FINAL COPY
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AGREEMENT AND PLAN OF MERGER
Among
SULZER MEDICA LTD,
SULZER MEDICA ORTHOPEDICS ACQUISITION CORP.
and
SPINE-TECH, INC.
Dated as of December 15, 1997
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE OFFER
SECTION 1.01. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Company Action. . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.02. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03. Effect of the Merger. . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.04. Articles of Incorporation; By-laws. . . . . . . . . . . . . . 5
SECTION 2.05. Directors and Officers. . . . . . . . . . . . . . . . . . . . 5
SECTION 2.06. Conversion of Securities. . . . . . . . . . . . . . . . . . . 5
SECTION 2.07. Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.08. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.09. Surrender of Shares; Stock Transfer Books . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries. . . . . . . . . 8
SECTION 3.02. Articles of Incorporation; By-laws. . . . . . . . . . . . . . 9
SECTION 3.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.04. Authority Relative to this Agreement. . . . . . . . . . . . . 10
SECTION 3.05. No Conflict; Required Filings and Consents. . . . . . . . . . 10
SECTION 3.06. Permits; Company Products; Regulation . . . . . . . . . . . . 11
SECTION 3.07. SEC Filings; Financial Statements . . . . . . . . . . . . . . 12
SECTION 3.08. Absence of Certain Changes or Events. . . . . . . . . . . . . 13
SECTION 3.09. Absence of Litigation . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.10. Employee Benefit Plans; Labor Matters . . . . . . . . . . . . 14
SECTION 3.11. Offer Documents; Schedule 14D-9; Proxy Statement. . . . . . . 16
SECTION 3.12. Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.13. Intellectual Property . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.15. Environmental Matters . . . . . . . . . . . . . . . . . . . . 20
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SECTION 3.16. Material Contracts. . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.17. Employee Confidentiality. . . . . . . . . . . . . . . . . . . 22
SECTION 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.19. Fraud and Abuse . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.20. Amendment to Rights Agreement . . . . . . . . . . . . . . . . 24
SECTION 3.21. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.22. No Implied Representation . . . . . . . . . . . . . . . . . . 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization. . . . . . . . . . . . . . . . . . . . 25
SECTION 4.02. Authority Relative to this Agreement. . . . . . . . . . . . . 25
SECTION 4.03. No Conflict; Required Filings and Consents. . . . . . . . . . 25
SECTION 4.04. Offer Documents; Proxy Statement. . . . . . . . . . . . . . . 26
SECTION 4.05. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.06. Interim Operations of Purchaser . . . . . . . . . . . . . . . 26
SECTION 4.07. Absence of Litigation . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.08. Ownership of Company Capital Stock. . . . . . . . . . . . . . 27
SECTION 4.09. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.10. No Implied Representation . . . . . . . . . . . . . . . . . . 27
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business Pending the Merger. . . . . . . . . . . . 27
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.02. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.03. Company Board Representation; Section 14(f) . . . . . . . . . 31
SECTION 6.04. Access to Information; Confidentiality. . . . . . . . . . . . 31
SECTION 6.05. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.06. Employee Stock Options and Other Employee Benefits. . . . . . 34
SECTION 6.07. S&N Options . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.08. Directors' and Officers' Indemnification and Insurance. . . . 35
SECTION 6.09. Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.10. Notification of Certain Matters . . . . . . . . . . . . . . . 36
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SECTION 6.11. Further Action; Reasonable Efforts. . . . . . . . . . . . . . 36
SECTION 6.12. Public Announcements. . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.13. Confidentiality Agreement . . . . . . . . . . . . . . . . . . 37
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger. . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.03. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.04. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.05. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.03. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.04. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.05. Entire Agreement; Assignment. . . . . . . . . . . . . . . . . 45
SECTION 9.06. Parties in Interest . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.07. Specific Performance. . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.09. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.10. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.11. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.12. Company Disclosure Schedule . . . . . . . . . . . . . . . . . 46
ANNEX A Conditions to the Offer
EXHIBIT I Articles of Incorporation of Purchaser
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Glossary of Defined Terms
Defined Term Location of Definition
Action . . . . . . . . . . . . . . . . . . . . . . . Section 3.09
acquisition proposal . . . . . . . . . . . . . . . . Section 6.05(a)
affiliate. . . . . . . . . . . . . . . . . . . . . . Section 9.03(a)
Agreement. . . . . . . . . . . . . . . . . . . . . . Preamble
Articles of Merger . . . . . . . . . . . . . . . . . Section 2.02
beneficial owner . . . . . . . . . . . . . . . . . . Section 9.03(b)
Blue Sky Laws. . . . . . . . . . . . . . . . . . . . Section 3.05(b)
Board. . . . . . . . . . . . . . . . . . . . . . . . Recitals
business day . . . . . . . . . . . . . . . . . . . . Section 9.03(c)
Certificates . . . . . . . . . . . . . . . . . . . . Section 2.09(b)
Code . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
Company. . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Common Stock . . . . . . . . . . . . . . . . Recitals
Company Disclosure Schedule . . . . . . . . . . . . Article III
Company Options. . . . . . . . . . . . . . . . . . . Section 3.03
Company Preferred Stock. . . . . . . . . . . . . . . Section 3.03
Company Rights . . . . . . . . . . . . . . . . . . . Section 3.03
Company Stock Plans. . . . . . . . . . . . . . . . . Section 3.03
Confidentiality Agreement. . . . . . . . . . . . . . Section 6.04(b)
Constituent Corporations . . . . . . . . . . . . . . Preamble
control. . . . . . . . . . . . . . . . . . . . . . . Section 9.03(d)
controlled by. . . . . . . . . . . . . . . . . . . . Section 9.03(d)
CSFB . . . . . . . . . . . . . . . . . . . . . . . . Section 4.09
Current Premiums . . . . . . . . . . . . . . . . . . Section 6.08(b)
Dissenting Shares. . . . . . . . . . . . . . . . . . Section 2.08(a)
Effective Time . . . . . . . . . . . . . . . . . . . Section 2.02
Employee Stock Options . . . . . . . . . . . . . . . Section 6.06(a)
Employment Contracts . . . . . . . . . . . . . . . . Section 6.06(b)
Environmental Laws . . . . . . . . . . . . . . . . . Section 3.15(a)
ERISA. . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
Exchange Act . . . . . . . . . . . . . . . . . . . . Section 1.02(b)
Expenses . . . . . . . . . . . . . . . . . . . . . . Section 8.03(b)
FDA. . . . . . . . . . . . . . . . . . . . . . . . . Section 3.06(b)
Fee. . . . . . . . . . . . . . . . . . . . . . . . . Section 8.03(a)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . Section 3.07(b)
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Governmental Authority . . . . . . . . . . . . . . . Section 3.05(b)
Hazardous Substances . . . . . . . . . . . . . . . . Section 3.15(a)
HSR Act. . . . . . . . . . . . . . . . . . . . . . . Section 3.05(b)
Intellectual Property. . . . . . . . . . . . . . . . Section 9.03(e)
IRS. . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
knowledge of the Company . . . . . . . . . . . . . . Section 9.03(f)
Law. . . . . . . . . . . . . . . . . . . . . . . . . Section 3.05(a)
Licensed Intellectual Property . . . . . . . . . . . Section 9.03(g)
Marks. . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(e)
Material Adverse Effect. . . . . . . . . . . . . . . Section 3.01
Material Contracts . . . . . . . . . . . . . . . . . Section 3.16(a)
Merger . . . . . . . . . . . . . . . . . . . . . . . Recitals
Merger Consideration . . . . . . . . . . . . . . . . Section 2.06(a)
Minimum Condition. . . . . . . . . . . . . . . . . . Section 1.01(a)
Minnesota Law. . . . . . . . . . . . . . . . . . . . Recitals
Multiemployer Plan . . . . . . . . . . . . . . . . . Section 3.10(b)
Multiple Employer Plan . . . . . . . . . . . . . . . Section 3.10(b)
NASD . . . . . . . . . . . . . . . . . . . . . . . . Section 3.05(b)
Offer. . . . . . . . . . . . . . . . . . . . . . . . Recitals
Offer Documents. . . . . . . . . . . . . . . . . . . Section 1.01(b)
Offer to Purchase. . . . . . . . . . . . . . . . . . Section 1.01(b)
Order. . . . . . . . . . . . . . . . . . . . . . . . Section 6.11(b)
Owned Intellectual Property. . . . . . . . . . . . . Section 9.03(h)
Parent . . . . . . . . . . . . . . . . . . . . . . . Preamble
Paying Agent . . . . . . . . . . . . . . . . . . . . Section 2.09(a)
Per Share Amount . . . . . . . . . . . . . . . . . . Recitals
Permits. . . . . . . . . . . . . . . . . . . . . . . Section 3.06(a)
person . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(i)
Piper Jaffray. . . . . . . . . . . . . . . . . . . . Section 1.02(a)
Plans. . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
Products . . . . . . . . . . . . . . . . . . . . . . Section 3.06(b)
Proxy Statement. . . . . . . . . . . . . . . . . . . Section 3.11
Purchaser. . . . . . . . . . . . . . . . . . . . . . Preamble
Rights Agreement . . . . . . . . . . . . . . . . . . Section 3.03
Schedule 14D-9 . . . . . . . . . . . . . . . . . . . Section 1.02(b)
Schedule 14D-1 . . . . . . . . . . . . . . . . . . . Section 1.01(b)
SEC. . . . . . . . . . . . . . . . . . . . . . . . . Section 1.01(a)
SEC Reports. . . . . . . . . . . . . . . . . . . . . Section 3.07(a)
Securities Act . . . . . . . . . . . . . . . . . . . Section 3.07(a)
Shares . . . . . . . . . . . . . . . . . . . . . . . Recitals
Shareholders' Meeting. . . . . . . . . . . . . . . . Section 6.01(a)
S&N. . . . . . . . . . . . . . . . . . . . . . . . . Section 3.03
S&N Options. . . . . . . . . . . . . . . . . . . . . Section 6.07(a)
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subsidiary . . . . . . . . . . . . . . . . . . . . . Section 9.03(j)
Subsidiaries . . . . . . . . . . . . . . . . . . . . Section 3.01
Superior Proposal. . . . . . . . . . . . . . . . . . Section 6.05(b)
Surviving Corporation. . . . . . . . . . . . . . . . Section 2.01
Tax/Taxes. . . . . . . . . . . . . . . . . . . . . . Section 3.14(b)
Tax Return . . . . . . . . . . . . . . . . . . . . . Section 3.14(c)
Transactions . . . . . . . . . . . . . . . . . . . . Section 3.04
under common control with. . . . . . . . . . . . . . Section 9.03(d)
WARN . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(f)
AGREEMENT AND PLAN OF MERGER, dated as of December 15, 1997 (this
"AGREEMENT"), among SULZER MEDICA LTD, a corporation organized under the laws of
Switzerland ("PARENT"), SULZER MEDICA ORTHOPEDICS ACQUISITION CORP., a Minnesota
corporation and an indirect wholly owned subsidiary of Parent ("PURCHASER"), and
SPINE-TECH, INC., a Minnesota corporation (the "COMPANY") (Purchaser and the
Company being sometimes hereinafter referred to as the "CONSTITUENT
CORPORATIONS").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company
have each determined that it is in the best interests of their respective
shareholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, it is proposed that Purchaser shall make a cash tender offer
(as it may be amended from time to time as permitted hereunder, the "OFFER") to
acquire all of the issued and outstanding shares of common stock, $0.01 par
value, of the Company ("COMPANY COMMON STOCK") (such shares of Company Common
Stock, including the Company Rights (as defined in Section 3.03) associated with
such shares, being hereinafter collectively referred to herein as "SHARES") for
$52.00 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being the "PER SHARE AMOUNT") net to the seller in cash, upon the
terms and subject to the conditions of this Agreement and the Offer;
WHEREAS, the Board of Directors of the Company (the "BOARD") has
unanimously consented to the making of the Offer by Purchaser and resolved and
agreed to recommend that holders of Shares tender their Shares pursuant to the
Offer;
WHEREAS, the Boards of Directors of Parent (on its own behalf and as
the sole shareholder of Purchaser), Purchaser and the Company have each approved
this Agreement and the merger (the "MERGER") of Purchaser with and into the
Company in accordance with the Minnesota Business Corporation Act (the
"MINNESOTA LAW") following the consummation of the Offer and upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. THE OFFER. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and none of the events set
forth in Annex A hereto shall have occurred or be existing (and shall not have
been waived by Purchaser),
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Purchaser shall commence the Offer as promptly as reasonably practicable after
the date hereof, but in no event later than five business days after the initial
public announcement of Purchaser's intention to commence the Offer. The
obligation of Purchaser to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject to the condition (the "MINIMUM
CONDITION") that a number of Shares that, when added to the Shares already owned
by Parent, shall constitute at least a majority of the then outstanding Shares
on a fully diluted basis (including, without limitation, all Shares issuable
upon the conversion of any outstanding convertible securities or upon the
exercise of any outstanding options, warrants or rights (other than the Company
Rights)) shall have been validly tendered and not withdrawn prior to the
expiration of the Offer and also shall be subject to the satisfaction or waiver
of each of the other conditions set forth in Annex A hereto. Purchaser
expressly reserves the right to waive any such condition, to increase the price
per Share payable in the Offer, and to make any other changes in the terms and
conditions of the Offer; PROVIDED, HOWEVER, that no change may be made which
decreases the price per Share payable in the Offer, reduces the maximum number
of Shares to be purchased in the Offer, changes the form of consideration to be
paid in the Offer, modifies the conditions to the Offer set forth in Annex A
hereto or imposes conditions to the Offer other than those set forth in Annex A
hereto or, except as provided in the next sentence, extends the Offer.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (i) extend the Offer beyond the scheduled expiration date, which shall
be 20 business days following the commencement of the Offer, if, at the
scheduled expiration of the Offer, any of the conditions to Purchaser's
obligation to accept for payment, and to pay for, the Shares, shall 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
"SEC") or the staff thereof applicable to the Offer, or (iii) extend the Offer
for an aggregate period of not more than 5 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 percent or more, but less than 90 percent, of the
outstanding Shares. The Per Share Amount shall, subject to applicable
withholding of taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. Subject to the terms and conditions of the
Offer, Purchaser shall, and Parent shall cause Purchaser to, promptly after
expiration of the Offer, accept for payment and pay for all Shares validly
tendered and not withdrawn.
