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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9/A
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 1
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CENTERPULSE LTD.
(NAME OF SUBJECT COMPANY)
CENTERPULSE LTD.
(NAME OF PERSON FILING STATEMENT)
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REGISTERED SHARES, PAR VALUE CHF 30 PER SHARE, INCLUDING SHARES
REPRESENTED BY AMERICAN DEPOSITARY SHARES
(TITLE AND CLASS OF SECURITIES)
-------------------------
NOT APPLICABLE*
(CUSIP NUMBER OF CLASS OF SECURITIES)
-------------------------
DR. MAX LINK
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
CENTERPULSE LTD.
ANDREASSTRASSE 15
CH-8050, ZURICH
SWITZERLAND
+41-1-306-9696
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPY TO:
ELLEN J. ODONER, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
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* There is no CUSIP Number assigned to the Registered Shares. CUSIP No.
152005104 has been assigned to the American Depositary Shares of Centerpulse
Ltd. that are quoted on the New York Stock Exchange under the symbol "CEP".
CUSIP No. 152005203 has been assigned to the American Depositary Shares of
Centerpulse Ltd. that were issued pursuant to a restricted ADR facility and are
not publicly traded.
|_| CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
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This constitutes Amendment No. 1 to the
Solicitation/Recommendation Statement on Schedule 14D-9 initially filed with the
Securities and Exchange Commission (the "SEC") on July 2, 2003 (the "Initial
Schedule 14D-9") by Centerpulse Ltd., a corporation organized under the laws of
Switzerland ("Centerpulse" or the "Company"), relating to the exchange offer
(the "Zimmer Offer") by Zimmer Holdings, Inc., a Delaware corporation
("Zimmer"), being made pursuant to the Prospectus, dated June 19, 2003 (the
"Zimmer Prospectus"), forming a part of Zimmer's Registration Statement (No.
333-105561) on Form S-4 (the "Zimmer Registration Statement") filed with the
SEC.
The information in the Initial Schedule 14D-9 is hereby
amended, restated and superceded in its entirety as follows:
ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company is Centerpulse Ltd. The
address of the principal executive offices of the Company is Andreasstrasse 15
CH-8050, Zurich, Switzerland. The telephone number of the Company at its
principal executive offices is 41-1-306-9696. Under its articles of
incorporation, Centerpulse has three legal names, each of which identifies the
same legal entity: Centerpulse AG, Centerpulse Ltd. and Centerpulse Inc.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (together with the
Exhibits hereto, this "Statement") relates is the registered shares, par value
CHF 30 per share, of Centerpulse ("Centerpulse Shares"), including Centerpulse
Shares represented by the American Depositary Shares of Centerpulse
("Centerpulse ADSs"). As of June 30, 2003, there were 11,912,678 Centerpulse
Shares outstanding, including Centerpulse Shares represented by Centerpulse
ADSs.
As more fully described in Item 2 below, this Statement
relates to the Zimmer Offer. Centerpulse is also currently the subject company
of an exchange offer by Smith & Nephew Group plc, a public limited company
organized under the laws of England and Wales ("S&N Group"), for all the
outstanding Centerpulse Shares, including Centerpulse Shares represented by
Centerpulse ADSs (the "S&N Offer"). The S&N Offer is being made pursuant to (a)
the Preliminary Prospectus, dated April 25, 2003, forming a part of S&N Group's
Registration Statement (No. 333-104751) on Form F-4 filed with the SEC (the "S&N
Registration Statement") and (b) the combination agreement, dated as of March
20, 2003 (the "Combination Agreement"), among Smith & Nephew plc, a public
limited company organized under the laws of England and Wales ("S&N"), S&N Group
and Centerpulse. Centerpulse has filed a Solicitation/Recommendation Statement
on Schedule 14D-9 relating to the S&N Offer (together with the Exhibits thereto
and as it may be amended from time to time, the "S&N Offer 14D-9") with the SEC.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The name, business address and business telephone number of
Centerpulse, which is the person filing this Statement, are set forth in Item 1
above.
Pursuant to the Zimmer Offer, Zimmer is offering to
exchange (a) for each outstanding Centerpulse Share, 3.68 shares of common
stock, par value $0.01 per share, of Zimmer ("Zimmer Shares") and CHF 120 in
cash, without interest, and (b) for each outstanding Centerpulse ADS, 0.368 of a
Zimmer Share and the US dollar equivalent of CHF 12 in cash, without interest.
The Zimmer Offer is subject to the terms and conditions set forth in the Zimmer
Prospectus. According to the Zimmer Prospectus, the Zimmer Offer will contain a
mix and match election feature, whereby tendering holders of Centerpulse Shares
and Centerpulse ADSs may elect to receive either more Zimmer Shares or more cash
than the standard entitlement; however, this election will be available to
holders of Centerpulse Shares and Centerpulse ADSs only to the extent that
off-setting elections have been made by other tendering security holders in the
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Zimmer Offer and Zimmer's offer (the "Zimmer InCentive Offer") for all the
outstanding bearer shares ("InCentive Shares") of InCentive Capital AG, a
corporation organized under the laws of Switzerland ("InCentive").
According to the Zimmer Prospectus, the principal executive
offices of Zimmer are located at 345 East Main Street, Warsaw, Indiana 46580,
and the telephone number at its principal executive offices is 574-267-6131.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
COMPENSATION ARRANGEMENTS OF THE CENTERPULSE SENIOR MANAGEMENT
Employment Agreements. The employment agreements of the
following members of the senior management of Centerpulse contain change of
control clauses providing for the following compensation (plus, in each case,
applicable social security system payments on behalf of such individuals) to be
granted in the event the employment agreements of these employees are terminated
during the 12-month period following the completion of the Zimmer Offer, either
by Centerpulse, or by those employees should their respective position with
Centerpulse be materially changed:
COMPENSATION UPON
MEMBER OF SENIOR MANAGEMENT CHANGE OF CONTROL
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Mike McCormick......................................................... $1,260,000
David Floyd............................................................ $1,530,000
Richard Fritschi....................................................... CHF 1,650,375
Steven Hanson.......................................................... $1,354,500
Urs Kamber............................................................. CHF 1,850,370
Matthias Molleney...................................................... CHF 1,525,140
Hans-Rudolf Schurch.................................................... CHF 917,955
Christian Stambach..................................................... CHF 1,332,000
Beatrice Tschanz....................................................... CHF 1,526,250
Thomas Zehnder......................................................... CHF 1,600,800
In addition, the employment agreement of Max Link, the
Chairman and Chief Executive Officer of Centerpulse, as the Chief Executive
Officer of Centerpulse entitles him to terminate his employment as Chief
Executive Officer upon a change of control. The compensation that is payable
upon a termination by Dr. Link following the completion of the Zimmer Offer is
CHF 4,950,000, plus Swiss social security system payments. Should all employment
agreements described above be terminated within the 12-month period following
the completion of the Zimmer Offer, the total compensation payable to such
employees as a group would amount to CHF 22,628,466 ($16,738,269), translated
from Swiss francs into US dollars at the noon buying rate on June 30, 2003, plus
applicable social security system payments.
Bonus Payments. The board of directors of Centerpulse (the
"Centerpulse Board") has granted a bonus payment to the members of the senior
management of Centerpulse for work performed in the first half year of 2003. The
amount of these payments corresponds to 50% of the bonus payments of 2002
(excluding extraordinary bonus payments).
ARRANGEMENTS WITH S&N AND S&N GROUP UNDER THE COMBINATION AGREEMENT
Board Seats. Dr. Link will be invited to join the board of
directors of S&N Group as a non-executive director and one of two Vice Chairmen
upon completion of the S&N Offer. Rene Braginsky, a member of the Centerpulse
Board and the Chief Executive Officer of InCentive, will also be invited to join
the board of directors of S&N Group as a non-executive director. As directors of
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S&N Group, Dr. Link and Mr. Braginsky will receive director fees and
reimbursement of expenses in accordance with S&N Group policies.
Conversion of the Centerpulse Stock Options. All
outstanding stock options of Centerpulse (the "Centerpulse Stock Options") will
be converted into stock options (the "New S&N Group Stock Options") for shares
of S&N Group ("S&N Group Shares") at an exchange ratio of 34 S&N Group Shares
for each Centerpulse Share issuable upon exercise of a Centerpulse Stock Option.
The New S&N Group Stock Options will vest 30 days after completion of the S&N
Offer, and the exercise period for the New S&N Group Stock Options will be the
18-month period following the completion of the S&N Offer. The exercise prices
of the New S&N Group Stock Options will be calculated by dividing the existing
exercise price by 34 and converting the resulting amount into pounds sterling at
the prevailing exchange rate on the settlement date. As of June 30, 2003,
members of the Centerpulse Board held 4,638 Centerpulse Stock Options in the
aggregate and members of the senior management of Centerpulse held 62,578
Centerpulse Stock Options in the aggregate.
