any of the
properties or assets of the Company or any Subsidiary under, any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, authorization, agreement, or other instrument or obligation
to which the Company or any Subsidiary is a party, or by which it or any of its
properties or assets may be bound, except, in the case of clauses (c) and (d),
for any such filings, permits, consents or approvals or violations, breaches,
defaults, or other occurrences that could not reasonably be expected to prevent
or delay consummation of any of the transactions contemplated hereby in any
material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and could not
reasonably be expected to have a Company Material Adverse Effect. Section 3.6 of
the Company Disclosure Schedule lists each note, bond, mortgage, indenture,
license, franchise, permit, authorization, agreement, or other instrument or
obligation to which the Company or any Subsidiary is a party, or by which it or
any of its properties or assets may be bound and which is material to the
Company and its Subsidiaries, considered as a whole, under or with respect to
which the transactions contemplated by this Agreement will result in any
material violation or breach of, or constitute (with or without due notice or
lapse of time or both) a material default under, result in the loss of any
material benefit under, or give rise to any material right of termination,
cancellation, increased payments, or acceleration under, or result in the
creation of any material Lien on any of the material properties or assets of the
Company or any Subsidiary. None of the matters described in Section 3.6 of the
Company Disclosure Schedule could reasonably be expected to prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect or otherwise prevent the Company from performing its obligations under
this Agreement in any material respect, or to have a Company Material Adverse
Effect.
3.7 Compliance with Laws. Neither the Company nor any Subsidiary is in
default or violation of any applicable federal, state, local, or foreign laws,
ordinances, regulations, interpretations, judgments, decrees, injunctions,
permits, licenses, certificates, governmental requirements, orders, or other
similar items of any court or other governmental entity (including, but not
limited to, those of the FDA or any nongovernmental self-regulatory agency and
including environmental laws or regulations), except for such defaults or
violations that could not reasonably be expected to have a Company Material
Adverse Effect. The Company and each Subsidiary has timely filed or otherwise
provided all registrations, reports, data, and other information and
applications with respect to its medical device, pharmaceutical, consumer,
health care, and other governmentally regulated products (the "Regulated
Products") required to be filed with or otherwise provided to the FDA or any
other federal, state, local, or foreign governmental authorities with
jurisdiction over the manufacture, use, or sale of the Regulated Products, and
all regulatory licenses or approvals in respect thereof are in full force and
effect, except where the failure to file timely such registrations, reports,
data, information, and applications or the failure to have such licenses and
approvals in full force and effect could not reasonably be expected to have a
Company Material Adverse Effect.
<PAGE>
3.8 Litigation. There are no claims, actions, suits, proceedings or, to
the knowledge of the Company, investigations or reviews of any kind, pending or,
to the knowledge of the Company, threatened in writing, against the Company or
any Subsidiary or any asset or property of the Company or any Subsidiary, except
for such claims, actions, suits, proceedings, investigations or reviews that
could not reasonably be expected to have a Company Material Adverse Effect.
3.9 Absence of Material Adverse Changes. Since December 31, 1997 there
has not been any (a) Company Material Adverse Effect; (b) damage, destruction,
or loss, not covered by insurance, that could reasonably be expected to have a
Company Material Adverse Effect; (c) material change by the Company or any
Subsidiary in accounting methods or principles used for financial reporting
purposes, except as required by a change in applicable law or generally accepted
accounting principles and concurred with by the Company's independent public
accountants; or (d) agreement, whether in writing or otherwise, to take any
action described or referenced in this Section 3.9.
3.10 Officers, Directors and Employees. Prior to the date hereof, the
Company has provided to Parent a list that completely and accurately sets forth
the name and current annual salary rate of each officer of the Company whose
total remuneration for the last fiscal year was, or for the current fiscal year
has been set at, in excess of $150,000, together with a summary of the bonuses,
commissions, additional compensation, and other like cash benefits, if any, paid
or payable to such persons for the last fiscal year and proposed for the current
fiscal year. The Company Disclosure Schedule completely and accurately sets
forth (i) the names of all former officers of the Company whose employment with
the Company has terminated either voluntarily or involuntarily during the
preceding 12-month period; and (ii) the names of the officers (with all
positions and titles indicated) and directors of the Company. Except as could
not reasonably by expected to have a Company Material Adverse Effect: (i) no
unfair labor practice complaint against the Company or any Subsidiary is pending
before the National Labor Relations Board, and there is no labor strike,
slowdown or stoppage pending or, to the knowledge of the Company, threatened in
writing against or involving the Company or any Subsidiary; (ii) no unionizing
efforts have, to the knowledge of the Company, been made by employees of the
Company or any Subsidiary, neither the Company nor any Subsidiary is a party to
or subject to any collective bargaining agreement, and no collective bargaining
agreement is currently being negotiated by the Company or any Subsidiary; and
(iii) there is no labor dispute pending or, to the knowledge of the Company,
threatened in writing between the Company or any Subsidiary and its employees.
<PAGE>
3.11 Taxes. Except for such matters that would not have a Company
Material Adverse Affect (i) the Company and each Subsidiary have filed, or have
obtained extensions to file (which extensions have not expired without filing),
all state, local, United States, foreign, or other tax reports and returns
required to be filed by any of them; (ii) the Company and each Subsidiary have
duly paid, or accrued on their books of account, all taxes (including estimated
taxes) shown as due on such reports and returns (or such extension requests), or
assessed against them, other than taxes being contested in good faith in proper
proceedings and (iii) the liabilities and reserves for taxes reflected on the
Company Audited Balance Sheet or the Company Interim Balance Sheet are adequate
to cover all taxes payable by the Company and its Subsidiaries for all taxable
periods and portions thereof ending on or before the dates thereof. To the
Company's knowledge, no tax audits are pending against and no claims for taxes
have been received in writing by the Company or any of its Subsidiaries, other
than audits and claims that are not reasonably expected to have a Company
Material Adverse Effect. Neither the Company nor any Subsidiary has, with regard
to any assets or property held, acquired or to be acquired by any of them, filed
a consent to the application of Section 341(f)(2) of the Code. Neither the
Company nor, to the knowledge of the Company, any of its Subsidiaries has taken
or agreed to take any action (other than actions contemplated by this Agreement)
that would prevent the Merger from constituting a reorganization qualifying
under Section 368(a) of the Code. The Company is not aware of any agreement,
plan or other circumstance that would prevent the Merger from so qualifying
under Section 368(a) of the Code.
For the purposes of this Agreement, "tax" shall mean and include taxes,
duties, withholdings, assessments, and charges assessed or imposed by any
governmental authority (together with any interest, penalties and additions to
tax imposed with respect thereto), including but not limited to all federal,
state, county, local, and foreign income, profits, gross receipts, import, ad
valorem, real and personal property, franchise, license, sales, use, value
added, stamp, transfer, withholding, payroll, employment, excise, custom, duty,
and any other taxes, obligations and assessments of any kind whatsoever; "tax"
shall also include any liability for taxes arising as a result of being (or
ceasing to be) a member of any affiliated, consolidated, combined, or unitary
group as well as any liability for taxes under any tax allocation, tax sharing,
tax indemnity, or similar agreement.
3.12 Contracts. Neither the Company nor any Subsidiary is, nor, to the
knowledge of the Company, is any other party thereto, in material violation of
or in default under any contract, plan, agreement, understanding, arrangement or
obligation that is material to the Company and its Subsidiaries considered as a
whole, except for such violations or defaults that could not reasonably be
expected to have a Company Material Adverse Effect. As of the date of this
Agreement, neither the Company nor any Subsidiary is a party to any contract,
plan, agreement, understanding, arrangement or obligation (i) which restricts
the Company's, or after the Merger would restrict Parent's, ability to conduct
any line of business, (ii) which imposes on the Company material obligations
(including, without limitation, to pay milestone payments or license fees) not
reflected in the Company's financial statements included within the Company's
SEC Filings, or (iii) that would be required to be filed with the SEC in a
filing to which paragraph (b)(10) of Item 601 of Regulation S-K of the Rules and
Regulations of the SEC is applicable, which has not been so filed.
3.13 Intellectual Property Rights. The Company Disclosure Schedule
contains a complete and accurate list of all material patents, trademarks, trade
names, service marks, copyrights, and all applications for or registrations of
any of the foregoing as to which the Company or any Subsidiary is the owner or a
licensee (the "Company Intellectual Property"). The Company and each Subsidiary
owns, free and clear of any Lien (as defined in Section 3.3), or is licensed to
use, all patents, trademarks, trade names, service marks, copyrights,
applications for or registrations of any of the foregoing comprising the Company
Intellectual Property. No claim has been asserted or, to the knowledge of the
Company, threatened in writing by any person, with respect to the use of the
<PAGE>
Company Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement with respect thereto, except for such
claims that could not reasonably be expected to have a Company Material Adverse
Effect. To the knowledge of the Company, neither the use of the Company
Intellectual Property by the Company or any Subsidiary in the present conduct of
its business nor any product or service of the Company or any Subsidiary
infringes on the valid intellectual property rights of any person in a manner
that could reasonably be expected to have a Company Material Adverse Effect.
Except as could not reasonably be expected to have a Company Material Adverse
Effect, (i) all Company Intellectual Property listed in the Company Disclosure
Schedule has the status indicated therein and, unless provided otherwise, all
applications are still pending in good standing and have not been abandoned, and
(ii) to the knowledge of the Company, the Company Intellectual Property is valid
and has not been challenged in any judicial or administrative proceeding. To the
knowledge of the Company, no person or entity nor such person's or entity's
business or products has infringed, or misappropriated any Company Intellectual
Property, or currently is infringing, or misappropriating any Company
Intellectual Property, except as could not reasonably be expected to have a
Company Material Adverse Effect.
