<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
AMENDMENT NO. 1
TO
SCHEDULE 13D
Under the Securities Exchange Act of 1934
EXOGEN, INC.
(Name of Issuer)
Common Shares, $.0001 Par Value
(Title of Class of Securities)
302092 10 1
(CUSIP Number)
Robert A. Lucas
Smith & Nephew Holdings, Inc.
1450 Brooks Road
Memphis, TN 38116
(901) 396-2121
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 25, 1999
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box: [_]
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
(Page 1 of 11 Pages)
<PAGE>
SCHEDULE 13D
- ----------------------- --------------------
CUSIP No. 302092 10 1 Page 2 of 11 Pages
- ----------------------- --------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Smith & Nephew Holdings, Inc.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 820,000
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 820,000
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
820,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
CO
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ----------------------- --------------------
CUSIP No. 302092 10 1 Page 3 of 11 Pages
- ----------------------- --------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Smith & Nephew plc
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
England and Wales
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 820,000
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 820,000
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
820,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
CO
- ------------------------------------------------------------------------------
<PAGE>
CUSIP No. 302092 10 1 Page 4 of 11 Pages
Amendment No. 1 to Schedule 13D
The Statement on Schedule 13D (the "Schedule 13D"), as previously filed on
December 18, 1998 by Smith & Nephew plc ("Parent") and Smith & Nephew Holdings,
Inc. ("Holdings"), relating to the common stock, par value $.0001 per share
("Company Common Stock"; the shares of Company Common Stock together with the
rights to purchase shares of Series A Preferred Stock of the Company associated
therewith, the "Shares") of Exogen, Inc., a Delaware corporation ("Company"),
filed pursuant to Rule 13D-1 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), is hereby
amended and supplemented as set forth below. Capitalized terms used herein and
not otherwise defined have the meaning given to such term in the Schedule 13D.
Item 2. Identity and Background
Annex A attached hereto and incorporated herein by reference sets forth the
name, residence or business address, present principal occupation or employment
and citizenship of each executive officer of Parent who has become such since
the date of the Schedule 13D.
None of the persons listed on Annex A has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
None of the persons listed on Annex A has, during the last five years,
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding been or is subject to
a judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
Jack R. Blair is no longer a director of Parent and Pierre J. Neethling is
no longer an executive officer of Parent.
Annex B attached hereto and incorporated by reference, sets forth the name,
residence or business address, present principal occupation or employment and
citizenship of each executive officer and of each director of Holdings who has
become such since the date of the Schedule 13D.
None of the persons listed in Annex B has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
None of the persons listed on Annex B has, during the last five years, been
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding been or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
David Southworth is no longer a director or executive officer of Holdings
and Cliff Lomax is now the Chairman of the Board and President of Holdings.
<PAGE>
CUSIP No. 302092 10 1 Page 5 of 11 Pages
Amendment No. 1 to Schedule 13D
Item 4. Purpose of Transaction.
The original purpose of acquiring the Shares was for investment. However,
as described in the Schedule 13D, pursuant to the terms of the Master Agreement,
Smith & Nephew, Inc. ("S&N"), a wholly owned subsidiary of Holdings and an
indirect wholly owned subsidiary of Parent, has a right of first negotiation
with respect to certain types of transactions with respect to the Company,
including the acquisition of control of the Company. Pursuant to the
requirements of the Master Agreement, in April 1999 the Company notified S&N
that it intended to seek partners for the development of new applications of
ultrasound and for the acquisition of the Company. After conducting due
diligence and participating in negotiations with the Company in response to such
notice, Parent and Holdings have changed their intentions as described in this
Amendment. S&N and Smith & Nephew Acquisition, Inc. ("Sub"), a wholly owned
subsidiary of S&N, have entered into an Agreement and Plan of Merger dated July
25, 1999 (the "Merger Agreement") with the Company, pursuant to which Sub has
agreed to commence, no later than July 30, 1999, a tender offer for all of the
outstanding Shares at a purchase price of $5.15 per Share, net to the seller in
cash. The Merger Agreement provides that, after the purchase of Shares pursuant
to the tender offer and the satisfaction of the other conditions set forth in
the Merger Agreement and in accordance with the relevant provisions of the
Delaware General Corporation Law, Sub will be merged (the "Merger") with and
into the Company. By virtue of the Merger each outstanding Share (other than
Shares held in the treasury of the Company or by any wholly owned subsidiary of
the Company and any Shares owned by S&N, any wholly owned subsidiary of S&N or
by Holdings and other than Shares with respect to which appraisal rights have
been exercised in accordance with the Delaware General Corporation Law) will be
converted into the right to receive $5.15 per Share. Following the consummation
of the Merger, the Company will continue as the surviving corporation and will
be a wholly owned subsidiary of S&N and an indirect wholly owned subsidiary of
each of Parent and Holdings.
Pursuant to the Merger Agreement, promptly after such time as Sub purchases
Shares pursuant to the Offer, Sub will be entitled to designate at its option up
to that number of directors, rounded to the nearest whole number, of the
Company's Board of Directors, subject to compliance with Section 14(f) of the
Exchange Act, as will make the percentage of the Company's directors designated
by Sub equal to the percentage of the aggregate voting power of the Shares held
by S&N and its subsidiaries. Notwithstanding this right, until the effective
time of the Merger, the Board of Directors of the Company will have at least
three directors who were directors on the date of the Merger Agreement and who
are not officers of the Company. After the effective time of the Merger, the
directors of Sub will be the directors of the Company.
At the effective time of the Merger the current Certificate of
Incorporation and the Bylaws of the Company will become the Certificate of
Incorporation and Bylaws of the surviving corporation. The Merger Agreement also
provides that the Company and Registrar & Transfer Company will enter into an
amendment (the "Rights Amendment") to the Rights Agreement dated as of December
6, 1996, as amended, between the Company and Registrar & Transfer Company, as
rights agent.
<PAGE>
CUSIP No. 302092 10 1 Page 6 of 11 Pages
Amendment No. 1 to Schedule 13D
It is anticipated that, following the consummation of the Merger, the
Company Common Stock will be delisted form the Nasdaq National Stock Market and
terminated from registration pursuant to Section 12(g)(4) of the Exchange Act.
A copy of the Merger Agreement, together with the exhibits thereto, is included
as Exhibit 1 hereto and the description of the Merger Agreement and the Rights
Amendment contained herein are qualified in their entirety by reference to such
exhibit, which is incorporated herein by reference.
Concurrently with the execution of the Merger Agreement the current
directors of the Company (collectively, the "Directors"), who beneficially own
an aggregate of 786,472 Shares entered into stockholder agreements (the
"Stockholder Agreements") with S&N. The Stockholder Agreements provided, among
other things, that: (a) each Director will vote the Shares held by such Director
in favor of the Merger and the Merger Agreement; (b) each Director will vote his
Shares against (i) any other merger agreement or merger, consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any other
Takeover Proposal (as defined in the Merger Agreement) or (ii) any amendment of
the Company's charter or by-laws or other proposal or transaction involving the
Company or any of its subsidiaries, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify the
Merger, the Merger Agreement or any of the other transactions contemplated by
the Merger Agreement; (c) each Director will not (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the sale,
transfer, pledge, assignment or other disposition of, his Shares to any person
other than Sub or Sub's designee or (ii) enter into any voting arrangement,
whether by proxy, voting agreement or otherwise, in connection, directly or
indirectly, with any Takeover Proposal; (d) each Director will not, and will not
permit any investment banker, attorney or other adviser or representative of
such Director to, (i) directly or indirectly solicit, initiate or encourage the
submission of, any Takeover Proposal or (ii) directly or indirectly participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal; and (e) each Director will tender
pursuant to the tender offer and not withdraw the Shares owned by such Director.
Parent and Holdings disclaim ownership of the Shares held by the Directors and
subject to the Stockholder Agreements.
The obligations of the Directors under the Stockholder Agreements terminate
upon the earlier of the effective time of the Merger and the termination of the
Merger Agreement. A copy of form of the Stockholder Agreements is filed as
Exhibit A to Exhibit 1 hereto, and the description of the Stockholder Agreements
contained herein is qualified in its entirety by reference to such exhibit,
which is incorporated herein by reference.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
The response to Item 4 hereof is incorporated herein by reference.
<PAGE>
CUSIP No. 302092 10 1 Page 7 of 11 Pages
Amendment No. 1 to Schedule 13D
In addition, on December 21, 1998, S&N and the Company entered into an
amendment to the Master Agreement pursuant to which the procedure relating to
the exercise of S&N's option to purchase Shares was amended to extend to 61 days
the period of time between the notice of exercise of the option and the date on
which Shares may be purchased. Also, on April 9, 1999, S&N and the Company
entered into a United Kingdom Distribution Agreement pursuant to which the
Company appointed S&N as its exclusive distributor for the sale and promotion in
the United Kingdom of all models of the Company's Sonic Accelerated Fracture
Healing System.
Except as set forth in this Amendment or in the Schedule 13D, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
between the persons listed in Item 2 of the Schedule 13D and any person with
respect to the Company Common Stock.
Item 7. Material to be Filed as Exhibits.
1. Agreement of Joint Filing
2. Agreement and Plan of Merger dated as of July 25, 1999 among Smith &
Nephew, Inc., Smith & Nephew Acquisition, Inc. and Exogen, Inc.
3. Press release issued by Smith & Nephew and Exogen, Inc. on July 26,
1999.
<PAGE>
CUSIP No. 302092 10 1 Page 8 of 11 Pages
Amendment No. 1 to Schedule 13D
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, correct and
complete.
/s/ Clifford K. Lomax
---------------------------------------
Title: Chairman of the Board and President
-----------------------------------
Dated: July 25, 1999
--------------------------------
<PAGE>
CUSIP No. 302092 10 1 Page 9 of 11 Pages
Amendment No. 1 to Schedule 13D
ANNEX A
-------
NEW EXECUTIVE OFFICERS
OF
Smith & Nephew plc
<TABLE>
<CAPTION>
NAME POSITION ADDRESS CITIZENSHIP
- ---- -------- ------- -----------
<S> <C> <C> <C>
Larry W. Papasan (responsible for Smith & Nephew U.S.A.
Orthopaedics) Orthopaedics
1450 Brooks Road
Memphis, TN 38116
Ronald M. Sparks (responsible for Smith & Nephew U.S.A.
Endoscopy) Endoscopy
160 Dascomb Road
Andover, MA 01810
Graham H. Siddle (responsible for Smith & Nephew British
Indirect Markets) Europe
Alum Rock Road
Birmingham, England
B8 3DZ
Paul M. Williams (responsible for Smith & Nephew plc British
Human Resources) 2 Temple Place
Victoria Embankment
London, England
WC2R 3BP
Peter W. Huntley (responsible for Smith & Nephew plc Australian
Business 2 Temple Place
Development) Victoria Embankment
London, England
WC2R 3BP
James L. Dick (responsible for Smith & Nephew British
Wound Management) Wound Management
P.O. Box 81
Hessle Road
Hull, England
HU3 2BN
</TABLE>
<PAGE>
CUSIP No. 302092 10 1 Page 10 of 11 Pages
Amendment No. 1 to Schedule 13D
ANNEX B
-------
NEW EXECUTIVE OFFICERS AND DIRECTORS
OF
SMITH & NEPHEW HOLDINGS, INC.
<TABLE>
<CAPTION>
NAME POSITION ADDRESS CITIZENSHIP
- ---- -------- ------- -----------
<S> <C> <C> <C>
James A. Ralston Assistant Secretary Smith & Nephew Inc. U.S.A.
1450 Brooks Road
Memphis, TN 38116
</TABLE>
<PAGE>
CUSIP No. 302092 10 1 Page 11 of 11 Pages
Amendment No. 1 to Schedule 13D
EXHIBIT INDEX
Exhibit 1 Agreement of Joint Filing
Exhibit 2 Agreement and Plan of Merger dated July 25, 1999 among Smith &
Nephew, Inc., Smith & Nephew Acquisition, Inc. and Exogen, Inc.
Exhibit 3 Press release issued by Smith & Nephew plc and Exogen, Inc. on
July 26, 1999.
<PAGE>
Exhibit 1
Agreement of Joint Filing
Pursuant to Rule 13d-1(k)(1)(iii) of Regulation 13D-G of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, the undersigned agree that the
statement to which this exhibit is attached is filed on behalf of each of them
in the capacities set forth below.
Date: July 26, 1999 SMITH & NEPHEW PLC
By: /s/ Michael Parson
---------------------------
Name: Michael Parson
-------------------------
Title: Company Secretary
------------------------
SMITH & NEPHEW HOLDINGS, INC.
By: /s/ Clifford K. Lomax
------------------------
Name: Clifford K. Lomax
----------------------
Title: Chairman of the Board and President
-----------------------------------
<PAGE>
Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
SMITH & NEPHEW
SMITH & NEPHEW ACQUISITION, INC.
AND
EXOGEN, INC.