Potential Compensation Payable to S&N Group. Under certain
circumstances, in the event the S&N Offer is not completed, Centerpulse would be
obligated to pay S&N Group a fixed compensation sum of CHF 20 million.
Commitment by S&N and S&N Group With Respect to Certain
Members of the Centerpulse Senior Management. S&N and S&N Group have agreed to
use their reasonable best endeavors to offer senior operating management of
Centerpulse suitable posts in the combined entity after the completion of the
S&N Offer.
OTHER INTERESTS OF MR. BRAGINSKY
In addition to being a director of Centerpulse, Mr.
Braginsky is also a shareholder of InCentive, holding approximately 20% of the
outstanding InCentive Shares, the InCentive delegate to the Centerpulse Board
and the Chief Executive Officer of InCentive. In connection with the S&N Offer,
pursuant to the InCentive Transaction Agreement (as defined below), S&N Group
has agreed to offer to acquire all outstanding InCentive Shares in the S&N
InCentive Offer. In addition, Mr. Braginsky, in his capacity as a shareholder of
InCentive, is a party to the InCentive Tender Agreement (as defined below).
The InCentive Transaction Agreement. On March 20, 2003,
InCentive, which may be deemed to be an affiliate of Centerpulse, entered into a
transaction agreement with S&N Group and S&N (the "InCentive Transaction
Agreement"). Under the terms of the InCentive Transaction Agreement, InCentive
is obligated to dispose of its investments, other than Centerpulse Shares, so
that, were S&N Group's offer for the outstanding InCentive Shares (the "S&N
InCentive Offer") to reach completion, InCentive's assets at that time would
consist only of Centerpulse Shares and cash. Pursuant to the InCentive
Transaction Agreement, under certain circumstances, InCentive could be obligated
to pay S&N Group a fixed compensation sum of CHF 4.0 million.
The InCentive Tender Agreement. On March 20, 2003, S&N
Group and S&N also entered into a tender agreement (the "InCentive Tender
Agreement") with Mr. Braginsky, Hans Kaiser, "Zurich" Versicherungs-Gesellschaft
and III Institutional Investors International Corp., who collectively hold
approximately 77% of InCentive's issued share capital (the "InCentive
Shareholders"). Pursuant to the InCentive Tender Agreement, the InCentive
Shareholders agreed, among other things: (i) not to acquire any S&N Group Shares
or shares of S&N ("S&N Shares") or rights to acquire S&N Group Shares or S&N
Shares until six months after the end of the subsequent offering period of the
S&N InCentive Offer without S&N Group's or S&N's consent, unless the S&N
InCentive Offer has previously failed, except that acquisitions or sales on
account of third parties in respect of asset management agreements shall be
permitted; (ii) to indemnify S&N Group or S&N for any loss resulting from an
4
acquisition by the InCentive Shareholders of InCentive Shares or Centerpulse
Shares which would cause S&N Group or S&N to be obligated under Swiss law to
increase the offer price under the S&N InCentive Offer or the S&N Offer; and
(iii) to not be entitled to withdraw any InCentive Shares tendered by them in
the S&N InCentive Offer, unless S&N Group announces that the S&N InCentive Offer
or the S&N Offer has failed for reasons other than a competing offer for
InCentive Shares or Centerpulse Shares and Centerpulse ADSs. The InCentive
Tender Agreement further provides in the event that a competing offer for
InCentive Shares and/or Centerpulse Shares and Centerpulse ADSs is made which
has a higher economic value than the consideration offered by S&N, and the
competing offer has become or been declared unconditional, S&N may (A) declare
the S&N InCentive Offer unconditional or (B) permit InCentive to tender its
Centerpulse Shares into the competing offer for Centerpulse Shares and
Centerpulse ADSs during the statutory extension period.
On June 11, 2003, the Swiss Takeover Board (the "STOB")
issued recommendations in connection with the Zimmer Offer and the Zimmer
InCentive Offer which, among other things, held that the limitations on
withdrawal rights of the InCentive Shareholders were invalid. S&N, S&N Group and
InCentive have appealed such recommendations to the Swiss Banking Commission.
Except as set forth above, there are no other material
agreements, arrangements or understandings and actual or potential conflicts of
interest between Centerpulse or, to its knowledge, its affiliates and (1)
Centerpulse, its executive officers, directors or affiliates or (2) Zimmer, its
executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
BACKGROUND; CONTACTS BETWEEN ZIMMER AND CENTERPULSE
Prior to 2001, Centerpulse, known as Sulzer Medica Ltd. at
such time, was a subsidiary of Sulzer AG ("Sulzer"). In 2001, Sulzer distributed
substantially all its shares of Sulzer Medica Ltd. pro rata to Sulzer
shareholders. In May 2002, Sulzer Medica Ltd. changed its name to Centerpulse
Ltd. Also in May 2002, a US district court approved a settlement of litigation
relating to Inter-Op(TM) shells and tibial base plates (the "US Litigation"),
which was funded in November 2002 using the proceeds of a rights offering to
Centerpulse's existing shareholders in October 2002. From time to time during
2002, Centerpulse also evaluated different strategies to improve its competitive
position and enhance shareholder value, including opportunities for
divestitures, alliances or other strategic transactions. On June 12, 2002, the
Centerpulse Board announced that it had decided to focus Centerpulse on its core
activities--orthopedics, spine and dental implants and biologics--and to divest
itself of the businesses represented by its cardiovascular division, ITI,
Vascutek and Carbomedics. On August 30, October 3 and November 26, 2002,
Centerpulse executed a definitive purchase agreement for the divestiture of each
of ITI, Vascutek and Carbomedics, respectively. The ITI and Vascutek
divestitures closed in November 2002 and the Carbomedics divestiture closed in
January 2003.
On March 10, 2002, J. Raymond Elliott, Chairman, President
and Chief Executive Officer of Zimmer, and Dr. Link, met in New York, New York
to discuss a potential business combination between Zimmer and Centerpulse.
According to the Zimmer Prospectus, on March 12, 2002,
Zimmer formally engaged Credit Suisse First Boston to act as its exclusive
financial advisor in connection with its potential interest in the acquisition
of Centerpulse.
On June 30, 2002, Mr. Elliott and Sam R. Leno, Senior Vice
President and Chief Financial Officer of Zimmer, met in Madrid, Spain with Dr.
Link to discuss the potential of a business combination between Zimmer and
5
Centerpulse, including the merits of such a combination, potential structure and
timing and general views as to valuation.
In early July 2002, Mr. Elliott and Dr. Link, at the
conclusion of a telephonic conversation regarding a potential business
combination of Zimmer and Centerpulse, determined to discontinue talks regarding
the combination of the two companies because of significant differences between
the parties regarding the relative valuations of Zimmer and Centerpulse.
According to the Zimmer Prospectus, on August 20, 2002, Mr.
Braginsky and a representative of Credit Suisse First Boston met in Zurich for
purposes of a general business discussion. Among other matters, the subject of a
potential business combination between Zimmer and Centerpulse was discussed, and
Mr. Braginsky suggested the reopening of discussions between Zimmer and
Centerpulse. Subsequent to the August 20 meeting, the parties agreed to schedule
another meeting between representatives of Zimmer and Centerpulse.
On September 5, 2002, a representative of Credit Suisse
First Boston contacted Prof. Dr. Rolf Watter, a member of the Centerpulse Board,
to discuss a potential re-initiation of discussions between Zimmer and
Centerpulse.
On September 7, 2002, Dr. Watter communicated to the Credit
Suisse First Boston representative that certain members of the Centerpulse
Board, including Dr. Link, Dr. Watter and Johannes Randegger, would be willing
to meet Mr. Elliott and Mr. Leno in Zurich, Switzerland on September 22, 2002.
On September 22, 2002, Mr. Elliott and Mr. Leno met in
Zurich, Switzerland with Dr. Link, Urs Kamber, Chief Financial Officer of
Centerpulse, Dr. Randegger and Dr. Watter to discuss the strategic compatibility
of Zimmer and Centerpulse. At the conclusion of the meeting, Centerpulse
informed Zimmer that its priority was the completion of a rights offering to
finance the settlement of the US Litigation.
On October 9, 2002, after Centerpulse had completed its
rights offering, representatives of Zimmer and Centerpulse met in New York, New
York and had a brief exploratory discussion about a potential business
combination between Zimmer and Centerpulse. At this meeting, Dr. Link requested
that Zimmer submit a written offer to Centerpulse regarding its interest in a
business combination with Centerpulse.
