Exhibit 4.5
NELLCOR INCORPORATED
1995 MERGER STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The Nellcor Incorporated 1995 Merger Stock Incentive Plan (the "Plan")
has been adopted in connection with the merger (the "Merger") of Puma Merger
Corporation, a Delaware corporation and wholly owned subsidiary of Nellcor, with
and into Puritan-Bennett Corporation, a Delaware corporation ("P-B"), pursuant
to which P-B became a wholly-owned subsidiary of Nellcor. The purpose of the
Plan is to provide for the issuance of options (the "Replacement Options") to
purchase shares of Nellcor's common stock, $.001 par value per share (the
"Nellcor Common Stock"), (a) which evidence converted options previously granted
under P-B's 1979 Employee Stock Benefit Plan (the "1979 P-B Plan") that remain
outstanding and unexercised as of the effective time of the Merger (the
"Effective Time"), and (b) which evidence substituted options in replacement of
options previously granted under P-B's 1988 Employee Stock Benefit Plan (the
"1988 P-B Plan") that had their vesting and exercisability accelerated as a
result of the Merger and expired unexercised as of the Effective Time
(collectively, the options referred to in (a) and (b), the "P-B Options"). P-B
Options issued under the 1979 P-B Plan shall sometimes be referred to herein as
"1979 P-B Options", and P-B Options issued under the 1988 P-B Plan shall
sometimes be referred to herein as "1988 P-B Options."
The purpose, intent and effect of this Plan shall be to reflect the
right of holders of P-B Options to acquire shares of Nellcor Common Stock in
lieu of, but not in addition to, the shares of P-B common stock underlying the
P-B Options held by them prior to the Effective Time.
2. SHARES SUBJECT TO THE PLAN
An aggregate of 550,000 shares of Nellcor Common Stock are
available for issuance under the Plan. Such shares shall be either authorized
but unissued shares, or treasury shares of Nellcor.
In the event that any Replacement Option under the Plan expires or is
cancelled, surrendered or terminated without being exercised for any reason, the
shares theretofore subject to such Replacement Option, or the unexercised
portion thereof, shall not be available for future awards under the Plan
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3. AWARDS UNDER THE PLAN
Awards under the Plan shall consist solely of Replacement Options with
respect to all P-B Options, and shall be issued promptly following the Effective
Time; PROVIDED, HOWEVER, that no Replacement Options will be issued under the
Plan to any holder of a P-B Option unless and until such holder has either (i)
returned the agreement evidencing such P-B Option to Nellcor for cancellation,
or (ii) delivered to Nellcor (a) evidence reasonably satisfactory to Nellcor of
the loss, theft or destruction of such option agreement and (b) indemnity or
security reasonably satisfactory to Nellcor. No additional awards shall be made
under the Plan other than such Replacement Options.
With respect to all P-B Options that are designed to qualify as
incentive stock options ("Incentive Stock Options") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), the corresponding
Replacement Options shall also be designed to qualify as Incentive Stock
Options. With respect to all P-B Options that are not described in Sections 422
or 423 of the Code ("Non-Qualified Stock Options"), the corresponding
Replacement Options shall also be Non-Qualified Stock Options.
4. ADMINISTRATION OF THE PLAN
A. The Committee
The Plan shall be administered by the Nominating and Compensation
Committee of the Board of Directors or such other committee as shall be
designated by the Board of Directors (the "Committee"). The Committee shall
consist solely of "disinterested persons" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3"). Any decision or
determination reduced to writing and signed by all the members of the Committee
shall be fully as effective as if it has been made by a majority vote at a
meeting duly called and held. The Committee may appoint a secretary (who need
not be a member of the Committee) and may make such rules and regulations for
the conduct of its business as it shall deem advisable. No member of the
Committee shall be liable, in the absence of bad faith, for any act or omission
with respect to his or her service on the Committee. Service on the Committee
by any person who is a director of Nellcor shall constitute service as a
director of Nellcor so that such members of the Committee shall be entitled to
indemnification and reimbursement as directors of Nellcor.