Dated as of July 25, 1999
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE OFFER...................................................................... 2
Section 1.1 The Offer......................................................... 2
Section 1.2 Company Actions................................................... 3
ARTICLE II.......................................................................... 4
THE MERGER..................................................................... 4
Section 2.1 The Merger........................................................ 4
Section 2.2 Effective Time.................................................... 5
Section 2.3 Effects of the Merger............................................. 5
Section 2.4 Charter and Bylaws; Directors and Officers........................ 5
Section 2.5 Conversion of Securities.......................................... 5
Section 2.6 Exchange of Certificates.......................................... 6
Section 2.7 Merger Without Meeting of Stockholders............................ 8
Section 2.8 Further Assurances................................................ 8
Section 2.9 Closing........................................................... 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............................... 9
Section 3.1 Organization...................................................... 9
Section 3.2 Authority......................................................... 9
Section 3.3 Consents and Approvals; No Violations.............................10
Section 3.4 Information Supplied..............................................11
Section 3.5 Ownership of Shares...............................................11
Section 3.6 Interim Operations of Sub.........................................11
Section 3.7 Brokers...........................................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization, Standing and Power..................................12
Section 4.2 Capital Structure.................................................12
Section 4.3 Authority.........................................................14
Section 4.4 Consents and Approvals; No Violation..............................14
Section 4.5 SEC Documents and Other Reports...................................15
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.6 Information Supplied.............................................16
Section 4.7 Absence of Certain Changes or Events.............................16
Section 4.8 Permits and Compliance...........................................17
Section 4.9 Tax Matters......................................................18
Section 4.10 Actions and Proceedings..........................................19
Section 4.11 Certain Agreements...............................................20
Section 4.12 ERISA............................................................20
Section 4.13 Compliance with Worker Safety Laws...............................22
Section 4.14 Liabilities; Products............................................22
Section 4.15 Labor Matters....................................................23
Section 4.16 Intellectual Property; Year 2000.................................23
Section 4.17 Title to Assets..................................................24
Section 4.18 State Takeover Statutes; Rights Agreement........................25
Section 4.19 Required Vote of Company Stockholders............................25
Section 4.20 Accounts Receivable..............................................25
Section 4.21 Inventories......................................................25
Section 4.22 Environmental Matters............................................26
Section 4.23 Suppliers, Customers and Employees...............................27
Section 4.24 Insurance........................................................27
Section 4.25 Transactions with Affiliates.....................................28
Section 4.26 Brokers..........................................................28
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by the Company Pending the Merger............29
Section 5.2 No Solicitation..................................................31
Section 5.3 Third Party Standstill Agreements................................32
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Stockholder Meeting..............................................32
Section 6.2 Access to Information............................................33
Section 6.3 Directors........................................................33
Section 6.4 Fees and Expenses................................................34
Section 6.5 Company Stock Options............................................35
Section 6.6 Warrants.........................................................35
Section 6.7 Reasonable Best Efforts..........................................36
Section 6.8 Public Announcements.............................................36
Section 6.9 State Takeover Laws..............................................37
Section 6.10 Indemnification; Directors and Officers Insurance................37
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6.11 Notification of Certain Matters..................................37
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger........38
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.......................................................38
Section 8.2 Effect of Termination.............................................40
Section 8.3 Amendment.........................................................40
Section 8.4 Waiver............................................................40
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties....................40
Section 9.2 Notices...........................................................40
Section 9.3 Interpretation; Certain Definitions...............................41
Section 9.4 Counterparts......................................................43
Section 9.5 Entire Agreement; No Third-Party Beneficiaries....................43
Section 9.6 Governing Law.....................................................44
Section 9.7 Assignment........................................................44
Section 9.8 Severability......................................................44
Section 9.9 Enforcement of this Agreement.....................................44
EXHIBITS
- --------
A Stockholder Agreement
B Conditions of the Offer
C Second Amendment to Rights Agreement
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of July 25, 1999 (this
"Agreement"), among Smith & Nephew, a Delaware corporation ("Parent"), Smith &
Nephew Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent ("Sub"), and Exogen, Inc., a Delaware corporation (the "Company") (Sub
and the Company being hereinafter collectively referred to as the "Constituent
Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent on the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Sub to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") to purchase the shares of Common Stock, par
value $.0001 per share, of the Company (the "Company Common Stock"; the shares
of Company Common Stock, together with the Rights (as defined in Section 4.2)
associated therewith, being hereinafter collectively referred to as the
"Shares") at a purchase price of $5.15 per Share (the "Offer Price"), net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in this Agreement; and the Board of Directors of the
Company has adopted resolutions approving the Offer and the Merger (as defined
below) and recommending that holders of Shares accept the Offer and that the
Company's stockholders approve this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable the merger of Sub and the Company
(the "Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding Share not owned directly or indirectly by
Parent, Smith & Nephew Holdings, Inc., a Delaware corporation ("Holdings"), or
the Company will be converted into the right to receive the price per share paid
in the Offer and the respective Boards of Directors of Sub and the Company have
approved and adopted this Agreement; and
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, concurrently herewith Parent and certain of the stockholders of the
Company are entering into Stockholder Agreements dated as of the date hereof
(the "Stockholder Agreements") in the forms of the attached Exhibit A.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
<PAGE>
ARTICLE I
THE OFFER
Section 1.1 The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than July 30, 1999,
Sub shall, and Parent shall cause Sub to, commence, within the meaning of Rule
14d-2 under the Securities Exchange Act of 1934, as amended (together with the
rules and regulations thereunder, the "Exchange Act"), the Offer. The obligation
of Sub to, and of Parent to cause Sub to, commence the Offer and accept for
payment, and pay for, any Shares tendered pursuant to the Offer shall be subject
only to the conditions set forth in the attached Exhibit B (the "Offer
Conditions") (any of which may be waived in whole or in part by Sub in its sole
discretion, except that Sub shall not waive the Minimum Condition (as defined in
Exhibit B) without the consent of the Company) and subject to the rights of
Parent and Sub to terminate this Agreement as provided in Section 8.1. Sub
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Sub shall not (i) reduce the number of
Shares subject to the Offer, (ii) reduce the Offer Price, (iii) impose any other
conditions to the Offer other than the Offer Conditions or modify the Offer
Conditions (other than to waive any Offer Conditions to the extent permitted by
this Agreement), (iv) except as provided in the next sentence, extend the Offer
or (v) change the form of consideration payable in the Offer. Notwithstanding
the foregoing, Sub may, without the consent of the Company, (i) extend the
Offer, if at the scheduled or extended expiration date of the Offer any of the
Offer Conditions shall not be satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer
and (iii) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than 15 business days beyond the latest expiration
date that would otherwise be permitted under clause (i) or (ii) of this
sentence, in each case subject to the right of Parent, Sub or the Company to
terminate this Agreement pursuant to the terms hereof. Parent and Sub agree that
if at any scheduled expiration date of the Offer, the Minimum Condition, the HSR
Condition (as defined in Exhibit B) or either of the conditions set forth in
paragraphs (e) or (f) of Exhibit B shall not have been satisfied, but at such
scheduled expiration date all the conditions set forth in paragraphs (a), (b),
(c), (d), (g) and (h) of Exhibit B shall then be satisfied, at the request of
the Company (confirmed in writing), Sub shall extend the Offer from time to
time, subject to the right of Parent, Sub or the Company to terminate this
Agreement pursuant to the terms hereof. Subject to the terms and conditions of
the Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept
for payment, and pay for, all Shares validly tendered and not withdrawn pursuant
to the Offer that Sub becomes obligated to accept for payment, and pay for,
pursuant to the Offer as soon as practicable after the expiration of the Offer,
and in any event in compliance with the obligations respecting prompt payment
pursuant to Rule 14e-1(c) under the Exchange Act.
-2-
<PAGE>
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-
1") with respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1 and
the documents included therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the "Offer Documents"), and
Parent and Sub shall cause to be disseminated the Offer Documents to holders of
Shares as and to the extent required by applicable Federal securities laws.
Parent, Sub and the Company each agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Parent and Sub further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents as
so corrected to be disseminated to holders of Shares, in each case as and to the
extent required by applicable Federal securities laws. The Company and its
counsel shall be given reasonable opportunity to review and comment upon the
Offer Documents prior to their filing with the SEC or dissemination to the
stockholders of the Company. Parent and Sub agree to provide the Company and its
counsel any comments Parent, Sub or their counsel may receive from the SEC or
its staff with respect to the Offer Documents promptly after the receipt of such
comments and to cooperate with the Company and its counsel in responding to any
such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any Shares that
Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer.
(d) Parent or Sub shall engage an information agent in connection
with the Offer.
Section 1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that the Board of Directors of
the Company, at a meeting duly called and held, at which all directors were
present (in person or by telephone), duly and unanimously adopted resolutions
approving and adopting this Agreement, approving the Offer and the Merger,
taking all action necessary to render the provisions of Section 203 of the DGCL
(as defined below) inapplicable to the Offer, the Merger and the Stockholder
Agreements, determining that the terms of the Offer and the Merger are fair to,
and in the best interests of, the Company's stockholders and recommending that
holders of Shares accept the Offer and that the Company's stockholders approve
this Agreement and the Merger. The Company represents and warrants that its
Board of Directors has received the opinion of U.S. Bancorp Piper Jaffray Inc.
that the proposed consideration to be received by holders of Shares pursuant to
the Offer and the Merger is fair to such holders from a financial point of view,
and a complete and correct signed copy of such opinion has been delivered by the
Company to Parent. The Company has been advised by each of its directors and
executive officers that each such person intends to tender all Shares owned by
such person pursuant to the Offer.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to
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the Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-
9") containing the recommendation described in paragraph (a), and the Company
shall cause to be disseminated the Schedule 14D-9 to holders of Shares as and to
the extent required by applicable Federal securities laws. Each of the Company,
Parent and Sub agrees promptly to correct any information provided by it for use
in the Schedule 14D-9 if and to the extent that such information shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be filed with the
SEC and disseminated to holders of Shares, in each case as and to the extent
required by applicable Federal securities laws. Parent and its counsel shall be
given reasonable opportunity to review and comment upon the Schedule 14D-9 prior
to its filing with the SEC or dissemination to stockholders of the Company. The
Company agrees to provide Parent and its counsel any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments and to cooperate with Parent, Sub
and their counsel in responding to any such comments.
(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent or agents to furnish Sub promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control, to the extent reasonably available to the Company,
regarding the beneficial owners of Shares and any securities convertible into
Shares, and shall furnish to Sub such information and assistance (including
updated lists of stockholders, security position listings and computer files) as
Parent may reasonably request in communicating the Offer to the Company's
stockholders. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent and Sub and their agents
shall hold in confidence the information contained in any such labels, listings
and files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon request, deliver,
and will use their best efforts to cause their agents to deliver, to the Company
all copies of such information then in their possession or control.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), Sub shall be merged with and into the Company
at the Effective Time (as hereinafter defined). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall
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succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL. Notwithstanding anything to the contrary herein, at the election of
Parent, any direct wholly-owned Subsidiary (as hereinafter defined) of Parent
may be substituted for Sub as a constituent corporation in the Merger. In such
event, the parties agree to execute an appropriate amendment to this Agreement,
in form and substance reasonably satisfactory to Parent and the Company, in
order to reflect such substitution.
Section 2.2 Effective Time. The Merger shall become effective when
the certificate of merger or, if applicable, the certificate of ownership and
merger (each, the "Certificate of Merger"), executed in accordance with the
relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware; provided, however, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than three (3) business days after the
date the Certificate of Merger is filed. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of Merger
is accepted for record or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of the
Closing (as defined in Section 2.9).
Section 2.3 Effects of the Merger. The Merger shall have the
effects set forth in the DGCL.
Section 2.4 Charter and Bylaws; Directors and Officers. (a) At the
Effective Time, the Second Restated and Amended Certificate of Incorporation, as
amended, of the Company (the "Company Charter") shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law. At the Effective Time, the Amended and
Restated Bylaws of the Company, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or by the Company Charter.
(b) The directors of Sub at the Effective Time shall be the directors
of the Surviving Corporation, until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be. The officers of the Company at the Effective Time shall be the officers
of the Surviving Corporation, until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be.
Section 2.5 Conversion of Securities. (a) As of the Effective Time,
by virtue of the Merger and without any action on the part of Sub, the Company
or the holders of any securities of the Constituent Corporations:
(i) Each issued and outstanding share of common stock, par value $.01
per share, of Sub shall be converted into one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
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(ii) All Shares that are held in the treasury of the Company or by
any wholly-owned Subsidiary of the Company and any Shares owned by Parent,
any wholly-owned Subsidiary of Parent or Holdings shall be canceled and no
capital stock of Parent or other consideration shall be delivered in
exchange therefor.
(iii) Subject to the provisions of Section 2.5(a)(iv), each Share
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.5(a)(ii) and other than
Dissenting Shares (as defined in Section 2.5(a)(iv)) shall be converted
into the right to receive from the Surviving Corporation in cash, without
interest, the per share price paid in the Offer (the "Merger
Consideration"). All such Shares, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each holder
of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration.
(iv) Notwithstanding any provision of this Agreement to the contrary,
if required by the DGCL but only to the extent required thereby, Shares
which are issued and outstanding immediately prior to the Effective Time
and which are held by holders who have properly exercised appraisal rights
with respect thereto in accordance with Section 262 of the DGCL (the
"Dissenting Shares") will not be exchangeable for the right to receive the
Merger Consideration, and holders of such Shares will be entitled to
receive payment of the appraised value of such Shares in accordance with
the provisions of such Section 262 unless and until such holders fail to
perfect or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails
to perfect or effectively withdraws or loses such right, such Shares will
thereupon be treated as if they had been converted into and have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company will give Parent
prompt notice of any demands received by the Company for appraisals of
Shares. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal or offer
to settle or settle any such demands.
(b) Each Company Stock Option (as hereinafter defined) shall be treated in
accordance with Section 6.5 of this Agreement.
Section 2.6 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, Parent shall designate a bank or trust company (or such other
person or persons as shall be reasonably acceptable to Parent and the Company)
to act as paying agent in the Merger (the "Paying Agent"), and, from time to
time on, prior to or after the Effective Time, Parent shall make available, or
cause the Surviving Corporation to make available, to the Paying Agent cash in
amounts and at the times necessary for the payment of the Merger Consideration
upon surrender of certificates representing Shares as part of the Merger
pursuant to Section 2.5. Any and all
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interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be paid over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the Shares theretofore
represented by such Certificate shall have been converted pursuant to Section
2.5, and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.6, each Certificate (other than Certificates
representing Dissenting Shares) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 2.5. No interest will
be paid or will accrue on the cash payable upon the surrender of any
Certificate. Parent or the Paying Agent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as Parent or the Paying Agent is required to
deduct and withhold with respect to the making of such payment under the Code
(as hereinafter defined) or under any provisions of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the Paying Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the person in respect of which such deduction or withholding
was made by the Parent or the Paying Agent.
(c) No Further Ownership Rights in Shares. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article II shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates. At the Effective Time, the
stock transfer books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective
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<PAGE>
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II.
(d) Termination of Payment Fund. Any portion of the funds made
available to the Paying Agent to pay the Merger Consideration which remains
undistributed to the holders of Shares for six months after the Effective Time
shall be delivered to Parent, upon demand, and any holders of Shares who have
not theretofore complied with this Article II and the instructions set forth in
the letter of transmittal mailed to such holders after the Effective Time shall
thereafter look only to Parent for payment of the Merger Consideration to which
they are entitled.
(e) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article II would otherwise escheat to or become the
property of any Governmental Entity (as hereinafter defined)), the cash payment
in respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interests of any person previously entitled thereto.
(f) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or the Paying Agent, the posting by such person of a bond, in such
reasonable amount as Parent or the Paying Agent may direct as indemnity against
any claim that may be made against them with respect to such Certificate, the
Paying Agent will pay in exchange for such lost, stolen or destroyed Certificate
the amount of cash to which the holders thereof are entitled pursuant to Section
2.5.
Section 2.7 Merger Without Meeting of Stockholders. Notwithstanding
the foregoing, if Sub, or any other direct or indirect subsidiary of Parent,
shall acquire at least 90 percent of the outstanding Shares, the parties hereto
agree to take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after expiration of the Offer without a meeting
of stockholders of the Company, in accordance with Section 253 of the DGCL.
