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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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SPINE-TECH, INC.
(NAME OF SUBJECT COMPANY)
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SPINE-TECH, INC.
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
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8488927 10 9
(CUSIP Number of Class of Securities)
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DAVID W. STASSEN
CHIEF EXECUTIVE OFFICER AND PRESIDENT
SPINE-TECH, INC.
7375 BUSH LAKE ROAD
MINNEAPOLIS, MINNESOTA 55439
(612) 832-5600
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person Filing Statement)
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COPIES TO:
W. SMITH SHARPE, ESQ.
FAEGRE & BENSON LLP
2200 NORWEST CENTER
90 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA
(612) 336-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Spine-Tech, Inc., a Minnesota corporation
(the "Company"), and the address of its principal executive offices is 7375 Bush
Lake Road, Minneapolis, Minnesota 55439. The title of the class of equity
securities to which this Statement relates is the common stock, $.01 par value
per share (the "Common Stock"), of the Company and the associated preferred
share purchase rights (together with the Common Stock, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by Sulzer Medica Orthopedics
Acquisition Corp., a Minnesota corporation ("Purchaser"), an indirect wholly
owned subsidiary of Sulzer Medica Ltd, a corporation organized under the laws of
Switzerland ("Parent"), described in a Tender Offer Statement on Schedule 14D-1,
dated December 19, 1997 (the "Schedule 14D-1"), to acquire all outstanding
Shares at a price of $52.00 per Share, net to the seller in cash, without
interest thereon (the "Per Share Amount"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 19, 1997 (the
"Offer to Purchase"), and the related letter of transmittal (which, together
with the Offer to Purchase, constitute the "Offer" and are contained within the
Schedule 14D-1).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 15, 1997 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, that as promptly
as practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, Purchaser will be merged with and into the Company (the
"Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation") and an indirect wholly owned subsidiary of Parent. A
copy of the Merger Agreement is filed herewith as Exhibit 1 and is incorporated
herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are located at Zurcherstrasse 12, 8401 Winterthur,
Switzerland.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b)(1) Certain contracts, agreements, arrangements and understandings
between the Company or its affiliates and its executive officers, directors or
affiliates are set forth under the captions "Right to Designate Directors;
Purchaser Designees," "Board of Directors and Executive Officers," "Report of
the Compensation Committee," "Executive Compensation," "Compensation
Arrangements" and "Security Ownership of Principal Shareholders and Management"
in the Information Statement Pursuant to Section 14(f) of the Securities and
Exchange Act of 1934 and Rule 14f-1 Thereunder dated December 19, 1997 (the
"Information Statement") attached hereto as Annex I and incorporated herein by
reference.
(b)(2) Descriptions of (i) the Merger Agreement, (ii) the Confidentiality
Agreement and (iii) the Employment Agreements entered into between the Company
and each of David W. Stassen, Paul R. Lunsford, Douglas W. Kohrs, Keith M.
Eastman, Richard C. Jansen and David L. Shaw are set forth below. Except as
described in this Item 3(b), there are no material contracts, agreements,
arrangements or understandings, or any potential or actual conflicts of interest
between the Company or its affiliates and the Company, Parent, Purchaser or any
of their respective executive officers, directors or affiliates.
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THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as Exhibit 1 hereto. Such summary is qualified in its entirety by reference to
the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable, but in no event later than five business days after
the initial public announcement of Purchaser's intention to commence the Offer
provided (i) the Merger Agreement is not terminated by its terms and (ii) none
of the events described below in "Conditions to the Offer" have occurred or are
existing. The obligation of Purchaser to accept for payment and pay for the
Shares tendered pursuant to the Offer is subject to the satisfaction of (i)
there being validly tendered and not withdrawn prior to expiration of the Offer
at least a majority of the Shares then outstanding on a fully diluted basis (the
"Minimum Condition") and (ii) certain other conditions described below in
"Conditions to the Offer". The Purchaser may waive any condition to the Offer,
increase the price per Share payable in the Offer and make any other changes to
the Offer. However, no change may (i) decrease the price per Share payable in
the Offer, (ii) reduce the maximum number of Shares to be purchased, (iii)
change the form of consideration to be paid in the Offer, (iv) modify the
conditions described below in "Conditions to the Offer", (v) impose conditions
to the Offer other than those described below in "Conditions to the Offer", or
(vi), except as provided in the following sentence, extend the Offer. The
Purchaser may, without the consent of the Company, (i) extend the Offer beyond
the scheduled expiration date (the initial scheduled expiration date being
January 21, 1998), if, at the scheduled expiration date, any of the conditions
to Purchaser's obligation to accept for payment, and to pay for, the Shares,
will not be satisfied or waived, (ii) extend the Offer for any period required
by any rule, regulation or interpretation of the Securities and Exchange
Commission (the "Commission") or the staff thereof applicable to the Offer or
(iii) extend the Offer for an aggregate period of not more than five business
days beyond the latest applicable date that would otherwise be permitted under
clause (i) or (ii) of this sentence, if as of such date, all of the conditions
to Purchaser's obligations to accept for payment, and to pay for, the Shares are
satisfied or waived, but the number of Shares validly tendered and not withdrawn
pursuant to the Offer equals 80% or more, but less than 90%, of the outstanding
Shares. The Per Share Amount will, subject to the applicable withholding of
taxes, be net to the seller in cash, upon the terms and conditions of the Offer.
Subject to the terms and conditions of the Offer, Purchaser shall, and Parent
will cause Purchaser to, promptly after expiration of the Offer, accept for
payment and pay for all Shares validly tendered and not withdrawn.
CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Offer,
Purchaser is not required to accept for payment or pay for any Shares tendered
pursuant to the Offer, and may terminate or amend the Offer and may postpone the
acceptance for payment of and payment for Shares tendered, if (i) the Minimum
Condition is not satisfied after the Offer has remained open for at least 20
business days, (ii) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") has not expired or terminated
prior to the expiration of the Offer, or (iii) at any time on or after the date
of the Merger Agreement, and prior to the acceptance for payment of Shares, any
of the following conditions exist:
(a) there will have been threatened or instituted by any governmental
authority any action or proceeding before any court or governmental,
administrative or regulatory authority or agency of competent jurisdiction,
domestic or foreign, (i) challenging or seeking to make illegal, materially
delay or otherwise directly or indirectly restrain or prohibit or make
materially more costly the making of the Offer, the acceptance for payment
of, or payment for, any Shares by Parent, Purchaser or any other affiliate
of Parent, or the consummation of any other transaction contemplated by the
Offer or Merger, or seeking to obtain material damages in connection with
any transaction contemplated by the Offer or Merger; (ii) seeking to
prohibit or limit materially the ownership or operation by the Company,
Parent or any of their subsidiaries of all or any material portion of the
business or assets of the Company, Parent or any of their subsidiaries, or
to compel the Company, Parent or any of their subsidiaries to dispose of or
hold separate all or any portion of the business or assets of the Company,
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Parent or any of their subsidiaries, as a result of the transaction
contemplated by the Offer or Merger; (iii) seeking to impose or confirm
limitations on the ability of Parent, Purchaser or any other affiliate of
Parent to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by
Purchaser pursuant to the Offer or otherwise on all matters properly
presented to the Company's shareholders, including, without limitation, the
approval and adoption of the Merger Agreement and the transaction
contemplated by the Offer or Merger; (iv) seeking to require divestiture by
Parent, Purchaser or any other affiliate of Parent of any Shares; or (v)
which otherwise gives rise to any circumstance, change in or effect on the
Company or any Subsidiary that is, or is reasonably likely to be, materially
adverse to the business, financial condition, results of operations, assets
or liabilities (including, without limitation, contingent liabilities) of
the Company and the Subsidiaries, taken as a whole ("Material Adverse
Effect").
(b) there will have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate of
Parent or the Company or (ii) any transaction contemplated by the Offer or
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign, other
than the routine application of the waiting period provisions of the HSR Act
to the Offer or the Merger, which is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above, except that the Offer may not be terminated or
amended solely because of a temporary order or injunction unless it is not
lifted within 20 days after being issued;
(c) there will have occurred any changes, conditions, events or
developments that have, individually or in the aggregate, a Material Adverse
Effect;
(d) there will have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or Switzerland, or (iii)
any limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency of the United States or
Switzerland on the extension of credit by banks or other lending
institutions;
(e) (i) it will have been publicly disclosed or Purchaser has otherwise
learned that beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of
more than 20% of the then outstanding Shares has been acquired by any
person, other than Parent or any of its affiliates or (ii) (A) the Board or
any committee thereof has withdrawn or modified in a manner adverse to
Parent or Purchaser the approval or recommendation of the Offer, the Merger
or the Merger Agreement, or approved or recommended any acquisition proposal
or any other acquisition of Shares other than the Offer or the Merger or (B)
the Board or any committee thereof has resolved to do any of the foregoing;
(f) the representations or warranties of the Company in the Merger
Agreement will not be true and correct, ignoring for this purpose any
qualification as to materiality or Material Adverse Effect, as if such
representations or warranties were made as of such time on or after the date
of this Agreement, except where the failure to be so true and correct,
individually and in the aggregate, would not have a Material Adverse Effect;
(g) the Company has failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Agreement;
(h) the Agreement has been terminated in accordance with its terms; or
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(i) Purchaser and the Company have agreed that Purchaser will terminate
the Offer or postpone the acceptance for payment of or payment for Shares
thereunder;
which, in the reasonable good faith judgment of Purchaser in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
any of its affiliates) giving rise to any such condition, makes it inadvisable
to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their sole discretion. The
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights will not be deemed a waiver of any such right; the waiver of any such
right with respect to particular facts and other circumstances will not be
deemed a waiver with respect to any other facts and circumstances; and each such
right will be deemed an ongoing right that may be asserted at any time and from
time to time.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the Minnesota Business
Corporation Act ("Minnesota Law"), Purchaser will be merged with and into the
Company and the Company will continue as the Surviving Corporation and will
become an indirect wholly owned subsidiary of Parent. The date and time of the
filing of articles of merger causing the Merger to be consummated will be the
"Effective Time." Upon consummation of the Merger, each issued and outstanding
Share (other than any Shares held in the treasury of the Company or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company and any outstanding Shares which are held by shareholders who
have not voted in favor of the Merger and who have properly exercised
dissenters' rights with respect to such Shares in accordance with Minnesota Law)
will be converted automatically into the right to receive the Per Share Amount
in cash. Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
CHARTER DOCUMENTS; INITIAL DIRECTORS AND OFFICERS. The Merger Agreement
provides that, at the Effective Time, the Articles of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, will be the
Articles of Incorporation of the Surviving Corporation; PROVIDED, HOWEVER, that
Article I of the Articles of Incorporation of the Surviving Corporation will be
amended to read as follows: "The name of the corporation is Spine-Tech, Inc."
The Merger Agreement also provides that the By-laws of Purchaser, as in effect
immediately prior to the Effective Time, will be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Articles of
Incorporation of the Surviving Corporation and such By-laws. Pursuant to the
Merger Agreement, the directors of Purchaser immediately prior to the Effective
Time will be the initial directors of the Surviving Corporation and the officers
of the Purchaser immediately prior to the Effective Time will be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified in accordance with
the Articles of Incorporation and By-laws of the Surviving Corporation and
Minnesota Law.