(b) As promptly as practicable on the date of commencement of the
Offer, Purchaser shall file with the SEC a Tender Offer Statement on Schedule
14D-1 (together with all amendments and supplements thereto, the "SCHEDULE
14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or shall
incorporate by reference an offer to purchase (the "OFFER TO PURCHASE") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule 14D-1, the Offer to Purchase and such other documents, together
with all supplements and amendments thereto, being, collectively, the "OFFER
DOCUMENTS"). Purchaser shall disseminate the Offer to Purchase, the related
letter of
3
transmittal and other Offer Documents to the extent required by applicable
federal securities laws. The Offer Documents will comply in all material
respects with the provisions of applicable federal securities laws. Each of
Parent, Purchaser and the Company agrees to correct promptly any information
provided by it for use in the Offer Documents which shall have become false or
misleading, and Parent and Purchaser further agree to take all steps necessary
to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the
other Offer Documents as so corrected to be disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws.
(c) Purchaser and Parent will file with the Commissioner of Commerce
of the State of Minnesota any registration statement relating to the Offer
required to be filed pursuant to Chapter 80B of the Minnesota Statutes.
SECTION 1.02. COMPANY ACTION. (a) The Company hereby consents to
the Offer and represents that (i) the Board, at a meeting duly called and held
on December 15, 1997, and a special committee of the Board, formed in accordance
with Section 302A.673 of the Minnesota Law, at a meeting duly called and held on
December 15, 1997, have, in each case, unanimously (A) determined that this
Agreement and the transactions contemplated hereby are in the best interests of
the Company and its shareholders, (B) approved this Agreement, the Merger, the
Offer and the other transactions contemplated hereby and (C) resolved to
recommend that the shareholders of the Company accept the Offer and approve and
adopt this Agreement and the transactions contemplated hereby, and (ii) Piper
Jaffray Inc. ("PIPER JAFFRAY") has delivered to the Board its opinion that the
consideration to be received by the holders of Shares pursuant to each of the
Offer and the Merger is fair to the holders of Shares from a financial point of
view. The Company hereby consents to the inclusion in the Offer Documents of
the recommendation of the Board described in the immediately preceding sentence
unless the Board shall determine in good faith that it is necessary to withdraw
such recommendation in accordance with its fiduciary duties to the Company and
its shareholders after consultation with its outside legal counsel..
(b) As promptly as practicable on the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "SCHEDULE 14D-9") containing the recommendation of the Board
described in Section 1.02(a), unless the Board determines in good faith in
accordance with Section 6.05(b) an alternative recommendation to be necessary in
accordance with its fiduciary duties to the Company and its shareholders under
applicable law after consultation with its outside legal counsel. The Company
shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9
promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and any other applicable federal securities laws. The Schedule 14D-9
will comply in all material respects with the provisions of applicable federal
securities laws. Each of the Company, Parent and Purchaser agrees to correct
promptly any information provided by it for use in the Schedule 14D-9 which
shall have become false or misleading, and the
4
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws.
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of a
recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish Purchaser with such
additional information, including, without limitation, updated listings and
computer files of shareholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Purchaser
shall, and each of Parent and Purchaser shall cause its affiliates, associates,
agents, representatives and advisors to, hold in confidence the information
contained in such labels, listings and files, shall use such information solely
in connection with the Offer and the Merger, and, if this Agreement shall be
terminated in accordance with Section 8.01 or if the Offer is otherwise
terminated, shall promptly deliver to the Company all copies (whether in human
or machine readable form) of such information and any information derived
therefrom then in their possession or the possession of their agents and
representatives.
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Minnesota
Law, at the Effective Time (as hereinafter defined) Purchaser shall be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of Purchaser shall cease, and the Company shall continue as the
surviving corporation of the Merger (the "SURVIVING CORPORATION").
SECTION 2.02. EFFECTIVE TIME. As promptly as practicable, but not
later than three business days, after the satisfaction or waiver of the
conditions set forth in Article VII, the parties hereto shall cause the Merger
to be consummated by filing articles of merger (the "ARTICLES OF MERGER") with
the Secretary of State of the State of Minnesota, in such form as is required
by, and executed by the party or parties required to execute the Articles of
Merger in accordance with the relevant provisions of, the Minnesota Law (the
date and time of such filing being the "EFFECTIVE TIME").
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SECTION 2.03. EFFECT OF THE MERGER. At the Effective Time, the
Merger shall have the effect provided in the applicable provisions of the
Minnesota Law.
SECTION 2.04. ARTICLES OF INCORPORATION; BY-LAWS. (a) At the
Effective Time the Articles of Incorporation of Purchaser, as in effect
immediately prior to the Effective Time, (in the form attached as Exhibit I)
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation;
PROVIDED, HOWEVER, that, at the Effective Time, by virtue of the Merger and this
Agreement and without any further action by the Constituent Corporations,
Article I of the Articles of Incorporation shall be amended to read as follows:
"The name of the corporation is Spine-Tech, Inc."
(b) The By-laws of Purchaser, as in effect immediately prior to the
Effective Time, by virtue of the Merger and this Agreement and without any
further action by the Constituent Corporations, shall 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.
SECTION 2.05. DIRECTORS AND OFFICERS. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation and the Minnesota Law,
and the officers of the Purchaser immediately prior to the Effective Time shall
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
the Minnesota Law.
SECTION 2.06. CONVERSION OF SECURITIES. The manner and basis of
converting the shares of stock of each of the Constituent Corporations is
hereinafter set forth in this Section 2.06. At the Effective Time, by virtue of
the Merger and without any further action on the part of Purchaser, the Company
or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section
2.06(b) and any Dissenting Shares (as hereinafter defined)) shall be
converted automatically into the right to receive the Per Share Amount in
cash (the "MERGER CONSIDERATION"), prorated for fractional shares, payable,
without interest, to the holder of such Share, upon surrender, in the
manner provided in Section 2.09, of the certificate that formerly evidenced
such Share and all such Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled;
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(b) Each Share held in the treasury of the Company and each
Share owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company immediately prior to the Effective
Time shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(c) Each share of common stock, par value $0.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
SECTION 2.07. OPTIONS. All outstanding Employee Stock Options (as
defined in Section 6.06(a)) and S&N Options (as defined in Section 6.07(a)) will
be cancelled immediately prior to the Effective Time and, in consideration of
such cancellation, the Company will, and Parent agrees to cause the Company to,
pay each holder of an Employee Stock Option or S&N Option, as the case may be,
the cash amount determined in accordance with Section 6.06(a) or Section
6.07(a), respectively.
SECTION 2.08. DISSENTING SHARES. (a) Notwithstanding any provision
of this Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and which are held of record or beneficially owned by
persons who shall not have voted such Shares in favor of the Merger and who
shall have properly exercised dissenters' rights with respect to such Shares in
accordance with Sections 302A.471 and 302A.473 of the Minnesota Law
(collectively, the "DISSENTING SHARES") shall not be converted into the Merger
Consideration. Such shareholders shall be entitled to receive payment of the
fair value of such Shares held by them in accordance with the provisions of such
Section 302A.473, except that all Dissenting Shares held of record or
beneficially owned by persons who shall have failed to perfect or who
effectively shall have withdrawn or lost their dissenters' rights to such Shares
under such Section 302A.473 shall thereupon be deemed to have been converted
into, as of the Effective Time, the right to receive the Merger Consideration,
without any interest thereon, upon surrender, in the manner provided in Section
2.09, of the certificate or certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any notice of
intent to demand the fair value of any Shares received by the Company pursuant
to Section 302A.473 of the Minnesota Law, withdrawals of such notices, and any
other instruments served pursuant to the Minnesota Law and received by the
Company with respect to Dissenting Shares and (ii) the opportunity to direct all
negotiations and proceedings with respect to the exercise of dissenters' rights
under the Minnesota Law. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to the exercise of dissenters'
rights or offer to settle or settle any such rights.