Section 2.8 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper
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to vest, perfect or confirm the Surviving Corporation's right, title or interest
in, to or under any of the rights, privileges, powers, franchises, properties or
assets of such Constituent Corporation and otherwise to carry out the purposes
of this Agreement.
Section 2.9 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Sidley & Austin, One
First National Plaza, Chicago, Illinois 60603, at 10:00 a.m., local time, no
later than the second business day following the day on which the last of the
conditions set forth in Article VII shall have been fulfilled or waived (if
permissible) or at such other time and place as Parent and the Company shall
agree.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
------------------------------------------------
Parent and Sub represent and warrant to the Company as follows:
Section 3.1 Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent and
Sub is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not, individually or in the aggregate, have
a Material Adverse Effect on Parent.
Section 3.2 Authority. On or prior to the date of this Agreement, the
Boards of Directors of Parent and Sub have declared the Merger advisable and the
Board of Directors of Sub has approved and adopted this Agreement in accordance
with the DGCL. Each of Parent and Sub has all requisite corporate power and
authority to execute and deliver this Agreement and the Stockholder Agreements,
and each of Parent and Sub has all requisite corporate power and authority to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Parent and Sub of this Agreement and the Stockholder
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action (including
Board action) on the part of Parent and Sub subject, in the case of this
Agreement, to the filing of the Certificate of Merger as required by the DGCL.
This Agreement and the Stockholder Agreements have been duly executed and
delivered by Parent and Sub and (assuming the valid authorization, execution and
delivery of this Agreement by the Company, the valid authorization, execution
and delivery of the Stockholder Agreements by the stockholders who are parties
thereto and the validity and binding effect hereof and thereof on the Company
and such stockholders), this Agreement and the Stockholder Agreements constitute
the valid and binding obligation of each of Parent and Sub enforceable against
them in accordance with their respective terms.
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Section 3.3 Consents and Approvals; No Violations. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.3 have been obtained and all filings and obligations described in this Section
3.3 have been made, the execution and delivery of this Agreement and the
Stockholder Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or result in the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Certificate of
Incorporation or the By-Laws of Parent, each as amended to date, (ii) any
provision of the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or (iv) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its Subsidiaries or any of their respective properties or assets,
other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or under the Stockholder Agreements or prevent
the consummation of any of the transactions contemplated hereby or thereby. No
filing or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal (a "Governmental
Entity") is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the Stockholder
Agreements by Parent or Sub or is necessary for the consummation of the Offer,
the Merger and the other transactions contemplated by this Agreement or the
Stockholder Agreements, except for (i) in connection, or in compliance, with the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), any foreign pre-merger filing obligations and the
Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) such filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Offer, the Merger
or by the transactions contemplated by this Agreement or the Stockholder
Agreements, (iv) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (v) such
filings as may be required in connection with the taxes described in Section
6.8, (vi) applicable requirements, if any, of state securities or "blue sky"
laws ("Blue Sky Laws"), (vii) as may be required under foreign laws and (viii)
such other consents, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on Parent, materially
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impair the ability of Parent or Sub to perform its obligations hereunder or
under the Stockholder Agreements or prevent the consummation of any of the
transactions contemplated hereby or thereby.
Section 3.4 Information Supplied. None of the information supplied or
to be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or
(iv) the proxy statement (together with any amendments or supplements thereto,
the "Proxy Statement") relating to the Stockholder Meeting (as defined in
Section 6.1) will (a) in the case of the Offer Documents, the Schedule 14D-9 and
the Information Statement, at the respective times the Offer Documents, the
Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the Company's stockholders, or (b) in the case of
the Proxy Statement, at the time the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Offer
Documents will comply as to form in all material respects with the requirements
of the Exchange Act, except that no representation or warranty is made by Parent
or Sub with respect to statements made or incorporated by reference therein
based on information supplied by the Company specifically for inclusion or
incorporation by reference therein.
Section 3.5 Ownership of Shares. As of the date of this Agreement,
Parent or its affiliates beneficially own 820,000 Shares.
Section 3.6 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
Section 3.7 Brokers. No broker, investment banker, financial advisor
or other person, other than Chase Securities, Inc., the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
Section 3.8 Financing. Prior to the consummation of the Offer, Parent
and Sub will have available to them all funds necessary to purchase and pay for
all of the Shares tendered pursuant to the Offer by stockholders of the Company.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of the Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. A list of all Subsidiaries of the Company, together with the
jurisdiction of incorporation of each Subsidiary, the percentage of the
outstanding capital stock of each Subsidiary owned by the Company and each other
Subsidiary and the name of any person other than the Company or another
Subsidiary that owns capital stock of the Subsidiary, is set forth in Section
4.1 of the letter dated the date hereof and delivered on the date hereof by the
Company to Parent, which relates to this Agreement and is designated therein as
the Company Letter (the "Company Letter").
Section 4.2 Capital Structure. (a) As of the date hereof, the
authorized capital stock of the Company consists of 27,000,000 Shares and
3,000,000 shares of Preferred Stock, par value $.0001 per share ("Company
Preferred Stock"), of which 140,000 shares have been designated as "Series A
Participating Preferred Stock" (the "Series A Preferred Stock").
(b) At the close of business on July 23, 1999:
(i) 12,752,855 Shares were issued and outstanding, all of which were
validly issued, fully paid and nonassessable and free of preemptive rights;
(ii) no shares of Company Preferred Stock were issued and
outstanding;
(iii) no Shares were held in the treasury of the Company or by
Subsidiaries of the Company;
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(iv) 422,085 Shares were reserved for issuance upon the exercise of
outstanding vested and exercisable stock options issued under the Company's
1995 Stock Option/Stock Issuance Plan, as amended (the "Company Stock
Option Plan");
(v) 667,779 Shares were reserved for issuance upon the exercise of
outstanding unvested stock options issued under the Company Stock Option
Plan;
(vi) 159,632 Shares were reserved for issuance and unissued pursuant
to the Company's Employee Stock Purchase Plan, as amended (the "Company
Stock Purchase Plan");
(vii) 80,000 Shares were reserved for issuance upon the exercise of
the Warrant dated September 30, 1998 issued to Arthur A. Pilla (the "Pilla
Warrant"); and
(viii) 45,000 Shares were reserved for issuance upon the exercise of
the Warrant dated September 30, 1998 issued to Alessandro Chiabera (the
"Chiabera Warrant" and, together with the Pilla Warrant, the "Warrants").
(c) Section 4.2 of the Company Letter contains a correct and complete
list as of the date of this Agreement of each outstanding option to purchase
Shares issued under the Company Stock Option Plan (collectively, the "Company
Stock Options"), including the holder, date of grant, exercise price and number
of shares of Company Common Stock subject thereto and whether the option is
vested and exercisable.
(d) Except for the Company Stock Options, the Company Stock Purchase
Plan, the Warrants, the rights to purchase shares of the Series A Preferred
Stock (the "Rights") issued pursuant to the Rights Agreement dated as of
December 6, 1996, as amended October 22, 1998 (as so amended, the "Rights
Agreement"), between the Company and Registrar and Transfer Company, as Rights
Agent, and the rights (the "Company Option") of Parent under the Master
Agreement dated August 10, 1998, as amended December 21, 1998, between Parent
and the Company, there are no options, warrants, calls, rights or agreements to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of the Company or any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right or agreement, and there are no outstanding contractual rights to
which the Company or any of its Subsidiaries is a party the value of which is
based on the value of Shares. Except as set forth in Section 4.2 of the Company
Letter, there are no outstanding contractual obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any capital stock of or any equity interests in any Subsidiary.
(e) Each outstanding share of capital stock of each Subsidiary of the
Company is duly authorized, validly issued, fully paid and nonassessable and,
except as set forth in Section 4.2
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of the Company Letter, each such share is owned by the Company or another
Subsidiary of the Company, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever.
(f) The Company does not have any outstanding bonds, debentures, notes
or other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter.
Section 4.3 Authority. On or prior to the date of this Agreement,
the Board of Directors of the Company has unanimously approved the Offer and
declared the Merger advisable and fair to and in the best interest of the
Company and its stockholders, approved and adopted this Agreement and the
transactions contemplated hereby in accordance with the DGCL, resolved to
recommend the acceptance of the Offer by the Company's stockholders and directed
that this Agreement be submitted to the Company's stockholders for approval.
The Company has all requisite corporate power and authority to enter into this
Agreement and, subject to approval by the stockholders of the Company of this
Agreement, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action (including Board action) on the part of the Company,
subject to (x) approval and adoption of this Agreement by the stockholders of
the Company and (y) the filing of the Certificate of Merger as required by the
DGCL. This Agreement has been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this Agreement by
Parent and Sub and the validity and binding effect of this Agreement on Parent
and Sub) constitutes the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
Section 4.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
4.4 have been obtained and all filings and obligations described in this Section
4.4 have been made, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or result in the
loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company or any of its Subsidiaries under, any provision of (i) the Company
Charter or the Amended and Restated Bylaws of the Company, (ii) any provision of
the comparable charter or organization documents of any of the Company's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets, other than, in
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the case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or is necessary for the consummation of the Offer, the Merger and
the other transactions contemplated by this Agreement, except for (i) in
connection, or in compliance, with the provisions of the HSR Act, any foreign
pre-merger filing obligation and the Exchange Act, (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which the
Company or any of its Subsidiaries is qualified to do business, (iii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Offer, the Merger or the transactions contemplated by
this Agreement, (iv) such filings, authorizations, orders and approvals as may
be required to obtain the State Takeover Approvals, (v) such filings as may be
required in connection with the taxes described in Section 6.8, (vi) applicable
requirements, if any, of Blue Sky Laws or the Nasdaq National Market, (vii) as
may be required under foreign laws and (viii) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
Section 4.5 SEC Documents and Other Reports. The Company has filed
all required documents (including proxy statements) with the SEC since October
1, 1996 (the "Company SEC Documents"). As of their respective dates, the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and, at the respective times they were filed, none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of the Company included in the Company SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with United States generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Company SEC Documents
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or as required by generally accepted accounting principles, the Company has not,
since October 1, 1996, made any change in the accounting practices or policies
applied in the preparation of financial statements.
Section 4.6 Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement, will (a) in the case of the
Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or (b) in the case of the Proxy Statement, at the time
the Proxy Statement is first mailed to the Company's stockholders or at the time
of the Stockholder Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Schedule 14D-9, the Information Statement and
the Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act, except that no representation or warranty is
made by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference therein.
Section 4.7 Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Documents filed with the SEC prior to the date of this
Agreement or as set forth in the Company Letter, since September 30, 1998, (A)
the Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would result in a Material Adverse Effect on the Company, (B)
the Company and its Subsidiaries have not sustained any loss or interference
with their business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had a Material Adverse
Effect on the Company, (C) there has been no change in the capital stock of the
Company except for the issuance of shares of the Company Common Stock pursuant
to Company Stock Options or the Company Stock Purchase Plan and no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its stock, (D) there has not been (v) any adoption of a new Company Plan (as
hereinafter defined), (w) any amendment to a Company Plan materially increasing
benefits thereunder, (x) any granting by the Company or any of its Subsidiaries
to any executive officer or other key employee of the Company or any of its
Subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Company SEC Documents filed prior to the date hereof,
(y) any granting by the Company or any of its Subsidiaries to any such executive
officer or other key employee of any increase in severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Company SEC Documents filed prior to the date hereof
or (z) any entry by the Company or any of its Subsidiaries into any employment,
severance or termination agreement with any such executive
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officer or other key employee, (E) there has not been any material changes in
the amount or terms of the indebtedness of the Company and its Subsidiaries from
that described in the Company SEC Documents filed prior to the date hereof and
(F) there has been no event causing a Material Adverse Effect on the Company,
nor any development that would, individually or in the aggregate, result in a
Material Adverse Effect on the Company.
Section 4.8 Permits and Compliance. (a) Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and, other than as set
forth in the succeeding sentence, except for permits and authorizations for the
manufacture, sale or distribution of or reimbursement for medical devices
("Regulatory Permits"). The Regulatory Permits held by the Company (the
"Company Regulatory Permits") are set forth in Section 4.8 of the Company
Letter. No suspension or cancellation of any of the Company Permits or the
Company Regulatory Permits is pending or, to the Knowledge of the Company (as
hereinafter defined), threatened, except where the suspension or cancellation of
any of the Company Permits or the Company Regulatory Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The Company has obtained certification to ISO 9000 Series standards of its SAFHS
(as hereinafter defined) devices. All existing products sold, marketed or
distributed by the Company in Europe have CE Marking authorization under the
European Medical Device Directive, as audited and approved by a European
Notified Body. Neither the Company nor any of its Subsidiaries is in violation
of (A) its charter, by-laws or other organizational documents, (B) any law,
ordinance, administrative or governmental rule or regulation, including any
consumer protection, equal opportunity, health, health care industry regulation
and third-party reimbursement laws including under any Federal Health Care
Program (as defined in Section 1128B(f) of the U.S. Federal Social Security Act
(together with all regulations promulgated thereunder, the "SSA")), or (C) any
order, decree or judgment of any Governmental Entity having jurisdiction over
the Company or any of its Subsidiaries, except, in the case of clauses (B) and
(C), for any violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. Without limiting the foregoing, the
Company and each Subsidiary is in compliance in all material respects with all
current applicable statutes, rules, regulations or orders administered or issued
by the United States Food and Drug Administration (the "FDA") or comparable
foreign Governmental Entity; the Company does not have knowledge of any facts
which furnish any reasonable basis for any warning letters from the FDA, Section
305 notices, or other similar communications from the FDA or comparable foreign
entity; and since September 30, 1996, there have been no recalls, field
notifications, alerts or seizures requested or threatened relating to the
products of the Company or its Subsidiaries, except as set forth in Section 4.8
of the Company Letter. The Sonic Accelerated Fracture Healing System ("SAFHS")
devices marketed by the Company in the United States are being marketed in the
United States under valid 510(k) or Pre-Market Approval Applications. To the
Knowledge of the Company, there is
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no false information or significant omission in any product application or
product-related submission made by the Company or any of its Subsidiaries to the
FDA or comparable foreign Governmental Entity. The Company and its Subsidiaries
have obtained all necessary regulatory approvals from any foreign regulatory
agencies related to the distribution and sale of SAFHS devices by the Company
and its Subsidiaries in the respective foreign jurisdictions in which such SAFHS
devices are distributed and sold. Neither the Company nor any Subsidiary, nor
the officers, directors, managing employees or agents (as those terms are
defined in 42 C.F.R. (S)1001.1001) of the Company or any Subsidiary: (i) have
engaged in any activities which are prohibited under, or are cause for civil
penalties or mandatory or permissive exclusion from, any Federal Health Care
Program under Sections 1128, 1128A, 1128B, or 1877 of SSA or related state or
local statutes, including knowingly and willfully offering, paying, soliciting
or receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind in return for,
or to induce, the purchase, lease, or order, or the arranging for or
recommending of the purchase, lease or order, of any item or service for which
payment may be made in whole or in part under any such program; (ii) have had a
civil monetary penalty assessed against them under Section 1128A of SSA; (iii)
have been excluded from participation under any Federal Health Care Program; or
(iv) have been convicted (as defined in 42 C.F.R. (S) 1001.2) of any of the
categories of offenses described in Sections 1128(a) or 1128(b)(1), (b)(2), or
(b)(3) of SSA.