3.14 Benefit Plans.
(a) Neither the Company nor any Subsidiary sponsors,
maintains, contributes to, or has, within the past five years,
sponsored, maintained, or contributed to or been required to contribute
to, any "employee pension benefit plan" ("Pension Plan"), as such term
is defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including, solely for the purpose of
this subsection, a plan excluded from coverage by Section 4(b)(5) of
ERISA. Each such Pension Plan presently maintained by the Company or
any Subsidiary is, in all material respects, in compliance with
applicable provisions of ERISA, the Code, and other applicable law and
the Company or such Subsidiary has performed all of its obligations
under such Pension Plan except for such obligations that could not
reasonably be expected to have a Company Material Adverse Effect.
(b) Neither the Company nor any Subsidiary sponsors,
maintains, contributes to, or has, within the past five years,
sponsored, maintained, or contributed to or been required to contribute
to, any Pension Plan that is subject to Title IV of ERISA.
(c) Neither the Company nor any Subsidiary sponsors,
maintains, or contributes to any "employee welfare benefit plan"
("Welfare Plan"), as such term is defined in Section 3(1) of ERISA,
whether insured or otherwise, and any such Welfare Plan presently
maintained by the Company or any Subsidiary is, in all material
respects, in compliance with the provisions of ERISA, the Code, and all
other applicable laws, including, but not limited to, Section 4980B of
the Code and the regulations thereunder, and Part 6 of Title I of
ERISA. Neither the Company nor any Subsidiary has established or
contributed to any "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code.
(d) Neither the Company nor any Subsidiary currently maintains
or contributes to any oral or written bonus, profit-sharing,
compensation (incentive or otherwise), commission, stock option, or
other stock-based compensation, retirement, severance, change of
control, vacation, sick or parental leave, dependent care, deferred
compensation, cafeteria, disability, hospitalization, medical, death,
retiree, insurance, or other benefit or welfare or other similar plan,
policy, agreement, trust, fund, or arrangement providing for the
remuneration or benefit of all or any employees, directors or any other
person, that is neither a Pension Plan nor a Welfare Plan
(collectively, the "Compensation Plans").
<PAGE>
(e) With respect to the Pension Plans, Welfare Plans or
Compensation Plans, no event has occurred and, to the knowledge of the
Company, there exists no condition or set of circumstances, in
connection with which the Company or any of its Subsidiaries could be
subject to any liability under the terms of such Plans (other than the
payment of benefits thereunder), ERISA, the Code or any other
applicable Law which could reasonably be expected to have a Company
Material Adverse Effect.
(f) The IRS has issued favorable determination letters with
respect to all Company and Subsidiary Pension Plans that are intended
to be qualified under Section 401(a) of the Code. The Company has
provided to Parent summaries of all Pension Plans, Welfare Plans,
Compensation Plans, and related agreements, and complete and accurate
copies of all annual reports (Form 5500), favorable determination
letters, current summary plan descriptions, and all employee handbooks
or manuals. The Company has provided to Parent (i) copies of all
employment agreements with officers of any of the Company, its U.S.
Subsidiaries or, to the extent reasonably available, its non-U.S.
Subsidiaries (or copies of forms of agreements setting forth
representative employment terms and conditions); (ii) copies of all
severance, bonus or incentive agreements, programs and policies of any
of the Company, any U.S. Subsidiary or, to the extent reasonably
available, its non-U.S. Subsidiaries with or relating to any of its
employees; and (iii) copies of all plans, programs, agreements and
other arrangements of any of the Company, any Subsidiary or, to the
extent reasonably available, its non-U.S. Subsidiaries with or relating
to any of its employees which contain change in control provisions.
With respect to any items that would be described in the immediately
preceding sentence but for the fact that such copies relate to non-U.S.
Subsidiaries and are not reasonably available to the Company, the
Company (i) shall deliver copies thereof to Parent prior to the
Effective Time, and (ii) represents and warrants to Parent that such
items will not, individually or in the aggregate, be material to the
Company and its Subsidiaries.
(g) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event
under any Pension Plan, Welfare Plan, Compensation Plan, or other
arrangement that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits, or obligation to fund
benefits. No amount that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer, or director of
the Company or any of its affiliates who is a "disqualified individual"
(as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any Pension Plan, Welfare Plan, or Compensation Plan
currently in effect would be an "excess parachute payment" (as such
term is defined in Section 280G(b)(1) of the Code).
3.15 Minute Books. The Company has previously made available to Parent
or its representatives all of its minutes of meetings of and corporate actions
or written consents by the shareholders, Boards of Directors, and committees of
the Boards of Directors of the Company.
3.16 No Finders. No act of the Company or any Subsidiary has given or
will give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except payments in the amounts specified in
the Company Disclosure Schedule to those parties identified thereon who have
acted as a finder for the Company or have been retained by the Company as
financial advisors pursuant to the agreements or other documents described in
the Company Disclosure Schedule, copies of which have been provided or made
available to Parent or its advisors prior to the date of this Agreement.
<PAGE>
3.17 Proxy Statement. The Proxy Statement/Prospectus (as defined in
Section 5.5 hereof) and any amendments or supplements thereto will comply as to
form in all material respects with all applicable laws, and none of the
information supplied by the Company specifically for inclusion or incorporation
therein or in any amendments or supplements thereto, or any schedules required
to be filed with the SEC in connection therewith, will, at the date the Proxy
Statement/Prospectus (or any amendment or supplement thereto) is first mailed to
stockholders, at the time of the Company Shareholders Meeting, or at the
Effective Time 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 were
made, not misleading; provided, however, that no representation or warranty is
made by the Company with respect to information relating to Parent or any
affiliate of Parent supplied by Parent specifically for inclusion in the Proxy
Statement/Prospectus.
3.18 Fairness Opinion. The Company has received an opinion from J.P.
Morgan Securities Inc. to the effect that, as of the date hereof, the
consideration to be paid to the holders of Company Common Stock is fair, from a
financial point of view, to such shareholders, and the Company will promptly
deliver a copy of such opinion to Parent.
3.19 State Takeover Laws. The Board of Directors of the Company has
approved the transactions contemplated by this Agreement, such that, assuming
that, and Parent hereby represents to the Company that, Parent and Merger
Subsidiary are not "interested shareholders" (as such term is defined in IBCL
Section 23-1-43-10) prior to entering into this Agreement and the agreements
contemplated hereby, the Merger is not subject to the provisions of Chapter 43
(Sections 23-1-43-1 et. seq.) (entitled "Business Combinations") of the IBCL.
The Company and the Company Common Stock is not subject to Chapter 42 (Sections
23-1-42-1 et. seq.) (entitled "Control Share Acquisitions") of the IBCL.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Except (i) as set forth in a document of even date herewith, referring
specifically to the representations and warranties in this Agreement which
identifies by section number to which such disclosure relates (the "Parent
Disclosure Schedule") or (ii) as specifically described through express
disclosure of current, specific facts set forth in Parent's Annual Report on
Form 10-K for the fiscal year ended April 30, 1998 or in any other filing with
the SEC filed by Parent after the date of filing such Form 10-K and prior to the
date hereof to the extent the relevancy of such disclosure to such particular
representation and warranty is readily apparent, Parent and Merger Subsidiary
hereby jointly and severally make the following representations and warranties
to the Company:
4.1 Organization. Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Minnesota. Merger
Subsidiary is a corporation duly organized and validly existing under the laws
of the State of Indiana. Each of Parent and Merger Subsidiary has all requisite
corporate power and authority to own, lease, and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such corporate power and
authority would not, individually or in the aggregate, have a Parent Material
Adverse Effect (as defined below). Each of Parent and Merger Subsidiary is duly
<PAGE>
qualified and in good standing to do business in each jurisdiction in which the
property owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or in good standing could not reasonably be expected to have a
Parent Material Adverse Effect (as defined below). "Parent Material Adverse
Effect" means an effect that, individually or in the aggregate with other
effects, is or would reasonably at the time of such effect be expected to be
materially adverse: (i) to the business, results of operation, or financial
condition of Parent and its subsidiaries, considered as a whole, or (ii) to
Parent's ability to perform any of its material obligations under this Agreement
or to consummate the Merger, except in each case for any such effects resulting
from or arising out of (i) this Agreement or the transactions contemplated by
this Agreement or the announcement hereof, (ii) any occurrence or condition
affecting the medical device industry generally, or (iii) any changes in general
economic, regulatory or political conditions. Parent has heretofore delivered or
made available to the Company or its advisors complete and accurate copies of
the Articles of Incorporation and Bylaws of Parent, as currently in effect.
4.2 Authorization. Each of Parent and Merger Subsidiary has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery by Parent and Merger Subsidiary of this Agreement and the other
agreements contemplated hereby to which Parent or Merger Subsidiary is a party,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and validly authorized and approved by the Boards of Directors of
Parent and Merger Subsidiary and by Parent as the sole shareholder of Merger
Subsidiary, and no other corporate proceedings on the part of Parent and Merger
Subsidiary, and no vote, consent or approval of Parent's shareholders, are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Subsidiary and, assuming due execution
and delivery by the Company, constitutes the valid and binding obligation of
Parent and Merger Subsidiary, enforceable against each of them in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and rules of law governing specific
performance, injunctive relief, or other equitable remedies.
