-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NTkZm1KfbzilmQUAGm6LHtG3Q5DFtudStvZMfdq2Miy314siTq2ProA7akAnbN0e ZPwuGiV81mr9Hqg0tYZeEA== 0000950123-98-006913.txt : 19980729 0000950123-98-006913.hdr.sgml : 19980729 ACCESSION NUMBER: 0000950123-98-006913 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980727 SROS: NYSE GROUP MEMBERS: JOHNSON & JOHNSON GROUP MEMBERS: LIB ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DEPUY INC CENTRAL INDEX KEY: 0001019900 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 351989795 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-50067 FILM NUMBER: 98671962 BUSINESS ADDRESS: STREET 1: PO BOX 988 STREET 2: 700 ORTHOPAEDIC DRIVE CITY: WARSAW STATE: IN ZIP: 46581-0988 BUSINESS PHONE: 2192678143 MAIL ADDRESS: STREET 1: PO BOX 988 STREET 2: 700 ORTHOPAEDIC DRIVE CITY: WARSAW STATE: IN ZIP: 46581-0988 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSON & JOHNSON CENTRAL INDEX KEY: 0000200406 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221024240 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE JOHNSON & JOHNSON PLZ CITY: NEW BRUNSWICK STATE: NJ ZIP: 08933 BUSINESS PHONE: 9085240400 SC 13D 1 SCHEDULE 13D 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 DEPUY, INC. (NAME OF ISSUER) COMMON STOCK, PAR VALUE $.01 PER SHARE (TITLE OF CLASS OF SECURITIES) 249726 10 0 (CUSIP NUMBER) JAMES R. HILTON, ESQ. LIB ACQUISITION CORP. C/O JOHNSON & JOHNSON ONE JOHNSON & JOHNSON PLAZA NEW BRUNSWICK, NEW JERSEY 08933 (732) 524-2450 WITH A COPY TO ROBERT A. KINDLER, ESQ. CRAVATH, SWAINE & MOORE 825 EIGHTH AVENUE NEW YORK, NY 10019 (212) 474-1000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) JULY 21, 1998 (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of sec.sec. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See sec. 240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). (Continued on following page(s)) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 - ------------------------- CUSIP NO. 249726 10 0 - -------------------------
- ---------------------------------------------------------------------------------------------------------- Names of Reporting Persons 1 Identification Nos. of Above Persons (entities only) LIB ACQUISITION CORP. (APPLIED FOR) - ---------------------------------------------------------------------------------------------------------- Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] 2 (b) [ ] - ---------------------------------------------------------------------------------------------------------- SEC Use Only 3 - ---------------------------------------------------------------------------------------------------------- Source of Funds (See Instructions) 4 AF - ---------------------------------------------------------------------------------------------------------- Check if Disclosure of Legal Proceedings is Required 5 Pursuant to Items 2(d) or 2(e) [ ] - ---------------------------------------------------------------------------------------------------------- Citizenship or Place of Organization 6 DELAWARE - ---------------------------------------------------------------------------------------------------------- Sole Voting power Number of Shares Beneficially Owned by Each Reporting Person with 7 83,000,000* (COMMON STOCK) ----------------------------------------------------------------- Shared Voting Power 8 ----------------------------------------------------------------- Sole Dispositive Power 9 83,000,000* (COMMON STOCK) ----------------------------------------------------------------- Shared Dispositive Power 10 - ---------------------------------------------------------------------------------------------------------- Aggregate Amount Beneficially Owned by Each Reporting Person 11 83,000,000* (COMMON STOCK) - ---------------------------------------------------------------------------------------------------------- Check Box if the Aggregate Amount in Row (11) Excludes 12 Certain Shares (See Instructions) [ ] - ---------------------------------------------------------------------------------------------------------- Percent of Class Represented by Amount in Row (11) 13 APPROXIMATELY 84.0% OF THE SHARES OUTSTANDING AS OF JULY 21, 1998 - ---------------------------------------------------------------------------------------------------------- Type of Reporting Person (See Instructions) 14 CO - ----------------------------------------------------------------------------------------------------------
* See Note on next page. 3 - ------------------------- CUSIP NO. 249726 10 0 - -------------------------
- ---------------------------------------------------------------------------------------------------------- Names of Reporting Persons (entities only) 1 Identification No. of above Persons JOHNSON & JOHNSON (22-1024240) - ---------------------------------------------------------------------------------------------------------- Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] 2 (b) [ ] - ---------------------------------------------------------------------------------------------------------- SEC Use Only 3 - ---------------------------------------------------------------------------------------------------------- Source of Funds (See Instructions) 4 WC - ---------------------------------------------------------------------------------------------------------- Check if Disclosure of Legal Proceedings is Required 5 Pursuant to Items 2(d) or 2(e) [ ] - ---------------------------------------------------------------------------------------------------------- Citizenship or Place of Organization 6 NEW JERSEY - ---------------------------------------------------------------------------------------------------------- Sole Voting Power Number of Shares Beneficially Owned by Each Reporting Person With 7 83,000,000* (COMMON STOCK) ----------------------------------------------------------------- Shared Voting Power 8 ----------------------------------------------------------------- Sole Dispositive Power 9 83,000,000* (COMMON STOCK) ----------------------------------------------------------------- Shared Dispositive Power 10 - ---------------------------------------------------------------------------------------------------------- Aggregate Amount Beneficially Owned by Each Reporting 11 Person 83,000,000* (COMMON STOCK) - ---------------------------------------------------------------------------------------------------------- Check Box if the Aggregate Amount in Row (11) Excludes 12 Certain Shares (See Instructions) [ ] - ---------------------------------------------------------------------------------------------------------- Percent of Class Represented by Amount in Row (11) 13 APPROXIMATELY 84.0% OF THE SHARES OUTSTANDING AS OF JULY 21, 1998 - ---------------------------------------------------------------------------------------------------------- Type of Reporting Person (See Instructions) 14 CO - ----------------------------------------------------------------------------------------------------------
* On July 21, 1998, Johnson & Johnson ("Parent") and LIB Acquisition Corp., a wholly owned subsidiary of Parent (the "Purchaser"), entered into a Stockholder Agreement (the "Stockholder Agreement") with certain stockholders (the "Stockholders") of DePuy, Inc., which are indirect wholly owned subsidiaries of Roche Holding Ltd, pursuant to which the Stockholders have agreed with Parent and the Purchaser to tender to the Purchaser, pursuant to the Offer (as defined below), or sell to the Purchaser immediately 4 following the Offer, in each case, at a price of $35 per Share, all the Shares owned by them, representing an aggregate of 83,000,000 Shares, or approximately 84.0% of the Shares outstanding as of July 21, 1998. In addition, any Shares that any such Stockholder may subsequently acquire (by exercise of stock options or otherwise) automatically become subject to the provisions of the Stockholder Agreement. The Purchaser's right to purchase the Shares subject to the Stockholder Agreement is reflected in Rows 7, 9 and 11 of each of the tables above. If the Purchaser accepts for payment and pays for any Shares tendered under the Offer, the Purchaser must exercise such purchase option immediately following the Offer (unless all the Shares subject to the Stockholder Agreement have been tendered by the Stockholders and accepted for payment by the Purchaser under the Offer). Pursuant to the Stockholder Agreement, each Stockholder has also delivered a proxy to the Purchaser to vote, or grant a consent or approval in respect of, the Shares subject to the Stockholder Agreement against any transaction with a third party other than the transactions contemplated by the Offer and the Merger (as defined in the Offer to Purchase). The Stockholder Agreement is described more fully in Section 12 ("Purpose of the Offer, The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase dated July 27, 1998 (the "Offer to Purchase"), filed as Exhibit (1) hereto. Parent has been informed that the Stockholders intend to file a Schedule 13D with respect to the Shares subject to the Stockholder Agreement on or about July 27, 1998. ITEM 1. SECURITY AND ISSUER. (a) This Schedule 13D relates to Common Stock, par value $.01 per share, of DePuy, Inc. (the "Shares"). (b) The issuer is DePuy, Inc., a Delaware corporation. (c) The address of the issuer's principal executive office is 700 Orthopaedic Drive, Warsaw, Indiana 46580. ITEM 2. IDENTITY AND BACKGROUND (a)-(c) and (f) This Schedule 13D is being filed by the Purchaser, a Delaware corporation, and Parent, a New Jersey corporation. The Purchaser is a wholly owned subsidiary of Parent. Information concerning the principal business and the address of the principal offices of the Purchaser and Parent is set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase and is incorporated herein by reference. The names, business addresses, present principal occupations or employment, material occupations, positions, offices or employment during the last five years and citizenship of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I to the Offer to Purchase and are incorporated herein by reference. (d) and (e) The information set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") and Section 15 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. ITEM 4. PURPOSE OF TRANSACTION (a)-(g) and (j) The information set forth in Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. (h) and (i) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. 5 ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a)-(c) The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent") and Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Contacts with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. (1) Offer to Purchase. (2) Text of Joint Press Release dated July 21, 1998, issued by Parent, the Company and Roche Holding Ltd. (3) Agreement and Plan of Merger dated as of July 21, 1998, among Parent, the Purchaser and the Company. (4) Stockholder Agreement dated as of July 21, 1998, among Parent, the Purchaser and certain stockholders of the Company.
6 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 27, 1998 LIB ACQUISITION CORP. by: /s/ JAMES R. UTASKI --------------------------------------------- Name: James R. Utaski Title: President JOHNSON & JOHNSON by: /s/ JAMES R. UTASKI --------------------------------------------- Name: James R. Utaski Title: Vice President, Business Development
7
EXHIBIT NO. DOCUMENT - ----------- -------- (1) Offer to Purchase. (2) Text of Joint Press Release dated July 21, 1998, issued by Parent, the Company and Roche Holding Ltd. (3) Agreement and Plan of Merger dated as of July 21, 1998, among Parent, the Purchaser and the Company. (4) Stockholder Agreement dated as of July 21, 1998, among Parent, the Purchaser and certain stockholders of the Company.
EX-99.1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DEPUY, INC. AT $35 NET PER SHARE BY LIB ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF JOHNSON & JOHNSON THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 21, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED AS OF JULY 21, 1998 AMONG JOHNSON & JOHNSON, LIB ACQUISITION CORP. (THE "PURCHASER") AND DEPUY, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED AND FOUND ADVISABLE THE MERGER AGREEMENT, THE OFFER AND THE MERGER REFERRED TO HEREIN, DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THE SHARES SUBJECT TO THE STOCKHOLDER AGREEMENT REFERRED TO HEREIN HAVING BEEN VALIDLY TENDERED TO THE PURCHASER AS REQUIRED BY THE STOCKHOLDER AGREEMENT, (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, HAVING EXPIRED OR BEEN TERMINATED AND (III) ANY APPROVAL UNDER COUNCIL REGULATION (EEC) NO. 4064/89 OF 21 DECEMBER 1989, AS AMENDED, HAVING BEEN OBTAINED. IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares (as defined herein) should either (i) complete and sign the Letter of Transmittal or a facsimile copy thereof in accordance with the instructions in the Letter of Transmittal, have such stockholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal or such facsimile, or, in the case of a book-entry transfer effected pursuant to the procedure set forth in Section 2, an Agent's Message (as defined herein), and any other required documents, to the Depositary (as defined herein) and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal or facsimile or deliver such Shares pursuant to the procedure for book-entry transfer set forth in Section 2 or (ii) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. Any stockholder who desires to tender Shares and whose certificates representing such Shares are not immediately available or who cannot comply in a timely manner with the procedure for book-entry transfer, or who cannot deliver all required documents to the Depositary prior to the expiration of the Offer, may tender such Shares by following the procedure for guaranteed delivery set forth in Section 2. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or any other tender offer materials may be directed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. The Dealer Manager for the Offer is: [CREDIT SUISSE, FIRST BOSTON LOGO] July 27, 1998 2 TABLE OF CONTENTS
PAGE ---- Introduction................................................ 1 1. Terms of the Offer...................................... 2 2. Procedure for Tendering Shares.......................... 4 3. Withdrawal Rights....................................... 6 4. Acceptance for Payment and Payment...................... 7 5. Certain Federal Income Tax Consequences................. 8 6. Price Range of the Shares; Dividends on the Shares...... 9 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations............................................. 9 8. Certain Information Concerning the Company.............. 10 9. Certain Information Concerning the Purchaser and Parent................................................... 12 10. Source and Amount of Funds.............................. 13 11. Contacts with the Company; Background of the Offer...... 13 12. Purpose of the Offer; The Merger Agreement and The Stockholder Agreement..................................... 14 13. Dividends and Distributions............................. 22 14. Certain Conditions of the Offer......................... 22 15. Certain Legal Matters................................... 24 16. Fees and Expenses....................................... 25 17. Miscellaneous........................................... 26 Schedule I -- Directors and Executive Officers.............. 27
3 To the Holders of Common Stock of DePuy, Inc.: INTRODUCTION LIB Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation ("Parent"), hereby offers to purchase all outstanding shares (the "Shares") of Common Stock, par value $.01 per share, of DePuy, Inc., a Delaware corporation (the "Company"), at $35 per Share (the "Offer Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering stockholders whose shares are registered in their own name and who tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions to the Purchaser, the Depositary or the Dealer Manager (as defined below) or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. Stockholders who hold their Shares through a bank or broker should check with such institution as to whether they charge any service fees. The Purchaser will pay the fees and expenses of Credit Suisse First Boston Corporation, which is acting as Dealer Manager for the Offer ("Credit Suisse First Boston" or the "Dealer Manager"), First Chicago Trust Company of New York, which is acting as the Depositary (the "Depositary"), and Georgeson & Company Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of July 21, 1998 (the "Merger Agreement") among Parent, the Purchaser and the Company, pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the merger (as such, the "Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger"). On the effective date of the Merger, each outstanding Share not tendered in the Offer (other than Shares owned by the Company as treasury stock or by Parent, the Purchaser or any other direct or indirect wholly owned subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive the Offer Price in cash, without interest (the "Merger Consideration"). See Section 12. The Merger is subject to a number of conditions, including approval by stockholders of the Company, if such approval is required by applicable law, and Shares having been purchased pursuant to the Offer. In the event the Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the short-form merger provisions of the Delaware General Corporation Law (the "DGCL"), without prior notice to, or any action by, any other stockholder of the Company. In such event, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. See Section 12. The Purchaser and Parent have entered into a Stockholder Agreement dated as of July 21, 1998 (the "Stockholder Agreement") with certain stockholders of the Company (the "Stockholders"), which are indirect wholly owned subsidiaries of Roche Holding Ltd ("Roche"), who beneficially own 83,000,000 Shares in the aggregate. Under the Stockholder Agreement, the Stockholders have agreed to sell, and the Purchaser has agreed to purchase, all Shares beneficially owned by them, representing approximately 84.0% of the outstanding Shares (approximately 82.2% on a fully diluted basis), as well as any Shares subsequently acquired by the Stockholders through the exercise of options or otherwise, at a price per Share equal to the Offer Price. The obligation of the Stockholders to sell, and the obligation of the Purchaser to purchase, Shares under the Stockholder Agreement are subject to the Purchaser having accepted Shares for payment under the Offer in accordance with the Merger Agreement. The Stockholders may, and the Purchaser may direct the Stockholders to, tender their Shares into the Offer. Any Shares of the Stockholders not purchased in the Offer will be purchased by the Purchaser immediately following the purchase of Shares in the Offer. In addition, the Stockholders have agreed to vote their Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement, and have agreed to vote against any other acquisition proposal. 1 4 THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THE SHARES OWNED BY THE STOCKHOLDERS HAVING BEEN VALIDLY TENDERED INTO THE OFFER OR DELIVERED TO THE PURCHASER FOR PURCHASE IMMEDIATELY FOLLOWING THE OFFER AS REQUIRED BY THE STOCKHOLDER AGREEMENT, (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, HAVING EXPIRED OR BEEN TERMINATED AND (III) ANY APPROVAL UNDER COUNCIL REGULATION (EEC) NO. 4064/89 OF 21 DECEMBER 1989, AS AMENDED, HAVING BEEN OBTAINED. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED AND FOUND ADVISABLE THE MERGER AGREEMENT, THE OFFER AND THE MERGER, DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. Bear, Stearns & Co. Inc. ("Bear Stearns") has delivered to the Board of Directors of the Company its written opinion dated July 20, 1998 that, as of such date and based upon and subject to the matters set forth therein, the consideration to be received by the stockholders of the Company (other than the Stockholders) in the Offer and the Merger is fair from a financial point of view to such stockholders. Such opinion is set forth in full as an exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders of the Company concurrently herewith. The Company has informed the Purchaser that, as of June 30, 1998, there were 98,816,286 Shares issued and outstanding and 2,216,553 Shares reserved for issuance upon exercise of outstanding Company Stock Options (as defined in the Merger Agreement). Based upon the foregoing, the Purchaser believes that approximately 50,516,420 Shares constitute a majority of the fully diluted Shares. Because the Shares subject to the Stockholder Agreement represent approximately 82.2% of the outstanding Shares on a fully diluted basis, if the Purchaser accepts for payment Shares tendered pursuant to the Offer, and accepts for payment the Shares subject to the Stockholder Agreement pursuant to the Offer or purchases such Shares immediately following the Offer, the Purchaser will be able to elect a majority of the members of the Company's Board of Directors and to effect the Merger without the affirmative vote of any other stockholder of the Company. The Merger Agreement and the Stockholder Agreement are more fully described in Section 12. Certain Federal income tax consequences of the sale of Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore properly withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, August 21, 1998, unless and until the Purchaser, in its sole discretion (but subject to the terms of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Purchaser expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "Commission")), at any time and from time to time, and regardless of whether or not any of the events set forth in Section 14 hereof shall have occurred, to (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER ON THE PURCHASE PRICE OF THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. 2 5 If by 12:00 Midnight, New York City time, on Friday, August 21, 1998 (or any other date or time then set as the Expiration Date), any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Commission, to (i) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders, (ii) waive all the unsatisfied conditions and, subject to complying with the terms of the Merger Agreement and the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer (other than as may be required by applicable law). Any extension, waiver, amendment or termination will be followed as promptly as practicable by public announcement. In the case of an extension, Rule 14e-l(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. In the Merger Agreement the Purchaser has agreed that it will not, without the prior consent of the Company, extend the Offer, except that, without the consent of the Company, the Purchaser may extend the Offer (i) if at the Expiration Date any of the conditions set forth in Section 14 are not satisfied or waived, until such time as such conditions are satisfied or waived, (ii) for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof, (iii) for up to ten business days if there have not been validly tendered and not properly withdrawn prior to the expiration of the Offer such number of Shares that, together with Shares subject to the Stockholder Agreement which have not been validly tendered, would constitute at least 90% of the fully diluted Shares as of the date of determination and (iv) for any reason for up to two business days; provided that no more than three extensions are permitted under clauses (iii) and (iv) of this sentence. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. In addition, the Purchaser has agreed in the Merger Agreement that it will not, without the consent of the Company, (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) add to or modify the conditions set forth in Section 14, (iv) extend the Offer, except as provided above, (v) change the form of consideration payable in the Offer or (vi) otherwise amend or alter the Offer in any manner adverse to the Company's stockholders. If the Purchaser extends the Offer or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its acceptance for payment of or payment for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 3. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, with the Company's consent, a waiver of the Stockholder Agreement Condition (as defined in Section 14)), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-l under the Exchange Act. The 3 6 minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in the percentage of securities sought or any dealer solicitation fee, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. Consummation of the Offer is conditioned upon satisfaction of the Stockholder Agreement Condition (which will be satisfied following the tendering of the Shares subject to the Stockholder Agreement), the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act"), the obtaining of approval under Council Regulation (EEC) No. 4064/89 of 21 December 1989, as amended (together with the HSR Act, the "Merger Control Laws"), and the other conditions set forth in Section 14. Subject to the terms and conditions contained in the Merger Agreement, the Purchaser reserves the right (but shall not be obligated) to waive any or all such conditions. The Company has provided the Purchaser with the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of the Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR TENDERING SHARES Valid Tender. For a stockholder validly to tender Shares pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedure for book-entry transfer set forth below (and a Book-Entry Confirmation (as defined below) received by the Depositary), in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. 4 7 THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal if (i) the Letter of Transmittal is signed by the registered holder of Shares (which, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) such Shares are tendered for the account of a firm that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be issued to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other documents required by the Letter of Transmittal, are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day", for purposes of the preceding sentence, is any day on which the New York Stock Exchange, Inc. (the "NYSE") and banks in New York are open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER ON THE PURCHASE PRICE OF THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. 5 8 Appointment. By executing a Letter of Transmittal as set forth above (including through delivery of an Agent's Message), the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after July 21, 1998. All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such acceptance for payment, all prior powers of attorney and proxies given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney and proxies may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares or other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders then scheduled. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in any tender with respect to any particular Shares, whether or not similar defects or irregularities are waived in the case of other Shares. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Backup Withholding. In order to avoid "backup withholding" of Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalty of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service ("IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. 3. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 3, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after September 24, 1998. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must 6 9 specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signature on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry delivery set forth in Section 2, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 3. Any determination concerning the satisfaction of such terms and conditions will be within the sole discretion of the Purchaser, and such determination will be final and binding on all tendering stockholders. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the Merger Control Laws. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer). Parent will file a Notification and Report Form with respect to the Offer under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th day after the date such form is filed, unless early termination of the waiting period is granted. In addition, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from Parent. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by Parent with such request. In addition to a Notification and Report Form under the HSR Act, Parent will file the required notification with the European Commission under the applicable Merger Control Laws and may make additional filings or reports under the antitrust laws of other nations. See Section 15 for additional information concerning the Merger Control Laws and the applicability of the antitrust laws to the Offer. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as described in Section 2), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered to the Purchaser and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be 7 10 made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER ON THE PURCHASE PRICE OF THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser is delayed in its acceptance for payment of or payment for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or otherwise, the certificates for such Shares will be returned, and if certificates are submitted for more Shares than are tendered, new certificates for the Shares not tendered will be sent, in each case without expense, to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in Section 2, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to one or more direct or indirect wholly owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to the Offer. Any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES Sales of Shares pursuant to the Offer (and the receipt of cash by stockholders of the Company pursuant to the Merger) will be taxable transactions for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be taxable transactions under applicable state, local, foreign and other tax laws. For Federal income tax purposes, a tendering stockholder will generally recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer (or pursuant to the Merger) and the aggregate tax basis in the Shares tendered by the stockholder and purchased pursuant to the Offer (or cancelled pursuant to the Merger). Gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer (or cancelled pursuant to the Merger). If tendered Shares are held by a tendering stockholder as capital assets, gain or loss recognized by the tendering stockholder will be capital gain or loss, which will be long-term capital gain or loss if the tendering stockholder's holding period for the Shares exceeds one year. Long-term capital gains recognized by a tendering individual stockholder will generally be taxed at a maximum Federal marginal tax rate of 20%, and long-term capital gains recognized by a tendering corporate stockholder will be taxed at a maximum Federal marginal tax rate of 35%. A stockholder (other than certain exempt stockholders including, among others, all corporations and certain foreign individuals) that tenders Shares may be subject to 31% backup withholding unless the stockholder provides its TIN and certifies that such number is correct or properly certifies that it is awaiting a TIN and certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A stockholder that does not furnish its correct TIN or that does not otherwise establish a basis for an exemption from backup withholding may be subject to a penalty imposed by the IRS. Each stockholder should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding. If backup withholding applies to a stockholder, the Depositary is required to withhold 31% from payments to such stockholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can 8 11 be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES The Shares are traded on the NYSE under the symbol "DPU". The following table sets forth, for each of the periods indicated, the high and low sales prices per Share on the NYSE Composite Transaction Tape.
