SCHEDULE 14C (Rule 14c-101) INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES EXCHANGE ACT OF 1934 Check the appropriate box: [X] Preliminary Information Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d) (2)) [ ] Definitive Information Statement MEDISENSE, INC. ---------------------------------------------------------------------- (Name of Registrant As Specified In Charter) Payment of Filing Fee (Check the appropriate box): [ ] $ 125 per Exchange Act Rules 0-11 (c)(1)(ii), or 14c-5(g). [X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11. (1) Title of each class of securities to which transaction applies: COMMON STOCK, CLASS B COMMON STOCK ----------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: 330,015 ----------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: $45 PER SHARE (PRICE AT WHICH SHARES WERE TENDERED PURSUANT TO TENDER ----------------------------------------------------------------- OFFER) ----------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: $14,850,675 ----------------------------------------------------------------- (5) Total fee paid: $2,971 ----------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid ----------------------------------------------------------------- (2) Form, Schedule or Registration Statement No. ----------------------------------------------------------------- (3) Filing Party ----------------------------------------------------------------- (4) Date Filed. ----------------------------------------------------------------- MEDISENSE, INC. 266 SECOND AVENUE WALTHAM, MASSACHUSETTS 02154 ---------------- NOTICE OF SPECIAL MEETING OF STOCKHOLDERS To Be Held on _______, 1996 ---------------- To the Stockholders of MediSense, Inc.: A Special Meeting of Stockholders (the "Special Meeting") of MediSense, Inc., a Massachusetts corporation (the "Company"), will be held on _______, 1996 at ____ a.m., local time, at _______________________, for the following purposes: (1) To consider and vote upon a proposal to adopt an Agreement and Plan of Merger dated as of March 29, 1996, as amended by the Amendment thereto dated as of May ___, 1996 (as so amended, the "Merger Agreement"), by and among the Company, Abbott Laboratories, an Illinois corporation ("Parent"), AAC Acquisition, Inc., a Massachusetts corporation and a wholly owned subsidiary of Parent ("AAC Acquisition"), and AAC Merger, Inc., a Massachusetts corporation and a wholly owned subsidiary of AAC Acquisition ("AAC Merger"), pursuant to which, among other things, (a) AAC Merger will be merged with and into the Company (the "Merger"), and the Company will be the surviving corporation and will become a wholly owned indirect subsidiary of Parent, and (b) each outstanding share of the Company's common stock, par value $.01 per share (the "Common Stock") (other than shares of Common Stock held by Parent, AAC Acquisition, AAC Merger, or in the treasury of the Company or any of their subsidiaries or that are held by those stockholders who perfect their appraisal rights under Massachusetts law), will be converted into the right to receive $45.00 in cash without interest thereon per share of Common Stock (the "Merger Consideration"); and (2) To transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof. A copy of the Merger Agreement is attached as Annex I to the Information Statement that accompanies this Notice of Special Meeting of Stockholders (the "Notice") and is incorporated by reference into this Notice. The Merger Agreement has been approved by the Board of Directors of the Company (the "Board"). The Board has carefully reviewed and considered the terms and conditions of the proposed Merger, and the Board believes the Merger is in the best interests of the Company and its stockholders. The Board has received a written opinion dated March 29, 1996 from Alex. Brown & Sons Incorporated ("Alex. Brown"), financial advisor to the Company, to the effect that, as of the date of such written opinion, the cash consideration to be received by the holders of shares of Common Stock of the Company pursuant to the Merger Agreement is fair from a financial point of view to such stockholders. THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. Under Massachusetts law and the Company's Restated Articles of Organization and Bylaws, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock that are entitled to vote thereon is required to adopt the Merger Agreement. AAC Acquisition owns approximately 98% of the issued and outstanding shares of Common Stock on a fully diluted basis. PARENT, AAC ACQUISITION AND THE COMPANY HAVE AGREED THAT PARENT AND AAC ACQUISITION WILL VOTE ALL SHARES OF COMMON STOCK HELD BY THEM AS OF THE RECORD DATE (AS DEFINED BELOW) IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT. ACCORDINGLY, UNDER MASSACHUSETTS LAW, WITH THE VOTE OF SUCH SHARES OF COMMON STOCK IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT, THE MERGER AGREEMENT WILL BE ADOPTED AND THE TRANSACTIONS CONTEMPLATED THEREBY WILL BE CONSUMMATED WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDERS. IN LIGHT OF THE FOREGOING, THE COMPANY HAS DETERMINED NOT TO SOLICIT PROXIES FROM ITS STOCKHOLDERS. Only stockholders of record at the close of business on _______, 1996 (the "Record Date") will be entitled to notice of and to vote at the Special Meeting or any adjournment or postponement thereof. If the Merger Agreement is approved by the stockholders at the meeting and the Merger is consummated, any stockholder (1) who files with the Company, before the taking of the vote on the approval of such action, a written objection to the proposed action stating that he intends to demand payment for his shares if the action is taken and (2) whose shares are not voted in favor of such action has or may have the right to demand in writing from the Company, within twenty days after the date of mailing to him of notice in writing that the corporate action has become effective, payment for his shares and an appraisal of the value thereof. The Company and any such stockholder shall in such cases have the rights and duties and shall follow the procedure set forth in sections 86 to 98, inclusive, of chapter 156B of the General Laws of Massachusetts. See "STOCKHOLDERS' RIGHTS OF APPRAISAL" in the accompanying Information Statement for a statement of the appraisal rights of stockholders and a description of the procedures required to be followed by them to obtain appraisal of their shares. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE READ THE ATTACHED INFORMATION STATEMENT CAREFULLY. THE COMPANY IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY. PLEASE DO NOT SEND ANY CERTIFICATES FOR YOUR STOCK AT THIS TIME. YOU WILL RECEIVE INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK CERTIFICATES AND RECEIPT OF PAYMENT FOR YOUR SHARES AFTER THE MERGER IS EFFECTIVE. ---------------- By Order of the Board of Directors, ------------------ CLERK Waltham, Massachusetts _______, 1996 2 MEDISENSE, INC. 266 SECOND AVENUE WALTHAM, MASSACHUSETTS 02154 ---------------- INFORMATION STATEMENT ---------------- SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON ______, 1996 WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY INTRODUCTION This Information Statement is being furnished to the holders of record as of _______, 1996 (the "Record Date") of shares of common stock, par value $.01 per share (the "Common Stock") of MediSense, Inc., a Massachusetts corporation (the "Company"), in connection with the Special Meeting of Stockholders of the Company (the "Special Meeting") to be held on _______, 1996 at _____ a.m., local time, at __________________, and any adjournment or postponement thereof. The purpose of the Special Meeting is to vote upon the adoption of the Agreement and Plan of Merger dated as of March 29, 1996, as amended by the Amendment thereto dated as of May __, 1996 (as so amended, the "Merger Agreement"), by and among the Company, Abbott Laboratories, an Illinois corporation ("Parent"), AAC Acquisition, Inc., a Massachusetts corporation and a wholly owned subsidiary of Parent ("AAC Acquisition"), and AAC Merger, Inc., a Massachusetts corporation and a wholly owned subsidiary of AAC Acquisition ("AAC Merger"). The Merger Agreement provides for, among other things, the merger of AAC Merger with and into the Company (the "Merger"). Pursuant to the Merger Agreement, (1) AAC Merger will be merged with and into the Company and the Company will be the surviving corporation and will become a wholly owned indirect subsidiary of Parent, and (2) each share of Common Stock (other than shares of Common Stock held by Parent, AAC Acquisition, AAC Merger, or in the treasury of the Company or any of their subsidiaries or that are held by those stockholders who perfect their appraisal rights under Massachusetts law) will be converted into the right to receive $45.00 in cash, without interest thereon (the "Merger Consideration"). As of the Record Date, there were issued and outstanding _____ shares of Common Stock. No shares of the Company's Class B common stock, par value $.01 per share (the "Class B Common Stock" and, together with the Common Stock, the "Shares"), by virtue of their conversion into shares of Common Stock, remain outstanding as of the Record Date. Under Massachusetts law and the Company's Restated Articles of Organization and Bylaws, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock that are entitled to vote thereon is required to adopt the Merger Agreement. AAC Acquisition owns approximately 98% of the issued and outstanding Shares on a fully 1 diluted basis, which were acquired by AAC Acquisition in a tender offer for all outstanding Shares, made at $45.00 per Share, which expired on May 1, 1996 (the "Offer"). PARENT, AAC ACQUISITION, AND THE COMPANY HAVE AGREED THAT PARENT AND AAC ACQUISITION WILL VOTE ALL SHARES OF COMMON STOCK HELD BY THEM AS OF THE RECORD DATE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT. ACCORDINGLY, ADOPTION OF THE MERGER AGREEMENT IS ASSURED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER. YOU ARE NOT BEING ASKED FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND ONE. YOU MAY VOTE YOUR SHARES, IF YOU SO WISH, BY ATTENDING THE SPECIAL MEETING IN PERSON. NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN, OR INCORPORATED BY REFERENCE IN, THIS INFORMATION STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, PARENT, AAC ACQUISITION, AAC MERGER, OR ANY OTHER PERSON. All information contained in this Information Statement relating to the Company and its subsidiaries has been supplied by the Company, and all information contained in this Information Statement relating to Parent, AAC Acquisition, AAC Merger, and their subsidiaries (other than the Company and its subsidiaries) has been supplied by Parent. The date of this Information Statement is __________, 1996. This Information Statement is first being mailed to the holders of shares of Common Stock on or about ______, 1996. AVAILABLE INFORMATION The Company and Parent are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Copies of such reports, proxy statements, and other information may be inspected and copied at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington, DC 20549; and at the public reference facilities of the Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and Suite 1300, 7 World Trade Center, New York, New York 10048. Copies of such material may be obtained by mail, at prescribed rates, from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, DC 20549. In addition, such material relating to the Company should also be available for inspection at the library of Nasdaq and such material relating to Parent should also be available for inspection at the library of the New York Stock Exchange. The Common Stock is currently registered under the Exchange Act. Following the Merger, the Company will become a wholly owned indirect subsidiary of Parent. Public trading of Common Stock will stop no later than the time of the Merger. Accordingly, registration of the shares of Common Stock under the Exchange Act will be terminated upon application by the Company to the Commission no later than the time the Merger is consummated and thereafter the Company will no longer be subject to the reporting requirements of the Exchange Act. 2 TABLE OF CONTENTS PAGE INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 2 TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 17 CONFIDENTIALITY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 25 STOCKHOLDERS' RIGHTS OF APPRAISAL. . . . . . . . . . . . . . . . . . . . 25 MARKET PRICES OF THE COMMON STOCK AND DIVIDEND POLICY. . . . . . . . . . 27 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . 28 INTERESTS OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON . . . . . . . . . . . . . . . . . . . . . . 29 SELECTED FINANCIAL DATA - MEDISENSE, INC.. . . . . . . . . . . . . . . . 32 SELECTED FINANCIAL DATA - ABBOTT LABORATORIES. . . . . . . . . . . . . . 33 CERTAIN INFORMATION CONCERNING AAC MERGER, AAC ACQUISITION, AND PARENT. . . . . . . . . . . . . . . . . . . . . 34 INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . 34 INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . 34 OTHER MATTERS TO COME BEFORE THE MEETING . . . . . . . . . . . . . . . . 35 3 SUMMARY THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS INFORMATION STATEMENT. THIS SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS INFORMATION STATEMENT AND THE ANNEXES HERETO, TO WHICH REFERENCE IS MADE FOR A COMPLETE STATEMENT OF THE MATTERS DISCUSSED BELOW. CAPITALIZED TERMS USED AND NOT DEFINED IN THE FOLLOWING SUMMARY HAVE THE MEANINGS SET FORTH UNDER "INTRODUCTION" ABOVE. STOCKHOLDERS ARE URGED TO READ THIS INFORMATION STATEMENT AND THE ANNEXES HERETO IN THEIR ENTIRETY. TRANSACTION PARTIES MEDISENSE, INC. (THE "COMPANY"). The Company develops, manufactures, and markets self-testing blood glucose monitoring systems that enable people with diabetes to manage their disease more effectively. The principal executive offices of the Company are located at 266 Second Avenue, Waltham, Massachusetts 02154, and its telephone number is (617) 895-6000. ABBOTT LABORATORIES ("PARENT"). The Parent's principal business is the discovery, development, manufacture, and sale of a broad and diversified line of health care products and services. The principal executive offices of Parent are located at 100 Abbott Park Road, Abbott Park, Illinois 60064, and its telephone number is (847) 937-6100. AAC ACQUISITION, INC. ("AAC ACQUISITION"). AAC Acquisition is a wholly owned subsidiary of Parent. AAC Acquisition is a recently organized corporation that has not conducted any business except in connection with the transactions contemplated by the Merger Agreement. The principal executive offices of AAC Acquisition are located at 100 Abbott Park Road, Abbott Park, Illinois 60064. AAC MERGER, INC. ("AAC MERGER"). AAC Merger is a wholly owned subsidiary of AAC Acquisition. AAC Merger is a recently organized corporation that has not conducted any business except in connection with the transactions contemplated by the Merger Agreement. The principal executive offices of AAC Merger are located at 100 Abbott Park Road, Abbott Park, Illinois 60064. THE TRANSACTION Pursuant to the Merger Agreement, AAC Acquisition commenced a tender offer (the "Offer") on April 4, 1996, in which AAC Acquisition offered to purchase any and all outstanding Shares at $45.00 per Share in cash. 19,861,081 Shares were validly tendered and not withdrawn prior to the expiration of the Offer on May 1, 1996. On May 2, 1996, AAC Acquisition accepted for payment and, therefore, purchased all 19,861,081 Shares tendered in response to the Offer. All of the outstanding shares of Class B Common Stock were tendered in response to the Offer. Pursuant to their terms, upon AAC Acquisition's purchase of all of the outstanding shares of Class B Common Stock, each such share of Class B Common Stock was automatically converted into one share of Common Stock. As a result, no shares of Class B Common Stock remain outstanding. The Merger Agreement further provides that following the consummation of the Offer, Parent would cause a direct or indirect wholly owned subsidiary of Parent to be merged with and into the Company, with the Company to be the surviving corporation. In the Merger, each remaining Share (other than Shares held by Parent, AAC Acquisition, AAC Merger, or in the treasury of the Company or any of their subsidiaries or that are held by those stockholders who perfect their appraisal rights under Massachusetts law) will be converted into the right to receive the Merger Consideration. As a result of the Merger, the Company will become a wholly owned indirect subsidiary of Parent. Parent is obtaining 4 the approximately $876 million required for these transactions from the proceeds of unsecured short-term borrowings at market interest rates. THE SPECIAL MEETING DATE, TIME AND PLACE OF SPECIAL MEETING. __________ at ____ a.m., local time, at _______________. PURPOSE. To consider and act upon a proposal to adopt the Merger Agreement. See "THE MERGER AGREEMENT." RECORD DATE. __________, 1996. VOTE REQUIRED. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock as of the Record Date entitled to vote thereon will be required to adopt the Merger Agreement. Parent, AAC Acquisition, and Company have agreed that AAC Acquisition will vote all its shares of Common Stock in favor of adoption of the Merger Agreement. Because AAC Acquisition owns approximately 98% of the outstanding shares of Common Stock on a fully diluted basis, the adoption of the Merger Agreement is assured. ACCORDINGLY, ADOPTION OF THE MERGER AGREEMENT IS ASSURED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER. YOU ARE NOT BEING ASKED FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND ONE. STOCKHOLDERS OF RECORD MAY VOTE THEIR SHARES, IF THEY SO WISH, BY ATTENDING THE SPECIAL MEETING IN PERSON. SEE "THE SPECIAL MEETING -- VOTING RIGHTS AND VOTE REQUIRED." THE MERGER AGREEMENT BACKGROUND OF THE MERGER. See "THE MERGER -- Background of the Merger." RECOMMENDATION OF THE BOARD. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS DETERMINED THAT THE MERGER AGREEMENT IS FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. THE BOARD HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT STOCKHOLDERS ADOPT THE MERGER AGREEMENT. See "THE MERGER -- Recommendation of the Board; Reasons for the Merger." INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the recommendation of the Board with respect to the Merger Agreement, stockholders should be aware that certain members of the Board and of the Company's management may have certain interests in the Merger that are in addition to or different from the interests of the stockholders of the Company generally. See "INTERESTS OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON." EXCHANGE OF SHARES. Pursuant to the Merger, each share of Common Stock (other than shares of Common Stock held by Parent, AAC Acquisition, AAC Merger, or in the treasury of the Company or any of their subsidiaries or that are held by those stockholders who perfect their appraisal rights under Massachusetts law) will be converted into and represent the right to receive the Merger Consideration. A letter of transmittal for use in surrendering stock certificates and obtaining payment for surrendered shares will be mailed to such holders promptly following the Effective Time (as defined below). See "THE MERGER AGREEMENT -- The Merger." CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE OBTAINED AND THEN SHOULD BE SURRENDERED ONLY IN ACCORDANCE WITH SUCH INSTRUCTIONS. 5 OPINION OF THE COMPANY'S FINANCIAL ADVISOR. Alex. Brown has delivered to the Board its written opinion, dated as of March 29, 1996 to the effect that, as of the date of such written opinion, the cash consideration to be received by the holders of the Shares is fair from a financial point of view to such stockholders. A copy of the full text of the written opinion of Alex. Brown, which sets forth among other things, the opinion expressed, assumptions made, procedures followed, matters considered, and limitations of review undertaken in connection with such opinion, is attached hereto as Annex II and should be read in its entirety. See "THE MERGER -- Opinion of Financial Advisor." CONDITIONS TO THE MERGER. Consummation of the Merger is subject to certain conditions, including without limitation (1) the adoption of the Merger Agreement by the requisite vote of the stockholders entitled to vote thereon and (2) the absence of any statute, rule, regulation, order, decree, ruling, injunction, or other order prohibiting the Merger or making the Merger illegal. See "THE MERGER AGREEMENT -- Conditions to Consummation of the Merger." EFFECTIVE TIME OF THE MERGER. The Merger shall become effective upon the filing of the articles of merger with the Secretary of State of the Commonwealth of Massachusetts (the "Effective Time"). See "THE MERGER AGREEMENT -- The Merger." EFFECTS OF THE MERGER. Pursuant to the Merger, holders of shares of Common Stock (other than shares of Common Stock held by Parent, AAC Acquisition, AAC Merger, or in the treasury of the Company or any of their subsidiaries or that are held by those stockholders who perfect their appraisal rights under Massachusetts law) will be entitled to receive the Merger Consideration for shares of Common Stock owned by them. After consummation of the Merger, the Company will become a wholly owned indirect subsidiary of Parent and the former holders of the Shares will no longer possess any interest in the Company. No later than the consummation of the Merger, the Company will terminate the registration of the Common Stock under Section 12 of the Exchange Act. Also no later than the consummation of the Merger, the Common Stock will no longer be listed on any public stock exchange. See "THE MERGER -- Certain Effects of the Merger." TAX CONSEQUENCES TO STOCKHOLDERS. The receipt of cash by a Company stockholder pursuant to the Merger will be a taxable transaction for federal income tax purposes and may also be taxable under applicable state, local, and foreign tax laws. See "THE MERGER -- Certain Federal Income Tax Consequences." ALL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS. ACCOUNTING TREATMENT. The Merger will be accounted for under the "purchase" method of accounting. See "THE MERGER -- Accounting Treatment of the Merger." APPRAISAL RIGHTS. If the Merger Agreement is approved by the stockholders at the meeting and the Merger is consummated, any stockholder (1) who files with the Company, before the taking of the vote on the approval of such action, a written objection to the proposed action stating that he intends to demand payment for his shares if the action is taken and (2) whose shares are not voted in favor of such action has or may have the right to demand in writing from the Company, within twenty days after the date of mailing to him of notice in writing that the corporate action has become effective, payment for his shares and an appraisal of the value thereof. The Company and any such stockholder shall in such cases have the rights and duties and shall follow the procedure set forth in sections 86 to 98, inclusive, of chapter 156B of the General Laws of Massachusetts. See "STOCKHOLDERS' RIGHTS OF APPRAISAL" and Annex III. 6 THE SPECIAL MEETING INTRODUCTION This Information Statement is being furnished to the stockholders of the Company as of the Record Date in connection with the Special Meeting to be held on ______, 1996 at ______ a.m., local time, at _________________, and any adjournment or postponement thereof. MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING At the Special Meeting, holders of shares of Common Stock will be asked to consider and vote upon a proposal to adopt the Merger Agreement, pursuant to which AAC Merger will be merged with and into the Company, with the Company as the surviving corporation after the Effective Time (the "Surviving Corporation"), and the Company will become a wholly owned indirect subsidiary of Parent. The Company's stockholders also will consider and vote upon such other matters as may properly come before the Special Meeting. VOTING RIGHTS AND VOTE REQUIRED Only holders of record of shares of Common Stock issued and outstanding as of the close of business on the Record Date will be entitled to vote at the Special Meeting, or any adjournment or postponement thereof, with respect to the proposal for the adoption of the Merger Agreement. As of the Record Date, the _________ shares of Common Stock issued and outstanding were held by approximately _____ holders of record, and, by virtue of their conversion into shares of Common Stock, no shares of Class B Common Stock were outstanding. At such date, 19,861,081 shares of Common Stock (or approximately 98% on a fully diluted basis) were held by AAC Acquisition. Holders of record of shares of Common Stock at the close of business on the Record Date are entitled to one vote per share with respect to the proposal for the adoption of the Merger Agreement at the Special Meeting or any adjournment or postponement thereof. The presence of the holders of a majority of the shares of Common Stock entitled to vote on the Merger is necessary to constitute a quorum to transact business at the Special Meeting. If a quorum is not present at the Special Meeting, the holders of Common Stock who are present and entitled to vote at the Special Meeting may, by majority vote, adjourn the Special Meeting from time to time without notice or other announcement until a quorum is present. BECAUSE THE SHARES OF COMMON STOCK OWNED BY AAC ACQUISITION WILL BE REPRESENTED AT THE SPECIAL MEETING, A QUORUM WILL BE PRESENT, EVEN IF NO OTHER SHARES OF COMMON STOCK ARE REPRESENTED. Adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon. Under Massachusetts law and the Company's Restated Articles of Organization and Bylaws, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock that are entitled to vote thereon is required to adopt the Merger Agreement. Abstentions of shares of Common Stock that are present at the Special Meeting will have the same effect as votes against adoption of the Merger Agreement, and broker non-votes will have the same effect as a vote against adoption of the Merger Agreement. AAC Acquisition owns approximately 98% of the issued and outstanding shares of Common Stock on a fully diluted basis. 