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SECTION 2.09. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior
to the Effective Time, Purchaser shall designate a bank or trust company located
in the United States having capital surplus and undivided profits exceeding
$500,000,000 to act as agent (the "PAYING AGENT") for the holders of Shares in
connection with the Merger to receive the funds to which holders of Shares shall
become entitled pursuant to Section 2.06(a). Such funds shall be invested by
the Paying Agent as directed by the Surviving Corporation.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each person who was, at the Effective Time, a holder
of record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.06(a): (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "CERTIFICATES") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and (ii) instructions for use
in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as reasonably may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled promptly to receive in exchange therefor the Merger Consideration for
each Share formerly evidenced by such Certificate, and such Certificate shall
then be cancelled. No interest shall accrue or be paid on the Merger
Consideration payable upon the surrender of any Certificate for the benefit of
the holder of such Certificate. If payment of the Merger Consideration is to be
made to a person other than the person in whose name the surrendered Certificate
is registered on the stock transfer books of the Company, it shall be a
condition of payment that the Certificate so surrendered shall be endorsed
properly or otherwise be in proper form for transfer and that the person
requesting such payment shall have paid all transfer and other taxes required by
reason of the payment of the Merger Consideration to a person other than the
registered holder of the Certificate surrendered or shall have established to
the satisfaction of the Surviving Corporation that such taxes either have been
paid or are not applicable.
(c) In the event any Certificate or Certificates shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate or Certificates to have been lost, stolen or
destroyed, the amount to which such person would have been entitled under
Section 2.09(b) hereof but for failure to deliver such Certificate or
Certificates to the Paying Agent shall nevertheless be paid to such person;
PROVIDED, HOWEVER, that the Surviving Corporation may, in its sole discretion
and as a condition precedent to such payment, require such person to give the
Surviving Corporation a written indemnity agreement in form and substance
reasonably satisfactory to the Surviving Corporation and, if reasonably deemed
advisable by the Surviving Corporation, a bond in such sum as it may reasonably
direct as indemnity against any claim that may be had against the Surviving
Corporation or Parent with respect to the Certificate or Certificates alleged to
have been lost, stolen or destroyed.
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(d) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them, and
Parent and the Surviving Corporation jointly and severally agree to be liable
for payments required to be made before or after the expiration of such six
month period under Section 2.06(a) hereof or Section 302A.473 of the Minnesota
Law. Notwithstanding the foregoing, neither the Surviving Corporation nor the
Paying Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official pursuant
to any abandoned property, escheat or other similar law.
(e) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Parent concurrently with the execution of this Agreement (the
"COMPANY DISCLOSURE SCHEDULE"), which shall identify exceptions by specific
Section references, or as otherwise described in the SEC Reports (as hereinafter
defined) filed prior the date of this Agreement, the Company hereby represents
and warrants to Parent and Purchaser that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
the Company and its two direct, wholly owned subsidiaries, Spine-Tech FSC Inc.,
a corporation organized under the laws of Barbados and Spine-Tech Surgical Inc.,
a Minnesota corporation (the "SUBSIDIARIES"), is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
corporate authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so incorporated, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below). Each of the Company and the Subsidiaries is duly
9
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing which would not, individually or in the aggregate, have a
Material Adverse Effect. When used in connection with the Company or the
Subsidiaries, the term "MATERIAL ADVERSE EFFECT" means 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. Other than
the Subsidiaries, there are no corporations, partnerships, joint ventures,
associations or other entities in which the Company owns, of record or
beneficially, any direct or indirect equity or similar interest or any right
(contingent or otherwise) to acquire the same.
SECTION 3.02. ARTICLES OF INCORPORATION; BY-LAWS. The Company has
heretofore made available to Parent a complete and correct copy of the Articles
of Incorporation and the By-laws (or equivalent organizational documents), each
as amended to date, of each of the Company and the Subsidiaries. Such Articles
of Incorporation, By-laws or equivalent organizational documents are in full
force and effect. Neither the Company nor the Subsidiaries is in violation of
any of the provisions of their respective Articles of Incorporation or By-laws
(or equivalent organizational documents).
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the
Company consists of 15,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock ("COMPANY PREFERRED STOCK"), of which 300,000 shares
have been designated Series A Junior Participating Preferred Stock, $.01 par
value per share. As of the date hereof, (i) 10,323,730 Shares are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no Shares are held in the treasury of the Company, (iii) no Shares are held by
the Subsidiaries, and (iv) 2,233,331 Shares are reserved for future issuance
pursuant to employee and other stock options (the "COMPANY OPTIONS") granted
under the Company's 1996 Omnibus Stock Plan, 1996 Employee Stock Purchase Plan,
1994 Stock Option Plan, 1993 Non-Employee Director Stock Option Plan and 1991
Stock Option Plan (collectively, the "COMPANY STOCK PLANS") and to Smith &
Nephew Richards Inc. ("S&N"). The number and exercise prices of such options
are set forth on Section 3.03 of the Company Disclosure Schedule. As of the
date hereof, no shares of Company Preferred Stock are issued and outstanding.
Except for (i) Company Options, and (ii) the preferred share purchase rights
(the "COMPANY RIGHTS") issued pursuant to the Rights Agreement, dated as of
August 21, 1996 (the "RIGHTS AGREEMENT"), between the Company and Norwest Bank
Minnesota, N.A., as rights agent, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any Subsidiary or obligating
the Company or any Subsidiary to issue or sell any shares of capital stock of,
or other equity interests in, the Company or such Subsidiary. All Shares
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the
10
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Shares or any capital stock of any Subsidiary. Each
outstanding share of capital stock of the Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and is owned by the Company free
and clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. There are no outstanding contractual
obligations of the Company or any Subsidiary to provide funds to any person
outside the ordinary course of business consistent with past practice, or to
make any investment (in the form of a loan or capital contribution) in any other
person.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has
all necessary corporate power and corporate authority to execute and deliver
this Agreement, to perform its obligations hereunder and, subject to approval by
the holders of the Shares at the Shareholders' Meeting (as hereinafter defined)
if so required by law with respect to its obligations to consummate the Merger,
to consummate the transactions contemplated hereby (the "TRANSACTIONS"). The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the approval and adoption
of this Agreement by the holders of a majority of the then outstanding Shares if
and to the extent required by applicable law, and the filing and recordation of
appropriate articles of merger as required by the Minnesota Law). As an
amplification and not in limitation of the immediately preceding sentence, a
special committee of the Board formed pursuant to Section 302A.673 of the
Minnesota Law has taken all actions required to render inapplicable to the
Transactions the restrictions on business combinations contained in Section
302A.671 and Section 302A.673 of the Minnesota Law. This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Purchaser, constitutes a
legal, valid and binding obligation of the Company.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Articles of Incorporation or By-laws of the Company or equivalent
organizational documents of the Subsidiaries, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 3.05(b) have
been made and all filings and obligations described in subsection (b) have been
made, conflict with or violate any foreign or domestic law, statute, ordinance,
rule, regulation, order, judgment or decree ("LAW") applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound, or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any right of
11
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, Permit (as hereinafter defined) or other instrument
or agreement, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic (local, state or federal)
or foreign ("GOVERNMENTAL AUTHORITY"), except (i) for applicable requirements,
if any, of the Exchange Act, state securities or "blue sky" laws ("BLUE SKY
LAWS"), the National Association of Securities Dealers ("NASD"), state takeover
laws, the pre-merger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT") and filing and
recordation of appropriate articles of merger as required by the Minnesota Law,
and (ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Offer or the Merger, or otherwise prevent the Company from
performing its obligations under this Agreement, and would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 3.06. PERMITS; COMPANY PRODUCTS; REGULATION. (a) Each of
the Company and each Subsidiary are in possession of all franchises, grants,
authorizations, clearances, licenses, registrations, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of any
Governmental Authority necessary for the Company or each Subsidiary to own,
lease and operate its properties or to carry on its business as it is now being
conducted (the "PERMITS"), except where the failure to have, or the suspension
or cancellation of, any of the Permits would not, individually or in the
aggregate, have a Material Adverse Effect. As of the date hereof, no suspension
or cancellation of any of the Permits is pending or, to the knowledge of the
Company, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Permits would not, individually or in the aggregate,
have a Material Adverse Effect. A list of the material Permits is set forth in
Section 3.06(a) of the Company Disclosure Schedule. Neither the Company nor any
Subsidiary is in conflict with, or in default or violation of, (i) the Foreign
Corrupt Practices Act of 1977, as amended, (ii) any Law applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) any Permits, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Except as would not have a Material Adverse Effect, since January
1, 1992, there have been no written notices, citations or decisions by any
Governmental Authority that any product produced, manufactured or marketed at
any time by the Company (the "PRODUCTS") is defective or fails to meet any
applicable standards promulgated by such
12
Governmental Authority, and the Company does not know of any such defect or
failure. Except as would not have a Material Adverse Effect, the Company has
complied with the Law, policies, procedures and specifications applicable to the
Company with respect to the design, manufacture, labelling, testing and
inspection of Products in the United States and the operation of manufacturing
facilities in the United States promulgated by the Food and Drug Administration
("FDA"), and has complied with the Law, policies, procedures and specifications
applicable to the Company in any jurisdiction outside the United States with
respect to the design, manufacture, labelling, testing and inspection of
Products and the operation of manufacturing facilities outside of the United
States. Since January 1, 1992, there have been no recalls, field notifications
or seizures ordered or, to the knowledge of the Company, threatened by any
Governmental Authority with respect to any of the Products that would,
individually or in the aggregate, have a Material Adverse Effect, and the
Company has not independently engaged in such recalls or field notifications.
The Company has not received any warning letter or Section 305 notices from the
FDA.
(c) The Company has obtained, in all countries where the Company is
marketing or has marketed its Products, all applicable Permits required to be
obtained by it by Governmental Authorities (including the FDA) in such countries
regulating the safety, effectiveness and market clearance of the Products that
are currently marketed by the Company or its affiliates, except where the
failure to obtain such Permits would not, individually or in the aggregate, have
a Material Adverse Effect. Section 3.06(c)(i) of the Company Disclosure
Schedule sets forth a list of all licenses, registrations, approvals, permits
and device listings. Section 3.06(c)(ii) of the Company Disclosure Schedule
sets forth a description of all Company inspections by regulatory authorities,
recalls, product actions and audits since January 1, 1992 and a description of
ongoing clinical studies.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company
has filed all forms, reports and documents required to be filed by it with the
SEC since June 22, 1995 through the date of this Agreement (collectively, the
"SEC REPORTS"). The SEC Reports (i) at the time of their filing complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Exchange Act, as the case may be, and the
applicable rules and regulations thereunder and (ii) did not, at the time they
were filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. The Subsidiaries are not required to file any form,
report or other document with the SEC.
(b) Each of the financial statements (including, in each case, any
notes thereto) contained in the SEC Reports was prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto), and each fairly presented in all material respects the
financial position, results of operations and cash flows of the Company and its
Subsidiaries, if any, as at the respective dates thereof and for the
13
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal year-end adjustments
and except that the unaudited financial statements do not contain all of the
footnote disclosures required by GAAP).
(c) Neither the Company nor any Subsidiary has any liability of any
nature (whether accrued, absolute, contingent or otherwise), except (i)
liabilities and obligations disclosed pursuant to any other representation or
warranty set forth in this Agreement, (ii) debts, liabilities and obligations
set forth in the Company Disclosure Schedule or which, because of the exceptions
set forth in the other representations and warranties contained in this
Agreement, are not required to be disclosed in the Company Disclosure Schedule
in order to avoid a breach of any other representation or warranty contained in
this Agreement, (iii) liabilities and obligations disclosed in any SEC Report
prior to the date hereof, including any Form 10-Q filed since December 31, 1996,
and (iv) other liabilities and obligations which, after giving effect to the
proceeds reasonably expected to be received from any insurance coverage, would
not, individually or in the aggregate, have a Material Adverse Effect.