4.3 Capitalization. As of October 23, 1998, the authorized capital
stock of Parent consisted of (a) 800,000,000 shares of Common Stock with a par
value of $.10 per share, of which there were 489,262,955 shares issued and
outstanding and no shares held in Parent's treasury, and (b) 2,500,000 shares of
Preferred Stock with a par value of $1.00 per share, of which there were no
shares issued and outstanding. The authorized capital stock of Merger Subsidiary
consists of 10,000,000 shares of Merger Subsidiary Common Stock, 1,000 of which
are issued and outstanding and owned by Parent. All issued and outstanding
shares of Parent Common Stock and Merger Subsidiary Common Stock are, and the
shares of Parent Common Stock to be issued and delivered in the Merger pursuant
to Article 1 hereof shall be, at the time of issuance and delivery, validly
issued, fully paid, nonassessable, and free of preemptive rights. The shares of
Parent Common Stock to be issued and delivered in the Merger pursuant to Article
1 hereof shall be registered under the 1933 Act and duly listed for trading on
the NYSE, subject to official notice of issuance.
4.4 Consents and Approvals. Except for (i) any applicable requirements
of the 1933 Act, the 1934 Act, state securities laws, the NYSE, the HSR Act, and
Foreign Merger Laws, (ii) the filing and recordation of appropriate merger
documents as required by the IBCL, and (iii) compliance with Chapter 44
(Sections 23-1-44-1 et. seq.) of the IBCL regarding dissenters' rights of the
Company's shareholders, the execution and delivery by Parent and Merger
Subsidiary of this Agreement and the other agreements contemplated hereby to
which Parent and Merger Subsidiary are parties, and the consummation of the
transactions contemplated hereby and thereby will not: (a) violate any provision
of the Articles of Incorporation or Bylaws of Parent or Merger Subsidiary; (b)
violate any statute, rule, regulation, order, or decree of any federal, state,
local or foreign governmental or regulatory body or authority (including, but
not limited to, the FDA or any nongovernmental self-regulatory agency) by which
Parent or any of its subsidiaries or any of their respective properties or
assets may be bound; (c) require any filing with or permit, consent, or approval
of any federal, state, local or foreign governmental or regulatory body or
<PAGE>
authority (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency); or (d) result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
under, result in the loss of any material benefit under, or give rise to any
right of termination, cancellation, increased payments, or acceleration under,
or result in the creation of any Lien on any of the properties or assets of
Parent or its subsidiaries under, any of the terms, conditions, or provisions of
any note, bond, mortgage, indenture, license, franchise, permit, agreement, or
other instrument or obligation to which Parent or any of its subsidiaries is a
party, or by which any of them or any of their respective properties or assets
may be bound, except, in the case of clauses (c) and (d), for any such filings,
permits, consents or approvals or violations, breaches, defaults, or other
occurrences that could not reasonably be expected to prevent or delay
consummation of any of the transaction contemplated hereby in any material
respect, or otherwise prevent Parent from performing its obligations under this
Agreement in any material respect, and could not reasonably be expected to have
a Parent Material Adverse Effect.
4.5 Reports; Financial Statements; Absence of Changes. Parent has filed
all forms, reports, registration statements, and documents required to be filed
by it with the SEC since May 1, 1995 (such forms, reports, registration
statements and documents, together with any amendments thereto, are referred to
as the "Parent SEC Filings"). As of their respective dates, the Parent SEC
Filings (i) complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may be, and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements and unaudited interim financial
statements included or incorporated by reference in the Parent SEC Filings (i)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC), (ii) complied as of their
respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, and (iii) fairly present in all material respects the consolidated
financial position of Parent as of the dates thereof and the income, cash flows,
and changes in shareholders' equity for the periods involved, except as
otherwise noted therein (subject, in the case of unaudited statements, to normal
and recurring year-end adjustments which were not and are not expected,
individually or in the aggregate, to have a Parent Material Adverse Effect).
4.6 Registration Statement. The Registration Statement (as defined in
Section 5.5 hereof) and any amendments or supplements thereto will comply as to
form in all material respects with the 1933 Act, and none of the information
supplied by Parent specifically for inclusion or incorporation therein or in any
amendments or supplements thereto, or any schedules required to be filed with
the SEC in connection therewith, will, at the time the Registration Statement
becomes effective, at the date the Proxy Statement/Prospectus (or any amendment
or supplement thereto) is first mailed to stockholders, at the time of the
Company Shareholders Meeting, or at the Effective Time, 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 were made, not misleading; provided, however,
that no representation or warranty is made by Parent with respect to information
supplied by the Company or any affiliate of the Company specifically for
inclusion in the Registration Statement.
4.7 No Finders. No act of Parent or Merger Subsidiary has given or will
give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein.
<PAGE>
4.8 Absence of Undisclosed Liabilities. To the best of Parent's
knowledge, neither Parent nor any of its subsidiaries has any liabilities or
obligations of any nature (whether absolute, accrued, contingent or otherwise)
except (a) liabilities or obligations that are accrued or reserved against in
the audited consolidated balance of Parent as of April 30, 1998 contained in the
Parent SEC Filings or in the unaudited consolidated balance sheet of Parent as
of July 31, 1998 contained in Parent's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 31, 1998 or referred to in the notes thereto, and (b)
liabilities or obligations that could not reasonably be expected to have a
Parent Material Adverse Effect.
4.9 Compliance with Laws. Neither Parent nor any of its subsidiaries is
in default or violation of any applicable federal, state, local or foreign laws,
ordinances, regulations, interpretations, judgments, decrees, injunctions,
permits, licenses, certificates, governmental requirements, orders or other
similar items of any court or other governmental entity (including, but not
limited to, those of the FDA or any nongovernmental self-regulatory agency and
including environmental laws or regulations), except for such defaults or
violations that could not reasonably be expected to have a Parent Material
Adverse Effect. Parent and each of its subsidiaries has timely filed or
otherwise provided all registrations, reports, data and other information and
applications with respect to its Regulated Products required to be filed with or
otherwise provided to the FDA or any other federal, state, local or foreign
governmental authorities with jurisdiction over the manufacture, use of sale of
the Regulated Products, and all regulatory licenses or approvals in respect
thereof are in full force and effect, except where the failure to file timely
such registrations, reports, data, information and applications or the failure
to have such licenses and approvals in full force and effect could not
reasonably be expected to have a Parent Material Adverse Effect.
4.10 Litigation. There are no claims, actions, suits, proceedings, or,
to the knowledge of Parent, investigations or reviews of any kind, pending or,
to the knowledge of Parent, threatened in writing, against Parent or any of its
subsidiaries or any asset or property of Parent or any of its subsidiaries,
except for such claims, actions, suits, proceedings, investigations or reviews
that could not reasonably be expected to have a Parent Material Adverse Effect.
4.11 Absence of Material Adverse Changes. Since April 30, 1998, there
has not been any (a) Parent Material Adverse Effect, (b) damage, destruction or
loss, not covered by insurance, that could reasonably be expected to have a
Parent Material Adverse Effect, (c) material change by Parent or any of its
subsidiaries in accounting methods or principles used for financial reporting
purposes, except as required by a change in applicable law or generally accepted
accounting principles and concurred with by Parent's independent public
accountants, or (d) agreement, whether in writing or otherwise, to take any
action described or referenced in this Section 4.11.
4.12 Reorganization. Neither Parent nor, to the knowledge of Parent,
any of its subsidiaries has taken or agreed to take any action (other than
actions contemplated by this Agreement) that would prevent the Merger from
constituting a reorganization qualifying under Section 368(a) of the Code.