SALES PRICE ------------------ HIGH LOW ---- --- 1996 Fourth Quarter (from October 31, 1996)(1)................. $20 1/4 $16 1/2 1997 First Quarter............................................. 24 18 1/8 Second Quarter............................................ 25 3/8 19 7/8 Third Quarter............................................. 27 9/16 21 1/2 Fourth Quarter............................................ 30 1/2 23 3/4 1998 First Quarter............................................. 31 24 3/8 Second Quarter............................................ 31 15/16 27 3/4 Third Quarter (through July 24, 1998)..................... 34 15/16 27 1/2
- --------------- (1) On October 30, 1996 the Company issued shares to the public through an initial public offering. Prior to the public offering, the Company was operated as a division of Corange Limited. On July 20, 1998, the last full day of trading before the public announcement of the execution of the Merger Agreement, the reported closing sale price of the Shares on the NYSE Composite Transaction Tape was $31 1/2 per Share. On July 24, 1998, the last full day of trading before the commencement of the Offer, the reported closing sale price of the Shares on the NYSE Composite Transaction Tape was $34 1/8 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. Other than the dividend paid on January 2, 1998 of $0.12, since October 30, 1996 the Company has not declared or paid any dividends on shares of its capital stock. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending on the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NYSE for continued listing on the NYSE. According to the NYSE's published guidelines, the NYSE normally gives consideration to delisting a security of a company when (i) the number of total stockholders is less than 400, (ii) the number of total stockholders is less than 1,200 and the average monthly trading volume for the most recent twelve months is less than 100,000 shares, (iii) the number of publicly held shares is less than 9 12 600,000, (iv) the aggregate market value of publicly traded shares is less than $8,000,000, (v) the aggregate market value of shares outstanding (excluding treasury stock) is less than $12,000,000 and the average net income after taxes for the past three years is less than $600,000, or (vi) the net tangible assets available to common stock are less than $12,000,000 and average net income after taxes for the past three years is less than $600,000. Shares held directly or indirectly by directors, officers, or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to the Company, as of July 23, 1998 there were approximately 1,260 holders of record of Shares and 98,830,084 Shares were outstanding. If as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements of the NYSE for continued listing, the market for Shares could be adversely affected. If the NYSE were to delist the Shares, it is possible that the Shares would continue to trade on other securities exchanges or in the over-the-counter market and that price quotations would be reported by such exchanges or through the Nasdaq National Market or other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would, subject to Section 15(d) of the Exchange Act, substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the shortswing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy or information statement pursuant to Section 14(a) or (c) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. The Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If registration of the Shares is not terminated prior to the Merger, then the Shares will cease to be reported on the NYSE and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for Nasdaq reporting. 8. CERTAIN INFORMATION CONCERNING THE COMPANY The Company is a Delaware corporation with its principal executive offices at 700 Orthopaedic Drive, Warsaw, Indiana 46580, telephone no. (219) 267-8143. According to the Company's Annual Report for the fiscal year ended December 31, 1997 (the "Annual Report"), the Company designs, manufactures and distributes orthopaedic devices and supplies. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries excerpted or derived from the information contained in the Annual Report, as well as the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, which are incorporated herein by reference. More comprehensive financial information is included in such reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports 10 13 and such other documents and all the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". DEPUY, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS)
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------------------ ---------------------------------------- 1998 1997 1997 1996 1995 ---------------- ----------- ------------ ----------- ----------- (UNAUDITED) STATEMENT OF EARNINGS DATA: Net sales.............. $ 207,331 $ 187,842 $ 770,188 $ 697,273 $ 636,561 Operating income....... 34,297 52,391 193,030 187,503 170,323 Net income............. 18,848 31,265 122,786 106,748 94,929
AT MARCH 31, AT DECEMBER 31, ---------------- -------------------------- 1998 1997 1996 ---------------- ------------ ----------- (UNAUDITED) BALANCE SHEET DATA: Current assets......... $ 624,024 $ 605,406 $ 546,719 Total assets........... 1,096,550 1,080,657 897,961 Current liabilities.... 192,452 202,166 177,601 Stockholders' equity... 794,311 762,118 670,628
Recent Developments. On June 3, 1998, the Company completed its acquisition of all the issued and outstanding shares of capital stock of AcroMed Corporation ("AcroMed"). AcroMed, which is based in Cleveland, Ohio, designs and sells spinal implants and related products. The acquisition was affected through the merger of a newly-formed, wholly owned subsidiary of the Company with and into AcroMed, as a result of which the Company became the sole shareholder of AcroMed. For further information regarding the provisions of the transaction, see the Company's Current Report on Form 8-K dated June 3, 1998, which is incorporated herein by reference. Available Information. The Company is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Certain information as of particular dates concerning the Company's directors and officers, their remuneration, Company Stock Options (as defined in Section 12) granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located in the Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be obtainable, by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web site on the internet at http://www.sec.gov that contains reports and certain other information regarding registrants that file electronically with the Commission. Such information should also be available for inspection at the library of the NYSE, 20 Broad Street, New York, New York 10005. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or based upon publicly available documents on file with the Commission and other publicly available information. Although the Purchaser and Parent do not have any knowledge that any such information is untrue, neither the Purchaser nor Parent takes any responsibility for the accuracy or completeness 11 14 of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT The Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, was organized to acquire the Company and has not conducted any unrelated activities since its organization. The principal offices of the Purchaser are located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. All outstanding shares of capital stock of the Purchaser are owned by Parent. Parent's principal line of business is the manufacture and sale of a broad range of products in the health care field. Parent is a New Jersey corporation with its principal office located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. Financial information with respect to Parent and its subsidiaries is included in Parent's Annual Report on Form 10-K for the fiscal year ended December 28, 1997 and in Parent's Quarterly Report on Form 10-Q for the quarter ended March 29, 1998, which are incorporated herein by reference, and other documents filed by Parent with the Commission. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". Except as described in this Offer to Purchase, neither the Purchaser nor Parent (together, the "Corporate Entities") or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I or any associate or majority owned subsidiary, of the Corporate Entities or any of the persons so listed, beneficially owns any equity security of the Company, and none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Except as described in this Offer to Purchase, (i) there have not been any contacts, transactions or negotiations between the Corporate Entities, any of their respective subsidiaries or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I, on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the Commission and (ii) none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Company. Except as described in this Offer to Purchase, during the last five years, none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I (i) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, Federal or state securities laws or finding any violation of such laws. The name, business address, present principal occupation or employment, five year employment history and citizenship of each of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I. Available Information. Parent is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, options granted to them, the principal holders of Parent's securities and any material interest of such persons in transactions with Parent is disclosed in proxy statements distributed to Parent's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the Commission, and copies thereof should be obtainable from the Commission, in the same manner as set forth with respect to information concerning the Company in Section 8. Such material should also be available for inspection at the library of the NYSE, 20 Broad Street, New York, New York 10005. 12 15 10. SOURCE AND AMOUNT OF FUNDS The total amount of funds required by the Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay fees and expenses related to the Offer and the Merger is estimated to be approximately $3.6 billion. The Purchaser plans to obtain all funds needed for the Offer and the Merger through a capital contribution which will be made by Parent to the Purchaser. Parent plans to use funds it has available in its cash accounts, under available lines of credit and pursuant to its current commercial paper program for such capital contribution. The Purchaser therefore has not conditioned the Offer on obtaining financing. 11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER In June 1998, James R. Utaski, Vice President Corporate Development of Parent, called representatives of the Stockholders to discuss Parent's interest in acquiring the Company. They confirmed that the Stockholders would be willing to consider a proposal with respect to such acquisition. On July 9, 1998, Mr. Utaski, James T. Lenehan, Worldwide Chairman Consumer Pharmaceuticals & Professional Group of Parent, James R. Hilton, Associate General Counsel of Parent, and William Doyle, Vice President Licensing and Acquisitions, Professional Group, of Parent, met with certain representatives of the Stockholders. During the meeting, representatives of Parent presented Parent's proposal for a transaction involving the acquisition of all of the outstanding Shares, including those held by the Stockholders, for cash. The parties discussed the general parameters pursuant to which Parent and the Stockholders would be willing to proceed with the transaction, including Parent's desire to obtain the support of the Company's Board of Directors and senior management. Parent's representatives proposed a price of approximately $33 to $34 per Share, subject to the accuracy of certain assumptions, completion of due diligence and the negotiation of definitive agreements. The representatives of the Stockholders expressed their interest in proceeding with discussions, but indicated they would not accept a price of less than $35 per Share. On July 9, 1998 and July 10, 1998, Mr. Utaski had brief telephone conversations with representatives of the Stockholders concerning the proposed transaction, including, among other things, the possible roles of the Company's senior management following the proposed transaction. On July 11, 1998, Messrs. Lenehan and Utaski and William D. Dearstyne, Jr., Company Group Chairman of Parent, met in Chicago with James A. Lent, Chairman and Chief Executive Officer of the Company, and Michael J. Dormer, President and Chief Operating Officer of the Company. Parent's representatives expressed Parent's serious interest in exploring an acquisition of the Company and proposed general parameters pursuant to which Parent would be willing to proceed with such a transaction as well as a timetable, senior management's roles and responsibilities in the event a transaction were consummated, due diligence and other actions necessary to proceed with such a transaction. Parent's representatives repeated their proposal for a price of approximately $33 to $34 per Share. Messrs. Lent and Dormer expressed the Company's interest in proceeding with discussions whereby the public stockholders would receive the same price as the Stockholders and indicated their desire for a price of not less than $35 per Share. Between July 12, 1998 and July 20, 1998, Parent, the Company, the Stockholders and their respective representatives conducted due diligence and had numerous discussions and continued negotiations with respect to the purchase price and other material terms of the transaction. On July 14, 1998, drafts of the definitive agreements were delivered to representatives of the Stockholders and the Company. On July 14, 1998, the Company and Parent entered into a Confidentiality Agreement, which was amended by the parties on July 18, 1998. On July 16, 1998, Mr. Dearstyne, Donald Grilli, President of Johnson & Johnson Professional, Inc., a subsidiary of Parent, Eric B. Jung, Attorney for Parent, and Mr. Doyle met in New York with Messrs. Lent and Dormer and discussed certain post-acquisition operating issues relating to the proposed transaction. On July 17, 1998, Ralph S. Larsen, Chairman, Board of Directors and Chief Executive Officer of Parent, Robert N. Wilson, Vice Chairman, Board of Directors of Parent, Mr. Utaski and Mr. Lenehan met in New York 13 16 with Messrs. Lent and Dormer and discussed the future strategic direction of the Company assuming consummation of the transaction and other material terms of the transaction. During the period from July 17, 1998 to July 20, 1998, the parties negotiated, and ultimately agreed upon, a price of $35 per Share and the other material terms of the proposed transaction and finalized the definitive agreements. On July 20, 1998, Parent's Board of Directors met and approved the transaction. In the afternoon of July 20, 1998, the Board of Directors of the Company met with its legal and financial advisors and, after being briefed on the transaction, approved the transaction. Following these approvals, each of the Merger Agreement and the Stockholder Agreement were executed and delivered and the transaction was publicly announced before the European and U.S. financial markets opened on July 21, 1998. 12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT Purpose. The purpose of the Offer is to acquire control of and the entire equity interest in the Company. Following the Offer, the Purchaser and Parent intend to acquire any remaining equity interest in the Company not acquired in the Offer by consummating the Merger. The Merger Agreement. The Merger Agreement provides that following the satisfaction or waiver of the conditions described below under "Conditions to the Merger", the Purchaser will be merged with and into the Company, and each then outstanding Share (other than Shares owned by the Company as treasury stock or by Parent, the Purchaser or any other direct or indirect wholly owned subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law), will be converted into the right to receive an amount in cash equal to the Offer Price. VOTE REQUIRED TO APPROVE MERGER. The DGCL requires, among other things, that the adoption of any plan of merger or consolidation of the Company must be approved and found advisable by the Board of Directors and generally by the holders of the Company's outstanding voting securities. The Board of Directors of the Company has approved the Offer and the Merger; consequently, the only additional action of the Company that may be necessary to effect the Merger is approval by such stockholders if the "short-form" merger procedure described below is not available. Under the DGCL, the affirmative vote of holders of a majority of the outstanding Shares (including any Shares owned by the Purchaser) is generally required to approve the Merger. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least a majority of the outstanding Shares (which would be the case if the Stockholder Agreement Condition were satisfied and the Purchaser were to accept for payment Shares tendered pursuant to the Offer, including the Shares subject to the Stockholder Agreement sold pursuant to the Stockholder Agreement or tendered by the Stockholders pursuant to the Offer), it would have sufficient voting power to effect the Merger without the vote of any other stockholder of the Company. However, the DGCL also provides that if a parent company owns at least 90% of each class of stock of a subsidiary, the parent company can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if, as a result of the Offer or otherwise, the Purchaser acquires or controls the voting power of at least 90% of the outstanding Shares, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. CONDITIONS TO THE MERGER. The Merger Agreement provides that the Merger is subject to the satisfaction or waiver of certain conditions, including the following: (i) if required by applicable law, the Merger Agreement having been approved and adopted by the holders of a majority of the Shares; provided that Parent and Purchaser shall vote all their Shares in favor of the Merger; (ii) no statute, rule, decision, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger being in effect; provided, however, that the party seeking to invoke such condition shall have performed its obligations under the Merger Agreement; and (iii) Purchaser having previously accepted for payment and paid for Shares pursuant to and subject to the conditions (including the Stockholder Agreement Condition) of the Offer and, if any Shares subject to the Stockholder Agreement were not purchased pursuant to the Offer, pursuant to the Stockholder Agreement. 14 17 TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated at any time prior to the effective time of the Merger (the "Effective Time"), whether before or after approval by the stockholders of the Company, (i) by mutual written consent of the Company and Parent, (ii) by either the Company or Parent if (a) the Purchaser shall not have accepted for payment Shares pursuant to the Offer prior to March 31, 1999, unless the failure of any condition to such acceptance results from the failure by the party seeking to terminate the Merger Agreement to perform any of its obligations under the Merger Agreement or from facts or circumstances that constitute a willful and intentional material breach of representation or warranty under the Merger Agreement by such party; or (b) if any Federal, state or local government or any court, tribunal, administrative agency or commission or other regulatory authority or agency, domestic, foreign or supranational (a "Governmental Entity"), shall have issued an order, decree or ruling or taken any action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action has become final and nonappealable; provided, however, that the party seeking to terminate the Merger Agreement pursuant to such provision shall have complied with its obligations under the Merger Agreement, (iii) by Parent or the Purchaser prior to the Purchaser's obligation to accept Shares for payment pursuant to the Offer, in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in the Merger Agreement which (I) would give rise to the failure of a condition set forth in paragraph (d) or (e) under Section 14 and (II) cannot be or has not been cured within 20 days after the giving of written notice to the Company, and (iv) by the Company if Parent or the Purchaser shall have (A) failed to commence the Offer within five business days of the public announcement of the Merger Agreement, (B) failed to pay for Shares pursuant to the Offer in accordance with the terms of the Merger Agreement or (C) breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach in respect of clause (C) is incapable of being cured or has not been cured within 20 days after the giving of written notice to Parent or the Purchaser, except in any case under clause (C), such breaches which individually or in the aggregate are not reasonably likely to affect adversely Parent's or the Purchaser's ability to complete the Offer or the Merger. TAKEOVER PROPOSALS. The Merger Agreement provides that the Company shall not, and shall not authorize or permit any of its subsidiaries, or any of its or their officers, directors or employees to, and shall use its reasonable efforts to cause any investment banker, financial advisor, attorney, accountant or other representative of the Company or any of its subsidiaries not to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal (as defined below) or (ii) participate in any discussions or negotiations regarding any Takeover Proposal. The Merger Agreement defines "Takeover Proposal" as any proposal or offer from any person relating to any direct or indirect acquisition or purchase of 20% or more of the assets of the Company and its subsidiaries, taken as a whole, or 20% or more of any class of outstanding equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of the Company or any of its subsidiaries or any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement. The Merger Agreement provides further that neither the Board of Directors of the Company 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 such Board of Directors or any such committee of the Merger Agreement, the Offer or the Merger, (ii) approve or recommend, or propose to approve or recommend, any Takeover Proposal or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement (an "Acquisition Agreement") with respect to any Takeover Proposal. In addition to the obligations of the Company set forth in the preceding paragraphs, the Merger Agreement provides that the Company shall immediately advise Parent orally and in writing of any Takeover Proposal, any request for information concerning the Company or its subsidiaries in relation to or any inquiry regarding the making of a Takeover Proposal, the material terms and conditions of such Takeover Proposal, request for information or inquiry, and the identity of the person making any such Takeover Proposal, request for information or inquiry. The Company is further required under the terms of the Merger Agreement to keep Parent fully 15 18 informed of the status and details (including amendments or proposed amendments) of any such Takeover Proposal, request for information or inquiry. The Merger Agreement provides that nothing contained therein shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act; provided that neither the Company nor the Board of Directors nor any committee thereof shall withdraw or modify, or propose to withdraw or modify, its position with respect to the Merger Agreement, the Offer or the Merger or approve or recommend, or propose to approve or recommend, a Takeover Proposal. FEES AND EXPENSES. All fees and expenses incurred in connection with the Merger Agreement, the Offer, the Merger and the Stockholder Agreement and the transactions contemplated by the Merger Agreement and the Stockholder Agreement will be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated. CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that during the term of the Merger Agreement, except as otherwise provided by the Merger Agreement or to the extent that Parent shall consent in writing, the Company shall, and shall cause each of its subsidiaries to, carry on its business in the ordinary course consistent with past practice and use reasonable efforts to preserve intact its current business organization, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having significant business dealings with it. The Merger Agreement further provides that, except as otherwise expressly permitted by the Merger Agreement, the Company shall not, and shall not permit any of its subsidiaries to, (without Parent's written consent) (i) other than dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its parent (a) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (b) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (c) purchase, redeem or otherwise acquire any shares of its capital stock or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of shares of Company Common Stock upon the exercise of employee stock options outstanding on the date of the Merger Agreement in accordance with their present terms); (iii) amend its certificate of incorporation or by-laws; (iv) acquire or agree to acquire (a) by merging or consolidating with, or by purchasing a substantial portion of the assets or any stock of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or (b) any assets that are material, individually or in the aggregate, to the Company except purchases of inventory in the ordinary course of business consistent with past practice; (v) sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its properties or assets, except sales of inventory or sales or licenses of immaterial assets, in each case in the ordinary course of business consistent with past practice; (vi) (a) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing except for short term borrowings incurred in the ordinary course of business consistent with past practice or (b) make any loans, advances or capital contributions to, or investments in, any other person, other than advances to employees in the ordinary course of business; (vii) make or agree to make any new capital expenditure or expenditures with respect to property, plant or equipment except as set forth in a schedule provided to Parent which exceeds in the aggregate (a) with respect to the year ended December 31, 1998, 110% of the amount set forth in the Company's capital budget for such year, (b) with respect to any quarterly period thereafter, 25% of the amount in (a) above, and (c) $10 million for a new computer system in the United Kingdom; (viii) make any material tax election or settle or compromise any material income tax liability or, except as required by generally accepted accounting principles, make any change in accounting methods, principles or practices; (ix) pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction, in the ordinary course of business consistent with past practice or in 16 19 accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in any report of the Company filed with the Commission since January 1, 1997 and publicly available prior to the date of the Merger Agreement or incurred thereafter in the ordinary course of business consistent with past practice, or waive any material benefits of, or agree to modify in any respect, any confidentiality, standstill or similar agreement to which the Company or any of its subsidiaries is a party; (x) except in the ordinary course of business, modify, amend or terminate any material contract or agreement to which the Company or any of its subsidiaries is a party or waive, release or assign any material rights or claims; (xi) enter into any material contracts or agreements relating to the distribution, sale or marketing by third parties of the products of, or products licensed, by the Company or any of its subsidiaries; (xii) except as required to comply with applicable law or agreements, plans or arrangements existing on the date of the Merger Agreement, (a) adopt, enter into, terminate or amend any employment agreement or benefit plan or other arrangement for the benefit or welfare of any director, officer or current or former employee, (b) increase in any manner the compensation or fringe benefits of, or pay any bonus to, any director, officer or "key employee" (as defined below) (except for normal increases of cash compensation or cash bonuses to individuals (and not across the board actions), in the ordinary course of business consistent with past practice), (c) pay any benefit not provided for under any benefit plan, (d) except as permitted in clause (b), grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or benefit plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any benefit plans or agreement or awards made thereunder) or (e) take any action other than in the ordinary course of business to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or benefit plan; or (xiii) authorize any of, or commit or agree to take any of, the foregoing actions. The Merger Agreement defines "key employee" as an employee of the Company or any of its subsidiaries with annual cash compensation in excess of $300,000. Pursuant to the Merger Agreement, neither the Company nor any of its subsidiaries, on the one hand, nor the Parent or the Purchaser on the other shall take any action that could reasonably be expected to result in (i) any of the representations and warranties of the Company, on the one hand, or of Parent or the Purchaser on the other hand, set forth in the Merger Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the conditions to the Offer or to the Merger not being satisfied. BOARD OF DIRECTORS; MANAGEMENT. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment for, any Shares by the Purchaser pursuant to and subject to the conditions (including the Stockholder Agreement Condition) of the Offer, the Purchaser shall be entitled to designate such number of the directors on the Board of Directors of the Company such that the Purchaser, subject to compliance with Section 14(f) of the Exchange Act, will control a majority of such directors, and the Company and its Board of Directors shall, at such time, take all such action needed to cause the Purchaser's designees to be appointed to the Company's Board of Directors; provided, however, that in the event that Purchaser's designees are elected to the Board of Directors of the Company, until the Effective Time such Board of Directors shall have at least two directors who are directors of the Company on the date of the Merger Agreement and who are not officers of the Company or any of its subsidiaries (the "Independent Directors") and; provided further that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of the Merger Agreement or, if no Independent Directors then remain, the other directors of the Company on the date of the Merger Agreement shall designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its subsidiaries, or officers or affiliates of Parent or any of its subsidiaries, and such persons shall be deemed to be Independent Directors for purposes of the Merger Agreement. Subject to applicable law, the Company has agreed to take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, which Information Statement is attached as Schedule I to the Schedule 14D-9. In connection with the foregoing, the Company will promptly, at the option of Parent, either increase the size of the Company's Board of Directors or use its best efforts to obtain the resignation of such number of its current directors as is necessary to enable the 17 20 Purchaser's designees to be elected or appointed to, and to constitute a majority of, the Company's Board of Directors as discussed above. The Merger Agreement provides that the directors of the Purchaser immediately prior to the Merger, and James A. Lent, the Chairman and Chief Executive Officer of the Company, and Michael J. Dormer, the President and Chief Operating Officer of the Company, will be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Parent is currently in negotiations with Messrs. Lent and Dormer with respect to their continued employment with the Company or Parent following the Merger. It is currently anticipated that, subject to the successful consummation of such negotiations, and to the consummation of the Offer, Mr. Lent would become a Company Group Chairman of Parent with responsibility for Parent's orthopaedic business and Mr. Dormer would become President of the Company, which would include most of the current orthopaedic businesses of the Company and Parent. Both of Messrs. Lent and Dormer participated in negotiating the terms of the Merger Agreement and participated in the Board's discussion of, and voted to approve, the Offer, the Merger and the Merger Agreement. Further, pursuant to the Merger Agreement, they will each serve as directors of the Surviving Corporation after the Merger and, pursuant to their respective employment contracts with the Company, if the Purchaser accepts a majority of the outstanding Shares pursuant to the Offer, the Company will be deemed to have met the target performance goals set under the DePuy, Inc. Senior Executive Incentive Compensation Plan for 1998 with respect to Messrs. Lent and Dormer and each will, accordingly, receive cash bonuses under the Incentive Plan. During the 60 days following the Merger, each of Steven L. Artusi, the Company's Senior Vice President, General Counsel and Secretary, Thomas J. Oberhausen, the Company's Senior Vice President, Chief Financial Officer and Treasurer and G. Taylor Seward, the Company's Senior Vice President, Personnel, will have the right, in accordance with his existing employment contract with the Company and the Merger Agreement, to declare that he has been "constructively terminated" (as defined in his employment agreement with the Company) and to discontinue his duties with the Company, whereupon the "Company's Notice Period" (as defined in his employment agreement) will be deemed to have commenced, and he will be entitled to continue receiving salary and benefits as set forth in such employment agreements. STOCK OPTIONS. The Merger Agreement provides that as soon as practicable following the date of the Merger Agreement but in no event later than the consummation of the Offer, the Company (or, if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans (as defined below)) shall take actions such that, with certain exceptions (including by adopting resolutions or taking any other actions), each outstanding option to purchase Shares (a "Company Stock Option") granted under any stock option, stock appreciation rights or stock purchase plan, program or arrangement of the Company (collectively, the "Stock Option Plans") that is outstanding immediately prior to the consummation of the Offer, whether or not then exercisable, shall be cancelled immediately prior to the effective time of the Merger (the "Effective Time") in exchange for an amount in cash, payable at the time of such cancellation, equal to the product of (x) the number of Shares subject to such Company Stock Option immediately prior to the Effective Time and (y) the excess of the price per Share to be paid in the Offer over the per Share exercise price of such Company Stock Option. The Merger Agreement further provides that the Company (or, if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans) shall take actions such that immediately prior to the Effective Time the Company Stock Options remaining are cancelled as set forth above. The Company shall not make, or agree to make, any payment of any kind to any holder of a Company Stock Option (except for the payment described above) without the consent of Parent. Notwithstanding the preceding paragraph, the Board of Directors of the Company will take action under Section 12.3(b) of the Company's Employee Stock Option/Purchase Plan to provide that, in the case of outstanding options under the Company's Savings-Related Share Option Scheme (the "Scheme"), participants will, upon any exercise of an option in accordance with the Scheme (or at any earlier time as may be permitted) and the payment of the applicable exercise price, be entitled to receive only a cash payment for each share of Company Common Stock reserved for purposes of the Scheme to which such participant would otherwise be entitled upon such exercise equal to the price per Share to be paid in the Offer. As soon as practicable following 18 21 the date of the Merger Agreement but not later than the consummation of the Offer, the Company will use its best efforts to obtain the approval of each participant holding an option under the Scheme to the surrender and cancellation thereof in consideration of a cash payment to be made by the Company in such amount or in accordance with such formula as will have been reviewed and consented to by Parent prior to the seeking of any such approval by the Company. In addition, and only to the extent permitted by applicable law, the Company will take action to cease employee contributions to the Scheme no later than the consummation of the Offer. The Company and the Parent agree to take such other actions as will reasonably be required to accomplish the surrender and cancellation of the options under the Scheme. The Merger Agreement provides further that subject to the provisions set forth above, all Stock Option Plans shall terminate as of the Effective Time and the provisions in any other benefit plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time. The Merger Agreement provides that the Company shall ensure that following the consummation of the Offer, no holder of a Company Stock Option or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation, and that the Company shall use its reasonable best efforts to ensure that following the Effective Time, no holder of any remaining Company Stock Option or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation. BENEFIT PLANS. The Merger Agreement states that it is Parent's intention that for a period of not less than one year after the Effective Time, employees of the Company who continue their employment after the Effective Time will be provided compensation and employee benefits which are substantially comparable in the aggregate to those provided for such employees in effect on the date of the Merger Agreement. The Merger Agreement also provides that neither the Parent nor the Surviving Corporation will have any obligation to issue, or adopt any plans or arrangements providing for the issuance of, shares of capital stock, warrants, options, stock appreciation rights or other rights in respect of any shares of capital stock of any entity or any securities convertible or exchangeable into such shares pursuant to any such plans or arrangements. Finally, the Merger Agreement provides that any plans or arrangements of the Company providing for such issuance shall be disregarded in determining whether employee benefits are substantially comparable in the aggregate. PURCHASE OF FOREIGN SUBSIDIARIES. The Merger Agreement provides that Parent and its affiliates will have the right, at the option of Parent, to purchase immediately prior to the consummation of the Offer any subsidiary of the Company that is not incorporated or organized under the laws of a jurisdiction within the United States at a price and on such terms as may be determined by mutual agreement of the Parent and the Company; provided that all of the conditions to Offer set forth in Section 14 have been satisfied or waived and Parent and Purchaser are unconditionally obligated to consummate the Offer. The Merger Agreement further provides that if the Parent and the Company are unable to agree upon a price or terms for such sale, Parent and the Company shall elect an independent appraisal firm to determine such price or terms and that the conclusions of such appraisal firm shall be conclusive and binding. The fees of such appraisal firm shall be shared equally by Parent and the Company. Parent has agreed in the Merger Agreement that in no event will the Company be deemed to have breached any of its representations, warranties, covenants or other obligations under the Merger Agreement by reason of (whether directly or indirectly, whether in whole or in part) any taxes or liabilities incurred, any payments made, or any action taken or any omissions of any necessary action as a result of or in connection with (i) Parent's exercise of its right to purchase the Company's foreign subsidiaries prior to the consummation of the Offer pursuant to this provision or (ii) any other transaction or agreement contemplated by this provision or entered into in connection therewith. INDEMNIFICATION, EXCULPATION AND INSURANCE. Parent has agreed in the Merger Agreement that all rights to indemnification and exculpation (including the advancement of expenses) from liabilities for acts or omissions occurring at or prior to the Effective Time (including with respect to the transactions contemplated by the Merger Agreement) existing now or at the Effective Time in favor of the current or former directors or officers of the Company as provided in its certificate of incorporation, its by-laws (each as in effect on the date of the Merger Agreement) and indemnification agreements shall be assumed by the Surviving Corporation in the Merger, without further action, as of the Effective Time and shall survive the Merger and shall continue in full force and effect without amendment, modification or repeal in accordance with their terms for a period of not less than six 19 22 years after the Effective Time; provided, however, that if any claims are asserted or made within such six year period, all rights to indemnification (and to advancement of expenses) hereunder in respect of any such claims shall continue, without diminution, until disposition of any and all such claims. The Merger Agreement provides that, unless Parent agrees to guarantee the indemnification obligations described in the preceding paragraph, for a period of six years from the Effective Time, Parent shall provide officers' and directors' liability insurance in respect of acts or omissions occurring at or prior to the Effective Time, covering each person currently covered by the Company's officers' and directors' liability insurance policy, or who becomes covered by such policy prior to the Effective Time, on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof; provided that in satisfying such obligation Parent shall not be obligated to pay premiums in excess of 200% of the amount per annum paid by the Company in its last full fiscal year; and provided further that Parent shall nevertheless be obligated to provide such coverage as may be obtained for such 200% amount. The Merger Agreement provides that in the event Parent, the Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then and in each such case, proper provisions shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall expressly assume the obligations set forth in the preceding paragraphs. The Merger Agreement also provides that, in the event the Surviving Corporation transfers any material portion of its assets, in a single transaction or in a series of transactions, Parent will either guarantee the indemnification obligations set forth in the preceding paragraphs or take such other action to ensure that the ability of the Surviving Corporation to satisfy such indemnification obligations will not be diminished in any material respect. REASONABLE EFFORTS. The Merger Agreement provides that, on the terms and subject to the conditions of the Merger Agreement, each of the parties will use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger and the other transactions contemplated by the Merger Agreement and the Stockholder Agreement. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. The Merger Agreement provides that in the event the Purchaser's designees are appointed or elected to the Board of Directors of the Company as described above under "Board of Directors", after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time of the Merger, the affirmative vote of a majority of the directors of the Company not designated by Parent or the Purchaser is required for the Company to amend or terminate the Merger Agreement, exercise or waive any of its rights or remedies under the Merger Agreement, extend the time for performance of the Purchaser's and Parent's respective obligations under the Merger Agreement or take any action to amend or otherwise modify the Company's certificate of incorporation or by-laws. Stockholder Agreement. The Stockholder Agreement provides that each Stockholder will sell, and the Purchaser will purchase, all Shares beneficially owned by such Stockholder, at a price per Share equal to $35. The obligation of the Stockholders to sell, and the obligation of the Purchaser to purchase, Shares under the Stockholder Agreement are subject to the Purchaser having accepted Shares for payment under the Offer in accordance with the Merger Agreement. The Stockholders may, and the Purchaser may direct the Stockholders to, tender their Shares into the Offer. Any Shares of the Stockholders not purchased in the Offer will be purchased by the Purchaser immediately following the purchase of Shares in the Offer. The Stockholders are not required to tender their Shares in the event of any amendment to the Merger Agreement that creates any additional condition to the Offer, reduces the Offer Price or otherwise adversely affects the Stockholders without the written approval of the Stockholders. Each of the Stockholders has agreed, among other things, not to: (i) sell, transfer, give, pledge, assign or otherwise dispose of (including by gift) (collectively, "Transfer") or consent to any Transfer of, any or all of such Shares or any interest therein, or enter into any contract, option or other arrangement (including any profit sharing arrangement) with respect to the Transfer of the Shares to any person other than pursuant to the terms of the 20 23 Offer or the Merger; (ii) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, in connection with, directly or indirectly, any Takeover Proposal; (iii) directly or indirectly solicit, initiate or encourage the submission of, any Takeover Proposal; or (iv) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal. Each of the Stockholders has also agreed, and the Stockholder Agreement includes an irrevocable proxy provision for the benefit of the Purchaser with respect to the Shares owned by each Stockholder, (i) to vote such Shares at any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement; and (ii) to vote such Shares at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which a Stockholder's vote, consent or other approval is sought, against (x) any Takeover Proposal or (y) any amendment of the Company's certificate of incorporation or by-laws or other proposal or transaction involving the Company, which amendment or other proposal or transaction would be reasonably likely to impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or change in any manner the voting rights of each class of the Company's common stock. Appraisal Rights. Holders of Shares do not have dissenters' rights as a result of the Offer. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. If the statutory procedures were complied with, such rights could lead to a judicial determination of the fair value required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price or the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his right to appraisal, as provided in the DGCL, the Shares of such stockholder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw his demand for appraisal by delivery to Parent of a written withdrawal of his demand for appraisal and acceptance of the Merger. The foregoing discussion is not a complete statement of law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. Going Private Transactions. The Merger would have to comply with any applicable Federal law operative at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority shareholders be filed with the Commission and disclosed to minority shareholders prior to consummation of the Merger. Other Matters. Except as otherwise described in this Offer to Purchase, the Purchaser and Parent have no current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company, such as a merger, reorganization or liquidation involving the Company, a sale or transfer of a material amount of assets of the Company, any change in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. 21 24 13. DIVIDENDS AND DISTRIBUTIONS Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the succeeding paragraph, and nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If, on or after the date of the Merger Agreement, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares or (c) issue or sell additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights or options, conditional or otherwise, to acquire, any of the foregoing, other than Shares issued pursuant to the exercise of outstanding employee stock options, then, subject to the provisions of Section 14 below, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after the date of the Merger Agreement, the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 14 below, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (i) the Stockholder Agreement is valid, binding and in full force and effect and enforceable by Parent and the Purchaser in accordance with its terms and no party thereto (other than Parent or the Purchaser) is in material breach thereof and the Shares subject to the Stockholder Agreement shall have been either tendered into the Offer or delivered to the Purchaser for purchase immediately following the Offer (the "Stockholder Agreement Condition"), (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated and (iii) Parent, the Purchaser and the Company shall have received in respect of the Merger and any matters arising therefrom confirmation by way of a decision from the Commission of the European Union (the "European Commission") under Council Regulation (EEC) No. 4064/89 of 21 December 1989, as amended (with or without the initiation of proceedings under Article 6(1)(c) thereof), that the Merger and any matters arising therefrom are compatible with the common market. Furthermore, notwithstanding any other term of the Offer, the Purchaser shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of 22 25 the Merger Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exists: (a) there shall be instituted or pending by any Governmental Entity any suit, action or proceeding (or by any other person any suit, action or proceeding that has a reasonable likelihood of success) (i) challenging the acquisition by Parent or the Purchaser of any Shares under the Offer or pursuant to the Stockholder Agreement, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement or the Stockholder Agreement, or seeking to obtain from the Company, Parent or the Purchaser any damages in connection with the aforesaid transactions that are material in relation to the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of a material portion of the business or assets of the Company and its subsidiaries, or Parent and its subsidiaries, in each case taken as a whole, or to compel the Company or Parent to dispose of or hold separate any material portion of the business or assets of the Company and its subsidiaries, or Parent and its subsidiaries, in each case taken as a whole, as a result of the Offer or any of the other transactions contemplated by the Merger Agreement or the Stockholder Agreement, (iii) seeking to impose material limitations on the ability of Parent or the Purchaser to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer or purchased under the Stockholder Agreement including, without limitation, the right to vote such Shares on all matters properly presented to the stockholders of the Company or (iv) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any material respect any material portion of the business or operations of the Company and its subsidiaries taken as a whole; (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity or court, other than the application to the Offer or the Merger of the applicable waiting period under the Merger Control Laws, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; (c) there shall have occurred any material adverse change with respect to the Company; (d) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case at the date of the Merger Agreement and at the scheduled or extended expiration of the Offer; (e) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under the Merger Agreement; or (f) the Merger Agreement shall have been terminated in accordance with its terms; which, in the reasonable judgment of Parent or the Purchaser in any such case, and regardless of the circumstances (including any action or omission by Parent or the Purchaser) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payments therefor. The Merger Agreement provides that the foregoing conditions in paragraphs (a) through (f) are for the sole benefit of the Purchaser and Parent and may, subject to the terms of the Merger Agreement, be waived by the Purchaser and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or the 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 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. 23 26 15. CERTAIN LEGAL MATTERS Based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, neither the Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action, except as otherwise described in this Section 15, by any Governmental Entity that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Parent currently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws". While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could, subject to the terms and conditions of the Merger Agreement, decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. State Takeover Laws. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law, and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders; provided that such laws were applicable only under certain conditions. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined generally as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) for a period of three years from the time such interested stockholders became the holders of 15% or more of such Shares unless, among other things, the corporation's board of directors has given its prior approval to either the business combination or the transaction which resulted in the stockholder becoming an "interested stockholder". The Company's Board of Directors has approved the Merger Agreement, the Stockholder Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore, Section 203 of the DGCL is inapplicable to the Merger. Based on information supplied by the Company and its own review, the Purchaser does not believe that any state takeover statutes purport to apply to the Offer or the Merger. Neither the Purchaser nor Parent has currently complied with any state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, the Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. 24 27 Antitrust. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. Parent is in the process of preparing such filing. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from Parent concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one such extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. The Merger would not require an additional filing under the HSR Act if the Purchaser owns 50% or more of the outstanding Shares at the time of the Merger or if the Merger occurs within one year after the HSR Act waiting period applicable to the Offer expires or is terminated. The consummation of the Merger is also contingent upon confirmation from the European Commission under Council Regulation (EEC) No. 4064/89 of 21 December 1989, as amended, that the Merger does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the European common market. Parent and the Company will jointly prepare and file with the European Commission the required notification of the Merger. The European Commission has one month from the date on which such information is supplied in which to complete its preliminary investigation into the Merger. If, following such one month period, the European Commission considers that it needs to examine the Merger more closely, it may initiate a Phase II investigation; if it does initiate a Phase II investigation, the European Commission must make a final determination as to whether or not the Merger is compatible with the European common market no later than four months after the initiation of such investigation. If the European Commission does not make a decision within this four month period, the Merger would automatically be deemed to be compatible with the European common market and would be allowed to proceed. Parent and the Company believe it is likely that the European Commission will determine that the Merger is compatible with the common market. However, no assurance can be given that the European Commission will not impose certain conditions or restrictions on the Merger. Filings with, notifications to, and authorizations and approvals of certain antitrust authorities in jurisdictions other than the United States and the European Union may be required. There can be no assurance that any authorizations, approvals or decisions required by such authorities will be granted or that such authorities will not challenge the Offer or the Merger. Parent and Company believe, however, that the failure to obtain such authorizations and approvals would not be material. Antitrust enforcement agencies frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's purchase of Shares pursuant to the Offer, such an agency could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of Parent or its subsidiaries, or the Company or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the results thereof. 16. FEES AND EXPENSES Credit Suisse First Boston is acting as Dealer Manager in connection with the Offer and as financial advisor to Parent in connection with Parent's proposed acquisition of the Company, for which services Credit Suisse First Boston will receive customary compensation. Parent also has agreed to reimburse Credit Suisse First Boston for 25 28 its out-of-pocket expenses, including the fees and expenses of legal counsel and other advisors if the retention of such advisors was approved in writing by Parent, incurred in connection with its engagement, and to indemnify Credit Suisse First Boston and certain related persons against certain liabilities and expenses in connection with its engagement, including certain liabilities under the Federal securities laws. The Purchaser has retained Georgeson & Company Inc. to act as the Information Agent and First Chicago Trust Company of New York to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the Federal securities laws. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser will amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction where securities or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. The Purchaser or Parent has filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. In addition, the Company has filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Sections 8 and 9 (except that they will not be available at the regional offices of the Commission). LIB ACQUISITION CORP. July 27, 1998 26 29 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Parent are set forth below. Unless otherwise indicated, the business address of each such director and each such executive officer is One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. Unless otherwise indicated below, each occupation set forth opposite an individual's name refers to employment with Parent. All directors and executive officers listed below are citizens of the United States except for Christian A. Koffmann and Arnold G. Langbo, who are citizens of France and Canada, respectively.