SHAREHOLDERS' MEETING. The Merger Agreement provides that, if required by
applicable law in order to consummate the Merger, the Company, acting through
the Board, will, in accordance with applicable law and its Articles of
Incorporation and By-Laws, duly call, give notice of, convene and hold a special
meeting of its shareholders as soon as practicable following consummation of the
Offer for the purpose of considering and taking action on the Merger Agreement
and the transactions contemplated thereby. Notwithstanding the foregoing, in the
event that Purchaser acquires at least 90% of the then outstanding Shares, the
parties have agreed, subject to the conditions to the Merger described below, to
take all necessary and appropriate action to cause the Merger to become
effective, in accordance with Section 302A.621 of Minnesota Law, as soon as
reasonably practicable after such acquisition, without a meeting of the
shareholders of the Company.
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FILINGS. The Merger Agreement provides that the Company will, as promptly
as reasonably practicable following consummation of the Offer and if required by
applicable law, file a proxy statement with the Commission, and will use its
reasonable efforts to have the proxy statement cleared by the Commission. The
Company has agreed that, except if the Board determines in good faith an
alternative action is necessary in accordance with its fiduciary duties to the
Company and its shareholders under applicable law after consultation with its
outside legal counsel, the proxy statement will contain the recommendation of
the Board that the holders of the Shares approve and adopt the Merger Agreement
and the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has agreed that, between the date of the Merger Agreement and the
Effective Time, except as set forth in the disclosure schedule of the Company or
as expressly contemplated by any other provision of the Merger Agreement, unless
Parent or Purchaser otherwise agree in writing, the businesses of the Company
and its subsidiaries will be conducted only in, and the Company and its
subsidiaries will not take any action with respect to their businesses except
in, the ordinary course of business; and each of the Company and its
subsidiaries will use its reasonable efforts to preserve substantially intact
the business organization of the Company and its subsidiaries, to keep available
the services of the current officers, employees and consultants of the Company
and its subsidiaries, and to preserve the current relationships of the Company
and its subsidiaries with physicians, customers, suppliers and other persons
with which the Company or any of its subsidiaries has significant business
relations. By way of amplification and not limitation, except as contemplated by
the Merger Agreement, neither the Company nor any subsidiary thereof will,
between the date of the Merger Agreement and the Effective Time, directly or
indirectly do any of the following without the prior written consent of Parent
or Purchaser:
(a) amend or otherwise change its Articles of Incorporation or By-laws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares
of capital stock of the Company or any of its subsidiaries, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any of its
subsidiaries (except for the issuance of Shares issuable pursuant to
outstanding options as of the date of the Merger Agreement, 6,500 Shares to
be issued pursuant to the Company's employee stock purchase plan and any
Shares required to be issued under the Rights Agreement, dated as of August
21, 1996, between the Company and Norwest Bank Minnesota, N.A. (the "Rights
Agreement")) or (ii) any assets of the Company or any of its subsidiaries,
except in the ordinary course of the business consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock except that any subsidiary of the Company may declare and pay
a dividend to the Company;
(d) reclassify, combine, split, subdivide or redeem any of its capital
stock, or purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof; (ii) incur
any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, except in
the ordinary course of business; (iii) enter into any material contract or
agreement other than in the ordinary course of business; (iv) authorize any
single capital expenditure which is in excess of $100,000 or capital
expenditures which are, in the aggregate, in excess of $250,000 for the
Company and its subsidiaries taken as a whole; or (v) enter into or amend
any contract, agreement, commitment or arrangement with respect to any of
the foregoing matters;
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(f) increase the compensation payable or to become payable or the
benefits provided to its officers or key employees, or grant any severance
or termination pay to, or enter into any employment or severance agreement
with, any director or officer or other key employee of the Company or any of
its subsidiaries, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or similar plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except to
the extent such endorsement or termination is required by law;
(g) subject to certain exceptions, hire or retain any single employee or
consultant at an annual rate of compensation in excess of $50,000, or
employees or consultants with annual rates of compensation in excess of
$250,000 in the aggregate;
(h) take any action, other than in the ordinary course of business
consistent with past practice, with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivable);
(i) make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability;
(j) commence or settle any litigation, suit, claim, action, proceeding
or investigation;
(k) amend, modify or consent to the termination of any material contract
or amend, modify or consent to the termination of the Company's or any of
its subsidiary's rights thereunder, in a manner materially adverse to the
Company or any of its subsidiaries, other than in the ordinary course of
business consistent with past practice;
(l) enter into any material contract, other than in the ordinary course
of business; or
(m) enter into any contract or agreement that contemplates the transfer
by the Company of any interest in certain owned or licensed intellectual
property.
DIRECTORS. The Merger Agreement provides that, promptly upon the purchase
by Purchaser of the Shares pursuant to the Offer (provided that the Minimum
Condition has been satisfied), and from time to time thereafter, Purchaser will
be entitled, subject to compliance with Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), to designate up to such number of
directors, rounded down to the next whole number (except where such rounding
down would cause Purchaser to not be entitled to designate at least a majority
of directors on the Board, in which case such number will be rounded up), on the
Board as will give Purchaser representation on the Board equal to the product of
the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Purchaser or any affiliate of
Purchaser following such purchase bears to the total number of Shares then
outstanding, and the Company will, at such time, promptly take all actions
necessary to cause Purchaser's designees to be elected or appointed as directors
of the Company, including increasing the size of the Board or securing the
resignations of incumbent directors or both. At such times, the Company will,
upon the written request of Purchaser, use its reasonable efforts to cause
persons designated by Purchaser to constitute the same percentage as persons
designated by Purchaser will constitute of the Board of (i) each committee of
the Board, (ii) the board of directors of each of the Company's subsidiaries and
(iii) each committee of each such board, in each case only to the extent
permitted by applicable law. Notwithstanding anything stated herein, if Shares
are purchased pursuant to the Offer, Parent and Purchaser will use reasonable
efforts to assure that until the Effective Time, the Board has at least one
director who is a director on the date of the Merger Agreement and is not an
employee of the Company.
Pursuant to the Merger Agreement, after the election of designees of
Purchaser pursuant to the preceding paragraph and prior to the Effective Time,
any amendment of the Merger Agreement or the
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Articles of Incorporation or By-laws of the Company, any termination of the
Merger 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 Purchaser
or waiver of any of the Company's rights thereunder will require the concurrence
of a majority of the directors of the Company then in office who neither were
designated by Purchaser nor are employees of the Company.
NO SOLICITATION. The Company has agreed that it will, and will direct and
use all reasonable efforts to cause its officers, directors, employees,
representatives and agents to, immediately cease any discussions or negotiations
with any parties that may be ongoing with respect to any Acquisition Proposal
(as defined below). The Company will not, nor will it permit any of its
subsidiaries to, nor will it authorize or permit any officer, director or
employee of, or any investment banker, accountant, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit or initiate, or knowingly encourage the submission of,
any Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate the making of any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal; PROVIDED, HOWEVER,
that, if and to the extent that, prior to the acceptance for payment of Shares
pursuant to the Offer, the Board determines in good faith that it is necessary
to do so in accordance with its fiduciary duties to the Company and its
shareholders under applicable law after consultation with its outside legal
counsel, the Company may, in response to a bona fide unsolicited Acquisition
Proposal, and subject to compliance with the notice requirements described
below, (x) furnish information with respect to the Company and provide access to
the person making such Acquisition Proposal pursuant to a customary
confidentiality agreement on terms no less favorable to the Company than those
contained in the confidentiality agreement described below between Parent and
the Company and (y) participate in discussions and negotiations regarding such
Acquisition Proposal.
For purposes of the Merger Agreement, "ACQUISITION PROPOSAL" means any bona
fide proposal or offer from any person relating to any direct or indirect
acquisition of over 20% of any class of equity securities of the Company or any
of its subsidiaries, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 20% or more of any class of
equity securities of the Company or any of its subsidiaries, or any merger,
consolidation, business combination, sale of all or a substantial part of the
assets other than in the ordinary course of business, recapitalization,
liquidation, dissolution or similar transaction involving the Company and its
subsidiaries, other than the transactions contemplated by the Offer and the
Merger.
The Merger Agreement also provides that neither the Board nor any committee
thereof will (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by the Board or any
such committee of the Offer, the Merger Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that, prior to the time of
acceptance for payment of Shares pursuant to the Offer, the Board determines in
good faith that it is necessary in accordance with its fiduciary duties to the
Company and its shareholders under applicable law after consultation with its
outside legal counsel to enter into a definitive agreement with respect to a
Superior Proposal (as defined below), the Board may terminate the Merger
Agreement in accordance with clause d(ii) of "Termination" below and
concurrently with, or immediately after, such termination cause the Company to
enter into such agreement with respect to such Superior Proposal and withdraw or
modify its approval or recommendation of the Offer, the Merger or the Merger
Agreement. For purposes of the Merger Agreement, a "SUPERIOR PROPOSAL" means any
bona fide unsolicited proposal made by a third party to acquire, directly or
indirectly, more than 50% of the outstanding Shares or the shares of capital
stock of any surviving corporation in a merger with the Company on a fully
diluted basis or all or substantially all the assets of the Company and
otherwise on terms which the Board determines in its good faith judgment (after
consultation with its financial advisor) to be more favorable to the Company's
shareholders than the Offer and the Merger.
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The Merger Agreement provides that the Company will promptly advise Parent
orally and in writing of any request for information or of any Acquisition
Proposal and the material terms and conditions of such request or Acquisition
Proposal but need not identify the person making such request or Acquisition
Proposal.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that the Articles of Incorporation and By-laws of the
Surviving Corporation will contain provisions no less favorable with respect to
indemnification, expense advancement and exculpation than are set forth in
Section 4.01 of the By-laws or in the Articles of Incorporation of the Company,
which provisions will not be amended, repealed or otherwise modified for a
period of six years from the Effective Time (or, in the event any claim is
asserted within such six year period, until final disposition of that claim) in
any manner that would affect adversely the rights thereunder of individuals who
at the Effective Time or at any time prior thereto were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification is
required by Minnesota Law. To the extent that the obligations under such
provisions are not fully performed by the Surviving Corporation, Parent has
agreed to perform fully the obligations thereunder for the remaining period.
Parent or the Surviving Corporation will use its best efforts to maintain in
effect for a period of not less than six years from the Effective Time the
current directors' and officers' liability insurance policies maintained by the
Company (provided that Parent or the Surviving Corporation may substitute
therefor policies of at least the same coverage containing terms and conditions
which are no less favorable to such directors and officers) with respect to
matters occurring prior to the Effective Time. Notwithstanding the foregoing, in
no event will Parent or the Surviving Corporation be required to expend more
than an amount per year equal to 150% of current annual premiums paid by the
Company for such insurance (which premiums the Company has represented and
warranted to be $120,000 in the aggregate); and, PROVIDED, FURTHER, that if the
Parent or the Surviving Corporation is not able to obtain the amount of
insurance for such aggregate premium, Parent or the Surviving Corporation will
obtain as much insurance as can be obtained for an annual premium of 150% of
such current premiums.
RIGHTS PLANS. Pursuant to the Merger Agreement, the Company will not redeem
any preferred share purchase rights issued pursuant to the Rights Agreement (the
"Rights") prior to the Effective Time unless the Merger Agreement has terminated
as provided below or unless required to do so by order of a court of competent
jurisdiction. The Board agrees to take, or cause to be taken, such action as is
necessary to effect the amendments to the Rights Agreement so that (a) none of
the execution or delivery of this Agreement, the making of the Offer, the
acceptance for payment or payment for Shares by Purchaser pursuant to the Offer
or the consummation of the Merger or any other transaction contemplated by the
Merger Agreement will result in (i) the occurrence of the "flip-in event"
described under Section 11 of the Rights Agreement, (ii) the occurrence of the
"flip-over event" described in Section 13 of the Rights Agreement, or (iii) the
Rights becoming evidenced by, and transferable pursuant to, certificates
separate from the certificates representing Common Stock, and (b) the Rights
will expire pursuant to the terms of the Rights Agreement at the Effective Time.
