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                                  EXHIBIT 10.7



                              EMPLOYMENT AGREEMENT
                           BETWEEN LAURENCE Y. FAIREY
                              AND THE COMPANY DATED
                                 APRIL 13, 1997











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                                  EXHIBIT 10.7

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of 13 day of April, 1997,
between SOFAMOR DANEK GROUP, INC., an Indiana oration (the "Employer"), and
Laurence Fairey (the "Employee").

                                    RECITALS

         WHEREAS, the Employer is an Indiana corporation and through its wholly
owned subsidiaries, Warsaw Orthopedic, Inc., Danek Medical, Inc., and Sofamor,
S.N.C. is engaged in the business of developing, manufacturing and distributing
medical devices, trauma instruments, surgical tools and implants (such business,
as it may change from time to time, is hereinafter refer-red to as "Business");
and

         WHEREAS, the Board of Directors of the Employer (the "Board") has
concluded that it desires to retain the valued services of the Employee by
entering into a new agreement which shall provide the Employee with certain
additional protections which are designed to ensure that the Employee will
devote himself attentively and energetically to his duties without distraction:

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein the parties agree as follows:

         1. Employment. The Employer (or a subsidiary of the Employer) hereby 
employs the Employee and the Employee hereby accepts employment upon the terms
and conditions hereinafter set forth,

         2. Term. Subject to the provisions for termination as provided in
paragraph 10 hereof, the term of this Agreement shall be from April 13, 1997 to
December 31, 1999, and it shall be automatically renewed for successive one (1)
year periods thereafter, unless either party elects not to renew this Agreement
by serving notice of such intention not to renew on the other party at least
ninety (90) days prior to the renewal date. Notwithstanding the foregoing, if a
Change in Control Date (as defined in paragraph 11) occurs during the term
described in the immediately preceding sentence, the term of the Employee's
employment hereunder shall extend until the third anniversary of such Change in
Control Date (the period beginning on such Change in Control Date and ending on
the third anniversary thereof being hereinafter referred to as the "Covered
Period").

         3. Duties. The Employee is engaged as Executive Vice President and
Chief Financial Officer of the Employer to assist the President and CEO of the
Employer in managing, directing and administering all aspects and matters of the
Business, subject to the direction and guidance of the President and CEO of the
Employer. Prior to a Change in Control (as hereinafter defined), the precise
services, duties and authority of the Employee as Executive Vice President


<PAGE>   3

and Chief Financial Officer of the Employer may be further defined, extended or
curtailed from time to time at the discretion of the President and CEO of the
Employer.

         4. Extent of Services. The Employee shall have the power and authority
commensurate and necessary to his position of Executive Vice President and Chief
Financial Officer and his other duties as assigned to him from time to time. He
shall devote his entire employable time, attention and best efforts to the
Business as may be necessary to efficiently and effectively perform and complete
the duties he is to undertake as described in this Agreement. The Employee shall
not, without the consent of the Employer, which consent shall not be
unreasonably withheld, during the term of this Agreement, be actively engaged in
any other business activity, whether or not such business activity is pursued
for gain, profit and other pecuniary advantage; but this shall not be construed
as preventing the Employee from investing his personal assets in such form or
manner as will not require any services on the part of the Employee in the
operation of the affairs of the companies in which such investments are made.

         5. Compensation. The Employee shall be compensated for services
rendered hereunder as follows:

         (a) The Employee shall receive a salary of not less than $19,167 per
month for each month of the first twelve (12) months that this Agreement is in
effect and for each month thereafter so long as the Employee receives Job
Performance Evaluations of "good" or better. After such first year, if the
Employee receives a Job Performance Evaluation of less than "good", his salary
shall be determined in the discretion of the President and CEO of the Employer.
Such salary paid to the Employee shall be subject to withholding of taxes and
other appropriate and customary amounts.

         (b) The Employee shall be entitled to participate in the employee
benefit plans the Employer may adopt from time to time for its management or
supervisory personnel generally at such time as the Employee shall have
fulfilled the eligibility requirements for participation therein as shall be
determined by the terms of the applicable contracts for each program. Nothing
herein shall be construed so as to prevent the Employer from modifying or
terminating any employee benefit plans or programs or employee fringe benefits
it currently sponsors or may adopt from time to time.