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY ------------------------- ----------------------------------- Gerard N. Burrow, M.D. ................... Director of Parent since 1993; Member, Nominating and Yale University School of Medicine Corporate Governance Committee and Chairman, Science and 333 Cedar Street Technology Advisory Committee. Special Advisor to the New Haven, CT 06520 President of Yale University for Health Affairs since 1997. Dean of the Yale University School of Medicine from 1992 to 1997. Member, the Institute of Medicine of the National Academy of Sciences; Fellow, the American Association for the Advancement of Science; Director of Neurex Corporation and the Sea Research Foundation. Joan Ganz Cooney.......................... Director of Parent since 1978; Member, Compensation Children's Television Workshop Committee and Chairman, Benefits Committee. Chairman, One Lincoln Plaza Executive Committee of Children's Television Workshop New York, NY 10023 since 1990; Chairman-CEO from 1988 to 1990. Director of Metropolitan Life Insurance Company, the Museum of Television and Radio and The New York and Presbyterian Hospitals, Inc.; Trustee, the National Child Labor Committee. James G. Cullen........................... Director of Parent since 1995; Member, Compensation Bell Atlantic Corporation Committee and Audit Committee. President and CEO, 1310 N. Court House Road Telecom Group of Bell Atlantic Corporation since August Arlington, VA 22201 of 1997; Vice Chairman, Bell Atlantic Corporation since 1995; President from 1993 to 1995; President and CEO of Bell Atlantic -- New Jersey, Inc. from 1989 to 1993. Director of Prudential Life Insurance Company. Robert J. Darretta........................ Member, Executive Committee and Vice President, Finance since 1997; Treasurer from 1995 to 1997; President, IOLAB Corporation from 1987 to 1995. Russell C. Deyo........................... Member, Executive Committee and Vice President, Administration since 1996; Associate General Counsel from 1991 to 1996. Roger S. Fine............................. Member, Executive Committee and Vice President and General Counsel since 1996; Vice President, Administration from 1991 to 1996; Associate General Counsel from 1984 to 1991. Member, Board of Trustees of the Foundation of the University of Medicine and Dentistry of New Jersey; Vice President of the National Ramah Commission.
27 30
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY ------------------------- ----------------------------------- M. Judah Folkman, M.D..................... Director of Parent since February of 1998; Member, Children's Hospital Science and Technology Advisory Committee. Senior Hunnewell 103 Associate in Surgery, Children's Hospital since 1981; 300 Longwood Avenue Director, Surgical Research Laboratory, Children's Boston, MA 02115 Hospital since 1981; Professor, Harvard Medical School, Department of Surgery since 1968; Member, National Academy of Sciences and the American Academy of Arts and Sciences. Ronald G. Gelbman......................... Member, Executive Committee and Worldwide Chairman, Health Systems & Diagnostics Group since June of 1998; Worldwide Chairman, Pharmaceuticals and Diagnostics Group from 1994 to 1998. Company Group Chairman from 1987 to 1994. JoAnn H. Heisen........................... Member, Executive Committee and Vice President, Chief Information Officer since 1997; Controller from 1995 to 1997; Treasurer from 1991 to 1995; Assistant Treasurer, Investor Relations from 1989 to 1991. Director, The Vanguard Group, Inc. Ann Dibble Jordan......................... Director of Parent since 1981; Member, Nominating and Corporate Governance Committee and Public Policy Advisory Committee. Consultant and previously Field Work Assistant Professor, School of Social Service Administration, University of Chicago from 1970 to 1987. Director, Automatic Data Processing, Salant Corporation and Travelers Inc.; Director, The Phillips Collection, The Child Welfare League and the National Symphony Orchestra. Christian A. Koffmann..................... Member, Executive Committee and Worldwide Chairman, Consumer & Personal Care Group since 1995. Company Group Chairman from 1989 to 1995. Arnold G. Langbo.......................... Director of Parent since 1991; Member, Audit Committee Kellogg Company and Chairman, Compensation Committee. Chairman of the One Kellogg Square Board and Chief Executive Officer of Kellogg Company Battle Creek, MI 49016-3599 since 1992; President and Chief Operating Officer of Kellogg Company from December, 1990 to 1992; President of Kellogg International from 1986 to 1992; Director of Kellogg Company and Whirlpool Corporation. Member, Advisory Board of J.L. Kellogg Graduate School of Management at Northwestern University. Chairman, Board of Trustees of Albion College. Ralph S. Larsen........................... Chairman, Board of Directors and Chief Executive Officer and Chairman, Executive Committee of Parent since 1989. Director, Xerox Corporation and AT&T Corp. Member, The Business Council and the Policy Committee of The Business Roundtable. Member, Board of United Way of Tri-State. James T. Lenehan.......................... Member, Executive Committee and Worldwide Chairman, Consumer Pharmaceuticals & Professional Group since 1994. Company Group Chairman from 1993 to 1994. President, McNeil Consumer Products Company from 1990 to 1993.
28 31
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY ------------------------- ----------------------------------- John S. Mayo, Ph.D........................ Director of Parent since 1986; Member, Science and Lucent Technologies Inc. Technology Advisory Committee; Chairman, Public Policy 600 Mountain Avenue Advisory Committee. President AT&T Bell Laboratories Murray Hill, NJ 07974 from 1991 to 1995; Executive Vice President of Network Systems and Network Services from 1989 to 1991; previously served as Director of the Ocean Systems Laboratory, Executive Director of the Ocean Systems Division, Executive Director of the Toll Electronic Switching Division, Vice President of Electronics Technology. Member, National Academy of Engineering and The Swedish Royal Academy of Engineering Services; Fellow, Institute of Electrical and Electronic Engineers; Member, Boards of Trustees of Polytechnic University (Emeritus), the Liberty Science Center (Chairman), the Kenan Institute for Engineering, Technology and Science; served on the Board of Overseers for the New Jersey Institute of Technology and the Board of Directors of the National Engineering Consortorium, Inc. Paul J. Rizzo............................. Director of Parent since 1982; Chairman, Audit Franklin Street Partners Committee, Member, Nominating and Corporate Governance 6330 Quadrangle Drive, Suite 200 Committee. Vice Chairman of International Business Chapel Hill, NC 27514 Machines Corporation from 1993 to 1994. Dean of the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill from 1987 to 1992. Became a partner in Franklin Street Partners, a Chapel Hill, North Carolina investment firm in 1992. Director of McGraw-Hill Companies, Inc. and Ryder Systems, Inc. Henry B. Schacht.......................... Director of Parent since 1997; Member, Audit Committee Lucent Technologies Inc. and Chairman, Nominating and Corporate Governance 32 Old Slip St. Committee. Chairman of the Board, Lucent Technologies 35th Flr. Inc. from 1996 to February of 1998; Chief Executive New York, NY 10005 Officer from 1996 to 1997; Chairman of Cummins Engine Company, Inc. from 1977 to 1995; Chief Executive Officer from 1973 to 1994. Director of Lucent Technologies Inc., Aluminum Corporation of America, The Chase Manhattan Corporation, The Chase Manhattan Bank, N.A. and Cummins Engine Company, Inc.; Chairman of the Board of Trustees of The Ford Foundation and Trustee, The Yale Corporation and the Business Enterprise Trust. Maxine F. Singer, Ph.D.................... Director of Parent since 1991; Member, Science and Carnegie Institution of Washington Technology Advisory Committee and Benefits Committee. 1530 P Street, N.W. President, Carnegie Institution of Washington since Washington, D.C. 20005 1988; Member, National Academy of Sciences, the American Philosophical Society, the Pontifical Academy of Sciences, the Governing Board of the Weizmann Institute of Science.
29 32
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY ------------------------- ----------------------------------- John W. Snow.............................. Director of Parent since April of 1998; Member, Benefits CSX Corporation Committee and Compensation Committee. Chairman, CSX One James Center Corporation since 1991; President and Chief Executive 901 East Cary St. Officer of CSX Corporation since 1989. Director of Richmond, VA 23219 Circuit City Stores, Inc., Textron, Inc. and USX Corporation. Member, Board of Trustees of Johns Hopkins University. William C. Weldon......................... Member, Executive Committee and Worldwide Chairman, Pharmaceuticals Group since June of 1998. Company Group Chairman from 1995 to June of 1998. President, Ethicon Endo-Surgery, Inc. from 1992 to 1995. Robert N. Wilson.......................... Vice Chairman, Board of Directors since 1989; Vice Chairman, Executive Committee since 1994; Member, Executive Committee since 1983. Director, U.S. Trust Corporation and Amerada Hess Corporation.
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser are set forth below. The business address of each such director and executive officer is One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. Unless otherwise indicated below, each occupation set forth opposite an individual's name refers to employment with Parent. All such directors and executive officers listed below are citizens of the United States.
POSITION WITH THE PURCHASER; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME 5-YEAR EMPLOYMENT HISTORY ---- ----------------------------------- Peter S. Galloway......................... Director and Vice President of the Purchaser since July of 1998. Associate General Counsel since 1988; Secretary since 1994. James R. Hilton........................... Director, Vice President, Secretary and Treasurer of the Purchaser since July of 1998. Associate General Counsel since March of 1998. Assistant General Counsel 1990 to 1998. James R. Utaski........................... Director and President of the Purchaser since July of 1998. Corporate Vice President, Business Development since 1990.
30 33 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Mail: By Overnight: By Hand: Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges P.O. Box 2569 14 Wall Street, 8th Floor c/o Securities Transfer & Suite 4660 Suite 4680 -- DPU Reporting Jersey City, NJ 07303-2569 New York, NY 10005 Services Inc. One Exchange Plaza, 3rd Floor New York, NY 10006
Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or any other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [GEORGESON & COMPANY LOGO] Wall Street Plaza New York, NY 10005 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll-Free (800) 223-2064 The Dealer Manager for the Offer is: CREDIT SUISSE FIRST BOSTON CORPORATION Eleven Madison Avenue New York, New York 10010-3629 Call Toll Free (800) 881-8320 EX-99.2 3 TEXT OF JOINT PRESS RELEASE 1 EXHIBIT (a)(8) CONFIDENTIAL Contact: Robert V. Andrews - Media Relations David R. Sheffield - Investor Relations Johnson & Johnson Johnson & Johnson 732 524-3348 732 534-6491 James R. Goff - Media and Investor Relations DePuy, Inc. 219 372-7305 Daniel Piller - Media Relations Max Wolfgang Gurtner - Investor Relations Roche Roche 41 61 687 05 29 41 61 688 55 54
FOR IMMEDIATE RELEASE Johnson & Johnson to Acquire DePuy For $35.00 Per Share or $3.5 Billion New Brunswick, NJ., and Warsaw, IN, (July 21, 1998) -- Johnson & Johnson (NYSE: JNJ), the world's most comprehensive and broadly-based manufacturer of health care products, and DePuy, Inc. (NYSE: DPU), one of the world's leading orthopaedic products companies, today announced they have entered into a definitive agreement under which Johnson & Johnson will acquire DePuy for $35.00 per share, for an aggregate transaction value of $3.5 billion. Pursuant to the agreement, Johnson & Johnson will begin a cash tender offer for all outstanding shares of DePuy for $35.00 per share. The offer is expected to commence on July 27 and will remain open for a minimum of 20 business days. Any shares not purchased in the offer will be acquired for the same price in cash in a second step merger. Simultaneously, Johnson & Johnson and Roche, of Basel, Switzerland, announced they have entered into an agreement under which Roche, which owns 84% of the outstanding shares of DePuy, has agreed to tender all of its shares. DePuy has approximately 99,000,000 shares outstanding. The boards of directors of Johnson & Johnson and DePuy have given approval to the acquisition. (more) 2 Johnson & Johnson Board Chairman Ralph S. Larsen termed the acquisition "a very important strategic addition to our worldwide orthopaedic business." He added, "We are delighted that this acquisition would place the new entity in a position to become the leading company in the $9 billion orthopaedic market. The excellent product synergies of both organizations would create a platform for ongoing growth, and the quality and breadth of these product lines would enable us to better serve the needs of hospitals, physicians and patients in today's rapidly changing health care environment." Mr. Larsen said that the new orthopaedic entity would be known as DePuy, a Johnson & Johnson Company, and would join another Johnson & Johnson affiliate, Codman & Shurtleff, under the umbrella of Johnson & Johnson Professional. Based upon 1997 results, combined sales of Johnson & Johnson Professional would be more than $1.4 billion. James A. Lent, chairman and chief executive officer of DePuy, said, "Our tradition of innovation and excellence can only be enhanced by joining forces with Johnson & Johnson, which has a strong presence and a wonderful reputation throughout the world. This partnership is in the best interest of our shareholders, employees and customers, and the expanded technologies and resources assure the development of innovative new products across the orthopaedic spectrum." Mr. Lent would have responsibility for Johnson & Johnson Professional as a company group chairman of Johnson & Johnson. Michael J. Dormer, president and chief operating officer of DePuy, Inc., would become president of the new worldwide orthopaedic entity -- DePuy, a Johnson & Johnson Company. The headquarters for the combined orthopaedic businesses would be in Warsaw, IN, with the exception of DePuy International, which would be in Leeds, U.K. Codman & Shurtleff would remain in Raynham, MA. The acquisition is subject to clearance under the Hart-Scott-Rodino Anti-Trust Improvements Act and under the European Union merger control regulation. (more) 3 DePuy was founded in 1895 and is a market leader in the global orthopaedic industry. The company's products are used by orthopaedic surgeons and medical specialists to reconstruct damaged or diseased joints, to facilitate fusion of elements of the spine and correct spinal deformities, to repair bone fractures, and to rehabilitate sports-related injuries. Johnson & Johnson, with 1997 sales of $22.6 billion, is the world's most comprehensive and broadly-based manufacturer of health care products for the consumer, pharmaceutical and professional markets. Johnson & Johnson has 91,000 employees and 180 operating companies in 51 countries around the world, selling products in more than 175 countries. Roche, headquartered in Basel, is a world leader in research-based health care with principal businesses in pharmaceuticals, diagnostics, vitamins, and fragrances and flavors. Roche has over 70,000 employees and sells its products in more than 100 countries. In the first half of 1998 the company reached sales of 13.4 billion Swiss francs. * * * Johnson & Johnson will sponsor a conference call for the investment community on Tuesday, July 21, at 11:30 a.m. (EDT) to discuss its announcement today to acquire DePuy for $3.5 billion. Telephone number for the conference call is 973 633-1010. A rebroadcast of the conference call will be available for a two-week period through August 4, 1998. Telephone number for the rebroadcast is 402 220-0873. * * * EX-99.3 4 AGREEMENT AND PLAN OF MERGER 1 CONFORMED COPY Exhibit (c)(1) ================================================================================ AGREEMENT AND PLAN OF MERGER among JOHNSON & JOHNSON, LIB ACQUISITION CORP. and DEPUY, INC. Dated as of July 21, 1998 ================================================================================ 2 TABLE OF CONTENTS AGREEMENT AND PLAN OF MERGER ARTICLE I THE OFFER Page ---- Section 1.01 The Offer .................................................... 2 Section 1.02 Company Actions .............................................. 4 ARTICLE II THE MERGER Section 2.01 The Merger ................................................... 6 Section 2.02 Closing ...................................................... 6 Section 2.03 Effective Time ............................................... 7 Section 2.04 Effects of the Merger ........................................ 7 Section 2.05 Certificate of Incorporation and Bylaws ...................... 7 Section 2.06 Directors .................................................... 7 Section 2.07 Officers ..................................................... 7 ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES Section 3.01 Effect on Capital Stock ...................................... 8 Section 3.02 Exchange of Certificates ..................................... 9 ARTICLE IV REPRESENTATIONS & WARRANTIES OF THE COMPANY Section 4.01 Organization ................................................ 12 Section 4.02 Company Subsidiaries; Equity Interests ...................... 12 Section 4.03 Capitalization .............................................. 13 3 3 Section 4.04 Authority ................................................... 14 4 4 Section 4.05 Consent and Approvals; No Violations ........................ 14 Section 4.06 SEC Documents; Financial Statements ......................... 15 Section 4.07 Information Supplied ........................................ 16 Section 4.08 Absence of Certain Changes or Events ........................ 17 Section 4.09 Litigation .................................................. 18 Section 4.10 Contracts ................................................... 18 Section 4.11 Compliance with Laws ........................................ 18 Section 4.12 Environmental Matters ....................................... 19 Section 4.13 Absence of Changes in Benefit Plans; Labor Relations ........ 20 Section 4.14 ERISA Compliance ............................................ 20 Section 4.15 Taxes ....................................................... 23 Section 4.16 No Excess Parachute Payments ................................ 24 Section 4.17 Title to Properties ......................................... 25 Section 4.18 Intellectual Property ....................................... 25 Section 4.19 Agreements for Distribution Outside the United States ....... 26 Section 4.20 Voting Requirements ......................................... 26 Section 4.21 State Takeover Statutes ..................................... 26 Section 4.22 Brokers; Schedule of Fees and Expenses ...................... 26 Section 4.23 Opinion of Financial Advisor ................................ 27 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Section 5.01 Organization ................................................ 27 Section 5.02 Authority ................................................... 27 Section 5.03 Consents and Approvals; No Violations ....................... 28 Section 5.04 Information Supplied ........................................ 28 Section 5.05 Interim Operations of Sub. .................................. 29 Section 5.06 Brokers ..................................................... 29 Section 5.07 Financing ................................................... 29 ARTICLE VI COVENANTS 5 5 Section 6.01 Conduct of Business ......................................... 30 Section 6.02 No Solicitation ............................................. 33 Section 6.03 Certain Tax Matters ......................................... 34 Section 6.04 Other Actions ............................................... 35 Section 6.05 Advice of Changes; Filings .................................. 35 ARTICLE VII ADDITIONAL AGREEMENTS Section 7.01 Company Stockholder Approval; Preparation of Proxy Statement ................................................. 35 Section 7.02 Access to Information; Confidentiality ...................... 36 Section 7.03 Reasonable Efforts; Notification ............................ 37 Section 7.04 Cooperation ................................................. 38 Section 7.05 Stock Option Plans .......................................... 38 Section 7.06 Indemnification, Exculpation and Insurance .................. 40 Section 7.07 Directors ................................................... 41 Section 7.08 Fees and Expenses ........................................... 42 Section 7.09 Transfer Taxes .............................................. 43 Section 7.10 Public Announcements ........................................ 43 Section 7.11 Severance Agreements ........................................ 43 Section 7.12 Continuation of Benefits .................................... 44 Section 7.13 Stop Transfer ............................................... 44 Section 7.14 Purchase of Foreign Subsidiaries ............................ 44 ARTICLE VIII CONDITIONS Section 8.01 Conditions to Each Party's Obligation to Effect the Merger ......................................... 45 ARTICLE IX TERMINATION AND AMENDMENT Section 9.01 Termination ................................................. 46 Section 9.02 Effect of Termination ....................................... 47 Section 9.03 Amendment ................................................... 47 6 6 Section 9.04 Extension; Waiver ........................................... 47 Section 9.05 Procedure for Termination, Amendment, Extension or Waiver .................................................... 48 ARTICLE X MISCELLANEOUS Section 10.01 Nonsurvival of Representations, Warranties and Agreements .. 48 Section 10.02 Notices .................................................... 48 Section 10.03 Interpretation ............................................. 50 Section 10.04 Counterparts ............................................... 50 Section 10.05 Entire Agreement; Third Party Beneficiaries ................ 51 Section 10.06 Governing Law .............................................. 51 Section 10.07 Assignment ................................................. 51 Section 10.08 Enforcement ................................................ 51 Section 10.09 Severability ............................................... 52 Section 10.10 Compliance with Law ........................................ 52 EXHIBIT A Conditions of the Offer A-1 7 AGREEMENT AND PLAN OF MERGER dated as of July 21, 1998, among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), LIB ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), and DEPUY, INC., a Delaware corporation (the "Company"). WHEREAS, the respective Boards of Directors of Parent, Sub and the Company have approved and found advisable this Agreement and the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement; WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub to make a tender offer to purchase all the outstanding shares of Common Stock, par value $0.01 per share, of the Company (the "Company Common Stock"; all the outstanding shares of Company Common Stock being hereinafter collectively referred to as the "Shares") at a purchase price of $35 per Share (the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Agreement (as it may be amended from time to time as permitted under this Agreement, the "Offer"); and the Board of Directors of the Company has adopted resolutions approving the Offer and the Merger (as defined below), recommending that the Company's stockholders accept the Offer and approving the acquisition of Shares by Sub pursuant to the Offer and the Stockholder Agreement (as defined below); WHEREAS, the respective Boards of Directors of Parent, Sub and the Company have each approved the merger of Sub into the Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby each Share, other than Shares owned directly or indirectly by Parent or the Company and Dissenting Shares (as defined in Section 3.01(d)), will be converted into the right to receive the price per Share paid in the Offer; WHEREAS, as an inducement to Parent to enter into this Agreement, Parent, Sub and certain stockholders of the Company have entered into a Stockholder Agreement dated as of the date hereof pursuant to which such stockholders have, among other things, agreed to sell all such stockholders' Shares to Sub at a cash price per Share equal to the Offer Price, upon the terms and subject to the conditions set 8 2 forth in such Stockholder Agreement (the "Stockholder Agreement"); and WHEREAS, Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Sub and the Company hereby agree as follows: ARTICLE I The Offer SECTION 1.01. The Offer. (a) Provided that none of the conditions set forth on Exhibit A hereto shall have occurred and be continuing, as promptly as practicable but in no event later than five business days after the date of the public announcement (on the date hereof or the following day) by Parent and the Company of this Agreement, Sub shall, and Parent shall cause Sub to, commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), the Offer. The obligation of Sub to, and of Parent to cause Sub to, commence the Offer, conduct and consummate the Offer and accept for payment, and pay for, any Shares tendered and not withdrawn pursuant to the Offer shall be subject only to the conditions set forth in Exhibit A (the "Offer Conditions") (any of which may be waived in whole or in part by Sub in its sole discretion; provided that, without the express written consent of the Company, Sub may not waive the Stockholder Agreement Condition (as defined in Exhibit A)). Sub expressly reserves the right, subject to compliance with the Exchange Act, to modify the terms of the Offer, except that, without the express written consent of the Company, Sub shall not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) add to or modify the Offer Conditions, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) amend or alter any other term of the Offer in any manner adverse to the holders of the Shares. Notwithstanding the foregoing, Sub may, without the consent of the Company, (A) extend the 9 3 Offer for a specified period, if at the scheduled or any extended expiration date of the Offer any of the Offer Conditions shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer, (C) extend the Offer for up to ten business days if there have not been validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares that, together with Shares subject to the Stockholder Agreement which have not been validly tendered, would constitute at least 90% of the fully diluted Shares as of the date of determination and (D) extend the Offer for any reason for up to two business days; provided that no more than three extensions shall be permitted under clauses (C) and (D) of this sentence. Subject only to the conditions set forth in Exhibit A, Sub shall, and Parent shall cause Sub to, accept for payment, and pay for, all Shares validly tendered and not withdrawn pursuant to the Offer that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) On the date of commencement of the Offer, Parent and Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (such Schedule 14D-1, as supplemented or amended from time to time, the "Schedule 14D-1") with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "Offer Documents"). Parent and Sub agree that the Offer Documents shall comply as to form in all material respects with the Exchange Act and the rules and regulations promulgated thereunder, and the Offer Documents, on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by Parent or Sub with respect to written information supplied by the Company or any of its stockholders specifically for inclusion or incorporation by reference in the Offer Documents. Parent, Sub and the Company each agrees promptly to correct any written information provided by it for use in the Offer 10 4 Documents if and to the extent that such information shall have become false or misleading in any material respect, and Parent and Sub 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. The Company and its counsel shall be given reasonable opportunity to review and comment upon the Offer Documents prior to their filing with the SEC or dissemination to the stockholders of the Company. Parent and Sub agree to provide the Company and its counsel any comments Parent, Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. (c) Parent shall provide or cause to be provided to Sub on a timely basis the funds sufficient to accept for payment, and pay for, any and all Shares that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer. (d) Sub shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Offer such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or under any provision of state, local or foreign tax law; provided, however, that Sub shall promptly pay any amounts deducted and withheld hereunder to the applicable governmental authority, shall promptly file all tax returns and reports required to be filed in respect of such deductions and withholding, and shall promptly provide to the Company proof of such payment and a copy of all such tax returns and reports. SECTION 1.02. Company Actions. (a) The Company hereby approves of and consents to the Offer and represents that the Board of Directors of the Company, at a meeting duly called and held, duly adopted resolutions approving this Agreement and the Stockholder Agreement, the Offer and the Merger, determining that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's stockholders and recommending that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and approve and adopt this Agreement (if required). The Company represents that its Board of Directors has received the opinion of Bear, Stearns & Co. Inc. ("Bear, Stearns") that, as of such date and based upon 11 5 and subject to the matters set forth therein, the cash consideration to be received by the holders of Shares pursuant to the Offer and the Merger was fair from a financial point of view to such holders, and a complete and correct signed copy of such opinion has been delivered by the Company to Parent. (b) On the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/ Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as supplemented or amended from time to time, the "Schedule 14D-9") containing the recommendation described in Section 1.02(a) and shall mail the Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9 shall comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Company with respect to written information supplied by Parent or Sub specifically for inclusion in the Schedule 14D-9. The Company, Parent and Sub each agree promptly to correct any written information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's stockholders, in each case as and to the extent required by applicable Federal securities laws. Parent and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the SEC or dissemination to stockholders of the Company. The Company agrees to provide Parent and its counsel any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. (c) In connection with the Offer and the Merger, the Company shall cause its transfer agent to furnish Sub promptly with mailing labels containing the names and addresses of the record holders of Shares as of a recent date and of those persons becoming record holders subsequent 12 6 to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Shares, and shall furnish to Sub such information and assistance (including updated lists of stockholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to the Company's stockholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Sub and their agents shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will, upon request, promptly deliver, and will use their best efforts to cause their agents promptly to deliver, to the Company all copies of such information (and all copies of information derived therefrom) then in their possession or control. 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 Delaware General Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Sub in accordance with the DGCL. At the election of Parent, any direct or indirect wholly-owned subsidiary (as defined in Section 10.03) of Parent may be substituted for Sub as a constituent corporation in the Merger. In such event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing. SECTION 2.02. Closing. The closing of the Merger will take place at 10:00 a.m. (New York City time) on a date to be specified by Parent or Sub, which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VIII (the "Closing Date"), at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, unless 13 7 another date, time or place is agreed to in writing by the parties hereto. SECTION 2.03. Effective Time. Subject to the provisions of this Agreement, as soon as practicable on or after the Closing Date, the parties shall file a certificate of merger or other appropriate documents (in any such case, the "Certificate of Merger") executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL and other applicable law. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Delaware Secretary of State, or at such other time specified in the Certificate of Merger as Sub and the Company shall agree (the time the Merger becomes effective being hereinafter referred to as the "Effective Time"). SECTION 2.04. Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL. SECTION 2.05. Certificate of Incorporation and Bylaws. (a) The Certificate of Incorporation of the Company (the "Certificate of Incorporation"), as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The bylaws of the Company (the "Bylaws") as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law. SECTION 2.06. Directors. The directors of Sub immediately prior to the Effective Time, and Michael J. Dormer and James A. Lent, shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. SECTION 2.07. Officers. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. 14 8 ARTICLE III Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates SECTION 3.01. Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Shares or any shares of capital stock of Sub: (a) Capital Stock of Sub. Each issued and outstanding share of capital stock of Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Surviving Corporation. (b) Cancelation of Treasury Stock and Parent Owned Stock. Each Share that is owned by the Company and each Share that is owned by Parent or Sub shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. Each Share that is owned by any direct or indirect wholly-owned subsidiary of Parent (other than Sub) or the Company shall remain outstanding without change. (c) Conversion of Company Common Stock. Subject to Section 3.01(d), each issued and outstanding Share (other than Shares to be canceled or to remain outstanding in accordance with Section 3.01(b) and other than Dissenting Shares) shall be converted into the right to receive from the Surviving Corporation in cash, without interest, the Offer Price (the "Merger Consideration"). As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest. (d) Shares of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding Shares held by a person (a "Dissenting Stockholder") who has neither voted in favor of the Merger nor consented in writing thereto and otherwise complies with all the applicable provisions of the DGCL concerning the right of holders of Company Common Stock to dissent from the Merger and 15 9 require appraisal of their Shares ("Dissenting Shares") shall not be converted as described in Section 3.01(c) but shall be converted into the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the laws of the State of Delaware. If, after the Effective Time, such Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or otherwise loses his right to appraisal, in any case pursuant to the DGCL, his Shares shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration. The Company shall give Parent (i) prompt notice of any demands for appraisal of Shares received by the Company and (ii) if and after Sub shall have accepted for payment Shares pursuant to and subject to the Offer Conditions, the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such demands. SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a substantial bank or trust company to act as paying agent in the Merger (the "Paying Agent"). Parent shall cause the Surviving Corporation to deposit with the Paying Agent in separate trust for holders of the Certificates (as defined in Section 3.02(b)) immediately available funds in an amount sufficient for the payment of the aggregate Merger Consideration for the Shares converted pursuant to Section 3.01(c) (it being understood that any and all interest earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to Parent). (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented Shares (the "Certificates"), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon 16 10 surrender of a Certificate for cancelation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor, and the Paying Agent shall pay pursuant to irrevocable instructions given by Sub or Parent, the amount of cash into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.01, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.01. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. (c) No Further Ownership Rights in Company Common Stock. All cash paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares theretofore represented by such Certificates. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, except notation thereon that a stockholder has elected to exercise his right to appraisal pursuant to the DGCL, they shall be canceled and exchanged as provided in this Article III. (d) No Liability. Any funds deposited with the Paying Agent that remain unclaimed by the former 17 11 stockholders of the Company for six months after the Effective Time shall be paid to the Surviving Corporation upon demand, and any former stockholders of the Company who have not theretofore complied with the instructions for exchanging their Certificates provided herein shall thereafter look only to the Surviving Corporation for payment of their claims for the Merger Consideration set forth in Section 3.01 hereof for each Share held by such stockholder, without any interest thereon. None of Parent, Sub, the Company or the Paying Agent shall be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered prior to seven years after the Effective Time (or immediately prior to such earlier date on which any payment pursuant to this Article III would otherwise escheat to or become the property of any Governmental Entity (as defined in Section 4.05)), the cash payment in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interests of any person previously entitled thereto. (e) Lost, Stolen or Destroyed Certificates. In the event any Certificates evidencing Shares shall have been lost, stolen or destroyed, the Paying Agent shall pay to such holder the Merger Consideration required pursuant to Section 3.01, in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof with such assurances as the Paying Agent, in its discretion and as a condition precedent to the payment of the Merger Consideration, may require of the holder of such lost, stolen or destroyed Certificates. (f) Withholding Rights. Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Code, or under any provision of state, local or foreign tax law; provided, however, that Parent and the Surviving Corporation shall promptly pay any amounts deducted and withheld hereunder to the applicable governmental authority, shall promptly file all tax returns and reports required to be filed in respect of such deductions and withholding, and shall promptly provide to the Company proof of such payment and a copy of all such tax returns and reports. 18 12 ARTICLE IV Representations and Warranties of the Company Except as disclosed in the SEC Documents (as defined in Section 4.06) filed or publicly available prior to the date of this Agreement (the "Filed SEC Documents") or set forth on the Disclosure Schedule delivered by the Company to Parent prior to the execution of this Agreement (the "Company Disclosure Schedule"), it being agreed that any matter disclosed in the Company Disclosure Schedule with respect to any subsection of this Agreement shall be deemed to have been disclosed with respect to all subsections of this Agreement, the Company represents and warrants to Parent and Sub as follows: SECTION 4.01. Organization. Each of the Company and its subsidiaries is a corporation, partnership, limited liability company or other company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized and has all requisite power and authority to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing individually or in the aggregate would not reasonably be expected to have a material adverse effect (as defined in Section 10.03) on the Company. The Company has made available to Parent complete and correct copies of its Certificate of Incorporation and Bylaws, and the certificate of incorporation and bylaws or other organizational documents of each of its subsidiaries, in each case as amended to the date of this Agreement. SECTION 4.02. Company Subsidiaries; Equity Interests. (a) Exhibit 21.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 lists each subsidiary of the Company. All the outstanding shares of capital stock of each subsidiary of the Company have been validly issued and are fully paid and nonassessable and (with the exception, in the case of certain non-U.S. subsidiaries, of shares held of record by nominees of the Company) are owned by the Company, by another subsidiary of the Company or by the Company and another subsidiary of the Company, free and clear of all 19 13 pledges, liens, charges, mortgages, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens") and free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests). (b) Except for its interests in its subsidiaries, the Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, limited liability interest, joint venture interest or other ownership interest with a fair market value as of the date of this Agreement in excess of $5,000,000 in any person. SECTION 4.03. Capitalization. The authorized capital stock of the Company consists of 130,000,000 shares of Company Common Stock and 10,000,000 shares of preferred stock, par value $1.00 per share ("Company Preferred Stock"). At the close of business on June 30, 1998, (i) 98,816,286 Shares were issued and outstanding, (ii) the Company did not hold any Shares in its treasury, (iii) 2,216,553 Shares were reserved for issuance upon exercise of outstanding Company Stock Options under the Stock Option Plans (each as defined in Section 7.05), (iv) 513,574 Shares were reserved for issuance pursuant to the Company's Employee Stock Purchase Plan and (v) no shares of Company Preferred Stock were issued and outstanding. Except as set forth above, since June 30, 1998, 7,964 shares of capital stock or other voting securities of the Company were issued, and no other shares of such stock or securities were reserved for issuance, issuable or outstanding. All outstanding Shares are, and all Shares which may be issued will be, when issued in accordance with the terms of the agreements, plans or other documents governing their issuance, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Certificate of Incorporation or the Bylaws of the Company or any contract, agreement, arrangement or understanding to which the Company is a party or otherwise bound. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above, there are not any securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the 20 14 Company or any of its subsidiaries is a party or by which any of them is bound obligating the Company or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the Company or any of its subsidiaries, or securities convertible into or exercisable for or exchangeable into any such shares, or obligating the Company to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are not any outstanding contractual obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries is a party to any voting agreement with respect to the voting of any of its securities. The Shares set forth in Exhibit A to the Stockholder Agreement represent in excess of 80% of the outstanding shares of Company Common Stock on a fully diluted basis. SECTION 4.04. Authority. The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the Shares if required by law (the "Company Stockholder Approval")). The execution, delivery and performance of this Agreement and the consummation by the Company of the Merger and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (in each case, other than, with respect to the Merger, the Company Stockholder Approval if required by law). This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of Parent and Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. SECTION 4.05. Consents and Approvals; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act (including the filing with the SEC of the Schedule 14D-9 and a proxy or information statement relating to any required approval by or meeting of the Company's stockholders with respect to 21 15 this Agreement (the "Proxy Statement")), the Merger Control Laws (as defined below), the DGCL and the laws of other states in which the Company is qualified to do or is doing business, neither the execution, delivery and performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or the Bylaws of the Company, (ii) require any filing with, or permit, authorization, consent or approval of, any Federal, state or local government or any court, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, domestic, foreign or supranational (a "Governmental Entity"), (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancelation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its subsidiaries or any of their properties or assets, except in the case of clause (ii), (iii) and (iv) for failures, violations, breaches or defaults that individually or in the aggregate would not reasonably be expected to have a material adverse effect on the Company. "Merger Control Laws" means (i) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (ii) Council Regulation (EEC) No. 4064/89 of 21 December 1989 and (iii) all amendments of, and all other applicable bills, acts, decrees, regulations or ordinances relating to, the foregoing legislative acts. SECTION 4.06. SEC Documents; Financial Statements. The Company has filed with the SEC all reports, forms, schedules and statements and other documents required to be filed by it since January 1, 1997 (the "SEC Documents"). As of their respective filing dates, (i) the SEC Documents 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 rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and (ii) none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the 22 16 statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any SEC Document has been revised or superseded by a later-filed SEC Document, none of the SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present, in all material respects, the consolidated financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth or reflected in the most recent financial statements included in the Filed SEC Documents, or incurred in the ordinary course of business consistent with past practice since the date of such statements, neither the Company nor any of its subsidiaries has any liabilities of any nature (whether accrued, absolute, contingent or otherwise) which individually or in the aggregate would reasonably be expected to have a material adverse effect on the Company. SECTION 4.07. Information Supplied. None of the information supplied or to be supplied by the Company in writing for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be filed by the Company in connection with the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or (iv) the Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting (as defined in Section 7.01), as such Proxy Statement may be amended or supplemented, contain any untrue statement of a material 23 17 fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-9, the Information Statement and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on written information supplied by Parent or Sub specifically for inclusion or incorporation by reference therein. SECTION 4.08. Absence of Certain Changes or Events. Since the date of the most recent financial statements included in the Filed SEC Documents, the Company and its subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice, and there has not been (i) any material adverse change (as defined in Section 10.03) in the Company, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of the Company's capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) (x) any granting by the Company or any of its subsidiaries to any director, officer or key employee (as defined below) of any increase in compensation, except in the ordinary course of business consistent with past practice or as was required under employment agreements in effect as of the date of the most recent financial statements included in the Filed SEC Documents, (y) any granting by the Company or any of its subsidiaries to any director, officer or key employee of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent financial statements included in the Filed SEC Documents or (z) any entry by the Company or any of its subsidiaries into, or amendment of, any employment, severance or termination agreement with any director, officer or key employee, (v) any damage, destruction or loss to property, whether or not covered by insurance, that individually or in the aggregate has or would reasonably be expected to have a material adverse effect on the Company, (vi) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or business, 24 18 except insofar as may have been required by a change in generally accepted accounting principles or (vii) any tax election that individually or in the aggregate would reasonably be expected to have a material adverse effect on the Company. SECTION 4.09. Litigation. There is no suit, action or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries that individually or in the aggregate would reasonably be expected to have a material adverse effect on the Company, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Company having, or which would reasonably be expected to have, any such effect. SECTION 4.10. Contracts. (a) There are no contracts or agreements that are material contracts (as defined in Securities Act Regulation 601(b)(10)) with respect to the Company and its subsidiaries taken as a whole. Neither the Company nor any of its subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or default under) any lease, permit, concession, franchise, license or any other contract or agreement to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that individually or in the aggregate would not reasonably be expected to result in a material adverse effect on the Company. (b) Section 4.10(b) of the Company Disclosure Schedule sets forth a complete list of each contract or agreement to which the Company or any of its subsidiaries is a party or bound (x) with any affiliate of the Company other than any direct or indirect wholly-owned subsidiary of the Company or (y) that includes any non-competition or similar provisions. The Company has made available to Parent and its representatives true and correct copies of all the agreements, contracts and arrangements set forth in Section 4.10(b) of the Company Disclosure Schedule. SECTION 4.11. Compliance with Laws. Each of the Company and its subsidiaries is in compliance with all applicable statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of any Governmental Entity applicable to its business or operations, except for instances of actual or possible noncompliance that individually or in the aggregate would not reasonably be 25 19 expected to have a material adverse effect on the Company. Each of the Company and its subsidiaries has in effect all Federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights, including all authorizations under Environmental Laws (as defined in Section 4.12(a)) ("Permits"), necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted, except for the failure to have such Permits that individually or in the aggregate would not reasonably be expected to have a material adverse effect on the Company. There has occurred no default under any Permit, except for defaults under Permits that individually or in the aggregate would not reasonably be expected to have a material adverse effect on the Company. No investigation or review by any Governmental Entity with respect to the Company or any of its subsidiaries is pending or, to the best knowledge of the Company, threatened, nor has any Governmental Entity indicated an intention to conduct any investigation or review, other than, in each case, those the outcome of which individually or in the aggregate would not reasonably be expected to have a material adverse effect on the Company. SECTION 4.12. Environmental Matters. (a) Each of the Company and its subsidiaries is, and has been, in compliance with all applicable Environmental Laws, except for actual or possible noncompliance which individually or in the aggregate would not reasonably be expected to have a material adverse effect on the Company. The term "Environmental Laws" means any Federal, state, provincial, regional, municipal, local or foreign judgment, order, decree, statute, law, ordinance, rule, regulation, code, permit, consent, approval, license, writ, decree, directive, injunction or other enforceable requirement, including any registration requirement, relating to: (A) Releases (as defined below) or threatened Releases of Hazardous Materials (as defined below) into the environment; (B) the generation, treatment, storage, disposal, use, handling, manufacturing, transportation or shipment of Hazardous Materials; or (C) otherwise relating to pollution or protection of health or safety or the environment. (b) There has been no Release or threatened Release of Hazardous Materials, in, on, under or affecting any property owned, leased or operated by the Company or any of its subsidiaries or, to the knowledge of the Company, any adjacent site or any property previously owned, leased or operated by the Company or any of its subsidiaries, except in each case for those Releases which individually or in the 26 20 aggregate would not reasonably be expected to have a material adverse effect on the Company. The term "Release" has the meaning set forth in 42 U.S.C. ss. 9601(22). The term "Hazardous Materials" means any pollutant, contaminant, hazardous, radioactive or toxic substance, material, constituent or waste, or any other waste, substance, chemical or material regulated under any Environmental Law, including (1) petroleum, crude oil and any fractions