Parent is not aware of any agreement, plan or other circumstances that would
prevent the Merger from so qualifying under Section 368(a) of the Code.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement or as set forth in Section 5.1 of the Company Disclosure Schedule,
unless Parent shall otherwise consent in writing (such consent not to be
unreasonably withheld or delayed), during the period from the date of this
Agreement to the Effective Time, the Company and each Subsidiary will conduct
its respective operations, to the extent commercially reasonable, according to
its ordinary and usual course of business and consistent with past practice, and
the Company and each Subsidiary will use its commercially reasonable efforts to
preserve substantially intact its respective business organizations, to keep
available the services of its respective officers and employees and to maintain
<PAGE>
satisfactory relationships with licensors, licensees, suppliers, contractors,
distributors, physicians, consultants, customers, and others having material
business relationships with it. The Company will promptly advise Parent of any
material change in the management, present or planned business, properties,
liabilities, results of operations, or financial condition of the Company or any
material Subsidiary. The Company will keep Parent reasonably advised on a
current basis as to the status of the matters described in Section 3.1 of the
Company Disclosure Schedule, and will not settle, resolve or compromise any of
such matters without reasonable prior notice to Parent and after giving due
consideration to Parent's recommendations with respect thereto. The Company
will, prior to distributing or otherwise circulating any notices, directives, or
other communications directed to all or groups of customers, vendors, employees,
distributors, or others associated with its business relating to the
transactions contemplated hereby or to the operation of business after
consummation of such transactions, consult with Parent and give Parent
reasonable opportunity to comment thereon. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in or contemplated by
this Agreement or as set forth in Section 5.1 of the Company Disclosure
Schedule, from the date of the Agreement until the Effective Time, neither the
Company nor any Subsidiary will, without the prior written consent of Parent
(such consent not to be unreasonably withheld or delayed):
(a) amend its Articles of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell, pledge, or deliver
(whether through the issuance or granting of additional options,
warrants, commitments, subscriptions, rights to purchase, or otherwise)
any stock of any class or any securities convertible into shares of
stock of any class (other than the issuance of shares of Company Common
Stock pursuant to the exercise of stock options outstanding on the date
of this Agreement and, so long as treatment of the Merger as a pooling
of interests is not jeopardized, the issuance, in the ordinary course
of business and consistent with past practice, of stock options to
purchase, at not less than fair market value on the date of grant of
such option, a maximum of 50,000 shares of Company Common Stock
pursuant to the Company Option Plans in effect on the date of this
Agreement and the shares of Company Common Stock issuable pursuant to
such stock options);
(c) split, combine, or reclassify any shares of its capital
stock, declare, set aside, or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in
respect of its capital stock; or redeem or otherwise acquire any shares
of its capital stock or its other securities; or amend or alter any
material term of any of its outstanding securities;
(d) other than indebtedness incurred in the ordinary course of
business and consistent with past practice and other than intercompany
indebtedness, create, incur or assume any indebtedness for borrowed
money, or assume, guarantee, endorse, or otherwise agree to become
liable or responsible for the obligations of any other person, or make
any loans, advances or capital contributions to, or investments in, any
other person; or create, incur or assume any material Lien on any
material asset;
(e) (i) increase in any manner the compensation of any of its
directors, officers, employees, or consultants, or accelerate the
payment of any such compensation, except in each case in the ordinary
course of business and consistent with past practice (including,
without limitation, annual year end increases) or consistent with
existing contractual commitments or as required by applicable law
(other than accelerated payments customarily made upon termination of
employment); (ii) pay or accelerate or otherwise modify in any material
respect the payment, vesting, exercisability, or other feature or
requirement of any pension, retirement allowance, severance, change of
control, stock option, or other employee benefit not required by any
existing plan, agreement, or arrangement to any such director, officer,
<PAGE>
employee or consultant; or (iii) except for normal increases in the
ordinary course of business in accordance with its customary past
practices or consistent with existing contractual commitments or as
required by applicable laws, commit itself to any additional or
increased pension, profit-sharing, bonus, incentive, deferred
compensation, group insurance, severance, change of control, retirement
or other benefit, plan, agreement, or arrangement, or to any employment
or consulting agreement, with or for the benefit of any person, or
amend any of such plans or any of such agreements in existence on the
date hereof (except any amendment required by law or that would not
materially increase benefits under the relevant plan);
(f) except in the ordinary course of business and consistent
with past practice or pursuant to contractual obligations existing on
the date hereof, sell, transfer, mortgage, or otherwise dispose of or
encumber any assets or properties material to the Company and its
Subsidiaries, considered as a whole;
(g) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business of any corporation,
partnership, joint venture, association, or other business organization
or division thereof or (ii) any assets that are material, individually
or in the aggregate, to the Company and its Subsidiaries, considered as
a whole, except as provided in subsection (h) below and except
purchases of inventory in the ordinary course of business consistent
with past practice;
(h) make or agree to make any new capital expenditure or
expenditures that, individually, is in excess of $1,000,000 or, in the
aggregate, are in excess of $4,000,000;
(i) enter into, amend in any material respect, or terminate
any joint ventures or any other agreements, commitments, or contracts
that are material to the Company and its Subsidiaries, considered as a
whole (except agreements, commitments, or contracts expressly provided
for or contemplated by this Agreement or for the purchase, sale, or
lease of goods, services, or properties in the ordinary course of
business, consistent with past practice);
(j) enter into or terminate, or amend, extend, renew, or
otherwise modify in any material respect (including, but not limited
to, by default or by failure to act) any material distribution, OEM,
independent sales representative, noncompetition, licensing, franchise,
research and development, supply, or similar contract, agreement, or
understanding (except agreements, commitments, or contracts expressly
provided for or contemplated by this Agreement or for the purchase,
sale, or lease of goods, services, or properties in the ordinary course
of business, consistent with past practice);
(k) change in any material respect its credit policy as to
sales of inventories or collection of receivables or its inventory
consignment practices;
(l) remove or permit to be removed from any building,
facility, or real property any material machinery, equipment, fixture,
vehicle, or other personal property or parts thereof, except in the
ordinary course of business;
<PAGE>
(m) alter or revise its accounting principles, procedures,
methods, or practices in any material respect, except as required by
applicable law or by a change in generally accepted accounting
principles and concurred with by the Company's independent public
accountants;
(n) institute, settle, or compromise any claim, action, suit,
or proceeding pending or threatened by or against it involving amounts
in excess of $1,000,000, at law or in equity or before any federal,
state, local, foreign, or other governmental department, commission,
board, bureau, agency, or instrumentality (including, but not limited
to, the FDA or any nongovernmental self-regulatory agency);
(o) knowingly take any action that would render any
representation, warranty, covenant, or agreement of the Company in this
Agreement inaccurate or breached such that the conditions in Section
6.2 will not be satisfied as of the Closing Date; or
(p) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 Conduct of Business of Parent. Except as contemplated by this
Agreement, from the date of this Agreement until the Effective Time, Parent will
not do, and will not permit any of its subsidiaries to do, any of the following
without the prior written consent of the Company (such consent not to be
unreasonably withheld or delayed):
(a) combine or reclassify any shares of its capital stock,
declare, set aside or pay any extraordinary dividend or other
distribution (whether in cash, stock or property or any combination
thereof, but excluding a stock split effected in the form of a stock
dividend) in respect of its capital stock, or redeem or otherwise
acquire (other than pursuant to Parent's previously established stock
repurchase program or as would not violate Section 5.21) any shares of
its capital stock or amend or alter any material term of any of its
outstanding securities;
(b) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business of any corporation, partnership, joint
venture, association or other business organization or division
thereof, or otherwise acquire or agree to acquire, or dispose or agree
to dispose, any assets of any other person, which, in each case, could
reasonably be expected to delay materially the consummation of, or
increase materially the risk of non-consummation of, the transactions
contemplated by this Agreement;
(c) alter or revise its accounting principles, procedures,
methods or practices in any material respect, except as required by
applicable law or regulation or by a change in generally accepted
accounting principles and concurred with by Parent's independent public
accountants;
(d) knowingly take any action that would result in a failure
to maintain the trading of Parent Common Stock on the NYSE; or
(e) knowingly take any action, or knowingly fail to take any
action, that would render any representation, warranty, covenant or
agreement of Parent in this Agreement inaccurate or breached such that
the conditions in Section 6.3 will not be satisfied; or
(f) agree, whether in writing or otherwise, to do any of the
foregoing.
<PAGE>
5.3 No Solicitation. Neither the Company nor any Subsidiary, nor any of
their respective officers, directors, employees, representatives, agents, or
affiliates (including, but not limited to any investment banker, attorney, or
accountant retained by the Company or any Subsidiary), shall, directly or
indirectly, solicit, knowingly encourage, initiate, or participate in any way in
discussions or negotiations with, or knowingly provide any information to, any
corporation, partnership, person, or other entity or group (other than Parent or
any affiliate or agent of Parent) concerning any proposed merger, sale or
licensing of any significant portion of the assets, sale of shares of capital
stock (including without limitation any proposal or offer to the Company's
shareholders), or similar transactions involving the Company or any Subsidiary
(an "Alternative Transaction"), or otherwise knowingly facilitate any effort or
attempt to make or implement an Alternative Transaction. The Company will
promptly inform Parent of any proposal or inquiry that it has received or may
receive in respect of any proposed Alternative Transaction or of any such
information requested from it or of any such negotiations or discussions being
sought to be initiated with the Company in respect of a proposed Alternative
Transaction; provided, however, that this section shall not prohibit the Board
of Directors of the Company from (i) furnishing information to or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
(from the date of this Agreement) Superior Proposal, if, and only to the extent
that, (a) the Board of Directors of the Company determines in good faith that
such action is so required for the Board of Directors to comply with its
fiduciary duties to shareholders imposed by law, after consultation with
independent, outside counsel (who may be the Company's regularly engaged legal
counsel), and (b) prior to first furnishing information to, or first entering
into substantive discussions or negotiations with, such person or entity, the
Company provides written notice to Parent to the effect that it is furnishing
information to, or entering into substantive discussions or negotiations with,
such person or entity, and (c) the Company keeps Parent informed of the status
of any such discussions or negotiations; and (ii) to the extent applicable,
complying with Rule 14e-2 promulgated under the 1934 Act with regard to a
proposed Alternative Transaction. Nothing in this section shall (x) permit the
Company to terminate this Agreement (except as specifically provided in Article
7 hereof), (y) permit the Company to enter into any agreement providing for an
Alternative Transaction (other than a usual and customary confidentiality
agreement) for as long as this Agreement remains in effect, or (z) affect any
other obligation of the Company under this Agreement. For purposes of this
Agreement, a "Superior Proposal" shall mean a proposal for an Alternative
Transaction that the Board of Directors of the Company has determined in its
good faith judgment to be more favorable to the Company's shareholders than the
transactions contemplated by this Agreement.