         6. Expenses and Travel. It is expected that in the course of his
employment, the Employee and his spouse shall be required to spend time
traveling and entertaining various persons on behalf of the Employer and
promoting the affairs of the Employer. The Employer shall provide to the
Employee an Employer Mastercard credit card or the Employer shall pay the
Employee the annual fee for one (1) personal credit card. The Employer shall pay
for or reimburse the Employee for all such reasonable expenses upon the
Employee's periodic presentation of an itemized account of such expenditures,
provided, however, the Employer shall only pay for or reimburse for the cost of
coach class air fare for business travel within the United States and only for
the cost of business class air fare for international business air travel. The
Employer shall bear the expense, in an amount not to exceed $250 per month, for
country club or social club dues for which the Employee may become a member
during the term hereof and/or a
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portable telephone and related telephone service, the use of either of which is
related to the Business. The Employee shall bear the expense of any initiation
fees and other assessments for or resulting from such membership. The Employee
shall be reimbursed in an amount not to exceed a total of $2,000 for each year
during the term or any renewal term hereof, for expenses incurred for his spouse
when traveling with the Employee on business matters for the Employer.


         7. Disability. If the Employee shall become physically or mentally
disabled during the term of this Agreement to the extent that he shall be unable
to perform his duties and services for and on behalf of the Employer, the
benefits made available to the Employee and the salary then payable to the
Employee pursuant to the foregoing paragraph 5 shall continue to be made
available and paid to the Employee for the shorter of (i) the period of
disability; or (ii) six (6) months from the commencement of the disability.
Thereafter, the Employee shall receive no salary from the Employer.

         8. Confidentiality. The Employee possesses and will continue to possess
information which has been created, discovered, developed by or otherwise become
known to the Employee (including information discovered or made available by
subsidiaries, affiliates or joint ventures of the Employer or in which property
rights have been assigned or otherwise conveyed to the Employer), which
information has commercial value to the Employer, including but not limited to
trade secrets, innovations, processes, computer codes, data, know-how,
improvements, discoveries, developments, techniques, marketing plans,
strategies, costs, customer and client lists, or any information the Employee
has reason to know the Employer would treat as confidential for any purpose,
whether or not developed by the Employee (hereinafter referred to as
"Confidential Information"). Unless previously authorized in writing or
instructed in writing by the Employer, the Employee will not, at any time,
disclose to others, or use, or allow anyone else to disclose or use any
Confidential Information (except as may be necessary in the performance of the
Employee's employment with the Employer), unless, until and then only to the
extent that such Confidential Information has become ascertainable or obtained
from public or published sources or was available to the Employee on a
non-confidential basis prior to any such disclosure or use, provided that the
source of such material is or was not bound by an obligation of confidentiality
to the Employer. This paragraph 8 shall survive termination of this Agreement.

         9. Restrictive Covenants. The terms of this paragraph 9 shall be
applicable during the Employee's employment and upon the termination of such
employment for any reason occurring prior to a Change in Control Date. In the
event of termination it without cause" as defined in paragraph 10(b) occurring
prior to a Change in Control Date, in consideration of, and subject to, the
Employee's continued compliance with the terms of this paragraph 9, the Employer
shall pay to the Employee twelve (12) months salary based on his salary for the
month immediately preceding the date of termination which shall be paid in
accordance with the Employer's customary payroll practices over twelve (12)
months. In the event of a termination for any other reason, including for "just
cause" as defined in paragraph 10(b) occurring prior to a Change in Control
Date, the Employer shall have no obligation to the Employee, This paragraph 9
shall survive termination of this Agreement occurring prior to a Change in
Control Date.