(d) The Company has heretofore furnished to Parent complete and
correct copies of all amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1996, except as contemplated by or as disclosed in this Agreement or as
disclosed in any SEC Report filed since December 31, 1996, the Company and the
Subsidiary have conducted their businesses only in the ordinary course and in a
manner consistent with past practice and, since such date, there has not been
(a), after giving effect to the proceeds reasonably expected to be received from
any insurance coverage, any Material Adverse Effect, (b) any material change by
the Company in its accounting methods, principles or practices, including
without limitation, those used in the calculation of contractual adjustments or
bad debts, (c) any revaluation by the Company of any material assets (including,
without limitation, any writing down of the value of inventory or writing off of
accounts receivable), other than in the ordinary course of business consistent
with past practice, (d) any declaration, setting aside or payment of any
dividend or distribution in respect of the Shares or any redemption, purchase or
other acquisition of any of its securities or (e) any increase in, or
establishment or modification of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or employees of the Company or any Subsidiary,
except increases in the salaries of employees who are not officers, payment of
profit sharing and bonuses, and granting of stock options to employees who are
not officers in the ordinary course of business consistent with past practice.
14
SECTION 3.09. ABSENCE OF LITIGATION. There is no litigation, suit,
claim, action, proceeding or investigation (an "ACTION") pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary, or
any property or asset of the Company or any Subsidiary, before any court,
arbitrator or Governmental Authority, which (i) individually or in the
aggregate, reasonably would be expected to have a Material Adverse Effect or
(ii) as of the date of this Agreement, seeks to delay or prevent the
consummation of any Transaction. Neither the Company nor any Subsidiary nor any
property or asset of the Company or any Subsidiary is subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with, or, to the knowledge of the Company, continuing investigation
by, any Governmental Authority, or any order, writ, judgment, injunction,
decree, determination or award of any Governmental Authority or arbitrator
having, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) Section
3.10 of the Company Disclosure Schedule contains a true and complete list of all
employee benefit plans (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements to which the Company or
any Subsidiary is a party, with respect to which the Company or any Subsidiary
has any obligation or which are maintained, contributed to or sponsored by the
Company or any Subsidiary for the benefit of any current or former employee,
officer or director of the Company or any Subsidiary (collectively, the
"PLANS"). Each Plan is in writing and the Company has previously furnished or
made available to Parent a true and complete copy of each Plan and a true and
complete copy of each material document prepared in connection with each such
Plan, including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Neither the Company nor any
Subsidiary has any express or implied commitment (i) to create, incur liability
with respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Internal Revenue Code of 1986, as amended
(the "CODE").
(b) None of the Plans is a multiemployer plan, within the meaning of
Section 3(37) or 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN"), or a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Company or any Subsidiary could incur liability under Section 4063 or
4064 of ERISA (a "MULTIPLE EMPLOYER PLAN"). None of the Plans is a "defined
benefit plan" within the meaning of
15
Section 3(35) of ERISA. Except as disclosed in Section 3.10 of the Company
Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any person, (ii)
obligates the Company or any Subsidiary to pay separation, severance,
termination or other benefits as a result of any Transaction or (iii) obligates
the Company or any Subsidiary to make any payment or provide any benefit that
could be subject to a tax under Section 4999 of the Code. None of the Plans
provides for or promises retiree medical, disability or life insurance benefits
to any current or former employee, officer or director of the Company or any
Subsidiary, except for continued healthcare coverage under COBRA.
(c) Each Plan which is intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the IRS that such
Plan is so qualified, and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that such trust is
so exempt. No fact or event has occurred since the date of any such
determination letter from the IRS that could adversely affect the qualified
status of any such Plan or the exempt status of any such trust. Each trust
maintained or contributed to by the Company or any Subsidiary which is intended
to be qualified as a voluntary employees' beneficiary association exempt from
federal income taxation under Sections 501(a) and 501(c)(9) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and so exempt, and no fact or event has occurred since the date of such
determination by the IRS that could adversely affect such qualified or exempt
status.
(d) There has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.
Neither the Company nor any Subsidiary is currently liable or has previously
incurred any liability for any tax or penalty arising under Section 4971, 4972,
4979, 4980 or 4980B of the Code or Section 502(c) of ERISA, and no fact or event
exists which could give rise to any such liability. Neither the Company nor any
Subsidiary has incurred any liability under, or by operation of, Title IV of
ERISA and no fact or event exists which could give rise to any such liability.
(e) Each Plan is now and has been operated in all respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company and the Subsidiaries have
performed all obligations required to be performed by them under, and are not in
any respect in default under or in violation of, any Plan. The audited balance
sheet of the Company dated December 31, 1996 reflects an accrual of all amounts
of employer contributions and premiums accrued but unpaid with respect to the
Plans.
(f) Neither the Company nor any Subsidiary has incurred any liability
under, and have complied in all respects with, the Worker Adjustment Retraining
16
Notification Act and the regulations promulgated thereunder ("WARN") and do not
reasonably expect to incur any such liability as a result of actions taken or
not taken prior to the Effective Time.
(g) (i) There are no claims or actions pending or, to the knowledge
of the Company, threatened between the Company or any Subsidiary and any of
their respective employees, which controversies have a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary, nor, to the knowledge of the Company,
are there any activities or proceedings of any labor union to organize any such
employees; (iii) neither the Company nor any Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or contract
and there are no grievances outstanding against the Company or any Subsidiary
under any such agreement or contract; (iv) there are no unfair labor practice
complaints pending against the Company or any Subsidiary before the National
Labor Relations Board or any current union representation questions involving
employees of the Company or any Subsidiary; and (v) there is no strike,
slowdown, work stoppage or lockout, or, to the knowledge of the Company, threat
thereof, by or with respect to any employees of the Company or any Subsidiary.
SECTION 3.11. OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT.
Neither the Schedule 14D-9 nor any information supplied by the Company for
inclusion in the Offer Documents shall, at the respective times the Schedule
14D-9, the Offer Documents or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to shareholders of the
Company, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. Neither the proxy statement to be
sent to the shareholders of the Company in connection with the Shareholders'
Meeting (as hereinafter defined) nor the information statement to be sent to
such shareholders, as appropriate (such proxy statement or information
statement, as amended or supplemented, being referred to herein as the "PROXY
STATEMENT"), shall, at the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to shareholders of the Company, contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading or
shall, at the time of the Shareholders' Meeting or at the Effective Time, omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Shareholders'
Meeting which shall have become false or misleading. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect to
statements therein based on information supplied by Parent or Purchaser or any
of their representatives which is contained in the Schedule 14D-9, the Offer
Documents, the Proxy Statement or any amendment or supplement thereto. The
Schedule 14D-9 and the Proxy Statement shall
17
comply in all material respects as to form with the requirements of the Exchange
Act and the applicable rules and regulations thereunder.
SECTION 3.12. PROPERTY. The Company and the Subsidiary have
sufficient title to, or right to use, all their tangible properties and assets
necessary to conduct their respective businesses as currently conducted or as
contemplated to be conducted, with only such exceptions as, individually or in
the aggregate, would not interfere with the current use of such property or
asset in such a manner as to have a Material Adverse Effect.
SECTION 3.13. INTELLECTUAL PROPERTY. (a) Section 3.13(a)(i) of the
Company Disclosure Schedule sets forth a true and complete list and a brief
description of all patents, registered trademarks, registered service marks and
registered copyrights, and all applications therefor, constituting Owned
Intellectual Property (including a complete identification of each patent and
patent application and each registration, certificate or application for
registration thereof, of all Owned Intellectual Property, and for all such Owned
Intellectual Property used by the Company or any Subsidiary in connection with
the development, manufacture, testing, or production of products, or otherwise
used, held or intended to be used in the business of the Company or any
Subsidiary, also lists the name and title of the person or persons responsible
for the creation thereof) and Section 3.13(a)(ii) of the Company Disclosure
Schedule sets forth a true and complete list and a brief description, including
a description of any license, franchise or sublicense thereof, of all Licensed
Intellectual Property, except customary non-negotiated licenses by the Company
as licensee of computer software. For each registration, certificate or patent
or application for registration or patent listed in Section 3.13(a)(i) of the
Company Disclosure Schedule held by assignment, the assignment has been lawfully
obtained and has been duly recorded with the state or national patent or
trademark office (or such other Governmental Authority as may be necessary under
any law) from which the original patent, certificate or registration issued or
before which the patent application or application for registration is pending.
Except as would not, individually or in the aggregate, have a Material Adverse
Effect, the rights of the Company or any Subsidiary, as the case may be, in or
to the Owned Intellectual Property set forth on Section 3.13(a)(i) of the
Company Disclosure Schedule are held exclusively by the Company or such
Subsidiary, do not conflict with the rights of any other person or entity, and
neither the Company nor any such Subsidiary has received any claim or written
notice from any person or entity to such effect.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, (i) all the Owned Intellectual Property is owned by the
Company or any Subsidiary, free and clear of any encumbrance, (ii) no existing
product of the Company or any Subsidiary or any product of the Company or any
Subsidiary currently in development is being provided, manufactured, sold or
developed in violation of any patents or trademarks, or any other rights of any
person or entity, and (iii) no Actions have been made or asserted or are pending
(nor, to the knowledge of the Company, has any such Action been threatened)
against the Company or any Subsidiary either (A) based upon or challenging or
seeking to
18
deny or restrict the use by the Company or any Subsidiary of any of the Owned
Intellectual Property or the Licensed Intellectual Property or (B) alleging that
any services provided, or products manufactured or sold by the Company or any
Subsidiary are being provided, manufactured or sold in violation of any patents
or trademarks, or any other rights of any person or entity. Except as would
not, individually or in the aggregate, have a Material Adverse Effect, to the
knowledge of the Company, no person or entity is using any patents, copyrights,
trademarks, service marks, trade names, trade secrets or similar property that
are confusingly similar to the Owned Intellectual Property or, except with
respect to customary non-negotiated licenses by the Company as licensee of
computer software, the Licensed Intellectual Property or that infringe upon the
Owned Intellectual Property or, except with respect to customary non-negotiated
licenses by the Company as licensee of computer software, the Licensed
Intellectual Property or upon the rights of the Company or any Subsidiary
therein. Neither the Company nor any Subsidiary has granted any license or
other right to any other person or entity with respect to the Owned Intellectual
Property or the Licensed Intellectual Property. Except as would not,
individually or in the aggregate, have a Material Adverse Effect, the
consummation of the Transactions will not result in the termination or
impairment of any of the Owned Intellectual Property or the Licensed
Intellectual Property.
(c) To the knowledge of the Company, with respect to all Licensed
Intellectual Property and Owned Intellectual Property, the registered user
provisions of all countries in which the Company or any Subsidiary has obtained
a registered trademark requiring such registrations have been or are in the
process of being complied with in all material respects.