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B. Authority of the Committee
Subject to the express provisions of the Plan, the Committee shall
have plenary authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan and to make all other determinations
deemed necessary or advisable in administering the Plan. The Committee shall
determine whether any authorized leave of absence or absence on military or
governmental service or for any other reason shall constitute a termination of
employment for purposes of the Plan. The Committee shall have the authority to
issue shares of Nellcor Common Stock upon the exercise of Replacement Options.
All decisions, determinations and interpretations of the Committee shall be
conclusive and binding on all participants.
C. Option Agreements
Each Replacement Option may be evidenced by a written agreement (the
"Option Agreement") in the form attached hereto as EXHIBIT A, which shall be
duly executed and delivered by or on behalf of Nellcor and the optionee. An
Option Agreement may evidence an Incentive Stock Option, a Non-Qualified Stock
Option or both an Incentive Stock Option and a Non-Qualified Stock Option. The
Option Agreement shall clearly identify the status of each Replacement Option
thereunder and shall contain provisions not inconsistent with the Plan.
5. ELIGIBILITY
Replacement Options may be issued only to the holders of P-B Options.
6. TERMS AND CONDITIONS OF REPLACEMENT OPTIONS
A. Number of Shares Covered
The number of shares of Nellcor Common Stock covered by each
Replacement Option shall equal the number of shares of P-B common stock covered
by the corresponding P-B Option multiplied by 0.88 (rounded up to the nearest
whole share).
B. Option Price
The per share exercise price of each Replacement Option shall equal
the exercise price per share of the corresponding P-B Option divided by 0.88
(rounded down to the nearest penny).
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C. Vesting Provisions
The vesting provisions, if any, of each Replacement Option shall be
the same as the vesting provisions, if any, of the corresponding P-B Option,
except that any acceleration of the 1988 P-B Options under Section 9 of the 1988
P-B Plan as a result of the Merger shall be disregarded.
D. Exercise of Replacement Options
(1) The term of each Replacement Option under the Plan shall commence
on the issue date and terminate on the termination date of the corresponding P-B
Option, subject to earlier termination as set forth herein; PROVIDED, HOWEVER,
that the termination of the 1988 P-B Options under Section 9 of the 1988 P-B
Plan as a result of the Merger shall be disregarded.
(2) Except as hereinafter provided, no Replacement Option under the
Plan may be exercised at any time unless the holder thereof is then an employee
of Nellcor or of an Affiliate. Replacement Options under the Plan shall not be
affected by any change of employment so long as the optionee continues to be an
employee of Nellcor or its Affiliates. The term "Affiliate" for purposes of
this Plan means parent or subsidiary corporations of Nellcor, as defined in
Sections 424(e) and (f) of the Code (but substituting "Nellcor" for "employer
corporation"), including parents or subsidiaries of Nellcor that become such
after adoption of the Plan. Retirement pursuant to Nellcor's then prevailing
retirement policies shall be deemed to be a termination of employment.
(3) Unless the underlying P-B Option otherwise provides, in the event
of the termination of employment of the holder of a Replacement Option (except
as provided in Subsection (4) below), such Replacement Option may be exercised
(only to the extent that the employee was entitled to do so at the termination
of his employment) at any time within three months after such termination, but
in no event after the expiration of the period of the Replacement Option.
(4) Unless the underlying P-B Option otherwise provides, if an
optionee's termination of employment results from death, total disability or
retirement under the employer's retirement policies, or if an optionee's
termination of employment is at the convenience of the employer, due to the
elimination of the optionee's position, or for other reasons unrelated to the
optionee's employment
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performance, then all unexpired Replacement Options held by such optionee shall
be exercisable in whole or in part, at the election of the optionee (or in the
case of the optionee's death or total disability by the optionee's estate or by
a person who acquired the right to exercise the Replacement Options by bequest
or inheritance or otherwise by reason of the death or total disability of the
optionee) without regard to any vesting provisions or other terms of the
Replacement Option, at any time or from time to time within three months (12
months if the termination of employment results from death or total disability)
after such termination, but in no event after the expiration period of the
Replacement Option.