(b) Except as disclosed in the Company SEC Documents filed prior to
the date of this Agreement, there are no contracts or agreements of the Company
or its Subsidiaries having terms or conditions which would have a Material
Adverse Effect on the Company or having covenants not to compete that materially
impair the ability of the Company to conduct its business as currently conducted
or purport to bind any stockholder or any Affiliated Person of any stockholder
of the Company after the Effective Time. Except as set forth in the Company SEC
Documents filed prior to the date of this Agreement, no event of default or
event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consummation by the Company
of the transactions contemplated by this Agreement, will exist under any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any lease, contractual license or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
such Subsidiary is bound or to which any of the properties, assets or operations
of the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 4.9 Tax Matters. Except as otherwise set forth in Section
4.9 of the Company Letter, (i) the Company and each of its Subsidiaries have
filed all Tax Returns (as hereinafter defined) required to have been filed, and
such Tax Returns are correct and complete and disclose all Taxes (as hereinafter
defined) required to be paid by the Company and its Subsidiaries for the periods
covered thereby, except to the extent that any failure to so file or any failure
to be correct and complete or to disclose all Taxes required to be paid would
not, individually or in the aggregate have a Material Adverse Effect on the
Company; (ii) all Taxes shown to be due on such Tax Returns have been timely
paid or extensions for payment have been
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properly obtained, or such Taxes are being contested; (iii) the Company and each
of its Subsidiaries have complied with all rules and regulations relating to the
withholding of Taxes and the remittance of withheld Taxes, except to the extent
that any failure to comply with such rules and regulations would not,
individually or in the aggregate have a Material Adverse Effect on the Company;
(iv) neither the Company nor any of its Subsidiaries has waived any statute of
limitations in respect of its Taxes; (v) any Tax Returns required to have been
filed by or with respect to the Company and each of its Subsidiaries relating to
federal and state income Taxes have been examined by the Internal Revenue
Service ("IRS") or the appropriate foreign or state taxing authority or the
period for assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired; (vi) to the Knowledge of the Company, no
issues that have been raised by the relevant taxing authority in connection with
the examination of Tax Returns required to have been filed by or with respect to
the Company and each of its Subsidiaries which are currently pending; (vii) all
deficiencies asserted or assessments made as a result of any examination of such
Tax Returns by any taxing authority have been paid in full or properly reflected
on the books of the Company; and (viii) there is no action, suit, investigation,
audit, claim or assessment pending or, to the Knowledge of the Company, proposed
or threatened in writing with respect to Taxes of the Company or any Subsidiary;
(ix) there are no liens for Taxes upon the assets of the Company or any
Subsidiary except liens relating to current Taxes not yet due; (x) none of the
Company or any Subsidiary has been a member of any group of corporations filing
Tax Returns on a consolidated, combined, unitary or similar basis other than
each such group of which it is currently a member; (xi) no transaction
contemplated by this Agreement is subject to withholding under Section 1445 of
the Code (relating to "FIRPTA") and no stock transfer Taxes, sales Taxes, use
Taxes, real estate transfer Taxes, or other similar Taxes will be imposed on the
transactions contemplated by this Agreement; (xii) except as may be limited by
the transactions contemplated by this Agreement, the "regular" and, if
applicable, "alternative minimum tax" net operating loss carry forwards of the
Company and its Subsidiaries for each of the taxable years ended on or prior to
September 30, 1998 (collectively, the "NOLs") are set forth (for each year) in
Section 4.9 of the Company Letter and are each available to the Company or the
applicable Subsidiary) for the period set forth in Section 172(b)(A) of the Code
as in effect for the taxable year in which the applicable NOL was incurred; and
(xiii) except as may be limited as a result of the transactions contemplated by
this Agreement, immediately prior to the Effective Time, none of the NOLs will
constitute separate return limitation year (SRLY) losses, consolidated return
change of ownership (CRCO) losses or "dual consolidated losses" and none of the
NOLs will be limited by sections 382 or 384 of the Code and the regulations
thereunder.
Section 4.10 Actions and Proceedings. There are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving the Company or any of its Subsidiaries, or against or
involving any of the present or former directors, officers, employees,
consultants, agents or stockholders of the Company or any of its Subsidiaries
with respect to the Company or any of its Subsidiaries, any of the properties,
assets or business of the Company or any of its Subsidiaries or any Company Plan
that, individually or in the aggregate, would have a Material Adverse Effect on
the Company or materially impair the ability of the Company to perform its
obligations hereunder. Except as set forth in Section 4.10 of the Company
Letter, there are no actions, suits or claims or legal, administrative or
arbitrative proceedings or investigations (including claims for workers'
compensation) pending or, to the
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Knowledge of the Company, threatened against or involving the Company or any of
its Subsidiaries or any of its or their present or former directors, officers,
employees, consultants, agents or stockholders with respect to the Company or
any of its Subsidiaries, or any of the properties, assets or business of the
Company or any of its Subsidiaries or any Company Plan that, individually or in
the aggregate, would have a Material Adverse Effect on the Company or materially
impair the ability of the Company to perform its obligations hereunder. There
are no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of its or their present or former officers, directors,
employees, consultants, agents or stockholders with respect to the Company or
its Subsidiaries, or any of the properties, assets or business of the Company or
any of its Subsidiaries relating to the transactions contemplated by this
Agreement.
Section 4.11 Certain Agreements. Except as set forth in Section 4.11
of the Company Letter, neither the Company nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any employment
agreement, severance agreement, stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan (collectively, the
"Compensation Agreements"), pension plan (as defined in Section 3(2) of ERISA)
or welfare plan (as defined in Section 3(1) of ERISA) any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. Except as set
forth in Section 4.11 of the Company Letter, no holder of any option to purchase
Shares, or Shares granted in connection with the performance of services for the
Company or its Subsidiaries, is or will be entitled to receive cash from the
Company or any Subsidiary in lieu of or in exchange for such option or shares as
a result of the transactions contemplated by this Agreement. Section 4.11 of
the Company Letter sets forth (i) for each officer, director or employee who is
a party to, or will receive benefits under, any Compensation Agreement as a
result of the transactions contemplated herein, the total amount that each such
person may receive, or is eligible to receive, assuming that the transactions
contemplated by this Agreement are consummated on the date hereof, and (ii) the
total amount of indebtedness owed to the Company or its Subsidiaries from each
officer, director or employee of the Company and its Subsidiaries.
Section 4.12 ERISA. (a) Each Company Plan is listed in Section
4.12(a) of the Company Letter. With respect to each Company Plan, the Company
has made available to Parent a true and correct copy of (i) the three most
recent annual reports (Form 5500) filed with the IRS, if applicable, (ii) each
such Company Plan that has been reduced to writing and all amendments thereto,
(iii) each trust agreement, insurance contract or administration agreement
relating to each such Company Plan, (iv) a written summary of each unwritten
Company Plan, (v) the most recent summary plan description or other written
explanation of each Company Plan provided to participants, (vi) the most recent
determination letter and request therefor, if any, issued by the IRS with
respect to any Company Plan intended to be qualified under Section 401(a) of the
Code, (vii) any request for a determination currently pending before the IRS and
(viii) all correspondence with the IRS, the Department of Labor, or the SEC
relating to any outstanding controversy. Except as would not have a Material
Adverse Effect on the Company, each
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Company Plan complies in all respects with ERISA, the Code and all other
applicable statutes and governmental rules and regulations. Neither the Company
nor any ERISA Affiliate currently maintains, contributes to or has any liability
under, or at any time during the past six years has maintained or contributed
to, any pension plan which is subject to Section 412 of the Code or Section 302
of ERISA or Title IV of ERISA. Neither the Company nor any ERISA Affiliate
currently maintains, contributes to or has any liability under, or at any time
during the past six years has maintained or contributed to, any Company
Multiemployer Plan.
(b) Except as listed in Section 4.12(b) of the Company Letter, with
respect to the Company Plans, to the Knowledge of the Company, no event has
occurred and there exists no condition or set of circumstances in connection
with which the Company or any Subsidiary or ERISA Affiliate or Company Plan
fiduciary could be subject to any liability under the terms of such Company
Plans, ERISA, the Code or any other applicable law which would have a Material
Adverse Effect on the Company. All Company Plans that are intended to be
qualified under Section 401(a) of the Code have been determined by the IRS to be
so qualified, or a timely application for such determination is now pending and
the Company is not aware of any reason why any such Company Plan is not so
qualified in operation. Except as disclosed in Section 4.12(b) of the Company
Letter, neither the Company nor any of its Subsidiaries or ERISA Affiliates has
any liability or obligation under any welfare plan to provide benefits after
termination of employment to any employee or dependent other than as required by
Section 4980B of the Code.
(c) As used herein, (i) "Company Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)), a
"welfare plan" (as defined in Section 3(1) of ERISA), or any other written or
oral bonus, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, restricted stock, stock
appreciation right, holiday pay, vacation, severance, medical, dental, vision,
disability, death benefit, sick leave, fringe benefit, personnel policy,
insurance or other plan, arrangement or understanding, in each case established
or maintained by the Company or any of its Subsidiaries or any ERISA Affiliate
or as to which the Company or any of its Subsidiaries or any ERISA Affiliate has
contributed or otherwise may have any liability, (ii) "Company Multiemployer
Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which the Company or any of its Subsidiaries or any ERISA Affiliate is or has
been obligated to contribute or otherwise may have any liability, and (iii)
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which would be considered a single employer with the Company or any of its
Subsidiaries pursuant to Section 414(b), (c), (m) or (o) of the Code and the
regulations promulgated under those sections or pursuant to Section 4001(b) of
ERISA and the regulations promulgated thereunder.
(d) Section 4.12(d) of the Company Letter contains a list of all (i)
severance and employment agreements with employees of the Company and each of
its Subsidiaries, (ii) severance programs and policies of the Company and each
of its Subsidiaries with or relating to its employees and (iii) plans, programs,
agreements and other arrangements of the Company and each of its Subsidiaries
with or relating to its employees containing change of control or similar
provisions.
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(e) Except as set forth in Section 4.12(e) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any agreement,
contract or arrangement that could result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(f) Except as set forth in Section 4.12(f) of the Company Letter, no
Company Plan is subject to laws outside of the United States.
Section 4.13 Compliance with Worker Safety Laws. The properties,
assets and operations of the Company and its Subsidiaries are in compliance with
all applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety (collectively, "Worker Safety Laws"), except for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries that may interfere
with or prevent compliance or continued compliance with applicable Worker Safety
Laws, other than any such interference or prevention as would not, individually
or in the aggregate with any such other interference or prevention, have a
Material Adverse Effect on the Company.
Section 4.14 Liabilities; Products. (a) Except as fully reflected
or reserved against in the financial statements included in the Company SEC
Documents filed prior to the date hereof, or disclosed in the footnotes thereto,
since September 30, 1998 the Company and its Subsidiaries have incurred no
liabilities (including Tax liabilities) or obligations of any nature, absolute
or contingent, other than liabilities or obligations that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or that would be required by Generally Accepted Accounting Principles ("GAAP")
to be reflected or reserved in the financial statements of the Company or in the
footnotes thereto, prepared in accordance with GAAP consistent with past
practices, other than in the ordinary course of business and consistent with
past practices. As of the date hereof, the indebtedness for borrowed money of
the Company and its Subsidiaries (other than advances from the Company to such
Subsidiaries) does not exceed $1 million.
(b) Except as set forth in Section 4.14(b) of the Company Letter,
since September 30, 1996, neither the Company nor any Subsidiary has received a
claim for or based upon breach of product warranty (other than warranty service
and repair claims in the ordinary course of business not material in amount or
significance), strict liability in tort, negligent manufacture of product,
negligent provision of services or any other allegation of liability, including
or resulting in product recalls, arising from the materials, design, testing,
manufacture, packaging, labeling (including instructions for use), or sale of
its products or from the provision of services; and, to the Knowledge of the
Company, there is no basis for any such claim which, if asserted, would likely
have a Material Adverse Effect on the Company. No product sold or delivered or
service rendered by the Company or any Subsidiary is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale for products delivered and
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services rendered by the Company or any Subsidiary, copies of which have
previously been delivered to Parent.
(c) The Company has provided to Parent a schedule of products in
development and planned introductions, a copy of which is attached to the
Company Letter.
Section 4.15 Labor Matters. Except as set forth in Section 4.15 of
the Company Letter, neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or labor contract. Neither the Company
nor any of its Subsidiaries has engaged in any unfair labor practice with
respect to any persons employed by or otherwise performing services primarily
for the Company or any of its Subsidiaries (the "Company Business Personnel"),
and there is no unfair labor practice complaint or grievance against the Company
or any of its Subsidiaries by any person pursuant to the National Labor
Relations Act or any comparable state or foreign law pending or threatened in
writing with respect to the Company Business Personnel, except where such unfair
labor practice, complaint or grievance would not have a Material Adverse Effect
on the Company. There is no labor strike, dispute, slowdown or stoppage pending
or, to the Knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries which may interfere with the respective business
activities of the Company or any of its Subsidiaries, except where such dispute,
strike or work stoppage would not have a Material Adverse Effect on the Company.
Section 4.16 Intellectual Property; Year 2000. (a) As used herein,
"Company Intellectual Property" means all trademarks, trademark registrations,
trademark rights and renewals thereof, trade names, trade name rights, patents,
patent rights, patent applications, industrial models, inventions, invention
disclosures, designs, utility models, inventor rights, software, computer
programs, computer systems, modules and related data and materials, copyrights,
copyright registrations and renewals thereof, servicemarks, servicemark
registrations and renewals thereof, servicemark rights, trade secrets,
applications for trademark and servicemark registrations, know-how, confidential
information and other proprietary rights, and any data and information of any
nature or form used or held for use in connection with the businesses of the
Company and/or the Subsidiaries as currently conducted or as currently
contemplated by the Company, together with all applications currently pending or
in process for any of the foregoing; and "Year 2000 Compliant" means the ability
of computers, computer software and computerized devices to process (including
calculate, compare, sequence, display or store), transmit or receive date data
from, into and between the twentieth and twenty-first centuries, and the years
1999 and 2000, and leap year calculations without error or malfunction.