(d) The Company has delivered or made available to Parent correct and
complete copies of all licenses, franchises and sublicenses for Licensed
Intellectual Property set forth in Section 3.13(a)(ii) of the Company Disclosure
Schedule and any and all ancillary documents pertaining thereto (including,
without limitation, all amendments, consents and evidence of commencement dates
and expiration dates). With respect to each of such licenses and sublicenses:
(i) such license, franchise or sublicense, together with all
ancillary documents delivered pursuant to the first sentence of this
Section 3.13(d), is legal, valid, binding, enforceable and in full force
and effect and represents the entire agreement between the respective
licensor and licensee with respect to the subject matter of such license or
sublicense;
(ii) such license, franchise or sublicense will not cease to be legal,
valid, binding, enforceable and in full force and effect on terms identical
to those currently in effect as a result of the consummation of the
Transactions, nor will the consummation of the Transactions constitute a
breach or default under such license, franchise or sublicense;
19
(iii) with respect to each such license or sublicense, except as
would not, individually or in the aggregate, have a Material Adverse
Effect: (A) neither the Company nor any Subsidiary has received any notice
of termination or cancellation under such license or sublicense and no
licensor or sublicensor has any right of termination or cancellation under
such license or sublicense prior to the expiration of its term except in
connection with the default of the Company or any Subsidiary thereunder or
pursuant to applicable Laws relating to bankruptcy or reorganization, (B)
neither the Company nor any Subsidiary has received any notice of a breach
or default under such license or sublicense, which breach or default has
not been cured, and (C) neither the Company nor any Subsidiary has granted
to any other person or entity any rights, adverse or otherwise, under such
license or sublicense; and
(iv) except as would not, individually or in the aggregate, have a
Material Adverse Effect, none of the Company, any Subsidiary and, to the
knowledge of the Company, any other party to such license or sublicense is
in breach or default of such license or sublicense; and, to the knowledge
of the Company, no event has occurred that, with notice or lapse of time
would constitute such a breach or default or permit termination,
modification or acceleration under such license or sublicense by any party
thereto (other than the Company or any Subsidiary).
(e) The Owned Intellectual Property and the Licensed Intellectual
Property constitutes all Intellectual Property necessary in the conduct of the
business of the Company and the Subsidiaries, and there are no other items of
Intellectual Property that are material to the Company, the Subsidiaries or
their businesses.
SECTION 3.14. TAXES. (a) The Company and the Subsidiaries have
timely filed all Tax Returns required to be filed by them, or extensions of time
for such filings have been filed, other than Tax Returns where the failure to
file would not have a Material Adverse Effect, and, except as would not,
individually or in the aggregate, have a Material Adverse Effect, such returns
and reports are true, complete and correct. Except as would not have a Material
Adverse Effect, the Company and the Subsidiaries have paid and discharged within
the time and in the manner prescribed by the law all Taxes that are due and
payable, other than such payments as are being contested in good faith by
appropriate proceedings. The accruals and reserves for Taxes reflected in the
Company's audited consolidated balance sheet for the fiscal year ended December
31, 1996 are in accordance with GAAP. Neither the IRS nor any other taxing
authority or agency, domestic or foreign, is now asserting or, to the knowledge
of the Company, threatening to assert against the Company or any Subsidiary any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. Except as would not have a Material Adverse Effect, no
adjustment relating to such returns has been proposed in writing by any Tax
authority (insofar as either relates to the activities or income of the Company
or any Subsidiary or could result in liability of the Company or any Subsidiary
on the basis of joint and/or several liability) and, to the knowledge of the
Company and the Subsidiaries, no basis exists for any
20
such adjustment, other than adjustments which would not, individually or in the
aggregate, have a Material Adverse Effect. Neither the Company nor any
Subsidiary has received a written ruling from, or entered into a written and
legally binding agreement with, a taxing authority relating to Taxes of the
Company or any Subsidiary. Neither the Company nor any Subsidiary has granted
any waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any income Tax. The statute of limitations for
the assessment of any federal income Taxes has expired for all income Tax
Returns of the Company, or such income Tax Returns of the Company and the
Subsidiaries have been examined by the IRS for all periods. There are no Tax
liens upon the assets of the Company or any Subsidiary except for Tax liens that
would not, individually or in the aggregate, have a Material Adverse Effect. No
audits or other administrative proceeding or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Company or any
Subsidiary. Neither the Company nor any Subsidiary is a party to any agreement
relating to allocating or sharing of Taxes which has not been disclosed on its
Tax Returns. No consent under Section 341(f) of the Code has been filed with
respect to the Company or any Subsidiary. Except as would not have a Material
Adverse Effect, neither the Company nor any of its Subsidiaries has a permanent
establishment or office or fixed place of business through which the business of
the Company or any of its Subsidiaries is wholly or partly carried on outside
the United States. Neither the Company nor any of its Subsidiaries has
participated in or cooperated with an international boycott within the meaning
of Section 999 of the Code.
(b) "TAX" or "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority, including, without
limitation, taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added or gains taxes; license,
registration and documentation fees; and customs' duties, tariffs, and similar
charges.
(c) "TAX RETURN" means any report, return, information statement,
payee statement declaration or other information required to be provided to any
federal, state, local or foreign government or taxing authority, or otherwise
retained, with respect to Taxes.
SECTION 3.15. ENVIRONMENTAL MATTERS. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i)
"HAZARDOUS SUBSTANCES" means (A) those substances defined in or regulated under
the following federal statutes and their state counterparts, as each may be
amended from time to time, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy
21
Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air
Act; (B) petroleum and petroleum products including crude oil and any fractions
thereof; (C) natural gas, synthetic gas, and any mixtures thereof; (D) radon;
(E) any other contaminant; and (F) any substance with respect to which a
federal, state or local agency requires environmental investigation, monitoring,
reporting or remediation; and (ii) "ENVIRONMENTAL LAWS" means any federal, state
or local law relating to (A) releases or threatened releases of Hazardous
Substances or materials containing Hazardous Substances; (B) the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous Substances
or materials containing Hazardous Substances; or (C) otherwise relating to
pollution of the environment or the protection of human health.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect: (i) the Company and the Subsidiaries have not violated
and are not in violation of any Environmental Law; (ii) none of the properties
owned or leased by the Company or any Subsidiary (including, without limitation,
soils and surface and ground waters) are contaminated with any Hazardous
Substance at levels which exceed standards established by applicable
Governmental Authorities; (iii) the Company and the Subsidiaries have no
liability for any off-site contamination; and (iv) the Company and the
Subsidiaries have no liability under any Environmental Law.
SECTION 3.16. MATERIAL CONTRACTS. (a) Subsections (i) through (ix)
of Section 3.16 of the Company Disclosure Schedule contain a list of the
following types of contracts and agreements to which the Company or any
Subsidiary is a party (such contracts, agreements and arrangements as are
required to be set forth in Section 3.16(a) of the Company Disclosure Schedule,
together with all agreements relating to Intellectual Property set forth in
Section 3.13(a) of the Company Disclosure Schedule, being the "MATERIAL
CONTRACTS"):
(i) each contract and agreement (excluding individual purchase and
sales orders) which (A) is likely to involve consideration of more than
$100,000 in the aggregate during the calendar year ending December 31,
1997, (B) is likely to involve consideration of more than $100,000 in the
aggregate over the remaining term of such contract, and which, in either
case, cannot be cancelled by the Company or any Subsidiary upon 90 days' or
less notice without penalty or further payment;
(ii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which the Company or any
Subsidiary is a party (true and complete copies of such contracts and
agreements have been provided to Parent);
(iii) all management contracts (excluding contracts for employment)
and contracts with physicians or other consultants, including any contracts
involving the payment of royalties or other amounts calculated based upon
the revenues or income
22
of the Company or any Subsidiary or income or revenues related to any
product of the Company or any Subsidiary to which the Company or any
Subsidiary is a party;
(iv) all contracts and agreements relating to indebtedness;
(v) all contracts and agreements with any Governmental Authority to
which the Company or any Subsidiary is a party other than for purchases or
sales of inventory to a Governmental Authority in the ordinary course of
business consistent with past practice;
(vi) all contracts and agreements that limit the ability of the
Company or any Subsidiary to compete in any line of business or with any
person or entity or in any geographic area or during any period of time;
(vii) all contracts and agreements providing for benefits under any
Plan;
(viii) all material contracts or arrangements that result in any
person or entity holding a power of attorney from the Company or any
Subsidiary that relates to the Company, such Subsidiary or their
businesses; and
(ix) all contracts for employment required to be listed in Section
3.10 of the Company Disclosure Schedule.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, each contract referred to in paragraphs (i) through
(ix) above is a legal, valid and binding agreement, neither the Company nor any
Subsidiary is in default under any Material Contract, and neither the Company
nor any Subsidiary is in receipt of any claim of default under any Material
Contract. The Company has furnished or made available to Parent true and
complete copies of all Material Contracts in effect as of the date hereof that
are not included as exhibits to the SEC Reports filed prior to the date hereof.
SECTION 3.17. EMPLOYEE CONFIDENTIALITY. All directors, officers,
management employees and technical and professional employees of the Company and
the Subsidiaries are under written obligation to the Company or a Subsidiary (or
bound by applicable Law) to maintain in confidence all confidential or
proprietary information acquired in the course of their employment and to assign
to the Company all inventions made in connection with the scope of their
employment during the tenure of their employment and for a reasonable time
period thereafter.
SECTION 3.18. INSURANCE. (a) Section 3.18(a) of the Company
Disclosure Schedule sets forth the following information with respect to each
insurance policy under which the Company or any Subsidiary has been an insured,
a named insured or otherwise the principal beneficiary of coverage at any time
within the past year:
23
(i) the name of the insurer and the names of the principal insured,
each named insured and each additional insured;
(ii) the policy number, the period of coverage, description and scope
(including an indication of whether the coverage was on a claims-made,
occurrence or other basis) and amount (including a description of how
deductibles, retentions and aggregates are calculated and operate) of
coverage;
(iii) if coverage is written on a claims-made basis, the retro date
and details concerning endorsements or terms which further restrict
coverage (E.G., "laser beam" endorsements);
(iv) summary of loss amounts paid to date, reserves for open claims,
and, if applicable, the remaining unexhausted coverage limits available to
the insured under each policy; and
(v) the premium charged for the policy, including, without
limitation, a description of any premium financing, retroactive premium
adjustments or other loss-sharing arrangements.
(b) With respect to each such insurance policy: (i) the policy is
legal, valid, binding and enforceable in accordance with its terms and, except
for policies that have expired under their terms in the ordinary course, is in
full force and effect; (ii) neither the Company nor any Subsidiary is in
material breach or default (including any such breach or default with respect to
the payment of premiums or the giving of notice), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default or permit termination or modification, under the policy; and (iii) to
the knowledge of the Company, no insurer on the policy has been declared
insolvent or placed in receivership, conservatorship or liquidation.
(c) At no time has the Company or any Subsidiary (i) subsequent to
January 1, 1992, been denied any insurance or indemnity bond coverage which it
has requested or (ii) subsequent to January 1, 1992, made any material
reduction in the scope or amount of its insurance coverage, or subsequent to
January 1, 1992, received notice from any of its insurance carriers that any
insurance coverage listed in Section 3.18(a) of the Company Disclosure Schedule
will not be available in the future substantially on the same terms as are now
in effect.