E. Nontransferability of Replacement Options
No Replacement Option under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution and a Replacement Option
may be exercised, during the lifetime of the optionee, only by the optionee
thereof.
F. Payment
Except in the case of the election of an alternative settlement method
as hereinafter provided, payment for shares of Nellcor Common Stock purchased
shall be made either in full in cash or by the transfer to Nellcor of shares of
Nellcor Common Stock or cash having a value at the time that a Replacement
Option, or any part thereof, is exercised, equal to but not exceeding the full
purchase price of the shares of Nellcor Common Stock with respect to which the
Replacement Option is exercised; provided that payment in part or full by the
transfer of shares of Nellcor Common Stock to Nellcor shall be subject to
approval by the Committee. If payment is made by the delivery of shares of
Nellcor Common Stock, the value of shares delivered shall be the fair market
value of Nellcor Common Stock as of the date of exercise. With respect to
Replacement Options issued in substitution of 1988 P-B Options ("1988
Replacement Options") only, the Committee may, in its discretion, permit payment
to be made by delivering a properly executed notice together with irrevocable
instructions to a broker to sell shares of Nellcor Common Stock and deliver the
sales proceeds to Nellcor, or to arrange for the delivery to Nellcor of cash in
any other manner that the Committee shall permit; provided that the method of
payment described in this sentence shall not apply to an optionee who is subject
to Section 16(b) of the Securities Exchange Act of 1934.
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G. Alternative Settlement Method
(1) The Committee, in its discretion, may provide that any
Replacement Option pursuant to the Plan may, by its terms, confer upon the
optionee the right to elect any of the alternative settlement methods set forth
in Subsection (3) below.
(2) The Committee, in its discretion, may at the request of an
optionee holding a Replacement Option pursuant to the Plan, which Replacement
Option does not by its terms include the right to elect any of such alternative
settlement methods, permit the election of any such alternative methods by the
optionee. The authority of the Committee to permit such elections of
alternative settlement methods shall not confer upon the optionee or holder of
any Replacement Option the right to such an election.
(3) The alternative settlement methods are: (a) cash equal to the
excess of the value of one share of Nellcor Common Stock over the purchase price
set forth in the Option Agreement evidencing the Replacement Option times the
number of shares as to which the Replacement Option is exercised; (b) the number
of full shares of Nellcor Common Stock having an aggregate value not greater
than the cash amount calculated under alternative (a); (c) any combination of
cash and full shares having an aggregate value not greater than the cash amount
calculated under alternative (a). Notwithstanding the other provisions of the
Plan, election of an alternative settlement method involving the receipt of cash
shall be subject to the approval of the Committee at the time of such election.
For purposes of determining an alternative settlement, the value per share of
Nellcor Common Stock shall be the fair market value of such stock as of the date
of the alternative settlement.
H. Manner of Exercise
A Replacement Option shall be exercised by giving a written notice to
the Stock Administrator of Nellcor stating the number of shares of Nellcor
Common Stock with respect to which the Replacement Option is being exercised and
containing such other information as the Stock Administrator may request,
including, if applicable, information regarding the election of an alternative
settlement method.
I. Limitation on Incentive Stock Options
The aggregate fair market value (determined at the time the Incentive
Stock Option is issued) of the stock with respect to which such Incentive Stock
Option is exercisable
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for the first time by an optionee during any calendar year (under all such plans
of Nellcor and its Affiliates) shall not exceed $100,000 for such optionee.
J. Tax Withholding
At any time when an optionee is required to pay to Nellcor an amount
required to be withheld under applicable income tax laws in connection with the
exercise of a Non-Qualified Stock Option, the optionee may satisfy this
obligation in whole or in part by electing (the "Election") to have Nellcor
withhold shares of Nellcor Common Stock having a value equal to the amount
required to be withheld. The value of the shares to be withheld shall be
determined on the date that the amount of tax to be withheld shall be determined
("Tax Date"). Each Election must be made prior to the Tax Date. The Committee
may disapprove any Election or may suspend or terminate the right to make
Elections. An Election is irrevocable.