On October 17, 2002, the Centerpulse Board received a
preliminary non-binding proposal from Mr. Elliot regarding a possible business
combination of Zimmer and Centerpulse under which Centerpulse shareholders would
receive a combination of Zimmer Shares and cash that valued each Centerpulse
Share, based on the then current market price of Zimmer Shares and the then
current exchange rate between the US dollar and Swiss franc, at approximately
CHF 250. The proposal indicated that it "could have additional limited upside"
following due diligence and that Zimmer was willing to proceed with due
diligence only on an exclusive basis. In late October 2002, Dr. Link informed
Mr. Elliott that the Centerpulse Board had reviewed Zimmer's proposal, deemed
Zimmer's proposal inadequate and was not prepared at that time to pursue further
discussions with Zimmer regarding a potential business combination between
Zimmer and Centerpulse.
On October 22, 2002, the Centerpulse Board met to discuss
Centerpulse's strategic options, including remaining as a stand-alone entity,
and authorized senior management of Centerpulse to initiate a formal process to
explore a possible sale of Centerpulse as an entirety to, or a possible business
combination of Centerpulse with, a third party.
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On December 11 and 20, 2002, the Centerpulse Board formally
engaged UBS Securities LLC ("UBS Securities") and Lehman Brothers Inc. ("Lehman
Brothers"), respectively, to represent Centerpulse in exploring a possible sale
of Centerpulse as an entirety to, or a possible business combination of
Centerpulse with, a third party.
Between December 11, 2002 and January 16, 2003,
representatives of Lehman Brothers and UBS Securities had telephonic
conversations with ten potential acquirors who had previously expressed an
interest in pursuing a possible strategic transaction with Centerpulse during
2002. Each of these parties was invited to participate in a process, authorized
by the Centerpulse Board, which could ultimately lead to a sale of the Company.
Six of these parties, including Zimmer, declined to participate in this process.
Upon execution of a confidentiality agreement, a process letter was sent out to
the remaining parties along with a confidential information memorandum. The
process letter requested that recipients submit a written indication of interest
to Lehman Brothers and UBS Securities, containing a preliminary non-binding
proposal for a transaction with Centerpulse as an entirety, no later than
January 14, 2003.
On January 14, 2003, S&N submitted a letter to Lehman
Brothers and UBS Securities containing S&N's preliminary non-binding proposal to
acquire Centerpulse through a stock-for-stock exchange offer for all outstanding
Centerpulse Shares at an exchange ratio that, based on the then current market
price of S&N Shares and the then current exchange rate between pound sterling
and Swiss franc, represented a premium to the then current market price of
Centerpulse Shares. S&N's preliminary non-binding proposal was subject to
completion of satisfactory due diligence and negotiation of the terms and
conditions of the exchange offer and the necessary documentation. In its
preliminary non-binding proposal, S&N also indicated that, to the extent that
some Centerpulse shareholders preferred cash consideration to S&N Shares, S&N
intended to make a significant element of cash consideration available in the
exchange offer. The three other written indications of interest received by
Lehman Brothers and UBS Securities related to specific business units rather
than Centerpulse as an entirety.
On January 16, 2003, Dr. Link and Christopher J. O'Donnell,
the Chief Executive Officer of S&N, and, separately, representatives of Lazard &
Co., Limited, S&N's primary financial advisor ("Lazard"), and representatives of
Lehman Brothers and UBS Securities held discussions relating to S&N's
preliminary non-binding proposal and S&N's desire that it be granted a period of
exclusivity during which to complete its due diligence investigation of
Centerpulse. Following these discussions, on January 17, 2003, Lazard delivered
a letter to Lehman Brothers and UBS Securities confirming S&N's willingness to
make a small increase to the exchange ratio set forth in S&N's preliminary
non-binding proposal if S&N were granted a period of exclusivity and access to
due diligence information. Also, on January 17, 2003, the Centerpulse Board met
to discuss S&N's preliminary non-binding proposal and the three other written
indications of interest. At that meeting, the Centerpulse Board authorized
senior management of Centerpulse to pursue further discussions with S&N
regarding its preliminary non-binding proposal and decided not to pursue the
three other written indications of interest because they related to specific
business units rather than Centerpulse as an entirety.
On January 21, 2003, Lehman Brothers and UBS Securities
sent a letter to Lazard describing the terms on which the Centerpulse Board was
prepared to grant S&N a period of exclusivity in which to complete its due
diligence investigation of Centerpulse. The letter also indicated that
Centerpulse would prefer offer consideration consisting of approximately 25% to
30% cash, proposed that the applicable exchange ratio would be subject to
increase upon a decrease of a S&N Share's price or upon foreign exchange rate
fluctuations adversely impacting the value of the consideration to be offered in
the S&N Offer and indicated that Centerpulse wished to conduct due diligence on
S&N. The letter indicated that Centerpulse was seeking non-executive
representation on the board of directors of S&N commensurate with the ownership
of Centerpulse shareholders of the outstanding S&N Shares after the completion
7
of the S&N Offer. Centerpulse also sought confirmation that Centerpulse's
Winterthur facility would continue to be a major manufacturing operation for at
least three years following completion of the S&N Offer and that the heads of
Centerpulse's four business units would be offered their existing or equivalent
positions. Centerpulse noted that it would require a secondary listing of S&N
Shares on the SWX Swiss Stock Exchange (the "SWX") and that in Centerpulse's
view, the S&N Offer should be subject only to conditions relating to approval of
the transaction by S&N shareholders, listing of the S&N Shares to be issued to
Centerpulse shareholders on the London Stock Exchange, clearance by relevant
competition law authorities and acceptance of the S&N Offer by the holders of
the minimum required percentage of Centerpulse Shares. The letter proposed a
staged process for S&N's due diligence, with the first phase to culminate in
S&N's submission of a confirmed proposal on February 20, 2003, after which,
assuming the proposal was acceptable to Centerpulse, S&N would be afforded
access to the more sensitive second phase due diligence. On January 22, 2003,
senior management of S&N and representatives of Lazard met with senior
management of Centerpulse and representatives of Lehman Brothers and UBS
Securities to discuss these matters.
On January 23, 2003, Lazard sent a letter to Lehman
Brothers and UBS Securities confirming the matters discussed at the January 22,
2003 meeting, including S&N's requirement for exclusivity commitments from both
Centerpulse and InCentive and for a fixed exchange ratio. The letter also
confirmed S&N's proposal that Dr. Link would become a non-executive Vice
Chairman of S&N, and S&N's expectation that it would keep the Winterthur plant
in operation, and stated that S&N could not make any commitment in relation to
the positions to be offered to the heads of Centerpulse's four business units.
The letter also indicated S&N would not agree to a mechanism that guaranteed
that the value of the offer consideration would not be negatively affected by
share price or foreign exchange rate fluctuations. The letter changed the
outside date for S&N's confirmed proposal to February 23, 2003.
In late January 2003, prior to January 24, 2003,
representatives of UBS Securities made further contact with representatives of
Zimmer in which Zimmer was given an opportunity to reconsider its decision not
to participate in the process. Again, Zimmer declined to participate in the
process.
On January 24, 2003, Centerpulse agreed, for a period
ending January 29, 2003, except as otherwise required by law, not to negotiate
with any other party or solicit proposals or offers from, or furnish information
to, any third parties in connection with or furtherance of an acquisition
transaction involving the sale of Centerpulse. On the same date, legal counsel
to Centerpulse delivered a draft of the Combination Agreement to legal counsel
to S&N.
On January 29, 2003, Lehman Brothers and UBS Securities, on
behalf of Centerpulse, and Lazard, on behalf of S&N, signed a letter
memorializing the parties' discussions to date with respect to the S&N Offer.
The letter extended the term of the January 24, 2003 exclusivity agreement to
March 3, 2003, subject to immediate termination if Centerpulse did not receive
an acceptable confirmed proposal from S&N by February 23, 2003.
From January 27, 2003 through February 21, 2003, senior
management of S&N, representatives of Lazard, S&N's legal counsel, S&N's
accounting advisors and S&N's outside management consultants met with the senior
management of Centerpulse and representatives of Lehman Brothers and UBS
Securities on numerous occasions in Zurich, Switzerland and New York, New York
to perform financial, operational and legal due diligence.
On January 31, 2003, at a meeting in Zurich, Switzerland
among representatives of Lazard, senior management of S&N and senior management
of InCentive, senior management of InCentive proposed that S&N conduct a
separate exchange offer for all of the InCentive Shares.
8
On February 5, 2003, Lazard sent a letter to Mr. Braginsky
indicating that any separate exchange offer for InCentive Shares by S&N would
require indemnification by InCentive shareholders and possibly an escrow
arrangement to protect S&N from any residual liabilities of InCentive. On
February 7, 2003, InCentive agreed, for a period ending March 3, 2003, not to
negotiate with any other party or solicit offers from, or furnish information
to, any third parties in connection with a sale or related transaction involving
InCentive or the Centerpulse Shares held by InCentive, subject to certain
conditions.