7 PARENT, AAC ACQUISITION, AND THE COMPANY HAVE AGREED THAT PARENT AND AAC ACQUISITION WILL VOTE ALL SHARES OF COMMON STOCK HELD BY THEM AS OF THE RECORD DATE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT. ACCORDINGLY, ADOPTION OF THE MERGER AGREEMENT IS ASSURED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER. YOU ARE NOT BEING ASKED FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND ONE. YOU MAY VOTE YOUR SHARES, IF YOU SO WISH, BY ATTENDING THE SPECIAL MEETING IN PERSON. STOCKHOLDERS' RIGHTS OF APPRAISAL As more fully described in "STOCKHOLDERS' RIGHTS OF APPRAISAL," holders of shares of Common Stock have the right to demand appraisal of, and obtain a cash payment for, the "fair value" of their shares (excluding any element of value arising from the consummation of the Merger Agreement) pursuant to Sections 86 to 98, inclusive, of Chapter 156B of the General Laws of Massachusetts. In order to exercise such rights, such holders of Common Stock must comply with the procedural requirements of Sections 86 to 98, inclusive, of Chapter 156B of the General Laws of Massachusetts. The full text of Sections 86 to 98, inclusive, of Chapter 156B of the General Laws of Massachusetts is attached to this Information Statement as Annex III and any stockholder of the Company desiring to exercise rights of appraisal in connection with the Merger should consult with legal counsel prior to taking any action to ensure that the stockholder complies with the applicable statutory provisions. Failure to take any of the steps required under Sections 86 to 98, inclusive, of Chapter 156B of the General Laws of Massachusetts on a timely basis may result in the loss of appraisal rights. See Annex III. THE MERGER BACKGROUND OF THE MERGER On February 15, 1996, Miles D. White, Senior Vice President, Diagnostic Operations of Parent, and Robert L. Coleman, President and Chief Executive Officer of the Company met and discussed, in general terms, the Company's business and prospects and the possibility of a business combination between Parent and the Company. On February 27, 1996, Dr. Coleman, Richard C.E. Morgan, Chairman of the Board of Directors of the Company, and James R. Tobin, a Director of the Company, met with Mr. White, Duane L. Burnham, Chairman and Chief Executive Officer of Parent, Thomas R. Hodgson, President and Chief Operating Officer of Parent, and Gary P. Coughlan, Senior Vice President, Finance and Chief Financial Officer of Parent, to discuss further the business of the Company and the possibility that Parent might acquire the Company. On March 2, 1996, the Board met via teleconference. At this meeting, Mr. Morgan and Dr. Coleman summarized to the Board their conversations with the representatives of Parent. The Board and the Company's legal and financial advisors discussed these conversations, as well as the advisability of the Company's entering into a business combination at that time compared to remaining independent. The Board and its advisors also discussed the likelihood that there would be other interested parties, as well as possible antitrust and other issues with respect to potential interested parties. Following these discussions, the Board authorized the Company's management to enter into a confidentiality agreement 8 with Parent containing "standstill" provisions prohibiting certain unsolicited proposals and transactions and to commence discussions of a possible business combination with Parent. Following the Company's March 2, 1996 Board meeting, the Company and Parent began to discuss a confidentiality and standstill agreement. From March 2 to March 13, 1996, representatives of Parent and the Company and their respective financial and legal advisors exchanged drafts and discussed various provisions of a confidentiality and standstill agreement. On March 13, 1996, the Company and Parent entered into a confidentiality agreement (the "Confidentiality Agreement") providing for the mutual non- disclosure of confidential information exchanged by the Company and Parent. The Confidentiality Agreement also provided for a one year standstill by Parent, subject to certain exceptions, and a 16-day period during which the Company would negotiate exclusively with Parent. Immediately thereafter, representatives of Alex. Brown, financial advisors to the Company, met with representatives of Goldman, Sachs & Co., financial advisors to Parent, to discuss the financial advisors' respective views as to the methodologies that should be used to value the Company. Later on March 13, 1996, Mr. Burnham telephoned Mr. Morgan to discuss certain financial aspects of the proposed transaction. On March 15, 1996, representatives of Alex. Brown and Goldman, Sachs & Co. met again to discuss valuation methodologies. From March 13, 1996 through March 29, 1996, Parent's financial and legal advisors continued to request and review various documents containing confidential information supplied by the Company and discuss various due diligence matters. On March 18, 1996, Mr. White and certain other representatives of Parent and Parent's financial advisors met with Dr. Coleman and certain other representatives of the Company and the Company's financial advisors. At that meeting, representatives of the Company made a financial presentation to Parent's representatives and financial advisors and discussed various aspects of the Company's business. Tentative discussions of a possible purchase price indicated that the views of the Company and Parent were significantly different. From March 18, 1996 through March 25, 1996, the parties exchanged numerous telephone calls with respect to valuation and other matters. On March 25, 1996, Mr. Burnham and Mr. White met with Mr. Morgan and Dr. Coleman to discuss the terms of a possible transaction. At that meeting, Mr. Burnham and Mr. Morgan, after extensive discussion, established a preliminary basis, subject to satisfactory completion of Parent's due diligence review of the Company, negotiation of satisfactory terms of a merger agreement, the receipt of fairness opinions and the approval of the respective Boards of Directors of Parent and the Company, to continue discussions regarding an acquisition of the Company by Parent at a price of $45.00 per Share, which represented a compromise between the competing views as to the price. On March 26, 1996, the Board at a regular meeting discussed the proposed transaction and received the views of the Company's financial and legal advisors. At the meeting, the Board received presentations from management and the Company's financial and legal advisors. The Company's management reviewed the state of the Company's business and its prospects. Shearman & Sterling, the Company's special counsel, reviewed the Board's fiduciary duties to the Company and its stockholders, and Alex. Brown presented its analysis as to the proposed consideration to be received by the Company's stockholders. Following the presentations, the Board, management, and the Company's advisors discussed the merits and risks of alternative transactions. The Board again discussed the number of likely 9 alternative bidders and the antitrust and other risks that would impact the likelihood of consummation of a transaction with such other bidders. During this meeting, special counsel to the Company contacted counsel to Parent by telephone to discuss certain aspects of a possible agreement relating to the proposed transaction. On March 26, 1996, counsel for Parent distributed a draft Merger Agreement to the Company and its legal and financial advisors. On March 26 and 27, 1996, representatives of Parent met with representatives of the Company to discuss certain additional due diligence matters and request certain additional information. Also on March 27, 1996, the Company's legal advisors distributed a revised draft Merger Agreement to Parent and its legal and financial advisors. On March 28, 1996, a representative of the Company and the Company's legal advisors met with representatives of Parent and Parent's legal advisors to continue negotiation of the terms of the proposed Merger Agreement. On March 28, 1996, Parent's financial advisors held discussions by telephone with the Company's financial advisors regarding certain financial aspects of the proposed transaction. On the morning of March 29, 1996, after completion of the negotiations over the proposed Merger Agreement, the Board held a special meeting by teleconference to review, with the advice and assistance of the Company's financial and legal advisors, the proposed Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger. At the meeting, counsel to the Company reviewed the terms of the Merger Agreement. Alex. Brown presented an update of its financial analysis and rendered to the Board its written opinion that the cash consideration of $45.00 per Share to be received by holders of the Shares pursuant to the Merger Agreement is fair from a financial point of view to such stockholders. Following a number of questions from, and discussion among the directors, the Board unanimously (1) approved the Merger Agreement and the transactions contemplated thereby and authorized the execution and delivery thereof, (2) determined that the Offer and the Merger, taken together, are fair to, and in the best interests of, the Company and its stockholders, and (3) recommended that the Company's stockholders accept the Offer and tender their Shares to AAC Acquisition. Simultaneously with the special meeting of the Board on March 29, 1996, the Board of Directors of Parent held a special meeting to review, with the advice and assistance of Parent's financial and legal advisors, the proposed Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger. At such meeting, Parent's management, financial advisors and legal advisors made presentations to the Board concerning the transaction and Parent's financial advisor, Goldman, Sachs & Co., provided its written opinion to the effect that the consideration to be paid by Parent pursuant to the Merger Agreement is fair to the stockholders of Parent from a financial point of view. Following the Board of Directors' review of the transaction, Parent's Board of Directors unanimously approved the Merger Agreement and the transactions contemplated thereby, and authorized the execution and delivery thereof. Also on March 29, 1996, immediately after the respective meetings of the Boards of Directors of the Company and Parent had concluded, the Merger Agreement was executed and delivered by the Company, Parent, and AAC Acquisition and the Company and Parent issued the following joint press release: ABBOTT LABORATORIES TO ACQUIRE MEDISENSE, INC. Abbott Park, Ill., and Waltham, Ma., March 29, 1996 - Abbott Laboratories (NYSE: ABT) and MediSense, Inc. (NASDAQ: MSNS) today announced that they have signed a 10 definitive agreement through which Abbott will acquire MediSense, the biosensor technology leader in blood glucose self-testing systems for people with diabetes. Under the terms of the agreement, Abbott will make a tender offer to acquire 100 percent of the outstanding shares of MediSense for $45 per share, or an equity value of approximately $876 million. The Abbott and MediSense boards of directors have endorsed the offer. The tender offer is expected to be completed in approximately five weeks, subject to regulatory approvals and customary closing conditions. Following the tender offer, MediSense will be merged into a wholly-owned subsidiary of Abbott Laboratories, and each remaining MediSense shareholder will receive $45 per share in exchange for each MediSense share held. "We are extremely pleased to add MediSense's superior technology and outstanding people to our company," said Duane L, Burnham, chairman and chief executive officer of Abbott Laboratories. "MediSense fits very well with our diagnostics operations, and will create many opportunities for synergy with our other divisions as well." According to Miles D. White, senior vice president, diagnostics operations, the acquisition advances Abbott's interests in the glucose monitoring market. "This important strategic step, combined with other internal and external initiatives to secure industry-leading technology in glucose monitoring, will position Abbott very favorably in this market. In addition to providing immediate access to the fastest-growing segment of the diagnostics market, MediSense's research and development program will augment our existing work to develop and commercialize future noninvasive monitoring technologies," said White. "We are delighted to become a part of the world's leading diagnostics company," said Robert L. Coleman, Ph.D., president and chief executive officer of MediSense. "The combination of the two organizations will accelerate market growth and will ensure continued development and availability of therapies to improve the care of people with diabetes." MediSense manufactures products that allow people with diabetes to routinely measure blood glucose which is critical to diabetes management. The products are compact, easy-to-use home glucose meters and disposable single-use test strips. MediSense was the first company to develop a biosensor-based blood glucose self-testing system. MediSense's leading system, the Precision Q-I-D-TM-, provides accurate results, with less blood, faster than any competing product. The MediSense subsidiary of Abbott will continue to be located in Massachusetts, with Dr. Coleman remaining as president of the subsidiary. MediSense is a worldwide developer, manufacturer and marketer of blood glucose self-testing systems that enable people with diabetes to manage their disease more effectively. MediSense believes the convenience and simplicity of its products promote increased testing compliance by individuals with diabetes and provide for more effective management of their condition. Abbott Laboratories is a diversified global manufacturer of health care products, employing 50,000 people. The company researches, develops and markets pharmaceutical, diagnostic, nutritional and hospital products. In 1995, the company's sales and net earnings were $10.0 billion and $1.7 billion, respectively, with earnings per share of $2.12. * * * 11 AAC Acquisition commenced the Offer on April 4, 1996. Parent received early termination of the waiting period under the Hart- Scott-Rodino Antitrust Improvements Act and on April 11, 1996, Parent issued the following press release: ABBOTT LABORATORIES ACQUISITION OF MEDISENSE, INC. RECEIVES ANTITRUST CLEARANCE ABBOTT PARK, Ill., April 11, 1996 -- Abbott Laboratories (NYSE: ABT) announced today that it received early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act applicable to Abbott's pending acquisition of MediSense, Inc. The termination of the Hart-Scott-Rodino waiting period satisfies one of the principal conditions to the pending acquisition. The two companies announced on March 29 that they had signed a definitive agreement through which Abbott will acquire MediSense, the biosensor technology leader in blood glucose self-testing systems for people with diabetes. Abbott commenced a cash tender offer on April 4, 1996, for all outstanding shares of MediSense common stock at a price of $45 per share. The tender offer is scheduled to expire at midnight, May 1, 1996, subject to customary closing conditions. Following the tender offer, MediSense will be merged with a wholly owned indirect subsidiary of Abbott Laboratories, and each remaining MediSense shareholder will receive $45 per share in exchange for each MediSense share held. Abbott Laboratories is a worldwide manufacturer of health care products, employing 50,000 people. In 1995, the company's sales and net earnings were $10.0 billion and $1.7 billion, respectively, with earnings per share of $2.12. * * * The Offer expired pursuant to its terms on May 1, 1996. On May 2, 1996, Parent accepted for payment and, therefore, purchased all of the 19,861,081 Shares that were validly tendered and not withdrawn prior to the expiration of the Offer. The Shares so purchased by AAC Acquisition represent approximately 98% of the outstanding Shares on a fully diluted basis. Also on May 2, 1996, Richard C.E. Morgan, John F. Gaither, Jr., Raymond D. Oddi, Kenneth E. Quickel, Jr., M.D., Peter R. Rosenblatt, and James R. Tobin resigned as directors of the Company and Gary P. Coughlan, Miles D. White, and Jose M. de Lasa, designees of Parent, were elected as directors of the Company. Robert L. Coleman, Ph.D., remains a director of the Company. RECOMMENDATION OF THE BOARD; REASONS FOR THE MERGER At a special meeting held on March 29, 1996, the Board unanimously approved the Merger Agreement and the transactions contemplated thereby and determined that the Merger and the Offer, taken together, are fair to, and in the best interests of, the Company and its stockholders. 12 THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. In light of the Board's review of the Company's competitive and financial position, recent operating results and prospects, the Board determined that the Offer and the Merger, taken together, are fair to, and in the best interests of, the Company and its stockholders. In making such recommendation and in approving the Merger Agreement and the transactions contemplated thereby, the Board considered a number of factors, including, but not limited to, the following: (1) the terms and conditions of the Merger Agreement; (2) the views expressed by management of the Company (at the Board meetings on March 26, 1996, March 29, 1996 and at previous Board meetings) regarding the financial condition, results of operations, business and prospects of the Company, including the prospects of the Company if the Company were to remain independent; (3) the trading price of the shares of Common Stock following the Company's initial public offering on July 8, 1994; and that the $45.00 per Share to be paid in the Offer and as the consideration in the Merger represents a premium of approximately 48.8% over the $30.25 closing sale price for the Shares on the Nasdaq National Market on March 28, 1996, the last trading day prior to the public announcement of the execution of the Merger Agreement and a premium of approximately 45.2% over the $31.00 closing sale price for the Shares on the Nasdaq National Market one month prior to March 28, 1996; (4) although the Company had not had any recent discussions with other potential acquirors of the Company, prior to the time of the initial public offering of the Common Stock, Alex. Brown had made inquiries of a number of potential acquirors, and those inquiries had failed to identify a transaction which would have resulted in an acquisition that appeared more attractive to the Board than the initial public offering of the Common Stock; (5) the views expressed by management and Alex. Brown, that there appeared to be a limited number of parties with which the Company would be a good strategic fit, the views of management and the Company's counsel that antitrust and other issues might affect the likelihood of consummation of any alternative transaction, and the Board's conclusion that it was not likely that any other party would consider a transaction that was more favorable to the Company and its stockholders; (6) the oral and written presentations by Alex. Brown at the March 26, 1996 and March 29, 1996 Board meetings and the opinion of Alex. Brown delivered to the Board at the March 29, 1996 Board meeting that, as of such date, and subject to the assumptions made, matters considered, and limitations set forth in such opinion, the consideration to be received by the holders of the Shares pursuant to the Merger Agreement is fair from a financial point of view to such stockholders. A copy of the opinion of Alex. Brown is attached hereto as Annex II to this Information Statement and is incorporated herein by reference. STOCKHOLDERS ARE URGED TO READ THE OPINION OF ALEX. BROWN CAREFULLY AND IN ITS ENTIRETY; (7) the Merger Agreement permits the Board, in the exercise of its fiduciary duties, to furnish nonpublic information and data, and enter into discussions and negotiations in connection with an unsolicited acquisition proposal and recommend an unsolicited acquisition proposal to the Company's stockholders; 13 (8) the Merger Agreement permits the Board, in the exercise of its fiduciary duties, to terminate the Merger Agreement in favor of a superior alternative acquisition proposal; upon such termination, the Company shall pay Parent a fee of $17,500,000 (representing approximately 2% of the total value of the consideration to be paid in the Offer and the Merger); and (9) the transactions contemplated by the Merger Agreement provided for an all cash payment to shareholders, with no financing condition; there appeared to be no significant regulatory impediments to consummation of the Merger; accordingly, the Offer and the Merger could be promptly completed with a high degree of certainty. The Board did not assign relative weights to the above factors or determine that any factor was of particular importance. Rather, the Board viewed its position and recommendations as being based on the totality of the information presented to and considered by it. The Board recognized that, while the consummation of the Offer and the Merger gives the Company's stockholders the opportunity to realize a significant premium over the price at which the Shares were traded prior to the public announcement of the Offer, the Offer and the Merger would eliminate the opportunity for such stockholders to participate in the future growth and profits of the Company. The Board believed that the loss of the opportunity to participate in the growth and profits of the Surviving Corporation was reflected in the Offer Price. The Board also recognized that there can be no assurance as to the level of growth or profits to be attained by the Surviving Corporation in the future. OPINION OF FINANCIAL ADVISOR The Company retained Alex. Brown on May 12, 1994 to act as the Company's financial advisor in connection with an acquisition transaction, such as the Offer and the Merger, including rendering its opinion to the Board as to the fairness from a financial point of view of such transaction. Pursuant to a letter agreement dated May 12, 1994 between the Company and Alex. Brown, the Company agreed to pay Alex. Brown a cash fee equal to 1.0% of the aggregate consideration received by the Company's stockholders in an acquisition transaction. The Company also agreed to reimburse Alex. Brown for its reasonable out-of-pocket expenses, including reasonable fees and disbursements of its counsel. The Company further agreed to indemnify and hold harmless Alex. Brown and each of its directors, officers, agents, employees, and controlling persons against any losses, claims, damages, or liabilities (or actions or proceedings in respect thereof) related to or arising out of its rendering of services under its engagement as financial advisor, and will reimburse Alex. Brown and each other person indemnified for all legal and other expenses as incurred in connection with investigating or defending any such loss, claim, damage, liability, action, or proceeding. Alex. Brown, as a customary part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements, and valuations for corporate and other purposes. Alex. Brown has served as financial advisor to the Company in connection with the Merger and will receive a fee for its services, a substantial portion of which is contingent upon the consummation of the Merger. Alex. Brown served as underwriter to the Company in its initial public offering of Common Stock in June 1994 and its follow-on offering of Common Stock in February 1995. Alex. Brown maintains a market in the Common Stock and regularly publishes research reports regarding the health 14 care industry and the businesses and securities of publicly owned companies in that industry, including the Company and Parent. At the March 26, 1996 meeting of the Board, representatives of Alex. Brown made a presentation with respect to the proposed consideration to be received by the Company's stockholders in the Offer and the Merger. At the March 29, 1996 meeting of the Board, Alex. Brown rendered to the Board its written opinion that, as of such date, and subject to the assumptions made, matters considered, and limitations set forth in such opinion and summarized below, the consideration to be received by the holders of Shares pursuant to the Merger Agreement is fair from a financial point of view to such stockholders. No limitations were imposed by the Board upon Alex. Brown with respect to the investigations made or procedures followed by it in rendering its opinion. THE FULL TEXT OF ALEX. BROWN'S WRITTEN OPINION DATED MARCH 29, 1996 WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX II AND IS INCORPORATED HEREIN BY REFERENCE. THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THE ALEX. BROWN OPINION IN ITS ENTIRETY. THE ALEX. BROWN OPINION IS DIRECTED TO THE BOARD, ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF SHARES PURSUANT TO THE MERGER AGREEMENT FROM A FINANCIAL POINT OF VIEW, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER SUCH STOCKHOLDER SHOULD VOTE HIS SHARES IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT. THE ALEX. BROWN OPINION WAS RENDERED TO THE BOARD FOR ITS CONSIDERATION IN DETERMINING WHETHER TO APPROVE THE MERGER AGREEMENT AND RECOMMEND THAT HOLDERS OF SHARES ACCEPT THE OFFER. THE DISCUSSION OF THE ALEX. BROWN OPINION IN THIS INFORMATION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE ALEX. BROWN OPINION. In connection with its opinion, Alex. Brown reviewed the Merger Agreement and certain publicly available financial information concerning the Company. Alex. Brown reviewed certain internal financial analyses and other information of the Company made available to it by the management of the Company and held discussions with members of the senior management of the Company regarding the business and prospects of the Company. In addition, Alex. Brown (1) reviewed the reported price and trading activity for the Common Stock, (2) compared certain financial and stock market information for the Company with similar information for certain publicly traded companies, (3) reviewed the financial terms of certain recent business combinations, and (4) performed such other studies and analyses and took into account such other matters as it deemed necessary. In conducting its review and arriving at its opinion, Alex. Brown assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by it for purposes of its opinion. With respect to the financial projections and information relating to the prospects of the Company, Alex. Brown assumed that such information had been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the likely future financial prospects of the Company. In addition, Alex. Brown did not make an independent valuation or appraisal of the assets of the Company (nor was it furnished with any such valuation or appraisal) nor did it make any physical inspection of the properties or assets of the Company. The Alex. Brown opinion is based on market, economic, financial, and other conditions as they existed and could be evaluated as of the date of its opinion. 15 CERTAIN EFFECTS OF THE MERGER At the Effective Time, all of the properties, rights, privileges, powers, and franchises of the Company and AAC Merger will vest in the Surviving Corporation, and all debts, liabilities, restrictions, disabilities, and duties of the Company and AAC Merger will become the debts, liabilities, restrictions, disabilities, and duties of the Surviving Corporation. Except for certain indemnification provisions, at the Effective Time, the Articles of Organization of AAC Merger in effect immediately prior to the Effective Time shall be the Articles of Organization of the Surviving Corporation until amended in accordance with applicable law; PROVIDED, however, that at the Effective Time, Article I of the Articles of Organization of the Surviving Corporation shall be amended to read as follows: "The name by which the corporation shall be known is MediSense, Inc." The By-Laws of AAC Merger in effect at the Effective Time shall be the By-Laws of the Surviving Corporation until amended in accordance with applicable law. As a result of the Offer and the Merger, no later than the Effective Time, the Common Stock no longer will be publicly traded and AAC Acquisition will become the sole stockholder of the Surviving Corporation. Following the Merger, the current stockholders other than Parent, AAC Acquisition, and AAC Merger will no longer have an opportunity to continue their interests in the Company as an ongoing corporation and therefore will not share in its future earnings and potential growth. Trading in the Common Stock on Nasdaq will cease no later than the Effective Time. Registration of the Common Stock under the Exchange Act also will be terminated, as will the ongoing disclosure requirements thereunder. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, AAC Acquisition, AAC Merger, the Company, or the holder of any of the shares of Common Stock, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock held by Parent, AAC Acquisition, AAC Merger, or in the treasury of the Company or any of their subsidiaries or that are held by those stockholders who perfect their appraisal rights under Massachusetts law), shall by virtue of the Merger and without any action on the part of the holder thereof be cancelled and extinguished and be converted into the right to receive an amount equal to the Merger Consideration. Each share of Common Stock issued and outstanding immediately prior to the Effective Time and owned by Parent, AAC Acquisition, or AAC Merger or any direct or indirect subsidiary of Parent, AAC Acquisition or AAC Merger, or which is held in the treasury of the Company or any of its subsidiaries, shall be cancelled and retired and no payment of any consideration shall be made with respect thereto. Each share of common stock, par value $0.01 per share, of AAC Merger issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. ACCOUNTING TREATMENT OF THE MERGER The Merger will be accounted for under the "purchase" method of accounting. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion is a summary of the principal federal income tax consequences of the Offer and the Merger to holders whose shares of Common Stock are purchased pursuant to the Offer and the Merger (including any cash amounts received by dissenting stockholders pursuant to the exercise of 16 appraisal rights). The discussion applies only to holders of shares of Common Stock in whose hands shares of Common Stock are capital assets, and may not apply to shares of Common Stock received pursuant to the exercise of employee stock options or otherwise as compensation, or to holders of shares of Common Stock who are not citizens or residents of the United States. THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON PRESENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES OF COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, AND OTHER TAX LAWS. The receipt of cash pursuant to the Offer and the Merger (including any cash amounts received by dissenting stockholders pursuant to the exercise of appraisal rights) will be a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986 (the "Code") and also may be a taxable transaction under applicable state, local, and other income tax laws. In general, for federal income tax purposes, a stockholder will recognize gain or loss equal to the difference between the cash received by the stockholder pursuant to the Offer and the Merger and the stockholder's adjusted tax basis in the shares of Common Stock purchased pursuant to the Offer and the Merger. Gain or loss must be determined separately for each block of shares of Common Stock (i.e., shares of Common Stock acquired at the same capital cost in a single transaction) purchased pursuant to the Offer and the Merger. Such gain or loss will be capital gain or loss and will be long-term gain or loss if, on the effective date of the Merger, the shares of Common Stock were held for more than one year. There are limitations on the deductibility of capital losses. Payments in connection with the Offer and the Merger may be subject to "backup withholding" at a 31% rate. Backup withholding generally applies if the stockholder fails to furnish such stockholder's social security number or other taxpayer identification number ("TIN"), or furnishes an incorrect TIN. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons generally are exempt from backup withholding, including corporations and financial institutions. Certain penalties apply for failure to furnish correct information and for failure to include the reportable payments in income. Stockholders should consult with their own tax advisors as to the qualifications for exemption from withholding and the procedure for obtaining such exemption. THE MERGER AGREEMENT GENERAL The following is a brief summary of certain provisions of the Merger Agreement, a copy of which is attached as Annex I to this Information Statement and is incorporated herein by reference. This summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement. ALL STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY. 17 THE MERGER The Merger Agreement provides that, at the Effective Time and upon the terms and subject to the conditions of the Merger Agreement and Massachusetts law, AAC Merger will be merged with and into the Company, and the separate existence of AAC Merger will cease with the Company continuing as the Surviving Corporation. At AAC Acquisition's option, the Merger may be structured so that any direct or indirect subsidiary of Parent is merged with and into the Company. As soon as practicable after the satisfaction or waiver of the conditions to the Merger, the parties will file with the Secretary of State of the Commonwealth of Massachusetts the articles of merger and will make all other filings or recordings required by Massachusetts law. The Merger will become effective upon the filing and acceptance of the articles of merger, or at such later time as is specified in the articles of merger. At the Effective Time, each Share outstanding immediately prior to the Effective Time (other than Shares held by Parent, AAC Acquisition, AAC Merger, or in the treasury of the Company or any of their subsidiaries or that are held by those stockholders who perfect their appraisal rights under Massachusetts law), will be cancelled and extinguished and will be converted into the right to receive an amount equal to the Merger Consideration. Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with Massachusetts law will not be converted into a right to receive the Merger Consideration unless such holder fails to perfect or withdraws or otherwise loses such holder's right to appraisal. If, after the Effective Time, such holder fails to perfect or withdraws or loses such holder's right to appraisal, such Shares will be treated as if they had been converted into a right to receive the Merger Consideration. The Merger Agreement provides that, if approval by the Company's stockholders is required by applicable law to consummate the Merger, the Company will, as soon as practicable following the consummation of the Offer, hold an annual or special meeting of its stockholders to consider and take action upon the Merger Agreement, including in the proxy or information statement the recommendation of the Board that stockholders vote in favor of the approval of adoption of the Merger Agreement and the transactions contemplated thereby. At such meeting, Parent and AAC Acquisition will vote all Shares owned by them in favor of the Merger Agreement and the transactions contemplated thereby. Promptly after the Effective Time, the Surviving Corporation will mail to each record holder a letter of transmittal and instructions for effecting the surrender of certificate(s) which, prior to the Effective Time, represented Shares. Upon surrender of the certificate(s) representing a holder's Shares, together with a completed and validly executed letter of transmittal, such holder will be entitled to receive the Merger Consideration in respect thereof. Until so surrendered or exchanged, each certificate will represent only the right to receive the Merger Consideration. 18 THE OFFER Pursuant to the terms of the Merger Agreement, AAC Acquisition was required to commence the Offer no later than the fifth business day following the public announcement of the terms of the Merger Agreement. The obligation of AAC Acquisition to accept for payment and pay for any Shares tendered pursuant to the Offer was subject only to the Offer conditions. The Merger Agreement allowed AAC Acquisition to increase the Offer price and make any other changes in the terms and conditions of the Offer, provided that, unless previously approved by the Company in writing, no change would be made that would decrease the price per Share payable in the Offer, change the form of consideration payable in the Offer, reduce the maximum number of Shares to be purchased in the Offer, or impose conditions to the Offer in addition to certain conditions set forth in the Merger Agreement. Subject to the satisfaction of certain conditions set forth in the Merger Agreement, AAC Acquisition agreed to accept for payment and pay for Shares that were validly tendered and not withdrawn pursuant to the Offer as soon as it was permitted to do so under applicable law. Notwithstanding the foregoing, if the number of Shares tendered and not withdrawn had represented less than 90% of the Shares outstanding on a fully diluted basis, AAC Acquisition was permitted to extend the Offer up to the tenth business day following the date on which all conditions to the Offer had first been satisfied or waived. The Merger Agreement provides that if the Offer Conditions had not been satisfied on the initial expiration date of the Offer, AAC Acquisition would have been required to extend (and re-extend) the Offer through June 30, 1996 to provide time to satisfy such conditions; provided that, if AAC Acquisition had not purchased Shares pursuant to the Offer prior to June 30, 1996 as the result of the receipt by the Company of an Acquisition Proposal (as defined below) or as a result of a failure of the applicable waiting period under the HSR Act to expire or the failure to obtain any necessary governmental or regulatory approvals, AAC Acquisition would have been required to extend (and re-extend) the Offer through September 30, 1996. The Merger Agreement required, as soon as practicable on the date of commencement of the Offer, (a) Parent and AAC Acquisition to file with the Commission a Tender Offer Statement on Schedule 14D-1 with respect to the Offer that contained the offer to purchase and form of the related letter of transmittal and (b) the Company to file with the Commission a Solicitation/Recommendation Statement on Schedule 14D-9 that it mailed to stockholders promptly after the commencement of the Offer. AAC Acquisition and the Company also agreed to take all steps necessary to cause the offer to purchase and the form of the related letter of transmittal to be disseminated to holders of Shares as and to the extent required by applicable federal securities laws. BOARD REPRESENTATION Following the purchase by AAC Acquisition of Shares pursuant to the Offer and from time to time thereafter, AAC Acquisition is entitled to designate a number of directors on the Board equal to the product of (1) the total number of directors on the Board and (2) AAC Acquisition's percentage ownership of the outstanding Shares of the Company. The Company will either increase the size of the Board or secure the resignation of the necessary number of directors to enable AAC Acquisition's designees to be elected to the Board and will cause such designees to be elected to the Board. 19 Any amendment of the Merger Agreement or the Restated Articles of Organization or By-laws of the Company, any termination of the Merger Agreement by the Company, and any extension by the Company of the time for performance of obligations or the waiver of any rights under the Merger Agreement will require the vote of a majority of directors of the Company who are not AAC Acquisition's designees or employees of the Company. REPRESENTATIONS AND WARRANTIES The Merger Agreement contains various representations and warranties of the Company, including representations by the Company as to: (1) organization, qualification, and similar corporate matters of the Company and its subsidiaries, (2) capitalization of the Company and its subsidiaries, (3) the authorization, execution, delivery, performance, and enforceability of the Merger Agreement, (4) the non-contravention of the Merger Agreement and related transactions with any charter provision, by-law, material contract, order, law, or regulation to which the Company or its subsidiaries is a party or by which it is bound or obligated, (5) the filing of required Commission reports and the absence of untrue statements of material facts or omissions of material facts in such reports, (6) the absence of changes or events which have had a material adverse effect on the Company and the absence of certain derivative instruments that would result in a material adverse effect on the Company, (7) the absence of untrue statements of material facts or omissions of material facts in the Schedule 14D-9 and the proxy or information statement to be sent to stockholders, (8) the absence of payments to any intermediary other than Alex. Brown of any finder's or other fee or commission, (9) claims and litigation, (10) the filing of tax returns and the payment of taxes, (11) employee benefits matters, (12) compliance with laws, rules, statutes, orders ordinances or regulations, and material notes, bonds, mortgages, indentures, contracts, agreements, leases, licenses, permits, franchise, or other instruments or obligations of the Company or any of its subsidiaries which would result in a Material Adverse Effect, (13) the absence of environmental claims and compliance with all environmental laws and regulations, (14) possession of all necessary rights and licenses in intellectual property, (15) possession of all necessary insurance, (16) the absence of real property ownership and the possession and enforceability of all real property leases, (17) the absence of notices, citations, or decisions of governmental or regulatory bodies and recalls or warning letters from the Food and Drug Administration with respect to any product produced, manufactured, marketed, or distributed by the Company, and possession of and compliance with all necessary approvals, clearances, authorizations, licenses, and registrations relating to such products, (18) labor matters, (19) applicable voting requirements, and (20) inapplicability of state takeover laws. The Merger Agreement contains various customary representations and warranties of Parent and AAC Acquisition, including representations by Parent and AAC Acquisition as to: (1) organization, qualification, and similar corporate matters of Parent and AAC Acquisition, (2) the authorization, execution, delivery, performance, and enforceability of the Merger Agreement, (3) the non-contravention of the Merger Agreement and related transactions with any charter provision, by-law, material contract, order, law, or regulation to which Parent or AAC Acquisition is a party or by which it is bound or obligated, (4) the absence of untrue statements of material facts or omissions of material facts in any documents related to the Offer and in information provided to the Company in connection with the Schedule 14D-1 and proxy statement, (5) the absence of prior activities of AAC Acquisition other than in connection with or as contemplated by the Merger Agreement, and (6) the possession of all funds necessary to satisfy AAC Acquisition's obligations under the Merger Agreement. 20 The representations and warranties in the Merger Agreement shall not survive beyond the Effective Time, except that the covenants and agreements in the Merger Agreement shall survive in accordance with their respective terms. COVENANTS CONDUCT OF BUSINESS PENDING THE CLOSING. From the date of the Merger Agreement to the time AAC Acquisition's designees are elected as directors of the Company, the Company and its subsidiaries were each required to conduct its operations in the ordinary course of business consistent with past practice, and the Company and its subsidiaries were each required to use its reasonable best efforts to preserve intact its business organization, to keep available the services of its officers and employees and to maintain existing relationships with licensors, licensees, suppliers, contractors, distributors, customers, and others having business relationships with it. Accordingly, prior to the date AAC Acquisition's nominees were elected to the Board, neither the Company nor any of its subsidiaries were permitted to, without prior written consent of AAC Acquisition, engage or agree to engage in an enumerated list of transactions generally characterized as being outside the ordinary course of business. Transactions requiring AAC Acquisition's prior approval included actions by the Company or its subsidiaries to (1) amend its articles of organization or by-laws or increase or propose to increase the number of directors; (2) authorize for issuance, issue, sell, deliver, or agree to commit to issue, sell or deliver any stock of any class or any other securities or equity equivalents (including, without limitation, stock appreciation rights), except as required by option agreements and option plans as in effect as of the date of the Merger Agreement, or amend any of the terms of any such securities or agreements outstanding as of the date of the Merger Agreement; (3) 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, repurchase or otherwise acquire any of its securities or any securities of its subsidiaries; (4) incur any debt or issue any debt securities or assume, guarantee, or endorse the obligations of any other person, make any loans, advances, or capital contributions to, or investments in, any other person (other than to wholly owned subsidiaries of the Company), pledge or otherwise encumber shares of capital stock of the Company or any of its subsidiaries or mortgage or pledge any of its assets or create any lien thereupon; (5) enter into, adopt, amend, or terminate any bonus, compensation, severance, termination, or employee benefit arrangement not required by any such plan or arrangement; (6) acquire, sell, lease, license, encumber, transfer, or dispose of any assets of the Company and its subsidiaries; (7) change any of the accounting principles or practices used by it, except as may be required as a result of a change in law or in generally accepted accounting principles; (8) acquire any corporation, partnership, or other business organization or division thereof, authorize any new capital expenditure not reflected in the Company's capital budget or settle any litigation for amounts in excess of $500,000 individually or $1,000,000 in the aggregate; (9) make any tax election or settle or compromise any material tax liability; (10) pay, discharge, or satisfy any claims, liabilities, or obligations outside the ordinary course or not in accordance with their terms, except where such action would not result in a material adverse effect; (11) enter into any agreement providing for the acceleration of payment or performance or other consequence as a result of a change in control of the Company; (12) enter into any agreement providing for any license, sale, assignment, or otherwise transfer any patent rights or grant any covenant not to sue with respect to any of its patent rights or take such action with respect to the Company's Intellectual Property that would have a Material Adverse Effect; or (13) take or agree to take any action which would make any of the 21 representations or warranties of the Company contained in the Merger Agreement untrue or incorrect or would result in any of the conditions to the Offer not being satisfied. Notwithstanding the above, the Company was permitted to adopt a shareholder rights plan, issue rights thereunder and issue securities upon exercise of such rights; provided, however, that such rights plan exempted the Offer and the Merger from the events which trigger the exercise of such rights. ACCESS TO INFORMATION. The Company agreed to give Parent and AAC Acquisition and their representatives reasonable access to all necessary information. Parent and AAC Acquisition agreed to be bound by the Confidentiality Agreement dated March 13, 1996 (described below). REASONABLE BEST EFFORTS. Each of the parties promised to use its reasonable best efforts to take all actions and do all things reasonably necessary to consummate and make effective the transactions contemplated by the Merger Agreement. PUBLIC ANNOUNCEMENTS. Parent and AAC Acquisition, on the one hand, and the Company, on the other hand, promised to consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by the Merger Agreement. INDEMNIFICATION. The Surviving Corporation has agreed to keep in effect the provisions in its Articles of Organization and By-laws with respect to exculpation of director and officer liability and indemnification set forth in the Restated Articles of Organization and Amended and Restated By-laws of the Company on the date of the Merger Agreement. From and after the Effective Time, Parent will guarantee and cause the Surviving Corporation to perform all of its obligations under the Restated Articles of Organization and By-laws of the Company with respect to indemnification. Parent will cause the Surviving Corporation to use its reasonable best efforts to maintain in effect for five years from the Effective Time, if available, the coverage provided by the current directors' and officers' liability insurance policies maintained by the Company with respect to matters occurring prior to the Effective Time; provided, however, that the Surviving Corporation will not be required to incur any annual premium in excess of 200% of the last annual aggregate premium paid prior to the date of the Merger Agreement for all current directors' and officers' liability insurance policies maintained by the Company. NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt notice to Parent or AAC Acquisition, and Parent or AAC Acquisition will give prompt notice to the Company, as the case may be, of (1) the occurrence or non-occurrence of any event which would be likely to cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate and (2) any failure of the Company, Parent, or AAC Acquisition, as the case may be, to comply with or satisfy any covenant, condition, or agreement under the Merger Agreement. TERMINATION OF STOCK PLANS. Prior to the consummation of the Offer, the Board promised to adopt resolutions or take other actions necessary to ensure that, following the Effective Time, no participant in any stock, stock option, stock appreciation, or other benefit plan of the Company or any of its subsidiaries or any holder of any option would have any right thereunder to acquire any capital stock of the Surviving Corporation or any subsidiary thereof. 22 NO SOLICITATION. The Merger Agreement required the Company immediately to cease any existing discussions or negotiations with any third parties with respect to any inquiry, proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including, without limitation, by way of a tender offer) or similar transactions involving the Company or any of its subsidiaries (an "Acquisition Proposal"). The Company was not permitted to, directly or indirectly, through any officer, director, employee, representative, or agent or any of its subsidiaries, (1) solicit, initiate, continue or encourage an Acquisition Proposal, (2) solicit, initiate, continue, or engage in negotiations or discussions concerning, or provide any nonpublic information or data to any person or entity relating to, any Acquisition Proposal, or (3) agree to approve or recommend any Acquisition Proposal; provided, that if the Board determined, after receiving advice of its independent counsel, that to do so would be required for the discharge of its fiduciary obligations, the Company was permitted, after receiving an executed confidentiality agreement (with terms no less favorable to the Company than those contained in the Confidentiality Agreement entered into with Parent), to furnish nonpublic information or data to, or to enter into discussions or negotiations with, any person in connection with an unsolicited Acquisition Proposal or to recommend an unsolicited Acquisition Proposal to the stockholders of the Company. The Company would have been required to advise Parent of all such nonpublic information delivered to such person, and would have been required to notify Parent immediately (and in no event later than 24 hours) after receipt by the Company of any Acquisition Proposal or any request for nonpublic information in connection with an Acquisition Proposal or for access to the properties, books or records of the Company by any person or entity that informed the Company that it was considering making, or had made, an Acquisition Proposal. CONDITIONS TO THE CONSUMMATION OF THE MERGER The obligations of the Company, Parent, and AAC Acquisition under the Merger Agreement are subject to the satisfaction or, if appropriate, waiver of the following conditions: (A) PURCHASE OF SHARES. AAC Acquisition having purchased Shares pursuant to the Offer. This condition was met on May 2, 1996. (B) STOCKHOLDER APPROVAL. If required by Massachusetts law, the Merger Agreement shall have been adopted by the affirmative vote of the stockholders of the Company by the requisite vote in accordance with Massachusetts law. (C) NO PROHIBITION. No order, decree, or ruling or other action restraining, enjoining, or otherwise prohibiting the Merger, which shall have been issued or taken by any court or other governmental body. (D) HSR ACT. Any waiting period applicable to the HSR Act having terminated. Such waiting period was terminated on April 11, 1996. TERMINATION The Merger Agreement provides that the Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (1) by mutual written consent of Parent, AAC Acquisition, and the Company; (2) by Parent or the Company to the extent that performance is prohibited, enjoined or otherwise materially restrained by any final, non-appealable judgment; (3) by Parent or the Company if AAC Acquisition had terminated the Offer or failed to accept for purchase and 23 pay for Shares pursuant to the Offer by June 30, 1996 unless AAC Acquisition failed to accept for purchase and pay for Shares pursuant to the Offer as the result of the receipt by the Company of an Acquisition Proposal or as a result of a failure of the applicable waiting period under the HSR Act to expire or the failure to obtain any necessary governmental or regulatory approvals, in which case, if AAC Acquisition had failed to accept for purchase and pay for Shares pursuant to the Offer by September 30, 1996, and the failure to purchase Shares by that date did not result from the failure by the party seeking termination to fulfill any obligation under the Merger Agreement; (4) by either Parent or the Company if, prior to the purchase of Shares pursuant to the Offer, there had been a material breach by the other party of any representation, warranty, covenant, or agreement that had not been cured within twenty business days notice of such breach; (5) by either Parent or the Company not sooner than three days after the Company's notice to Parent of the Company's receipt of an Acquisition Proposal determined by the Board to be more favorable to the Company and to its stockholders than the transactions contemplated by the Merger Agreement, or (6) by Parent if the Board withdraws or modifies in a manner adverse to Parent or AAC Acquisition its approval of the Offer, the Merger Agreement, or the Merger or its recommendation to the Company's stockholders. If the Merger Agreement is terminated pursuant to clause (5) or (6) above, the Company will pay Parent a nonrefundable fee of $17,500,000. SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations and warranties in the Merger Agreement shall not survive beyond the Effective Time, except that the covenants and agreements in the Merger Agreement shall survive in accordance with their respective terms. AMENDMENT; EXTENSION; WAIVER Subject to approval by the Board in the manner described above under "Board Representation," the Merger Agreement may be amended by the Company, Parent, and AAC Acquisition in a writing signed on behalf of each of the parties; however, after approval of the Merger Agreement by the stockholders of the Company (if required by applicable law), no amendment may decrease the Merger Consideration or change the form thereof which adversely affects the stockholders without approval of such stockholders. Subject to approval by the Board in the manner described above under "Board Representation," at any time prior to the Effective Time, the Company, on the one hand, and Parent and AAC Acquisition, on the other hand, may in writing (1) extend the time for the performance of any of the obligations or other acts of the other party, (2) waive any inaccuracies in the representations and warranties of the other party, or (3) waive compliance by the other party with any of the agreements or conditions contained in the Merger Agreement. EXPENSES Subject to the payment of a fee by the Company to Parent if the Merger Agreement is terminated under certain circumstances, each party shall bear its own expenses and costs in connection with the Merger Agreement and the transactions contemplated thereby. 