If the optionee is an officer of Nellcor within the meaning of Section
16 of the Securities Exchange Act of 1934, then an Election is subject to the
following additional restrictions.
(1) No Election shall be effective for a Tax Date which occurs within
six months of the issue of the Replacement Option.
(2) The Election must be made either six months prior to the Tax Date
or must be made during the period beginning on the third business day following
the date of release for publication of Nellcor's quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date (except that this limitation will not apply in the event the
death or disability of the optionee occurs prior to the expiration of the
six-month period).
K. Modification of Outstanding Replacement Options
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may, with the consent of the optionee, modify outstanding
Replacement Options under the Plan to extend the term thereof by one day.
L. Sequential Exercise
A 1979 Replacement Option issued with respect to a 1979 P-B Option
that is an Incentive Stock Option (a "1979 P-B Incentive Stock Option") granted
by P-B prior to
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January 1, 1987 shall provide by its terms that it may not be exercised while
there remains outstanding (within the meaning of Section 422A(c)(7) of the
Internal Revenue Code of 1954, as amended) any Incentive Stock Options (or
Replacement Options with respect thereto) issued by P-B (or by any corporation
which was a parent or subsidiary of P-B at the time the option was granted) to
the same optionee prior to the date of such 1979 P-B Incentive Stock Option.
7. STOCKHOLDER AND EMPLOYMENT RIGHTS
A holder of a Replacement Option shall have none of the rights of a
stockholder with respect to any of the shares subject to the Replacement Option
until such shares shall be issued upon the exercise of the Replacement Option.
Nothing in the Plan or any Replacement Option or related Option Agreement issued
pursuant to the Plan shall, in the absence of an express provision to the
contrary, confer on any individual any right to be or to continue in the employ
of Nellcor or any of its Affiliates or shall interfere in any way with the right
of Nellcor or any of its Affiliates to terminate the employment of any
individual at any time.
8. ADJUSTMENTS IN NELLCOR COMMON STOCK
The number of shares of Nellcor Common Stock covered by each
outstanding Replacement Option and the price per share thereof in each such
Replacement Option may be appropriately adjusted, as the Board of Directors or
the Committee may determine, for any increase or decrease in the number of
shares of Nellcor Common Stock resulting from a subdivision or consolidation of
shares whether through reorganization, recapitalization, stock split-up or
combination of shares, or the payment of a stock dividend or other increase or
decrease in such shares effected without receipt of consideration by Nellcor.
In the event that any such adjustment otherwise would result in fractional
shares becoming issuable upon the exercise of any Replacement Option, the
Committee shall have the discretion, upon exercise of such Replacement Option,
to issue such fractional shares or to deliver cash in lieu thereof (based on the
fair market value of such fractional shares as of the exercise date); PROVIDED,
HOWEVER, that with respect to 1988 Replacement Options only, the Committee shall
also have the discretion to provide for the elimination of such fractional
shares which might otherwise become subject to 1988 Replacement Options without
payment therefor.