SECTION 3.19. FRAUD AND ABUSE. Neither the Company nor any
Subsidiary have engaged knowingly and willfully in any activities which are
prohibited under federal Medicare and Medicaid statutes, including, without
limitation, 42 U.S.C. Section 1320a-7b and 42 U.S.C. Section 1395nn or related
state or local statutes or regulations or which otherwise constitutes fraud,
including, without limitation, the following: (a) knowingly and willfully
24
making or causing to be made a false statement or representation of a material
fact in any application for any benefit or payment; (b) knowingly and willfully
making or causing to be made any false statement or representation of a material
fact for use in determining rights to any benefit or payment; (c) knowingly and
willfully failing to disclose knowledge of the occurrence of any event affecting
the initial or continued right to any benefit or payment on its behalf or on
behalf of another, with intent to secure such benefit or payment fraudulently;
(d) knowingly and willfully soliciting or receiving any remuneration (including
any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in
cash or in kind or offering to pay such remuneration (i) in return for referring
an individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid or (ii) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any good,
facility, service, or item for which payment may be made in whole or in part by
Medicare or Medicaid.
SECTION 3.20. AMENDMENT TO RIGHTS AGREEMENT. The Board has taken all
necessary action to approve the amendment of 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 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 Company Rights becoming
evidenced by, and transferable pursuant to, certificates separate from the
certificates representing Company Common Stock, and (b) the Company Rights will
expire pursuant to the terms of the Rights Agreement at the Effective Time.
SECTION 3.21. BROKERS. No broker, finder or investment banker (other
than Piper Jaffray) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore made available to
Parent a complete and correct copy of all agreements between the Company and
Piper Jaffray pursuant to which such firm would be entitled to any payment
relating to the Transactions.
SECTION 3.22. NO IMPLIED REPRESENTATION. It is the explicit intent
of each party hereto that the Company is making no representation or warranty
whatsoever, not express or implied, beyond those given in this Agreement,
including but not limited to any implied warranty or representation as to
condition, merchantability or suitability. It is understood that any estimates,
projections or other predictions contained herein or referred to in the Company
Disclosure Schedule or in any material that has been provided to Purchaser or
Parent are not and shall not be deemed to be representations or warranties of
the Company.
25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby jointly and severally represent and
warrant to Company that:
SECTION 4.01. CORPORATE ORGANIZATION. Each of Parent and Purchaser
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the requisite corporate
power and corporate authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to have such governmental approvals would
not delay consummation of the Transactions, or otherwise prevent Parent or
Purchaser from performing its obligations under this Agreement.
SECTION 4.02. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent
and Purchaser has all necessary corporate power and corporate authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
Parent and Purchaser and the consummation by Parent and Purchaser of the
Transactions have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of Parent or Purchaser
(including any action by the sole shareholder of Purchaser) are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate articles of
merger as required by the Minnesota Law). This Agreement has been duly and
validly executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Purchaser enforceable against each
of Parent and Purchaser in accordance with its terms.
SECTION 4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Articles of Incorporation or By-laws (or equivalent
organizational documents) of either Parent or Purchaser, (ii) assuming that all
consents, approvals, authorizations and other actions described in Section
4.03(b) have been obtained and all filings and obligations described in
subsection (b) have been made, conflict with or violate any Law applicable to
Parent or Purchaser or by which any property or asset of either of them is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts,
26
violations, breaches, defaults, or other occurrences which would not prevent or
delay consummation of the Transactions, or otherwise prevent Parent or Purchaser
from performing its obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws, the NASD, state
takeover laws, the pre-merger notification requirements of the HSR Act and
filing and recordation of appropriate articles of merger as required by the
Minnesota Law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Offer or the Merger, or otherwise prevent
Parent or Purchaser from performing their respective obligations under this
Agreement.
SECTION 4.04. OFFER DOCUMENTS; PROXY STATEMENT. Neither the Offer
Documents nor any information supplied by Parent or Purchaser for inclusion in
the Schedule 14D-9 will, at the time the Offer Documents, the Schedule 14D-9, or
any amendments or supplements thereto, are filed with the SEC or are first
published, sent or given to shareholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to shareholders of the Company, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, or at the
time of the Shareholders' Meeting or at the Effective Time, omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Shareholders' Meeting which
shall have become false or misleading. Notwithstanding the foregoing, Parent
and Purchaser make no representation or warranty with respect to any information
supplied by the Company or any of its representatives which is contained in any
of the Offer Documents, the Proxy Statement or any amendment or supplement
thereto. The Offer Documents shall comply in all material respects as to form
with the requirements of the Exchange Act and the rules and regulations
thereunder.
SECTION 4.05. FINANCING. Parent and Purchaser have, or will have,
available all of the funds necessary for the acquisition of all the outstanding
Shares pursuant to the Offer and the Merger, as the case may be, and to perform
their respective obligations under this Agreement.
27
SECTION 4.06. INTERIM OPERATIONS OF PURCHASER. Purchaser was formed
solely for the purpose of engaging in the Transactions and has not engaged in
any business activities or conducted any operations other than in connection
with the Transactions.
SECTION 4.07. ABSENCE OF LITIGATION. There is no Action pending or,
to the knowledge of the Parent and Purchaser, threatened against Parent or
Purchaser, or any property or asset of Parent or Purchaser, before any court,
arbitrator or Governmental Authority, which individually or in the aggregate,
reasonably would be expected to delay consummation of the Transactions or
otherwise prevent Parent or Purchaser from performing its obligations under this
Agreement. Neither Parent nor Purchaser nor any property or asset of Parent or
Purchaser is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or, to the knowledge of
Parent and Purchaser, continuing investigation by, any Governmental Authority,
or any order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority or arbitrator which, individually or in the aggregate,
would delay consummation of the Transactions or otherwise prevent Parent or
Purchaser from performing its obligations under this Agreement.
SECTION 4.08. OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date of
this Agreement, neither Parent, Purchaser nor any of their affiliates is the
beneficial owner of any shares of capital stock of the Company.
SECTION 4.09. BROKERS. No broker, finder or investment banker (other
than Credit Suisse First Boston Corporation ("CSFB")) is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or
Purchaser. Parent agrees to pay all such fees and commissions of CSFB.
SECTION 4.10. NO IMPLIED REPRESENTATION. It is the explicit intent
of each party hereto that neither Parent nor Purchaser is making any
representation or warranty whatsoever, express or implied, beyond those given in
this Agreement, including but not limited to any implied warranty or
representation as to condition, merchantability or suitability.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS PENDING THE MERGER. The Company
agrees that, between the date of this Agreement and the Effective Time, except
as set forth in Section 5.01 of the Company Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, unless Parent or
Purchaser shall otherwise agree in writing, the businesses of the Company and
the Subsidiaries shall be conducted only in, and the Company
28
and the Subsidiaries shall not take any action with respect to their businesses
except in, the ordinary course of business; and each of the Company and the
Subsidiaries shall use its reasonable efforts to preserve substantially intact
the business organization of the Company and the Subsidiaries, to keep available
the services of the current officers, employees and consultants of the Company
and the Subsidiaries, and to preserve the current relationships of the Company
and the Subsidiaries with physicians, customers, suppliers and other persons
with which the Company or any Subsidiary has significant business relations. By
way of amplification and not limitation, except as contemplated by this
Agreement, neither the Company nor any Subsidiary shall, between the date of
this 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 Subsidiary, 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 Subsidiary
(except for the issuance of Shares issuable pursuant to Company Options
outstanding on the date hereof, 6,500 Shares to be issued pursuant to the
1996 Employee Stock Purchase Plan and any Shares required to be issued
under the Rights Agreement) or (ii) any assets of the Company or any
Subsidiary, 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 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 the Subsidiaries taken as a whole; or (v)
enter into or amend any contract, agreement,
29
commitment or arrangement with respect to any matter set forth in this
Section 5.01(e);
(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
Subsidiary, 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) 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 Action;
(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 Subsidiary's rights thereunder, in a manner materially adverse to the
Company or any Subsidiary, other than in the ordinary course of business
consistent with past practice;
(l) enter into any contract or agreement that would have been a
Material Contract if entered into prior to the date hereof, 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 Owned Intellectual Property or
Licensed Intellectual Property.
30
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. SHAREHOLDERS' MEETING . (a) If required by applicable
law in order to consummate the Merger, the Company, acting through the Board,
shall, in accordance with applicable law and the Company's Articles of
Incorporation and By-laws, (i) 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
this Agreement and the Transactions (the "SHAREHOLDERS' MEETING") and (ii)
unless the Board determines in good faith that 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, (A) include in the Proxy Statement the unanimous recommendation of the
Board that the holders of the Shares approve and adopt this Agreement and the
Merger and (B) use its reasonable efforts to obtain such approval and adoption
of the holders of Shares. At the Shareholders' Meeting, Parent and Purchaser
shall cause all Shares then owned by them and their subsidiaries to be voted in
favor of the approval and adoption of this Agreement and the Merger.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, subject to Article VII, to take all necessary and appropriate action to
cause the Merger to become effective, in accordance with Section 302A.621 of the
Minnesota Law, as soon as reasonably practicable after such acquisition, without
a meeting of the shareholders of the Company.
SECTION 6.02. PROXY STATEMENT. If required by applicable law, as
promptly as reasonably practicable following consummation of the Offer, the
Company shall file the Proxy Statement with the SEC under the Exchange Act, and
shall use its reasonable efforts to have the Proxy Statement cleared by the SEC.
Parent, Purchaser and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the reasonable opportunity
to review the Proxy Statement prior to its being filed with the SEC and shall
give Parent and its counsel the opportunity to review all amendments and
supplements to the Proxy Statement and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC. Each of the Company, Parent and Purchaser agrees to use its reasonable
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of, and requests by, the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of Shares entitled to vote at the Shareholders' Meeting at the
earliest practicable time.
31
SECTION 6.03. COMPANY BOARD REPRESENTATION; SECTION 14(F). (a)
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer
(provided that the Minimum Condition has been satisfied), and from time to time
thereafter, Purchaser shall 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 shall be rounded up), on the Board as shall
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 shall, 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 shall, 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 shall constitute of the Board of (i) each committee of the Board,
(ii) the board of directors of each Subsidiary 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 shall use reasonable efforts to assure that until
the Effective Time, the Board shall have at least one director who is a director
on the date hereof and is not an employee of the Company.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election of designees of Purchaser pursuant to
this Section 6.03, prior to the Effective Time, any amendment of this
Agreement or the Articles of Incorporation or By-laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of
Parent or Purchaser or waiver of any of the Company's rights hereunder shall
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.
SECTION 6.04. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the
date hereof to the Effective Time, upon reasonable notice, the Company shall,
and shall cause the
32
Subsidiary and the officers, directors, employees, auditors and agents of the
Company and the Subsidiary to, afford the officers, employees and agents of
Parent and Purchaser reasonable access during normal business hours and upon
reasonable notice to the officers, employees, agents, properties, offices and
other facilities, books and records of the Company and each Subsidiary, and
shall furnish Parent and Purchaser with all financial, operating and other data
and information as Parent or Purchaser, through its officers, employees or
agents, may reasonably request. Parent and Purchaser shall make all reasonable
efforts to minimize any disruption to the businesses of the Company and the
Subsidiaries which may result from the requests for data and information
hereunder.
(b) All information obtained by Parent or Purchaser pursuant to this
Section 6.04 shall be kept confidential in accordance with the confidentiality
agreement, dated September 25, 1997 (the "CONFIDENTIALITY AGREEMENT"), between
Parent and the Company.