On February 13, 2003 and February 14, 2003, Centerpulse
senior management, representatives of Lehman Brothers and UBS Securities,
Centerpulse's legal counsel and Centerpulse's accounting advisors conducted a
due diligence review of S&N in London, England, pursuant to a confidentiality
agreement executed on February 11, 2003. On February 13, 2003, S&N and InCentive
each executed mutual confidentiality agreements and representatives of InCentive
attended S&N's due diligence presentations to Centerpulse and its advisors.
On February 15, 2003, legal counsel to S&N delivered
comments to the draft of the Combination Agreement to Centerpulse's legal
counsel.
On February 27, 2003, Mr. O'Donnell sent a letter to Dr.
Link that indicated that, as a result of movements in the market prices of S&N
Shares and Centerpulse Shares and adverse currency fluctuations and in light of
S&N's assessment of Centerpulse upon completion of its due diligence review, S&N
would not be prepared to proceed with a transaction at the exchange ratio
proposed in S&N's preliminary non-binding proposal. In his letter, Mr. O'Donnell
suggested two alternative ways to proceed with a possible transaction: (1) an at
market price business combination that included a cash element or (2) a business
combination with an exchange ratio, which, based on the then current market
price of S&N Shares and the then current exchange rate between pounds sterling
and Swiss francs, represented a slight premium to the then current market value
of Centerpulse Shares, but provided that a portion of the cash element of the
offer consideration would be contingent for five years.
On February 28, 2003, the Centerpulse Board met to discuss
Mr. O'Donnell's letter of February 27, reviewed the two alternatives proposed in
the letter, rejected the business combination alternative contemplating a
contingency structure and authorized senior management of Centerpulse to pursue
further discussions with S&N regarding an at market price business combination.
On March 3, 2003, Mr. O'Donnell and Peter Hooley, finance
director of S&N, met with Dr. Link and Mr. Braginsky in London, England to
discuss the idea of an at market price business combination.
Also, on March 3, 2003, after the expiration of the
exclusivity period between S&N and Centerpulse, a representative of Lehman
Brothers met with representatives of Zimmer at the Lehman Brothers healthcare
conference. At that meeting, the representative of Lehman Brothers informed the
representatives of Zimmer that the process relating to Centerpulse was moving
forward, but that the result was unclear, and that there was therefore an
opportunity for Zimmer to reconsider whether it was interested in pursuing a
business combination with Centerpulse. The representatives of Zimmer did not
indicate any interest in such a transaction with Centerpulse at such time.
On March 5, 2003, S&N submitted a non-binding confirmed
proposal to Lehman Brothers and UBS Securities in which S&N described the terms
under which S&N would offer to exchange each Centerpulse Share for a total
consideration equal to 33.6 S&N Shares, including a total cash component of
(pound)400 million to be offered to Centerpulse shareholders through a "mix and
match facility". The transaction proposed by S&N would give Centerpulse
shareholders ownership of approximately 24% of the outstanding S&N Shares after
completion of the transaction, in addition to the (pound)400 million of total
cash consideration. S&N indicated its willingness to proceed with a separate
exchange offer for all of the InCentive Shares at an exchange offer
consideration equal to the amount that, and in the same form as, InCentive would
9
have received had it tendered the Centerpulse Shares held by it in the S&N
Offer, with additional cash consideration being paid in respect of the cash
assets of InCentive resulting from the liquidation of InCentive's
non-Centerpulse Share assets. S&N also increased to two the number of
Centerpulse directors it would invite to join the board of the combined company,
indicated that it would seek to offer senior operating management of Centerpulse
suitable posts in the combined company, clarified that it envisaged the
Winterthur facility continuing to be an important center for the combined group
for a number of years and confirmed that it would seek a secondary listing on
the SWX by the completion of the S&N Offer. S&N stated that its non-binding
confirmed proposal was subject to satisfactory completion of any outstanding
first phase or second phase due diligence, negotiation of the terms and
conditions of the S&N Offer, including a combination agreement containing an
appropriate break fee, negotiation of indemnification, escrow and irrevocable
tender arrangements with InCentive's major shareholders and final approval of
the board of directors of S&N.
On March 5 and March 6, 2003, representatives of Lazard and
representatives of Lehman Brothers and UBS Securities had a number of
discussions in which Centerpulse's financial advisors indicated that S&N would
have to increase the exchange ratio in order to gain the approval of the
Centerpulse Board. On the morning of March 7, 2003, S&N indicated that it was
willing to increase the exchange ratio to 34.0 S&N Shares per Centerpulse Share,
but would not increase the exchange ratio any further. S&N also indicated that
S&N would want key shareholders of InCentive to escrow funds to be used to
indemnify S&N against possible liabilities of InCentive. On March 7, 2003, the
Centerpulse Board met to discuss and consider the terms set forth in S&N's
non-binding confirmed proposal. After such meeting, Dr. Link indicated in a
letter to Mr. O'Donnell that, as of that date, and subject to Centerpulse Board
approval of definitive agreements, Centerpulse would be willing to proceed upon
the terms set forth in S&N's non-binding confirmed proposal. The letter
suggested that each party provide a break fee to the other not to exceed CHF 20
million, noting the limitations on break fees under Swiss law. Dr. Link also
indicated that Centerpulse would extend S&N's exclusivity period to March 20,
2003. On March 8, 2003, Mr. O'Donnell sent a letter to Dr. Link advising him
that S&N believed that a CHF 40 million break fee was appropriate.
On March 10, 2003, S&N submitted to representatives of
InCentive a proposed term sheet detailing the terms and conditions under which
S&N would be willing to acquire the InCentive Shares in a separate exchange
offer. Also on March 10, 2003, Mr. Braginsky delivered a letter to Mr. O'Donnell
indicating that InCentive would be willing to proceed with a transaction
structured as an exchange offer for InCentive Shares on the terms previously
outlined by S&N, subject to the execution of the transaction agreements. On the
same date, legal counsel to Centerpulse delivered a revised draft of the
Combination Agreement to legal counsel to S&N.
During the week of March 10, 2003, S&N and its financial
and legal advisors conducted additional due diligence on Centerpulse and
InCentive. On March 12, 2003, legal counsel to S&N delivered S&N's comments on
the revised draft of the Combination Agreement to legal counsel to Centerpulse.
On March 13 and March 15, 2003, at meetings of senior management of S&N and
Centerpulse and their respective financial and legal advisors and independent
auditors, representatives of S&N presented a proposal to include the proposed
reorganization of S&N by way of a court-approved scheme of arrangement as part
of the transaction structure. Representatives of S&N explained that under the
revised structure, the exchange offers for Centerpulse and InCentive would be
made by S&N Group, the proposed holding company of S&N. Representatives of S&N
further explained that the proposed structure would enable S&N Group
shareholders to receive dividends without incurring withholding tax under Swiss
law (other than those S&N Group shareholders who are Swiss tax residents, who
may obtain a refund or tax credit in the full amount of the withholding tax).
Between March 13 and March 19, 2003, senior management of
S&N and Centerpulse and their respective financial and legal advisors negotiated
the terms of the Combination Agreement, including the conditions to the S&N
10
Offer. At the same time, senior management of S&N and InCentive and their
respective legal advisors negotiated the terms of the InCentive Transaction
Agreement, as well as the InCentive Tender Agreement pursuant to which the
InCentive Shareholders agreed to tender their InCentive Shares in the S&N
InCentive Offer and, in the case of a third party offer, granted S&N Group a
right to purchase such InCentive Shares at the third party offer price. In
addition, pursuant to the InCentive Tender Agreement, the InCentive Shareholders
agreed to indemnify S&N Group against certain liabilities of InCentive and to
escrow a portion of the consideration they would receive in the S&N InCentive
Offer to support the indemnity.
On March 19, 2003, the Centerpulse Board met with senior
management of Centerpulse, Centerpulse's legal counsel and representatives of
Lehman Brothers and UBS Securities to consider the S&N Offer. Representatives of
Lehman Brothers and UBS Securities presented their analyses of the S&N Offer and
each of Lehman Brothers and UBS Securities rendered to the Centerpulse Board its
oral opinion (each of which opinion was subsequently confirmed by delivery of a
written opinion dated March 20 and 19, 2003, respectively) that, as of such date
and based on and subject to the matters described in the opinion, the
consideration to be received by the holders of Centerpulse Shares (other than
InCentive and its affiliates) pursuant to the S&N Offer is fair, from a
financial point of view, to such holders. Representatives of Lehman Brothers and
UBS Securities then responded to questions raised by the Centerpulse Board
regarding their respective analyses and opinions. The Centerpulse Board then
engaged in a full discussion of the terms of the proposed Combination Agreement,
the various factors considered by the Centerpulse Board in approving the
Combination Agreement and recommending the S&N Offer and the analyses and
opinions of Lehman Brothers and UBS Securities. Thereafter, the Centerpulse
Board determined that the Combination Agreement and the transactions
contemplated thereby, including the S&N Offer, are fair to, and in the best
interests of, shareholders of Centerpulse and recommended that the shareholders
of Centerpulse accept the S&N Offer.