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9. ACCELERATION AND/OR TERMINATION IN CERTAIN CIRCUMSTANCES
A. 1988 Replacement Options
(1) Notwithstanding any contrary provisions of the Plan, all 1988
Replacement Options under the Plan and outstanding shall become (i) exercisable
for 100% of the shares subject thereto for a period of 30 days preceding any of
the events described in (x) below and, if not exercised within such period,
shall terminate upon the happening of such event and (ii) immediately
exercisable as to 100% of the shares subject thereto as to the events described
in (y) and (z) below, if any of the following events shall occur: (x) a merger
of, or consolidation involving, Nellcor in which the Nellcor Common Stock is
converted into securities of another corporation or into cash; a plan of
complete liquidation of Nellcor (whether or not in connection with a sale of all
or substantially all of Nellcor's assets) shall be adopted; or any other
transaction as a result of which Nellcor Common Stock shall no longer be
publicly traded, in each case excluding a transaction solely for the purpose of
reincorporating Nellcor in a different jurisdiction or recapitalizing the
Nellcor Common Stock; (y) 40 percent or more of the combined voting power of the
then outstanding voting securities of Nellcor shall become beneficially owned,
directly or indirectly, by one or more persons acting together, other than
Nellcor; or (z) unless otherwise determined by the Committee in its sole
discretion, any purchase of Nellcor Common Stock shall be publicly disclosed
pursuant to a tender offer or exchange offer to acquire 20 percent or more of
the outstanding Nellcor Common Stock by one or more persons acting together,
other than Nellcor, or a sale, exchange or other disposition of all or
substantially all of Nellcor's assets.
(2) At the sole discretion of the Committee, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of a 1988 Replacement Option under the Plan or by a resolution adopted
prior to the occurrence of an event described in clauses (x), (y) or (z) above,
that upon such event, such 1988 Replacement Option shall be assumed by the
successor corporation, or a parent or subsidiary thereof, or shall be
substituted for by a similar 1988 Replacement Option, covering the stock of the
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and exercise prices. In the
event that the Committee provides for such assumption or substitution of 1988
Replacement Options, the assumed or substituted 1988 Replacement Options shall
continue to be subject to their original vesting schedules notwithstanding the
provision for acceleration of vesting set forth above.
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B. 1979 Replacement Options
Subject to any required action by the stockholders, if Nellcor shall
be the surviving corporation in any merger or consolidation, any 1979
Replacement Option shall pertain to and apply to the securities to which a
holder of the number of shares of Nellcor Common Stock subject to such 1979
Replacement Option would have been entitled. Upon a dissolution of Nellcor, or
a merger or consolidation in which Nellcor is not the surviving corporation,
every 1979 Replacement Option outstanding hereunder shall terminate; PROVIDED,
HOWEVER, that in the case of such dissolution, merger or consolidation, then
during the period thirty days prior to the effective date of such event, each
holder of a 1979 Replacement Option hereunder shall have a right to exercise
such 1979 Replacement Option, in whole or in part.
10. AMENDMENT AND TERMINATION
The Plan shall terminate upon the expiration or exercise in full of
the last remaining Replacement Option issued hereunder; PROVIDED, HOWEVER, that
no new issuances of Replacement Options may be made hereunder following the
initial issuances, which will occur promptly following the Effective Time,
subject to the proviso contained in Section 3 of this Plan.
The Board of Directors shall have complete power and authority to
amend the Plan, PROVIDED, HOWEVER, that except as expressly permitted in the
Plan, the Board of Directors shall not, without the affirmative vote of the
holders of a majority of the shares of voting stock of Nellcor present in person
or represented by proxy at a stockholder's meeting, increase the maximum number
of shares on which Replacement Options may be issued, amend the formula for
determination of the purchase price of shares on which Replacement Options may
be issued, extend the period during which Replacement Options may be issued, or
amend the requirements as to the class of employees eligible to receive
Replacement Options.
No termination or amendment of the Plan may, without the consent of
the holder of any outstanding Replacement Option, adversely affect the rights of
such holder or optionee.
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11. EFFECTIVENESS OF THE PLAN
The Plan shall become effective on the later to occur of (a) the
adoption hereof by the Board of Directors of Nellcor and (b) the consummation of
the Merger.
12. GOVERNMENT AND OTHER REGULATIONS
The obligation of Nellcor to sell or deliver shares under Replacement
Options pursuant to the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies as may be
required.
13. RULE 16B-3 COMPLIANCE
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan, or any
action of the Committee, fails so to comply, such provision or action will be
deemed null and void to the extent that is permitted by applicable law and that
the Committee deems advisable; PROVIDED, HOWEVER, that no such provision or
action will be deemed null and void solely as a result of the failure of the
stockholders of Nellcor to approve the Plan.