5.4 Access and Information.
(a) Except as required pursuant to any confidentiality
agreement or similar agreement or arrangement to which the Company or
any of its Subsidiaries is a party (in which case the Company shall use
all commercially reasonable efforts to provide acceptable alternative
arrangements, not in violation of such agreement or arrangement, for
disclosure to Parent or its advisors) or pursuant to applicable Law,
the Company shall afford to Parent, and to Parent's accountants,
officers, directors, employees, counsel, and other representatives,
reasonable access during normal business hours upon reasonable prior
notice, from the date hereof through the Effective Time, to all of its
properties, books, contracts, commitments, and records, and, during
such period, the Company shall furnish promptly to Parent all
information concerning the Company's and its Subsidiaries' businesses,
prospects, properties, liabilities, results of operations, financial
condition, testing, clinicals, officers, employees, investigators,
distributors, customers, suppliers, and others having material dealings
with the Company as Parent may reasonably request and reasonable
opportunity to contact and obtain information from such officers,
employees, investigators, distributors, customers, suppliers, and
others having dealings with the Company as Parent may reasonably
request. During the period from the date hereof to the Effective Time,
the parties shall in good faith meet and correspond on a regular basis
for mutual consultation concerning the conduct of the Company's and the
Subsidiaries' businesses and, in connection therewith, Parent shall be
entitled, during normal business hours upon reasonable prior notice and
in a manner that does not unreasonably interfere with the Company's
business, to have employees or other representatives present at the
offices of the Company and its Subsidiaries to observe, and be kept
informed concerning, the Company's and the Subsidiaries' operations and
business planning.
<PAGE>
(b) Parent shall hold in confidence all such nonpublic
information as required and in accordance with the confidentiality
agreement dated October 1, 1998, between Parent and the Company (the
"Confidentiality Agreement").
5.5 Approval of Shareholders; Proxy Statement; Registration Statement.
(a) The Company shall promptly take all action necessary in
accordance with Indiana law and the Company's Articles of Incorporation
and Bylaws to cause a special meeting of the Company's shareholders
(the "Company Shareholders Meeting") to be duly called and (unless
prohibited by the IBCL as advised by Indiana counsel to the Company)
held as soon as reasonably practicable following the date upon which
the Registration Statement (as defined below) becomes effective for the
purpose of voting upon the Merger. The shareholder vote or consent
required for approval of the Plan of Merger and the Merger shall be no
greater than that set forth in the IBCL and the Company's Articles of
Incorporation as previously provided to Parent. Accordingly, the
Company represents and warrants that the affirmative vote of the
holders of record of a majority of the outstanding shares of Company
Common Stock is all that is necessary to obtain shareholder approval of
the Plan of Merger and the Merger. The Company shall use all reasonable
efforts to obtain the approval by the Company's shareholders of this
Agreement, the Plan of Merger, and the Merger, unless otherwise
required by the applicable fiduciary duties of the directors of the
Company, as determined by such directors in good faith after
consultation with independent legal counsel (who may be the Company's
regularly engaged legal counsel). In accordance therewith, the Company
shall, with the cooperation of Parent, prepare and file, as soon as
reasonably practicable, a proxy statement/prospectus included as part
of the Registration Statement (such proxy statement/prospectus,
together with notice of meeting, form of proxy, and any letter or other
materials to the Company's shareholders included therein are referred
to in this Agreement as the "Proxy Statement/Prospectus"). Parent shall
furnish to the Company all information concerning Parent, and shall
take such other action and otherwise cooperate, as the Company may
reasonably request in connection with any such action. The Company
shall use all reasonable efforts to cause the definitive Proxy
Statement/Prospectus to be mailed to the shareholders of the Company,
as soon as reasonably practicable after the Registration Statement
shall have become effective, with the date of mailing as mutually
determined by the Company and Parent. The Proxy Statement/Prospectus
shall include the recommendation of the Company's Board of Directors in
favor of the Merger, unless otherwise required by the applicable
fiduciary duties of the directors of the Company, as determined by such
directors in good faith after consultation with independent legal
counsel (who may be the Company's regularly engaged legal counsel).
(b) Parent shall, with the cooperation of the Company, prepare
and file, as soon as reasonably practicable, a registration statement
under the 1933 Act registering the shares of Parent Common Stock to be
issued in the Merger (the "Registration Statement"), which Registration
Statement shall include the Proxy Statement/Prospectus. Parent will use
all reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly thereafter as practicable. Parent
shall also take any action required to be taken under state blue sky or
securities laws in connection with the issuance of Parent Common Stock
pursuant to the Merger. The Company shall furnish to Parent all
information concerning the Company and its Subsidiaries and the holders
of its capital stock, and shall take such other action and otherwise
cooperate, as Parent may reasonably request in connection with any such
action.
<PAGE>
(c) Parent shall notify the Company promptly of the receipt of
the comments of the SEC and of any request by the SEC for amendments or
supplements to the Registration Statement of the time when the
Registration Statement has become effective or any supplement or
amendment has been filed, or the issuance of any stop order, of the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction and
shall supply the Company with copies of all correspondence with the SEC
with respect to the Registration Statement.
(d) If at any time prior to the Effective Time, any event or
circumstance relating to the Company, any Subsidiary, or the Company's
officers or directors should occur or be discovered by the Company that
is required to be described in an amendment or supplement to the
definitive Proxy Statement/Prospectus or the Registration Statement,
the Company shall promptly inform Parent. If at any time prior to the
Effective Time, any event or circumstance relating to Parent or Merger
Subsidiary or their respective officers or directors should occur or be
discovered by Parent that is required to be described in an amendment
or supplement to the definitive Proxy Statement/Prospectus or the
Registration Statement, Parent shall promptly inform the Company.
Whenever any event occurs that should be described in an amendment of,
or supplement to, the definitive Proxy Statement/Prospectus or the
Registration Statement, the Company or Parent, as the case may be,
shall, upon learning of such event, promptly notify the other and
consult and cooperate with the other in connection with the preparation
of a mutually acceptable amendment or supplement. The parties shall
promptly file such amendment or supplement with the SEC and mail such
amendment or supplement as soon as practicable after it is cleared by
the SEC. No amendment or supplement to the Proxy Statement/Prospectus
or the Registration Statement will be made by Parent or the Company
without the approval of the other party (such approval not to be
unreasonably withheld or delayed).
5.6 Consents. The Company will, at its cost and expense, use all
reasonable efforts to obtain all approvals and consents of all third parties
necessary on the part of the Company or its Subsidiaries to consummate the
transactions contemplated hereby. Parent agrees to cooperate with the Company in
connection with obtaining such approvals and consents. Parent will, at its cost
and expense, use all reasonable efforts to obtain all approvals and consents of
all third parties necessary on the part of Parent to consummate the transactions
contemplated hereby. The Company agrees to cooperate with Parent in connection
with obtaining such approvals and consents.
5.7 Affiliates' Letters.
(a) The Company has delivered to Parent a list of names and
addresses of those persons, in the Company's reasonable judgment after
consultation with outside legal counsel, who, as of the date hereof,
are affiliates within the meaning of Rule 145 of the rules and
regulations promulgated under the 1933 Act or otherwise applicable SEC
accounting releases with respect to pooling-of-interests accounting
treatment (each such person, an "Affiliate") of the Company. The
Company shall provide Parent such information and documents as Parent
shall reasonably request for purposes of reviewing such list and shall
promptly update such list to reflect any changes thereto. The Company
has delivered or caused to be delivered, or will, promptly after the
execution hereof, deliver or cause to be delivered, to Parent an
affiliate's letter in the form attached hereto as Exhibit B, executed
by each of the Affiliates of the Company identified in the foregoing
list, and shall use all reasonable efforts to deliver or cause to be
delivered to Parent prior to the Effective Time such an affiliate's
letter executed by any additional persons who, to the knowledge of the
Company, become Affiliates after the date hereof. Parent shall be
entitled to place legends as specified in such affiliates' letters on
the certificates evidencing any of the Parent Common Stock to be
received by such Affiliates pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer
agent for the Parent Common Stock, consistent with the terms of such
letters.
<PAGE>
(b) For so long as resales of shares of Parent Common Stock
issued pursuant to the Merger are subject to the resale restrictions
set forth in Rule 145 under the Securities Act, Parent will use all
reasonable efforts to comply with Rule 144(c)(1) under the Securities
Act.
5.8 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the transactions
contemplated hereby, the Proxy Statement/Prospectus, and the Registration
Statement will be paid by the party incurring such costs and expenses, except
that the Company and Parent will share equally the cost of printing and filing
with the SEC the Proxy Statement/Prospectus and the Registration Statement, the
filing fees required under the HSR Act or any Foreign Merger Laws, and the fees
charged by PricewaterhouseCoopers LLP for the letters described in Section 5.16
(the "Shared Expenses").
5.9 Further Actions. Subject to the terms and conditions herein
provided and without being required to waive any conditions herein (whether
absolute, discretionary, or otherwise), each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
5.10 Regulatory Approvals.
(a) The Company and Parent each agree to use its best efforts
to take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things as may be necessary under federal or state
securities laws or the HSR Act or Foreign Merger Laws applicable to or
necessary for, and will file as soon as reasonably practicable and, if
appropriate, use its best efforts to have declared effective or
approved all documents and notifications with the SEC and other
governmental or regulatory bodies (including, without limitation, the
FDA and equivalent foreign regulatory bodies, and other foreign
regulatory bodies that administer Foreign Merger Laws, and any foreign
labor councils or bodies as may be required) that they deem necessary
or appropriate for, the consummation of the Merger and the transactions
contemplated hereby, and each party shall give the other information
reasonably requested by such other party pertaining to it and its
subsidiaries and affiliates to enable such other party to take such
actions.