<PAGE>   5

         The Employee acknowledges that because of his skills, the Employee's
position with the Employer and the Confidential Information to which the
Employee shall have access or be provided on account of such employment with the
Employer, competition by the Employee with the Employer could damage the
Employer in a manner which cannot adequately be compensated by damages or an
action at law. In view of such circumstances, because of the Confidential
Information obtained by, or disclosed to the Employee, and as a material
inducement to the Employer to enter into this Agreement and to compensate the
Employee, as described in paragraph 5, as well as provide him with additional
benefits as provided herein and other good and valuable consideration, the
Employee covenants and agrees that:

         (a) Noncompetition. During the Employee's employment with the Employer
and for a period of three (3) years thereafter, the Employee shall not (as
principal, agent, employee, consultant or otherwise), directly or indirectly, in
any geographic area in which the Employer is engaged in Business, engage in
activities for, or render services of any nature to. any firm or business, which
firm or business competes. directly or indirectly, with the Employer or the
Business.

         (b) Nonsolicitation of Customers. During the Employee's employment with
the Employer and for a period of three (3) years thereafter, the Employee shall
not, directly or indirectly, solicit, divert or accept any work or services
which compete with the Employer's Business from any customer of the Employer or
seek to cause any such customer to refrain from doing business with or
patronizing the Employer.

         (c) Nonsolicitation of Employees. During the Employee's employment with
the Employer and for a period of three (3) years thereafter, the Employee shall
not, directly or indirectly, solicit for employment or employ any current or
former employee of the Employer.

         (d) Definitions. For purposes of this Agreement, the term "directly or
indirectly" shall be construed in its broadest sense and shall include the
activities of the members of the Employee's immediate family or any partnership.
The term "Business" shall be construed in its broadest sense and shall include
any activity engaged in or conducted by the Employer or any of its subsidiaries,
affiliates or joint ventures or which the Employer or any of its subsidiaries,
affiliates or joint ventures intends to engage in or conduct. The term
"customer" shall mean any person or entity with which the Employer, or any of
its subsidiaries, affiliates or joint ventures has engaged in or conducted
Business during the one (1) year period prior to the date the Employee ceased
employment with the Employer or any persons or entities targeted by the Employer
or contacted for the purpose of engaging in or conducting Business during such
one (1) year period.

         (e) Reasonable Limitations. Given the important nature of the position
the Employee will hold with the Employer, the nature of the Employer's Business
and the sensitive nature of the Confidential Information and duties the Employee
will have with the Employer, the parties acknowledge that the limitations,
including but not limited to, the scope of activities prohibited. the geographic
area covered and the time limitation, are reasonable.


<PAGE>   6

         In the event of an actual or threatened breach by the Employee of the
provisions of paragraphs 8 and 9 of this Agreement, the Employer shall be
entitled to a temporary restraining order and an injunction restraining the
Employee from such breach. Nothing herein, however, shall be construed as
prohibiting the Employer from pursuing any other remedies available to it for
such actual or threatened breach, including, without limitation, the recovery of
damages and reasonable attorneys' and paralegals' fees and costs from the
Employee. If the Employee violates any of the covenants in paragraphs 8 and 9 of
this Agreement, the term and the covenant violated shall be automatically
extended for the period of time of the violation, either from the date on which
the Employee ceases such violation or from the date of the entry by a court of
competent jurisdiction of an order or judgment enforcing such covenants.
whichever period is later,

         10. Termination Prior to a Change in Control Date. The Employer may, at
its option, terminate this Agreement at any time prior to the occurrence of a
Change in Control Date upon written notice to the Employee for just cause or
without cause.

         (a)      "Just cause" shall include, but not be limited to:

                  (i)     The Employee receiving a Job Performance Evaluation of
                          less than "good";

                  (ii)    The Employee's misuse or embezzlement of funds
                          belonging to the Employer, conviction of a felony or
                          crime involving moral turpitude or use of alcohol or
                          drugs in such a manner as will injure or adversely
                          affect the reputation of the Employer or its
                          employees, customers, agents, officers or directors,

                  (iii)   The Employee's absence from his employment, for
                          whatever cause, other than by disability for which
                          salary is continued pursuant to paragraph 7, for a
                          period of thirty (30) consecutive days or more;

                  (iv)    The Employee's absence from employment as a result of
                          disability beyond the period for which salary is
                          continued pursuant to paragraph 7;