Also on March 19, 2003, the board of directors of InCentive
met with senior management of InCentive, InCentive's legal counsel and
representatives of InCentive's financial advisor, Lombard Odier, to consider the
proposed S&N InCentive Offer. Representatives of Lombard Odier presented their
analysis of the S&N InCentive Offer and rendered to the InCentive board of
directors its oral opinion (which opinion was subsequently confirmed by delivery
of a written opinion dated March 19, 2003) that as of such date and based on and
subject to the matters described in the opinion, the consideration to be
received by holders of InCentive Shares in the S&N InCentive Offer is fair, from
a financial point of view, to such holders. Thereafter, the InCentive board of
directors approved the InCentive Transaction Agreement and the S&N InCentive
Offer, determined that the terms of the S&N InCentive Offer are fair to, and in
the best interests of, shareholders of InCentive and recommended that the
shareholders of InCentive accept the S&N InCentive Offer.
Negotiations of the Combination Agreement and the InCentive
Transaction Agreement, as well as the InCentive Tender Agreement, continued
until the morning of March 20, 2003, when each of these agreements was executed
by the parties thereto. In the morning of March 20, 2003, the execution of the
transaction agreements relating to the S&N Offer and the S&N InCentive Offer was
publicly announced by way of a press release in the United Kingdom and the
United States as well as Swiss pre-announcements of the S&N Offer and the S&N
InCentive Offer. Later that day, S&N filed the press release and the
pre-announcements with the SEC pursuant to Rule 425 under the Securities Act of
1933.
On April 4, 2003, due to comments of the STOB to the effect
that a fairness opinion should be obtained from a financial advisor that did not
have a fee arrangement contingent upon the completion of the S&N Offer,
Centerpulse retained KPMG Fides Peat ("KPMG") to render to the Centerpulse Board
an opinion as to the fairness, from a financial point of view, of the
consideration to be received by the holders of Centerpulse Shares (other than
InCentive and its affiliates) pursuant to the S&N Offer. On April 10, 2003, KPMG
11
rendered its opinion that, as of such date, the consideration to be received by
the holders (other than InCentive and its affiliates) of Centerpulse Shares in
the S&N Offer is fair, from a financial point of view, to such holders.
On April 14, 2003, by circular resolution (written
consent), the Centerpulse Board adopted the board report formally recommending
that Centerpulse shareholders accept the S&N Offer based on the Centerpulse
Board's assessment of various strategic considerations and the fairness opinions
provided by Lehman Brothers, UBS Securities and KPMG.
On April 25, 2003, S&N filed the S&N Registration Statement
with the SEC and commenced the S&N Offer and the S&N InCentive Offer.
On May 20, 2003, Zimmer announced that, subject to certain
conditions contained in its Swiss pre-announcement, it planned to commence an
unsolicited exchange offer for Centerpulse Shares in which it would offer 3.68
Zimmer Shares and CHF 120 for each Centerpulse Share. Zimmer also announced that
it would also make an unsolicited exchange offer for InCentive Shares. On that
same day, Dr. Link received a letter from Mr. Elliott regarding Zimmer's
intention to make an exchange offer, subject to due diligence and other
conditions, for all outstanding Centerpulse Shares and Centerpulse ADSs. Later
that day, the Company issued a press release stating, inter alia, that the
Centerpulse Board was evaluating the value, the conditions to and the certainty
of execution of Zimmer's proposal and intended to make a further announcement in
due course.
On May 21, 2003, Mr. Elliott and other Zimmer
representatives met with Dr. Randegger and Dr. Watter to discuss, among other
things, the pre-announcement of Zimmer's planned exchange offer for Centerpulse
Shares and the process for the due diligence to be conducted by Zimmer.
On May 25, 2003, Centerpulse engaged Goldman Sachs
International ("Goldman Sachs") to act as an additional advisor to the
Centerpulse Board in relation to the sale of Centerpulse and to advise the
Centerpulse Board on, among other things, the S&N Offer and the Zimmer Offer.
In connection with each party's proposed due diligence
review of the other party, on May 26, 2003, Zimmer and Centerpulse executed a
confidentiality agreement relating to information to be provided to Zimmer and
its representatives, and on June 9, 2003, Zimmer and Centerpulse executed a
confidentiality agreement relating to information to be provided to Centerpulse
and its representatives. Following these dates, the parties provided each other
with access to information and personnel for due diligence purposes.
On May 27, 2003, Zimmer filed the Zimmer Registration
Statement and a registration statement relating to the Zimmer InCentive Offer
(the "Zimmer InCentive Registration Statement") with the SEC.
On May 29, 2003, Zimmer announced that it was notifying the
STOB that the Zimmer Offer would no longer contain the conditions included in
Zimmer's May 20, 2003 Swiss pre-announcement relating to (1) the US Litigation
and (2) confirmation that the completion of the Zimmer Offer and the related
acquisition of InCentive will not trigger a corporate income tax liability in
connection with Centerpulse's spin-off from Sulzer.
On May 30, 2003, the Centerpulse Board met to review the
situation with representatives of Lehman Brothers, UBS Securities and Goldman
Sachs.
On June 11, 2003, the STOB issued recommendations in
connection with the Zimmer Offer which, among other things, specified a
timetable for the Zimmer Offer and the S&N Offer and held that the limitations
12
on withdrawal rights of the InCentive Shareholders were invalid. S&N, S&N Group
and InCentive have appealed such recommendations to the Swiss Banking
Commission.
Also, on June 11, 2003, Zimmer and InCentive executed
confidentiality agreements relating to due diligence information to be provided
to each party. Thereafter, Zimmer and InCentive conducted due diligence reviews
of one another.
On June 19, 2003, the Zimmer Registration Statement and the
Zimmer InCentive Registration Statement were declared effective by the SEC, and
Zimmer commenced the Zimmer Offer and the Zimmer InCentive Offer. Later that
day, Centerpulse issued a press release stating, among other things, that the
Centerpulse Board would issue a report to Centerpulse shareholders on the Zimmer
offer as soon as it had an opportunity to study the Zimmer Offer in detail and
in accordance with Swiss Takeover Law. In the meantime, the Centerpulse Board
advised Centerpulse shareholders that they were not required to take any further
action at that point. In the early evening of June 19, 2003, the Centerpulse
Board met to review and discuss the S&N Offer and the Zimmer Offer with
representatives of Lehman Brothers, UBS Securities and Goldman Sachs.
On June 20, 2003, Dr. Link sent a letter to Centerpulse
shareholders stating, inter alia, that in accordance with Swiss Takeover Law,
the Centerpulse Board intends to make a report to Centerpulse shareholders on
the Zimmer Offer by July 9, 2003, once the Centerpulse Board has had the
opportunity to study the Zimmer Offer in detail. The letter also reiterated that
Centerpulse shareholders are not required to take any action in the meantime.
On June 30, 2003, Mr. Kamber sent a letter to Mr. Leno
objecting to certain statements in the Zimmer Prospectus and reiterating a
request for access to undisclosed schedules to Zimmer's credit agreements that
are said to contain conditions precedent to funding the cash portion of the
consideration for the Zimmer Offer. Mr. Leno and Mr. Kamber exchanged further
correspondence on these matters on July 3 and 7, 2003, respectively, and Zimmer
furnished the requested information to Centerpulse.
On July 3, 2003, the STOB issued further recommendations
specifying the timetable for the S&N Offer and the Zimmer Offer.
On July 7, 2003, at the request of S&N Group, Mr. Kamber
and another representative of Centerpulse, together with representatives of
Lehman Brothers, UBS Securities and Goldman Sachs, met a representative of S&N
Group and representatives of Lazard regarding the timetable specified by the
STOB. On July 8, 2003, Dr. Link met with Mr. O'Donnell in Zurich, Switzerland
about the same subject.
On July 8, 2003, the Centerpulse Board met with senior
management of Centerpulse, Centerpulse's legal counsel and independent
accountants, an independent industry specialist and representatives of Lehman
Brothers, UBS Securities and Goldman Sachs to consider the Zimmer Offer and
compare it to the S&N Offer. The Centerpulse Board reviewed the results of the
business, financial and legal due diligence Centerpulse and its advisors had
conducted with respect to Zimmer. Representatives of Lehman Brothers, UBS
Securities and Goldman Sachs then presented their financial analyses of the
Zimmer Offer and a comparison of the Zimmer Offer to the S&N Offer. After
discussion, the Centerpulse Board adopted the report (the "July 8 Centerpulse
Board Report") attached to this Statement as Annex B.