(b) Although the parties do not anticipate any legislative,
administrative or judicial objection to the consummation of the Merger
or any of the transactions contemplated by this Agreement, each of the
Company, Parent and Merger Subsidiary agrees to use its best efforts
vigorously to contest and resist any action, including legislative,
administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) (an "Order") that is in
effect and that restricts, prevents or prohibits the consummation of
the Merger or any other transactions contemplated by this Agreement,
including, without limitation, by vigorously pursuing available avenues
of administrative and judicial appeal. Each of the Company, Parent and
Merger Subsidiary also agrees to use its best efforts to take any and
all actions necessary to avoid or eliminate each and every impediment
under any antitrust law that may be asserted by any governmental
antitrust authority or any other party so as to enable the parties to
close by the date specified in Section 7.1(b) the transactions
contemplated hereby, including without limitation, committing to and/or
effecting, by consent decree, hold separate orders, or otherwise, the
sale or disposition of such assets or businesses as are required to be
divested in order to avoid the entry of, or to effect the dissolution
of, any injunction, temporary restraining order or other order in any
suit or proceeding, which would otherwise have the effect of preventing
the consummation by the date specified in Section 7.1(b) of all or any
material part of the transactions contemplated hereby. Notwithstanding
the foregoing or anything herein to the contrary, in no event shall
Parent be required under this Section 5.10 to make arrangements for or
to effect the sale, cessation, or other disposition of product lines or
businesses or take any action materially adverse to Parent.
<PAGE>
5.11 Certain Notifications. The Company shall promptly notify Parent in
writing of the occurrence of any event that will or could reasonably be expected
to result in the failure by the Company or its affiliates to satisfy any of the
conditions specified in Section 6.1 or 6.2. Parent shall promptly notify the
Company in writing of the occurrence of any event that will or could reasonably
be expected to result in the failure by Parent or its affiliates to satisfy any
of the conditions specified in Section 6.1 or 6.3.
5.12 Voting of Shares. To induce Parent to execute this Agreement,
certain executive officers and directors of the Company have executed and
delivered as of the date hereof Agreements to Facilitate Merger in the form
attached hereto as Exhibit C, pursuant to which each such person has agreed to
vote his or her shares of Company Common Stock in favor of the Merger at the
Company Shareholders Meeting.
5.13 Stock Option Agreement. To induce Parent to execute this
Agreement, the Company has executed and delivered to Parent as of the date
hereof a Stock Option Agreement in the form attached hereto as Exhibit D (the
"Stock Option Agreement"), pursuant to which the Company has granted to Parent
an option to acquire from the Company such number of shares of Company Common
Stock as equals 19.9% of the aggregate number of outstanding shares of Company
Common Stock at an exercise price equal to $115 per share. Such option shall
become exercisable only in the events described in the Stock Option Agreement.
5.14 NYSE Listing Application. Parent shall promptly prepare and submit
to the NYSE a listing application for the Parent Common Stock to be issued in
the Merger pursuant to Article 1 of this Agreement and pursuant to the Company
Options assumed by Parent, and shall use its reasonable best efforts to obtain,
prior to the Effective Time, approval for the listing of such Parent Common
Stock, subject to official notice to the NYSE of issuance. The Company shall
cooperate with Parent in such listing application.
5.15 Indemnification.
(a) The articles of incorporation and the bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification, payment of fees and expenses and exculpation from
liability set forth in the Company's articles of incorporation and
bylaws on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who on or at any time prior to the Effective
Time were directors, officers, employees or agents of the Company,
unless such modification is required by law. Parent shall guarantee the
obligations of the Surviving Corporation with respect to the
indemnification and payment of fees and expenses provisions contained
in the Surviving Corporation's articles of incorporation and bylaws
with respect to acts occurring at or before the Effective Time
(including the transactions contemplated by this Agreement).
(b) For a period of three years after the Effective Time,
Parent shall cause to be maintained in effect the Company's current
directors' and officers' liability insurance policy with respect to
claims arising from facts or events that occurred at or prior to the
Effective Time; provided, however, that (i) Parent may substitute
therefor policies providing coverage on terms and conditions that are
no less advantageous to such persons, and (ii) Parent may satisfy its
obligations hereunder by extending the discovery or reporting period
under such policy for three years from the Effective Time to maintain
in effect directors' and officers' liability insurance covering
pre-acquisition acts (including acts in connection with this Agreement
<PAGE>
and the transactions contemplated hereby) for those persons who are
currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered or made
available to Parent or its advisors ) (the "Indemnified Parties") on
terms no less favorable than the terms of such current insurance
coverage; provided, however, that in no event shall Parent be required
to expend for any such coverage an amount per year in excess of 150% of
the annual premium currently paid by the Company for such insurance;
and provided further that if the cost per year of such coverage exceeds
such 150% amount, Parent shall be obligated to obtain such coverage as
is available for a cost per year not exceeding such amount.
(c) In the event Parent, the Surviving Corporation or any of
their successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and
in each such case, proper provisions shall be made so that the
successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section
5.15.
(d) This Section 5.15 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company,
Parent, the Surviving Corporation and the Indemnified Parties, and
shall be binding on all successors and assigns of Parent and the
Surviving Corporation.
5.16 Letters of the Company's and Parent's Accountants.
(a) The Company shall cooperate with Parent and use its
reasonable efforts to cause to be delivered to Parent and the Company
the following letters from PricewaterhouseCoopers LLP addressed to
Parent and the Company: (i) a letter dated the date of this Agreement,
stating that after appropriate review and based on its familiarity with
the Company, neither the Company nor any of its shareholders who are
affiliates has taken or agreed to take any action that would prevent
Parent from accounting for the Merger as a pooling of interests
transaction under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations; and (ii) a letter dated as of the
Closing Date stating that after appropriate review and based on its
familiarity with the Company, neither the Company nor any of its
shareholders has taken or agreed to take any action that would prevent
Parent from accounting for the Merger as a pooling of interests under
Opinion 16 of the Accounting Principles Board and applicable SEC rules
and regulations.
(b) The Company shall cooperate with Parent and Parent shall
use its reasonable efforts to cause to be delivered to the Company and
Parent the following letters from PricewaterhouseCoopers LLP addressed
to the Company and Parent: (i) a letter dated the date of this
Agreement, stating that after appropriate review of this Agreement and
a letter from the Parent describing the transaction, the Merger will
qualify as a pooling of interests transaction under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations;
and (ii) a letter dated as of the Closing Date confirming as of the
Closing Date that the Merger will qualify as a pooling of interests
transaction under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations.
<PAGE>
5.17 Subsidiary Shares. At or prior to the Closing, the Company shall
use its reasonable efforts to cause all issued and outstanding Subsidiary shares
(other than any interests in joint ventures or similar arrangements) owned by
any person other than the Company or any of its Subsidiaries to be transferred
for no or nominal consideration to such person or persons designated by Parent.
5.18 Benefit Plans and Employee Matters.
(a) From and after the Effective Time, Parent shall to the
extent practicable cause the Surviving Corporation to provide employee
benefits and programs to the Company's employees that, in the
aggregate, are substantially comparable or more favorable, as a whole,
than those in existence as of the date hereof and disclosed in writing
to Parent prior to the date hereof; provided that stock-based
compensation shall be comparable to that offered by Parent and its
subsidiaries generally. From and after the Effective time, the Parent
shall honor, in accordance with their terms, all employment and
severance agreements and all severance, incentive and bonus plans as in
effect immediately prior to the Closing Date that are applicable to any
current or former employees or directors of the Company or any of its
Subsidiaries and that were disclosed to Parent prior to the date
hereof.
(b) To the extent that service is relevant for purposes of
eligibility, level of participation, or vesting under any employee
benefit plan, program or arrangement established or maintained by
Parent, the Company or any of their respective subsidiaries, employees
of the Company and its Subsidiaries shall be credited for service
accrued or deemed accrued prior to the Effective Time with the Company
or such Subsidiary, as the case may be. Under no circumstances shall
employees receive credit for service accrued or deemed accrued prior to
the Effective Time with the Company or such Subsidiary, as the case may
be, for benefit accruals under any employee pension benefit plan (as
defined by Section 3(2) of ERISA) or any retiree health plan. To the
extent Parent satisfies its obligations under this Section by
maintaining Company benefit plans, Parent shall not be required to
include employees of the Company in Parent's benefit plans.
5.19. Obligations of Merger Subsidiary. Parent shall take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
5.20 Plan of Reorganization. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income
tax regulations promulgated under the Code. From and after the date of this
Agreement, each party hereto shall use all reasonable efforts to cause the
Merger to qualify, and shall not, without the prior written consent of the other
parties hereto, knowingly take any actions or cause any actions to be taken
which could prevent the Merger from qualifying as a reorganization under the
provisions of Section 368(a) of the Code.
5.21 Pooling. From and after the date of this Agreement and until the
Effective Time, neither Parent nor the Company, nor any of their respective
subsidiaries or other affiliates, shall knowingly take any action, or knowingly
fail to take any action, that is reasonably likely to jeopardize the treatment
of the Merger as a "pooling of interests" for accounting purposes. Between the
date of this Agreement and the Effective Time, Parent and the Company each shall
take all reasonable actions necessary to cause the characterization of the
Merger as a pooling of interests for accounting purposes if such a
characterization were jeopardized by action taken by Parent or the Company,
respectively, prior to the Effective Time. Following the Effective Time, Parent
shall not knowingly take any action, or fail to take any action, that would
jeopardize the characterization of the Merger as a "pooling of interests" for
accounting purposes.
<PAGE>
ARTICLE 6
CLOSING CONDITIONS
6.1 Conditions to Obligations of Parent, Merger Subsidiary, and the
Company. The respective obligations of each party to consummate the Merger shall
be subject to the fulfillment at or prior to the Closing of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable Law:
(a) No Injunction. None of Parent, Merger Subsidiary, or the
Company shall be subject to any final order, decree, or injunction of a
court of competent jurisdiction within the United States that is then
in effect and has the effect of making the Merger illegal or otherwise
prohibiting the consummation of the Merger.