                  (v)     The Employee's resignation from employment during the
                          term hereof or if the Employee serves notice to not
                          renew this Agreement as provided in paragraph 2;

                  (vi)    The Employee's willful malfeasance in discharging his
                          obligations hereunder and such acts and their
                          consequences are not remedied within ten (10) days or
                          such longer reasonable period of time designated by 
                          the Employer after written notice thereof has been 
                          given to the Employee; or

                  (vii)   The Employee's breach of the provisions of this
                          Agreement and such breach and its consequences are not
                          remedied within ten (10) days or such 

<PAGE>   7

                          longer reasonable period of time designated by the 
                          Employer, after written notice thereof has been given 
                          to the Employee.

         (b)      "Without cause" shall mean:

                  (i)     The termination and dissolution of the Employer or a 
                          bona fide decision by the Employer to terminate its 
                          Business; or

                  (ii)    Any involuntary termination of the Employee's
                          employment by the Employer without just cause.

         (c) In addition to those reasons enumerated above, this Agreement shall
be terminated upon the happening of any of the following events:

                  (i)     Whenever the Employer and the Employee shall mutually
                          agree to a termination in writing; or

                  (ii) Upon death of the Employee.

Upon the termination of this Agreement prior to the occurrence of a Change in
Control Date for any of the foregoing reasons in paragraph 10, the Employee
shall be entitled to receive only the compensation accrued but unpaid as of the
date of the termination hereof and shall not be entitled to additional
compensation except as expressly provided in paragraph 9 of this Agreement.

         11. Effect of a Change in Control.

         (a) Involuntary Termination; Consulting Period.

         (i) Consulting Services Following an Involuntary Termination. In the
event of the Employee's Involuntary Termination during the Covered Period he
shall commence providing consulting services to the Employer for a period (the
"Consulting Period") of (i) three years, in the event the Involuntary
Termination occurs during the first year of the Covered Period, (ii) two years,
in the event the Involuntary Termination occurs during the second year of the
Covered Period, or (iii) one year, in the event the Involuntary Termination
occurs in the last year of the Covered Period. The Employee's consulting
services shall consist in advising the Employer on such matters as may be
reasonably requested by the Employer. Such services shall be performed at such
times and in such locations as shall be mutually agreed by the Employee and the
Employer, and shall not interfere with his duties to a new employer. In any
event, the Employee shall not be required to perform consulting services for
more than 8 hours per month during the Consulting Period. The Employee shall not
be an employee of the Employer during the Consulting Period, but shall act
solely in the capacity of an independent contractor.

         (ii) Consulting Fees; Reimbursement of Expenses. In consideration of
the Employee's agreement to provide consulting services hereunder, the Employer
shall pay the Employee, not less than 5 days following an Involuntary
Termination, a lump sum consulting fee 

<PAGE>   8

payment equal to the product of (A) the Employee's base salary in effect
immediately prior to his Date of Termination (without taking into account any
salary reduction that gave rise to Good Reason), and (B) the number of years in
the Consulting Period, as determined pursuant to paragraph 11(a)(i) above. In
addition, the Employee shall be reimbursed for all expenses reasonably incurred
by him in connection with the performance of his consulting services hereunder.
The Employee shall not be entitled to benefits under any other severance pay
plan or arrangement sponsored by the Employer and its subsidiaries in the event
of an Involuntary Termination during the Covered Period, and any amounts payable
to him under any statutory severance policy shall reduce the aggregate amount of
the consulting fees payable hereunder. In addition, in the event of the
Employee's Involuntary Termination, the Employer shall pay him within 5 days of
the date of such Involuntary Termination the full amount of any earned but
unpaid base salary through the Date of Termination at the rate in effect at the
time of the Notice of Termination, plus a cash payment for all unused vacation
time which he may have accrued as of the Date of Termination. The Employer shall
also pay the Employee within 5 days of the Date of Termination a pro rata
portion of his projected annual bonus for the year in which his Involuntary
Termination occurs, calculated on the basis of his target bonus for that year.