(b) Except as disclosed in the Company SEC Documents filed with the
SEC prior to the date hereof, the Company and the Subsidiaries own, or possess
adequate licenses or other valid rights to use (including the right to
sublicense to customers, suppliers or others as needed), all of the material
Company Intellectual Property that is necessary for the conduct or contemplated
conduct of the Company's or Subsidiaries' businesses. Section 4.16 of the
Company Letter lists each material license or other agreement pursuant to which
the Company or any Subsidiary has the right to use Company Intellectual Property
utilized in connection with any product of, or service provided by, the Company
and the Subsidiaries, the cancellation or
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expiration of which would have a Material Adverse Effect on the Company (the
"Company Licenses"). There are no pending, or, to the Knowledge of the Company,
threatened interferences, re-examinations, oppositions or cancellation
proceedings involving any patents or patent rights, trademarks or trademark
rights, or applications therefor, of the Company or any Subsidiary, except such
as would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. There is no breach or violation by the Company or by any
Subsidiary under, and, to the Knowledge of the Company, there is no breach or
violation by any other party to, any Company License that is reasonably likely
to give rise to any termination or any loss of rights thereunder. To the
Knowledge of the Company, there has been no unauthorized disclosure or use of
confidential information, trade secret rights, processes and formulas, research
and development results and other know-how of the Company or any Subsidiary,
except where such disclosure or use of such information would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. To the
Knowledge of the Company, the conduct of the business of the Company and the
Subsidiaries as currently conducted or contemplated does not and will not
infringe upon or conflict with, in any way, any license, trademark, trademark
right, trade name, trade name right, patent issued as of the date hereof, patent
right, industrial model, invention, service mark, service mark right, copyright
or trade secret of any third party that, individually or in the aggregate, would
have a Material Adverse Effect on the Company. Except as disclosed in the
Company SEC Documents filed with the SEC prior to the date hereof, to the
Knowledge of the Company, there are no infringements of, or conflicts with, any
Company Intellectual Property which, individually or in the aggregate, would
have a Material Adverse Effect on the Company. Except as set forth in Section
4.16 of the Company Letter, neither the Company nor any Subsidiary has licensed
or otherwise permitted the use by any third party of any proprietary information
or Company Intellectual Property on terms or in a manner which, individually or
in the aggregate, would have a Material Adverse Effect on the Company.
(c) Except as set forth in Section 4.16 of the Company Letter, the
current and previously sold products of the Company and its Subsidiaries and
software, operations, systems and processes (including, to the Knowledge of the
Company, software, operations, systems and processes obtained from third
parties) used in the conduct of the business of the Company and its
Subsidiaries, are Year 2000 Compliant except where the failure to be Year 2000
Compliant would not, individually or in the aggregate, have a Material Adverse
Effect on the Company and the Company has delivered to Parent true and correct
copies of any consultant or other third-party reports prepared on behalf of the
Company with respect to such compliance.
Section 4.17 Title to Assets. (a) As of the date hereof, the Company
and the Subsidiaries own, and as of the Effective Time the Company and the
Subsidiaries will own, good and marketable title to all of their assets material
to their business (excluding, for purposes of this sentence, assets held under
leases or assets covered under Section 4.16 hereof), free and clear of any and
all mortgages, liens, encumbrances, charges, claims, restrictions, pledges,
security interests or impositions, except as set forth in the Company SEC
Documents filed with the SEC prior to the date hereof, or Section 4.17 of the
Company Letter.
(b) Neither the Company nor any of its Subsidiaries owns any Real
Estate. The leases to all Real Estate occupied by the Company and the
Subsidiaries which are material to the
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operation of the businesses of the Company are in full force and effect and no
event has occurred which with the passage of time, the giving of notice, or
both, would constitute a default or event of default by the Company or any
Subsidiary or, to the Knowledge of the Company, any other person who is a party
signatory thereto, other than such defaults or events of default which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 4.18 State Takeover Statutes; Rights Agreement. (a) The Board
of Directors of the Company has, to the extent such statutes are applicable,
taken all action so to render the provisions of Section 203 of the DGCL
inapplicable to the Offer, the Merger and the Stockholder Agreements and the
consummation of the transactions contemplated by this Agreement and the
Stockholder Agreements. As of the date hereof, no other state takeover statute
or similar charter or bylaw provisions are applicable to the Offer, the Merger,
this Agreement, the Stockholder Agreements and the transactions contemplated
hereby and thereby.
(b) The amendment to the Rights Agreement in the form of Exhibit C
has been duly approved by the Company's Board of Directors and duly executed and
delivered by the Company.
Section 4.19 Required Vote of Company Stockholders. The affirmative
vote of the holders of at least a majority of Shares entitled to vote is
required to adopt this Agreement. No other vote of the security holders of the
Company is required by law, the Company Charter or the Amended and Restated
Bylaws of the Company or otherwise in order for the Company to consummate the
Merger and the transactions contemplated hereby.
Section 4.20 Accounts Receivable. All of the accounts and notes
receivable of the Company and its Subsidiaries set forth on the books and
records of the Company (net of the applicable reserves reflected on the books
and records of the Company and in the financial statements included in the
Company SEC Documents) (i) represent sales actually made or transactions
actually effected in the ordinary course of business for goods or services
delivered or rendered to unaffiliated customers in bona fide arm's length
transactions, (ii) constitute valid claims, and (iii) are good and collectible
at the aggregate recorded amounts thereof (net of such reserves) without right
of recourse, defense, deduction, return of goods, counterclaim, or offset and
have been or will be collected in the ordinary course of business and consistent
with past experience, except where the failure to collect such receivables in
such manner would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 4.21 Inventories. Except as set forth in Section 4.21 of the
Company Letter, all inventories of the Company and its Subsidiaries (net of the
obsolescence reserves therefor shown in the financial statements included in the
Company SEC Documents and determined in the ordinary course of business
consistent with past practice) consist of items of merchantable quality and
quantity usable or salable in the ordinary course of business, are salable at
prevailing market prices that are not less than the book value amounts thereof
or the price customarily charged by the Company or the applicable Subsidiary
therefor, conform to the specifications established therefor, and have been
manufactured in accordance with applicable regulatory requirements, except to
the extent that the failure of such inventories so to consist, be
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saleable, conform, or be manufactured would not have a Material Adverse Effect
on the Company.
Section 4.22 Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i) "Hazardous
Substances" means (A) petroleum and petroleum products, by-products or breakdown
products, radioactive materials, asbestos-containing materials and
polychlorinated biphenyls, and (B) any other chemicals, materials or substances
regulated as toxic or hazardous or as a pollutant, contaminant or waste or for
which liability or standards of care are imposed under any applicable
Environmental Law; (ii) "Environmental Law" means any law, past, present or
future and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, or common law, relating to pollution or protection of the environment,
health or safety or natural resources, including those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Substances; and (iii) "Environmental Permit" means any permit,
approval, identification number, license or other authorization required under
any applicable Environmental Law.
(b) Except as disclosed in Section 4.22 of the Company Letter, the
Company and the Subsidiaries are and have been in compliance with all applicable
Environmental Laws, have obtained all Environmental Permits and are in
compliance with their requirements, and have resolved all past non-compliance
with Environmental Laws and Environmental Permits without any pending, on-going
or future obligation, cost or liability, except in each case for the notices set
forth in Section 4.22 of the Company Letter or where such non-compliance would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(c) Except as disclosed in Section 4.22 of the Company Letter,
neither the Company nor any of the Subsidiaries has (i) placed, held, located,
released, transported or disposed of any Hazardous Substances on, under, from or
at any of the Company's or any of the Subsidiaries' properties or any other
properties, nor caused any facts or conditions that could give rise to an
environmental claim, other than in a manner that would not, in all such cases
taken individually or in the aggregate, result in a Material Adverse Effect on
the Company, (ii) any Knowledge or reason to know of the presence of any
Hazardous Substances on, under, emanating from, or at any of the Company's or
any of the Subsidiaries' properties or any other property but arising from the
Company's or any of the Subsidiaries' current or former properties or
operations, other than in a manner that would not result in a Material Adverse
Effect on the Company, or (iii) any Knowledge, nor has it received any written
notice since October 1, 1996 (A) of any violation of or liability under any
Environmental Laws, (B) of the institution or pendency of any suit, action,
claim, proceeding or investigation by any Governmental Entity or any third party
in connection with any such violation or liability, (C) requiring the
investigation of, response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of the Subsidiaries' current or former
properties or operations or any other properties, (D) alleging noncompliance by
the Company or any of the Subsidiaries with the terms of any Environmental
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Permit in any manner reasonably likely to require material expenditures or to
result in material liability or (E) demanding payment for response to or
remediation of Hazardous Substances at or arising from any of the Company's or
any of the Subsidiaries' current or former properties or operations or any other
properties, except in each case for the notices set forth in Section 4.22 of the
Company Letter or where such violation, liability, action, noncompliance or
payment would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
(d) Except as disclosed in Section 4.22 of the Company Letter, no
Environmental Law imposes any obligation upon the Company or any of the
Subsidiaries arising out of or as a condition to any transaction contemplated by
this Agreement, including any requirement to modify or to transfer any permit or
license, any requirement to file any notice or other submission with any
Governmental Entity, the placement of any notice, acknowledgment or covenant in
any land records, or the modification of or provision of notice under any
agreement, consent order or consent decree.
(e) The Company and the Subsidiaries have provided Parent with copies
of any Environmental assessment or audit report or other similar studies or
analyses currently in the possession of or available to the Company or any of
the Subsidiaries relating to any real property currently or formerly owned,
leased or occupied by the Company or any of the Subsidiaries.
Section 4.23 Suppliers, and Employees. Except as set forth in Section
4.23 of the Company Letter, neither the Company nor any Subsidiary has received
any notice or has any reason to believe that (a) any significant supplier will
not sell raw materials, supplies, merchandise and other goods to the Company or
any Subsidiary at any time after the Effective Time on terms and conditions
substantially similar to those used in its current sales to the Company and the
Subsidiaries, subject only to general and customary price increases, unless
comparable raw materials, supplies, merchandise or other goods are readily
available from other sources on comparable terms and conditions, or (b) any
employee or group of employees significant to Company, any of its Subsidiaries
or any of their operations intends to terminate or has terminated his or their
employment with the Company or any Subsidiary.
Section 4.24 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of the Company and the Subsidiaries
and their respective properties and assets, and are in character and amount at
least equivalent to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such failures
to maintain insurance policies that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. The Company and each Subsidiary
have made any and all payments required to maintain such policies in full force
and effect. Except as set forth in Section 4.24 of the Company Letter, neither
the Company nor any Subsidiary has received notice of default under any such
policy, and has not received written notice or, to the Knowledge of the Company,
oral notice of any pending or threatened termination or cancellation, coverage
limitation or reduction or material premium increase with respect to such
policy.
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Section 4.25 Transactions with Affiliates. (a) For purposes of this
Agreement, "Affiliated Person" means (i) any holder of 2% or more of the Company
Common Stock, (ii) any director, officer or senior executive of the Company or
any Subsidiary, (iii) any person, firm or corporation that directly or
indirectly controls, is controlled by, or is under common control with, any of
the Company or any Subsidiary or (iv) any member of the immediate family or any
of such persons, in each case other than Holdings or Parent or its Subsidiaries.
(b) Except as set forth in Section 4.25 of the Company Letter or in
the Company SEC Documents filed with the SEC prior to the date hereof, to the
Knowledge of the Company, since September 30, 1998, the Company and the
Subsidiaries have not, in the ordinary course of business or otherwise, (i)
purchased, leased or otherwise acquired any material property or assets or
obtained any material services from, (ii) sold, leased or otherwise disposed of
any material property or assets or provided any material services to (except
with respect to remuneration for services rendered in the ordinary course of
business as director, officer or employee of the Company or any Subsidiary),
(iii) entered into or modified in any manner any contract with, or (iv) borrowed
any money from, or made or forgiven any loan or other advance (other than
expenses or similar advances made in the ordinary course of business) to, any
Affiliated Person other than Parent.
(c) Except as set forth in Section 4.25 of the Company Letter or in
the Company SEC Documents filed with the SEC prior to the date hereof, to the
Knowledge of the Company, (i) the contracts of the Company and the Subsidiaries
do not include any material obligation or commitment between the Company or any
Subsidiary and any Affiliated Person, (ii) the assets of the Company or any
Subsidiary do not include any receivable or other obligation or commitment from
an Affiliated Person to the Company or any Subsidiary and (iii) the liabilities
of the Company and the Subsidiaries do not include any payable or other
obligation or commitment from the Company or any Subsidiary to any Affiliated
Person.
(d) To the Knowledge of the Company and except as set forth in
Section 4.25 of the Company Letter or in the Company SEC Documents filed with
the SEC prior to the date hereof, no Affiliated Person of any of the Company or
any Subsidiary is a party to any contract with any supplier of the Company or
any Subsidiary that affects in any material manner the business, financial
condition or results of operation of the Company or any Subsidiary.
Section 4.26 Brokers. No broker, investment banker or other person,
other than U.S. Bancorp Piper Jaffray Inc. the fees and expenses of which will
be paid by the Company (as reflected in an agreement between U.S. Bancorp Piper
Jaffray Inc. and the Company, a copy of which has been furnished to Parent), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
Section 5.1 Conduct of Business by the Company Pending the Merger.