thereof, (2) natural gas, synthetic gas and any mixtures thereof, (3) asbestos or asbestos-containing material, (4) radon and (5) polychlorinated biphenyls ("PCBs"), or materials or fluids containing PCBs. (c) Neither the Company nor any of its subsidiaries has received any written or, to the knowledge of the Company, oral notice of a pending or threatened action, demand, investigation or inquiry by any Governmental Entity or other person relating to any actual or potential violations of Environmental Law or any actual or potential obligation to investigate or remediate a Release or threatened Release of any Hazardous Materials. (d) Neither the Company nor any of its subsidiaries has assumed, whether by contract or, to the Company's knowledge based on written notification or opinion of counsel, operation of law, any liabilities or obligations arising under Environmental Laws in connection with formerly owned, leased or operated properties or facilities or in connection with any formerly owned divisions, subsidiaries, companies or other entities, except in each case for those which individually or in the aggregate would not reasonably be expected to have a material adverse effect on the Company. SECTION 4.13. Absence of Changes in Benefit Plans; Labor Relations. Since the date of the most recent financial statements included in the Filed SEC Documents, there has not been any adoption or amendment in any material respect by the Company or any of its subsidiaries of any employment contract, collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan or arrangement providing benefits to any current or former employee, officer or director of the Company or any of its subsidiaries. There exist no employment, consulting, severance, termination or indemnification agreements or arrangements between the 27 21 Company or any of its subsidiaries and any current or former key employee, officer or director of the Company or any of its subsidiaries. There are no collective bargaining or other labor union agreements to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound. To the best knowledge of the Company, since January 1, 1997, neither the Company nor any of its subsidiaries has encountered any labor union organizing activity, or had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts. SECTION 4.14. ERISA Compliance. (a) Schedule 4.14(a) to the Company Disclosure Schedule contains a list of all "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension Plans"), severance, termination or change in control plans and all other stock option, stock purchase, equity based, deferred compensation or incentive plans or programs (in each case, whether or not subject to ERISA) maintained or contributed to by the Company, any of its subsidiaries or any other person or entity that, together with the Company and its subsidiaries, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (the Company and each such other person or entity, a "Commonly Controlled Entity") for the benefit of any current or former employees, officers or directors of the Company or any of its subsidiaries (collectively, "Benefit Plans"). The Company has delivered or made available to Parent true, complete and correct copies of (i) each Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions thereof), (ii) the most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to each Benefit Plan (if any such report was required), (iii) the most recent summary plan description for each Benefit Plan for which such summary plan description is required, (iv) the most recent financial or actuarial valuation prepared with respect to any Benefit Plan and (v) each trust agreement and group annuity contract relating to any Benefit Plan. Each Benefit Plan has been administered in all material respects in accordance with its terms. Each of the Company and its subsidiaries and all the Benefit Plans are all in compliance in all material respects with applicable provisions of ERISA, the Code and all other applicable laws, rules or regulations. (b) All Pension Plans intended to qualify under Section 401(a) of the Code have been the subject of determination letters from the Internal Revenue Service to 28 22 the effect that such Pension Plans are qualified and exempt from Federal income taxes under Section 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor has any such Pension Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or materially increase its costs. All amendments to Pension Plans required under ERISA and the Code to be adopted by the Company by the date of this Agreement have been adopted. (c) Neither the Company nor its subsidiaries has within the five-year period immediately preceding the date of this Agreement maintained, contributed to or been obligated to contribute to any Benefit Plan that is subject to Title IV of ERISA. Neither the Company nor its subsidiaries is required to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such withdrawal has resulted or would result in any "withdrawal liability" (within the meaning of Section 4201 of ERISA) that has not been fully paid. There is no material unsatisfied liability with respect to any Benefit Plan. No event has occurred with respect to any Pension Plan, other than a Benefit Plan, maintained or contributed to by any Commonly Controlled Entity which has resulted or will likely result in the Company or any of its subsidiaries becoming subject to liability under Title IV of ERISA or the minimum funding requirements of Section 412 of the Code or Part 3 of Title I of ERISA, including withdrawal liability with respect to any multiemployer plan. (d) With respect to any plan that is an employee welfare benefit plan of the Company or its subsidiaries, (i) no such plan provides post-retirement benefits to former employees and (ii) there are no understandings, agreements or undertakings, written or oral, that would prevent any such plan (including any such plan covering retirees or other former employees) from being amended or terminated without material liability to the Company on or at any time after the Effective Time. (e) Schedule 4.14(e) to the Company Disclosure Schedule lists all outstanding Stock Options as of June 30, 1998, showing for each such Option: (i) the number of Shares issuable, (ii) the number of vested Shares, (iii) the date of grant and (iv) the exercise price. 29 23 (f) No employee of the Company or any of its subsidiaries will be entitled to any additional compensation or benefits or any acceleration of the time of payment or vesting of any compensation or benefits under any Benefit Plan as a result of the transactions contemplated by this Agreement. Any equity-related, bonus or incentive compensation program maintained by the Company or its subsidiaries to provide payments or benefits to any current or former employee or director of the Company or any of its subsidiaries satisfies the requirements of Section 162(m) of the Code. Actions taken by Parent or the Company after the Effective Time shall not be taken into account for purposes of the preceding sentence. (g) There are no pending or, to the knowledge of the Company, threatened claims, suits, investigations or audits involving the Benefit Plans (other than claims for benefits in the ordinary course). (h) As a result of the transactions contemplated by this Agreement, no current or former employee or director of the Company or any of its subsidiaries shall be eligible for compensation or benefits duplicative of those provided or made available as a result of the acquisition of the shares of Corange Limited by an indirect wholly-owned subsidiary of Roche Holding Ltd in March, 1998. SECTION 4.15. Taxes. (a) Each of the Company and its subsidiaries has filed all tax returns and reports required to be filed by it, which tax returns and reports are true, complete and accurate in all material respects, and has paid all material taxes due and required to be paid by it, and the most recent financial statements contained in the Filed SEC Documents reflect an adequate reserve for all taxes payable by the Company and its subsidiaries for all taxable periods and portions thereof through the date of such financial statements. No deficiencies for any taxes which remain outstanding have been proposed, asserted or assessed against the Company or any of its subsidiaries, and no requests for waivers of the time to assess any such taxes are pending. Neither the Company nor any of its subsidiaries has or will have any material liability with respect to taxes of any person (other than the Company or any of its subsidiaries) which, immediately prior to the consummation of the Offer, is an affiliate of the Company or of any of its subsidiaries. (b) The Federal consolidated income tax returns of the Company and each of its affiliates that have joined 30 24 in the filing of such returns have been examined by and settled with the United States Internal Revenue Service for all years through the year ended December 31, 1992. The statute of limitations on assessment or collection of any Federal income taxes due from the Company or any other members of the affiliated group with which the Company files Federal consolidated income tax returns has expired for all taxable years of the Company and such group through the year ended December 31, 1992. (c) Section 4.15 of the Company Disclosure Schedule sets forth a complete list of each tax sharing agreement, tax indemnity obligation or similar agreement or arrangement with respect to taxes pursuant to which the Company or any of its subsidiaries would have any material obligation after the date of this Agreement. (d) As used in this Agreement, "taxes" shall mean all Federal, state, local and foreign income, franchise, property, sales, excise, employment, payroll, social security, value-added, ad valorem, transfer, withholding and other taxes, tariffs, levies, impositions, assessments or other governmental charges in the nature of a tax as well as any interest, penalties and additions to tax. SECTION 4.16. No Excess Parachute Payments. No amount that would be received, or benefit provided, in connection with any of the transactions contemplated by this Agreement by any employee, officer or director of the Company or any of its subsidiaries who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect would be an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). To the best knowledge of the Company, no disqualified individual is entitled to receive any additional payment from the Company or any of its subsidiaries, the Surviving Corporation, or any other person referred to in Q&A 10 under proposed Treasury Regulation Section 1.280G-1 (a "Parachute Gross-Up Payment") in the event that the excise tax of Section 4999(a) of the Code is imposed on such person. The Board of Directors of the Company has not during the six months prior to the date of this Agreement granted to any officer, director or employee of the Company any right to receive any Parachute Gross-Up Payment. 31 25 SECTION 4.17. Title to Properties. (a) Each of the Company and its subsidiaries has good and marketable title to, or valid leasehold interests in or valid rights to, all its material properties and assets except for such as are no longer used or useful in the conduct of its businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances that individually or in the aggregate do not materially interfere with its ability to conduct its business as currently conducted. All such material assets and properties, other than assets and properties in which the Company or any of its subsidiaries has a leasehold interest, are free and clear of all Liens except for Liens that individually or in the aggregate do not materially interfere with the ability of the Company and its subsidiaries to conduct their respective businesses as currently conducted. (b) Each of the Company and its subsidiaries has complied in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. Each of the Company and its subsidiaries enjoys peaceful and undisturbed possession under all such material leases, except for failures to do so that individually or in the aggregate would not reasonably be expected to have a material adverse effect on the Company. SECTION 4.18. Intellectual Property. Each of the Company and its subsidiaries owns, or is validly licensed or otherwise has the right to use, without any obligation to make any fixed or contingent payments, including any royalty payments, all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and other proprietary intellectual property rights and computer programs (certain of which computer programs may require royalty payments) that are material to the conduct of its business as now operated (collectively, "Intellectual Property Rights"). Schedule 4.18 to the Company Disclosure Schedule sets forth a description of all patents, trademarks and copyrights and applications therefor owned by or licensed to the Company or any of its subsidiaries that are material to the conduct of the business of the Company or any of its subsidiaries as now operated. No claims are pending or, to the knowledge of the Company, threatened that the Company or any of its subsidiaries is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right. To the knowledge of the Company, no person 32 26 is infringing the rights of the Company or any of its subsidiaries with respect to any Intellectual Property Right. Neither the Company nor any of its subsidiaries has licensed, or otherwise granted, to any third party, any rights in or to any Intellectual Property Rights. SECTION 4.19. Agreements for Distribution Outside the United States. Schedule 4.19 to the Company Disclosure Schedule is a complete list of all material contracts or agreements to which the Company or any of its subsidiaries is a party, other than contracts between the Company and its wholly-owned subsidiaries or between wholly-owned subsidiaries of the Company, relating to the distribution, sale or marketing outside of the United States by third parties of the products of, or products licensed by, the Company or any of its subsidiaries. The Company has made available to Parent and its representatives true and correct copies of all contracts and agreements to which the Company or any of its subsidiaries is a party relating to the distribution, sale or marketing outside of the United States by third parties of the products of, or products licensed by, the Company or any of its subsidiaries. SECTION 4.20. Voting Requirements. The affirmative vote of the holders of a majority of the outstanding Shares is the only vote of the holders of any class or series of the Company's capital stock necessary to approve this Agreement and the transactions contemplated by this Agreement. SECTION 4.21. State Takeover Statutes. The Board of Directors of the Company has approved the Merger, this Agreement and the Stockholder Agreement, and such approval is sufficient to render inapplicable to the Merger, this Agreement, the Stockholder Agreement, and the transactions contemplated by this Agreement and the Stockholder Agreement, the provisions of Section 203 of the DGCL. SECTION 4.22. Brokers; Schedule of Fees and Expenses. No broker, investment banker, financial advisor or other person, other than Bear, Stearns, the fees and expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. Such fees and expenses incurred and to be incurred in connection with this Agreement and the transactions contemplated by this Agreement (other than printing and mailing costs and 33 27 expenses), including the fees and expenses of Bear, Stearns, shall be as set forth on Schedule 4.22 to the Company Disclosure Schedule. SECTION 4.23. Opinion of Financial Advisor. The Board of Directors of the Company has received the opinion of Bear, Stearns that, as of such date and based upon and subject to the matters set forth therein, the cash consideration to be received by holders of Shares pursuant to the Offer and the Merger was fair from a financial point of view to such holders, a signed copy of which opinion has been delivered to Parent. ARTICLE V Representations and Warranties of Parent and Sub Parent and Sub represent and warrant to the Company as follows: SECTION 5.01. Organization. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now being conducted. Each of Parent and Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualifications or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed individually or in the aggregate would not reasonably be expected to prevent or materially delay the consummation of the Offer or the Merger. Parent has made available to the Company complete and correct copies of its certificate of incorporation and bylaws and the certificate of incorporation and bylaws of Sub, in each case as amended to the date of this Agreement. SECTION 5.02. Authority. Parent and Sub have the requisite corporate power and authority to execute and deliver this Agreement and the Stockholder Agreement, and to consummate the transactions contemplated by this Agreement and the Stockholder Agreement. The execution, delivery and performance of this Agreement and the Stockholder Agreement, and the consummation of the transactions contemplated by this Agreement and the Stockholder Agreement, have been duly authorized by all necessary corporate action on the part of 34 28 Parent and Sub and no other corporate proceedings on the part of Parent and Sub are necessary to authorize this Agreement or the Stockholder Agreement or to consummate the transactions contemplated hereby or thereby. No vote of Parent stockholders is required to approve this Agreement or the Stockholder Agreement or the transactions contemplated hereby or thereby. Each of this Agreement and the Stockholder Agreement has been duly executed and delivered by Parent and Sub, and, assuming each such agreement constitutes a valid and binding obligation of the other parties thereto, constitutes a valid and binding obligation of Parent and Sub enforceable against Parent and Sub in accordance with its terms. SECTION 5.03. Consents and Approvals; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act (including the filing with the SEC of the Offer Documents), the Merger Control Laws, the DGCL and the laws of other states in which Parent is qualified to do or is doing business, neither the execution, delivery and performance of this Agreement and the Stockholder Agreement by Parent and Sub, nor the consummation by Parent and Sub of the transactions contemplated hereby and thereby will (i) conflict with or result in any breach of any provision of the respective certificate of incorporation or bylaws of Parent and Sub, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancelation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Parent or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of its subsidiaries or any of their properties or assets, except in the case of clauses (ii), (iii) and (iv) for violations, breaches or defaults that individually or in the aggregate would not reasonably be expected to prevent or materially delay the consummation of the Offer or the Merger. SECTION 5.04. Information Supplied. None of the information supplied or to be supplied by Parent or Sub in writing for inclusion or incorporation by reference in 35 29 (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting, as such Proxy Statement may be amended or supplemented, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Parent or Sub with respect to statements made or incorporated by reference therein based on written information supplied by the Company specifically for inclusion or incorporation by reference therein. SECTION 5.05. Interim Operations of Sub. Sub (and any other wholly-owned subsidiary of Parent which may be used to effect the Offer and the Merger pursuant to Section 2.01) was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. SECTION 5.06. Brokers. No broker, investment banker, financial advisor or other person, other than Credit Suisse First Boston Corporation, the fees and expenses of which will be paid by Parent, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Sub. SECTION 5.07. Financing. At the expiration of the Offer and at the Effective Time, Parent and Sub will have available all the funds necessary to purchase all the Shares pursuant to the Offer and the Merger and to pay all fees and expenses payable by Parent or Sub related to the transactions contemplated by this Agreement. 36 30 ARTICLE VI Covenants SECTION 6.01. Conduct of Business. During the period from the date of this Agreement to the Effective Time or termination of this Agreement pursuant to Section 9.01 hereof, except as otherwise contemplated hereby or to the extent that Parent shall otherwise consent in writing, the Company shall, and shall cause each of its subsidiaries to, carry on its business in the ordinary course consistent with past practice and, to the extent consistent therewith, use reasonable efforts to preserve intact its current business organization, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having significant business dealings with it. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, the Company shall not, and shall not permit any of its subsidiaries to (except as expressly permitted by this Agreement or as set forth in Schedule 6.01 to the Company Disclosure Schedule or to the extent that Parent shall otherwise consent in writing): (i) other than dividends and distributions by a direct or indirect wholly-owned subsidiary of the Company to its parent, (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (z) purchase, redeem or otherwise acquire any shares of its capital stock or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of shares of Company Common Stock upon the exercise of Company Stock Options outstanding on the date of this Agreement in accordance with their present terms); 37 31 (iii) amend its Certificate of Incorporation or Bylaws or other comparable charter or organizational documents; (iv) acquire or agree to acquire (A) by merging or consolidating with, or by purchasing a substantial portion of the assets or any stock of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or (B) except as set forth on Schedule 6.01(iv) to the Company Disclosure Schedule, any assets that are material, individually or in the aggregate, to the Company, except purchases of inventory in the ordinary course of business consistent with past practice; (v) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets, except sales of inventory or sales or licenses of immaterial assets, in each case in the ordinary course of business consistent with past practice; (vi) (y) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings incurred in the ordinary course of business consistent with past practice, or (z) make any loans, advances (other than to employees of the Company in the ordinary course of business) or capital contributions to, or investments in, any other person; (vii) except as set forth on Schedule 6.01(vii) to the Company Disclosure Schedule, make or agree to make any capital expenditure or expenditures with respect to property, plant or equipment which exceeds in the aggregate (a) with respect to the year ended December 31, 1998, 110% of the amount set forth in the Company's capital budget for such year, (b) with respect to any quarterly period thereafter, 25% of the amount in (a) above, and (c) $10 million for a new computer system in the United Kingdom; 38 32 (viii) make any material tax election or settle or compromise any material income tax liability or, except as required by generally accepted accounting principles, make any change in accounting methods, principles or practices; (ix) pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in the Filed SEC Documents or incurred thereafter in the ordinary course of business consistent with past practice, or waive any material benefits of, or agree to modify in any material respect, any confidentiality, standstill or similar agreements to which the Company or any of its subsidiaries is a party; (x) except in the ordinary course of business, modify, amend or terminate any material contract or agreement to which the Company or any of its subsidiaries is a party, or waive, release or assign any material rights or claims; (xi) enter into any material contracts or agreements relating to the distribution, sale or marketing by third parties of the products of, or products licensed by, the Company or any of its subsidiaries; (xii) except as required to comply with applicable law or agreements, plans or arrangements existing on the date hereof or as set forth in Schedule 6.01(xii) of the Company Disclosure Schedule, (A) adopt, enter into, terminate or amend any employment agreement or Benefit Plan or other arrangement for the benefit or welfare of any director, officer or current or former employee, (B) increase in any manner the compensation or fringe benefits of, or pay any bonus to, any director, officer or key employee (except for normal increases of cash compensation or cash bonuses to individuals (and not across the board actions), in the ordinary course of business consistent with past practice), (C) pay any benefit not provided for under 39 33 any Benefit Plan, (D) except as permitted in clause (B), grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Benefit Plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any Benefit Plans or agreement or awards made thereunder) or (E) take any action other than in the ordinary course of business to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Benefit Plan; or (xiii) authorize any of, or commit or agree to take any of, the foregoing actions. SECTION 6.02. No Solicitation. (a) The Company shall not, and shall not authorize or permit any of its subsidiaries or any of its or their officers, directors or employees to, and shall use its reasonable efforts to cause any investment banker, financial advisor, attorney, accountant or other representative of the Company or of any of its subsidiaries not to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal (as defined below) or (ii) participate in any discussions or negotiations regarding any Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" means any proposal or offer from any person relating to any direct or indirect acquisition or purchase of 20% or more of the assets of the Company and its subsidiaries, taken as a whole, or 20% or more of any class of outstanding equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of the Company or any of its subsidiaries or any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by this Agreement. (b) Neither the Board of Directors of the Company 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 such Board of 40 34 Directors or such committee of the Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to approve or recommend, any Takeover Proposal or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement (an "Acquisition Agreement") with respect to any Takeover Proposal. (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 6.02, the Company shall immediately advise Parent orally and in writing of any Takeover Proposal, any request for information concerning the Company or its subsidiaries in relation to or any inquiry regarding the making of a Takeover Proposal, the material terms and conditions of such Takeover Proposal, request for information or inquiry and the identity of the person making such Takeover Proposal, request for information or inquiry. The Company will keep Parent fully informed of the status and details (including amendments or proposed amendments) of any such Takeover Proposal, request for information or inquiry. (d) Nothing contained in this Section 6.02 shall prohibit the Company from at any time taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act; provided, however, neither the Company nor its Board of Directors nor any committee thereof shall withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer, the Merger or this Agreement or approve or recommend, or propose to approve or recommend, a Takeover Proposal. SECTION 6.03. Certain Tax Matters. From the date hereof until the Effective Time, (i) the Company and each of its subsidiaries will timely file all tax returns and reports ("Post-Signing Returns") required to be filed (in each case, at the Company's own cost and expense and in a manner that is consistent with past practice and that is not likely to materially defer income to a tax period that ends after the Closing Date or to materially accelerate deductions to a tax period that ends on or before the Closing Date, except to the extent that any such deferral of income or acceleration of deductions is required by applicable law); (ii) the Company and each of its subsidiaries will timely pay all taxes shown as due and payable on their Post-Signing Returns that are so filed; (iii) the Company and each of its subsidiaries will make provision for all taxes payable by the Company and each of its subsidiaries for which no Post-Signing Return is due 41 35 prior to the Effective Time; and (iv) the Company will promptly notify Parent of any action, suit, proceeding, claim or audit pending against or with respect to the Company or any of its subsidiaries in respect of any tax where there is a possibility of a determination or decision which would reasonably be expected to have a significant adverse effect on the tax liabilities or tax attributes of the Company or any of its subsidiaries. SECTION 6.04. Other Actions. Neither the Company nor any of its subsidiaries, on the one hand, nor the Parent nor Sub or any of their respective subsidiaries on the other hand, shall take any action that would reasonably be expected to result in (i) any of the representations and warranties of the Company on the one hand, or of Parent or Sub on the other hand, set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the Offer Conditions not being satisfied. SECTION 6.05. Advice of Changes; Filings. The Company shall confer with Parent on a regular and frequent basis as reasonably requested by Parent concerning operational matters and promptly advise Parent orally and, if requested by Parent, in writing of any material adverse change with respect to the Company. The Company shall promptly provide to Parent (or its counsel) copies of all filings made by the Company with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby. ARTICLE VII Additional Agreements SECTION 7.01. Company Stockholder Approval; Preparation of Proxy Statement. (a) If the Company Stockholder Approval is required by law, the Company will, as soon as practicable following the acceptance for payment of, and payment for, Shares by Sub pursuant to and subject to the conditions of the Offer (including the Stockholder Agreement Condition), duly call, give notice of, convene and hold a meeting of its stockholders (the "Stockholders Meeting") for the purpose of obtaining the Company Stockholder Approval. The Company will, through its Board of Directors, recommend to its stockholders that the Company Stockholder Approval be given. Notwithstanding the 42 36 foregoing, if Sub or any other subsidiary of Parent shall acquire at least 90% of the outstanding Shares, the parties shall, at the request of Parent, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a stockholders meeting in accordance with Section 253 of the DGCL. (b) If the Company Stockholder Approval is required by law, the Company will, at Parent's request, as soon as practicable following the expiration of the Offer, prepare and file a preliminary Proxy Statement with the SEC and will use its best efforts to respond to any comments of the SEC or its staff and to cause the Proxy Statement to be mailed to the Company's stockholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. The Company will notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the Stockholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company will promptly prepare and mail to its stockholders and file with the SEC such an amendment or supplement. The Company will not mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects; provided, that Parent shall identify its objections and fully cooperate with the Company to create a mutually satisfactory Proxy Statement. (c) Parent agrees to cause all Shares purchased pursuant to the Offer and all other Shares owned by Parent or any subsidiary of Parent to be voted in favor of the Company Stockholder Approval. SECTION 7.02. Access to Information; Confidentiality. The Company shall, and shall cause each of its subsidiaries to, afford to Parent, and to Parent's officers, employees, accountants, counsel, financial advisers and other representatives, reasonable access during normal business hours during the period prior to the Effective Time to all their respective properties, books, contracts, commitments, personnel and records and, during such period, the Company shall furnish promptly to Parent 43 37 (a) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal or state securities laws and (b) all other information concerning its business, properties and personnel as Parent may reasonably request. Except as required by law, Parent will hold, and will cause its officers, employees, accountants, counsel, financial advisers and other representatives and affiliates to hold, any and all information received from the Company or any of its subsidiaries, directly or indirectly, in confidence, according to the terms of the confidentiality agreement dated July 11, 1998, as amended, between the Company and Parent (the "Confidentiality Agreement"). SECTION 7.03. Reasonable Efforts; Notification. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger, and the other transactions contemplated by this Agreement and the Stockholder Agreement, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the Stockholder Agreement or the consummation of any of the transactions contemplated hereby or thereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. In connection with and without limiting the foregoing, the Company and its Board of Directors shall (i) take all reasonable actions available to them to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the Offer, the Merger, this Agreement, the Stockholder Agreement or any of the other transactions contemplated by this Agreement or 44 38 the Stockholder Agreement and (ii) if any state takeover statute or similar statute or regulation becomes applicable to the Offer, the Merger, this Agreement, the Stockholder Agreement or any other transaction contemplated by this Agreement or the Stockholder Agreement, take all reasonable actions available to them to ensure that the Offer, the Merger and the other transactions contemplated by this Agreement and the Stockholder Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and the Stockholder Agreement and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger, this Agreement, the Stockholder Agreement and the other transactions contemplated by this Agreement or the Stockholder Agreement. Nothing in this Agreement shall be deemed to require Parent to agree to dispose of any significant assets or businesses of the Company, Parent or any of their respective subsidiaries. (b) The Company shall give prompt notice to Parent of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. SECTION 7.04. Cooperation. Without limiting the generality of Section 7.03, Parent, Sub and Company shall together, or pursuant to an allocation of responsibility to be agreed between them, coordinate and cooperate (i) in determining whether any action by or in respect of, or filing with, any governmental body, agency or official, or authority is required and (ii) in promptly seeking any such action or making any such filing, furnishing information required in connection therewith and seeking timely to obtain any such actions. SECTION 7.05. Stock Option Plans. (a) As soon as practicable following the date of this Agreement but in no event later than the consummation of the Offer, the Company (or, if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans (as defined below)) shall take actions such that 45 39 (including by adopting resolutions or taking any other actions) each outstanding option to purchase Shares (a "Company Stock Option") heretofore granted under any stock option, stock appreciation rights or stock purchase plan, program or arrangement of the Company (collectively, the "Stock Option Plans") that is outstanding immediately prior to the consummation of the Offer, whether or not then exercisable, shall be canceled immediately prior to the Effective Time in exchange for an amount in cash, payable at the time of such cancelation, equal to the product of (y) the number of Shares subject to such Company Stock Option immediately prior to the Effective Time and (z) the excess of the price per Share to be paid in the Offer over the per Share exercise price of such Company Stock Option. The Company (or, if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans) shall take actions such that immediately prior to the Effective Time the Company Stock Options set forth on Schedule 7.05(a) to the Company Disclosure Schedule are canceled as set forth above. The Company shall not make, or agree to make, any payment of any kind to any holder of a Company Stock Option (except for the payment described above) without the consent of Parent. (b) Notwithstanding Section 7.05(a), in the case of the Company's Savings-Related Share Option Scheme (the "Scheme") under the Company's Employee Stock Option/Purchase Plan, the provisions of Section 7.05(a) shall not apply and, in lieu thereof, (i) the Board of Directors of the Company shall take action under Section 12.3(b) of the Company's Employee Stock Option/Purchase Plan to provide that, in the case of outstanding options under the Scheme, participants shall, upon any exercise of an option in accordance with the Scheme (or at any earlier time as may be permitted) and the payment of the applicable exercise price, be entitled to receive only a cash payment for each share of Company Common Stock reserved for purposes of the Scheme to which such participant would otherwise be entitled upon such exercise equal to the price per Share to be paid in the Offer and (ii) as soon as practicable following the date of this Agreement but in no event later than the consummation of the Offer, the Company shall use its best efforts to obtain the approval of each participant holding an option under the Scheme to the surrender and cancellation thereof in consideration of a cash payment to be made by the Company in such amount or in accordance with such formula as shall have been reviewed and consented to by Parent prior to the seeking of any such approval by the Company. In addition, and only to the extent permitted by applicable law, the 46 40 Company shall take action to cease employee contributions to the Scheme no later than the consummation of the Offer. The Company and the Parent agree to take such other actions as shall reasonably be required to accomplish the surrender and cancellation of the options under the Scheme as contemplated by the foregoing. (c) Subject to Section 7.05(a) and Section 7.05(b), all Stock Option Plans shall terminate as of the Effective Time and the provisions in any other Benefit Plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time. The Company shall ensure that following the consummation of the Offer no holder of a Company Stock Option or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation, and the Company shall use its reasonable best efforts to ensure that following the Effective Time, no holder of a Company Stock Option set forth on Schedule 7.05(a) to the Company Disclosure Schedule or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation. SECTION 7.06. Indemnification, Exculpation and Insurance. (a) Parent agrees that all rights to indemnification and exculpation (including the advancement of expenses) from liabilities for acts or omissions occurring at or prior to the Effective Time (including with respect to the transactions contemplated by this Agreement) existing now or at the Effective Time in favor of the current or former directors or officers of the Company as provided in its Certificate of Incorporation, its Bylaws (each as in effect on the date hereof) and indemnification agreements shall be assumed by the Surviving Corporation in the Merger, without further action, as of the Effective Time and shall survive the Merger and shall continue in full force and effect without amendment, modification or repeal in accordance with their terms for a period of not less than six years after the Effective Time; provided, however, that if any claims are asserted or made within such six year period, all rights to indemnification (and to advancement of expenses) hereunder in respect of any such claims shall continue, without diminution, until disposition of any and all such claims. (b) In the event that Parent, the Surviving Corporation or any of their successors or assigns 47 41 (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall expressly assume the obligations set forth in this Section 7.06. In the event the Surviving Corporation transfers any material portion of its assets, in a single transaction or in a series of transactions, Parent will either guarantee the indemnification obligations referred to in Section 7.06(a) or take such other action to insure that the ability of the Surviving Corporation, legal and financial, to satisfy such indemnification obligations will not be diminished in any material respect. (c) For six years after the Effective Time, Parent shall, unless Parent agrees in writing to guarantee the indemnification obligations set forth in Section 7.06(a), provide officers' and directors' liability insurance in respect of acts or omissions occurring at or prior to the Effective Time, covering each person currently covered by the Company's officers' and directors' liability insurance policy, or who becomes covered by such policy prior to the Effective Time, on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof; provided that in satisfying its obligation under this Section 7.06(c) Parent shall not be obligated to pay premiums in excess of 200% of the amount per annum paid by the Company in its last full fiscal year; and provided further that Parent shall nevertheless be obligated to provide such coverage as may be obtained for such 200% amount. The Company represents that it paid officers' and directors' liability insurance premiums as set forth in Schedule 7.06(c). (d) The provisions of this Section 7.06 (i) are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. SECTION 7.07. Directors. Promptly upon the acceptance for payment of, and payment for, any Shares by Sub pursuant to and subject to the conditions (including the Stockholder Agreement Condition) of the Offer, Sub shall be 48 42 entitled to designate such number of directors on the Board of Directors of the Company as will give Sub, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and the Company shall, at such time, cause Sub's designees to be so elected by its existing Board of Directors; provided, however, that in the event that Sub's designees are elected to the Board of Directors of the Company, until the Effective Time such Board of Directors shall have at least two directors who are directors of the Company on the date of this Agreement and who are not officers of the Company or any of its subsidiaries (the "Independent Directors") and; provided further that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Directors then remain, the other directors of the Company on the date hereof shall designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its subsidiaries, or officers or affiliates of Parent or any of its subsidiaries, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable law, the Company shall take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to the Company on a timely basis in writing all information required to be included in the Information Statement with respect to Sub's designees). In connection with the foregoing, the Company will promptly, at the option of Parent, either increase the size of the Company's Board of Directors or use its best efforts to obtain the resignation of such number of its current directors as is necessary to enable Sub's designees to be elected or appointed to, and to constitute a majority of, the Company's Board of Directors as provided above. SECTION 7.08. Fees and Expenses. All fees and expenses incurred in connection with the Offer, the Merger, this Agreement and the Stockholder Agreement and the transactions contemplated by this Agreement and the Stockholder Agreement shall be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated. 49 43 SECTION 7.09. Transfer Taxes. All state, local or foreign sales, use, real property transfer, stock transfer or similar taxes (including any interest or penalties with respect thereto) attributable to the Merger shall be timely paid by the Company. SECTION 7.10. Public Announcements. Parent and Sub, on the one hand, and the Company, on the other hand, will consult with each other before issuing, and provide each other with a reasonable opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Stockholder Agreement, including the Offer and the Merger, and shall not issue, or permit any of their respective subsidiaries to issue, any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system, in which case the party making such release will use reasonable efforts to obtain comments from the other party before issuance of such release or statement. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. SECTION 7.11. Severance Agreements. Parent acknowledges and agrees that (1) the letter agreements dated May 1, 1996 in effect between the Company and Steven L. Artusi, G. Taylor Seward and Thomas J. Oberhausen, respectively (collectively, the "Severance Agreements"), are, and following consummation of the transactions contemplated by this Agreement will continue to be, valid, in full force and effect and enforceable in accordance with their respective terms by the parties thereto; (2) Parent shall honor the Severance Agreements in accordance with their terms; (3) each of the three individuals subject to a Severance Agreement shall be entitled, on any date within sixty days following the Effective Time, to declare that he has been "constructively terminated" (by virtue of the Offer and the Merger resulting in an involuntary material change in such person's duties) and to discontinue his duties with the Company, whereupon the "Company's Notice Period" (as such term is defined in each of the Severance Agreements) shall be deemed to have commenced; provided that if such person continues his employment with the Company (or its successor) for more than sixty days following the Effective 50 44 Time, any right arising solely by virtue of (3) above shall terminate. SECTION 7.12. Continuation of Benefits. It is Parent's intention that, for a period of not less than one year after the Effective Time, employees of the Company who continue their employment after the Effective Time will be provided compensation and employee benefits which are substantially comparable in the aggregate to those provided for such employees as of the date hereof. Neither the Parent nor the Surviving Corporation will have any obligation to issue, or adopt any plans or arrangements providing for the issuance of, shares of capital stock, warrants, options, stock appreciation rights or other rights in respect of any shares of capital stock of any entity or any securities convertible or exchangeable into such shares pursuant to any such plans or arrangements. Any plans or arrangements of the Company providing for such issuance shall be disregarded in determining whether employee benefits are substantially comparable in the aggregate. SECTION 7.13. Stop Transfer. The Company shall not register the transfer of any certificate representing any Subject Shares (as defined in the Stockholder Agreement), unless such transfer is made to Parent or Sub or otherwise in compliance with the Stockholder Agreement. The Company will inscribe upon any certificates representing Subject Shares tendered by a Stockholder (as defined in the Stockholder Agreement) for such purpose the following legend: "The shares of Common Stock, $.01 par value, of DePuy, Inc. represented by this certificate are subject to a Stockholder Agreement dated as of July 21, 1998, and may not be sold or otherwise transferred, except in accordance therewith. Copies of such Agreement may be obtained at the principal executive offices of DePuy, Inc." SECTION 7.14. Purchase of Foreign Subsidiaries. Parent and its affiliates shall have the right, at the option of Parent, to purchase immediately prior to the consummation of the Offer any subsidiary of the Company that is not incorporated or organized under the laws of a jurisdiction within the United States at a price and on such terms as may be determined by mutual agreement of the Parent and the Company; provided that all of the conditions set forth in Exhibit A have been satisfied or waived and Parent and Sub are unconditionally obligated to consummate the Offer. If the Parent and the Company are unable to agree upon a price or terms for such sale, Parent and the Company shall elect an independent appraisal firm to determine such 51 45 price or terms. The conclusions of such appraisal firm shall be conclusive and binding. The fees of such appraisal firm shall be shared equally by Parent and the Company. Parent agrees that in no event will the Company be deemed to have breached any of its representations, warranties, covenants or other obligations under this Agreement (including Section 4.15) by reason of (whether directly or indirectly, whether in whole or in part) any taxes or liabilities incurred, any payments made, or any action taken or any omissions of any necessary action as a result of or in connection with (i) Parent's exercise of its right to purchase the Company's foreign subsidiaries prior to the consummation of the Offer pursuant to this Section 7.14 or (ii) any other transaction or agreement contemplated by this Section 7.14 or entered into in connection therewith. ARTICLE VIII Conditions SECTION 8.01. Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction or waiver prior to the Closing Date of the following conditions: (a) Company Stockholder Approval. If required by applicable law, the Company Stockholder Approval shall have been obtained; provided that Parent and Sub shall vote all their Shares in favor of the Merger. (b) No Injunctions or Restraints. No statute, rule, decision, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that the party seeking to invoke such condition shall have performed its obligations under Sections 7.03 and 7.04. (c) Purchase of Shares. Sub shall have previously accepted for payment and paid for Shares pursuant to and subject to the conditions (including the Stockholder Agreement Condition) of the Offer and, if any Subject Shares were not purchased pursuant to the Offer, pursuant to the Stockholder Agreement. 52 46 ARTICLE IX Termination and Amendment SECTION 9.01. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the terms of this Agreement by the stockholders of the Company: (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company: (i) if Sub shall not have accepted for payment Shares pursuant to the Offer prior to March 31, 1999; provided, however, that the right to terminate this Agreement pursuant to this Section 9.01(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of any Offer Condition or if the failure of such condition results from facts or circumstances that constitute a willful and intentional material breach of representation or warranty under this Agreement by such party; or (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; provided, however, that the Party seeking to terminate this Agreement pursuant to the provision shall have performed its obligations under Section 7.03 and 7.04. (c) by Parent or Sub prior to Sub's obligation to accept Shares for payment pursuant to the Offer in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in this Agreement which (i) would give rise to the failure of a condition set forth in paragraph (d) or (e) of Exhibit A and (ii) cannot be or has not been cured within 20 days after the giving of written notice to the Company; or 53 47 (d) by the Company, if Sub or Parent shall have (A) failed to commence the Offer within five business days of the public announcement (on the date hereof or the following day) by Parent and the Company of this Agreement, (B) failed to pay for Shares pursuant to the Offer in accordance with Section 1.01(a) hereof or (C) breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform in respect of clause (C) is incapable of being cured or has not been cured within 20 days after the giving of written notice to Parent or Sub, as applicable, except, in any case under clause (C), such breaches and failures which individually or in the aggregate are not reasonably likely to affect adversely Parent's or Sub's ability to complete the Offer or the Merger subject to the terms and conditions of this Agreement. SECTION 9.02. Effect of Termination. In the event of a termination of this Agreement by either the Company or Parent as provided in Section 9.01, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Sub or the Company or their respective officers or directors, except with respect to the last sentence of Section 1.02(c), Section 5.06, the last sentence of Section 7.02, Section 7.08, this Section 9.02 and Article X; provided, however, that nothing herein shall relieve any party for liability for any willful and intentional breach hereof. SECTION 9.03. Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after obtaining the Company Stockholder Approval (if required by law), but, after any such approval, no amendment shall be made which by law requires further approval by such shareholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. SECTION 9.04. Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (iii) subject to 54 48 Section 9.03, waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. SECTION 9.05. Procedure for Termination, Amendment, Extension or Waiver. A termination of this Agreement pursuant to Section 9.01, an amendment of this Agreement pursuant to Section 9.03 or an extension or waiver pursuant to Section 9.04 shall, in order to be effective, require in the case of Parent, Sub or the Company, action by its Board of Directors or the duly authorized designee of its Board of Directors; provided, however, that in the event that Sub's designees are appointed or elected to the Board of Directors of the Company as provided in Section 7.07, after the acceptance for payment and payment of Shares pursuant to and subject to the Conditions (including the Stockholder Agreement Condition) of the Offer and prior to the Effective Time, the affirmative vote of a majority of the directors of the Company that were not designated by Parent or Sub shall be required by the Company to (i) amend or terminate this Agreement by the Company, (ii) exercise or waive any of the Company's rights or remedies under this Agreement, (iii) extend the time for performance of Parent's and Sub's respective obligations under this Agreement or (iv) take any action to amend or otherwise modify the Company's Certificate of Incorporation or Bylaws. ARTICLE X Miscellaneous SECTION 10.01. Nonsurvival of Representations, Warranties and Agreements. Except as otherwise provided in this Section 10.01, none of the representations, warranties or covenants in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time or, in the case of the Company, shall survive the acceptance for payment of, and payment for, any Shares by Sub pursuant to the Offer. This Section 10.