         (iii) Benefits. The Employee and his eligible dependents shall continue
to be eligible to participate during the Consulting Period in the medical,
dental, health, life and other fringe benefit plans and arrangements applicable
to him immediately prior to his Involuntary Termination on the same terms and
conditions in effect for the Employee and his dependents immediately prior to
such Involuntary Termination; provided, however, that any benefit plan or
arrangement will end on the date that the Employee and his dependents are
eligible and elect coverage under a plan or arrangement of a subsequent employer
which provides a substantially equivalent or greater benefit to him and his
dependents.

         (iv) Date and Notice of Termination. Any termination of the Employee's
employment during the Covered Period by the Employer or by the Employee shall be
communicated by a notice of termination to the other party hereto (the "Notice
of Termination"). The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances, claimed to provide a basis for
termination of the Employee's employment under the provision so indicated. The
date of the Employee's termination of employment with the Employer and its
subsidiaries (the "Date of Termination") shall be determined as follows: (i) if
the Employee's employment is terminated by the Employer in an Involuntary
Termination, five (5) days after the date the Notice of Termination is received
by the Employee and (ii) if the Employee's employment is terminated by the
Employer for just cause, the date specified in the Notice of Termination. If the
basis for the Employee's Involuntary Termination is his resignation for Good
Reason, the Date of Termination shall be ten (10) days after the date his Notice
of Termination is received by the Employer. The Date of Termination for a
resignation of employment other than for Good Reason shall be the date set forth
in the applicable notice, which shall be no earlier than ten (10) days after the
date such notice is received by the Employer.

         (b) Non-Competition Agreement. During the Consulting Period, the
Employee shall comply with the substantive restrictions set forth in paragraphs
8 and 9 above.

<PAGE>   9

         (c) Legal Fees and Expenses. The Employer shall pay or reimburse the
Employee on an after-tax basis for all costs and expenses (including, without
limitation, court costs and reasonable legal fees and expenses which reflect
common practice with respect to the matters involved) incurred by him as a
result of any claim, action or proceeding (i) arising out of his termination of
employment during the Covered Period, (ii) contesting, disputing or enforcing
any right, benefits or obligations under this paragraph 11 or (iii) arising out
of or challenging the validity, advisability or enforceability of this paragraph
I 1 or any provision thereof; provided, however, that this provision will not
apply if the trier of fact determines that the Employee's claim was entirely
without merit.

         (d) Definitions. For purposes of this paragraph 11, the following
capitalized words shall have the meanings set forth below:

         "Cause" shall mean a termination of the Employee's employment by the
Employer which is a result of (i) his felony conviction, (ii) his willful
disclosure of material trade secrets or other material confidential information
related to the business of the Employer and its subsidiaries or (iii) his
willful and continued failure substantially to perform his duties with the
Employer (other than any such failure resulting from his incapacity due to
physical or mental illness or any such actual or anticipated failure resulting
from a resignation by the Employee for Good Reason) after a written demand for
substantial performance is delivered to the Employee by the Board, which demand
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed his duties, and which performance is not
substantially corrected by him within 10 days of receipt of such demand. For
purposes of the previous sentence, no act or failure to act on the Employee's
part shall be deemed "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Employer. Notwithstanding the foregoing, the Employee shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths (3/4ths) of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Employee and an opportunity for him,
together with his counsel, to be heard before the Board), finding that in the
good faith opinion of the Board he was guilty of conduct set forth above in
clause (i), (ii) or (iii) of the first sentence of this definition and
specifying the particulars thereof in detail.