EMPLOYEE STOCK OPTIONS. The Merger Agreement provides that the Company will
take all such actions as necessary to cause all stock options (including any
related alternative rights) granted under the Company's stock option plans
(including those granted to current or former employees, consultants and
directors of the Company or any of its subsidiaries) (the "Employee Stock
Options"), to become exercisable either prior to the purchase of the Shares
pursuant to the Offer or immediately prior to the Effective Time, as permitted
under the respective stock option plan. The Company agrees to take all such
actions as necessary to cause all Employee Stock Options that are outstanding
immediately prior to the Effective Time (whether or not then presently
exercisable or vested), to be cancelled. In exchange for the cancellation of
each such Employee Stock Option (whether or not presently exercisable or
vested), the holder thereof will be entitled to receive from the Company an
amount in cash equal to the product of the
8
difference between the Per Share Amount and the per share exercise price of such
Employee Stock Option, and the number of shares of Common Stock covered by such
Employee Stock Option. All payments in respect of Employee Stock Options will be
made not later than five business days after the Effective Time, subject to the
Company's collection of all applicable withholding taxes. The Company's stock
option plans will be terminated as of the Effective Time and thereafter the only
rights of participants therein will be the right to receive the consideration
set forth in the previous sentence.
S&N OPTIONS. The Merger Agreement provides that all stock options
(including any related alternative rights) issued to Smith & Nephew Richards
Inc. by the Company (the "S&N Options") will vest, terminate, become exercisable
and be cancelled according to their terms and conditions. The Company will take
all necessary action to cause all S&N Options that are outstanding immediately
prior to the Effective Time (whether or not then presently exercisable and
vested) to be cancelled. In exchange for the cancellation of each S&N Option,
the holder of the S&N Options (whether or not then presently exercisable or
vested) will be entitled to receive from the Company an amount in cash equal to
the product of the difference between the Per Share Amount and the per share
exercise price of such S&N Option, and the number of shares of Common Stock
covered by such S&N Option.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the Company's corporate organization and
qualification, capitalization, authority, filings with the Commission and other
governmental authorities, financial statements, litigation, employment benefit
matters, intellectual property, property, taxes, insurance, environmental
matters, material contracts, compliance with law and amendments to the Rights
Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER. The Merger Agreement provides
that the respective obligations of each party to effect the Merger are subject
to the following conditions: (a) the Merger Agreement and the Merger will have
been approved and adopted by the affirmative vote of the shareholders of the
Company to the extent required by Minnesota Law and the Articles of
Incorporation of the Company; (b) any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act will have expired
or been terminated; (c) no foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state court
of competent jurisdiction will have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the acquisition of Shares by Parent or Purchaser or any
affiliate of either of them illegal or otherwise restricting, preventing or
prohibiting consummation of the Offer or the Merger; and (d) Purchaser or its
permitted assignee will have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; PROVIDED, HOWEVER, that the obligation of
Parent and Purchaser to effect the Merger will not be subject to the condition
set forth in clause (d) above if the failure of Purchaser to purchase the Shares
pursuant to the Offer will have constituted a breach of the Offer or the Merger
Agreement.
TERMINATION. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated thereby may be abandoned at any time prior to
the Effective Time, notwithstanding any requisite approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the shareholders
of the Company: (a) by mutual written consent of Parent, Purchaser and the
Company duly authorized by the Boards of Directors of Parent, Purchaser and the
Company; or (b) by Parent, Purchaser or the Company if (i) the Shares shall not
have been accepted for payment pursuant to the Offer on or before March 31,
1998; PROVIDED, HOWEVER, that the right to terminate the Merger Agreement
pursuant to the foregoing is not available to any party whose failure to fulfill
any obligation under the Merger Agreement has been the cause of, or resulted in,
the failure of the Shares to have been accepted for payment on or before such
date nor be available to Parent or Purchaser unless the failure to accept Shares
for payment pursuant to the Offer resulted from the failure of any one of the
conditions described
9
above in "Conditions to the Offer" to have been satisfied; or (ii) any court of
competent jurisdiction or other governmental authority will have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable or, if a temporary order, shall not
have been lifted within 20 days of being issued; or (c) by Parent if due to an
occurrence or circumstance, other than as a result of a breach by Parent or
Purchaser of their obligations hereunder, resulting in a failure to satisfy any
condition described above in "Conditions to the Offer", Purchaser has (i) failed
to commence the Offer within 30 days following the date of the Merger Agreement
or (ii) terminated the Offer without having accepted any Shares for payment
thereunder; or (d) by the Company, upon approval of the Board, if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any of the
conditions described above in "Conditions to the Offer", Purchaser has
terminated the Offer without having accepted any Shares for payment thereunder
or (ii) prior to the purchase of Shares pursuant to the Offer, if the Board
determines in good faith, after giving effect to any concessions that may be
offered by Parent, that it is necessary to do so in accordance with its
fiduciary duties to the Company and its shareholders under applicable law after
consultation with its outside legal counsel in order to enter into a definitive
agreement with respect to a Superior Proposal, upon five days' prior written
notice to Parent, setting forth in reasonable detail the final terms and
conditions of, the Superior Proposal (but the Company will not be required to
disclose the identity of the person making the Superior Proposal); PROVIDED,
HOWEVER, that any termination of the Merger Agreement pursuant to the foregoing
is not effective until the Company has made full payment of all amounts
described in "Fees and Expenses" below.
FEES AND EXPENSES. The Merger Agreement provides that (a) in the event that
(i) any person (including, without limitation, the Company or any affiliate
thereof), other than Parent or any affiliate of Parent, has become the
beneficial owner of more than 20% of the then outstanding Shares; and the Merger
Agreement has been terminated as described in "Termination" above; or (ii) any
person has publicly made or communicated to the Company an Acquisition Proposal
that is publicly disclosed and the Board will have either (A) withdrawn, amended
or modified its recommendation of the Offer in a manner adverse to Parent and
Purchaser, (B) recommended such Acquisition Proposal or (C) taken any action
with respect to the Rights Agreement to facilitate such Acquisition Proposal,
and (x) the Offer will have remained open for at least 20 business days, (y) the
Minimum Condition will not have been satisfied and (z) the Merger Agreement will
have been terminated as described in "Termination" above; or (iii) the Merger
Agreement is terminated as described in clause (d)(ii) of "Termination" above;
or (iv) the Company enters into an agreement with respect to an Acquisition
Proposal or an Acquisition Proposal is consummated, in each case within 18
months after the termination of the Merger Agreement as described in clause
(b)(i), (c) or (d)(i) of "Termination" above, which termination resulted from a
breach by the Company of its obligations thereunder, resulting in a failure to
satisfy any condition as described above in "Conditions to the Offer", and the
Company will not theretofore have been required to pay the Fee to Parent
pursuant to clause (a)(i), (a)(ii) or (a)(iii) hereof; then, in any such event,
the Company will pay Parent promptly (but in no event later than one business
day after the first of such events shall have occurred) a fee of $15,000,000
(the "Fee"), which amount shall be payable in immediately available funds, plus
all Expenses (as hereinafter defined). In no event will more than one Fee be
payable under the foregoing.
The Company will, at such time as a Fee is required to be paid, reimburse
each of Parent, Purchaser and their respective shareholders and affiliates (not
later than one business day after submission of statements therefor) for up to
$5,000,000 of actual and documented out-of-pocket expenses (including, without
limitation, fees and expenses payable to all banks, investment banking firms,
other financial institutions and other persons and their respective agents and
counsel, for arranging, committing to provide or providing any financing for the
transactions contemplated by the Offer or Merger or structuring the transactions
contemplated by the Offer or Merger and all fees of counsel, accountants,
experts and consultants to Parent, Purchaser and their respective shareholders
and affiliates, and all printing and advertising expenses) actually incurred or
accrued by either of them or on their behalf in connection with
10
the transactions contemplated by the Offer or Merger, including, without
limitation, the financing thereof, and actually incurred by banks, investment
banking firms, other financial institutions and other persons and assumed by
Parent or Purchaser in connection with the negotiation, preparation, execution
and performance of the Merger Agreement, the structuring and financing of the
transactions contemplated by the Offer or Merger and any financing commitments
or agreements relating thereto (all of the foregoing being referred to herein
collectively as the "Expenses").
Except as set forth above, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated by the Offer and
Merger will be paid by the party incurring such expenses, whether or not any
transaction contemplated by the Offer or Merger is consummated.
In the event that the Company fails to pay the Fee or any Expenses when due,
the term "Expenses" shall be deemed to include the out-of-pocket costs and
expenses actually incurred or accrued by Parent and Purchaser (including,
without limitation, fees and out-of-pocket expenses of counsel) in connection
with the collection under and enforcement of the foregoing, together with
interest on such unpaid Fee and Expenses, commencing on the date that the Fee or
such Expenses became due, at a rate equal to the rate of interest publicly
announced by Citibank, N.A., from time to time, in The City of New York, as such
bank's Prime Rate plus 2.00%.
CONFIDENTIALITY AGREEMENT
On September 25, 1997 the Company and Parent entered into a confidentiality
agreement (the "Confidentiality Agreement"). The Confidentiality Agreement
contains customary provisions pursuant to which, among other matters, Parent and
the Company each agreed to keep confidential all non-public information
furnished to it by the other party (the "Confidential Information") and to use
such information solely in connection with a possible transaction involving the
Company and Parent. Parent also agreed not to use the Confidential Information
in connection with any trading in securities of the Company. Parent has agreed
in the Confidentiality Agreement that, for a period of eighteen months after the
date of the Confidentiality Agreement, neither it nor any of its affiliates
will, without the prior written consent of the Company, generally (i) acquire or
seek to acquire any of the Company's assets, other than in the ordinary course
of business, or voting stock representing in excess of 1% of the voting power of
the Company, other than in a confidential proposal to the Board of Directors of
the Company, (ii) solicit proxies with regard to the Company or (iii) otherwise
propose to influence or control management or policies of the Company or obtain
representation on the Company's Board of Directors. The foregoing summary of the
Confidentiality Agreement does not purport to be complete and is qualified in
its entirety by reference to the full text of the Confidentiality Agreement
which is filed herewith as Exhibit 2 and is incorporated herein by reference.
EMPLOYMENT AGREEMENTS
In connection with Parent's execution of the Merger Agreement, the Company
entered into employment agreements with each of David W. Stassen, Paul R.
Lunsford, Douglas W. Kohrs, Keith M. Eastman, Richard C. Jansen and David L.
Shaw (the "Executives"), each dated as of December 15, 1997 (the "Employment
Agreements"), that will become effective as of the Effective Time and will
become null and void if the Merger is not consummated by June 30, 1998. At the
Effective Time, the Employment Agreements will supersede the current employment
and/or management agreements between each Executive and the Company, which are
described in the Information Statement under the caption "Executive
Compensation--Compensation Arrangements." The following summary of the
Employment Agreements is qualified in its entirety by reference to the
Employment Agreements, which are filed herewith as Exhibits 3 through 8 and are
incorporated herein by reference.