On July 9, 2003, Dr. Link sent letters to Centerpulse
shareholders, a copy of which is attached to this Statement as Annex A, and
Centerpulse employees informing such shareholders and such employees about the
issuance of the July 8 Centerpulse Board Report and the position of the
13
Centerpulse Board taken therein. On that same day, Centerpulse also issued a
press release regarding the issuance of the July 8 Centerpulse Board Report.
POSITION OF THE CENTERPULSE BOARD WITH RESPECT TO THE ZIMMER OFFER
AND THE REASONS THEREFOR
Reference is made to the July 8 Centerpulse Board Report
attached to this Statement as Annex B, which is incorporated herein by
reference.
INTENT OF CERTAIN PERSONS TO TENDER
The directors and executive officers of Centerpulse have
not indicated how they intend to tender under the changed circumstances.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
Pursuant to a letter agreement, dated as of December 20,
2002, Centerpulse engaged Lehman Brothers to act as its co-financial advisor in
connection with the sale of the Company. Pursuant to the terms of this
engagement letter, Centerpulse (1) has paid to Lehman Brothers an opinion fee of
$1.5 million in connection with the delivery of a fairness opinion regarding the
S&N Offer, which will be offset against the transaction fee referred to below,
and (2) has agreed to pay Lehman Brothers a transaction fee of 0.3% of the
transaction value of any transaction involving the sale of the Company upon
completion of such transaction. Centerpulse also has agreed to reimburse Lehman
Brothers for its reasonable out-of-pocket expenses, including attorneys' fees,
and to indemnify Lehman Brothers against certain liabilities, including certain
liabilities under the United States federal securities laws. Lehman Brothers is
an internationally recognized investment banking firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for corporate and
other purposes. The Centerpulse Board selected Lehman Brothers because of its
expertise, reputation and familiarity with Centerpulse and the orthopedic
industry generally, and because its investment banking professionals have
substantial experience in transactions comparable to the contemplated
transaction. In the ordinary course of its business, Lehman Brothers may
actively trade in the debt or equity securities of Centerpulse, S&N or Zimmer
for its own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
Pursuant to a letter agreement, dated as of December 11,
2002, Centerpulse engaged UBS Securities to act as its co-financial advisor in
connection with the sale of the Company. Pursuant to the terms of this
engagement letter, Centerpulse (1) has paid to UBS Securities an opinion fee of
$1.5 million in connection with the delivery of a fairness opinion regarding the
S&N Offer, which will be offset against the transaction fee referred to below,
and (2) has agreed to pay UBS Securities a transaction fee of 0.3% of the
transaction value of any transaction involving the sale of the Company upon
completion of such transaction. Centerpulse also has agreed to reimburse UBS
Securities for its reasonable out-of-pocket expenses, including attorneys' fees,
and to indemnify UBS Securities against certain liabilities, including certain
liabilities under the United States federal securities laws. Centerpulse
selected UBS Securities based on its experience, expertise and reputation. UBS
Securities is an internationally recognized investment banking firm that
regularly engages in the valuation of securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Prior to this engagement,
UBS Securities and its predecessors have provided investment banking and other
financial services to Centerpulse and its affiliates and received customary
compensation for the rendering of such services. In the ordinary course of
14
business, UBS Securities, its successors and affiliates may trade or have traded
securities of Centerpulse, S&N, InCentive or Zimmer for their own accounts and,
accordingly, may at any time hold a long or short position in such securities.
Pursuant to a letter agreement, dated as of May 25, 2003,
Centerpulse engaged Goldman Sachs to act as advisor to the Centerpulse Board in
relation to the sale of the Company and to advise the Centerpulse Board on,
among other things, the S&N Offer and the Zimmer Offer. Pursuant to the terms of
this engagement letter, Centerpulse has agreed to pay Goldman Sachs $6 million
upon the completion of a sale of the Company. Centerpulse also has agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorneys' fees, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the United States federal securities laws.
Goldman Sachs, as part of its investment banking business, is continually
engaged in performing financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities and private placements as well as for estate, corporate and
other purposes. Goldman Sachs is familiar with Centerpulse having acted as its
financial advisor from time to time. Goldman Sachs also may provide investment
banking services to Zimmer or S&N in the future. Goldman Sachs provides a full
range of financial, advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
positions in the debt and equity securities, including derivative securities, of
Centerpulse or Zimmer or S&N for its own account and for the account of
customers.
Except as set forth above, neither Centerpulse nor any
person acting on its behalf has employed, retained or compensated, or currently
intends to employ, retain or compensate any person to make solicitations or
recommendations to holders of the Centerpulse Shares, including Centerpulse
Shares represented by Centerpulse ADSs, on its behalf with respect to the Zimmer
Offer, except that such solicitations or recommendations may be made by
directors, officers or employees of Centerpulse, for which services no
additional compensation will be paid.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
The following table sets forth information regarding the
exercise of stock options by the executive officers of Centerpulse listed below:
NUMBER OF SECURITIES ISSUED
NAME DATE WEIGHTED AVERAGE EXERCISE PRICE UPON EXERCISE
---- ---- ------------------------------- -------------
David Floyd May 23, 2003 $9.46 per Centerpulse ADS 17,360 Centerpulse ADSs
Steven Hanson May 22, 2003 $12.53 per Centerpulse ADS 19,250 Centerpulse ADSs
May 23, 2003 $19.02 per Centerpulse ADS 17,500 Centerpulse ADSs
Matthias Moelleney May 14, 2003 CHF 147 per Centerpulse Share 1,000 Centerpulse Shares
June 2, 2003 CHF 147 per Centerpulse Share 250 Centerpulse Shares
Beatrice Tschanz May 30, 2003 CHF 198 per Centerpulse Share 1,250 Centerpulse Shares
Thomas Zehnder May 27, 2003 CHF 131 per Centerpulse Share 1,500 Centerpulse Shares
May 27, 2003 CHF 76 per Centerpulse Share 250 Centerpulse Shares
June 2, 2003 CHF 198 per Centerpulse Share 1,250 Centerpulse Shares
15
The following table sets forth information regarding the
sale of Centerpulse Shares or Centerpulse ADSs, as the case may be, by the
executive officers of Centerpulse listed below:
NAME DATE WEIGHTED AVERAGE SALE PRICE NUMBER OF SECURITIES SOLD EXCHANGE
---- ---- --------------------------- ------------------------- --------
David Floyd May 23, 2003 $26.40 per Centerpulse ADS 17,360 Centerpulse ADSs NYSE
May 23, 2003 $26.30 per Centerpulse ADS 1,000 Centerpulse ADSs NYSE
Steven Hanson May 22, 2003 $25.87 per Centerpulse ADS 19,250 Centerpulse ADSs NYSE
May 23, 2003 $26.75 per Centerpulse ADS 17,500 Centerpulse ADSs NYSE
Mike McCormick May 16, 2003 $22.40 per Centerpulse ADS 3,750 Centerpulse ADSs NYSE
May 19, 2003 $22.65 per Centerpulse ADS 1,680 Centerpulse ADSs NYSE
Matthias Moelleney May 14, 2003 CHF 289 per Centerpulse Share 1,000 Centerpulse Shares SWX
June 2, 2003 CHF 355 per Centerpulse Share 250 Centerpulse Shares SWX
Beatrice Tschanz May 30, 2003 CHF 350 per Centerpulse Share 1,250 Centerpulse Shares SWX
Thomas Zehnder May 27, 2003 CHF 340 per Centerpulse Share 1,750 Centerpulse Shares SWX
June 2, 2003 CHF 355 per Centerpulse Share 1,250 Centerpulse Shares SWX
The information above as to sales has been provided to the
Company by the relevant executive officer of Centerpulse.
Except as set forth above, no transactions in the
Centerpulse Shares or the Centerpulse ADSs have been effected during the past 60
days by Centerpulse or any subsidiary of Centerpulse or, to Centerpulse's
knowledge, by any executive officer, director or affiliate of Centerpulse.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a) Except as set forth in this Statement or the S&N Offer
14D-9, which information is incorporated by reference in this Statement,
Centerpulse is not undertaking or engaged in any negotiations in response to the
Zimmer Offer that relate to: (1) a tender offer or other acquisition of
Centerpulse's securities by Centerpulse, any subsidiary of Centerpulse or any
other person; (2) an extraordinary transaction, such as a merger, reorganization
or liquidation, involving Centerpulse or any subsidiary of Centerpulse; (3) any
purchase, sale or transfer of a material amount of assets of Centerpulse or any
subsidiary of Centerpulse or (4) any material change in the present dividend
rate or policy, or indebtedness or capitalization, of Centerpulse.
(b) Except as set forth in this Statement or the S&N Offer
14D-9, which information is incorporated by reference in this Statement, there
are no transactions, board resolutions, agreements in principle or signed
contracts entered into in response to the Zimmer Offer that relate to one or
more of the matters referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION.