Except as expressly permitted by clauses (i) through (xvii) of this Section 5.1,
during the period from the date of this Agreement through the Effective Time,
the Company shall, and shall cause each of its Subsidiaries to, in all material
respects carry on its business in the ordinary course of its business as
currently conducted and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement or as set forth in the
Company Letter (with specific reference to the applicable subsection below), the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of Parent:
(i) (A) other than dividends paid by wholly-owned Subsidiaries,
declare, set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity
as such, (B) other than in the case of any Subsidiary, split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (C) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options (including options under the Company Stock Option Plans) to acquire
any such shares, voting securities, equity equivalent or convertible
securities, other than (A) the issuance of shares of Company Common Stock
upon the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms, (B) the issuance of
shares of Company Common Stock upon exercise of the Warrants, and (C) the
grant of purchase rights or issuance of Shares pursuant to the Company
Stock Purchase Plan in accordance with Section 6.5 of this Agreement;
(iii) amend its charter or by-laws;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, limited liability
company, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets;
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(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets with a fair market value in excess
of $10,000, other than sales of inventory that are in the ordinary course
of business consistent with past practice;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) in the ordinary
course of business consistent with past practices and, in the case of
indebtedness and guarantees, in an amount not to exceed $100,000 and (B)
indebtedness, loans, advances, capital contributions and investments
between the Company and any of its wholly-owned Subsidiaries or between any
of such wholly-owned Subsidiaries, in each case in the ordinary course of
business consistent with past practices;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or ownership
of the Company or any Subsidiary;
(viii) except as provided in Section 5.1(viii) of the Company Letter
and Section 6.5, enter into or adopt any, or amend any existing, severance
plan, agreement or arrangement or enter into or amend any Company Plan or
employment or consulting agreement;
(ix) except as provided in Section 5.1(ix) of the Company Letter and
Section 6.5, increase the compensation payable or to become payable to its
directors, officers or employees (except for increases in the ordinary
course of business consistent with past practice in salaries or wages of
employees of the Company or any of its Subsidiaries who are not officers of
the Company or any of its Subsidiaries) or grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any director or officer of the Company or any of its Subsidiaries, or
establish, adopt, enter into, or, except as may be required to comply with
applicable law, amend in any material respect or take action to enhance in
any material respect or accelerate any rights or benefits under, any labor,
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any obligation
or duty imposed upon it or any Subsidiary by any applicable material
federal, state or local law, rule, regulation, guideline or ordinance;
(xi) make any change to accounting policies or procedures (other than
actions required to be taken by generally accepted accounting principles);
(xii) prepare or file any Tax Return inconsistent with past practice
or, on any such Tax Return, take any position, make any election, or adopt
any method that is inconsistent with positions taken, elections made or
methods used in preparing or filing similar Tax Returns in prior periods;
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(xiii) settle or compromise any Tax liability in excess of $100,000;
(xiv) settle or compromise any claims or litigation in excess of
$100,000 or commence any litigation or proceedings;
(xv) enter into or amend any agreement or contract (i) having a term
in excess of 12 months and which is not terminable by the Company or a
Subsidiary without penalty or premium by notice of 60 days or less or (ii)
which involves or is expected to involve payments of $100,000 or more
during the term thereof (provided that in the case of agreements or
contracts with any customer, the margins anticipated from any such
agreement or contract shall be consistent in all material respects with
historical margins); enter into or amend any other agreement or contract
material to the Company and its Subsidiaries, taken as a whole; or purchase
any real property, or make or agree to make any new capital expenditure or
expenditures (other than the purchase of real property) which in the
aggregate are in excess of $100,000;
(xvi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations in the ordinary course of business
consistent with past practice or in accordance with their terms; or
(xvii) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 5.2 No Solicitation. (a) The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of or any financial advisor, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, (i) solicit,
initiate or encourage the submission of, any Takeover Proposal, (ii) enter into
any agreement with respect to or approve or recommend any Takeover Proposal or
(iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to the Company or any Subsidiary in
connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Takeover Proposal; provided, however, that nothing contained in this
Section 5.2(a) shall prohibit the Company or its directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer or (ii) referring a third party to this Section 5.2(a) or making
a copy of this Section 5.2(a) available to any third party; and provided,
further, that prior to the acceptance for payment of Shares pursuant to the
Offer, if the Board of Directors of the Company reasonably determines that a
Takeover Proposal constitutes a Superior Proposal, then, to the extent required
by the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by a majority thereof after consultation with
independent counsel (who may be the Company's regularly engaged independent
counsel), the Company may, in response to an unsolicited request therefor, and
subject to compliance with Section 5.2(b), furnish information with respect to
the Company and its Subsidiaries to any person pursuant to a customary
confidentiality statement (as determined by
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the Company's independent counsel) and participate in discussions or
negotiations with such person. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence by
any officer or director of the Company or any of its Subsidiaries or any
financial advisor, attorney or other advisor or representative of the Company or
any of its Subsidiaries, whether or not such person is purporting to act on
behalf of the Company or any of its Subsidiaries or otherwise, shall be deemed
to be a breach of this Section 5.2(a) by the Company.
(b) The Company shall advise Parent orally and in writing of (i) any
Takeover Proposal or any inquiry with respect to or which could lead to any
Takeover Proposal received by any officer or director of the Company or, to the
Knowledge of the Company, any financial advisor, attorney or other advisor or
representative of the Company, (ii) the material terms of such Takeover Proposal
(including a copy of any written proposal), and (iii) the identity of the person
making any such Takeover Proposal or inquiry no later than 48 hours following
receipt of such Takeover Proposal or inquiry. If the Company intends to furnish
any Person with any information with respect to any Takeover Proposal in
accordance with Section 5.2(a), the Company shall advise Parent orally and in
writing of such intention not less than two business days in advance of
providing such information. The Company will keep Parent fully informed of the
status and material terms of any such Takeover Proposal or inquiry.
Section 5.3 Third Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party
(other than any involving Parent). During such period, the Company agrees to
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreements, including, but not limited to, obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States or any state thereof
having jurisdiction.
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
Section 6.1 Stockholder Meeting. (a) The Company will duly call, give
notice of, convene and hold a meeting of stockholders (the "Stockholder
Meeting") for the purpose of considering the approval of this Agreement and at
such meeting call for a vote and cause proxies to be voted in respect of the
approval and adoption of this Agreement. The Stockholder Meeting shall be held
as soon as practicable following the purchase of Shares pursuant to the Offer,
and the Company will, through its Board of Directors, recommend to its
stockholders the approval of this Agreement, and shall not withdraw or modify
such recommendation. The record date for the Stockholder Meeting shall be a date
subsequent to the date Parent or Sub becomes a record holder of Company Common
Stock purchased pursuant to the Offer.
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(b) The Company shall, at Parent's request, as soon as practicable
following the expiration of the Offer, prepare and file a preliminary Proxy
Statement with the SEC and shall use its reasonable best efforts to respond to
any comments of the SEC or its staff and to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after responding
to all such comments to the satisfaction of the staff. The Company shall notify
Parent promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Stockholder Meeting there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company shall promptly prepare and mail to its
stockholders such an amendment or supplement. The Company shall not mail any
Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects. Parent shall cooperate with the Company in the preparation
of the Proxy Statement or any amendment or supplement thereto, including the
supply of any information required to be included in the Proxy Statement
regarding Parent or Sub.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer
and all other Shares owned by Parent or any subsidiary of Parent to be voted in
favor of approval of the Merger.
Section 6.2 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors and other representatives
of Parent reasonable access to, and permit them to make such inspections as they
may reasonably require of, during the period from the date of this Agreement
through the Effective Time, all of their respective properties, books,
contracts, commitments and records (including accounting records and Tax Returns
and the work papers of independent accountants, if available and subject to the
consent of such independent accountants) and, during such period, the Company
shall, and shall cause each of its Subsidiaries to (i) furnish promptly to
Parent a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws, (ii) furnish promptly to Parent all other information
concerning its business, properties and personnel as Parent may reasonably
request and (iii) promptly make available to Parent all personnel of the Company
and its Subsidiaries knowledgeable about matters relevant to such inspections.
No investigation pursuant to this Section 6.2 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. All information obtained by Parent pursuant
to this Section 6.2 shall be kept confidential in accordance with the
Confidentiality Agreement dated June 2, 1999 between Parent and the Company, as
amended (the "Confidentiality Agreement").
Section 6.3 Directors. Promptly after such time as Sub purchases
Shares pursuant to the Offer, Sub shall be entitled, to the fullest extent
permitted by law, to designate at its option up to that number of directors,
rounded to the nearest whole number, of the Company's Board of Directors,
subject to compliance with Section 14(f) of the Exchange Act, as will make the
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percentage of the Company's directors designated by Sub equal to the percentage
of the aggregate voting power of the shares of Common Stock held by Parent or
any of its Subsidiaries; provided, however, that in the event that Sub's
designees are elected to the Board of Directors of the Company, until the
Effective Time such Board of Directors shall have at least three directors who
are directors on the date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided further that, in such event,
if the number of Independent Directors shall be reduced below three for any
reason whatsoever, the remaining Independent Directors or Director shall
designate a person or persons to fill such vacancy or vacancies, each of whom
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors shall designate
three persons to fill such vacancies who shall not be officers or affiliates of
the Company or any of its subsidiaries, or officers or affiliates of Parent or
any of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Following the election or appointment
of Sub's designees pursuant to this Section 6.3 and prior to the Effective Time,
any amendment, or waiver of any term or condition, of this Agreement or the
Company Charter or the Amended and Restated By-Laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Sub or
waiver or assertion of any of the Company's rights hereunder, and any other
consent or action by the Board of Directors of the Company with respect to this
Agreement, will require the concurrence of a majority of the Independent
Directors and no other action by the Company, including any action by any other
director of the Company, shall be required for purposes of this Agreement. To
the fullest extent permitted by applicable law, the Company shall take all
action requested by Parent that is reasonably necessary to effect any such
election, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company will promptly, at the option of Parent, to the fullest
extent permitted by law, either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its current directors
as is necessary to enable Sub's designees to be elected or appointed to the
Company's Board of Directors as provided above.
Section 6.4 Fees and Expenses. (a) Except as provided in this Section
6.4 and Section 6.8, whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including the fees and disbursements of counsel, financial
advisors and accountants, shall be paid by the party incurring such costs and
expenses.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent the following amounts under the circumstances and at the times set forth
as follows:
(i) if Parent or Sub terminates this Agreement under Section 8.1(d),
the Company shall pay the Expenses of Parent and the Termination Fee upon
demand; or
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(ii) if the Company terminates this Agreement under Section 8.1(e),
the Company shall pay the Termination Fee within one business day following
such termination and the Expenses of Parent upon demand.
Section 6.5 Company Stock Options. (a) Prior to the consummation of
the Offer, the Board of Directors of the Company (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and take all other
actions necessary or appropriate to cause each Company Stock Option that is
outstanding as of the consummation of the Offer to vest in full and become
exercisable immediately prior to the consummation of the Offer with respect to
all of the shares of Company Common Stock at the time subject to such Company
Stock Option. Each Company Stock Option that is outstanding upon the
consummation of the Offer shall be canceled as of the consummation of the Offer,
in consideration for which the holder thereof (an "Option Holder") shall be
entitled to receive from the Company an amount equal to (A) the product of (1)
the number of shares of Company Common Stock subject to such Option and (2) the
excess, if any, of the Offer Price over the exercise price per share for the
purchase of the Company Common Stock subject to such Option, minus (B) all
applicable federal, state and local Taxes required to be withheld in respect of
such payment. The amounts payable pursuant to the second sentence of this
Section 6.5 shall be paid as soon as reasonably practicable following the
acceptance for payment by Sub pursuant to the Offer. The surrender of an Option
in exchange for the consideration contemplated by the second sentence of this
Section 6.5 shall be deemed a release of any and all rights the Option Holder
had or may have had in respect thereof.
(b) The Company shall take all actions necessary to ensure that (i)
the Purchase Period (as defined in the Company Stock Purchase Plan) applicable
to the options outstanding under the Company Stock Purchase Plan (each, a
"Purchase Plan Option") is shortened so as to have a Purchase Date (as defined
in the Company Stock Purchase Plan) that occurs before the acceptance for
payment by Sub of Shares pursuant to the Offer; and (ii) no current holder of a
Purchase Plan Option is permitted to increase his or her rate of payroll
deduction under the Company Stock Purchase Plan from and after the date hereof.
(c) The Company shall take all actions necessary to provide that,
effective as of acceptance for payment by Sub of Shares pursuant to the Offer,
(i) the Company Stock Option Plan and any similar plan or agreement of the
Company shall be terminated, (ii) any rights under any other plan, program,
agreement or arrangement relating to the issuance or grant of any other interest
in respect of the capital stock of the Company or any of its Subsidiaries shall
be terminated, and (iii) no Option Holder will have any right to receive any
shares of capital stock of the Company or, if applicable, the Surviving
Corporation, upon exercise of any Company Stock Option.
(d) The Company represents and warrants that it has the power and
authority under the terms of the Company Stock Purchase Plan and the Company
Stock Option Plan to comply with this Section 6.5 without the consent of any
Option Holder.
Section 6.6 Warrants. Prior to the acceptance for payment of any
Shares by Sub pursuant to the Offer, the Company will obtain written
confirmation, in form and substance
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reasonably satisfactory to Parent, from the holders of each of the Pilla Warrant
and the Chiabera Warrant that after the Effective Time of the Merger such
Warrant will represent the right to receive an amount equal to (A) the product
of (1) the number of shares of Company Common Stock subject to such Warrant and
(2) the excess, if any, of the Merger Consideration over the Exercise Price (as
defined in such Warrant) per share for the purchase of the Company Common Stock
subject to such Warrant, minus (B) all applicable federal, state and local Taxes
required to be withheld in respect of such payment.
Section 6.7 Reasonable Best Efforts. (a) Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by this Agreement, including: (i) the
obtaining of all necessary actions or non-actions, waivers, consents and
approvals from all Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity
(including those in connection with the HSR Act, any other pre-merger filings
and State Takeover Approvals), (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by this Agreement. No party to this Agreement shall consent to any
voluntary delay of the consummation of the Offer or the Merger at the behest of
any Governmental Entity without the consent of the other parties to this
Agreement, which consent shall not be unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in connection with any filing or submission required or action to be
taken by either Parent or the Company to effect the Offer, the Merger and to
consummate the other transactions contemplated hereby, the Company shall not,
without Parent's prior written consent, commit to any divestiture transaction,
and neither Parent nor any of its Affiliates shall be required to divest or hold
separate or otherwise take or commit to take any action that limits its freedom
of action with respect to, or its ability to retain, the Company or any of the
businesses, product lines or assets of Parent or any of its Subsidiaries or that
otherwise would have a Material Adverse Effect on Parent.
Section 6.8 Public Announcements. Parent and the Company will not
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the
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other party, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange.
Section 6.9 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby or
the Stockholder Agreements, Parent and the Company and their respective Boards
of Directors shall use their reasonable best efforts to grant such approvals and
take such actions as are necessary so that the transactions contemplated hereby
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to minimize the effects of any such statute or regulation on
the transactions contemplated hereby.
Section 6.10 Indemnification; Directors and Officers Insurance. (a)
From and after the Effective Time, Parent shall cause the Surviving Corporation
to indemnify and hold harmless all past and present officers and directors of
the Company and of its Subsidiaries to the same extent and in the same manner
such persons are indemnified as of the date of this Agreement by the Company
pursuant to the DGCL, the Company Charter or the Company's Amended and Restated
Bylaws for acts or omissions occurring at or prior to the Effective Time.