(c) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.05. NO SOLICITATION. (a) The Company shall, and shall
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 in this Section 6.05(a)). The Company shall
not, nor shall it permit any Subsidiary to, nor shall 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 the Subsidiary 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 Section 6.05(c), (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 and (y) participate in discussions and negotiations
regarding such acquisition proposal. For purposes of this 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 Subsidiary, any tender offer or exchange
offer that if consummated would result in any person beneficially owning 20% or
more of any class of
33
equity securities of the Company or any Subsidiary, 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 or any
Subsidiary, other than the Transactions.
(b) Except as set forth in this Section 6.05, neither the Board nor
any committee thereof shall (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, this 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, the Board may terminate this Agreement in accordance with
Section 8.01(d)(ii) 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 this Agreement. For purposes of this 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.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.05, the Company shall 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.
(d) Nothing contained in this Section 6.05 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if 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, PROVIDED, HOWEVER, neither the Company nor the Board nor any committee
thereof shall, except as permitted by Section 6.05(b) or required pursuant to
Rule 14e-2(a) promulgated under the Exchange Act, withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to the Offer, this
Agreement or the Merger or to approve or recommend, or propose publicly to
approve or recommend, an acquisition proposal.
34
(e) The Company agrees not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which the
Company is a party.
SECTION 6.06. EMPLOYEE STOCK OPTIONS AND OTHER EMPLOYEE BENEFITS.
(a) The Company shall take all such actions as shall be necessary to cause all
Company Options (including any related alternative rights) granted under the
Company Stock 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 pursuant to the terms and conditions of the applicable Company Stock
Plan. The Company shall take all such actions as shall be 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 shall 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 Employee Stock Option, and the number of shares of Company Common Stock
covered by such Employee Stock Option. All payments in respect of such Employee
Stock Options shall be made after the Effective Time and not later than five
business days following such time, subject to the Company's collection of all
applicable withholding taxes required by law to be collected by the Company.
The Company Stock Plans shall be terminated as of the Effective Time and
thereafter the only rights of participants therein shall be the right to receive
the consideration set forth in the previous sentence. Prior to the Effective
Time, the Company shall take action as may be necessary to carry out the terms
of this Section 6.06(a).
(b) Section 6.06(b) of the Company Disclosure Schedule contains a
list of each employee of the Company and the Subsidiary who has a written
employment agreement that provides for the payment of severance or similar-type
payments or benefits to such employee following such employee's termination of
employment with the Company and Subsidiary (the "EMPLOYMENT CONTRACTS").
(c) For the period through and including December 31, 1998, Parent
shall, or shall cause the Surviving Corporation to, maintain employee benefit
plans, programs and arrangements which are, in the aggregate, for the employees
as a whole who were active full-time employees of the Company or any Subsidiary
immediately prior to the Effective Time and continue to be active full-time
employees of Purchaser, the Surviving Corporation, any Subsidiary or any other
affiliate of Purchaser, no less favorable than those provided by the Company and
the Subsidiary immediately prior to the Effective Time. From and after the
Effective Time, for purposes of determining eligibility, vesting and entitlement
to vacation and severance and other benefits for employees actively employed
full-time by the Company or any Subsidiary immediately prior to the Effective
Time under any compensation, severance, welfare, pension, benefit, savings or
other plan of Purchaser or any of its affiliates in which active full-time
employees of the Company and any Subsidiary
35
become eligible to participate (whether pursuant to this Section 6.06(c) or
otherwise), service with the Company or any Subsidiary (whether before or after
the Effective Time) shall be credited as if such service had been rendered to
Purchaser or such affiliate.
SECTION 6.07. S&N OPTIONS. (a) All Company Options (including any
related alternative rights) issued to S&N by the Company (the "S&N OPTIONS")
shall vest, terminate, become exercisable and be cancelled in accordance with
their terms and conditions. The Company shall take all such actions as shall be
necessary to cause all S&N 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 S&N Option, the holder of
the S&N Options (whether or not then presently exercisable or vested) shall 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 Company Common Stock covered by
such S&N Option. Prior to the Effective Time, the Company shall take action as
may be necessary to carry out the terms of this Section 6.07(a).
(b) The Company has provided Parent true and complete copies of the
S&N Options. Section 6.07(b) of the Company Disclosure Schedule sets forth a
true and complete list of the S&N Options, together with information as to each
S&N Option with respect to date of grant, vesting date, and amount of Company
Common Stock underlying such S&N Option.
SECTION 6.08. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The By-laws or Articles of Incorporation of the Surviving Corporation shall
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 shall 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 shall be required by Minnesota
Law. To the extent that the obligations under such provisions are not fully
performed by the Surviving Corporation, Parent agrees to perform fully the
obligations thereunder for the remaining period.
(b) Parent or the Surviving Corporation shall 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 shall Parent or the Surviving Corporation be required to
expend
36
pursuant to this Section 6.08(b) more than an amount per year equal to 150% of
current annual premiums (the "CURRENT PREMIUMS") paid by the Company for such
insurance (which premiums the Company represents and warrants 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 required by this
Section 6.08(b) for such aggregate premium, Parent or the Surviving Corporation
shall obtain as much insurance as can be obtained for an annual premium of 150%
of the Current Premiums.
SECTION 6.09. RIGHTS PLAN. The Company shall not redeem the Company
Rights prior to the Effective Time unless this Agreement shall have been
terminated pursuant to Article VIII or unless required to do so by order of a
court of competent jurisdiction. The Board shall take, or cause to be taken,
such action as is necessary to effect the amendments to the Rights Plan as
approved by the Board and described in Section 3.20.
SECTION 6.10. NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence, to the extent the Company has
knowledge thereof, of any event the occurrence, or non-occurrence, of which
would cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect when made provided that no breach
of this covenant shall be deemed to have occurred if the occurrence or
non-occurrence did not result in a breach that had a Material Adverse Effect,
and (ii) any material failure of the Company, Parent or Purchaser, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section 6.10 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 6.11. FURTHER ACTION; REASONABLE EFFORTS. (a) Upon the
terms and subject to the conditions hereof, each of the parties hereto shall (i)
make promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use all
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using its reasonable efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and each Subsidiary as are necessary for the consummation of
the Transactions and to fulfill the conditions to the Offer and the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable efforts to
take all such action.
(b) Each of the parties hereto agrees to cooperate and use its
reasonable efforts vigorously to contest and resist any action, including
administrative or judicial action,
37
and to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order (whether temporary, preliminary or permanent) (an
"ORDER") that is in effect and that restricts, prevents or prohibits the
consummation of the Transactions, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial appeal.
(c) Each of the parties hereto agrees that the provisions of this
Section shall not interfere with Board's exercise of its fiduciary duties to the
Company and its shareholders as specified in Sections 1.02, 6.01, 6.05 and 8.01.
SECTION 6.12. PUBLIC ANNOUNCEMENTS. Unless otherwise required by
applicable law or stock exchange or NASD requirements applicable to any party
hereto, neither Parent nor the Company shall issue any such press release or
make any such public statement shall with respect to this Agreement or any
Transaction without the consent of the other. In the event that Parent or the
Company shall be required by applicable law or stock exchange or NASD
requirements to make any such release or statement, it shall first consult the
other.
SECTION 6.13. CONFIDENTIALITY AGREEMENT. The Company hereby waives
the provisions of the Confidentiality Agreement as and to the extent necessary
to permit the consummation of each Transaction. Upon the acceptance for payment
of Shares pursuant to the Offer, the Confidentiality Agreement shall be deemed
to have terminated without further action by the parties thereto.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE MERGER. The respective obligations
of each party to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the affirmative vote of the shareholders of
the Company to the extent required by the Minnesota Law and the Articles of
Incorporation of the Company;
(b) HSR ACT. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated;
38
(c) NO ORDER. No foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state
court of competent jurisdiction shall 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 Merger; and
(d) OFFER. Purchaser or its permitted assignee shall 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 shall not be conditioned upon this Section 7.01(d) if the
failure of Purchaser to purchase the Shares pursuant to the Offer shall
have constituted a breach of the Offer or this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby 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 this Agreement under
this Section 8.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the 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 set forth in Annex A to have been
satisfied; or (ii) any court of competent jurisdiction or other
governmental authority shall 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
39
(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 set forth in Annex A
hereto, Purchaser shall have (i) failed to commence the Offer within 30
days following the date of this 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 set forth in Annex A hereto, Purchaser shall have 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 shall
not be required to disclose the identity of the person making the Superior
Proposal); PROVIDED, HOWEVER, that any termination of this Agreement
pursuant to this Section 8.01(d)(ii) shall not be effective until the
Company has made full payment of all amounts provided under Section 8.03.
SECTION 8.02. EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except (i) as set forth in Sections 8.03 and 9.01 and (ii) nothing herein shall
relieve any party from liability for any willful and material breach hereof.
SECTION 8.03. FEES AND EXPENSES. (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, shall
have become the beneficial owner of more than 20% of the then outstanding
Shares; and this Agreement shall have been terminated pursuant to Section
8.01; or
(ii) any person shall have publicly made or communicated to the
Company an acquisition proposal that is publicly disclosed and the Board
shall 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 shall
have remained open for at least 20 business days, (y)
40
the Minimum Condition shall not have been satisfied and (z) this Agreement
shall have been terminated pursuant to Section 8.01; or
(iii) this Agreement is terminated pursuant to Section 8.01(d)(ii);
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 this Agreement pursuant to
Section 8.01(b)(i), 8.01(c), or 8.01(d)(i), which termination resulted from
a breach by the Company of its obligations hereunder, resulting in a
failure to satisfy any condition set forth on Annex A hereto, and the
Company shall not theretofore have been required to pay the Fee to Parent
pursuant to Section 8.03(a)(i), 8.03(a)(ii) or 8.03(a)(iii);
then, in any such event, the Company shall 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 shall
more than one Fee be payable under this Section 8.03(a).
(b) The Company shall, at such time as a Fee is required to be paid,
reimburse each of Parent, Purchaser and their respective stockholders 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 or structuring the Transactions 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 the Transactions, 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 this Agreement, the structuring and financing of the Transactions
and any financing commitments or agreements relating thereto (all of the
foregoing being referred to herein collectively as the "EXPENSES").
(c) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(d) In the event that the Company shall fail 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 by Parent and Purchaser
(including, without limitation, fees and
41
out-of-pocket expenses of counsel) in connection with the collection under and
enforcement of this Section 8.03, 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%.
SECTION 8.04. AMENDMENT. Subject to Section 6.03 and applicable law,
this Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; PROVIDED, HOWEVER, that, after the approval and adoption of this
Agreement and the transactions contemplated hereby by the shareholders of the
Company, no amendment may be made which would reduce the amount or change the
type of consideration into which each Share shall be converted upon consummation
of the Merger. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any
party hereto may (i) extend the time for the performance of any obligation or
other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in
an instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Articles II and IX and Sections 6.06(a) and 6.08 shall survive the
Effective Time indefinitely and those set forth in Sections 6.04(b), 8.03 and
9.01 shall survive termination indefinitely.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) or overnight courier, to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
42
if to Parent or Purchaser:
Sulzer Medica Ltd
CH - 8401
Winterthur, Switzerland
Telecopier: 41-52-262-0059
Attention: Andre P. Buchel
and
Sulzer Medica Orthopedics Acquisition Corp.
c/o Sulzer Medica USA Inc.