(b) Shareholder Approval. The approval of the shareholders of
the Company referred to in Section 5.5 hereof shall have been obtained,
in accordance with the IBCL and the Company's Articles of Incorporation
and Bylaws.
(c) Registration Statement. The Registration Statement (as
amended or supplemented) shall have become effective under the 1933 Act
and shall not be subject to any "stop order," and no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness or
qualification thereof shall have been initiated and be continuing.
(d) NYSE Listing. The shares of Parent Common Stock to be
delivered pursuant to the Merger shall have been duly authorized for
listing on the NYSE, subject to official notice of issuance.
(e) Waiting Periods. The waiting periods (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act
and any Foreign Merger Laws shall have expired or been terminated.
6.2 Conditions to Obligations of Parent and Merger Subsidiary. The
respective obligations of Parent and Merger Subsidiary to consummate the Merger
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions, any or all of which may be waived by Parent, in whole or
in part, to the extent permitted by applicable Law:
(a) Representations and Warranties True. Each representation
and warranty of the Company contained in this Agreement, without regard
to any qualification or reference to "Company Material Adverse Effect,"
shall be true and correct on the Closing Date as though such
representations and warranties were made on such date, except that
those representations and warranties that address matters only as of a
particular date shall remain true and correct as of such date, and
except in any case for any inaccuracies that have not had, or could not
reasonably be expected to have a Company Material Adverse Effect, and
except as provided in Section 3.1 of the Company Disclosure Schedule
but subject to the provisions of Section 8.14 hereof. Parent shall have
received a certificate to the foregoing effect signed by the Chief
Executive Officer of the Company.
(b) Performance. The Company shall have performed and complied
in all material respects with all material covenants required by this
Agreement to be performed or complied with by it on or prior to the
Closing, and Parent shall have received a certificate to such effect
signed by the Chief Executive Officer of the Company.
<PAGE>
(c) Affiliates' Letters. Parent shall have received a letter
from each of the Affiliates pursuant to Section 5.7 hereof.
(d) Resignations and Waivers. Such officers and directors of
the Company or of any Subsidiary as shall have been specified by Parent
shall have tendered their respective resignations effective as of the
Effective Time (without prejudice to rights and obligations under
employment agreements). Parent shall have received from any person
having a right to designate one or more nominees to the Board of
Directors of the Company a signed waiver of such right, in form
reasonably acceptable to Parent.
(e) Pooling Opinion. Parent shall have received each of the
letters described in Section 5.16.
6.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger shall be subject to the fulfillment at or prior
to the Closing of the following additional conditions, any or all of which may
be waived by the Company, in whole or in part, to the extent permitted by
applicable Law:
(a) Representations and Warranties True. Each representation
and warranty of Parent contained in this Agreement, without regard to
any qualification or reference to "Parent Material Adverse Effect,"
shall be true and correct on the Closing Date as though such
representations and warranties were made on such date, except that
those representations and warranties that address matters only as of a
particular date shall remain true and correct as of such date, and
except in any case for any inaccuracies that have not had, or could not
reasonably be expected to have a Parent Material Adverse Effect. The
Company shall have received a certificate to the foregoing effect
signed by the Chief Executive Officer or other authorized officer of
Parent.
(b) Performance. Parent and Merger Subsidiary shall have
performed and complied in all material respects with all material
covenants required by this Agreement to be performed or complied with
by them on or prior to the Closing, and the Company shall have received
a certificate to such effect signed by the Chief Executive Officer or
other authorized officer of Parent.
(c) Tax Opinion. The Company shall have received an opinion of
Shearman & Sterling, counsel to the Company, based upon representations
of Parent, Merger Sub and the Company and normal assumptions, and dated
on or about the date that is two business days prior to the date the
Proxy Statement/Prospectus is first mailed to Company shareholders,
which opinion shall not have been withdrawn or modified in any material
respect prior to the Effective Time, to the effect that, subject to
customary conditions and representations, the Merger will be treated
for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that each of Parent, Merger
Subsidiary and the Company will be considered a party to such
reorganization. Parent, Merger Subsidiary and the Company hereby agree
to provide to such counsel certificates acceptable to such counsel
setting forth the customary representations which may be relied upon by
such counsel in rendering such opinion.
(d) Pooling Opinion. The Company shall have received each of
the letters described in Section 5.16.
<PAGE>
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the shareholders of the
Company, only:
(a) by mutual written consent duly authorized by the Board of
Directors of Parent and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not
have been consummated on or before April 30, 1999; provided, however,
that the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that shall
have been the proximate cause of, or resulted in, the failure to
consummate the Merger by such date and provided further, however, that,
if a request for additional information is received from the U.S.
Federal Trade Commission ("FTC") or Department of Justice ("DOJ")
pursuant to the HSR Act or additional information is requested by an
authority (a "Foreign Authority") pursuant to Foreign Merger Laws, such
date shall be extended to the 90th day following acknowledgment by the
FTC, DOJ, or Foreign Authority, as applicable, that Parent and the
Company have complied with such request, but in any event not later
than September 30, 1999;
(c) by either Parent or the Company if a court of competent
jurisdiction or an administrative, governmental, or regulatory
authority has issued a final nonappealable order, decree, or ruling, or
taken any other action, having the effect of permanently restraining,
enjoining, or otherwise prohibiting the Merger;
(d) by either Parent or the Company if, at the Company
Shareholders Meeting, the requisite vote of the shareholders of the
Company is not obtained, except that the right to terminate this
Agreement under this Section 7.1(d) will not be available to any party
whose failure to perform any material obligation under this Agreement
has been the proximate cause of, or resulted in, the failure to obtain
the requisite vote of the shareholders of the Company;
(e) by Parent if either (i) the Board of Directors of the
Company has recommended, approved, accepted, or entered into an
agreement regarding, an Alternative Transaction, as defined in Section
5.3, (ii) the Board of Directors of the Company has withdrawn or
modified in a manner materially adverse to Parent its recommendation of
the Merger, or (iii) a tender offer or exchange offer for any
outstanding shares of Company Common Stock is commenced, and the Board
of Directors of the Company, within 10 business days after such tender
offer or exchange offer is so commenced, either fails to recommend
against acceptance of such tender offer or exchange offer by its
shareholders or takes no position with respect to the acceptance of
such tender offer or exchange offer by its shareholders;
(f) by the Company if (i) it is not in material breach of its
obligations under this Agreement, (ii) the Board of Directors of the
Company has authorized, subject to complying with the terms of this
Agreement, the Company to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal and the
Company notifies Parent in writing that it intends to enter into such
agreement, attaching the most current version of such agreement to such
notice, (iii) Parent does not make, within five business days after
receipt of the Company's written notice of its intention to enter into
a binding agreement for a Superior Proposal, an offer that the Board of
Directors of the Company determines, in good faith after consultation
with its financial and legal advisors, is at least as favorable to the
shareholders of the Company as the Superior Proposal, and (iv) if so
requested by Parent prior to the Company's termination pursuant to this
Section 7.1(f), the Company pays to Parent the fee required by Section
7.2 to be paid to Parent in the manner therein provided. The Company
agrees (x) that it will not enter into a binding agreement referred to
in clause (ii) above until at least the sixth business day after it has
provided the notice to Parent required by clause (ii) above, and (y) to
notify Parent promptly if its intention to enter into a binding
agreement referred to in its notice to Parent shall change at any time
after giving such notice;
<PAGE>
(g) by Parent if (i) Parent is not in material breach of its
obligations under this Agreement and (ii) there has been a material
breach by the Company of any of its representations, warranties, or
obligations under this Agreement such that the conditions in Section
6.2 will not be satisfied ("Terminating Company Breach"); provided,
however, that, if such Terminating Company Breach is curable by the
Company through the exercise of its best efforts and such cure is
reasonably likely to be completed prior to the applicable date
specified in Section 7.1(b), then for so long as the Company continues
to exercise such best efforts, Parent may not terminate this Agreement
under this Section 7.1(g) and; provided, further, that Parent's right
to terminate this Agreement for any Terminating Company Breach is
subject to the provisions of Section 3.1 of the Company Disclosure
Schedule and Section 8.14 of this Agreement;
(h) by the Company if (i) the Company is not in material
breach of its obligations under this Agreement and (ii) there has been
a material breach by Parent of any of its representations, warranties,
or obligations under this Agreement such that the conditions in Section
6.3 will not be satisfied, ("Terminating Parent Breach"); provided,
however, that, if such Terminating Parent Breach is curable by Parent
through the exercise of its best efforts and such cure is reasonably
likely to be completed prior to the applicable date specified in
Section 7.1(b), then for so long as Parent continues to exercise such
best efforts, the Company may not terminate this Agreement under this
Section 7.1(h).
7.2 Effect of Termination.
(a) In recognition of the time, efforts, and expenses expended
and incurred by Parent with respect to the Company and the opportunity
that the acquisition of the Company presents to Parent, if:
(i) this Agreement is terminated by Parent pursuant
to Sections 7.1(e)(i) or 7.1(e)(iii); or
(ii) this Agreement is terminated by Parent pursuant
to Section 7.1(e)(ii) and at or prior to the time that the
Board of Directors of the Company shall have withdrawn or
modified its recommendation of the Merger as described in
Section 7.1(e)(ii), a proposal for an Alternative Transaction
shall have been made and the Board of Directors of the Company
shall not have reinstated its recommendation of the Merger
prior to such termination by Parent.