The information contained in all of the Exhibits referred
to in Item 9 below is incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
(a)(1) Not applicable
(a)(2)(A) Letter of the Chairman and Chief Executive Officer of
Centerpulse to the Centerpulse Shareholders, dated June
20, 2003 (incorporated by reference to Exhibit (a)(14) of
16
Centerpulse's Amendment No. 4 to Schedule 14D-9 filed
with the SEC on June 24, 2003).
(a)(2)(B) Letter of the Chairman and Chief Executive Officer of
Centerpulse to the Centerpulse Shareholders, dated July
9, 2003 (included as Annex A hereto).+
(a)(2)(C) Letter of the Chairman and Chief Executive Officer of
Centerpulse to Centerpulse Employees, dated July 9,
2003.+
(a)(2)(D) Report of the Centerpulse Board to the Centerpulse
Shareholders, dated July 8, 2003 (included as Annex B
hereto).+
(a)(3) Not applicable
(a)(4) Not applicable
(a)(5)(A) Press release issued by Centerpulse on June 19, 2003
(incorporated by reference to Exhibit (a)(13) of
Centerpulse's Amendment No. 4 to Schedule 14D-9 filed
with the SEC on June 24, 2003).
(a)(5)(B) Press release issued by Centerpulse on May 20, 2003
(incorporated by reference to Exhibit (a)(12) of
Centerpulse's Amendment No. 1 to Schedule 14D-9 filed
with the SEC on May 21, 2003).
(a)(5)(C) Press release issued by Centerpulse on July 2, 2003.*
(a)(5)(D) Press release issued by Centerpulse on July 9, 2003.+
(e)(1) Combination Agreement, dated as of March 20, 2003, among
S&N, S&N Group and Centerpulse (incorporated by reference
to Exhibit 4.30 of Centerpulse's Annual Report on Form
20-F filed with the SEC on April 24, 2003).
(e)(2) Transaction Agreement, dated as of March 20, 2003, among
S&N, S&N Group and InCentive.*
(e)(3) Tender Agreement, dated as of March 20, 2003, among S&N,
S&N Group and certain shareholders of InCentive listed
therein.*
(e)(4) Employment Agreement of Dr. Max Link, dated August 21,
2002, including an addendum, dated September 12, 2002
(incorporated by reference to Exhibit (e)(4) to
Centerpulse's Schedule 14D-9 filed with the SEC on April
25, 2003).
(e)(5) Form of Change of Control Agreement for US Members of
Centerpulse Senior Management (incorporated by reference
to Exhibit (e)(5) to Centerpulse's Schedule 14D-9 filed
with the SEC on April 25, 2003).
(e)(6) Form of Change of Control Agreement for non-US Members of
Centerpulse Senior Management (incorporated by reference
to Exhibit (e)(6) to Centerpulse's Schedule 14D-9 filed
with the SEC on April 25, 2003).
17
(e)(7) Centerpulse's Amended and Restated 1997 Management Stock
Option Plan, as amended (incorporated by reference to
Exhibit 4.1 of Centerpulse's Annual Report on Form 20-F
filed with the SEC on April 24, 2003).
(e)(8) Centerpulse's Amended and Restated 2001 Stock Option
Plan, as amended (incorporated by reference to Exhibit
4.2 of Centerpulse's Annual Report on Form 20-F filed
with the SEC on April 24, 2003).
(e)(9) Centerpulse's Amended and Restated 2001 Long-Term Stock
Option Plan, as amended (incorporated by reference to
Exhibit 4.3 of Centerpulse's Annual Report on Form 20-F
filed with the SEC on April 24, 2003).
(e)(10) Sulzer Medica's 2001 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 4 of Centerpulse's
Annual Report on Form 20-F filed with the SEC on June 18,
2001).
(e)(11) Sulzer Medica's 2002 Employee Stock Purchase Plan United
States and Canada (incorporated by reference to Exhibit
4.3 of Centerpulse's Registration Statement on Form S-8
filed with the SEC on April 2, 2002 (Registration Number
333-85388)).
(e)(12) Centerpulse's 2003 Employee Stock Purchase Plan United
States and Canada (incorporated by reference to Exhibit
4.3 of Centerpulse's Registration Statement on Form S-8
filed with the SEC on March 20, 2003 (Registration Number
333-103946)).
(e)(13) Centerpulse's 2003 Stock Option Plan (incorporated by
reference to Exhibit 4.3 of Centerpulse's Registration
Statement on Form S-8 filed with the SEC on March 20,
2003 (Registration Number 333-103945)).
(e)(14) Centerpulse's 2003 Long-Term Stock Option Plan
(incorporated by reference to Exhibit 4.3 of
Centerpulse's Registration Statement on Form S-8 filed
with the SEC on March 20, 2003 (Registration Number
333-103944)).
(g) None.
------------------------
+ Filed herewith.
* Filed as an Exhibit to the Initial Schedule 14D-9.
18
SIGNATURE
After due 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.
CENTERPULSE LTD.
By: /s/ Max Link
---------------------------------------
Max Link
Chairman and Chief Executive Officer
By: /s/ Urs Kamber
---------------------------------------
Urs Kamber
Chief Financial Officer
Dated: July 9, 2003
19
ANNEX A
[LETTERHEAD OF CENTERPULSE]
Zurich, July 9, 2003
Dear Shareholder,
I have enclosed for your information a copy of the Centerpulse Board's report of
July 8 on the offer by Zimmer Holdings, Inc., as required by Swiss Takeover Law.
You will notice that the Board has not made any recommendation at this time
regarding the offer by Zimmer. We believe that it would be premature to do so
given the current share-price for Centerpulse and market expectations. In our
deliberations we have concluded that a combination of Centerpulse with Zimmer or
Smith & Nephew Group plc would better serve the long-term interests of
shareholders rather than the continued independence of Centerpulse. We believe
that both are well run companies and a combination of Centerpulse with either of
them will produce an industry leader. However, at this stage,
o The offers differ considerably in respect of conditionality
o The value of the offers is subject to fluctuation due to changes
in the respective bidders' share prices and currency exchange
rates, and
o It is possible that either one or both of the offers may be
increased.
The Board will make a final recommendation and it is our intention to recommend
the offer that constitutes the better value for Centerpulse's shareholders. The
Board will also make an effort to receive final offers as quickly as possible,
so as to provide shareholders, employees and customers with clarity as to the
future.
May I remind you that in the meantime Centerpulse shareholders are not required
to take any action.
The offer period for the Zimmer offer opened on July 3 and will close on August
27, 2003. The Smith and Nephew offer period will be extended to the same dates
as the Zimmer offer - that is until August 27, 2003.
For your information, also attached is an indicative timetable of the next steps
in the offer process. Please note that the timetable is subject to further
change. I will write to you again in due course to update you on significant
further developments.
If you have any questions, please also feel free to contact the Centerpulse
Shareholder Helpline, telephone +41 (0) 848 372 436, Monday to Friday 8.30am to
5.30pm CET.
Yours sincerely,
/s/ Max Link
Max Link
Chairman of the Board and Chief Executive Officer
Indicative Timetable - Subject to Change
----------------------------------------
July 31, 2003 Latest day for a third party to launch an offer
August 18, 2003 Latest day for Smith & Nephew to amend its offer
August 27, 2003 End of both the Smith & Nephew and the Zimmer offer
(With the prior approval of the Swiss Takeover Board, both
Smith & Nephew and Zimmer reserve the right to extend
their offer periods beyond 40 days.)
August 28, 2003 Publication of the preliminary interim results of the
offers by Smith & Nephew and Zimmer (press release)
September 2, 2003 Publication of the definitive interim results of the
offers by Smith & Nephew and Zimmer (newspaper ads)
September 2, 2003 Start of the additional acceptance period of the
successful offer
September 15, 2003 End of the additional acceptance period of the successful
offer
September 16, 2003 Publication of the preliminary final results of the
successful offer (press release)
September 19, 2003 Publication of the definitive final results of the
successful offer (newspaper ads)
September 29, 2003 Settlement
ANNEX B
REPORT OF THE BOARD OF DIRECTORS OF CENTERPULSE AG FOLLOWING ZIMMER'S PUBLIC
TAKEOVER OFFER, AS PER ART. 29 OF THE FEDERAL ACT ON STOCK EXCHANGES AND
SECURITIES TRADING AND ART. 29-32 OF THE ORDINANCE OF THE TAKEOVER BOARD ON
PUBLIC TAKEOVERS
1 BACKGROUND
On March 20, 2003 Smith & Nephew plc and Centerpulse AG
("Centerpulse") announced that they had agreed the terms and
conditions of a public exchange and takeover offer in the form of a
combination agreement (the "Combination Agreement"). On April 16,
2003 the board of directors of Centerpulse ("Board") issued a
recommendation to accept Smith & Nephew's offer. On April 25, 2003
Smith & Nephew Group plc ("Smith & Nephew") issued an offer for all
outstanding shares of Centerpulse (the "Smith & Nephew Offer").