Angleton, Texas 77515
Telecopier: (409) 849-1940
Attention: Lawrence H. Panitz, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier: (212) 848-7179
Attention: Peter D. Lyons, Esq.
if to the Company:
Spine-Tech, Inc.
7375 Bush Lake Road
Minneapolis, Minnesota 55439-2029
Telecopier: (612) 830-6388
Attention: David W. Stassen
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402-3901
Telecopier: (612) 336-3026
Attention: W. Smith Sharpe, Esq.
43
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement,
the term:
(a) "AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "BENEFICIAL OWNER" with respect to any Shares means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "BUSINESS DAY" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in The City of New York or the State of
Minnesota;
(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "INTELLECTUAL PROPERTY" means (a) inventions, whether or not
patentable, whether or not reduced to practice, or whether or not yet made
the subject of a pending patent application or applications, (b)
potentially patentable subject matter, including, without limitation, any
patent disclosures, whether or not reduced to practice and whether or not
yet made the subject of a pending patent application or applications, (c)
national and multinational statutory invention registrations, patents,
patent registrations, inventor's certificates, renewals, substitutions and
patent applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights
therein provided by multinational treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent,
certificate or application, (d) trademarks, service marks, trade
44
dress, logos, trade names and corporate names, whether or not registered,
including all common-law rights, and registrations and applications for
registration thereof (for purposes of this subpart (d), collectively,
"MARKS"), including, but not limited to, all Marks registered in the United
States Patent and Trademark Office, the Trademark Offices of the States and
Territories of the United States of America, and the Trademark Offices of
other nations throughout the world, and all rights therein provided by
multinational treaties or conventions, (e) copyrights (registered or
otherwise) and registrations and applications for registration thereof, and
all rights therein provided by multinational treaties or conventions, (f)
moral rights (including, without limitation, rights of paternity and
integrity), and waivers of such rights by others, (g) computer software
specifically designed or custom created, including, without limitation,
source code, operating systems and specifications, Company data, Company
data bases, Company files, Company documentation and other materials
related thereto, (h) trade secrets and confidential, technical or business
information (including ideas, formulas, compositions, inventions, and
conceptions of inventions whether patentable or unpatentable and whether or
not reduced to practice), (i) whether or not confidential, technology
(including know-how and show-how), manufacturing and production processes
and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data and copyrightable
works, (j) copies and tangible embodiments of all of the foregoing, in
whatever form or medium, (k) all rights to obtain and rights to apply for
patents, and to register trademarks and copyrights, and (l) all rights to
sue and recover and retain damages and costs and attorneys' fees for
present and past infringement of any of the Intellectual Property rights
hereinabove set out;
(f) "KNOWLEDGE OF THE COMPANY" means the actual knowledge of the
executive officers of the Company;
(g) "LICENSED INTELLECTUAL PROPERTY" means all Intellectual Property
licensed, sublicensed or franchised to the Company or any Subsidiary from a
third party and which the Company or such Subsidiary has a right to use in
its business, is necessary to operate either such business, is used by the
Company or any Subsidiary in connection with the development, manufacture
or production of products or is otherwise used, held or intended to be used
by either the Company or any Subsidiary in its business;
(h) "OWNED INTELLECTUAL PROPERTY" means all Intellectual Property in
and to which the Company or any Subsidiary holds, or has a right to hold,
right, title and interest and which the Company or such Subsidiary has a
right to use in its business, is necessary to operate either such business,
is used by the Company or any Subsidiary in connection with the
development, manufacture or production of products or is otherwise used,
held or intended to be used by either the Company or any Subsidiary in its
business;
45
(i) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government; and
(j) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving
Corporation, Parent or any other person means an entity, a majority of the
voting power which is controlled by such person, directly or indirectly,
through one or more intermediaries.
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes, except as set forth in Sections 6.04(b) and 6.13,
all prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This Agreement shall
not be assigned by operation of law or otherwise, except that Parent and
Purchaser may assign all or any of their rights and obligations hereunder to any
affiliate of Parent, PROVIDED that no such assignment shall relieve the
assigning party of its obligations hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 9.06. PARTIES IN INTEREST. Except as set forth in Section
6.07, this Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
46
SECTION 9.08. GOVERNING LAW. Except to the extent that the laws of
Minnesota are mandatorily applicable to the Merger, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any U.S. federal court located in the Borough of
Manhattan, The City of New York. The parties hereto hereby (i) submit to the
exclusive jurisdiction of any U.S. federal court located in the Borough of
Manhattan, The City of New York for the purpose of any Action arising out of or
based upon this Agreement or the Transactions brought by any party hereto, and
(ii) waive, and agree not to assert by way of motion, as a defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the Transactions may not be enforced in or by any of the
above-named courts.
SECTION 9.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. INTERPRETATION. As used in this Agreement, unless
otherwise expressly defined herein, (i) the term "including" shall mean
"including without limitation"; and (ii) all dollar amounts are expressed in
United States funds.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 9.12. COMPANY DISCLOSURE SCHEDULE. Matters reflected in the
Company Disclosure Schedule are not necessarily limited to matters required by
this Agreement to be reflected in the Company Disclosure Schedule. Such
additional matters are set forth for informational purposes and do not
necessarily include other matters of a similar nature.
47
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SULZER MEDICA LTD
By /s/ A. Buchel
--------------------------------
Name: Andre P. Buchel
Title: CEO
SULZER MEDICA ORTHOPEDICS ACQUISITION
CORP.
By /s/ A. Buchel
--------------------------------
Name: Andre P. Buchel
Title: CEO
SPINE-TECH, INC.
By /s/ David W. Stassen
--------------------------------
Name: David W. Stassen
Title: CEO
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not
be 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 shall
not have been satisfied after the Offer has remained open for at least 20
business days, (ii) any applicable waiting period under the HSR Act shall not
have expired or been terminated prior to the expiration of the Offer, or (iii)
at any time on or after the date of this Agreement, and prior to the acceptance
for payment of Shares, any of the following conditions shall exist:
(a) there shall 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, or seeking to obtain material damages in connection with any
Transaction; (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, Parent or any of their subsidiaries, as
a result of the Transactions; (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 this Agreement and the Transactions; (iv) seeking
to require divestiture by Parent, Purchaser or any other affiliate of
Parent of any Shares; or (v) which otherwise has a Material Adverse Effect;
(b) there shall 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, 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
2
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 shall have occurred any changes, conditions, events or
developments that have, individually or in the aggregate, a Material
Adverse Effect;
(d) there shall 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 shall have been publicly disclosed or Purchaser shall have
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 shall have withdrawn or modified in a manner
adverse to Parent or Purchaser the approval or recommendation of the Offer,
the Merger or the 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 shall have resolved to do
any of the foregoing;
(f) the representations or warranties of the Company in the Agreement
shall 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 shall have 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 shall have been terminated in accordance with its
terms; or
3
(i) Purchaser and the Company shall have agreed that Purchaser shall
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 shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
EXHIBIT I
ARTICLES OF INCORPORATION
STATE OF MINNESOTA
[SEAL OF THE STATE OF MINNESOTA]
SECRETARY OF STATE
This is to acknowledge that the items desribed below have been accepted by the
Secretary of State of Minnesota on the date noted. Those documents will be
microfilmed and the original will be returned to the submitter within ten days.
The microfilm will be available for public inspection at the office of the
Secretary of State.
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Description of Item Date Accepted
Articles 12/12/97
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Company Name
Pike Acquisition Corp.
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Secretary of State
Business Service Division by: /s/ Linda J. Crawley
180 State Office Bldg., 100 Constitution Ave. ---------------------------
St. Paul, MN 55155-1299, (612)296-2803 Evidence of Filing
ARTICLES OF INCORPORATION
OF
PIKE ACQUISITION CORP.
The undersigned incorprator, being a natural person 18 years of age or
older, in order to form a corporate entity under Minnesota Statutes, Chapter
302A, hereby adopts the following Articles of Incorporation:
ARTICLE I
The name of the corporation is Pike Acquisition Corp. (the
"Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State
of Minnesota is C T Corporation System, Inc., 405 Second Avenue, South,
Minneapolis, MN 55041.
ARTICLE III
The Corporation is authorized to issue an aggreagte total of 1,000
shares, all of which shall be designated Common Stock, having a par value of
$.01 per share.
ARTICLE IV
The name and address of the incorporator of this Corporation is as
follows:
James Silk
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
2
ARTICLE V
No shareholder of this Corporation shall have any cumulative voting
rights.
ARTICLE VI
No shareholder of this Corporation shall have any preemptive rights by
virtue of Section 302A.413 of the Minnesota Statutes (or any similar provisions
of future law) to subscribe for, purchase or acquire (i) any shares of the
Corporation of any class or series, whether unissued or now or hereafter
authorized, or (ii) any obligations or other securities convertible into or
exchangeable for (or that carry any other right to acquire) any such shares,
securities or obligations, or (iii) any other rights to purchase any such
shares, securities or obligations. The Corporation shall have the power,
however, in its discretion to grant such rights by agreement or other instrument
to any person or persons (whether or not they are shareholders).
ARTICLE VII
Any action required or permitted to be taken at a meeting of the Board
of Directors of this Corporation not needing approval by the shareholders under
Minnesota Statutes, Chapter 302A, may be taken by written action signed by the
number of directors that would be required to take such action at a meeting of
the Board of Directors at which all directors are present.
ARTICLE VIII
No director of this Corporation shall be personally liable to the
Corporation or its shareholders for monetary dameges for breach of fiuciary duty
by such director as a director; provided, however, that this Article shall not
eliminate or limit the liability of a director to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for act or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 302A.559 or 80A.23 of the Minnesota Statutes, (iv) for any transaction
from which the director derived an improper personal benefit or (v) for any act
or omission occuring prior to the effective date of this Article. No amendment
to or repeal of this Article shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
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IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of
December, 1997.
/s/ James G. Silk
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James G. Silk, Incorporator
[Stamped by
Minnesota
Secretary of
State]
[SEAL OF THE STATE OF MINNESOTA]
MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
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READ INSTRUCTIONS LISTED BELOW, BEFORE COMPLETING THIS FORM.
1. Only complete the "Amendment of Articles of Incorporation" form if you are
making changes to items 2-4 of the "Annual Registration" form (reverse side).
2. Type or print in black ink.
3. There is a $35.00 fee payable to the Secretary of State for filing this
"Amendment of Articles of Incorporation".
4. Return Completed Amendment Form and Fee to the address listed on the bottom
of the form.
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CORPORATE NAME:(List the name of the company prior to any desired name change)
Pike Acquisition Corp.
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This amendment is effective on the day it is filed with the Secretary of State,
unless you indicate another date, no later than 30 days after filing with the
Secretary of State.
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The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the amendment
will not fit in the space provided, attach additional numbered pages. (Total
number of pages including this form ____.)
ARTICLE 1
The name of the corporation is Sulzer Medica Orthopedics Acquisition Corp. (the
"Corporation").
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A OR
317A. I certify that I am authorized to execute this amendment and further
certify that I understand that by signing this amendment, I am subject to the
penalties of perjury as set forth in section 609.48 as if I has signed this
amendment under oath.
/s/ Illegible
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(Signature of Authorized Person)
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If you have any questions please contact the FOR OFFICE USE ONLY
Secretary of State's office at (612) 296-2803.
RETURN TO:
Secretary of State/Records Processing Station
180 State Office Bldg., 100 Constitution Ave.
St. Paul, MN 55155-1299