         "Change in Control" shall mean the happening of any of the following:

                  (i) any person or entity, including a "group" as defined in
         Section 13(d)(3) of the Exchange Act. other than the Employer, a
         subsidiary of the Employer, or any employee benefit plan of the
         Employer or its subsidiaries, becomes the beneficial owner of the
         Employer's securities having 25 percent or more of the combined voting
         power of the then outstanding securities of the Employer that may be
         cast for the election for directors of the Employer (other than as a
         result of an issuance of securities initiated by the Employer in the
         ordinary course of business); or

<PAGE>   10


                  (ii) as the result of, or in connection with, any cash tender
         or exchange offer, merger or other business combination, sale of assets
         or contested election, or any combination of the foregoing
         transactions, less than a majority of the combined voting power of the
         then outstanding securities of the Employer or any successor
         corporation or entity entitled to vote generally in the election of
         directors of the Employer or such other corporation or entity after
         such transaction, are held in the aggregate by holders of the
         Employer's securities entitled to vote generally in the election of
         directors of the Employer immediately prior to such transactions; or

                  (iii) during any period of two consecutive years, individuals
         who at the beginning of any such period constitute the Board cease for
         any reason to constitute at least a majority thereof, unless the
         election, or the nomination for election by the Employer's
         stockholders, of each director of the Employer first elected during
         such period was approved by a vote of at least two-thirds of the
         directors of the Employer then still in office who were directors of
         the Employer at the beginning of any such period (together, directors
         at the beginning of such period and new directors whose election or
         nomination was so approved are the "Incumbent Directors").

         "Change in Control Date" shall mean the date on which the Change in
Control occurs. Notwithstanding the first sentence of this section, if the
Employee's employment with the Employer terminates prior to the Change in
Control Date and it is reasonably demonstrated that his termination of
employment (i) was at the request of the third party who has taken steps
reasonably calculated to effect the Change in Control or (ii) otherwise arose in
connection with or in anticipation of the Change in Control, then Change in
Control Date shall mean the date immediately prior to the date of the Employee's
termination of employment.

         "Common Stock" shall mean the common stock of the Employer.

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor provisions thereto.

         "Good Reason" shall mean a resignation by the Employee from his
employment with the Employer on or following the Change in Control Date as a
result of the occurrence of any of the following without his consent:

                  (i) A failure by the Employer to ensure that the Employee's
         position, titles, nature and status of responsibilities and reporting
         obligations are substantially equivalent to those that the Employee
         enjoyed immediately prior to the Change in Control Date, it being
         understood and agreed that such features shall be deemed less than
         substantially equivalent by reason of the Employer ceasing to be a
         public company.

                  (ii) A reduction by the Employer in the Employee's annual base
         salary as in effect immediately prior to the Change in Control Date or
         as the same may be increased from time to time thereafter; a failure by
         the Employer to increase the Employee's salary at a rate commensurate
         with that of other key executives of the Employer; or a reduction

<PAGE>   11

         in the Employee's target annual bonus (expressed as a percentage of
         base salary) below the target in effect for him prior to the Change in
         Control Date;

                  (iii) The relocation of the office of the Employer where the
         Employee is employed immediately prior to the Change in Control Date
         (the "CIC Location") to a location which is more than fifty (50) miles
         away from the CIC Location or the Employer's requiring the Employee to
         be based more than fifty (50) miles away from the CIC Location (except
         for required travel on the Employer's business to an extent
         substantially consistent with his customary business travel obligations
         in the ordinary course of business prior to the Change in Control
         Date), unless such relocation is to a location closer to his principal
         residence;

                  (iv) The failure by the Employer to continue in effect any
         compensation plan in which the Employee participated prior to the
         Change in Control Date or made available to him after the Change in
         Control Date, unless an equitable arrangement (embodied in an ongoing
         substitute or alternative plan) has been made with respect to such plan
         in connection with the Change in Control, or the failure by the
         Employer to continue the Employee's participation therein on at least
         as favorable a basis, both in terms of the amount of benefits provided
         and the level of his participation relative to other participants, as
         existed on the Change in Control Date;

                  (v) The failure by the Employer to continue to provide the
         Employee with benefits at least as favorable in the aggregate to those
         enjoyed by him under the Employer's pension, savings, life insurance,
         medical, health and accident, disability, and fringe benefit plans and
         programs in which he was participating immediately prior to the Change
         in Control Date, or the failure by the Employer to provide the Employee
         with the number of paid vacation days to which he is entitled on the
         basis of years of service with the Employer in accordance with the
         Employer's normal vacation policy in effect immediately prior to the
         Change in Control;