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. SECTION 10.02. Notices. All notices and other communications hereunder shall be in writing and shall be 55 49 deemed given if delivered personally, telecopied (which is confirmed), sent by overnight courier (providing proof of delivery) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses or telecopier numbers (or at such other address or telecopier number for a party as shall be specified by like notice): (a) if to Parent or Sub, to Johnson & Johnson One Johnson & Johnson Plaza New Brunswick, NJ 08933 Attention: General Counsel Telecopy No.: (732) 524-2788 with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019 Attention: Robert A. Kindler, Esq. Telecopy No.: (212) 474-3700 and (b) if to the Company, to DePuy, Inc. 700 Orthopaedic Drive Warsaw, Indiana 46581-0988 Attention: President Telecopy No.: (219) 269-5675 56 50 with a copy to: Coudert Brothers 1114 Avenue of the Americas New York, NY 10036-7703 Attention: Jeffrey E. Cohen, Esq. Telecopy No.: (212) 626-4120 SECTION 10.03. Interpretation. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, including Exhibit A, they shall be deemed to be followed by the words "without limitation". As used in this Agreement, including Exhibit A, the term "subsidiary" of any person means another person whether foreign or domestic, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person. As used in this Agreement, including Exhibit A, the term "affiliate" of any person means any person, whether foreign or domestic, that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person. As used in this Agreement, including Exhibit A, the term "key employee" means an employee of the Company or any of its subsidiaries with annual cash compensation in excess of $300,000. As used in this Agreement, including Exhibit A, "material adverse effect" means, when used in connection with the Company, any effect that is materially adverse to the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, or would prevent or materially delay the consummation of the Offer or the Merger. As used in this Agreement, including Exhibit A, "material adverse change" means any change that is reasonably likely to have a material adverse effect. SECTION 10.04. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall 57 51 be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. SECTION 10.05. Entire Agreement; Third Party Beneficiaries. This Agreement and the Confidentiality Agreement (including the documents and the instruments referred to herein) (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 7.06 and Section 7.11, Articles II and III are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. SECTION 10.06. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. SECTION 10.07. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to any direct or indirect wholly-owned subsidiary of Parent. 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 10.08. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in a Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit such party to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court 58 52 in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or any of the transactions contemplated hereby in any court other than a Federal court sitting in the State of Delaware or a Delaware state court and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. SECTION 10.09. 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. 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 to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. SECTION 10.10. Compliance with Law. Nothing in this Agreement, including Section 1.02 or 6.02, shall in any way prevent the Company or the Board of Directors of the Company from making any disclosure to the stockholders of the Company, or taking any position, that is required by Federal or state law. Nothing in this Agreement, including Section 6.01, shall require the Company or any of its subsidiaries to take any action prohibited by, or refrain from taking any action required by, applicable Merger Control Laws. 59 53 IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. JOHNSON & JOHNSON, by /S/ JAMES R. UTASKI --------------------------- Name: James R. Utaski Title: Vice President LIB ACQUISITION CORP., by /s/ JAMES R. HILTON --------------------------- Name: James R. Hilton Title: Vice President DEPUY, INC., by /s/ JAMES A. LENT --------------------------- Name: James A. Lent Title: Chairman and Chief Executive Officer 60 1 EXHIBIT A Conditions of the Offer Notwithstanding any other term of the Offer, Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (i) the Stockholder Agreement is valid, binding and in full force and effect and enforceable by Parent and Sub in accordance with its terms and no party thereto (other than Parent or Sub) is in material breach thereof, and the Shares subject to the Stockholder Agreement shall have been either tendered into the Offer or delivered to Sub for purchase immediately following the Offer (the "Stockholder Agreement Condition"), (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated and (iii) Parent, Sub and Company shall have received in respect of the Merger and any matters arising therefrom confirmation by way of a decision from the Commission of the European Union under Regulation 4064.89 (with or without the initiation of proceedings under Article 6(1)(c) thereof) that the Merger and any matters arising therefrom are compatible with the common market. Furthermore, notwithstanding any other term of the Offer, Sub shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of this Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exists: (a) there shall be instituted or pending by any Governmental Entity any suit, action or proceeding (or by any other person any suit, action or proceeding that has a reasonable likelihood of success) (i) challenging the acquisition by Parent or Sub of any Shares under the Offer or pursuant to the Stockholder Agreement, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement or the Stockholder Agreement, or seeking to obtain from the Company, Parent or Sub any damages in connection with the aforesaid transactions that are material in relation to the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of a material portion of 61 2 the business or assets of the Company and its subsidiaries, or Parent and its subsidiaries, in each case taken as a whole, or to compel the Company or Parent to dispose of or hold separate any material portion of the business or assets of the Company and its subsidiaries, or Parent and its subsidiaries, in each case taken as a whole, as a result of the Offer or any of the other transactions contemplated by this Agreement or the Stockholder Agreement, (iii) seeking to impose material limitations on the ability of Parent or Sub to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer or purchased under the Stockholder Agreement including, without limitation, the right to vote such Shares on all matters properly presented to the stockholders of the Company or (iv) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any material respect any significant portion of the business or operations of the Company and its subsidiaries taken as a whole; (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity or court, other than the application to the Offer or the Merger of the applicable waiting period under the Merger Control Laws, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; (c) there shall have occurred any material adverse change with respect to the Company; (d) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case at the date of this Agreement and at the scheduled or extended expiration of the Offer; (e) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be 62 3 performed or complied with by it under this Agreement; or (f) this Agreement shall have been terminated in accordance with its terms; which, in the reasonable judgment of Parent or Sub in any such case, and regardless of the circumstances (including any action or omission by Parent or Sub) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payments therefor. The foregoing conditions in paragraphs (a) through (f) are for the sole benefit of Sub and Parent and may, subject to the terms of this Agreement, be waived by Sub and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Sub 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 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. Terms used herein but not defined herein shall have the meanings assigned to such terms in the Agreement of which this Exhibit A is a part. EX-99.4 5 STOCKHOLDER AGREEMENT 1 EXHIBIT (c)(2) CONFORMED COPY STOCKHOLDER AGREEMENT dated as of July 21, 1998, among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), LIB ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub") and the parties listed on Schedule A attached hereto (the "Stockholders"). WHEREAS Parent, Sub and DePuy, Inc., a Delaware corporation (the "Company"), propose to enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented in accordance with this Agreement, the "Merger Agreement") providing for (i) the making of a cash tender offer (as such offer may be amended from time to time as permitted under the Merger Agreement, the "Offer") by Sub for all the outstanding shares of common stock, par value $.01 per share, of the Company ("Company Common Stock") and (ii) for the merger of Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS each Stockholder is the record and beneficial owner of the number of shares of Company Common Stock set forth opposite such Stockholder's name on Schedule A attached hereto (such shares of Company Common Stock, together with any other shares of capital stock of the Company acquired by the Stockholders after the date hereof and during the term of this Agreement (including through the exercise of any stock options, warrants or similar instruments), being collectively referred to herein as the "Subject Shares"); and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Parent and Sub have requested that the Stockholders enter into this Agreement. NOW, THEREFORE, to induce Parent and Sub to enter into, and in consideration of their entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties agree as follows: 1. Purchase and Sale of Shares. (a) The Stockholders hereby jointly and severally agree to sell to 2 2 Sub, and Sub hereby agrees to purchase, all Subject Shares of such Stockholders at a price equal to the Offer Price; provided that such obligation to sell and such obligation to purchase are subject to Sub having accepted shares of Company Common Stock for payment under the Offer in accordance with Section 1.01 of the Merger Agreement. Each Stockholder may tender its Subject Shares into the Offer and Sub may direct that each Stockholder tender its Subject Shares. Any Subject Shares not purchased in the Offer will be purchased by Sub immediately following the purchase of shares of Company Common Stock in the Offer. Sub shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, or under any provision of state, local or foreign tax law; provided, however, that Sub shall promptly pay any amounts deducted and withheld hereunder to the applicable governmental authority, shall promptly file all tax returns and reports required to be filed in respect of such deductions and withholding, and shall promptly provide to the Stockholders proof of such payment and a copy of all such tax returns and reports. (b) The Stockholders shall not be required to tender their Subject Shares in the event of any amendment to the Merger Agreement that creates any additional Offer Condition, reduces the Offer Price or otherwise adversely affects the Stockholders without the prior written approval of the Stockholders. 2. Representations and Warranties of the Stockholders. The Stockholders hereby jointly and severally represent and warrant to Parent and Sub as follows: (a) Authority. Each Stockholder has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each Stockholder, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of each Stockholder. This Agreement has been duly executed and delivered by each Stockholder and constitutes a valid and binding obligation of each Stockholder enforceable against each such Stockholder in accordance with its 3 3 terms. Except for the expiration or termination of the applicable waiting periods under the Merger Control Laws (as defined below) and required filings with the Securities and Exchange Commission, the execution and delivery of this Agreement do not, and the consummation by Stockholders of the transactions contemplated hereby and compliance with the terms hereof will not, (i) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to any Stockholder or to the property or assets of any Stockholder, (ii) require any filing with, or permit, authorization, consent or approval of, any Federal, state or local government or any court, tribunal, administrative agency or commission or other governmental or regulatory authority or agency, domestic, foreign or supranational, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to any Stockholder or any of the properties or assets of any Stockholder, including the Subject Shares. "Merger Control Laws" means (i) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (ii) Council Regulation (EEC) No. 4064/89 of 21 December 1989 and (iii) all amendments of, and all other applicable bills, acts, decrees, regulations or ordinances relating to, the foregoing legislative acts. (b) Capitalization. At the close of business on July 20, 1998, the Stockholders were the record and beneficial owners of 83,000,000 Shares. (c) The Subject Shares. Each Stockholder is the record and beneficial owner of, and has good and valid title to, the Subject Shares set forth opposite its name on Schedule A attached hereto, free and clear of any claims, liens, encumbrances, security interests, options, charges and restrictions of any kind (other than restrictions pursuant to applicable securities laws). Each Stockholder does not own, of record or beneficially, any shares of capital stock of the Company other than the Subject Shares set forth 4 4 opposite its name on Schedule A attached hereto. Each Stockholder has the sole right to vote such Subject Shares, and none of such Subject Shares are subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Subject Shares, except as contemplated by this Agreement. (d) Brokers. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Stockholders. 3. Representation and Warranty of Parent and Sub. Parent and Sub hereby jointly and severally represent and warrant to the Stockholders as follows: (a) Authority. Parent and Sub have all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Sub, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of each of Parent and Sub. This Agreement has been duly executed and delivered by Parent and Sub and constitutes a valid and binding obligation of Parent and Sub enforceable against Parent and Sub in accordance with its terms. Except for the expiration or termination of the applicable waiting periods under the Merger Control Laws and required filings with the Securities and Exchange Commission, the execution and delivery of this Agreement do not, and the consummation by Parent and Sub of the transactions contemplated hereby and compliance with the terms hereof will not, (i) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to Parent or Sub or to the property or assets of Parent or Sub, (ii) require any filing with, or permit, authorization, consent or approval of, any Federal, 5 5 state or local government or any court, tribunal, administrative agency or commission or other governmental or regulatory authority or agency, domestic, foreign or supranational, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or Sub or any of the properties or assets of Parent or Sub. (b) Securities Act. The Subject Shares will be acquired in compliance with, and Sub will not offer to sell or otherwise dispose of any Shares so acquired by it in violation of the registration requirements of, the Securities Act of 1933, as amended. (c) Financing. Sub has, or will have at the time that any payment is required to be made to any Stockholder hereunder, the funds necessary to make such payment to such Stockholder. (d) Brokers. No broker, investment banker, financial advisor or other person, other than Credit Suisse First Boston Corporation, the fees and expenses of which will be paid by Parent, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Sub. 4. Covenants of Stockholders. The Stockholders jointly and severally agree as follows: (a) At any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, the Stockholders shall vote (or cause to be voted) the Subject Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement; provided that no amendment to the Merger Agreement will be made that creates additional Offer Conditions, reduces the Offer Price or otherwise adversely affects the Stockholders without the prior approval of the Stockholders. 6 6 (b) At any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which the Stockholders' votes, consents or other approvals are sought, the Stockholders shall vote (or cause to be voted) the Subject Shares against (i) any Takeover Proposal (as such term is defined in Section 6.02 of the Merger Agreement) and (ii) any amendment of the Company's Certificate of Incorporation or Bylaws or other proposal or transaction involving the Company, which amendment or other proposal or transaction would be reasonably likely to impede, frustrate, prevent, delay or nullify the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or change in any manner the voting rights of any class of Company Common Stock. The Stockholders further agree not to enter into any agreement inconsistent with the foregoing. (c) The Stockholders shall not (i) sell, transfer, give, pledge, assign or otherwise dispose of (including by gift) (collectively, "Transfer"), or consent to any Transfer of, any or all of such Subject Shares or any interest therein or enter into any contract, option or other arrangement (including any profit sharing arrangement) with respect to the Transfer of, the Subject Shares to any person other than pursuant to the terms of the Offer or the Merger or otherwise to Sub in accordance with Section 1 or (ii) enter into any voting arrangement, whether by proxy, voting agreement, voting trust, power-of-attorney or otherwise, with respect to the Subject Shares in connection with, directly or indirectly, any Takeover Proposal. The Stockholders shall not commit or agree to take any of the foregoing actions. (d) The Stockholders shall not, and shall use their reasonable efforts to cause any investment banker, financial advisor, attorney, accountant or other representative of any such Stockholder not to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal or (ii) participate in any discussions or negotiations regarding any Takeover Proposal. 7 7 5. Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each Stockholder hereby irrevocably grants to, and appoints, Parent and James R. Utaski and Peter S. Galloway, in their respective capacities as officers of Parent, and any individual who shall hereafter succeed to any such office of Parent, and each of them individually, such Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote such Stockholder's Subject Shares, or grant a consent or approval in respect of such Subject Shares against (i) any Takeover Proposal or (ii) any amendment of the Company's Certificate of Incorporation or Bylaws, or other proposal or transaction (including any consent solicitation to remove or elect any directors of the Company) involving the Company which amendment or other proposal or transaction would be reasonably likely to impede, frustrate, prevent, delay or nullify the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement. (b) Each Stockholder represents that any proxies heretofore given in respect of such Stockholder's Subject Shares are not irrevocable, and that any such proxies are hereby revoked. (c) Each Stockholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Stockholder in accordance with this Agreement. Such Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Such Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law (the "DGCL"). Such irrevocable proxy shall be valid until the earlier to occur of (i) eleven months from the date hereof or (ii) the termination of this Agreement pursuant to Section 9. (d) Any action taken by Parent pursuant to the proxy granted under Section 5(a)(ii) shall provide that the Stockholders may revoke such action effective upon termination of the Merger Agreement. 8 8 6. Further Assurances. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use all reasonable efforts (as described in Section 7.03(a) of the Merger Agreement) to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger, and the other transactions contemplated by this Agreement and the Merger Agreement. 7. Certain Events. (a) Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Subject Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Subject Shares shall pass, whether by operation of law or otherwise, including such Stockholder's administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other voting securities of the Company by any Stockholder, the number of Subject Shares listed in Schedule A beside the name of such Stockholder shall be deemed adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or other voting securities of the Company issued to or acquired by such Stockholder. (b) Each Stockholder agrees that it will deliver to the Company, within 10 business days after the date hereof (or, in the event Subject Shares are acquired subsequent to the date hereof within 10 business days after the date of such acquisition), any and all certificates representing such Stockholder's Subject Shares solely for the purpose of the Company inscribing upon such certificates the legend in accordance with Section 7.13 of the Merger Agreement. 8. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties without the prior written consent of the other parties, except that (i) Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to any U.S. subsidiary of Parent that may be substituted for Sub as contemplated by Section 2.01 of the Merger Agreement, and (ii) Parent may assign, in its sole discretion, any and all of its rights, 9 9 interests and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, provided that Parent will remain liable for its obligations hereunder in the event of any assignment pursuant to this clause (ii). 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. 9. Termination. (a) This Agreement, and all rights and obligations of the parties hereunder, shall terminate upon the date upon which the Merger Agreement is terminated in accordance with its terms. Notwithstanding the foregoing, Sections 8, 9 and 10 shall survive any termination of this Agreement. (b) Notwithstanding Section 9(a) above, Stockholders may terminate this Agreement in the event the Company has the right to terminate the Merger Agreement pursuant to Section 9.01(b) thereof. 10. General Provisions. (a) Amendments. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. (b) Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed), sent by overnight courier (providing proof of delivery) or mailed by registered or certified mail (return receipt requested) to Parent and Sub in accordance with Section 10.02 of the Merger Agreement and to the Stockholders at their respective addresses or telecopier numbers set forth on Schedule A attached hereto (or at such other address or telecopier number for a party as shall be specified by like notice). (c) Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". 10 10 Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to them in the Merger Agreement. (d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart. (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (f) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. (g) 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. 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 to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. 11. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall 11 11 be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in a Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit such party to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than a Federal court sitting in the State of Delaware or a Delaware state court and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. 12. Public Announcements. Parent and Sub, on the one hand, and the Stockholders, on the other hand, will consult with each other before issuing, and provide each other with a reasonable opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Merger Agreement, including the Offer and the Merger, and shall not issue, or permit any of their respective subsidiaries to issue, any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system, in which case the party making such release will use reasonable efforts to obtain comments from the other party before issuance of such release or statement. 13. Indemnification. Parent agrees to indemnify and hold harmless each Stockholder from all liability for taxes, costs and other expenses incurred by any Stockholder or any affiliate of any Stockholder (other than the Company or any of its foreign or domestic subsidiaries) solely as a result of Parent's exercise of its right to purchase the Company's foreign subsidiaries prior to the closing of the Offer pursuant to Section 7.14 of the Merger Agreement, to 12 12 the extent such taxes, costs or other expenses are in excess of the taxes, costs or other expenses that would have been incurred by such Stockholder or such affiliate of such Stockholder (other than the Company or any of its foreign or domestic subsidiaries) if Parent had not exercised such right prior to closing of the Offer. 13 13 IN WITNESS WHEREOF, Parent, Sub and the Stockholders have caused this Agreement to be duly executed and delivered as of the date first written above. JOHNSON & JOHNSON, By: /s/ James R. Utaski ------------------------------------ Name: James R. Utaski Title: Vice President LIB ACQUISITION CORP., By: /s/ James R. Hilton ------------------------------------ Name: James R. Hilton Title: Vice President CORANGE LIMITED, By: /s/ John R. Talbot ------------------------------------ Name: John R. Talbot Title: Director CORANGE INTERNATIONAL LIMITED, By: /s/ John R. Talbot ------------------------------------ Name: John R. Talbot Title: Director CORANGE INTERNATIONAL HOLDING B.V., By: /s/ W. J. VAN DER HOEK ------------------------------------ Name: W. J. van der Hoek Title: Director 14 14 PHARMINVEST S.A., By: /s/ JURGEN FRIEDRICH ------------------------------------ Name: Jurgen Friedrich Title: President & GM 15 SCHEDULE A
Name, Address Number of Shares and Telecopier of Company Common Number of Stockholder Stock Owned of Record --------------------- --------------------- Corange Limited 3,168,745 Corner House, Church and Parliament Streets Hamilton HM 12, Bermuda Attention: President Tel: ++1 441 295 33 91 Fax: ++1 441 295 41 65 Corange International Limited 528,247 Corner House, Church and Parliament Streets Hamilton HM 12, Bermuda Attention: President Tel: ++1 441 295 33 91 Fax: ++1 441 295 41 65 Corange International Holding B.V. 13,272,193 c/o Roche Nederland B.V. Nijverheidsweg 38 NL-3641 AA Mijdrecht The Netherlands Attention: General Manager Tel: ++31 297 29 12 22 Fax: ++31 297 28 31 58 Pharminvest S.A. 66,030,815 145 Rue de Treves L-2630 Luxembourg, Luxembourg Attention: President Tel: ++352 42 2020-1 Fax: ++352 43 10 01
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