Under the Employment Agreements, in exchange for full-time employment with
the Company, Mr. Stassen will receive an annual base salary of $260,000, Mr.
Lunsford will receive an annual base salary
11
of $180,000, Mr. Kohrs will receive an annual base salary of $165,000, Mr.
Eastman will receive an annual base salary of $150,000, Mr. Jansen will receive
an annual base salary of $140,000 and Mr. Shaw will receive an annual base
salary of $125,000. The annual base salaries payable under the Employment
Agreements generally equal the Executives' current base salaries and can be
increased at the direction of officers of affiliates of Parent. Each Executive
will also be eligible for an annual bonus based upon the attainment of annual
sales and operating income objectives. The minimum annual bonus that may be
earned based upon the attainment of sales and operating income thresholds for
each year is 50% of the Executive's annual base salary and the maximum annual
bonus that may be earned is 100% of the Executive's annual base salary. Each
Executive will also be eligible for a long-term bonus based upon the attainment
of sales and operating income objectives over the two-year period ending on
December 31, 1999. The minimum long-term bonus that may be earned based upon the
attainment of sales and operating income thresholds for the two-year period is
150% of the Executive's annual average base salary and the maximum long-term
bonus that may be earned is 300% of the Executive's annual average base salary.
The Employment Agreements have a two-year term unless earlier terminated. If
the Company terminates the Employment Agreement other than for Cause (as defined
in the Employment Agreement) or if the Executive resigns for Constructive
Discharge (as defined in the Employment Agreement) or in the case of death or
Permanent Disability (as defined in the Employment Agreement), the Company must
continue the Executive's base salary through the second anniversary of the
Effective Time and will pay a portion of the Executive's annual and long-term
bonuses as set out in the Employment Agreement. During the terms of the
Employment Agreements, the Executives will be eligible to participate in
Parent's Management Stock Option Plan and will be entitled to participate in
Parent's benefit plans and programs on the same basis and on the same level as
other senior executives of the Company.
The Employment Agreements contain provisions restricting the Executives
from, during a period ending on the earlier of four years from the Effective
Time and two years from the date of cessation of the Executive's employment with
the Company, (i) soliciting or contacting any customer of the Company or its
affiliates for a pursuit competitive with the Company or its affiliates or
otherwise attempting to interfere with the business of the Company or its
affiliates and (ii) becoming engaged in any orthopedic business competitive with
the Company or any affiliated orthopedic business of Parent, except that the
last year of Mr. Kohrs' noncompetition obligations relates only to spine
products. The Employment Agreements also provide that any Developments (as
defined in the Employment Agreements) that are conceived of by Executive during
his employment under his Employment Agreement will be the sole property of the
Company and its affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
At a meeting of the Board of Directors held on December 15, 1997, the Board
of Directors unanimously approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, and determined that
the terms of the Offer and the Merger are in the best interests of the Company
and its shareholders.
The Company's Board of Directors unanimously recommends that shareholders
accept the Offer and tender their shares pursuant to the Offer and approve and
adopt the Merger Agreement and the transactions contemplated by the Merger
Agreement, including the Merger, if a vote of shareholders is required to
complete the Merger.
A letter to the Company's shareholders communicating the Board of Directors'
recommendation and a press release announcing the Offer, the Merger and the
Merger Agreement are filed herewith as Exhibit 9 and Exhibit 10, respectively,
and are incorporated herein by reference.
12
(B) BACKGROUND REASONS FOR THE BOARD OF DIRECTORS' RECOMMENDATION.
BACKGROUND. In April 1997, David W. Stassen, the Chief Executive Officer
and President of the Company, was approached concerning the possibility of a
strategic alliance or business combination with another medical device company.
In response, officers of the two companies had preliminary discussions at the
end of April 1997 and during the month of May 1997. During that time period, Mr.
Stassen and Keith M. Eastman, Chief Financial Officer of the Company, together
with representatives of Piper Jaffray Inc. ("Piper Jaffray"), also met with a
second medical device company to explore whether it would have any interest in
pursuing a possible transaction.
On May 27, 1997, at a meeting of the Board of Directors, Mr. Stassen
discussed, and provided information concerning, a medical device company that
was interested in a possible transaction with the Company. The Board then heard
presentations by two investment banking firms and, after discussing the factors
involved in selecting a financial advisor and the relative qualifications of the
two firms, the Board determined to engage Piper Jaffray as the Company's
exclusive representative and financial advisor for the purpose of advising the
Company concerning certain strategic alternatives, including the possibility of
a business combination or other transaction.
As a result of discussions with Piper Jaffray concerning the companies that
might be most likely to be interested in effecting a possible transaction, the
Board authorized Piper Jaffray to approach five medical device companies
concerning their possible interest in a business combination or other strategic
alliance with the Company. Three of the medical device companies initially
expressed an interest in a possible transaction with the Company and signed
confidentiality agreements with the Company. During May, June and July 1997,
senior management of the Company, with the assistance of Piper Jaffray, had
discussions with all three of the interested medical device companies, including
the company that had originally expressed an interest in April 1997, concerning
a possible transaction. After these discussions, two of the companies determined
not to proceed and, at its July 22, 1997 Board meeting, Piper Jaffray reviewed
with the Board the status of a possible stock-for-stock business combination
with the medical device company that had originally contacted the Company in
April 1997. After discussion, the Board authorized management to pursue
discussions and negotiations regarding a possible transaction with that company.
After further discussions and negotiations, the medical device company that
had originally contacted the Company determined not to proceed with the
transaction for what the Company understands were internal business reasons. On
August 28, 1997, Piper Jaffray met with Mr. Stassen to consider alternatives.
During this time, management of the Company was also exploring possible
collaborations and/or acquisitions by the Company or a public offering to raise
additional capital.
Following the completion of its initial public offering in July 1997, Parent
conducted an industry-wide search for potential acquisition candidates within
areas it previously had targeted for expansion and identified the Company as one
of the most attractive acquisition candidates in the spinal field. As a result,
Parent began its review of publicly available information concerning the
Company.
In early September 1997, with the consent of the Company, Piper Jaffray
contacted four additional medical device companies, including Parent, concerning
their interest in effecting a possible transaction with the Company. Robert
Cohen, Vice President Business Development of Parent, indicated that Parent
would have an interest in pursuing discussions. The other three companies did
not express an interest. On September 25, 1997, the Company and Parent entered
into the Confidentiality Agreement described in Item 3(b) above, and Parent
began its review and analysis of non-public information supplied to it by the
Company. On October 7, 1997, Mr. Cohen indicated to Piper Jaffray that Parent
was interested in continuing to explore a possible transaction. Parent continued
its analysis of the Company throughout October 1997.
On October 14, 1997, Mr. Stassen, Mr. Eastman and Douglas W. Kohrs, Vice
President, Research and Development of the Company, a representative of Piper
Jaffray and Mr. Cohen and Jerry L. Marlar,
13
President Sulzer Orthopedics Inc., met in Houston. At the meeting, the Company's
representatives made a
presentation to Parent's representatives concerning the Company's operations,
including its product development.
On October 30, 1997, Fritz Fahrni, Chairman of the Parent, Andre P. Buchel,
the President and Chief Executive Officer of Parent, and Mr. Cohen met with
Messrs. Stassen, Eastman and Kohrs and a representative of Piper Jaffray in
Minneapolis to discuss the Company's operations, the possibility of a
transaction and the integration of the companies in the event of such a
transaction.
From November 3 through November 5, 1997, representatives of Parent and the
Company met in Minneapolis to facilitate Parent's due diligence review of the
Company. During those meetings, Mr. Cohen indicated to Mr. Stassen that Parent
was interested in continuing to explore a transaction. Following these meetings,
Parent continued its analysis of a possible acquisition of the Company.
On November 20, 1997, Messrs. Stassen, Eastman and Kohrs met in London with
Mr. Cohen and Felix Scherrer, President of Sulzer Orthopedics Ltd., to continue
to discuss a potential transaction and the integration issues that might arise
in the event of such a transaction.
On November 27, 1997, Parent's Board of Directors reviewed the potential
acquisition of the Company and authorized Parent's management to continue to
pursue the potential transaction. On November 29, 1997, Mr. Cohen telephoned Mr.
Stassen and requested that they meet in New York so that Parent could make an
acquisition proposal to the Company.
On December 1, 1997, representatives of Parent and Credit Suisse First
Boston Corporation ("Credit Suisse First Boston"), its financial advisor, and
Shearman & Sterling, Parent's counsel, met in New York with Messrs. Stassen and
Eastman and Piper Jaffray. During those meetings, Parent made a proposal to
acquire the Company that was equivalent to approximately $49.40 per Share. The
Company's representatives indicated that they believed that Parent's proposal
did not deliver sufficient value to the Company's shareholders, but that they
would review the proposal with the Board. Shortly following the meeting, Parent
delivered an initial draft of the Merger Agreement to the Company.
At a Board meeting of the Company on December 4, 1997, the proposal and the
proposed terms of the initial draft of the Merger Agreement were reviewed by
Faegre & Benson LLP, counsel to the Company, with the Board, and Piper Jaffray
reviewed with the Board the process that had been undertaken and analyzed the
proposed transaction assuming the merger price proposed by Parent. The Board
instructed management to continue negotiations and to attempt to obtain a higher
price for the Company.
Following the December 4, 1997 Board meeting, Mr. Stassen advised Mr. Cohen
that the Board would consider a transaction that delivered $52.00 per share in
cash to the Company's shareholders, and on December 5, 1997, Faegre & Benson LLP
communicated to Shearman & Sterling the Company's initial response to the draft
Merger Agreement. After Parent reviewed this response, Mr. Cohen advised Mr.
Stassen on December 8, 1997 that Parent was willing to discuss such a
transaction, but only if Parent was able to reach a satisfactory agreement with
the Company's senior management concerning their continuing role in the Company
following the transaction. Shearman & Sterling and Faegre & Benson LLP continued
to negotiate the terms of the Merger Agreement.
On December 12, 1997, Parent reviewed the proposal to acquire the Company at
$52.00 per Share with the Board of Directors of Sulzer AG, which owns
approximately 75% of Parent's outstanding common stock, and Sulzer AG's Board of
Directors endorsed the transaction.
Prior to the meeting of the Company's Board on December 12, 1997, Piper
Jaffray, in separate conversations, contacted Mr. Cohen and Credit Suisse First
Boston and discussed whether Parent would be willing to increase its price. Mr.
Cohen and a representative of Credit Suisse First Boston each stated that it was
his belief that the Board of Directors of Parent would not entertain a request
for a higher price.
14
The Board of the Company met later on December 12 to discuss Parent's new
proposal to acquire the Company for $52.00 per Share. Mr. Stassen discussed
recent developments, including certain adverse rulings regarding the products of
two competitors by an FDA panel and the effect of this development on the
Company's stock price as well as its impact on the future prospects of the
Company. The Board also was informed (i) of Piper Jaffray's contact with Mr.
Cohen and a representative of Credit Suisse First Boston concerning whether
Parent would be willing to increase its price, (ii) that Piper Jaffray had been
informed by Mr. Cohen and the representative of Credit Suisse First Boston, and
believed, that it was unlikely that Parent would increase the price, (iii) that
Piper Jaffray had effectively canvassed the market of logical buyers and (iv)
that Piper Jaffray was prepared to deliver its opinion that as of such date and
based upon and subject to the matters considered by Piper Jaffray, the $52.00
price proposed to be received by the holders of Shares in the Offer and the
Merger was fair, from a financial point of view, to such holders. The most
recent draft of the Merger Agreement received from Shearman & Sterling that day
was distributed and reviewed with Faegre & Benson LLP and major outstanding
issues were discussed. Mr. Stassen reviewed with the Board Parent's position
that its proposal assumed that it would be able to reach satisfactory
arrangements with the Company's senior management concerning their role in the
Company following the transaction, and the Board was informed that Parent was
requesting a termination fee of $20 million and that certain conditions to the
Offer remained in the proposed Merger Agreement which the Board determined were
not acceptable. The Board authorized management to propose a termination fee of
$12 million and to continue negotiations on the other outstanding issues.