24 GOVERNING LAW The Merger Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. CONFIDENTIALITY AGREEMENT The following summary of the Confidentiality Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Confidentiality Agreement, which is filed as an exhibit to the Schedule 14D-1. On March 13, 1996, the Company and Parent entered into the Confidentiality Agreement providing for the nondisclosure of confidential information to be provided by the Company to Parent and by Parent to the Company. The Confidentiality Agreement provided that for a period of 16 days from the date of the Confidentiality Agreement, the Company would not initiate, solicit, encourage, or engage in any discussions with a party other than Parent with respect to any merger, consolidation, or other business combination transaction, any sale, lease, exchange, transfer, or other disposition of all or substantially all of the assets of the Company, any tender offer or exchange offer for more than 20% of the outstanding shares of any class of the Company's equity or voting securities or any solicitation of proxies with respect to the Company's equity or voting securities in the election of directors or in a vote on any of the foregoing transactions (a "Specified Transaction"). The Confidentiality Agreement also provides that, for a period of one year from the date of the Confidentiality Agreement, without the prior written consent of the Company, Parent will not (1) acquire, offer to acquire, or agree to acquire any voting securities or any material assets of the Company, (2) solicit any proxies to vote any voting securities of the Company, (3) make any public announcement or submit any proposal for any extraordinary transaction involving the Company, (4) form, join or participate in any "group" as defined in Section 13(d)(3) of the Exchange Act in connection with any of the foregoing, or (5) request the Company to amend or waive any of the foregoing provisions in a manner that would be required to be disclosed publicly. The restrictions discussed in the previous sentence are not binding upon Parent if, on or after the date of the Confidentiality Agreement, (a) any person or group of persons (other than certain institutional investors not having any intention to change or influence control of the Company) acquires beneficial ownership of any equity or voting security of the Company representing 15% or more of the then total outstanding shares of any such class of the Company's securities, (b) the Company issues or commits to issue any voting securities (other than shares of Common Stock or securities convertible or exchangeable for shares of Common Stock), or (c) it is publicly announced or disclosed that any person or group of persons other than Parent, the Company, or any of their respective affiliates, proposes to effect or has effected a Specified Transaction. STOCKHOLDERS' RIGHTS OF APPRAISAL Stockholders of the Company who do not vote in favor of adoption of the Merger Agreement have the right to seek payment in cash of the fair value of their shares of Common Stock by complying with Sections 86 to 98, inclusive, of Chapter 156B of the General Laws of Massachusetts ("Sections 86-98"). 25 The following discussion is not a complete statement of the law pertaining to appraisal rights under Massachusetts law, and is qualified in its entirety by the full text of Sections 86-98, which are provided in their entirety as Annex III to this Information Statement. All references in Sections 86-98 and in this summary to a "stockholder" are to the record holder of the shares of Common Stock as to which appraisal rights are asserted. IF THE MERGER AGREEMENT IS APPROVED BY THE STOCKHOLDERS AT THE MEETING AND THE MERGER IS CONSUMMATED, ANY STOCKHOLDER (1) WHO FILES WITH THE COMPANY BEFORE THE TAKING OF THE VOTE ON THE APPROVAL OF SUCH ACTION WRITTEN OBJECTION TO THE PROPOSED ACTION STATING THAT HE INTENDS TO DEMAND PAYMENT FOR HIS SHARES OF COMMON STOCK IF THE ACTION IS TAKEN AND (2) WHOSE SHARES OF COMMON STOCK ARE NOT VOTED IN FAVOR OF THE MERGER AGREEMENT HAS OR MAY HAVE THE RIGHT TO DEMAND IN WRITING FROM THE COMPANY, WITHIN TWENTY DAYS AFTER THE DATE OF MAILING TO HIM OF NOTICE IN WRITING THAT THE CORPORATE ACTION HAS BECOME EFFECTIVE, PAYMENT FOR HIS SHARES OF COMMON STOCK AND AN APPRAISAL OF THE VALUE THEREOF. THE COMPANY AND ANY SUCH STOCKHOLDER SHALL IN SUCH CASES HAVE THE RIGHTS AND DUTIES AND SHALL FOLLOW THE PROCEDURE SET FORTH IN SECTIONS 86 TO 98, INCLUSIVE, OF CHAPTER 156B OF THE GENERAL LAWS OF MASSACHUSETTS. Therefore, under Massachusetts law, a stockholder wishing to exercise his appraisal rights (1) must not vote in favor of adoption of the Merger Agreement, (2) must deliver to the Company prior to the vote on the Merger Agreement at the Special Meeting to be held on __________, a written objection to the proposed action stating that he intends to demand payment for his shares of Common Stock if the action is taken, and (3) within twenty days after the date of mailing to him of notice in writing that the Merger has become effective, must demand in writing from the Company, payment for his shares of Common Stock. Within ten days after the Effective Time, the Company will notify each stockholder who has properly filed written objection and who did not vote in favor of adoption of the Merger Agreement that the Merger has become effective. The stockholder must be the record holder of such shares of Common Stock on the date the written objection is made and must continue to hold such shares of Common Stock of record until the Effective Time. Accordingly, a stockholder who is the record holder of shares of Common Stock on the date the written demand for appraisal is made, but who thereafter transfers such shares of Common Stock prior to the Effective Time, will lose any right to appraisal in respect of such shares of Common Stock. 26 MARKET PRICES OF THE COMMON STOCK AND DIVIDEND POLICY MARKET PRICES The Company's Common Stock is listed and traded on Nasdaq under the symbol MSNS. The following table sets forth, for the periods indicated, the high and low sale prices per share for the Common Stock as reported in THE WALL STREET JOURNAL for the periods indicated. COMMON STOCK ----------------- HIGH LOW ------- ------- Fiscal 1995: Quarter Ended July 1, 1994 (from June 30, 1994). . . . $12 1/4 $12 Quarter Ended September 30, 1994 . . . . . . . . . . . 20 3/8 12 Quarter Ended December 30, 1994. . . . . . . . . . . . 26 16 3/4 Quarter Ended March 31, 1995 . . . . . . . . . . . . . 25 1/8 18 5/8 Fiscal 1996: Quarter Ended July 1, 1995 . . . . . . . . . . . . . . 20 13 7/8 Quarter Ended September 30, 1995 . . . . . . . . . . . 27 1/4 17 Quarter Ended December 30, 1995. . . . . . . . . . . . 32 19 7/8 Quarter Ended March 31, 1996 . . . . . . . . . . . . . 46 1/2 24 On March 28, 1996, the last full trading day prior to announcement of the execution of the Merger Agreement and AAC Acquisition's intention to commence the Offer, the closing sale price of the Common Stock on Nasdaq was $30 1/4 per share of Common Stock. On _____ __, 1996, the last full trading day prior to the printing of this Information Statement, such closing sales price was $___ per share and the high and low prices were $___ and $___, respectively. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES OF COMMON STOCK. DIVIDENDS The Company has not paid or declared any dividends in respect of Shares. 27 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to the beneficial ownership of the Common Stock as of _______, 1996 by (1) each person who is known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (2) each of the chief executive officer and the four other most highly paid executive officers of the Company in fiscal 1995 (collectively, the "Named Executive Officers") and each director of the Company, and (3) all executive officers and directors of the Company as a group. Except as otherwise indicated, each of the stockholders named below has sole voting and investment power with respect to the shares of Common Stock beneficially owned: Common Stock Beneficially Owned --------------------------------- Percent of Outstanding Number of Shares (on a fully Shares diluted basis) ----------- ------------------ 5% STOCKHOLDERS AAC Acquisition. . . . . . . . . . . . . . . . . . . .19,861,081 98.37% 100 Abbott Park Road Abbott Park, Illinois 60064 NAMED EXECUTIVE OFFICERS Robert L. Coleman(1/). . . . . . . . . . . . . . . . . 0 0 John H. Chiricotti . . . . . . . . . . . . . . . . . . 0 0 Geoffrey H. Jenkins. . . . . . . . . . . . . . . . . . 0 0 Donald H. Pieper . . . . . . . . . . . . . . . . . . . 0 0 DIRECTORS Gary P. Coughlan . . . . . . . . . . . . . . . . . . . 0 0 Miles D. White . . . . . . . . . . . . . . . . . . . . 0 0 Jose M. de Lasa. . . . . . . . . . . . . . . . . . . . 0 0 All directors and executive officers as a group (10 persons) . . . . . . . . . . . . . . . . . . . . 160,000(2/) * * Less than one percent. (1/) Robert L. Coleman is also a Director. (2/) Messrs. Huffman and Gonze each hold options to purchase 80,000 shares of Common Stock. 28 INTERESTS OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON Except as described below or elsewhere in this Information Statement or incorporated by reference herein, to the knowledge of the Company, as of the date hereof, no person who has been a director or officer of the Company at any time since the beginning of the last fiscal year or who is a nominee for election as a director or who is an associate of such a director or nominee has any substantial interest in the approval of the Merger Agreement. In addition, no director has informed the Company in writing that he intends to oppose approval of the Merger Agreement. In November 1995, Lawrence W. Huffman, Corporate Vice President of the Company for International Sales and Marketing, was granted options to purchase 80,000 shares of Common Stock. In December 1995, Peter C. Gonze, Corporate Vice President of the Company for Sales and Marketing in North America, was granted options to purchase 80,000 shares of Common Stock. In addition, the Company is a party to an agreement with Gerald J. Bojas, its Corporate Controller and Treasurer, dated November 15, 1990. Pursuant to this agreement, Mr. Bojas will be entitled to receive a lump sum payment equal to two times his base salary in the event that he is terminated after a Change in Control of the Company or if he resigns for certain specified reasons after such a Change in Control. A "Change in Control" is defined in the agreement as any of several events, including the replacement of a majority of the directors of the Company as a result of a tender offer, the acquisition by an entity (or a group of entities acting together) of securities representing 30% of the voting power of the Company and the execution of an agreement providing for any of the transactions described in the definition of "Change in Control." To the extent that any payments under the agreement are not deductible by the Company pursuant to Section 280G of the Internal Revenue Code of 1986, as amended, such payments will be reduced to the extent necessary to avoid the loss of the deduction. AAC ACQUISITION DESIGNEES Gary P. Coughlan, Jose M. de Lasa, and Miles D. White were elected as directors of the Company on May 2, 1996 at the request of Parent. Messrs. Coughlan, de Lasa, and White replaced Richard C.E. Morgan, John F. Gaither, Jr., Raymond D. Oddi, Kenneth E. Quickel, Jr., M.D., Peter R. Rosenblatt, and James R. Tobin, who resigned as directors of the Company. Robert L. Coleman, Ph.D., remains a director of the Company. Mr. Coughlan serves as sole director, Vice President and Treasurer of AAC Acquisition. He was elected as a Corporate Officer of Parent in 1990. He has served as Senior Vice President, Finance and Chief Financial Officer of Parent for at least the past five years. Mr. de Lasa has served as Senior Vice President, Secretary and General Counsel of Parent since 1994. Prior to that, he served as Vice President and Associate General Counsel of Bristol-Myers Squibb Company. In 1994 he also became Secretary of such company. Mr. White serves as President of AAC Acquisition. He also has served as Senior Vice President, Diagnostic Operations of Parent since 1994. From 1993 to 1994 he served as Vice President, Diagnostic Systems and Operations of Parent, and from 1992 to 1993 he served as Divisional Vice President and 29 General Manager, Diagnostic Systems and Operations of Parent. Prior to 1992 he served as Divisional Vice President and General Manager, Hospital Laboratory Sector of Parent. EMPLOYMENT AGREEMENTS On September 24, 1991, Dr. Robert L. Coleman entered into a one-year employment agreement with the Company that automatically extends for successive one-year terms on each anniversary date unless terminated by either party on ninety days' notice. Under the agreement, the Company agrees to pay Dr. Coleman a base salary of $225,000 subject to annual review by the Board and a bonus based on Company performance in the range of 35% to 70% of the base salary as then in effect. The base salary for fiscal 1995 was $300,000. The agreement granted Dr. Coleman an option to purchase 500,000 shares of Common Stock and contains a clause prohibiting Dr. Coleman from competing for a period of two years following termination of employment. In the event Dr. Coleman is terminated without cause (as defined in the agreement), the Company is obligated to pay his base salary for a period of twelve months from the date of termination. Mr. Jenkins has entered into an employment agreement with the Company dated September 9, 1992. The agreement, which had an initial expiration of March 31, 1993, is automatically extended for one-year periods commencing on its expiration date unless terminated by either party on ninety days' notice. Mr. Jenkins is entitled to receive base salary at the rate of $145,000 per year, subject to annual review by the Board, and a cash bonus of up to 40% of his base salary based on the achievement of specific performance goals. Mr. Jenkins's base salary for fiscal 1995 was $188,412. With respect to the options outstanding prior to the date of the agreement, the agreement provides for automatic vesting with respect to 75% of the shares covered thereby in the event of the termination by the Company of Mr. Jenkins's employment without cause (as defined in the agreement) or in the event of a merger, consolidation, liquidation, dissolution or sale of all or substantially all of the Company's assets. The agreement contains a clause prohibiting Mr. Jenkins from competing for a period of two years following termination of employment. In the event Mr. Jenkins is terminated without cause, the Company is obligated to pay his base salary and fringe benefits for twelve months following the date of termination and a bonus pro-rated for the year in which termination occurs. Mr. Pieper entered into an employment agreement with the Company on February 2, 1995 that governs his employment relationship from the commencement of his employment (October 6, 1993). The agreement automatically extends for successive one-year terms on October 6 of each year unless terminated by either party on ninety days' notice. The agreement sets Mr. Pieper's base compensation at $172,500 per year, subject to increase in the sole judgment of the Board. In addition, each year Mr. Pieper will receive a bonus of between 30% and 60% of his base compensation based upon the achievement of specific performance goals. In the event of termination other than for cause, the Company will pay Mr. Pieper base compensation and fringe benefits for twelve months and a bonus pro- rated for the year in which termination occurs. For options outstanding on February 2, 1995, the agreement provides for automatic vesting of all shares covered thereby in the event of a merger, consolidation, liquidation, dissolution, or sale of all or substantially all of the Company's assets. For options subsequently granted, the agreements provide for automatic vesting as to 75% of the shares in such events. Mr. Pieper's agreement prohibits him from competing with the Company for a period of 24 months following termination. 30 Mr. Chiricotti's written offer of employment contained a provision which provides that, if terminated, he will receive one year of severance pay. In addition, the offer letter guarantees Mr. Chiricotti an annual bonus of at least $50,000. 31 SELECTED FINANCIAL DATA MEDISENSE, INC. (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) Nine Months Ended Fiscal Year Ended March 31, Dec. 31, 1995 1995 1994 1993 1992 ------------- ---- ---- ---- ---- Net Sales $129.7 $141.0 $110.4 $93.2 $89.8 Income from Continuing Operations 22.5 22.0 6.2 (2.5) (13.0) Total Assets 110.3 82.0 43.5 45.6 56.2 Long-Term Debt 0.3 0.4 0.6 1.0 2.3 Book Value per Share 4.20 2.85 (A) (A) (A) Income from Continuing Operations per Share 1.21 1.34 0.61 (B) (B) Cash Dividends Declared per Common Share 0.00 0.00 0.00 0.00 0.00 Working Capital (Deficiency) 56.0 37.0 8.6 (1.7) (3.3) Shareholders' Equity (Deficit) 73.9 48.8 (31.3) (37.8) (30.7) Average Number of Common Shares Outstanding (000s) 18,575 16,349 15,684 N/A N/A (A) Book value per share is not meaningful for these periods. (B) Net income per share for the periods prior to fiscal 1995 has not been presented, as such information is not considered meaningful. 32 SELECTED FINANCIAL DATA ABBOTT LABORATORIES (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) Three Months Ended Fiscal Year Ended December 31, March 31, 1996 1995 1994 1993 1992 1991 -------------- ---- ---- ---- ---- ---- Net Sales $2,672.2 $10,012.2 $9,156.0 $8,407.8 $7,851.9 $6,876.6 Income from Continuing Operations 480.1 1,688.7 1,516.7 1,399.1 1,239.1 1,088.7 Total Assets 9,312.0 9,412.6 8,523.7 7,688.6 6,941.2 6,255.3 Long-Term Debt 433.7 435.2 287.1 306.8 110.0 125.1 Book Value per Share 5.82 5.58 5.04 4.48 4.00 3.77 Income from Continuing Operations per Share 0.61 2.12 1.87 1.69 1.47 1.27 Cash Dividends Declared per Common Share 0.24 0.84 0.76 0.68 0.60 0.50 Working Capital 621.8 436.4 400.5 490.6 449.2 661.7 Shareholders' Equity 4,565.7 4,396.8 4,049.4 3,674.9 3,347.6 3,203.0 Average Number of Common Shares Outstanding (000s) 785,836 795,362 812,236 828,988 844,122 854,062 33 CERTAIN INFORMATION CONCERNING AAC MERGER, AAC ACQUISITION, AND PARENT AAC MERGER AAC Merger, a Massachusetts corporation and wholly owned subsidiary of AAC Acquisition, recently was organized for the purpose of effecting the Merger and has not carried on any activities except in connection with the Merger. The principal executive offices of AAC Merger are located at 100 Abbott Park Road, Abbott Park, Illinois. All the outstanding capital stock of AAC Merger is owned by AAC Acquisition. AAC ACQUISITION AAC Acquisition, a Massachusetts corporation and wholly owned subsidiary of Parent, recently was organized for the purpose of effecting the Offer and the Merger and has not carried on any activities except in connection with the Offer and the Merger. The principal executive offices of AAC Acquisition are located at 100 Abbott Park Road, Abbott Park, Illinois. All the outstanding capital stock of AAC Acquisition is owned by Parent. PARENT Parent is an Illinois corporation with its principal offices located at 100 Abbott Park Road, Abbott Park, Illinois. Parent's principal business is the discovery, development, manufacture, and sale of a broad and diversified line of health care products and services. Parent is a public company whose stock is traded on the New York Stock Exchange, Chicago Stock Exchange, and Pacific Stock Exchange. INDEPENDENT PUBLIC ACCOUNTANTS No representatives of the Company's independent public accountants will be present at the Special Meeting. INCORPORATION BY REFERENCE The following documents previously filed with the Commission by the Company and Parent pursuant to the Exchange Act are incorporated by reference into this Information Statement: (1) the Annual Report on Form 10-K of Parent for the fiscal year ended December 31, 1995; (2) the Tender Offer Statement on Schedule 14D-1 filed by Parent and AAC Acquisition on April 4, 1996; (3) the Current Report on Form 8-K of Parent dated March 29, 1996; (4) the Quarterly Report on Form 10-Q of Parent for the quarterly period ended March 31, 1996; (5) the Solicitation/Recommendation statement on Schedule 14D-9 filed by the Company dated April 4, 1996; (6) the Annual Report on Form 10-K of the Company for the fiscal year ended March 31, 1995; (7) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended July 1, 1995; (8) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 1995; (9) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended December 30, 1995; and (10) the Current Report on Form 8-K of the Company dated May 2, 1996. 34 All documents filed by Parent or the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Information Statement and prior to the date of the Special Meeting shall be deemed to be incorporated by reference into this Information Statement and to be a part hereof from the dates of filing such documents or reports. Any statement contained herein or in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Information Statement to the extent that a statement contained herein or in any other subsequently filed document which is also incorporated or deemed to be incorporated herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Statement. THIS INFORMATION STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN CERTAIN EXHIBITS TO DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM A COPY OF THIS INFORMATION STATEMENT HAS BEEN DELIVERED UPON WRITTEN OR ORAL REQUEST, IN THE CASE OF COMPANY TO DOCUMENTS, TO MEDISENSE, INC., 266 SECOND AVENUE, WALTHAM, MASSACHUSETTS 02154, ATTENTION: _______, TELEPHONE NUMBER (617) 895-6000, AND, IN THE CASE OF PARENT DOCUMENTS, TO ABBOTT LABORATORIES, 100 ABBOTT PARK ROAD, ABBOTT PARK, ILLINOIS 60064, ATTENTION: _____________, TELEPHONE NUMBER (847) 937-6100. IN ORDER TO ENSURE DELIVERY PRIOR TO THE SPECIAL MEETING, REQUESTS SHOULD BE RECEIVED BY __________, 1996. OTHER MATTERS TO COME BEFORE THE MEETING No other matters are intended to be brought before the meeting by the Company nor does the Company know of any matters that are expected to be brought properly before the meeting by others. ------------------ By Order of the Board of Directors, ------------------ CLERK Waltham, Massachusetts _________, 1996 35 ANNEX I AGREEMENT AND PLAN OF MERGER Among MEDISENSE, INC., ABBOTT LABORATORIES and AAC ACQUISITION, INC. dated as of March 29, 1996 as amended by ____________________ TABLE OF CONTENTS Page ARTICLE I THE OFFER . . . . . . . . . . . . . 1 Section 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2 Company Action. . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.3 Boards of Directors and Committees; Section 14(f) . . . . . 3 ARTICLE II THE MERGER . . . . . . . . . . . . 4 Section 2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2.2 Effective Time; Closing . . . . . . . . . . . . . . . . . . 4 Section 2.3 Effects of the Merger; Subsequent Actions . . . . . . . . . 5 Section 2.4 Articles of Organization; By-Laws . . . . . . . . . . . . . 5 Section 2.5 Directors . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.6 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.7 Conversion of Securities. . . . . . . . . . . . . . . . . . 6 Section 2.8 Stock Options . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.9 Company Employee Stock Purchase Plan. . . . . . . . . . . . 6 Section 2.10 Stockholders' Meeting . . . . . . . . . . . . . . . . . . . 7 ARTICLE III DISSENTING SHARES; EXCHANGE OF SHARES. . . . . . 7 Section 3.1 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . 7 Section 3.2 Exchange of Certificates. . . . . . . . . . . . . . . . . . 8 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . 9 Section 4.1 Organization and Qualification; Subsidiaries. . . . . . . . 9 Section 4.2 Capitalization of the Company and Its Subsidiaries. . . . . 9 Section 4.3 Authority Relative to This Agreement. . . . . . . . . . . . 10 Section 4.4 Non-Contravention; Required Filings and Consents. . . . . . 10 Section 4.5 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 4.6 Absence of Certain Changes; Derivatives . . . . . . . . . . 12 Section 4.7 Schedule 14D-9; Offer Documents; Proxy Statement. . . . . . 12 Section 4.8 Finder's Fee. . . . . . . . . . . . . . . . . . . . . . . . 12 Section 4.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . 13 Section 4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 4.11 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 14 Section 4.12 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . 15 i Section 4.13 Environmental Matters . . . . . . . . . . . . . . . . . . . 16 Section 4.14 Intellectual Property . . . . . . . . . . . . . . . . . . . 17 Section 4.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 4.16 Properties. . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 4.17 Regulatory Matters. . . . . . . . . . . . . . . . . . . . . 18 Section 4.18 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 19 Section 4.19 Voting Requirements . . . . . . . . . . . . . . . . . . . . 19 Section 4.20 State Takeover Laws . . . . . . . . . . . . . . . . . . . . 19 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION. 20 Section 5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 5.2 Authority Relative to this Agreement . . . . . . . . . . . . 20 Section 5.3 Non-Contravention; Required Filings and Consents . . . . . . 20 Section 5.4 Offer Documents; Schedule 14D-9; Proxy Statement . . . . . . 21 Section 5.5 No Prior Activities. . . . . . . . . . . . . . . . . . . . . 21 Section 5.6 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE VI COVENANTS. . . . . . . . . . . . . 21 Section 6.1 Conduct of Business of the Company. . . . . . . . . . . . . 21 Section 6.2 Access to Information . . . . . . . . . . . . . . . . . . . 23 Section 6.3 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . 24 Section 6.4 Public Announcements. . . . . . . . . . . . . . . . . . . . 24 Section 6.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . 24 Section 6.6 Notification of Certain Matters . . . . . . . . . . . . . . 25 Section 6.7 Termination of Stock Plans. . . . . . . . . . . . . . . . . 25 Section 6.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER. . . . . 26 Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. . . . . . . . . . . . . . . . . . . . 26 ARTICLE VIII TERMINATION; EXPENSES; AMENDMENT; WAIVER. . . . . 