(b) Parent shall cause the Surviving Corporation to provide, for an
aggregate period of not less than six years from the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective Time (the
"D&O Insurance") that is substantially similar to the Company's existing policy
or, if substantially equivalent insurance coverage is unavailable, the best
available coverage; provided, however, that the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 150% of
the last annual premiums paid prior to the date hereof (which premiums the
Company has disclosed to Parent), but in such case shall purchase as much
coverage as possible for such amount.
Section 6.11 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware and which would be reasonably likely to cause
(x) any representation or warranty contained in this Agreement and made by it to
be untrue or inaccurate in any material respect or (y) any covenant, condition
or agreement contained in this Agreement and made by it not to be complied with
or satisfied in all material respects, (ii) any failure of Parent or the
Company, as the case may be, to comply in a timely manner with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder or (iii) any change or event which would be reasonably likely to have
a Material Adverse Effect on the Company; provided, however, that the delivery
of any notice pursuant to this Section 6.11 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement (including the Merger) shall
have been approved and adopted by the affirmative vote of the stockholders of
the Company (unless the vote of stockholders is not required under the DGCL) as
required by the DGCL and the Company Charter.
(b) HSR Act and Other Pre-Merger Filings. Any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act or any other waiting periods under applicable foreign laws shall have
expired or been terminated.
(c) Purchase of Shares. Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer, except that this condition
shall not apply if Sub shall have failed to purchase Shares pursuant to the
Offer in breach of its obligations under this Agreement.
(d) No Order. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger illegal.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any of the Offer
Conditions the Offer shall have terminated or expired in accordance
with its terms without Sub having accepted for payment any Shares
pursuant to the Offer or (y) Sub shall not have accepted for payment
any Shares pursuant to the Offer prior to October 31, 1999; provided,
however, that the right to terminate this Agreement pursuant to this
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Section 8.1(b)(i) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the
failure of any such condition or if the failure of such condition
results from facts or circumstances that constitute a breach of any
representation or warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or
payment for, Shares pursuant to the Offer and such order, decree or
ruling or other action shall have become final and nonappealable;
(c) by Parent or Sub prior to the purchase of Shares pursuant to the
Offer in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in this Agreement which (i)
would give rise to the failure of a condition set forth in paragraph (e) or
(f) of Exhibit B and (ii) cannot be or has not been cured within 30 days
after the giving of written notice to the Company;
(d) by Parent or Sub if either Parent or Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraph
(d) of Exhibit B;
(e) by the Company if the Board of Directors of the Company
reasonably determines that a Takeover Proposal constitutes a Superior
Proposal and a majority of the members of the Board of Directors
determines, in its reasonable good faith judgment, after consultation with
independent counsel, that failing to terminate this Agreement would
constitute a breach of such Board's fiduciary duties under applicable law,
provided that the Company has complied with all provisions of Section 5.2,
including the notice provisions therein, and that it has complied with the
requirements of Section 6.4(b) relating to the payment (including the
timing of any payment) of the Expenses and the Termination Fee to the
extent required by Section 6.4(b); and provided further that the Company
may not terminate this Agreement pursuant to this Section 8.1(e) unless and
until 72 hours have elapsed following delivery to Parent of a written
notice of such determination by the Board of Directors of the Company;
(f) by the Company, if (i) any of the representations or warranties
of Parent or Sub set forth in this Agreement that are qualified as to
materiality shall not be true and correct in any respect or any such
representations or warranties that are not so qualified shall not be true
and correct in any material respect, or (ii) Parent or Sub shall have
failed to perform in any material respect any material obligation or to
comply in any material respect with any material agreement or covenant of
Parent or Sub to be performed or complied with by it under this Agreement
and such untruth, incorrectness or failure cannot be or has not been cured
within 30 days after the giving of written notice to Parent or Sub, as
applicable; or
(g) by the Company, if the Offer has not been timely commenced in
accordance with Section 1.1.
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The right of any party hereto to terminate this Agreement pursuant to
this Section 8.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 8.2 Effect of Termination. In the event of termination of
this Agreement by either Parent or the Company, as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 6.2 and the entirety of
Section 6.4, which shall survive the termination); provided, however, that
nothing contained in this Section 8.2 shall relieve any party hereto from any
liability for any breach of a representation or warranty contained in this
Agreement, the breach of any covenant contained in this Agreement or for fraud.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.4 Waiver. At any time prior to the Effective Time, subject
to Section 6.3, the parties hereto may (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 9.1 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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(a) if to Parent or Sub, to:
Smith & Nephew, Inc.
1450 Brooks Road
Memphis, Tennessee 38116
Attention: President, Orthopedic Division
with copies to:
Smith & Nephew, Inc.
1450 Brooks Road
Memphis, Tennessee 38116
Attention: General Counsel
Facsimile No.: 901-396-7824
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Dennis V. Osimitz
Facsimile No.: 312-853-7036
(b) if to the Company, to:
Exogen, Inc.
10 Constitution Ave.
Piscataway, New Jersey 08855
Attention: Patrick A. McBrayer
Facsimile No.: 732-981-0648
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway
New York, New York
Attention: Ellen B. Corenswet
Facsimile No.: 212-586-7878
Section 9.3 Interpretation; Certain Definitions. (a) When a
reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
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(b) For purposes of this Agreement, the following terms have the
meaning specified in this Section 9.3:
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Expenses" means documented out-of-pocket fees and expenses incurred
or paid by or on behalf of Parent in connection with the Offer, the Merger or
the consummation of any of the transactions contemplated by this Agreement,
including all fees and expenses of law firms, commercial banks, investment
banking firms, accountants, experts and consultants to Parent.
"Knowledge of the Company" means the actual knowledge of the directors
and executive officers of the Company.
"Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to the Company or Parent, as the case may be, any change or
effect that is or could reasonably be expected (as far as can be foreseen at the
time) to be materially adverse to the business, operations, properties or
results of operations, financial projections or forecasts, or the business
prospects and condition (financial or otherwise), with all such matters being
considered in the aggregate, of the Company and its Subsidiaries, taken as a
whole, or Parent and its Subsidiaries, taken as a whole, as the case may be.
"Real Estate" means, with respect to the Company or any Subsidiary, as
applicable, all of the fee or leasehold ownership right, title and interest of
such person, in and to all real estate and improvement owned or leased by any
such person and which is used by any such person in connection with the
operation of its business.
"Subsidiary" means any corporation, partnership, limited liability
company, joint venture or other legal entity of which Parent or the Company, as
the case may be (either alone or through or together with any other Subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation, partnership,
limited liability company, joint venture or other legal entity.
"Superior Proposal" means a bona fide proposal made by a third party
to acquire the Company pursuant to a tender or exchange offer, a merger, a sale
of all or substantially all of the Company's assets or otherwise on terms which
a majority of the disinterested members of the Board of Directors of the Company
determines, at a duly constituted meeting of the Board of Directors or by
unanimous written consent, in its reasonable good faith judgment to be more
favorable to the Company's stockholders than the Merger (based on the advice of
the Company's
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independent financial advisor that the value of the consideration provided for
in such proposal exceeds the value of the consideration provided for in the
Merger) and for which financing, to the extent required, is then committed or
which, in the reasonable good faith judgment of a majority of such disinterested
members, as expressed in a resolution adopted at a duly constituted meeting of
such members (based on the advice of the Company's independent financial
advisor), is reasonably capable of being obtained by such third party.
"Takeover Proposal" means any proposal for (i) a merger or other
business combination involving the Company or any of its Subsidiaries, (ii) any
proposal or offer to acquire in any manner, directly or indirectly, an equity
interest in or any voting securities of the Company representing 15% or more of
the Shares or of the total voting securities of the Company outstanding or (iii)
an offer to acquire in any manner, directly or indirectly, a substantial portion
of the assets of the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"Taxes" means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer or
excise tax, or other tax, custom, duty, governmental fee or any other like
assessment or charge of any kind whatsoever, together with any interest or
penalty imposed by any Governmental Entity.
"Tax Return" means any return, report or similar statement (including
the attached schedules) required to be filed with respect to any Tax, including
any information return, claim for refund, amended return or declaration of
estimated Tax.
"Termination Fee" means $2,500,000.
Section 9.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, except as provided in the last sentence of Section 6.2, constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof. This Agreement, except for the provisions of Section 6.10, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 9.6 Governing Law. Except to the extent that the laws of the
State of Delaware are mandatorily applicable to the Merger, this Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
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Section 9.7 Assignment. Subject to Section 2.1, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties.
Section 9.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 9.9 Enforcement of this Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific wording or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, such
remedy being in addition to any other remedy to which any party is entitled at
law or in equity. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the District of Delaware in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
courts (and waives any objection based on forum non conveniens or any other
objection to venue therein). Each party hereto waives any right to a trial by
jury in connection with any such action, suit or proceeding.
-44-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
SMITH & NEPHEW, INC.
By: /s/ Clifford K. Lomax
----------------------------
Name: Clifford K. Lomax
--------------------------
Title: Treasurer
-------------------------
SMITH & NEPHEW ACQUISITION, INC.
By: /s/ Clifford K. Lomax
----------------------------
Name: Clifford K. Lomax
--------------------------
Title: Chairman
-------------------------
EXOGEN, INC.
By: /s/ Patrick A. McBrayer
----------------------------
Name: Patrick A. McBrayer
--------------------------
Title: President and CEO
-------------------------
-45-
<PAGE>
Exhibit A
---------
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of _____, 1999,
among Smith & Nephew, Inc., a Delaware corporation ("Parent"), Smith & Nephew
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and the undersigned stockholder (the "Stockholder") of Exogen,
Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "Merger Agreement") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "Offer")
by Sub for any and all shares of Common Stock, par value $.0001 per share, of
the Company (the "Common Stock") at the Offer Price (as defined in the Merger
Agreement) and the merger of the Company and Sub (the "Merger");
WHEREAS, the Stockholder legally and/or beneficially owns that number
of shares of Common Stock appearing on the signature page hereof (such shares,
as they may be adjusted by any stock dividend, stock split, recapitalization,
combination or exchange of shares, merger, consolidation, reorganization or
other change or transaction of or by the Company (each, an "Adjustment Event")
being referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Sub have requested that the Stockholder enter into this
Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. Representations and Warranties of the Stockholder. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) Authority. The Stockholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding obligation
of the Stockholder enforceable in accordance with its terms. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of, or default (with or
without
<PAGE>
notice or lapse of time or both) under any provision of, any trust
agreement, loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or
regulation applicable to the Stockholder or to the Stockholder's property
or assets. Except for the expiration or termination of the waiting period
under the HSR Act and informational filings with the SEC, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic, foreign or supranational, is
required by or with respect to the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the
Stockholder of the transactions contemplated hereby.
(b) The Shares. The Stockholder has good and marketable title to the
Subject Shares, free and clear of any claims, liens, encumbrances and
security interests whatsoever. The Stockholder owns no shares of Common
Stock other than the Subject Shares.
2. Representations and Warranties of Parent and Sub.
------------------------------------------------
(a) Authority. Parent and Sub hereby represent and warrant to the
Stockholder that each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and constitutes a valid and
binding obligation of Parent and Sub enforceable in accordance with its
terms.
3. Covenants of the Stockholder. The Stockholder agrees as follows:
----------------------------
(a) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought, the Stockholder
shall vote (or cause to be voted) the Subject Shares in favor of the
Merger, the approval of the Merger Agreement and the approval of the terms
thereof and each of the other transactions contemplated by the Merger
Agreement, provided that the terms of the Merger Agreement shall not have
been amended to adversely affect the Stockholder.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the Stockholder
shall vote (or cause to be voted) the Subject Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the
-2-
<PAGE>
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up of
or by the Company or any other Takeover Proposal or (ii) any amendment of
the Company's articles of incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge, assign
or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the
sale, transfer, pledge, assignment or other disposition of, the Subject
Shares to any person other than Sub or Sub's designee or (ii) enter into
any voting arrangement, whether by proxy, voting agreement or otherwise, in
connection, directly or indirectly, with any Takeover Proposal.
(d) The Stockholder shall not, nor shall the Stockholder permit any
investment banker, attorney or other adviser or representative of the
Stockholder to, (i) directly or indirectly solicit, initiate or encourage
the submission of, any Takeover Proposal or (ii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated, the
Stockholder shall tender pursuant to the Offer, and not withdraw, all of
the Subject Shares.
4. Further Assurances. The Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further transfers, assignments, endorsements, consents and other instruments as
Parent or Sub may reasonably request for the purpose of effectively carrying out
the transactions contemplated by this Agreement.
5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns and, in the case of the Stockholder, the
heirs, executors and administrators of the Stockholder.
6. Termination. Except as provided otherwise herein, this Agreement
shall terminate upon the earlier of (i) the Effective Time (as defined in the
Merger Agreement) and (ii) the termination of the Merger Agreement in accordance
with its terms.
-3-
<PAGE>
7. General Provisions.
------------------
(a) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as specified in the Merger
Agreement.
(b) Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction,
this being in addition to any other remedy to which they are entitled at
law or in equity. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the District of
Delaware in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such courts (and waives any objection based on forum non
conveniens or any other objection to venue therein). Each party hereto
waives any right to a trial by jury in connection with any such action,
suit or proceeding.
(c) Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing
and if served by personal delivery upon the party for whom it is intended
or if sent by telex or telecopier (and also confirmed in writing) to the
person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such person:
(i) if to Parent or Sub, to::
Smith & Nephew, Inc.
c/o Smith & Nephew plc
2 Temple Place
Victoria Embankment
London WC2R 3BP
Attention: Peter Huntley
Facsimile No.: 171-240-1343
with a copy to:
Smith & Nephew, Inc.
1450 Brooks Road
Memphis, Tennessee 38116
Attention: General Counsel
Facsimile No.: 901-396-7824
-4-
<PAGE>
and:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Dennis V. Osimitz
Facsimile No.: 312- 853-7036
(ii) if to the Stockholder, to:
with a copy to:
(d) Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any Person other than Parent, Sub or the
Stockholder, or their permitted successors or assigns, any rights or
remedies under or by reason of this Agreement.
(e) Entire Agreement; Amendments. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge may be sought.
(f) Headings. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same
document.
-5-
<PAGE>
(h) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
(i) Capitalized Terms. Capitalized terms not otherwise defined in
this Agreement shall have the meanings set forth in the Merger Agreement.
(j) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in
any manner materially adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
8. No Limitations on Actions of the Shareholder as a Director.
Notwithstanding anything to the contrary in this Agreement, nothing in this
Agreement is intended or shall be construed to require the Shareholder to take
or in any way limit any action that the Shareholder may take to discharge the
Shareholder's fiduciary duties as a director of the Company.