Shearman & Sterling and Faegre & Benson LLP continued their negotiation of
the Merger Agreement. On December 14, 1997, Messrs. Stassen and Eastman met with
representatives of Parent in Angleton, Texas, where they reached agreement
concerning employment arrangements following the transaction.
On December 15, 1997, the Company's Board met again. Management, Piper
Jaffray and Faegre & Benson LLP updated the Board on the status of discussions,
including the willingness of Parent to accept a $15 million termination fee and
to further limit its conditions to the Offer. Piper Jaffray updated certain
aspects of its fairness opinion presentation, and formally presented its opinion
to the Board. A special committee of the Board, consisting of all of the
independent directors of the Board for purposes of Section 302A.673 of the
Minnesota Law, unanimously approved the Offer, the Merger and the Merger
Agreement. Immediately thereafter, the Board unanimously approved the Offer, the
Merger and the Merger Agreement and determined that the terms of the Offer and
the Merger are in the best interests of the Company and its shareholders.
That evening the parties signed the Merger Agreement.
REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE BOARD.
In approving the Merger, the Offer and the Merger Agreement and recommending
that all shareholders tender their Shares pursuant to the Offer and approve and
adopt the Merger Agreement and the transactions contemplated by the Merger
Agreement, including the Merger, the Board of Directors considered a number of
factors, including:
1. the financial and other terms and conditions of the Offer, the Merger
and the Merger Agreement;
2. the Board's familiarity with and review of the business, financial
condition, results of operations and prospects of the Company, including the
desirability of attempting to diversify the business of the Company through
acquisition or other expansion, the need for additional capital and
management resources and sales persons whether or not the business of the
Company was diversified, and the risks of attempting to expand the business
or diversify through acquisitions;
15
3. the historical market price performance of the Common Stock of the
Company, the present value of the projected future market price of the
stock, the timing of the transaction and the risks that such projected
performance might not be achieved.
4. the prospect, including anticipated timing, of additional competitors
in the Company's business and the potential effects of such competitors on
the Company's business, taking into account recent efforts of two potential
competitors who had not received requisite FDA approvals and recent setbacks
of those competitors before an FDA panel;
5. the possible alternatives to the Offer and the Merger, including that
the Purchaser appeared unlikely to pay a higher price despite the effort to
increase the proposed price, that Piper Jaffray had effectively canvassed
the market of other logical buyers and that continuing independence would,
as a practical matter, necessitate changes of the nature set forth in
paragraph 2 above that would involve the risks referred to in paragraphs 2,
3 and 4 above;
6. the presentations of Piper Jaffray at the December 4, 12 and 15, 1997
Board of Directors' meetings and the opinion of Piper Jaffray (the
"Opinion") to the effect that, as of the date of the Opinion and based upon
and subject to certain matters stated therein, the consideration to be
received by the holders of Shares in the Offer and the Merger is fair, from
a financial point of view, to such holders;
7. the fact that the Merger Agreement, which prohibits the Company, its
subsidiaries and their respective officers, directors, employees, advisors
or representatives from soliciting, initiating or knowingly encouraging any
potential acquisition proposal (as defined in the Merger Agreement), does
permit the Company to furnish non-public information and provide access to,
or to participate in discussions and negotiations with, any person or entity
that makes a bona fide unsolicited acquisition proposal after the date of
the Merger Agreement, if the Board of Directors determines in good faith
that it is necessary to do so in accordance with its fiduciary duties to the
Company and its shareholders under applicable law, after consultation with
its outside legal counsel;
8. the Board's belief that the terms of the Merger Agreement, taking
into account the termination fee and reimbursement of actual and documented
out-of-pocket expenses payable to Parent in the event of the Company's
acceptance of a superior acquisition proposal, should not unduly discourage
superior third party offers; and
9. the limited number of conditions to the obligations of Parent and
Purchaser to consummate the Offer and the Merger, including the absence of a
financing condition to the Offer.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of more importance than other factors. Rather, the
Board of Directors viewed its position and recommendation as being based on the
totality of the information presented to and considered by it.
The full text of the Opinion, which sets forth the assumptions made, general
procedures followed, matters considered and limitations on the review undertaken
by Piper Jaffray, is filed herewith as Exhibit 11 and is incorporated herein by
reference. Shareholders are urged to read the Opinion carefully in its entirety.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company and Piper Jaffray entered into an agreement, dated June 10,
1997, pursuant to which Piper Jaffray was retained as the Company's exclusive
representative and financial advisor for the purpose of advising the Company
concerning certain strategic alternatives, including a possible merger or other
business combination. For its services as financial advisor, the Company has
agreed to pay Piper Jaffray the following fees: (a) a cash fee of $1,750,000 if
the Company effected a transaction with the medical device company that
initially contacted the Company, provided that the Company had not received an
indication
16
of interest from a third party, (b) a cash fee equal to 0.65% of the aggregate
consideration paid to the Company or its shareholders in connection with a
possible transaction if the conditions in clause (a) did not apply and (c) in
the event a fairness opinion is requested, a cash fee of $350,000 due upon
delivery of the written fairness opinion, which is to be credited against the
payment set forth in (a) or (b) above. The Company has also agreed to reimburse
Piper Jaffray for its reasonable out-of-pocket expenses (including the fees and
expenses of its counsel) and to indemnify Piper Jaffray against certain
liabilities and expenses.
Neither the Company nor any other persons acting on its behalf currently
intends to employ, retain or compensate any other person to make solicitations
or recommendations to shareholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the knowledge of the Company, by any executive officer,
director, affiliate or subsidiary of the Company, other than (i) grants of
options and (ii) sales or gifts of an aggregate of 1,220 Shares by David L.
Shaw, Vice President--Manufacturing Operations.
(b) To the knowledge of the Company, its executive officers, directors,
affiliates and subsidiaries presently intend to tender, pursuant to the Offer,
any Shares which are held of record or are beneficially owned by them, except in
certain cases in which an individual may benefit from extending his holding
period for long term capital gains by holding certain Shares until the Effective
Time.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company. As described in Item 3(b) above, the Board of Directors
of the Company, in connection with the exercise of its fiduciary duties, is
permitted under certain conditions to engage in negotiations in response to an
unsolicited Acquisition Proposal.
(b) Except as described in Items 3(b) and 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer which relate to or would result in one or more of the
matters referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(a) The Information Statement attached as Annex I hereto and incorporated
herein by reference is being furnished pursuant to Rule 14f-1 under the Exchange
Act in connection with potential designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company Board other than at
a meeting of shareholders, as described in Item 3.
(b) At its meeting held on December 15, 1997, a special committee of the
Board of Directors authorized and approved entering into the Merger Agreement
and the transactions contemplated thereby for purposes of Sections 302A.671 and
302A.673 of the Minnesota Law. At that meeting, the Special Committee also took
all necessary action such that (i) neither the Offer nor the Merger would
constitute a "flip-in event" or a "flip-over event" as described in the Rights
Agreement, or would result in the Rights becoming evidenced by, and transferable
pursuant to, certificates separate from the certificates representing Company
Common Stock and (ii) the Rights will expire under the terms of the Rights
Agreement at the Effective Time.
17
(c) No dissenters' rights are available in connection with the Offer.
However, if the Merger is consummated, dissenting shareholders who comply with
statutory procedural requirements will be entitled to exercise dissenters'
rights for the fair value for their Shares under Section 302A.473 of Minnesota
Law. To be entitled to payment, the dissenting shareholder must not accept the
Offer, must file with the Company, prior to the vote for the Merger, a written
notice of intent to demand payment of the fair value of the shares, must not
vote in favor of the Merger and must satisfy the other procedural requirements
of Section 302A.473 of Minnesota Law. Any shareholder contemplating the exercise
of their dissenters' rights should review carefully the provisions of Section
302A.471 and 302A.473 of Minnesota Law, particularly the procedural steps
required to perfect such rights. SUCH RIGHTS WILL BE LOST IF THE PROCEDURAL
REQUIREMENTS OF SECTION 302A.473 ARE NOT FULLY AND PRECISELY SATISFIED.
If a vote of shareholders is required to approve the Merger under Minnesota
Law, the notice and proxy statement for the shareholder meeting will again
inform each shareholder of record as of the record date of the shareholder
meeting (excluding persons who tender all of their Shares pursuant to the Offer
if such Shares are purchased in the Offer) of their dissenters' rights and shall
include a copy of Section 302A.471 and 302A.473 of Minnesota Law and a summary
description of the procedures to be followed under those Sections to obtain
payment of fair value for their Shares under those Sections. If a shareholder
vote is not required to approve the Merger, the Surviving Corporation will send
a notice to those persons who are shareholders of the Surviving Corporation
immediately prior to the Effective Time of the Merger which, among other things,
includes a copy of Sections 302A.471 and 302A.473 of Minnesota Law and a summary
description of the procedures to be followed under those Sections to obtain
payment of fair value for their Shares under those Sections.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 Agreement and Plan of Merger, dated December 15, 1997, among Purchaser, Parent
and the Company.
Exhibit 2 Confidentiality Agreement, dated September 25, 1997, between the Company and
Parent.
Exhibit 3 Employment Agreement, dated as of December 15, 1997, between the Company and
David W. Stassen.
Exhibit 4 Employment Agreement, dated as of December 15, 1997, between the Company and Paul
R. Lunsford.
Exhibit 5 Employment Agreement, dated as of December 15, 1997, between the Company and
Douglas W. Kohrs.
Exhibit 6 Employment Agreement, dated as of December 15, 1997, between the Company and
Keith M. Eastman.
Exhibit 7 Employment Agreement, dated as of December 15, 1997, between the Company and
Richard C. Jansen.
Exhibit 8 Employment Agreement, dated as of December 15, 1997, between the Company and
David L. Shaw.
Exhibit 9 Letter to shareholders of the Company, dated December 19, 1997.+
Exhibit Press release issued by the Company on December 16, 1997.
10
Exhibit Opinion of Piper Jaffray Inc. dated December 15, 1997.+
11
Exhibit The Company's 1996 Omnibus Stock Plan.*
12
- ------------------------
+ Included in copies of the Schedule 14D-9 mailed to shareholders.
* Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
18
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
SPINE-TECH, INC.
By: /s/ DAVID W. STASSEN
-----------------------
David W. Stassen,
CHIEF EXECUTIVE OFFICER
AND PRESIDENT
Dated: December 19, 1997
19
ANNEX I
SPINE-TECH, INC.
7375 BUSH LAKE ROAD
MINNEAPOLIS, MINNESOTA 55439
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
GENERAL INFORMATION
This Information Statement is being mailed on or about December 19, 1997 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Spine-Tech, Inc., a Minnesota corporation (the "Company"),
to the holders of record of shares of common stock, par value $.01 per share, of
the Company (the "Common Stock" or the "Shares"). You are receiving this
Information Statement in connection with the possible election of persons
designated by Purchaser (as defined below) to a majority of the seats of the
Board of Directors of the Company.