26 Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 28 Section 8.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 28 Section 8.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 8.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . 28 ii ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . 29 Section 9.1 Nonsurvival of Representations and Warranties . . . . . . . 29 Section 9.2 Entire Agreement; Assignment. . . . . . . . . . . . . . . . 29 Section 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 9.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 30 Section 9.5 Parties in Interest . . . . . . . . . . . . . . . . . . . . 30 Section 9.6 Specific Performance. . . . . . . . . . . . . . . . . . . . 30 Section 9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . 30 Section 9.8 Descriptive Headings. . . . . . . . . . . . . . . . . . . . 30 Section 9.9 Certain Definitions . . . . . . . . . . . . . . . . . . . . 30 Section 9.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 31 iii THIS AGREEMENT AND PLAN OF MERGER, dated as of March 29, 1996, is among MediSense, Inc., a Massachusetts corporation (the "Company"), Abbott Laboratories, an Illinois corporation ("Parent") and AAC Acquisition, Inc., a Massachusetts corporation and a wholly owned subsidiary of Parent ("Acquisition"). WHEREAS, the Board of Directors of Parent, Acquisition and the Company have each approved the acquisition of the Company by Parent upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, in furtherance thereof, it is proposed that Acquisition shall make a tender offer to acquire all outstanding shares of common stock, par value $0.01 per share, of the Company (the "Common Stock") and all outstanding shares of class B common stock, par value $0.01 per share, of the Company (the "Class B Common Stock" and together with the Common Stock, the "Shares"), for a cash amount of $45.00 per Share (such amount, or any greater amount per Share paid pursuant to the tender offer, being hereinafter referred to as the "Per Share Amount") in accordance with the terms and subject to the conditions provided for herein (the "Offer"); WHEREAS, the Board of Directors of the Company (the "Board") has (i) determined that the consideration to be paid for each Share in the Offer and the Merger (as defined below) is fair to and in the best interests of the stockholders of the Company and (ii) approved this Agreement and the transactions contemplated hereby and resolved to recommend acceptance of the Offer and approval and adoption of this Agreement by the stockholders of the Company; and WHEREAS, the Boards of Directors of Parent and Acquisition have each approved the merger (the "Merger") of AAC Merger with and into the Company following the Offer in accordance with the General Laws of the Commonwealth of Massachusetts ("Massachusetts Law") upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company, Parent and Acquisition hereby agree as follows; ARTICLE I THE OFFER Section 1.1 THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1, as promptly as practicable, but in no event later than the fifth business day following the public announcement of the terms of this Agreement, Acquisition shall commence the Offer. The obligation of Acquisition to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject to the condition that a number of Shares representing not less than a majority of the Company's outstanding voting power (assuming the exercise of all outstanding options to purchase shares of Common Stock and the conversion of all outstanding shares of Class B Common Stock into Common Stock) shall have been validly tendered and not withdrawn prior to the expiration date of the Offer (the "Minimum Condition"), and the obligation of Acquisition to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject to the other conditions set forth in Annex A hereto. It is agreed that the Minimum Condition and the other conditions set forth in Annex A hereto are for the sole benefit of Acquisition and may be asserted by Acquisition regardless of the circumstances giving rise to any such condition unless Parent, Acquisition or their affiliates shall have caused the circumstances giving rise to such condition. Acquisition expressly reserves the right in its sole discretion to waive, in whole or in part, at any time or from time to time, any such condition (other than the Minimum Condition, which may not be waived without the prior written consent of the Company), to increase the price per Share payable in the Offer or to make any other changes in the terms and conditions of the Offer; PROVIDED that, unless previously approved by the Company in writing, no change may be made that decreases the price per Share payable in the Offer, changes the form of consideration payable in the Offer, reduces the maximum number of Shares to be purchased in the Offer or imposes conditions to the Offer in addition to those set forth in Annex A hereto. Acquisition covenants and agrees that, subject to the conditions of the Offer set forth in Annex A hereto, Acquisition shall accept for payment and pay for Shares which have been validly tendered and not withdrawn pursuant to the Offer as soon as it is permitted to do so under applicable law; PROVIDED that, if the number of Shares that have been validly tendered and not withdrawn represent less than 90% of the Shares outstanding on a fully diluted basis, Acquisition may extend the Offer up to the tenth business day following the date on which all conditions to the Offer shall first have been satisfied or waived. The Per Share Amount payable in the Offer shall be paid net to the seller in cash, upon the terms and subject to the conditions of the Offer. Acquisition agrees that if all conditions set forth in Annex A are not satisfied on the initial expiration date of the Offer, Acquisition shall extend (and re-extend) the Offer through June 30, 1996 to provide time to satisfy such conditions; PROVIDED that, if Acquisition shall not have purchased Shares pursuant to the Offer prior to June 30, 1996 as the result of the receipt by the Company of an Acquisition Proposal (as defined below) or as a result a failure of the applicable waiting period under the HSR Act (as defined below) to expire or the failure to obtain any necessary governmental or regulatory approvals, Acquisition shall extend (and re-extend) the Offer through September 30, 1996. (b) As soon as practicable on the date of commencement of the Offer, Parent and Acquisition shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer which will contain the offer to purchase and form of the related letter of transmittal (together with any supplements or amendments thereto, the "Offer Documents"). Parent, Acquisition and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that any such information shall have become false or misleading in any material respect and Parent and Acquisition each further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to their filing with the SEC and shall be provided with any comments Parent, Acquisition and their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after receipt of such comments. Section 1.2 COMPANY ACTION. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board, at a meeting duly called and held on March 29, 1996, unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interests of the stockholders of the Company, (ii) approved this Agreement and the transactions contemplated hereby, including the Offer and the 2 Merger and (iii) resolved to recommend that the stockholders of the Company accept the Offer, tender their Shares thereunder to Acquisition and, if required by applicable law, approve and adopt this Agreement and the Merger. The Company further represents and warrants that Alex. Brown & Sons Incorporated ("Alex. Brown") has delivered to the Board its written opinion to the effect that, as of the date of such opinion, the consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to such holders from a financial point of view. The Company has been authorized by Alex. Brown to permit the inclusion of such fairness opinion in the Offer Documents and the Schedule 14D-9 referred to below and the Proxy Statement referred to in Section 4.7. Subject to the fiduciary duties of the Board under applicable law (as determined in good faith after consultation with independent counsel), the Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Board described in this Section 1.2(a). (b) As soon as practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the "Schedule 14D-9") and shall mail the Schedule 14D-9 to the stockholders of the Company promptly after the commencement of the Offer. The Schedule 14D-9 shall, subject to the fiduciary duties of the Board under applicable law (as determined in good faith after consultation with independent counsel), at all times contain the determinations, approvals and recommendations described in Section 1.2(a). Parent, Acquisition and the Company each agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that any such information shall have become false or misleading in any material respect and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Parent, Acquisition and their counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its filing with the SEC and shall be provided with any comments the Company and its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt of such comments. (c) In connection with the Offer, the Company will promptly furnish Acquisition with mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of the Shares as of a recent date and shall furnish Acquisition with such additional information and assistance (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) as Acquisition or its agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Acquisition and its affiliates and associates shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger, and, if this Agreement shall be terminated, will deliver to the Company all copies of such information then in their possession. Section 1.3 BOARDS OF DIRECTORS AND COMMITTEES; SECTION 14(f). (a) Promptly upon the purchase by Acquisition of Shares pursuant to the Offer and from time to time thereafter, Acquisition shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board that equals the product of (i) the total number of directors on the Board (giving effect to the election of any additional directors pursuant to this Section) and (ii) the percentage that the number of Shares owned by Acquisition and its affiliates (including any Shares purchased pursuant to the Offer) bears to the total number of outstanding Shares, and the Company shall, upon request by Acquisition, 3 subject to the provisions of Section 1.3(b), promptly either increase the size of the Board (and shall, if necessary, amend the Company's By-Laws to permit such an increase) or use its reasonable best efforts to secure the resignation of such number of directors as is necessary to enable Acquisition's designees to be elected to the Board and shall cause Acquisition's designees to be so elected. Promptly upon request by Acquisition, the Company will, subject to the provisions of Section 1.3(b), use its reasonable best efforts to cause persons designated by Acquisition to constitute the same percentage as the number of Acquisition's designees to the Board bears to the total number of directors on the Board on (i) each committee of the Board, (ii) each board of directors or similar governing body or bodies of each subsidiary of the Company designated by Acquisition and (iii) each committee of each such board or body. (b) The Company's obligations to appoint designees to the Board shall be subject to Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.3 and shall include in the Schedule 14D-9 or a separate Rule 14f-1 Statement provided to shareholders such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1. Parent or Acquisition will supply to the Company in writing and be solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. (c) Following the election or appointment of Acquisition's designees pursuant to this Section 1.3 and prior to the Effective Time (as defined below), any amendment of this Agreement or the Restated Articles of Organization or By- Laws of the Company, any termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Acquisition or any waiver of any of the Company's rights hereunder will require the concurrence of a majority of the directors of the Company then in office who are not designees of Acquisition or employees of the Company. ARTICLE II THE MERGER Section 2.1 THE MERGER. At the Effective Time (as defined below) and upon the terms and subject to the conditions of this Agreement and Massachusetts Law, AAC Merger shall be merged with and into the Company whereupon the separate corporate existence of AAC Merger shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation"). At Acquisition's option, the Merger may be structured so that any direct or indirect subsidiary of Parent is merged with and into the Company. In the event of such election, the parties agree to execute an appropriate amendment to this Agreement in order to reflect such election. Section 2.2 EFFECTIVE TIME; CLOSING. As soon as practicable after the satisfaction or waiver of the conditions set forth in Article VII, the parties hereto will file articles of merger with the Secretary of the Commonwealth of Massachusetts and make all other filings or recordings required by Massachusetts Law in connection with the Merger. The Merger shall become effective at such time as the articles of merger are duly filed with the Secretary of the Commonwealth of Massachusetts, or 4 at such later time as is specified in the articles of merger (the "Effective Time"). Prior to such filing, a closing shall be held at the offices of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver of the conditions set forth in Article VII. Section 2.3 EFFECTS OF THE MERGER; SUBSEQUENT ACTIONS. (a) The Merger shall have the effects set forth in Massachusetts Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and AAC Merger shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and AAC Merger shall become the debts, liabilities and duties of the Surviving Corporation. (b) If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of the Company or AAC Merger acquired or to be acquired by the Surviving Corporation as a result of or in connection with the Merger, or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company or AAC Merger, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm of record or otherwise any and all right, title and interest in, to and under such rights, properties or assets of the Surviving Corporation or otherwise to carry out this Agreement. Section 2.4 ARTICLES OF ORGANIZATION; BY-LAWS. (a) Subject to Section 6.5, at the Effective Time, the Articles of Organization of AAC Merger in effect immediately prior to the Effective Time shall be the Articles of Organization of the Surviving Corporation until amended in accordance with applicable law; PROVIDED, however, that at the Effective Time, Article I of the Articles of Organization of the Surviving Corporation shall be amended to read as follows: "The name by which the corporation shall be known is MediSense, Inc." (b) The By-Laws of AAC Merger in effect at the Effective Time shall be the By-Laws of the Surviving Corporation until amended in accordance with applicable law. (c) The Articles of Organization of the Surviving Corporation shall state that the purpose of the Surviving Corporation shall be to carry on any manufacturing, mercantile, selling, management, service or other business, operation or activity which may be lawfully carried on by a corporation organized under Massachusetts Law. The Surviving Corporation initially shall be authorized to issue up to 1,000 shares of its common stock, par value $0.01 per share. Section 2.5 DIRECTORS. The directors of Acquisition at the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Organization and By-Laws of the Surviving Corporation and until his or her successor is duly elected and qualified. 5 Section 2.6 OFFICERS. The officers of the Company at the Effective Time, and any additional individuals designated by Parent, shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Articles of Organization and By-Laws of the Surviving Corporation and until his or her successor is duly appointed and qualified. Section 2.7 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Acquisition, AAC Merger, the Company or the holder of any of the following securities: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be cancelled pursuant to Section 2.7(b) hereof and Dissenting Shares (as defined in Section 3.1)), shall by virtue of the Merger and without any action on the part of the holder thereof be cancelled and extinguished and be converted into the right to receive an amount equal to the Per Share Amount (the "Merger Consideration"). (b) Each Share issued and outstanding immediately prior to the Effective Time and owned by Parent, Acquisition, AAC Merger or any direct or indirect subsidiary of Parent, Acquisition or AAC Merger, or which is held in the treasury of the Company or any of its subsidiaries, shall be cancelled and retired and no payment of any consideration shall be made with respect thereto. (c) Each share of common stock, par value $0.01 per share, of AAC Merger issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. Section 2.8 STOCK OPTIONS. Immediately prior to the Effective Time, each outstanding option (including any related stock appreciation right) (an "Option") issued pursuant to the Company's 1983 Stock Option Plan, 1992 Directors' Stock Option Plan, 1993 Stock Option Plan, 1995 U.K. Stock Option Scheme and 1995 Directors' Stock Option Plan or any other option plan or agreement of the Company or other outstanding options to purchase Common Stock granted by the Company to its executive officers, whether or not then exercisable, shall be cancelled by the Company, and each holder of a cancelled Option shall be entitled to receive at the Effective Time or as soon as practicable thereafter from the Company in consideration for the cancellation of such Option an amount in cash (less applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock previously subject to such Option and (ii) the excess, if any, of the Merger Consideration over the exercise price per share of Common Stock previously subject to such Option. Section 2.9 COMPANY EMPLOYEE STOCK PURCHASE PLAN. The Company shall take such actions as are necessary to cause the exercise date applicable to the then current Purchase Period (as defined in the Company's 1994 Employee Stock Purchase Plan (the "Stock Purchase Plan")) to be the last trading day on which the Common Stock is traded on the Nasdaq National Market immediately prior to the Effective Time (the "Final Company Purchase Date"); PROVIDED that such change in the exercise date shall be conditioned upon the consummation of the Merger. On the Final Company Purchase Date, the Company shall apply the funds credited as of such date under the Company Stock Purchase Plan within each participant's payroll withholdings account to the purchase of whole shares of Common Stock in accordance with the terms of the Company Stock Purchase Plan. The cost to each participant in the Company Stock Purchase Plan for shares of the Common Stock shall be the 6 lower of 85% of the closing sale price of the Common Stock, as reported by Nasdaq National Market (as published in THE WALL STREET JOURNAL) on (i) the first day of the then current Purchase Period or (ii) the last trading day on or prior to the Final Company Purchase Date. Section 2.10 STOCKHOLDERS' MEETING. If approval by the Company's stockholders is required by applicable law to consummate the Merger, the Company, acting through the Board, shall in accordance with applicable law and subject to the fiduciary duties of the Board under applicable law (as determined in good faith after consultation with independent counsel), as soon as practicable following the consummation of the Offer: (a) duly call, give notice of, convene and hold an annual or special meeting of its stockholders (the "Stockholders' Meeting") for the purpose of considering and taking action upon this Agreement; (b) include in the Proxy Statement (as defined in Section 4.7) the recommendation of the Board that stockholders of the Company vote in favor of the approval and adoption of this Agreement and the transactions contemplated hereby; and (c) use its reasonable best efforts (A) to obtain and furnish the information required to be included by it in the Proxy Statement and, after consultation with Parent, respond promptly to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof and cause the Proxy Statement to be mailed to its stockholders at the earliest practicable time following the consummation of the Offer and (B) to obtain the necessary approvals by its stockholders of this Agreement and the transactions contemplated hereby. At such meeting, Parent, Acquisition and AAC Merger will vote all Shares owned by them in favor of this Agreement and the transactions contemplated hereby. ARTICLE III DISSENTING SHARES; EXCHANGE OF SHARES Section 3.1 DISSENTING SHARES. Notwithstanding anything in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with Massachusetts Law ("Dissenting Shares") shall not be converted into a right to receive the Merger Consideration unless such holder fails to perfect or withdraws or otherwise loses his, her or its right to appraisal. If, after the Effective Time, such holder fails to perfect or withdraws or loses his, her or its right to appraisal, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration without interest thereon. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Shares, and, prior to the Effective Time, Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands. 7 Section 3.2 EXCHANGE OF CERTIFICATES. (a) Prior to the Effective Time, a bank or trust company shall be designated by Parent (the "Paying Agent") to act as agent in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.7(a). Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each record holder, as of the Effective Time, of a certificate or certificates (the "Certificates") that, prior to the Effective Time, represented Shares and a form of letter of transmittal and instructions for use in effecting the surrender of the Certificates for payment of the Merger Consideration therefor. Upon the surrender of each such Certificate formerly representing Shares, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the Paying Agent shall pay the holder of such Certificate the Merger Consideration multiplied by the number of Shares formerly represented by such Certificate, in exchange therefor, and such Certificate shall forthwith be cancelled. Until so surrendered and exchanged, each such Certificate (other than Certificates representing Dissenting Shares or Shares held by Parent, Acquisition or the Company, or any direct or indirect subsidiary thereof) shall represent solely the right to receive the Merger Consideration. No interest shall be paid or accrue on the Merger Consideration. If the Merger Consideration (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate formerly representing Shares surrendered in exchange therefor is registered, it shall be a condition to such exchange that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person requesting such exchange shall pay to the Paying Agent any transfer or other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Paying Agent that such tax has been paid or is not applicable. (b) When and as needed, Parent, Acquisition or AAC Merger shall deposit, or cause to be deposited, in trust with the Paying Agent the Merger Consideration to which holders of Shares shall be entitled at the Effective Time pursuant to Section 2.7(a) hereof. (c) The Merger Consideration shall be invested by the Paying Agent, as directed by Parent, provided such investments shall be limited to direct obligations of the United States of America, obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, commercial paper rated of the highest quality by Moody's Investors Service, Inc. or Standard & Poor's Corporation, or certificates of deposit issued by a commercial bank having at least $1,000,000,000 in assets. (d) Promptly following the date which is six months after the Effective Time, Parent will cause the Paying Agent to deliver to the Surviving Corporation all cash and documents in its possession relating to the transactions described in this Agreement, and the Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate formerly representing a Share may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the Merger Consideration, without any interest thereon. (e) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Shares. If, after the Effective Time, Certificates formerly representing Shares are presented to the Surviving Corporation or the Paying Agent, they shall be cancelled and exchanged for the Merger Consideration, as provided in this Article III, subject to applicable law in the case of Dissenting Shares. 8 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the schedules delivered by the Company to Parent and Acquisition concurrently with the execution of this Agreement and the SEC Reports (as defined in Section 4.5) filed prior to the date hereof, the Company represents and warrants to Parent and Acquisition as follows: Section 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its 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 and in good standing or to have such power and authority would not, individually or in the aggregate, have a material adverse effect on the business, assets, liabilities, results of operations, reserves or financial condition of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"); PROVIDED, HOWEVER, that the term Material Adverse Effect shall not include a material adverse change which affects the glucose monitoring industry as a whole. (b) Each of the Company and its subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction (including any foreign country) in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not, individually or in the aggregate, have a Material Adverse Effect. (c) The Company has heretofore made available to Parent complete and correct copies of the Company's Restated Articles of Organization and By-Laws and the equivalent organizational documents of each of its subsidiaries, each as amended to the date hereof. Such Restated Articles of Organization, By-Laws and equivalent organizational documents are in full force and effect and no other organizational documents are applicable to or binding upon the Company or its subsidiaries. The Company is not in violation of any of the provisions of its Restated Articles of Organization or By-Laws and no subsidiary of the Company is in violation of any of the provisions of such subsidiary's equivalent organizational documents except, in each case, for such violations that would not, individually or in the aggregate, have a Material Adverse Effect. (d) The Company has heretofore furnished to Parent a complete and correct list of all entities in which the Company owns, directly or indirectly, any equity or voting interest, which list sets forth the amount of capital stock of or other equity interests in such entities, directly or indirectly. No entity in which the Company owns, directly or indirectly, less than a 50% equity interest is, individually or when taken together with all other such entities, material to the business of the Company and its subsidiaries, taken as a whole. Neither the Company, nor any of its subsidiaries, is subject to any outstanding material obligation or has made any commitment to purchase any additional equity interests, make any capital contributions to or invest any funds in any business or entity other than any wholly-owned subsidiary of the Company. Section 4.