(iii) this Agreement is terminated by the Company
pursuant to Section 7.1(f); or
(iv) (A) this Agreement is terminated by Parent or
the Company pursuant to Section 7.1(d) due to the failure of
the Company's shareholders to approve the Merger, (B) at any
time prior to the time of such failure to so approve the
Merger a proposal for an Alternative Transaction shall have
been publicly announced and (C) within 12 months of the date
of such termination, the Company shall have entered into an
agreement providing for an Alternative Transaction.
<PAGE>
then, in any such event, the Company will pay to Parent, (1) upon
demand by Parent on or after the termination date in the event of
termination pursuant to Section 7.1(f), and (2) within ten business
days after demand by Parent in the case of termination in the case of
the events specified in clause (i) or (ii) above, and (3) within ten
business days after demand by Parent after the date of entering into an
agreement providing for an Alternative Transaction, in the case of the
events specified in clause (iv) above (in each case by wire transfer of
immediately available funds to an account designated by Parent for such
purpose), a fee equal to $105,000,000; provided in the event the fee is
payable pursuant to one or more of clauses (i), (ii), (iii) or (iv)
above, the fee shall be due and payable pursuant to the clause calling
for payment at the earliest time.
(b) In recognition of the time, efforts, and expenses expended
and incurred by Parent with respect to the Company and the opportunity
that the acquisition of the Company presents to Parent, if this
Agreement is terminated by Parent pursuant to Section 7.1(e)(ii), where
the conditions of Section 7.2(a)(ii) do not apply, or if this Agreement
is terminated (other than in the case of the events described in
Section 7.2(a) above) pursuant to other provisions but termination
pursuant to Section 7.1(e)(ii) is available to Parent, then the Company
will pay to Parent, within ten business days after demand by Parent
after the termination date (by wire transfer of immediately available
funds to an account designated by Parent for such purpose), a fee equal
to $65,000,000; provided, however, if within 12 months of such
termination the Company has entered into an agreement providing for an
Alternative Transaction, then within ten business days after demand by
Parent after the date of entering into an agreement providing for an
Alternative Transaction, the Company shall pay to Parent (by wire
transfer of immediately available funds to an account designated by
Parent for such purpose) an additional fee of $40,000,000.
(c) The Company acknowledges that the agreements contained in
this Section 7.2 are an integral part of the transactions contemplated
by this Agreement and are not a penalty, and that, without these
agreements, Parent would not enter into this Agreement. If the Company
fails to pay promptly the fee due pursuant to this Section 7.2, the
Company shall also pay to Parent Parent's costs and expenses (including
legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment,
together with interest on the amount of the unpaid fee under this
section, accruing from its due date, at an interest rate per annum
equal to two percentage points in excess of the prime commercial
lending rate quoted by Norwest Bank Minnesota, N.A.; provided, however,
that Parent shall pay to the Company the Company's costs and expenses
(including legal fees and expenses) incurred in connection with any
such legal action if Parent's claims against the Company in such legal
action do not prevail. Any change in the interest rate hereunder
resulting from a change in such prime rate shall be effective at the
beginning of the date of such change in such prime rate.
(d) Parent agrees that the payments provided for in Sections
7.2(a) and (b) shall be the sole and exclusive remedies of Parent upon
termination of this Agreement pursuant to Section 7.1(d), (e) and (f),
as the case may be, and such remedies shall be limited to the sums
stipulated in such Sections 7.2(a) and (b), regardless of the
circumstances giving rise to such termination; provided, however, that
nothing herein shall relieve any party from liability for the willful
breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement. In no event shall the Company
be required to pay to Parent more than one fee pursuant to Section
7.2(a) and 7.2(b) (except in the case of Section 7.2(b) for the
additional fee payable pursuant to such section); provided that, in the
event Section 7.2(b) and one or more clauses of Section 7.2(a) have
become applicable, Section 7.2(a) shall govern. In no event shall the
sum of the termination fee paid pursuant to Section 7.2(a) or Section
7.2(b) plus the Cancellation Amount (as defined in the Stock Option
Agreement) paid pursuant to the Stock Option Agreement exceed
$105,000,000.
<PAGE>
(e) Except as provided in the next sentence of this paragraph,
in the event of the termination of this Agreement pursuant to any
paragraph of Section 7.1, the obligations of the parties to consummate
the Merger will expire, and none of the parties will have any further
obligations under this Agreement except pursuant to Sections 5.4(b),
5.8, 7.2(a), 7.2(b) and 7.2(c) and Article 8. Nothing herein shall
relieve any party from liability for the willful breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by written agreement of
Parent, Merger Subsidiary, and the Company at any time prior to the Effective
Time with respect to any of the terms contained herein provided, however, that,
after the approval of this Agreement by the shareholders of the Company, no
amendment may be made which would reduce the amount or change the type of
consideration into which each share of Company Common Stock shall be converted
upon consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.2 Waiver of Compliance; Consents. Any failure of Parent or Merger
Subsidiary on the one hand, or the Company on the other hand, to comply with any
obligation, covenant, agreement, or condition herein may be waived by the
Company or Parent, respectively, only by a written instrument signed by an
officer of the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement, or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing. Merger
Subsidiary agrees that any consent or waiver of compliance given by Parent
hereunder shall be conclusively binding upon Merger Subsidiary, whether or not
given expressly on its behalf.
8.3 Investigation; Survival of Representations and Warranties. The
respective representations and warranties of Parent and the Company contained
herein or in any certificates or other documents delivered prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto. The representations, warranties and agreements in this
Agreement and in any certificate delivered pursuant hereto shall terminate at
the Effective Time, except that the agreements set forth in Articles I and II
and Sections 5.8, 5.9, 5.15, 5.18, 5.19, 5.20, 5.21 and this Article VIII shall
survive the Effective Time.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally by commercial
courier service or otherwise, or by telecopier, or three days after such notice
is mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Merger Subsidiary, to it at:
Medtronic, Inc.
7000 Central Avenue, N.E.
Minneapolis, MN 55432
with separate copies thereof addressed to:
Attention: General Counsel
FAX: (612) 572-5459
and
Attention: Vice President and Chief Development Officer
FAX: (612) 572-5404
<PAGE>
(b) If to the Company, to it at:
Sofamor Danek Group, Inc.
1800 Pyramid Place
Memphis, TN 38132
FAX: (901) 344-1576
Attention: Stephen S. Phillips, Executive Vice President
and General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
FAX: (212) 848-7179
Attention: Creighton O'M. Condon, Esq.
8.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Except for the provisions of Article II and Section 5.15 (the "Third Party
Provisions"), this Agreement is not intended to confer upon any other person,
except the parties hereto, any rights or remedies hereunder, and no third person
shall be a third party beneficiary of this Agreement. The Third Party Provisions
may be enforced by the beneficiaries thereof.
8.6 Governing Law. Except to the extent that Indiana law is mandatorily
applicable, this Agreement shall be governed by the laws of the State of
Minnesota (regardless of the laws that might otherwise govern under applicable
Minnesota principles of conflicts of law).
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.8 Knowledge. As used in this Agreement or the instruments,
certificates or other documents required hereunder, the term "knowledge" of a
party hereto shall mean actual knowledge of the directors or executive officers
of such party.
8.9 Interpretation. The Table of Contents, article and section headings
contained in this Agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. This Agreement shall
be construed without regard to any presumption or other rule requiring the
resolution of any ambiguity regarding the interpretation or construction hereof
against the party causing this Agreement to be drafted.
<PAGE>
8.10 Publicity. Upon execution of this Agreement by Parent, Merger
Subsidiary, and the Company, the parties shall jointly issue a press release, as
agreed upon by them. The parties intend that all future statements or
communications to the public or press regarding this Agreement or the Merger
will be mutually agreed upon by them. Neither party shall, without such mutual
agreement or the prior consent of the other, issue any statement or
communication to the public or to the press regarding this Agreement, or any of
the terms, conditions, or other matters with respect to this Agreement, except
as required by law or the rules of the NYSE and then only (a) upon the advice of
such party's legal counsel; (b) to the extent required by law or the rules of
the NYSE; and (c) following prior notice to, and consultation with, the other
party (which notice shall include a copy of the proposed statement or
communication to be issued to the press or public). The foregoing shall not
restrict Parent's or the Company's communications with their employees or
customers in the ordinary course of business.
8.11 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and the Confidentiality Agreement referred to herein, embodies
the entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. This Agreement and the Confidentiality
Agreement supersede all prior agreements and the understandings between the
parties with respect to such subject matter.
8.12 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 so long as the economic or legal substance of
the transactions contemplated by this Agreement 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 a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
8.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
8.14 Section 3.1 of Company Disclosure Schedule. The provisions and
effects of Section 3.1 of the Disclosure Schedule, as described therein, shall
not apply and shall have no effect on any representations, warranties,
conditions, termination rights or otherwise under this Agreement in the event
the Company has fraudulently or with an intent to deceive misrepresented or
omitted any material information in the disclosures made by the Company to
Parent prior to the date hereof regarding the matters described in Section 3.1
of the Company Disclosure Schedule.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
MEDTRONIC, INC.
By: /s/ William W. George
William W. George, Chairman
and Chief Executive Officer
MSD MERGER CORP.
By: /s/ William W. George
William W. George, Chairman
and Chief Executive Officer
SOFAMOR DANEK GROUP, INC.
By: /s/ E. R. Pickard
E.R. Pickard, Chairman
and Chief Executive Officer