On December 15, 1997, the Company, Sulzer Medica Ltd, a corporation
organized under the laws of Switzerland ("Parent"), and Sulzer Medica
Orthopedics Acquisition Corp., a Minnesota corporation and an indirect wholly
owned subsidiary of Parent ("Purchaser"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which (i) Purchaser will commence a
tender offer (the "Offer") for all outstanding Shares at a price of $52.00 per
Share, net to the seller in cash without interest thereon and (ii) Purchaser
will be merged with and into the Company (the "Merger"). As a result of the
Offer and the Merger, the Company will continue as an indirect wholly owned
subsidiary of Parent.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of the Shares pursuant to the Offer (provided that the Minimum Condition has
been satisfied), Purchaser will be entitled to designate directors (the
"Purchaser Designees") on the Company Board that will give Purchaser
representation substantially proportionate to its ownership interest. The Merger
Agreement requires the Company promptly to take necessary action to cause the
Purchaser Designees to be elected or appointed to the Company Board under the
circumstances described therein. This Information Statement is required by
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 14f-1 thereunder. Capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Schedule 14D-9.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with this Information
Statement.
The information contained in this Information Statement concerning Purchaser
and the Purchaser Designees has been furnished to the Company by Purchaser. The
Company assumes no responsibility for the accuracy or completeness of such
information.
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock has one vote. As of December 15, 1997
there were 10,323,730 shares of Common Stock outstanding.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of the Shares pursuant to the Offer (provided that the Minimum Condition has
been satisfied), and from time to time thereafter, Purchaser will be entitled,
subject to compliance with Section 14(f) of the Exchange Act, to designate up to
such number of directors, rounded down to the next whole number (except where
such rounding down would cause Purchaser to not be entitled to designate at
least a majority of directors on the Board, in which case such number will be
rounded up), on the Board as will give Purchaser representation
on the Board equal to the product of the total number of directors on the Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser following such purchase bears to the
total number of Shares then outstanding, and the Company will, at such time,
promptly take all actions necessary to cause Purchaser's designees to be elected
or appointed as directors of the Company, including increasing the size of the
Board or securing the resignations of incumbent directors or both. At such
times, the Company will, upon the written request of Purchaser, use its
reasonable efforts to cause Purchaser Designees to constitute the same
percentage as persons designated by Purchaser will constitute of the Board of
(i) each committee of the Board, (ii) the board of directors of each of the
Company's subsidiaries and (iii) each committee of each such board, in each case
only to the extent permitted by applicable law. Notwithstanding anything stated
herein, if Shares are purchased pursuant to the Offer, Parent and Purchaser will
use reasonable efforts to assure that, until the Effective Time, the Board has
at least one director who is a director on the date of the Merger Agreement and
is not an employee of the Company.
As of the date of this Information Statement, Purchaser has not determined
who will be the Purchaser Designees. However, the Purchaser Designees will be
selected by Purchaser from among the directors and executive officers of Parent
or Purchaser. Certain information regarding the list of candidates as Purchaser
Designees is contained in Schedule I annexed hereto.
None of the persons from among whom the Purchaser Designees will be selected
or their associates is a director of, or holds any position with, the Company.
To the knowledge of the Company, except as set forth in Schedule I annexed
hereto, none of the Purchaser Designees or their associates beneficially owns
any equity securities, or rights to acquire any equity securities, of the
Company or has been involved in any transactions with the Company or any of its
directors or executive officers that are required to be disclosed pursuant to
the rules and regulations of the Commission.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors currently consists of four directors, each of whom
holds office until his resignation or removal and until his successor is duly
elected and qualified at the next Annual Meeting of Shareholders.
DAVID W. STASSEN, age 45, has served as President and Chief Executive
Officer of the Company since June 1992 and as a director of the Company since
June 1991. From January 1990 to June 1992, he served as Executive Vice President
of St. Paul Venture Capital, Inc., a venture capital company. He is currently a
director of Avecor Cardiovascular, Inc. and RSI Systems, Inc.
ROBERT J. DEPASQUA, age 48, has served as a director of the Company since
June 1992. From 1989 to July 1994, he served as the President, Chief Executive
Officer and a director of Spectranetics Corp., a medical device company. He
remained a director of Spectranetics until his resignation in September 1996.
JAMES F. LYONS, age 66, has served as a director of the Company since July
1993. Mr. Lyons is currently Chairman of the Board of Directors of Bio-Vascular,
Inc., a medical device company. Mr. Lyons is also a founder of Avecor
Cardiovascular, Inc., and served as the Chairman of its Board of Directors until
April 1996. Mr. Lyons also serves as a director of ATS Medical and Quantech Ltd.
KENNETH W. ANSTEY, age 50, has served as a director of the Company since May
1995. Mr. Anstey has served as President and CEO of Oratec Interventions, Inc.
since July 1997. From December 1995 until March 1997, Mr. Anstey served as
President and Chief Executive Officer of Biofield, Inc., a medical technology
company. From August 1991 to December 1995, Mr. Anstey served as President and
Chief Executive Officer of Mitek Surgical Products, Inc., a supplier of
minimally invasive proprietary surgical implants, which is a subsidiary of
Johnson & Johnson. From 1989 to July 1991, Mr. Anstey served as President of
ConvaTec Inc., a manufacturer and marketer of ostomy and wound care products,
which is a
2
subsidiary of Bristol Meyers Squibb Corporation. Mr. Anstey serves as a director
of Vision-Sciences, Inc. and Cellpro, Inc.
KEITH M. EASTMAN, age 47, has served as Chief Financial Officer of the
Company since September 1992. Mr. Eastman was an independent consultant from
January 1991 to September 1992 and served as Chief Financial Officer of CIMA
Labs, Inc., a pharmaceutical manufacturer, from December 1991 to August 1992.
PAUL R. LUNSFORD, JR., age 39, has served as Vice President, Sales and
Marketing since August 1997. From February 1996 to July 1997, he served as
National Sales manager for the Company. From March 1995 to February 1996 he
served as Director of Corporate Sales for Boston Scientific Corporation, a
specialty medical device company. Prior to that time he was employed by Scimed
Life Systems Inc., a manufacturer and marketer of cardiovascular catheters and
devices, where he served as Director of National Accounts from August 1994 to
March 1995 and Director of Sales from December 1991 to August 1994.
DOUGLAS W. KOHRS, age 39, has served as Vice President, Research and Product
Development since January 1993 and previously served as Director of Product
Development and Marketing for the Company from August 1991 to January 1993.
RICHARD C. JANSEN, age 48, has served as Vice President, Regulatory and
Clinical Affairs since August 1993 and previously served as Director of
Regulatory Affairs and Operations of the Company from August 1991 to August
1993.
DAVID L. SHAW, age 51, has served as Vice President, Manufacturing
Operations since June 1994 and previously served as Director of Manufacturing of
the Company from June 1992 to June 1994. From December 1991 to June 1992, Mr.
Shaw worked as a manufacturing consultant for the Company.
Executive officers are elected annually by the Board of Directors and serve
a one-year period or until their successors are elected.
None of the above directors is related to each other or to any executive
officer of the Company, and none of the above executive officers is related to
each other or to any director of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Audit Committee of the Board of Directors consists of Robert J. DePasqua
and James F. Lyons. It has the responsibility to meet with the Company's
independent auditors and approve the scope and timing of the independent
auditors' audit, evaluate the independent auditors' opinions as to internal
controls and discuss the meaning and significance of the audited financial
results. The Audit Committee held one meeting in 1996.
The Compensation Committee of the Board of Directors consists of Robert J.
DePasqua and James F. Lyons. It has the responsibility to grant or make
recommendations to the Board of Directors concerning employee stock options,
bonuses and other compensation. The Compensation Committee adopted resolutions
by written action 70 times during fiscal 1996. The majority of these written
actions related to the grant of stock options to each new employee of the
Company.
The Board of Directors does not have a nominating committee.
The Board of Directors held four meetings during 1996. All directors
attended at least 75% of the meetings of the Board of Directors during 1996.
DIRECTOR COMPENSATION
Non-employee directors of the Company received an annual retainer of
$12,000, plus $1,000 for each meeting of the Board of Directors. The Spine-Tech,
Inc. 1996 Omnibus Stock Plan (the "1996 Plan")
3
provides for the non-discretionary grant of a non-statutory stock option to
purchase 15,000 shares of Common Stock upon election or appointment to the Board
of Directors to each non-employee director at a price equal to the fair market
value of a share of Common Stock on the date of grant. Of the shares covered by
such initial grant, 5,000 vest immediately upon grant and 5,000 vest upon each
of the next two anniversaries of the director's election or appointment. After a
non-employee director has served the Company as a director for two full years,
that director will be granted an option to purchase 5,000 shares of Common Stock
at the conclusion of each subsequent annual meeting of shareholders of the
Company, at a price equal to the fair market value of a share of Common Stock on
the date of grant, these options to vest one year from the date of grant.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policies for all executive officers of
the Company, including the five most highly compensated executive officers of
the Company named in the accompanying tables. The Committee establishes the
total compensation for the executive officers in light of these policies. The
Committee is composed entirely of non-employee directors.
The following report describes the Company's executive compensation program
and discusses the factors considered by the Committee in determining the
compensation of the Company's Chief Executive Officer and other executive
officers for 1996.
COMPENSATION OBJECTIVES
The Committee's objective is to make the compensation packages of the
executive officers of the Company sufficient to attract and retain highly
talented and productive executives and to provide effective incentives to
motivate and reward Company executives for achieving the Company's financial and
strategic goals essential to its long-term success and growth in shareholder
value. A benefits consultant provides the Committee with compensation statistics
from other companies comparable in size and industry. The Company's current
compensation levels are at the low end of the range for comparable companies.
The Company's executive compensation package consists of two main components (in
addition to the benefit plans offered to all employees): base salary and
long-term incentive compensation, consisting of grants made under the Company's
stock incentive program. Under certain circumstances, the Company's executive
compensation will include an annual bonus.
BASE SALARY
The base salary of each of the executive officers, including the Company's
Chief Executive Officer and President (the "CEO"), is determined annually by the
Committee and ratified by the Board of Directors after considering the
compensation levels of personnel with similar responsibilities at other
companies in the medical device industry, the Company's financial performance
during the prior fiscal year, and, in the case of executive officers other than
the CEO, the individual performance of each executive officer. Salary decisions
concerning executive officers are made by the Committee in conjunction with the
Board of Directors in a review process that includes the CEO's recommendations
for all executive officers other than himself.
The measures of individual performance considered in setting 1996 and
current salaries of individual executive officers, including the CEO, included a
number of quantitative and qualitative factors such as the Company's historical
and recent financial performance, the individual's progress toward non-financial
goals within his area of responsibility, individual performance, experience and
level of responsibility and other contributions made to the Company's success.
4
STOCK OPTIONS
The Company's stock option program is intended to provide a long-term
incentive for executive officers and other key employees. The purpose of the
program is to promote the interests of the Company and its shareholders by
providing the Company's personnel with an opportunity to acquire a proprietary
interest in the Company and thereby develop a stronger incentive to put forth
maximum effort for its continued success and growth and to aid the Company in
attracting and retaining personnel of outstanding ability.