                  (vi) The failure of the Employer to obtain an agreement
         reasonably satisfactory to the Employee from any successor to assume
         and agree to perform this Agreement, as contemplated in paragraph 12(a)
         hereof or, if the business of the Employer for which the Employee's
         services are principally performed is sold at any time after a Change
         in Control, the failure of the Employer to obtain such an agreement
         from the purchaser of such business;

                  (vii) Any termination of the Employee's employment which is
         not effected pursuant to the terms of this Agreement; or

                  (viii) A material breach by the Employer of the provisions of
this Agreement;

provided, however, that an event described above in clause (i), (ii), (iv), (v)
or (viii) shall not constitute Good Reason unless it is communicated by the
Employee to the Employer in writing and is not corrected by the Employer in a
manner which is reasonably satisfactory to the

<PAGE>   12

Employee (including full retroactive correction with respect to any monetary
matter) within 10 days of the Employer's receipt of such written notice from
him.

         "Involuntary Termination" shall mean (i) the termination of the
Employee's employment during the Covered Period by the Employer and its
subsidiaries other than for Cause or disability or (ii) the Employee's
resignation of employment during the Covered Period with the Employer and its
subsidiaries for Good Reason.

         12. Successors, Binding Agreement.

         (a) Assumption by Successor. The Employer will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Employer expressly to
assume and to agree to perform this Agreement in the same manner and to the same
extent that the Employer would be required to perform it if no such succession
had taken place; provided, however, that no such assumption shall relieve the
Employer of its obligations hereunder. As used in this Agreement, the "Employer"
shall mean the Employer as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise.

         (b) Enforceability; Beneficiaries. This Agreement shall be binding upon
and inure to the benefit of the Employee (and his personal representatives and
heirs) and the Employer and any organization which succeeds to substantially all
of the business or assets of the Employer, whether by means of merger,
consolidation, acquisition of all or substantially all of the assets of the
Employer or otherwise, including, without limitation, as a result of a Change in
Control or by operation of law. This Agreement shall inure to the benefit of and
be enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amount would still be payable to him hereunder if
he had continued to live, all such amounts. unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to his devisee,
legatee or other designee or, if there is no such designee, to his estate.

         13. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered personally or sent by
registered mail (i) to Employee's residence, in the case of the Employee, or
(ii) to the business address of its President and Chief Executive Officer, in
the case of the Employer.

         14. Waiver of Breach and Severability. The waiver by the Employer of a
breach of any provision of this Agreement by the Employee shall not operate or
be construed as a waiver of any subsequent breach by the Employee. In the event
any provision of this Agreement is found to be invalid or unenforceable, it may
be severed from the Agreement and the remaining provision of the Agreement shall
continue to be binding and effective; provided, however, that, if possible, it
is the intention of the Employer and the Employee that such provision be
construed and interpreted as narrowly as necessary in order to make such
provision valid and enforceable.

<PAGE>   13

         15. Entire Agreement. This instrument and the letter agreement between
the Employee and the Employer dated January 1, 1996 contain the entire agreement
of the parties and supersede any prior understandings and agreements between
them respecting the subject matter of this Agreement, including, without
limitation, the Employment Agreement dated as of January 1, 1996. It may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension or discharge is
sought.

         16. Survival. Upon termination of the Employee's employment with the
Company prior to a Change in Control Date, the rights and obligations of the
parties hereto as provided in paragraphs 8 and 9 shall continue for the time
periods as set forth herein.

         17. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Tennessee without regard to the laws of
any other state or jurisdiction. Any action brought or maintained in connection
with this Agreement shall be brought exclusively in the courts located in Shelby
County, Tennessee. Each of the Employer and the Employee hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement.



<PAGE>   14


         IN WITNESS WHEREOF, the parties hereto execute this Agreement on the
date first above written.

                                            SOFAMOR DANEK GROUP, INC.



                                            BY: /s/ E. Ron Pickard
                                                ---------------------------
                                                     "Employer"
ATTEST:


/s/ J. Mark Merrill
------------------------

                                            /s/ Laurence Y. Fairey
                                            -------------------------------
                                            Laurence Fairey
                                            "Employee"