On May 20, 2003 Zimmer Holdings, Inc. ("Zimmer") published the
pre-announcement of a competing public exchange and takeover offer
for all outstanding shares of Centerpulse. Zimmer subsequently filed
the competing public exchange and takeover offer on June 19, 2003
(the "Zimmer Offer"). According to the timetable published by the
Swiss Takeover Board, Smith & Nephew has until 18 August 2003 to
improve its offer if it decides to do so. A third bidder would have
to publish its offer by 31 July 2003. Such offer may not contain any
condition other than an acceptance condition.
Swiss takeover law stipulates that the report of the board of
directors of the target company must be published at the latest on
the 15th trading day following the publication of an offer. For this
reason this publication is made at this time, despite the fact that
all facts and circumstances relevant for the final assessment of the
offers are not yet known.
2 OPINION OF THE BOARD
The Board, together with management, has again analysed the short-
and long-term prospects of Centerpulse as an independent enterprise
and carefully evaluated, with a view to the market position of
Centerpulse in certain key markets, the advantages of joining forces
with a strategic partner, particularly with one of the bidders. The
Board has, supported by an independent advisor, evaluated the
strategic implications of the two offers from the perspective of all
stakeholders. In addition, the Board has weighed the financial
aspects of the offers with strategic and financial advisors and,
together with external auditors and legal counsel, has conducted a
due diligence review of Zimmer, comparable in scope and depth to that
conducted on Smith & Nephew.
The Board has examined the Zimmer Offer, compared it to the Smith &
Nephew Offer and, based on its analysis and after consultation with
its advisors, has concluded that joining forces with either Smith &
Nephew or Zimmer would be in the interests of Centerpulse, its
customers, employees and shareholders. The Board has therefore
decided that the bidder's offer that constitutes the better value for
Centerpulse's shareholders should be recommended, as soon as such
value can be sufficiently ascertained. This is currently not the
case, as:
- the offers differ considerably in respect of
conditionality,
- the value of both Zimmer's and Smith & Nephew's
consideration is subject to fluctuation due to changes in
the respective bidders' share prices and currency exchange
rates, and
- it is possible that either one or both of the offers may
be increased.
The final recommendation with regard to the acceptance of an offer
will therefore be made and published at a later stage. The Board, in
the interest of Centerpulse, will, in accordance with its role and
within the limitations of a regulated public takeover process, make
an effort to receive final offers as quickly as possible, so as to
provide shareholders, employees and customers with clarity as to
Centerpulse's future.
3 POTENTIAL CONFLICTS OF INTEREST OF BOARD MEMBERS AND MANAGEMENT AND
COUNTERMEASURES
The Combination Agreement provides for Dr. Max Link, CEO and Chairman
of the Board, and Rene Braginsky, member of the Board, to be proposed
for election as members of the board of directors of Smith & Nephew
Group plc and for a further three members of the Board to conclude
temporary mandate agreements with Smith & Nephew plc following the
combination. The terms and conditions of such mandates have not yet
been set. There is no such agreement with Zimmer. The Zimmer Offer
does, however, provide that each member of the Board will be required
to make certain undertakings as to how the business of Centerpulse is
to be managed until the new members of the Board (to be proposed by
Zimmer and elected by an extraordinary shareholders' meeting) may
take up their office. No such statements have been provided by the
current members of the Board as of the date of this report.
The members of the Board, with the exception of Dr. Max Link, are not
entitled to any special severance payments. One half of the ordinary
compensation of the Board members is payable after the first six
months of this year, with the payment for the second half scheduled
for December 2003. Rene Braginsky is shareholder, delegate to the
board of directors and CEO of InCentive Capital AG, a major
shareholder of Centerpulse (see below). In his capacity as one of
several shareholders of InCentive Capital AG Rene Braginsky, together
with other shareholders of InCentive Capital AG, concluded an
agreement with Smith & Nephew plc and Smith & Nephew Group plc under
which Smith & Nephew plc and Smith & Nephew Group plc undertook to
make a public exchange and takeover offer for all shares of InCentive
Capital AG, and according to which the respective shareholders of
InCentive Capital AG committed to irrevocably tender their InCentive
Capital AG shares. The main shareholders of InCentive Capital AG had
already tendered their shares to Smith & Nephew Group plc when, on
May 20, 2003, the pre-announcement of the Zimmer Offer occurred. The
Swiss Takeover Board has, in the meantime, rejected the
permissibility of irrevocable tenders. As a result, Smith & Nephew
Group plc as well as Incentive Capital AG have each launched appeals
on the matter to the Swiss Federal Banking Commission.
The Combination Agreement with Smith & Nephew stipulates that all
outstanding options on Centerpulse shares, which are part of
Centerpulse's employee stock option plan, are to be exchanged for
options on shares in Smith & Nephew Group plc. All members of senior
management as well as three members of the Board (Dr. Max Link, Larry
L. Mathis and Prof. Dr. Steffen Gay) hold options that would be
exchanged for share options of Smith & Nephew Group plc upon
consummation of the offer. Furthermore, the Combination Agreement
contains the general obligation of Smith & Nephew Group plc to make a
reasonable effort to offer senior management of Centerpulse
appropriate positions. As of today, there are no such agreements with
Zimmer. The Combination Agreement with Smith & Nephew contains a
clause, according to which Centerpulse must pay Smith & Nephew the
sum of CHF 20 million in the event that the combination does not
occur with Smith & Nephew Group plc, but with a competing bidder,
such as Zimmer.
Apart from the aforementioned agreements the Board does not have any
knowledge of contractual agreements or other links with Smith &
Nephew or Zimmer that may constitute a conflict of interest of
certain of its members or members of senior management.
The employment contracts of the following members of senior
management contain provisions that provide for severance payments
(plus corresponding social security payments) in the event that the
employment relationship is terminated within 12 months following a
change of control by Centerpulse or the employee, however, in the
latter case only if the position of the employee has substantially
deteriorated: Mike McCormick (USD 1'260'000), David Floyd (USD
1'530'000), Richard Fritschi (CHF 1'650'375), Steven Hanson (USD
1'354'500), Urs Kamber (CHF 1'850'370), Matthias Molleney (CHF
1'525'140), Hans-Rudolf Schurch (CHF 917'955), Christian Stambach
(CHF 1'332'000), Beatrice Tschanz (CHF 1'526'250) and Dr. Thomas
Zehnder (CHF 1'600'800). Dr. Max Link is entitled to terminate his
employment contract as CEO in the event of a change of control. His
severance payment is CHF 4'950'000, plus respective social security
payments. The Board has granted the members of senior management,
including Dr. Max Link, bonus payments for their work during the
first half of 2003. The amount of such payments is equal to half of
the bonus payments made the preceding year (excluding extraordinary
bonuses).
With the exception of the aforementioned items the Board has no
knowledge of possible financial effects of the offers of Smith &
Nephew or Zimmer on members of the Board or senior management that
may constitute a conflict of interest for members of the Board or
senior management. While Rene Braginsky has abstained from the
discussions and votes in connection with the assessment of the
present offers and with regard to this report due to his
aforementioned conflict of interest, Dr. Max Link has, based on a
decision of the Board, led the negotiations to date and participated
in the discussion and voting with regard to this recommendation. No
additional measures following the recommendation of the Board dated
April 16, 2003 were deemed necessary, as Dr. Max Link fully supports
the Board's decision to recommend the offer with the higher value at
a later stage. Furthermore, the Board is considering commissioning an
additional fairness opinion in due course.
4 INTENTIONS OF SHAREHOLDERS HOLDING MORE THAN 5% OF VOTING RIGHTS
InCentive Capital AG, directly or indirectly through its 100%-owned
subsidiary InCentive Jersey Ltd, holds 18.9% of the Centerpulse
shares (as disclosed up to 7 July 2003). InCentive Capital AG entered
into the aforementioned agreement regarding the public takeover offer
to all shareholders of InCentive Capital AG with Smith & Nephew plc
and Smith & Nephew Group plc; as mentioned, the legal fate of the
irrevocability of the tender obligation remains undecided.
The Board is not aware of any further shareholders holding more than
5% of the voting rights of Centerpulse.
Dr. Max Link
Chairman of the Board of Directors
Centerpulse AG
Zurich, 8 July 2003
Centerpulse has filed separate statements on Schedule 14D-9 with the US
Securities and Exchange commission with respect to the offers for Centerpulse
shares by Smith & Nephew Group plc and by Zimmer Holdings, Inc. Centerpulse
shareholders in the United States and holders of Centerpulse American Depositary
Shares are urged to read these Statements and any further amendments thereto
filed with the SEC by Centerpulse, because they contain important information
about the offers. You may obtain free copies of these documents from the SEC's
website at www.sec.gov.