The Company's stock option program is administered by the Committee and
authorizes the Committee to grant to employees, including all executive
officers, options to purchase the Company's Common Stock. Generally, options are
granted to purchase shares of Common Stock over a ten-year period at the fair
market value per share at the time the options are granted. Options granted
during 1996 generally vest over four years after the date of grant. Potential
recipients and the number of shares to be awarded to each recipient are proposed
by the CEO and the Chief Financial Officer on the basis of their views of the
overall strategic contribution of such individuals to corporate performance. The
Committee reviews and approves the final list of option recipients and the
amounts of the awards. In granting options, the Committee considers several
factors, including the position of the potential optionee, as well as the number
of options currently held by him.
ANNUAL BONUS
Except for two key milestones achieved in 1995, the Company traditionally
has not paid annual bonuses to its executive officers. In 1996, David L. Shaw,
the Company's Vice President of Manufacturing and Operations, received a cash
bonus for his work in connection with the Company achieving ISO 9001 and CE Mark
certifications.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which became effective January 1, 1994, limits the tax deductibility of
compensation in excess of $1 million to each of the CEO and the four other
highest paid executive officers, unless such compensation is based on
performance in accordance with rules promulgated in connection with Section
162(m). The Committee will seek to comply with these rules to the extent
compliance is practicable and in the best interests of the Company and its
shareholders.
COMPENSATION COMMITTEE
Robert J. DePasqua, Chairman
James F. Lyons
5
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer and each of its four other
most highly compensated executive officers for the years ended December 31,
1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------------
--------------------- SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
- ------------------------------------------------------------- --------- ---------- --------- -------------------
David W. Stassen............................................. 1996 $ 177,396 $ -- 55,000
Chief Executive Officer and 1995 152,295 25,000 --
President 1994 130,166 20,000 75,000
Keith M. Eastman............................................. 1996 111,032 -- 35,000
Chief Financial Officer and 1995 101,600 20,000 --
Secretary 1994 93,533 -- 45,000
Ted K. Schwarzrock(1)........................................ 1996 120,000 -- --
Vice President, Sales and 1995 114,167 -- 10,000
Marketing 1994 108,000 -- 60,000
Douglas W. Kohrs............................................. 1996 116,516 -- 35,000
Vice President, Research and 1995 108,563 -- --
Product Development 1994 91,688 -- 45,000
David L. Shaw................................................ 1996 99,462 10,000 15,000
Vice President, Marketing 1995 94,500 -- --
and Operations 1994 76,750 -- 75,000
- ------------------------
(1) Mr. Schwartzrock resigned effective August 5, 1997.
STOCK OPTIONS
The following table summarizes option grants made during 1996 to the
executive officers named in the Summary Compensation Table.
6
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
PERCENT OF TOTAL OPTION TERM(3)
OPTIONS OPTIONS EXERCISE EXPIRATION ------------------------
NAME GRANTED(1) GRANTED(2) PRICE DATE 5% 10%
- -------------------------------------- ----------- ----------------- ----------- ----------- ---------- ------------
David W. Stassen...................... 30,000 5.4% $ 22.25 3/18/06 $ 419,787 $ 1,063,823
25,000 4.5% 25.00 7/25/06 393,059 996,089
Keith M. Eastman...................... 25,000 4.5% 22.25 3/18/06 349,823 886,519
10,000 1.8% 23.75 9/24/06 149,362 378,514
Ted K. Schwarzrock.................... -- -- -- -- -- --
Douglas W. Kohrs...................... 25,000 4.5% 22.25 3/18/06 349,823 886,519
10,000 1.8% 23.38 9/15/06 147,036 372,617
David L. Shaw......................... 15,000 2.7% 22.25 3/18/06 209,894 531,912
- ------------------------
(1) Options granted pursuant to the Plan. Options become exercisable with
respect to one-fourth of the shares covered thereby on the first through
fourth anniversary of the date of grant but will vest and be exercisable in
their entirety prior to the Effective Time under the terms of the Plan. Each
option has a maximum term of ten years, subject to earlier termination in
the event of the optionee's cessation of service with the Company. The
options were granted at the fair market value of the shares subject to the
options on the date of grant.
(2) Reflects the percent of options granted to employees during 1996 under the
Plan.
(3) Potential realized values shown above represent the potential gains based
upon compound price appreciation of 5% and 10% from the date of grant
through the full option term. The actual value realized, if any, on stock
option exercises will be dependent upon overall market conditions and the
future performance of the Company and its Common Stock. There is no
assurance that the actual value will approximate the amounts reflected in
this table.
The following table summarizes option exercises during 1996 by the executive
officers named in the Summary Compensation Table, and the value of their
unexercised options at December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ----------- ------------- ------------ -------------
David W. Stassen............... 2,000 $ 48,000 410,500 92,500 $ 9,754,875 $ 885,375
Keith M. Eastman............... 17,000 540,720 112,375 63,125 2,586,924 689,781
Ted K. Schwarzrock............. 5,000 126,080 100,625 61,875 2,211,445 1,230,132
Douglas W. Kohrs............... 10,000 236,600 149,750 57,500 3,545,910 567,875
David L. Shaw.................. 12,000 276,960 79,500 57,000 1,820,236 962,611
- ------------------------
(1) Value realized and value of unexercised options are calculated by
determining the difference between the fair market value of the shares
underlying the options at exercise or at December 31, 1996, as applicable.
7
COMPENSATION ARRANGEMENTS
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain executive
officers that will become effective as of the Effective Time, and which will
become null and void if the Merger is not consummated. See "Employment
Agreements" under Item 3(b) in the Schedule 14D-9.
The Company is currently party to effective employment agreements with David
W. Stassen, Douglas W. Kohrs, Richard C. Jansen and Paul R. Lunsford. These
employment agreements remain in effect until terminated by either party with
notice, subject to the Company's right to terminate the agreement immediately
for cause or upon the employee's death. Under each employment agreement, the
employee has agreed that, during the term of employment and for a period of one
year thereafter, he will not compete with the Company. These employment
agreements will terminate upon the effectiveness of the new Employment
Agreements at the Effective Time.
MANAGEMENT AGREEMENTS
The Company has entered into currently effective five-year management
agreements, which automatically renew for one-year terms, with each of Messrs.
Stassen, Eastman, Kohrs, Jansen and Shaw. The management agreements are
substantially similar. Their purpose is to encourage the executive (1) to
continue to carry out his duties in the event of a possible change in control of
the Company and (2) to remain in the service of the Company in order to
facilitate an orderly transition in the event of an actual change in control of
the Company.
Under the terms of each management agreement, if, between the occurrence of
a change in control of the Company and the end of the three-year anniversary
date of such occurrence, an executive's employment is voluntarily or
involuntarily terminated for any reason (unless such termination is a voluntary
termination by the employee other than for good reason (as defined in the
management agreement) or is on account of the death or disability of the
employee or is a termination for cause (as defined in the management agreement),
he will be entitled to receive severance compensation. Severance compensation is
also payable if the termination occurs before the change in control, but after
steps to change control have been taken. Severance compensation consists of (i)
one times the executive's Average Annual Compensation for an executive who has
been employed by the Company for one year or more, but less than three years,
(ii) two times the executive's Average Annual Compensation for an executive
employed by the Company for at least three years, but less than five years, or
(iii) three times the executive's Average Annual Compensation less $1.00 for an
executive who has been employed by the Company for at least five years or more.
"Average Annual Compensation" means the average annual compensation payable by
the Company and includible in gross income for federal income tax purposes of
the executive during the shorter period consisting of the five most recently
completed taxable years of the executive ending before the change in control or
that portion of such period during which he was employed by the Company. Each
executive is also entitled to receive continuation of certain employee benefit
plans of the Company, subject to reduction for the amount of any other severance
compensation or benefits paid by the Company to the employee under other
agreements of the Company, if any. If a change in control occurred as of March
28, 1997 (the date of the Company's last proxy statement), Messrs. Stassen,
Eastman, Kohrs and Shaw would receive $302,835, $203,879, $270,554 and $168,820,
respectively. If and when the Employment Agreements entered into in connection
with the Offer and the Merger become effective, these management agreements will
be of no further force and effect.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of December 15, 1997 by each
shareholder who is known by the Company to own beneficially (under the
circumstances described in the last two sentences of this paragraph) more than
five
8
percent of the Company's outstanding Common Stock, each director, each executive
officer and all directors and executive officers as a group. Except as otherwise
noted below, the listed beneficial owner has sole voting and investment power
with respect to such shares and the address of the listed beneficial owner is
that of the Company. The options referred to in the footnotes to the table are
presently exercisable or will become exercisable prior to the Effective Time.
For this reason, the Shares subject to all options held by directors and
executive officers are listed in the table as being beneficially owned by them
even if certain of such Shares would not be deemed to be so beneficially owned
for purposes of the Exchange Act.
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- ----------------------------------------------------------------------- -------------------- ---------------------
David W. Stassen....................................................... 555,000(1) 5.1%
7375 Bush Lake Road
Minneapolis, MN 55409
Douglas W. Kohrs....................................................... 228,374(2) 2.2%
Keith M. Eastman....................................................... 212,161(3) 2.0%
Richard C. Jansen...................................................... 200,500(4) 1.9%
David L. Shaw.......................................................... 147,517(5) 1.4%
Paul R. Lunsford....................................................... 101,627(6) 1.0%
James F. Lyons......................................................... 50,750(7) *
Robert J. DePasqua..................................................... 44,008(8) *
Kenneth W. Anstey...................................................... 15,000(9) *
All directors and executive officers as a group (9 persons)............ 1,544,937(10) 13.2%
- ------------------------
* Less than one percent
(1) Includes an aggregate of 4,378 shares held of record by Mr. Stassen's wife
and children, in which shares he disclaims beneficial ownership. Also
includes 503,000 shares issuable pursuant to options.
(2) Includes 217,250 shares issuable pursuant to options.
(3) Includes 18,300 shares held of record by H&E Investors, a partnership of
which Mr. Eastman is a general partner. Also includes 172,500 shares
issuable pursuant to options.
(4) Includes an aggregate of 2,500 shares held of record by his children, in
which shares he disclaims beneficial ownership. Also includes 168,000 shares
issuable pursuant to options.
(5) Includes an aggregate of 220 shares held of record by his grandchildren, in
which shares he disclaims beneficial ownership, and 131,500 shares issuable
pursuant to options.
(6) Includes 100,000 shares issuable pursuant to options.
(7) Includes 26,250 shares issuable pursuant to options.
(8) All shares are held in joint tenancy with Mr. DePasqua's spouse, except for
258 shares held of record by Mr. DePasqua's son, in which shares he
disclaims beneficial ownership. Includes 3,750 shares issuable pursuant to
options.
(9) Includes 15,000 shares issuable pursuant to options.
(10) Includes 1,337,250 shares issuable pursuant to options.
PERFORMANCE GRAPH
The following graph compares the cumulative shareholder return on the Common
Stock of the Company for the period from the date of the Company's initial
public offering (June 22, 1995) to December 31, 1996, with the total cumulative
return on the NASDAQ Stock Market-U.S. Companies
9
Index (the "NASDAQ-U.S. Index") and the Hambrecht & Quist Health Care-Excluding
Biotechnology Index (the "H&Q Health Care Index") over the same period. The
graph assumes that $100 was invested on June 22, 1995 in each of the Common
Stock of the Company, the NASDAQ-U.S. Index and the H&Q Health Care Index, and
that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HAMBRECHT & QUIST HEALTHCARE
SPINE-TECH, INC. NASDAQ STOCK MARKET-US EXCLUDING BIOTECHNOLOGY
6/22/95 $100.00 $100.00 $100.00
12/95 $258.00 $113.00 $134.00
12/96 $278.00 $138.00 $149.00
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by the Securities and Exchange Commission rules under Section
16(a) of the Exchange Act, and based solely on a review of copies of forms
submitted to the Company during and with respect to 1996, the Company makes the
following disclosures. In February 1997, Mr. Kohrs amended a previously filed
Form 5 to report a grant of an incentive stock option under the Plan. In
February 1997, Mr. Stassen filed late a Form 4 to report an option exercise in
December 1996. Mr. Stassen also filed late a Form 5 in March 1997 to report a
grant of an incentive stock option under the Plan. In March 1997, Mr. Eastman
amended a previously filed Form 5 to report a grant of an incentive stock option
under the Plan.