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES. The authorized capital stock of the Company consists of (i) 30,000,000 shares of Common Stock of which, as of March 28, 1996, 9 16,792,849 shares of Common Stock were issued and outstanding (including 8,173 shares subject to restrictions issued pursuant to employee benefit plans of the Company and its subsidiaries or otherwise), (ii) 3,000,000 shares of class A common stock, par value $0.01 per share, of which, as of March 28, 1996, no shares were issued and outstanding, (iii) 1,500,000 shares of Class B Common Stock, of which, as of March 28, 1996, 897,340 shares were issued and outstanding and (iv) 1,000,000 shares of undesignated preferred stock, of which, as of March 28, 1996, no shares were issued and outstanding. All outstanding shares of capital stock of the Company have been validly issued, and are fully paid, nonassessable and free of preemptive rights. As of March 28, 1996, Options to purchase an aggregate of 2,500,913 shares of Common Stock were outstanding and the weighted average exercise price of such Options was $12.8656 per share of Common Stock. Except as set forth above, and except as a result of the exercise of Options outstanding as of March 28, 1996, there are outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company, (iii) no options, subscriptions, warrants, convertible securities, calls or other rights to acquire from the Company, and no obligation of the Company to issue, deliver or sell any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company and (iv) no equity equivalents, interests in the ownership or earnings of the Company or other similar rights (collectively, "Company Securities"). There are no outstanding obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any Company Securities, other than the Company's obligations hereunder to cancel the Options. Each of the outstanding shares of capital stock of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable and is directly or indirectly owned by the Company, free and clear of all security interests, liens, claims, pledges, charges, voting agreements or other encumbrances of any nature whatsoever (collectively, "Liens"). There are no existing options, calls or commitments of any character relating to the issued or unissued capital stock or other securities of any subsidiary of the Company. Section 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the outstanding Shares if and to the extent required by applicable law and the filing of the appropriate merger documents as required by Massachusetts Law). This Agreement has been duly and validly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms. Section 4.4 NON-CONTRAVENTION; REQUIRED FILINGS AND CONSENTS. (a) The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby (including the Merger) do not and will not (i) contravene or conflict with the Restated Articles of Organization or By-Laws of the Company or the equivalent organizational documents of any of its subsidiaries; (ii) assuming that all consents, authorizations and approvals contemplated by subsection (b) below have been obtained and all filings described therein have been made, contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Company, any of its 10 subsidiaries or any of their respective properties; (iii) conflict with, or result in the breach or termination of any provision of or constitute a default (with or without the giving of notice or the lapse of time or both) under, or give rise to any right of termination, cancellation, or loss or impairment of any benefit to which the Company or any of its subsidiaries is entitled under any provision of any agreement, contract, license or other instrument binding upon the Company, any of its subsidiaries or any of their respective properties, or allow the acceleration of the performance of, any obligation of the Company or any of its subsidiaries under any indenture, mortgage, deed of trust, lease, license, contract, instrument or other agreement to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their respective assets or properties is subject or bound; or (iv) result in the creation or imposition of any Lien on any asset of the Company or any of its subsidiaries, except in the case of clauses (ii), (iii) and (iv) for any such contraventions, conflicts, violations, breaches, terminations, defaults, cancellations, losses, accelerations and Liens which would not individually or in the aggregate have a Material Adverse Effect or materially interfere with the consummation of the transactions contemplated by this Agreement. (b) The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby (including the Merger) by the Company require no action by or in respect of, or filing with, any governmental body, agency, official or authority (either domestic, foreign or supranational) other than (i) the filing of articles of merger in accordance with Massachusetts Law; (ii) compliance with any applicable requirements of the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (iii) compliance of any applicable requirements of any laws or regulations relating to the regulation of monopolies or competition in Germany; (iv) compliance with any applicable requirements of the Exchange Act and state securities, takeover and Blue Sky laws; and (v) such actions or filings which, if not taken or made, would not, individually or in the aggregate, have a Material Adverse Effect or materially interfere with the consummation of the transactions contemplated by this Agreement. Section 4.5 SEC REPORTS. (a) The Company has filed all required forms, reports and documents with the SEC since July 8, 1994 (collectively, the "SEC Reports"), each of which has complied in all material respects with applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act. As of their respective dates, none of the SEC Reports, including, without limitation, any financial statements or schedules included therein, contained any untrue statement of a material fact or omitted to state a 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. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company included in the SEC Reports fairly present, in all material respects and in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). (b) Except as reflected or reserved against in the audited consolidated balance sheet of the Company and its subsidiaries at December 31, 1995, the Company and its subsidiaries have no liabilities of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities incurred in the ordinary course of business since December 31, 1995 or liabilities which would not, 11 individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any of its subsidiaries is liable as an indemnitor, guarantor, surety or endorser, and no person has the power to confess judgment against the Company or any of its subsidiaries, assets, properties or business except as would not, individually or in the aggregate, result in or reasonably be likely to result in a Material Adverse Effect. Section 4.6 ABSENCE OF CERTAIN CHANGES; DERIVATIVES. (a) Since December 41, 1995, except as specifically disclosed in the SEC Reports filed prior to the date of this Agreement, neither the Company nor any of its subsidiaries has (A) except as disclosed on Schedule 4.6, taken any of the actions set forth in Sections 6.1(a), (c), (d), (g), (h)(i), (h)(ii), (h)(iii), (i), (j) or (k), (B) taken any of the actions set forth in Sections 6.1(e) or (f) except, in each case, as would not individually or in the aggregate, result in a Material Adverse Effect, or (C) entered into any transaction, or conducted its business or operations, other than in the ordinary course of business consistent with past practice. Since December 31, 1995, there has not been any change or event resulting in a Material Adverse Effect. (b) As of the date hereof, there are no futures, forward, swap, option or swaption contract, or any other financial instruments with similar characteristics and/or generally characterized as a "derivative" security except as would not, individually or in the aggregate, result in or reasonably be likely to result in a Material Adverse Effect. Section 4.7 SCHEDULE 14D-9; OFFER DOCUMENTS; PROXY STATEMENT. Neither the Schedule 14D-9, nor any of the information provided by the Company and/or by its auditors, legal counsel, financial advisors or other consultants or advisors specifically for use in the Offer Documents shall, on the respective dates the Schedule 14D-9, the Offer Documents or any supplements or amendments thereto are filed with the SEC or on the date first published, sent or given to the Company's stockholders, as the case may be, 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. The proxy or information statement or similar materials distributed to the Company's stockholders in connection with the Merger, including any amendments or supplements thereto (the "Proxy Statement"), shall not, at the time filed with the SEC, at the time mailed to the Company's stockholders, at the time of the Stockholders' 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 are made, not misleading. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information provided by Parent, Acquisition and/or by their auditors, legal counsel, financial advisors or other consultants or advisors specifically for use in the Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9 and the Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Section 4.8 FINDER'S FEE. No broker, finder, investment banker or other intermediary (other than Alex. Brown) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of the Company. The Company has heretofore furnished to Parent a complete and correct copy of all agreements between the Company and Alex. Brown pursuant to which Alex. Brown would be entitled to any payment relating to the transactions contemplated hereby. 12 Section 4.9 ABSENCE OF LITIGATION. Except as disclosed on Schedule 4.9, there is no action, suit, claim, investigation or proceeding pending against or, to the knowledge of the Company, threatened against, the Company or any of its subsidiaries or any of their respective properties before any court or arbitrator or any administrative, regulatory or governmental body, or any agency or official (i) which, individually or in the aggregate, would reasonably be likely to have a Material Adverse Effect; (ii) which, as of the date of this Agreement, in any manner challenges or seeks to prevent, enjoin, alter or delay the Offer or the Merger or any of the other transactions contemplated hereby; or (iii) which, as of the date of this Agreement, alleges criminal action or inaction and which, as of the Effective Time, alleges any criminal action or inaction which would reasonably be likely to have a Material Adverse Effect. As of the date hereof, neither the Company nor any of its subsidiaries nor any of their respective properties is subject to any order, writ, judgment, injunction, decree, determination or award having, (or which would reasonably be expected to have, a Material Adverse Effect or which would prevent or delay the consummation of the transactions contemplated hereby. Section 4.10 TAXES. (a) All federal, state, local, foreign and other Tax returns, reports, information returns and statements of the Company and each of its subsidiaries (including any consolidated Tax returns that include the income or loss of the Company or any of its subsidiaries) required by law to be filed or sent as of the Effective Time have been or will be duly filed or sent, except where the failure to file or send such returns, reports or statements would not have a Material Adverse Effect and to the best knowledge of the Company such returns, reports and statements are or will be true, complete and correct in all respects, except where the failure to be true, complete and correct would not have a Material Adverse Effect. All federal, state, local, foreign and other taxes, assessments, fees and other governmental charges, including without limitation income, gross receipts, net proceeds, alternative or add-on minimum, ad valorem, value added, turnover, sales, use, property, personal property (tangible and intangible), stamp, leasing, lease, user, excise, duty, franchise, transfer, license, withholding, payroll, employment, fuel, excess profits, occupational and interest equalization, windfall profits, severance, and other charges (including interest and penalties) (collectively, "Taxes") imposed upon the Company or any of its subsidiaries or any of the properties, assets or income of the Company or any of its subsidiaries which are due and payable through the Effective Time or claimed by any taxing authority to be due and payable through the Effective Time have been or will be paid or reserved for, or adequate provision will be made therefor, as of the Effective Time, other than Taxes being contested in good faith by the Company or any of its subsidiaries and other than where the failure to pay, reserve or provide for such Taxes would not have a Material Adverse Effect. The most recent financial statements contained in the SEC Reports reflect an adequate tax reserve in accordance with generally accepted accounting principles. (b) Neither the IRS nor any other taxing authority or agency, domestic or foreign, has asserted or, to the best knowledge of the Company has threatened to assert, against the Company or its subsidiaries any deficiency or claim for additional Taxes which, if such deficiency or claims were finally resolved against the Company or its subsidiaries, would have a Material Adverse Effect. (c) The Company and all of its subsidiaries have paid or are withholding and will pay when due to the proper taxing authorities all withholding amounts required to be withheld with respect to all Taxes, including without limitation sales and use Taxes and Taxes on income or benefits and taxes for unemployment, social security or other similar programs with respect to salary and other 13 compensation of directors, officers and employees of the Company and its subsidiaries, except where the failure to withhold and pay such Taxes would not have a Material Adverse Effect. (d) Neither the Company nor any of its subsidiaries has any liability for any federal, state, local, foreign or other Taxes of any corporation or entity other than the Company and its subsidiaries, including without limitation any liability arising from the application of U.S. Treasury Regulations Section 1.1502-6 or any analogous provision of state, local or foreign law, except any liability that would not have a Material Adverse Effect. (e) Neither the Company nor any of its subsidiaries is or has been a party to any Tax sharing agreement with any corporation other than the Company and its subsidiaries, except any Tax sharing agreement under which the liability of the Company or its subsidiaries would not have a Material Adverse Effect. (f) To the best of the Company's knowledge and as of the date hereof, no person who holds 5 percent or more of the stock of the Company is a "foreign person" as defined in Section 1445(f)(3) of the Code. Section 4.11 EMPLOYEE BENEFITS.(a) Schedule 4.11 lists all employee pension plans (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended "ERISA")), all material employee welfare plans (as defined in Section 3(l) of ERISA), and all other material bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance or termination and other similar fringe or employee benefit plans, programs or arrangements, and any material current or former employment, executive compensation or severance contracts or agreements, written or otherwise, for the benefit of, or relating to, any employee of the Company, any trade or business (whether or not incorporated) which is a member of a controlled group including the Company or which is under common control with the Company (an "ERISA Affiliate") within the meaning of Section 414 of the Code, or Section 4001 of ERISA or any subsidiary of the Company, as well as each plan with respect to which the Company or an ERISA Affiliate could incur liability under Section 4069 (if such plan has been or were terminated) or Section 4212(c) of ERISA (together, all of the foregoing plans, programs, arrangements contracts or agreements referred to as the "Employee Plans"). There have been made available to Parent copies of (i) each such written Employee Plan (other than those referred to in Section 4(b)(4) of ERISA), and (ii) the most recent summary plan description and annual report on Form 5500 series, with accompanying schedules and attachments, filed with respect to each Employee Plan required to make such a filing. Except as provided at Section 4.11(c), for purposes of this Section 4.11, the term "material," used with respect to any Employee Plan, shall mean that the Company or an ERISA Affiliate has incurred or may incur obligations, or has or may have liabilities, in an amount exceeding $400,000 with respect to, or may have or under, such Employee Plan. (b) (i) None of the Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person, and none of the Employee Plans is a "multiemployer plan" as such term is defined in Section 3(37) of ERISA; (ii) there has been no "prohibited transaction," as such term is defined in Section 406 of ERISA and Section 4975 of the Code, with respect to any Employee Plan, which could result in any material liability of the Company or any of its subsidiaries; (iii) all Employee Plans are in compliance in all material respects with the requirements prescribed by any 14 and all statutes (including ERISA and the Code), orders or governmental rules and regulations currently in effect with respect thereto (including all applicable requirements for notification to participants or the Department of Labor, Internal Revenue Service (the "IRS") or Secretary of the Treasury) and the Company and each of its subsidiaries have performed all material obligations required to be performed by them under, are not in any material respect in default under or violation of, and have no knowledge of any default or violation by any other party to, any of the Employee Plans; (iv) each Employee Plan intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code is the subject of a favorable determination letter from the IRS and, to the Company's knowledge, nothing has occurred which may reasonably be expected to impair such determination; (v) all contributions required to be made to any Employee Plan pursuant to Section 412 of the Code, or the terms of the Employee Plan, have been made on or before their due dates; and (vi) none of the Employee Plans are subject to Title IV of ERISA and none is intended to be a VEBA under Section 501(c)(9). (c) No amounts payable under any Employee Plan or pursuant to this Agreement (including but not limited to payments pursuant to Section 2.8 hereof) will fail to be deductible for federal income tax purposes by virtue of Section 280G of the Code. For purposes of this Section 4.11 the term "Employee Plan" shall include all Employee Plans described at Section 4.11(a), as well as any plan, program, arrangement, contract or agreement that would be an Employee Plan described at Section 4.11(a), but for the requirement that such plan, program, arrangement, contract or agreement be "material." (d) The consummation of the transactions contemplated by this Agreement will not under any Employee Plans (i) entitle any current or former employee or officer of the Company or any ERISA Affiliate to severance pay, unemployment compensation or any other payment (except as expressly provided in this Agreement) or (ii) accelerate the time of payment or vesting (except in the case of stock options), or increase the amount of compensation due any such employee or officer. (e) There are no material pending, threatened or anticipated claims by or on behalf of any Employee Plan, by any employee or beneficiary covered under any such Employee Plan, or otherwise involving any such Plan (other than routine claims for benefits). (f) The Company has the right to terminate any Plan which is a welfare benefit plan, as that term is defined in section 3(1) of ERISA. Section 4.12 COMPLIANCE. Neither the Company nor any of its subsidiaries is in violation of, or has violated, any applicable provisions of (i) any laws, rules, statutes, orders, ordinances or regulations or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise, or other instrument or obligation to which the Company or its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties are bound or affected, which, in the case of either subsection (i) or (ii), individually or in the aggregate, would result or reasonably be likely to result in a Material Adverse Effect. Without limiting the generality of the foregoing, neither the Company nor any of its subsidiaries is in violation of, or has violated any applicable provisions of, the Foreign Corrupt Practices Act, the Trading with the Enemy Act, the Anti-Economic Discrimination Act or any law or regulation relating to Medicare or Medicaid anti-kickback fraud and abuse, except for such violations that would not, individually or in the aggregate, result in or reasonably be likely to result in a Material Adverse Effect. 15 Section 4.13 ENVIRONMENTAL MATTERS. (a) The Company and its subsidiaries are in compliance with all applicable Environmental Laws (as defined below) (which compliance includes, but is not limited to, the possession by the Company and its subsidiaries of all permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof), except for any noncompliance that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. To the knowledge of Cheryl Lawton or Robert Coleman, neither the Company nor any of its subsidiaries has received any communication (written or oral), whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is not in such compliance, and there are no past or present (or to the knowledge of the Company, future) actions, activities, circumstances, conditions, events or incidents that may prevent or interfere with such compliance in the future, except for any such interference that would not reasonably be likely to have a Material Adverse Effect. (b) There is no Environmental Claim (as defined below) pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, or, to the knowledge of the Company, against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has or may have retained or assumed either contractually or by operation of law, which, individually or in the aggregate, would reasonably be likely to have a Material Adverse Effect. (c) There are no past or present (or to the knowledge of the Company, future) actions, activities, circumstances, conditions, events or incidents (including, without limitation, the release, emission, discharge, presence or disposal of any Hazardous Material (as defined below)) which could reasonably be likely to form the basis of any Environmental Claim against the Company or any of its subsidiaries, or, to the knowledge of the Company, against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has or may have retained or assumed either contractually or by operation of law, which, in either case, individually or in the aggregate, would reasonably be likely to have a Material Adverse Effect. (d) To the knowledge of Cheryl Lawton and Robert Coleman, neither the Company nor any of its subsidiaries has received any request for information regarding the contamination, or notice that it is a potentially responsible party for the Cleanup (as defined below), of any property, whether or not owned or operated by the Company or any of its subsidiaries, which individually or in the aggregate would reasonably be likely to have a Material Adverse Effect. (e) No transfers of permits or other governmental authorizations under Environmental Laws, and no additional permits or other governmental authorizations under Environmental Laws, will be required to permit the Company and its subsidiaries or the Surviving Corporation and its subsidiaries, as the case may be, to be in full compliance with all applicable Environmental Laws immediately following the transactions contemplated hereby, as conducted by the Company and its subsidiaries immediately prior to the date hereof. To the extent that such transfers or additional permits and other governmental authorizations are required, the Company and its subsidiaries agree to use its reasonable best efforts to effect such transfers and obtain such permits and other governmental authorizations prior to the consummation of the Offer. (f) The following terms as used in this Section shall have the following meanings: 16 "Cleanup" means all actions required to: (1) clean up, remove, treat or remediate Hazardous Materials in the indoor or outdoor environment; (2) prevent the Release of Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or welfare of the indoor or outdoor environment; (3) perform pre-remedial studies and investigations and post- remedial monitoring and care; or (4) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Hazardous materials in the indoor or outdoor environment. "Environmental Claim" means any claim, action, cause of action, investigation or notice (written or oral) by any person or entity alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or Release into the indoor or outdoor environment, of any Hazardous Materials at any location, whether or not owned or operated by the Company or any of its subsidiaries or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Laws" means all federal, state, local and foreign laws and regulations, rules, permits, licenses, approvals and orders relating to pollution or protection of human health or the environment, including without limitation, laws relating to Releases or threatened Releases of Hazardous Materials in or into the indoor or outdoor environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials and all laws and regulations with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. "Hazardous Materials" means all substances defined as Hazardous Substances under Section 101(14) of the Comprehensive Environmental Response Compensation and Liability Act, as amended ("CERCLA") except that the term Hazardous Materials shall include petroleum, natural gas, natural gas liquids, liquefied natural gas, synthetic gas, mixtures of any of the above, and constituents of any of the above which are themselves considered hazardous or toxic. The term shall also include any material which is regulated as a hazardous, toxic or otherwise dangerous material by any state in the United States or by any human health or environmental agency in the United Kingdom or which otherwise may be the basis for any federal, state, local or foreign government requiring cleanup, removal, treatment or remediation. "Release" means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration in or into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater and land surface or subsurface strata) or into or out of any property, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or property. Section 4.14 INTELLECTUAL PROPERTY.