-6-
<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder has caused
this Agreement to be signed by its officer thereunto duly authorized and the
Stockholder has signed this Agreement, all as of the date first written above.
SMITH & NEPHEW, INC.
By: ___________________________________
Name:
Title:
SMITH & NEPHEW ACQUISITION, INC.
By: ___________________________________
Name:
Title:
STOCKHOLDER
_______________________________________
Number of shares of Common Stock owned by the
Stockholder on the date hereof:
____________
Options to purchase Common Stock held by the
Stockholder on the date hereof:
____________
-7-
<PAGE>
EXHIBIT B
---------
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of Shares that, together with
the Shares then owned by Holdings and Parent and its Subsidiaries, would
constitute at least a majority of the Shares that in the aggregate are
outstanding determined on a fully diluted basis (assuming the exercise of all
options to purchase Company Common Stock (other than the Parent Option), and the
conversion or exchange of all securities convertible or exchangeable into,
Shares outstanding at the expiration date of the Offer) ("Minimum Condition")
and (ii) any waiting period under the HSR Act and any other waiting periods
under any foreign laws applicable to the purchase of Shares pursuant to the
Offer shall have expired or been terminated prior to the expiration date of the
Offer (the "HSR Condition"). Furthermore, notwithstanding any other term of the
Offer or this Agreement, Sub shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for payment
or paid for, and may terminate the Offer if, at any time on or after the date of
this Agreement and before the acceptance of such Shares for payment or the
payment therefor, any of the following conditions exists (other than as a result
of any action or inaction of Parent or any of its subsidiaries that constitutes
a breach of this Agreement):
(a) there shall be threatened or pending by any Governmental Entity
any suit, action or proceeding (i) challenging the acquisition by Parent or
Sub of any Shares under the Offer, seeking to restrain or prohibit the
making or consummation of the Offer or the Merger or the performance of any
of the other transactions contemplated by this Agreement or the Stockholder
Agreements (including the voting provisions thereunder), or seeking to
obtain from the Company, Parent or Sub any damages that are material in
relation to the Company and its subsidiaries taken as a whole, (ii) seeking
to prohibit or materially limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of a material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or Parent and its subsidiaries, taken as a whole, or to compel the Company
or Parent to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or Parent and its subsidiaries, taken as a whole, as a result of the Offer
or any of the other transactions contemplated by this Agreement or the
Stockholder Agreements, (iii) seeking to impose material limitations on the
ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any Shares to be accepted for payment pursuant to the Offer,
including the right to vote such Shares on all matters properly presented
to the stockholders of the Company, (iv) seeking to prohibit Parent or any
of its subsidiaries
<PAGE>
from effectively controlling in any material respect any material portion
of the business or operations of the Company or its subsidiaries or (v)
which otherwise is reasonably likely to have a Material Adverse Effect on
the Company, or there shall be pending by any other person any suit, action
or proceeding which would have a Material Adverse Effect on the Company.
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any Governmental Entity any
statute, rule, regulation, judgment, order or injunction, other than the
application to the Offer or the Merger of applicable waiting periods under
the HSR Act or any other applicable waiting periods under any foreign laws
enacted as of the date hereof, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) there shall have occurred any Material Adverse Change with
respect to the Company other than a Material Adverse Change primarily
caused by the loss of employees of the Company as a result of the Offer or
the announcement thereof;
(d) (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or
Sub its approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Takeover Proposal or (ii) the
Board of Directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions;
(e) the representations and warranties of the Company set forth in
this Agreement shall not be true and correct in each case at the date of
this Agreement and at the scheduled or extended expiration of the Offer
unless the inaccuracies (without giving effect to any materiality or
Material Adverse Effect qualifications or exceptions contained therein)
under such representations and warranties, taking all the inaccuracies
under all such representations and warranties together in their entirety,
do not, individually or in the aggregate, result in a Material Adverse
Effect on the Company;
(f) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant of the Company to be performed or
complied with by it under this Agreement other than any failures which
would not have, either individually or in the aggregate, a Material Adverse
Effect on the Company;
(g) any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Sub or their affiliates or any group of
which any of them is a member, shall have acquired or announced its
intention to acquire beneficial ownership (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of 15% or more of the Shares;
-2-
<PAGE>
(h) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a
national securities exchange in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index), (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States, (iii)
any limitation (whether or not mandatory) by any Governmental Entity on, or
other event that materially adversely affects, the extension of credit by
banks or other lending institutions, (iv) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States which in any case is reasonably
expected to have a Material Adverse Effect on the Company or to materially
adversely affect Parent's or Sub's ability to complete the Offer and/or the
Merger or materially delay the consummation of the Offer and/or the Merger,
or (v) from the date of this Agreement through the date of termination or
expiration, a decline of at least 25% in either the Dow Jones Industrial
Average or the Standard & Poor's 500 Index; or
(i) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and Sub
and may, subject to the terms of this Agreement, be waived by Parent and Sub in
whole or in part at any time and from time to time in their sole discretion.
The failure by Parent or Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
Terms used but not defined herein shall have the meanings assigned to such terms
in the Agreement to which this Exhibit B is a part.
-3-
<PAGE>
Exhibit C
---------
SECOND AMENDMENT TO RIGHTS AGREEMENT
------------------------------------
Second Amendment dated as of July __, 1999 (this "Amendment") to
Rights Agreement dated as of December 6, 1996, as amended (the "Rights
Agreement"), between Exogen, Inc., a Delaware corporation (the "Company"), and
Registrar and Transfer Company (the "Rights Agent").
W I T N E S S E T H :
-------------------
WHEREAS, the Board of Directors of the Company has approved and
adopted an Agreement and Plan of Merger(the "Merger Agreement") among the
Company, Smith & Nephew, Inc., a Delaware corporation ("Parent") and Smith &
Nephew Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent ("Sub"), providing for the making of a cash tender offer (as such
offer may be amended from time to time, the "Offer") and the merger (the
"Merger") of Sub with and into the Company;
WHEREAS, the Board of Directors of the Company has determined that the
Offer and the Merger are in furtherance of and consistent with the long-term
business strategy of the Company and are in the best interests of the Company
and its shareholders;
WHEREAS, the willingness of Parent and Sub to enter into the Merger
Agreement is conditioned on, among other things, the amendment of the Rights
Agreement on the terms set forth herein;
WHEREAS, at the date of this Amendment, the Distribution Date has not
occurred and there is no Acquiring Person;
WHEREAS, Section 27 of the Rights Agreement provides that the Company
may from time to time supplement or amend the Rights Agreement in any respect
without the approval of any holders of Rights Certificates, any such supplement
or amendment to be evidenced in a writing signed by the Company and the Rights
Agent; provided, however, that from and after the Distribution Date, the Rights
Agreement may not be amended in any manner which would adversely affect the
interests of the holders of Rights; and
WHEREAS, in compliance with Section 27 of the Rights Agreement, the
Company and the Rights Agent desire to amend the Rights Agreement as hereinafter
set forth and have executed and delivered this Amendment immediately prior to
the execution and delivery of the Merger Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the Rights Agreement and the
premises and mutual agreements herein set forth, the parties hereby agree as
follows:
1. Section 1 of the Rights Agreement is hereby amended by adding the
following definitions thereto:
"Merger" shall mean the merger of Sub with and into the Company as
contemplated by the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger among
Parent, Sub and the Company, as the same may be amended in accordance with
the terms thereof.
"Parent" shall mean Smith & Nephew, Inc., a Delaware corporation.
"Stockholder Agreements" shall mean the Stockholder Agreements between
Parent and each of ___________________, as the same may be amended in
accordance with the terms thereof.
"Sub" shall mean Smith & Nephew Acquisition, Inc. a Delaware
corporation and a wholly-owned subsidiary of Parent.
2. The definition of Acquiring Person contained in Section 1(a) of
the Rights Agreement is hereby amended by replacing the "." that appears at the
end of clause (iv) of such Section with "; or " and by adding the following
clause thereafter:
"(v) prior to the termination of the Merger Agreement in accordance with
Section 8.1 thereof, Parent, Sub or any of their Affiliates or Associates."
3. Section 1(l) of the Rights Agreement is hereby amended by adding
the following to the end of the second parenthetical phrase in clause (ii) of
such Section:
"and, prior to the termination of the Merger Agreement in accordance with
Section 8.1 thereof, other than Parent, Sub or any other Subsidiary of
Parent"
4. Section 1(q) of the Rights Agreement is hereby amended by
replacing the word "or" that appears immediately prior to the symbol "(iv)" with
a comma and by adding the following to the end of the amended Section 1(q):
", or (iv) the time immediately prior to the Effective Time (as
defined in the Merger Agreement)."
5. The term "Agreement" as used in the Rights Agreement shall be
deemed to refer to the Rights Agreement as amended by this Amendment.
-2-
<PAGE>
6. This Amendment shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State.
7. This Amendment may be executed in two or more counterparts, and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute one and the same instrument.
8. Any capitalized term used herein without definition shall have
the meaning specified in the Rights Agreement.
9. Except as otherwise expressly set forth herein, this Amendment
shall not by implication or otherwise alter, modify, amend or in any other
manner affect any of the terms, conditions, obligations, covenants or agreements
contained in the Rights Agreement, all of which are hereby ratified and
confirmed in all respects and shall continue in full force and effect.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and attested, all as of the day and year first above written.
EXOGEN, INC.
By: ____________________________
Name:
Title:
Attest:
By: ________________________
Name:
Title:
REGISTRAR AND TRANSFER COMPANY
By: __________________________________
Name:
Title:
Attest:
By: ________________________
Name:
Title:
-4-
<PAGE>
Exhibit 3
Exogen, Inc. Smith & Nephew, Inc.
Patrick A. McBrayer, CEO Larry Papasan, President
Or Richard H. Reisner, CFO Orthopedic Division
732-981-0990 901-399-6023
Betty Cole
Group Communications Manager
901-399-6166
SMITH & NEPHEW TO ACQUIRE EXOGEN IN CASH TENDER OFFER
London, England and Piscataway, NJ - July 26, 1999 - Smith & Nephew plc (London
Stock Exchange: SN), the worldwide healthcare group, and Exogen, Inc. (NASDAQ:
EXGN), a leading supplier of non-invasive ultrasound devices for accelerated
healing of bone fractures, today jointly announced that Smith & Nephew, Inc. of
Memphis, Tenn., a subsidiary of Smith & Nephew plc, has signed a definitive
agreement to acquire all of the outstanding shares of common stock of Exogen for
a cash price of $5.15 per share. The transaction values Exogen at approximately
$68 million. The board of directors of each company has approved the
transaction.
Tender Offer
- ------------
Under the terms of the transaction, a subsidiary of Smith & Nephew, Inc. will
commence a tender offer for all of Exogen's outstanding common stock no later
than July 30,1999. The acquisition is expected to close in September 1999, at
which time the subsidiary of Smith & Nephew, Inc. will be merged into Exogen.
Smith & Nephew will consummate the transaction from its existing cash resources.
The tender offer is contingent upon customary conditions, including the tender
of that number of shares that, together with the 6.4% of shares already owned by
subsidiaries of Smith & Nephew, constitute at least a majority of Exogen's
outstanding stock on a fully diluted basis.
Exogen's directors have each agreed to support the transaction and to tender
their respective shares. U.S. Bancorp Piper Jaffray acted as Exogen's financial
advisor and has rendered a fairness opinion to the Exogen Board of Directors.
Chase Securities Inc. acted as Smith & Nephew's financial advisor and will act
as dealer manager.
<PAGE>
Exogen
- ------
Exogen designs, develops, manufactures and markets medical devices for the non-
invasive treatment of musculoskeletal injury and disease. Exogen's proprietary
ultrasound and mechanical stress technologies are based on the well-established
principle that bone growth is stimulated by mechanical force.
In August 1998, Exogen entered into an exclusive sales representative agreement
with Smith & Nephew, for its ultrasound accelerated fresh fracture healing
devices in the United States, with rights for Smith & Nephew to extend this to
worldwide distribution, excluding Japan. At the same time, Smith & Nephew
acquired its existing stake in Exogen.
Smith & Nephew
- --------------
Smith & Nephew is a global healthcare company with operations in 36 countries.
The company markets technologically advanced products principally in
Orthopedics, Endoscopy and Wound Management. Smith & Nephew announced in
December 1998 that, as part of its group strategy, it would prioritize
investment in these three divisions. The acquisition of Exogen, with its
innovative bone healing technology, will further develop Smith & Nephew's
portfolio of next generation orthopedic products.
The transition of Exogen's sales activities to the Smith & Nephew sales force
has already been completed in the United States as part of the sales
representative agreement. Following the merger, Exogen's operations will be
integrated with the Orthopedic business of Smith & Nephew.
Commentary
- ----------
Patrick McBrayer, Chief Executive Officer of Exogen, said "Since forming our
marketing alliance for the United States almost one year ago, it has been clear
that the combination of Exogen's ultrasound fracture healing technology and
Smith & Nephew's distribution strength deliver a formidable market presence.
Our merger can only serve to strengthen our opportunity for worldwide market
leadership in non-invasive fracture repair. Further, Smith & Nephew's worldwide
presence in healthcare provides an ideal platform to launch Exogen's products
currently in development for cartilage repair and osteoporosis treatment."
Chris O'Donnell, Chief Executive of Smith & Nephew plc, said "The acquisition of
Exogen, with its innovative ultrasound healing technology, will strengthen our
Orthopedic business in this important emerging field."
Larry Papasan, President of Smith & Nephew's Orthopedic Division, said "We have
worked closely with Exogen since commencing U.S. sales of its ultrasound bone
healing device last year. The acquisition will allow further investment in
developing this technology, plus further investment in Exogen's exciting
portfolio of research and development projects.
<PAGE>
As these two businesses are merged, the expertise of the Exogen team combined
with Smith & Nephew's global distribution network will enable us to continue our
aggressive efforts in expanding the ultrasound business worldwide and developing
additional technologies."
Chase Mellon Shareholder Services LLC. will act as information agent for the
offer. Any questions or requests for assistance, or for additional copies of
the Offer to Purchase, the Letter of Transmittal, or the Notice of Guaranteed
Delivery related to the offer, may be directed to the information agent at
1-800-684-8823 or the dealer manager at 1-212-270-3722.
This press release contains forward-looking statements regarding future events
or the future financial performance of Exogen. Such statements are only
predictions, and actual events or results may differ materially. All forward-
looking statements involve risks and uncertainties. The factors that could
cause actual results to differ materially from those in the forward-looking
statements contained herein are detailed in Exogen's filings and reports with
the Securities and Exchange Commission, including its most recent filings on
Form 10-K and Form 10-Q.
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