14. SECTION 424(a) COMPLIANCE
Transactions under the Plan are intended to comply with all applicable
conditions of Section 424(a) of the Code. To the extent any provision of the
Plan, or any action of the Committee, fails so to comply, such provision or
action will be deemed null and void to the extent that is permitted by
applicable law and that the Committee deems advisable.
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EXHIBIT A
NELLCOR INCORPORATED
1995 MERGER INCENTIVE STOCK PLAN
REPLACEMENT OPTION AGREEMENT
To: _____________________
This will confirm the following agreement made as of ___________, 1995
between you and Nellcor Incorporated (the "Corporation") pursuant to the Nellcor
Incorporated 1995 Merger Stock Incentive Plan (the "Plan").
1. The Corporation hereby grants you an option to purchase up to a
total of ________ shares of common stock of the Corporation (the "option
shares") at the price of $_______ per share, at any time on or after the date
such option becomes exercisable hereunder or under the Plan and before [insert
expiration date of underlying P-B Option].
2. The option represented hereby shall consist of Incentive Stock
Options ("ISOs") and/or Nonqualified Stock Options ("NSOs") in the following
amounts and shall become exercisable hereunder on the following dates ("Vesting
Dates"):
Number of Shares ISO/NSO Vesting Date
---------------- ------- ------------
The number of shares and the price per share of these options are subject to
adjustment as provided in the Plan.
3. The option and this agreement are subject to all the terms,
conditions, limitations and restrictions contained in the Plan. The option is
not transferable other than by will or the laws of descent and distribution, and
is exercisable, during your lifetime, only by you. It is understood that you
shall not have any of the rights of a
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stockholder with respect to any of the option shares until such shares are
actually paid for by, and issued to, you.
[4. This option is issued in replacement of an incentive stock option
issued by Puritan-Bennett Corporation under its 1979 Employee Stock Benefit Plan
on _________, 19__, a date prior to January 1, 1987. Accordingly, this option
is subject to the provisions of Section 422A(b)(7) of the Internal Revenue Code
of 1954, as amended, which provides that this option may not be exercised while
there remains outstanding any incentive stock option granted to you by
Puritan-Bennett Corporation (or by any corporation which, at the time of option
grant, was a parent or subsidiary of Puritan-Bennett Corporation), prior to
_________, 19__.] [To be included only in agreements evidencing Replacement
Options issued in replacement of ISOs granted prior to January 1, 1987].
5. Nothing herein contained shall obligate the Corporation of any
subsidiary of the Corporation to continue the employment for any particular
period or on any particular basis of compensation of you or any other employee,
nor shall anything herein contained constitute a request or consent to postpone
the retirement date of you or any employee.
6. If you dispose of any of the shares purchased pursuant to the
option, then, in order to provide the Corporation with the opportunity to claim
the benefit of any income tax deduction which may be available to it under the
circumstances, you shall promptly notify the Corporation of the dates of
acquisition and disposition of such shares, the number of shares so disposed of,
and the consideration, if any, received for such shares. You will be solely
responsible for any federal, state or local income taxes imposed in connection
with the exercise of the option or the delivery of option shares incident
thereto, and you authorize the Corporation to make any withholding for taxes
which the Corporation deems necessary or proper in connection therewith.
7. You shall give the Corporation notice in writing of any exercise
of the option, in whole or in part, identifying this option, specifying the
number of shares with respect to which you are exercising the option, and
specifying the date of exercise, which shall also be the date for payment of the
full purchase price of the shares.
8. It is expressly understood and agreed that you assume all risks
incident to any change hereafter in the applicable laws or regulations or
incident to any change in
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the market value of the stock after the exercise of this option in whole or in
part.
To confirm the foregoing, please sign and return one copy of this
letter immediately.
Very truly yours,
NELLCOR INCORPORATED
By:______________________________
Name:____________________________
Title:___________________________
Date: ___________, 1995
CONFIRMED:
__________________________________
Optionee
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