10
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name, address, citizenship, age and present principal occupation or
employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of Parent. Unless otherwise indicated, the current business
address of each person is Sulzer Medica Ltd, Zurcherstrasse 12, 8401 Winterthur,
Switzerland. Unless otherwise indicated, each such person is a citizen of
Switzerland, and each occupation set forth opposite an individual's name refers
to employment with Parent.
NAME, CITIZENSHIP PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND CURRENT BUSINESS ADDRESS AGE AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------ --- ---------------------------------------------------------------------------
Dr. Fritz Fahrni 54 Chairman of the Board of Directors since 1997. President and Chief
Sulzer AG Executive Officer of Sulzer AG since 1988.
Postfach 8401 Winterthur,
Switzerland
Pierre Borgeaud 63 Director since 1997. Chairman of the Board of Sulzer AG since 1988.
Sulzer AG
Postfach 8401 Winterthur,
Switzerland
Dr. Peter Spalti 67 Director since 1997. Chairman and Chief Executive Officer of Winterthur
Winterthur Swiss Insurance Swiss Insurance Company, General Guisan-Strasse 40 P.O. Box 357 CH-8401
Company Winterthur, since 1989. Director of Sulzer AG since 1982 and Vice Chairman
General Guisan Strasse 40 of the Sulzer AG Board.
8401 Winterthur,
Switzerland
Dr. Reto F. Domeniconi 61 Director since 1997. Director of Sulzer AG since 1994. Chief Financial
Clos des Mesanges Officer of the Nestle Group, Vevey, Switzerland, from 1983 to 1996.
1807 Blonay, Switzerland Retired.
Max Link 57 Director since 1997. Chief Executive Officer of Corange Ltd Hamilton,
Tobelmofstrasse 30 Bermuda, from 1993 to 1994. Chairman of Sandoz Pharma, 4002 Basel,
8044 Zurich, Switzerland Switzerland, from 1992 to 1993, Chief Executive Officer of Sandoz Pharma
from 1987 to 1992.
Larry L. Mathis 54 Director since 1997. President and Chief Executive Officer of The Methodist
U.S. citizen Health Care System, 6565 Faunin St., Houston, TX 77030 since 1983. Chairman
The Methodist Health Care of the American College of Healthcare Executives, Past- Chairman of the
System American Hospital Association, the Texas Hospital Association, the Greater
3037 Reba Drive Houston Hospital Council and the National Task Force on Health Care
Houston, TX 77019 Technology Assessment.
Andre P. Buchel 58 President from 1990 and Chief Executive Officer since 1997. From 1990, also
President and Chief Executive Officer of Sulzer Medica USA Inc., 4000
Technology Drive, Angleton, TX 77515, and Executive Vice President of
Sulzer AG.
1
NAME, CITIZENSHIP PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND CURRENT BUSINESS ADDRESS AGE AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------ --- ---------------------------------------------------------------------------
Josef Ruegg 56 Chief Financial Officer since 1997 and Group Vice President Finance and
Controlling since 1989.
Vanessa Oelz.................. 44 Secretary General since 1997. Employed by Sulzer Management Ltd, from 1989
to 1997.
John H. Rankin 49 Vice President Human Resources since 1997. Employed by the Graduate School
U.S. citizen of Business & Public Administration, Olten, Riggenbachstrasse 16, 4601
Olten, Switzerland, from 1996 to 1997. Employed by Kraft Jacobs Suchard
European Headquarters, Klausstrasse 4, 8022 Zurich, Switzerland, from 1992
to 1996.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, address, citizenship, age and present principal occupation or
employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of Purchaser. Unless otherwise indicated, the current business
address of each person is Sulzer Medica Orthopedics Acquisition Corp., 4000
Technology Drive, Angleton, TX 77515. Unless otherwise indicated, each such
person is a citizen of the United States of America, and each occupation set
forth opposite an individual's name refers to employment with Purchaser.
NAME, CITIZENSHIP PRESENT PRINCIPAL OCCUPATION OR
AND CURRENT BUSINESS ADDRESS AGE EMPLOYMENT AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------ --- ---------------------------------------------------------------------
Andre P. Buchel 58 President, Chief Executive Officer, Chief Financial Officer and sole
Swiss citizen Director since 1997. President since 1990 and Chief Executive Officer
Sulzer AG since 1997 of Sulzer AG, Zurcherstrasse 12, 8401 Winterthur,
Zurcherstrasse 12 Switzerland. From 1990, President and Chief Executive Officer of
8401 Winterthur, Sulzer Medica USA Inc. and Executive Vice President of Sulzer AG.
Switzerland
Robert Cohen 39 Vice President Business Development since 1997. Group Vice President
Business Development of Sulzer Medica USA Inc. since 1992.
Lawrence H. Panitz 56 Vice President, Secretary and General Counsel since 1997. Group Vice
President and General Counsel of Sulzer Medica USA Inc. since 1997.
Vice President Legal Affairs of ICN Pharmaceuticals, 3300 Hylach
Avenue, Costa Mesa, CA, from 1993 to 1997. Partner and Head of
Corporate Finance Group of Messrs. Frere Cholmely, Attorneys, 15 Rue
Guillmard, 1050 Brussels, Belgium.
T.C. Selman II 47 Vice President Human Resources since 1997. Group Vice President Human
Resources and Facilities, Sulzer Medica USA Inc.
James H. Johnson 53 Vice President and Assistant Secretary since 1997. Assistant General
Counsel of Sulzer Medica USA Inc. Attorney and shareholder of Jenkins
& Gilchrist, a professional corporation, 1445 Ross Avenue, #3200,
Dallas TX 75202, from 1994 to 1997. Vice President, Associate General
Counsel and Secretary of Ornda Healthcorp., Dallas, TX and Nashville,
TN, from 1985 to 1994.
3. DIRECTORS AND EXECUTIVE OFFICERS OF SULZER AG. The following table sets
forth the name, address, citizenship, age and present principal occupation or
employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of Sulzer AG. Unless otherwise indicated, the current business
address of each person is Sulzer AG, Postfach 8401 Winterthur, Switzerland.
Unless otherwise indicated, each such person is a
2
citizen of Switzerland, and each occupation set forth opposite an individual's
name refers to employment with Sulzer AG.
NAME, CITIZENSHIP PRESENT PRINCIPAL OCCUPATION OR
AND CURRENT BUSINESS ADDRESS AGE EMPLOYMENT AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------ --- ---------------------------------------------------------------------
Pierre Borgeaud 63 Chairman of the Board of Directors since 1988.
Dr. Peter Spalti 67 Vice Chairman of the Board of Directors. Chairman and Chief Executive
Winterthur Swiss Insurance Company Officer of Winterthur Swiss Insurance Company.
General Guisan-Strasse 40
P.O. Box 357 CH-8401
Winterthur, Switzerland
Dr. Georges Blum 62 Director. President of the Board of Directors of Swiss Bank
Swiss Bank Corporation Corporation since 1996. President of the Corporate Executive
Postfach 4002 Basel, Management of Swiss Bank Corporation since 1993.
Switzerland
Urs Buhler 54 Director. Employed by Buhler AG since 1970.
Buhler AG
9240 Uzwil, Switzerland
Dr. Reto F. Domeniconi 61 Director. Chief Financial Officer of Nestle S.A., Vevey, Switzerland,
Clos des Mesanges, from 1983 to 1995. Retired.
1807 Blonay, Switzerland
Jan Kleinewefers 62 Director. Employed by Kleinewefers Beteiligungs-GmbH for the past
German citizen five years.
Kleinewefers Beteiligungs-GmbH
Postfach 1521, D-47715
Krefeld, Germany
Bernard Koechlin 67 Director. Employed by Zschokke Holding AG since 1992.
Zschokke Holding AG
42 Rue du 31-Decembre
1211 Genf 6, Switzerland
Dr. Guido Richterich 67 Director. Vice President of the Board of Directors since 1994 and
F. Hoffman-La Roche AG Member of the Executive Committee since 1982 of F. Hoffman- La Roche
Gienzachiestrasse 124 AG.
14070 Basel, Switzerland
Jacob Schmidheiny 54 Director. President of the Board of Directors of Zurcher Ziegeleien
Zurcher Ziegeleien Holding Postfach Holding since 1984.
8045 Zurich,
Switzerland
Dr. Leonardo E. Vannotti 58 Director. Chairman of Carlo Gavazzi since 1996. Self-employed from
Cerlo Gavazzi 1994 to 1996. Employed by Ascom Holding, Bern, Switzerland, from
Hertensteinstrasse 33 1990-1993.
5408 Ennetbaden, Switzerland
Dr. Fritz Fahrni 55 President and Chief Executive Officer since 1988.
Dr. Viktor Beglinger 59 Member of the Corporate Executive Management. Head of Human Research
Sulzer Management AG Development since 1994 and Head of Sulzer Infra Group from 1986 to
Postfach 8401 Winterthur, 1994.
Switzerland
Karl Boohsler 51 Member of the Corporate Executive Management. President of Sulzer
Sulzer Infra AG Infra Group for past five years.
Postfach 8401 Winterthur,
Switzerland
3
NAME, CITIZENSHIP PRESENT PRINCIPAL OCCUPATION OR
AND CURRENT BUSINESS ADDRESS AGE EMPLOYMENT AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------ --- ---------------------------------------------------------------------
Andre P. Buchel 58 Member of the Corporate Executive Management. From 1990, Executive
Sulzer Medica AG Vice President of Sulzer AG, President of Sulzer Medica Ltd and
Postfach 8401 Winterthur, President and Chief Executive Officer of Sulzer Medica USA Inc. From
Switzerland 1997, Chief Executive Officer of Sulzer Medica Ltd.
Richard Burger 54 Member of the Corporate Executive Management. Head of Sulzer Roteq
Sulzer Roteq Group since 1995. Employed by Sulzer AG for past five years.
Hardstrasse 319
8023 Zurich, Switzerland
Dr. Cristoph Etter 59 Member of the Corporate Executive Management. Head of Sulzer
Sulzer International AG International Ltd for past five years.
Postfach 8401 Winterthur,
Switzerland
Erich Muller 59 Member of the Corporate Executive Management. Chief Financial Officer
Sulzer Management AG of Sulzer AG since 1984.
Postfach 8401 Winterthur,
Switzerland
Helmut Pirchl 62 Member of the Corporate Executive Management. Head of Sulzer Ruti Ltd
Austrian citizen for past five years.
Sulzer Ruti AG
8630 Ruti, Switzerland
Dr. Edward Rikli 46 Member of the Corporate Executive Management. Employed by Sulzer
Sulzer Management AG Escher Wyss AG from 1986 to 1996.
Postfach 8401 Winterthur,
Switzerland
Urs Scherrer 59 Member of the Corporate Executive Management. Employed by Sulzer
Sulzer Wintec AG Wintec AG for past five years.
Postfach 8401 Winterthur,
Switzerland
4