(a) Schedule 4.14 sets forth a complete list of all patents, trademarks and service marks issued in the United States and other material patents owned by the Company. (b) Except as set forth on Schedule 4.14 and as otherwise would not result in a Material Adverse Effect: (i) the Company and each of its subsidiaries owns and has the exclusive right to make, have 17 made, use, sell, import and offer for sale (in each case, free and clear of any Liens), all Intellectual Property (as defined below) used in the conduct of its business as currently conducted; (ii) to the knowledge of the Company, the manufacture, use, sale, import or offer for sale of any Intellectual Property by the Company and its subsidiaries does not infringe on or otherwise violate the rights of any person; (iii) to the knowledge of the Company, no product (or component thereof or process) used, sold, imported or manufactured by and/or for, or supplied to, the Company or any of its subsidiaries infringes or otherwise violates the Intellectual Property of any other person; (iv) to the knowledge of the Company, no person is challenging, infringing on or otherwise violating any right of the Company or any of its subsidiaries with respect to any Intellectual Property owned by and/or licensed to the Company and its subsidiaries; and (v) to the knowledge of the Company, the Company is not obligated to pay royalties in respect of any Intellectual Property. For purposes of this Agreement "Intellectual Property" shall mean trademarks, service marks, brand names, certification marks, trade dress, assumed names, trade names and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and ideas, whether patentable or not in any jurisdiction; patents, applications for patents (including, without limitation, division, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic information, trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; writings and other works, whether copyrightable or not in any jurisdiction including, without limitation, products being researched or developed; registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; any similar intellectual property or proprietary rights; and any claims or causes of action arising out of or related to any infringement or misappropriation of any of the foregoing. Section 4.15 INSURANCE. The coverage provided by the Company's insurance policies is reasonable in scope and amount compared to similarly situated companies, except where the failure to be so reasonable in scope and amount would not have a Material Adverse Effect. Section 4.16 PROPERTIES. The Company and its subsidiaries do not own any real property. The Company and its subsidiaries are not parties to any material real property leases other than the Company's leases with respect to the real property located in Abingdon, England, Waltham, Massachusetts and Bedford, Massachusetts, and true and complete copies of instruments setting forth material terms of these leases have heretofore been furnished to Parent. Such leases are valid and binding, and there does not exist any event which, with notice or lapse of time or both, would constitute a material default under such leases by the Company. Section 4.17 REGULATORY MATTERS. (a) Except as disclosed in Schedule 4.17 and except as would not, individually or in the aggregate, have a Material Adverse Effect, to the knowledge of the Company, (i) since December 31, 1995 through the date hereof there have been no written notices, citations or decisions by any governmental or regulatory body that any product produced, manufactured, marketed or distributed at any time by the Company or any Company subsidiary (the "Company Products") is defective or fails to meet any applicable standards promulgated by any such governmental or regulatory body, or any other governmental or regulatory body, agency or office of any other jurisdiction to which the Company or any of its subsidiaries is subject, (ii) since December 31, 1995 through the date hereof there have been no recalls, field notifications or seizures ordered or 18 threatened by the United States Food and Drug Administration (the "FDA") or any other comparable governmental or regulatory body with respect to any of the Company Products and (iii) since December 31, 1995 through the date hereof none of the Company or the Company subsidiaries have received any warning letter or Section 305 notices from the FDA (or comparable notices from such other governmental or regulatory bodies). (b) Except as set forth in Schedule 4.17 and as would not, individually or in the aggregate, have a Material Adverse Effect, with respect to each Company Product: (i) the Company and its subsidiaries have obtained all applicable approvals, clearances, authorizations, licenses (including site licensures) and registrations required by United States or foreign governments or government agencies to permit the manufacturing, distribution, sale (including reimbursement and pricing), marketing, export, import or human research (including clinical and non-clinical trials) of such Product (collectively, "Licenses"); and (ii) the Company and its subsidiaries are in full compliance with all terms and conditions of each License in each country in which such Company Product is marketed, and with all requirements pertaining to the manufacturing (including current good manufacturing practices), distribution, sale (including reimbursement and pricing), marketing, export, import or human research (including good laboratory practices and clinical and non-clinical trials) of such Company Product which is not required to be the subject of a License. Section 4.18 LABOR MATTERS. Neither the Company nor any of its subsidiaries is a party to any collective bargaining or other labor union contract applicable to persons employed by the Company or any of its subsidiaries, no collective bargaining agreement is being negotiated by the Company or any of its subsidiaries and the Company has no knowledge of any activities or proceedings of any labor union to organize any of their respective employees. There is no labor dispute, strike or work stoppage against the Company or any of its subsidiaries pending or, to the Company's knowledge, threatened. Section 4.19 VOTING REQUIREMENTS. The affirmative vote of a majority of the outstanding shares of Common Stock and Class B Common Stock approving this Agreement is the only vote of the holders of any class or series of Company Securities necessary to approve this Agreement and the transactions contemplated by this Agreement. Pursuant to a stockholders' agreement with the J.P. Morgan Capital Corporation, the holder of all of the issued and outstanding shares of the Class B Common Stock ("Morgan"), Morgan is required to vote its shares of Class B Common Stock in the same manner and proportion as the Common Stock is voted with respect to approval of this Agreement and the transactions contemplated by this Agreement. Section 4.20 STATE TAKEOVER LAWS. The Board has approved the transactions contemplated hereby so as to render inapplicable to such transactions, including, without limitation, the Offer and the Merger, the restrictions on business combinations contained in Chapter 110F of Massachusetts Law. The provisions of Chapter 110D of Massachusetts Law are inapplicable to the Company, the Offer and the Merger and the Offer and the Merger are exempt from the requirements of any other "moratorium," "control share," "fair price," or other anti-takeover laws or regulations of any state. The Company has taken all steps necessary irrevocably to exempt the transactions contemplated by this Agreement from any applicable provisions of the Company's Restated Articles of Organization and By-Laws which would have the effect of delaying, preventing or materially reducing the expected benefits to Parent or Acquisition of the transactions contemplated by this Agreement. 19 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION Each of Parent and Acquisition represents and warrants to the Company as follows: Section 5.1 ORGANIZATION. Each of Parent and Acquisition is a corporation duly organized, validly existing and in good standing under the laws of the state of its 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 and in good standing or to have such power and authority would not reasonably be likely to prevent or materially delay the consummation of the Offer or the Merger. Section 5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Acquisition has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the boards of directors of Acquisition and Parent and by Parent as the sole stockholder of Acquisition, and no other corporate proceedings on the part of Parent or Acquisition are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by each of Parent and Acquisition and constitutes a legal, valid and binding agreement of each of Parent and Acquisition, enforceable against each of Parent and Acquisition in accordance with its terms. Section 5.3 NON-CONTRAVENTION; REQUIRED FILINGS AND CONSENTS. (a) The execution, delivery and performance by Parent and Acquisition of this Agreement and the consummation of the transactions contemplated hereby (including the Merger) do not and will not (i) contravene or conflict with the Certificate of Incorporation or By-Laws of Parent or Acquisition; (ii) assuming that all consents, authorizations and approvals contemplated by subsection (b) below have been obtained and all filings described therein have been made, contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to Parent or Acquisition or any of their respective properties; (iii) conflict with, or result in the breach or termination of any provision of or constitute a default (with or without the giving of notice or the lapse of time or both) under, or give rise to any right of termination, cancellation, or loss of any benefit to which Parent or Acquisition is entitled under any provision of any agreement, contract, license or other instrument binding upon Parent, Acquisition or any of their respective properties, or allow the acceleration of the performance of, any obligation of Parent or Acquisition under any indenture, mortgage, deed of trust, lease, license, contract, instrument or other agreement to which Parent or Acquisition is a party or by which Parent or Acquisition or any of their respective assets or properties is subject or bound; or (iv) result in the creation or imposition of any Lien on any asset of Parent or Acquisition, except in the case of clauses (ii), (iii) and (iv) for any such contraventions, conflicts, violations, breaches, terminations, defaults, cancellations, losses, accelerations and Liens which, individually or in the aggregate, would not reasonably be likely to prevent or materially delay the consummation of the Offer or the Merger. 20 (b) The execution, delivery and performance by Parent and Acquisition of this Agreement and the consummation of the transactions contemplated hereby (including the Merger) by Parent and Acquisition require no action by or in respect of, or filing with, any governmental body, agency, official or authority (whether domestic, foreign or supranational) other than (i) the filing of articles of merger in accordance with Massachusetts Law; (ii) compliance with any applicable requirements of the HSR Act; (iii) compliance with any applicable requirements of the Exchange Act and state securities, takeover and Blue Sky laws; and (iv) such actions or filings which, if not taken or made, would not, individually or in the aggregate, reasonably be likely to prevent the consummation of the Offer or the Merger. Section 5.4 OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT. Neither the Offer Documents, nor any of the information provided by Parent or Acquisition and/or by their auditors, legal counsel, financial advisors or other consultants or advisors specifically for use in the Schedule 14D-9 shall, on the respective dates the Offer Documents, the Schedule 14D-9 or any supplements or amendments thereto are filed with the SEC or on the date first published, sent or given to the Company's stockholders, as the case may be, 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. Notwithstanding the foregoing, neither Parent nor Acquisition makes any representation or warranty with respect to any information provided by the Company and/or by its auditors, legal counsel, financial advisors or other consultants or advisors specifically for use in the Offer Documents. None of the information provided by Parent or Acquisition and/or by their auditors, attorneys, financial advisors or other consultants or advisors specifically for use in the Proxy Statement shall, at the time filed with the SEC, at the time mailed to the Company's stockholders, at the time of the Stockholders' 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 are made, not misleading. The Offer Documents will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Section 5.5 NO PRIOR ACTIVITIES. Since the date of its incorporation, Acquisition has not engaged in any activities other than in connection with or as contemplated by this Agreement or in connection with arranging any financing required to consummate the transactions contemplated hereby. Section 5.6 FINANCING. Acquisition has or will have available to it all funds necessary to satisfy its obligations hereunder, including, without limitation, the obligation to pay the Per Share Amount pursuant to the Offer and the Merger Consideration pursuant to the Merger and to pay all related fees and expenses in connection with the Offer and the Merger. ARTICLE VI COVENANTS Section 6.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as otherwise expressly provided in this Agreement, during the period from the date hereof to the time Acquisition's designees are elected as directors of the Company pursuant to Section 1.3, the Company and its subsidiaries will each conduct 21 its operations in the ordinary course of business consistent with past practice, and the Company and its subsidiaries will each use its reasonable best efforts to preserve intact its business organization, to keep available the services of its officers and employees and to maintain existing relationships with licensors, licensees, suppliers, contractors, distributors, customers and others having business relationships with it. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, prior to the Effective Time, neither the Company nor any of its subsidiaries will, without the prior written consent of Acquisition: (a) amend or propose to amend its articles of organization or by-laws or equivalent organizational documents, or increase or propose to increase the number of directors of the Company; (b) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities (or equity equivalents (including, without limitation, stock appreciation rights), except as required by option agreements and option plans as in effect as of the date hereof, or amend any of the terms of any such securities or agreements outstanding as of the date hereof; (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, repurchase or otherwise acquire any of its securities or any securities of its subsidiaries; (d) (i) except in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money or issue any debt securities, or assume, guarantee or endorse the obligations of any other person; (ii) make any loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned subsidiaries of the Company); (iii) pledge or otherwise encumber shares of capital stock of the Company or any of its subsidiaries; or (iv) except in the ordinary course of business consistent with past practice, mortgage or pledge any of its assets, tangible or intangible, or create or suffer to exist any Lien thereupon; (e) enter into, adopt or (except as may be required by law) amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the benefit or welfare of any director, officer or employee, or (except, in the case of employees who are not officers or directors, for normal compensation increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company) increase in any manner the compensation or benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement as in effect as of the date hereof (including, without limitation, the granting of stock options, restricted stock, stock appreciation rights or performance units); (f) acquire, sell, lease, license, encumber, transfer or dispose of any assets outside the ordinary course of business consistent with past practice or any assets which in the aggregate are material to the Company and its subsidiaries, taken as a whole, or enter into any contract, agreement, commitment or transaction outside the ordinary course of business consistent with past practice; 22 (g) except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it; (h) (i) acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof; (ii) authorize any new capital expenditure or expenditures which was not reflected in the capital budget previously furnished to Parent by the Company; (iii) settle any litigation for amounts in excess of $500,000 individually or $1,000,000 in the aggregate; or (iv) enter into or amend any contract, agreement, commitment or arrangement with respect to any of the foregoing; (i)make any tax election or settle or compromise any material Tax liability; (j) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in the consolidated financial statements (or the notes thereto) of the Company and its consolidated subsidiaries or incurred in the ordinary course of business consistent with past practice, except where such action would not result in a Material Adverse Effect; (k) enter into any agreement providing for the acceleration of payment or performance or other consequence as a result of a change in control of the Company; (l)(i) enter into any agreement providing for any license, sale, assignment or otherwise transfer any patent rights or grant any covenant not to sue with respect to any of its patent rights or (ii) enter into any agreements providing for any license, sale or assignment or otherwise transfer any Intellectual Property or grant any covenant not to sue with respect to its Intellectual Property, except if such agreement, assignment or transfer would not have a Material Adverse Effect; or (m) take, or agree in writing or otherwise to take, any of the actions described above in Section 6.1 or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect or would result in any of the conditions to the Offer not being satisfied. Notwithstanding anything to the contrary contained herein, the Company may adopt a shareholder rights plan, issue rights thereunder and issue securities upon exercise of such rights; PROVIDED, HOWEVER, that such rights plan exempts the Offer and the Merger from the events which trigger the exercise of such rights. Section 6.2 ACCESS TO INFORMATION.(a) Subject to applicable law and the agreements set forth in Section 6.2(b), between the date hereof and the Effective Time, the Company will give each of Parent and Acquisition and their counsel, financial advisors, auditors, and other authorized representatives reasonable access to all employees, plants, offices, warehouses and other facilities and to all books and records of the Company and its subsidiaries, will permit each of Parent and Acquisition and their respective counsel, financial advisors, auditors and other authorized representatives to make such inspections as Parent or Acquisition may reasonably require and will cause the Company's officers or representatives and those of its subsidiaries to furnish promptly to Parent or Acquisition or their 23 representatives such financial and operating data and other information with respect to the business and properties of the Company and any of its subsidiaries as Parent or Acquisition may from time to time request. No investigation pursuant to this Section 6.2 shall affect any representations or warranties of the parties herein or the conditions to the obligations of the parties hereunder. (b) Parent and Acquisition agree to be bound by the confidentiality agreement dated March 13, 1996 (the "Confidentiality Agreement"), among the Company and Parent as if the references to Parent therein were to Acquisition. Notwithstanding any provision of the Confidentiality Agreement, Parent and Acquisition may (i) enter into this Agreement, (ii) acquire Shares pursuant to the Offer and the Merger and (iii) make such disclosures in connection with the Offer and the Offer Documents as Parent and Acquisition may determine in their reasonable discretion is required by applicable law. Section 6.3 REASONABLE BEST EFFORTS. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, Parent, Acquisition and the Company shall cooperate with one another (i) in the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy Statement and any required filings under the HSR Act and the other laws referred to in Sections 4.4(b) and 5.3(b); (ii) in determining whether action by or in respect of, or filing with, any governmental body, agency, official or authority (either domestic or foreign) is required, proper or advisable or any actions, consents, waivers or approvals are required to be obtained from parties to any contracts, in connection with the transactions contemplated by this Agreement; and (iii) in seeking timely to obtain any such actions, consents and waivers and to make any such filings. 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 hereto shall take all such necessary action. Section 6.4 PUBLIC ANNOUNCEMENTS. Parent and Acquisition, on the one hand, and the Company, on the other hand, will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or by applicable rules of any securities exchange or the Nasdaq National Market. The initial joint announcement of the transactions contemplated by this Agreement shall be in the form attached hereto as Annex B. Section 6.5 INDEMNIFICATION.(a) Parent shall cause the Surviving Corporation to keep in effect the provisions in its Articles of Organization and By-Laws containing the provisions with respect to exculpation of director and officer liability and indemnification set forth in the Restated Articles of Organization and Amended and Restated By-Laws of the Company on the date of this Agreement to the fullest extent permitted under applicable law, which provisions shall not be amended, repealed or otherwise modified except as required by applicable law or except to make changes permitted by applicable law that would enlarge the exculpation or rights of indemnification thereunder. (b) From and after the Effective Time, Parent hereby agrees to guarantee and to cause the Surviving Corporation to perform all of its obligations under the Restated Articles of Organization and By-Laws of the Company with respect to indemnification. 24 (c) Parent shall cause the Surviving Corporation to use its reasonable best efforts to maintain in effect for five years from the Effective Time, if available, the coverage provided by the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time; PROVIDED, HOWEVER, that nothing contained herein shall require the Surviving Corporation to incur any annual premium in excess of 200% of the last annual aggregate premium paid prior to the date of this Agreement for all current directors' and officers' liability insurance policies maintained by the Company which the Company represents and warrants to be $278,000 (the "Current Premium"). If such premiums for such insurance would at any time exceed 200% of the Current Premium, then the Surviving Corporation shall cause to be maintained policies of insurance which, in the Surviving Corporation's good faith determination, provide the maximum coverage available at an annual premium equal to 200% of the Current Premium. Section 6.6 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to Parent or Acquisition, and Parent or Acquisition shall give prompt notice to the Company, as the case may be, of (i) the occurrence, or non- occurrence, of any event the respective occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (ii) any failure of the Company, Parent or Acquisition, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; PROVIDED, that the delivery of any notice pursuant to this Section 6.6 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 6.7 TERMINATION OF STOCK PLANS. Prior to the consummation of the Offer, the Board (or, if appropriate, any committee thereof) shall adopt such resolutions or take such other actions as are required to ensure that, following the Effective Time, no participant in any stock, stock option, stock appreciation or other benefit plan of the Company or any of its subsidiaries or any holder of any Option shall have any right thereunder to acquire any capital stock of the Surviving Corporation or any subsidiary thereof. Section 6.8 NO SOLICITATION. (a) The Company will immediately cease any existing discussions or negotiations with any third parties conducted prior to the date hereof with respect to any Acquisition Proposal (as defined below). The Company shall not, directly or indirectly, through any officer, director, employee, representative or agent or any of its subsidiaries, (i) solicit, initiate, continue or encourage any inquiries, proposals or offers that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including, without limitation, by way of a tender offer) or similar transactions involving the Company or any of its subsidiaries, other than the transactions contemplated by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as an "Acquisition Proposal"), (ii) solicit, initiate, continue or engage in negotiations or discussions concerning, or provide any non-public information or data to any person or entity relating to, any Acquisition Proposal, or (iii) agree to, approve or recommend any Acquisition Proposal; PROVIDED, that nothing contained in this Section 6.8 shall prevent the Company from, prior to the purchase by Acquisition of Shares pursuant to the Offer, furnishing nonpublic information or data to, or entering into discussions or negotiations with, any person in connection with an unsolicited Acquisition Proposal by such person or recommending an unsolicited Acquisition Proposal to the stockholders of the Company, if and only to the extent that (1) the Company's 25 directors determine in good faith, after receiving advice of its independent counsel, that such action is required for the discharge of their fiduciary duties to stockholders under applicable law and (2) prior to furnishing such nonpublic information to, or entering into discussions or negotiations with, such person, the Company receives from such person an executed confidentiality agreement with terms no less favorable, taken as a whole, to the Company than those contained in the Confidentiality Agreement, but which confidentiality agreement shall not include any provision calling for any exclusive right to negotiate with the Company, and (3) the Company advises Parent of all such nonpublic information delivered to such person concurrently with its delivery to the requesting party. (b) The Company shall notify Parent immediately (and in no event later than 24 hours) after receipt by the Company of any Acquisition Proposal or any request for non-public information in connection with an Acquisition Proposal or for access to the properties, books or records of the Company by any person or entity that informs the Company that it is considering making, or has made, an Acquisition Proposal. ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of each party hereto to effect the Merger is subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Acquisition shall have purchased Shares pursuant to the Offer; (b) if required by Massachusetts Law, this Agreement shall have been adopted by the affirmative vote of the stockholders of the Company by the requisite vote in accordance with Massachusetts Law; (c) there shall not be in effect any order, decree or ruling or other action restraining, enjoining or otherwise prohibiting the Merger, which order, decree, ruling or action shall have been issued or taken by any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States or any country or economic region in which the Company or any of its subsidiaries or Parent or any of its affiliates, directly or indirectly, has material assets or operations; and (d) any waiting period applicable to the Merger under the HSR Act shall have terminated or expired. ARTICLE VIII TERMINATION; EXPENSES; AMENDMENT; WAIVER Section 8.1 TERMINATION. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company: 26 (a) by mutual written consent of Parent, Acquisition and the Company; (b) by Parent or the Company if any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States or any country or economic region in which the Company or any of its subsidiaries or Parent or any of its affiliates, directly or indirectly, has material assets or operations, shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Offer or the Merger and such order, decree, ruling or other action shall have become final and nonappealable; (c) by Parent or the Company if Acquisition shall have (A) terminated the Offer or (B) failed to accept for purchase and pay for Shares pursuant to the Offer by June 30, 1996 unless Acquisition shall have failed to accept for purchase and pay for Shares pursuant to the Offer as the result of the receipt by the Company of an Acquisition Proposal or as a result of a failure of the applicable waiting period under the HSR Act to expire or the failure to obtain any necessary governmental or regulatory approvals, in which case, if Acquisition shall have failed to accept for purchase and pay for Shares pursuant to the Offer by September 30, 1996; PROVIDED, that the right to terminate this Agreement under the foregoing clauses (A) or (B) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause or resulted in any of the circumstances described in such clauses; (d) by either Parent or the Company if, prior to the purchase of Shares pursuant to the Offer, the other party shall have failed to comply in all material respects with any of its covenants or agreements contained in this Agreement required to be complied with prior to the date of such termination, which failure to comply has not been cured within twenty business days following receipt by such other party of written notice of such failure to comply; PROVIDED, HOWEVER, that, if such breach is curable by the breaching party through the exercise of the breaching party's best efforts and for so long as the breaching party continues to exercise such best efforts, the nonbreaching party may not terminate this Agreement under this Section 8.1(d); (e) by either Parent or the Company if, prior to the purchase of Shares pursuant to the Offer, there has been (i) a breach in any material respect by the other party (in the case of Parent, including any material breach by Acquisition) of any representation or warranty that is not qualified as to materiality which has the effect of making such representation or warranty not true and correct in all material respects or (ii) a breach by the other party (in the case of Parent, including any material breach by Acquisition) of any representation that is qualified as to materiality, in each case which breach has not been cured within twenty business days following receipt by the breaching party of written notice of the breach; PROVIDED, HOWEVER, that, if such breach is curable by the breaching party through the exercise of the breaching party's best efforts and for so long as the breaching party continues to exercise such best efforts, the nonbreaching party may not terminate this Agreement under this Section 8.1(e); (f) by either Parent or the Company, not sooner than the third business day after the Company's notice to Parent of the Company's receipt of an Acquisition Proposal if the Board reasonably determines that such Acquisition Proposal constitutes a Superior Proposal; or 27 (g) by Parent if the Board shall have withdrawn or modified in a manner adverse to Parent or Acquisition its approval of the Offer, this Agreement, the Merger, its recommendation that the Company's stockholders accept the Offer and the Company shall have entered into an agreement providing for an Acquisition Proposal or the Board shall have resolved to do any of the foregoing. "SUPERIOR PROPOSAL" shall mean a bona fide proposal or offer made by a third party to acquire the Company pursuant to a tender or exchange offer, a merger, consolidation, acquisition of a majority of the Shares or other business combination or a sale of all or substantially all of the assets of the Company and its subsidiaries on terms which the Board determines in good faith (after consultation with independent financial advisors and counsel) to be more favorable to the Company and to its stockholders than the transactions contemplated hereby. Section 8.2 EFFECT OF TERMINATION.(a) If this Agreement is terminated pursuant to Section 8.1(f) or Section 8.1(g), the Company shall pay Parent a non-refundable fee of $17,500,000, which amount shall be payable by wire transfer of same day funds within two business days after the date this Agreement is so terminated. (b) In the event of the termination and abandonment of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void and have no effect, other than the provisions of this Section 8.2 and Section 8.3. No termination of this Agreement and nothing contained in this Section 8.2 shall relieve any party from liability for any breach of this Agreement. Section 8.3 FEES AND EXPENSES. Subject to Section 8.2(a) above, each party shall bear its own expenses and costs in connection with this Agreement and the transactions contemplated hereby. Section 8.4 AMENDMENT. Subject to Section 1.3(c), this Agreement may be amended by action taken by the Company, Parent and Acquisition at any time before or after adoption of the Merger by the stockholders of the Company (if required by applicable law) but, after any such approval, no amendment shall be made which decreases the Merger Consideration or changes the form thereof or which adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 8.5 EXTENSION; WAIVER. Subject to Section 1.3(c), at any time prior to the Effective Time, the Company, on the one hand, and Parent and Acquisition, on the other hand, may (i) extend the time for the performance of any of the obligations or other acts of the other party, (ii) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document, certificate or writing delivered pursuant hereto, or (iii) waive compliance by the other party with any of the agreements or conditions contained herein. Any agreement on the part of any party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights. 28 ARTICLE IX MISCELLANEOUS Section 9.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made herein shall not survive beyond the Effective Time. The covenants and agreements herein shall survive in accordance with their respective terms. Section 9.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, and the Confidentiality Agreement (i) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise; PROVIDED that Acquisition may assign its rights and obligations in whole or in part to Parent or any subsidiary of Parent, but no such assignment shall relieve Acquisition of its obligations hereunder if such assignee does not perform such obligations. Section 9.3 NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile or by registered or certified mail (postage prepaid, return receipt requested), to the other party as follows: if to Parent or Acquisition: Abbott Laboratories 100 Abbott Park Road Abbott Park, Illinois 60064 Fax: 847-937-4604 Attention: President, Diagnostics Division and, Fax: 847-938-6277 Attention: General Counsel with copies to: Mayer, Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603-3441 Fax: 312-701-7711 Attention: Robert A. Helman and Scott J. Davis if to the Company: MediSense, Inc. 266 Second Avenue Waltham, Massachusetts 02154 Fax: 617-890-8637 Attention: General Counsel 29 with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Fax: 212-848-7179/80/81/82 Attention: Peter D. Lyons or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Section 9.4 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts applicable to contracts executed in and to be performed in that State. Section 9.5 PARTIES IN INTEREST. Except for Section 6.5, which shall inure to the benefit of the persons identified therein, this Agreement shall be binding upon and inure solely to the benefit of each party hereto and its successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. Section 9.6 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. Section 9.7 SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity and enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or entity or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid and unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. Section 9.8 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Section 9.9 CERTAIN DEFINITIONS. For purposes of this Agreement, the term: (a) "affiliate" of a person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; 30 (b) "associate" of a Person means a corporation or organization of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities or any person who is a director or officer of such person or any of its parents or subsidiaries; (c)"business day" shall mean any day other than a Saturday, Sunday or federal holiday. (d) "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise; (e) "generally accepted accounting principles" shall mean the generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession in the United States, in each case applied on a basis consistent with the manner in which the audited financial statements for the fiscal year of the Company ended March 31, 1995 were prepared; (f) "knowledge" or "known" means, with respect to any matter in question, if the executive officers of the Company or Parent, as the case may be, have actual knowledge of such matter; (g) "person" means an individual, corporation, partnership, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act); and (f) "subsidiary" or "subsidiaries" of any person means any corporation, partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, joint venture or other legal entity. Section 9.10. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 31 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its representatives thereunto duly authorized, all as of the day and year first above written. [CORPORATE SEAL] ABBOTT LABORATORIES Attest by: /s/ Jose M. de Lasa By: /s/ Duane L. Burnham ------------------- ------------------------- Title: Senior Vice Title: Chairman of the Board President, and Chief Executive Secretary and Officer General Counsel Attest by: /s/ Jose M. de Lasa By: /s/ Miles D. White ------------------- ------------------------- Title: Senior Vice Title: Senior Vice President, President, Diagnostic Operations Secretary and General Counsel [CORPORATE SEAL] AAC ACQUISITION, INC. Attest by: /s/ Jose M. de Lasa By: /s/ Miles D. White ------------------- ------------------------- Title: Clerk Title: President Attest by: /s/ Jose M. de Lasa By: /s/ Miles D. White ------------------- ------------------------- Title: Clerk Title: President [CORPORATE SEAL] MEDISENSE, INC. Attest by: /s/ Jose M. de Lasa By: /s/ Robert L. Coleman ------------------- ------------------------- Title: Clerk Title: President, Chief Executive Officer and Director Attest by: /s/ Jose M. de Lasa By: /s/ Gerald J. Bojas ------------------- -------------------------- Title: Clerk Title: Corporate Controller and Treasurer 32 ANNEX II March 29, 1996 Alex. Brown Board of Directors MediSense, Inc. 266 Second Avenue Waltham, MA 02154 Dear Sirs: MediSense, Inc. ("MediSense" or the "Company"), Abbott Laboratories ("Abbott" or the "Buyer") and AAC Acquisition, Inc., a Massachusetts corporation and a wholly owned subsidiary of Buyer (the "Merger Sub"), have entered into an Agreement and Plan of Merger dated March 29, 1996 (the "Agreement"). Pursuant to the Agreement, the Merger Sub will commence a tender offer (the "Tender Offer") to purchase all the outstanding common stock, $.01 par value per share, and all the outstanding Class B common stock, $01 par value (together, the "Common Stock"), of MediSense at a price of $45.00 per share, net to the seller in cash. The Agreement also provides that following such tender offer, Merger Sub will be merged with and into MediSense (the "Merger"), and that each outstanding share of Common Stock, other than the shares held by Abbott or the Company, will be converted into the right to receive $45.00 in cash. You have requested our opinion as to whether the consideration to be received by the holders of the Common Stock pursuant to the Agreement is fair from a financial point of view to such stockholders. Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements and valuations for corporate and other purposes. We have served as financial advisor to the Company in connection with the Merger and will receive a fee for our services, a substantial portion of which is contingent upon the consummation of the Merger. Alex. Brown served as underwriter to MediSense in its initial public offering of Common Stock in June 1994 and its follow-on offering of Common Stock in February 1995. Alex. Brown maintains a market in MediSense and regularly publishes research reports regarding the healthcare industry and the businesses and securities of publicly owned companies in that industry, including MediSense and Abbott. In connection with this opinion, we have reviewed the Agreement and certain publicly available financial information concerning MediSense and certain internal financial analyses and other information furnished to us by the Company. We have also held discussions with senior management of MediSense regarding the business and prospects of the Company. In addition, we have (i) reviewed the reported price and trading activity for MediSense Common Stock, (ii) compared certain financial and stock market information for MediSense with similar information for certain publicly traded companies, (iii) reviewed the financial terms of certain recent business combinations and (iv) performed such other studies and analyses and taken into account such other matters as we deemed necessary. 1 Board of Directors MediSense, Inc. March 29, 1996 We have assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by us for purposes of this opinion. With respect to financial projections and information relating to the prospects of the Company, we have assumed that such information has been reasonably prepared and reflects the best currently available estimates and judgments of management of the Company as to the likely future financial prospects of the Company. In addition, we have not made an independent valuation or appraisal of the assets of the Company (nor have we been furnished with any such valuation or appraisal), nor have we made any physical inspection of the properties or assets of the Company. Our opinion is based on market, economic, financial and other conditions as they exist and can be evaluated as of the date of this letter. It is understood that this letter is for the information of the Board of Directors of the Company and may not be used for any other purpose without our prior written consent, except that this opinion may be included in its entirety in any filing made by the Company with the Securities and Exchange Commission with respect to the Tender Offer and the Merger. In addition, we express no opinion as to whether the stockholders of the Company should tender their shares of Common Stock in the Tender Offer. Based upon and subject to the foregoing, it is our opinion that, as of the date of this letter, the cash consideration to be received by the holders of the Common Stock pursuant to the Agreement is fair from a financial point of view to such stockholders. Very truly yours, ALEX. BROWN & SONS INCORPORATED 2 ANNEX III MASSACHUSETTS GENERAL LAWS Business Corporation Law Chapter 156 Section 86 [RIGHT OF APPRAISAL]. - If a corporation proposes to take a corporate action as to which any section of this chapter provides that a stockholder who objects to such action shall have the right to demand payment for his shares and an appraisal thereof, sections eighty-seven to ninety-eight, inclusive, shall apply except as otherwise specifically provided in any section of this chapter. Except as provided in sections eighty-two and eighty-three, no stockholder shall have such right unless (1) he files with the corporation before the taking of the vote of the shareholders on such corporate action, written objection to the proposed action stating that he intends to demand payment for his shares if the action is taken and (2) his shares are not voted in favor of the proposed action. (Last amended by Ch. 749, L. '73, eff. 10-8- 73.) Section 87 [NOTICE OF STOCKHOLDERS MEETING TO CONTAIN STATEMENT AS TO APPRAISAL RIGHTS]. - The notice of the meeting of stockholders at which the approval of such proposed action is to be considered shall contain a statement of the rights of objecting stockholders. The giving of such notice shall not be deemed to create any rights in any stockholder receiving the same to demand payment for his stock, and the directors may authorize the inclusion in any such notice of a statement of opinion by the management as to the existence or non- existence of the right of the stockholders to demand payment for their stock on account of the proposed corporate action. The notice may be in such form as the directors or officers calling the meeting deem advisable, but the following form of notice shall be sufficient to comply with this section: "If the action proposed is approved by the stockholders at the meeting and effected by the corporation, any stockholder (1) who files with the corporation before the taking of the vote on the approval of such action, written objection to the proposed action stating that he intends to demand payment for his shares if the action is taken and (2) whose shares are not voted in favor of such action has or may have the right to demand in writing from the corporation (or, in the case of a consolidation or merger, the name of the resulting or surviving corporation shall be inserted), within twenty days after the date of mailing to him of notice in writing that the corporate action has become effective, payment for his shares and an appraisal of the value thereof. Such corporation and any such stockholder shall in such cases have the rights and duties and shall follow the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the General Laws of Massachusetts." (Last amended by Ch. 749, L. '73, eff. 10-8- 73.) Section 88 [NOTICE TO OBJECTING STOCKHOLDER THAT CORPORATE ACTION HAS BECOME EFFECTIVE]. - The corporation taking such action, or in the case of a merger or consolidation the surviving or resulting corporation, shall, within ten days after the date on which such corporate action became effective, notify each stockholder who filed written objection meeting the requirements of section eighty-six and whose shares were not voted in favor of the approval of such action, that the action approved at the meeting of the corporation of which he is a stockholder has become effective. The giving of such notice shall not be deemed to create any rights in any stockholder receiving the same to demand payment for his stock. The notice shall be sent by registered or certified mail, addressed to the stockholder at his last known address as it appears in the records of the corporation. (Last amended by Ch. 749, L. '73, eff. 10-8- 73.) Section 89 [DEMAND FOR PAYMENT BY OBJECTING STOCKHOLDER]. - If within twenty day after the date of mailing of a notice under subsection (e) of section eighty-two, subsection (f) of section eighty-three, or section eighty-eight any stockholder to whom the corporation was required to give such notice shall demand in writing from the corporation taking such action, or in the case of a consolidation or merger from the resulting or surviving corporation, payment for his stock, the corporation upon which such demand is made shall pay to him the fair value of his stock within thirty days after the expiration of the period during which such demand may be made. (Last amended by Ch. 749, L. '73. eff. 10-8-73.) Section 90 [DETERMINATION OF VALUE OF STOCK BY SUPERIOR COURT]. - If during the period of thirty days provided for in section eighty-nine the corporation upon which such demand is made and any such objecting stockholder fail to agree as to the value of such stock, such corporation or any such stockholder may within four months after the expiration of such thirty-day period demand a determination of the value of the stock of all such objecting stockholders by a bill in equity filed in the superior court in the county where the corporation in which such objecting stockholder held stock had or has its principal office in the commonwealth. Section 91 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF ETC; PARTIES TO BILL ETC; SERVICE OF BILL ON CORPORATION; NOTICE TO STOCKHOLDER PARTIES ETC. - If the bill is filed by the corporation, it shall name as parties respondent all stockholders who have demanded payment for their shares and with whom the corporation has not reached agreement as to the value thereof. If the bill is filed by a stockholder, he shall bring the bill in his own behalf and in behalf of all other stockholders who have demanded payment for their shares and with whom the corporation has not reached agreement as to the value thereof, and service of the bill shall be made upon the corporation by subpoena with a copy of the bill annexed. The corporation shall file with its answer a duly verified list of all such other stockholders, and such stockholders shall thereupon be deemed to have been added as parties to the bill. The corporation shall give notice in such form and returnable on such date as the court shall order to each stockholder party to the bill by registered or certified mail, addressed to the last known address of such stockholder as shown in the records of the corporation, and the court may order such additional notice by publication or otherwise as it deems advisable. Each stockholder who makes demand as provided in section eighty-nine shall be deemed to have consented to the provisions of this section relating to notice, and the giving of notice by the corporation to any such stockholder in compliance with the order of the court shall be a sufficient service of process on him. Failure to give notice to any stockholder making demand shall not invalidate the proceedings as to other stockholders to whom notice was properly given, and the court may at any time before the entry of a final decree make supplementary orders of notice. Section 92 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC; ENTRY OF DECREE DETERMINING VALUE OF STOCK; DATE ON WHICH VALUE IS TO BE DETERMINED. - After hearing the court shall enter a decree determining the fair value of the stock of those stockholders who have become entitled to the valuation of and payment for their shares, and shall order the corporation to make payment of such value, together with interest, if any, as hereinafter provided, to the stockholders entitled thereto upon the transfer by them to the corporation of the certificates representing such stock if certificated or if uncertificated, upon receipt of an instruction transferring such stock to the corporation. For this purpose, the value of the shares shall be determined as of the day preceding the date of the vote approving the proposed corporate action and shall be exclusive of any element of value arising from the 2 expectation or accomplishment of the proposed corporate action. (Last amended by Ch. 522, L. '83, eff. 3-1-84.) Section 93 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; COURT MAY REFER BILL, ETC., TO SPECIAL MASTER TO HEAR PARTIES, ETC. - The court in its discretion may refer the bill or any question arising thereunder to a special master to hear the parties, make findings and report the same to the court, all in accordance with the usual practice in suits in equity in the superior court. Section 94 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; STOCKHOLDER PARTIES MAY BE REQUIRED TO SUBMIT THEIR STOCK CERTIFICATES FOR NOTATION THEREON OF PENDENCY OF BILL, ETC. - On motion the court may order stockholder parties to the bill to submit their certificates of stock to the corporation for notation thereon of the pendency of the bill, and may order the corporation to note such pendency in its records with respect to any uncertificated shares held by such stockholder parties, and may on motion dismiss the bill as to any stockholder who fails to comply with such order. (Last amended by Ch. 522, L. '83, eff. 3-1-84.) Section 95 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; TAXATION OF COSTS, ETC.; INTEREST ON AWARD, ETC. - The costs of the bill, including the reasonable compensation and expenses of any master appointed by the court, but exclusive of fees of counsel or of experts retained by any party, shall be determined by the court and taxed upon the parties to the bill, or any of them, in such manner as appears to be equitable, except that all costs of giving notice to stockholders as provided in this chapter shall be paid by the corporation. Interest shall be paid upon any award from the date of the vote approving the proposed corporate action, and the court may on application of any interested party determine the amount of interest to be paid in the case of any stockholder. (Last amended by Ch. 685, L. '65, eff. 10-1-65.) Section 96 STOCKHOLDER DEMANDING PAYMENT FOR STOCK NOT ENTITLED TO NOTICE OF STOCKHOLDERS' MEETINGS OR TO VOTE STOCK OR TO RECEIVE DIVIDENDS, ETC.; EXCEPTIONS. - Any stockholder who has demanded payment for his stock as provided in this chapter shall not thereafter be entitled to notice of any meeting of stockholders or to vote such stock for any purpose and shall not be entitled to the payment of dividends or other distribution on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the date of the vote approving the proposed corporate action) unless: (1) A bill shall not be filed within the time provided in section ninety; (2) A bill, if filed, shall be dismissed as to such stockholder; or (3) Such stockholder shall with the written approval of the corporation, or in the case of a consolidation or merger, the resulting or surviving corporation, deliver to it a written withdrawal of his objections to and an acceptance of such corporate action. 3 Section 97 CERTAIN SHARES PAID FOR BY CORPORATION TO HAVE STATUS OF TREASURY STOCK, ETC. - The shares of the corporation paid for by the corporation pursuant to the provisions of this chapter shall have the status of treasury stock or in the case of a consolidation or merger the shares or the securities of the resulting or surviving corporation into which the shares of such objecting stockholder would have been converted had he not objected to such consolidation or merger shall have the status of treasury stock or securities. (Last amended by Ch. 685, L. '65, eff. 10-1-65.) Section 98 ENFORCEMENT BY STOCKHOLDER OF RIGHT TO RECEIVE PAYMENT FOR HIS SHARES TO BE EXCLUSIVE REMEDY; EXCEPTION. - The enforcement by a stockholder of his right to receive payment for his shares in the manner provided in this chapter shall be an exclusive remedy except that this chapter shall not exclude the right of such stockholder to bring or maintain an appropriate proceeding to obtain relief on the ground that such corporate action will be or is illegal or fraudulent as to him. (Last amended by Ch. 685, L. '65, eff. 10-1-65.) 4