EXHIBIT 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXX & NEPHEW, INC.,
ORCHID MERGER CORP.
AND
ORATEC INTERVENTIONS, INC.
Dated as of February 13, 2002
TABLE OF CONTENTS
Page
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ARTICLE I THE OFFER.................................................... 1
Section 1.1 The Offer.............................................. 1
Section 1.2 Company Actions........................................ 2
ARTICLE II THE MERGER.................................................. 3
Section 2.1 The Merger............................................. 3
Section 2.2 Effective Time......................................... 4
Section 2.3 Effects of the Merger.................................. 4
Section 2.4 Charter and By-Laws; Directors and Officers............ 4
Section 2.5 Conversion of Securities............................... 4
Section 2.6 Exchange of Certificates............................... 5
Section 2.7 Merger Without Meeting of Stockholders................. 6
Section 2.8 Further Assurances..................................... 6
Section 2.9 Closing................................................ 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........... 7
Section 3.1 Organization........................................... 7
Section 3.2 Authority.............................................. 7
Section 3.3 Consents and Approvals; No Violations.................. 7
Section 3.4 Information Supplied................................... 8
Section 3.5 Interim Operations of Sub.............................. 8
Section 3.6 Ownership of Shares.................................... 8
Section 3.7 Financing.............................................. 8
Section 3.8 Brokers................................................ 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 8
Section 4.1 Organization, Standing and Power....................... 8
Section 4.2 Capital Structure...................................... 9
Section 4.3 Authority.............................................. 10
Section 4.4 Consents and Approvals; No Violation................... 10
Section 4.5 SEC Documents and Other Reports........................ 11
Section 4.6 Information Supplied................................... 11
Section 4.7 Absence of Certain Changes or Events................... 12
Section 4.8 Permits and Compliance................................. 12
Section 4.9 Tax Matters............................................ 14
Section 4.10 Actions and Proceedings................................ 14
Section 4.11 Compensation Agreements................................ 15
Section 4.12 Employee Benefits...................................... 15
Section 4.13 Liabilities............................................ 1
Section 4.14 Labor Matters; Worker Safety Laws...................... 16
Section 4.15 Intellectual Property.................................. 17
Section 4.16 Title to Assets........................................ 18
Section 4.17 Inventories............................................ 18
Section 4.18 Environmental Matters.................................. 18
Section 4.19 State Takeover Statutes; Rights Agreement.............. 19
Section 4.20 Required Vote of Company Stockholders.................. 19
Section 4.21 Transactions with Affiliates........................... 20
Section 4.22 Suppliers; Sales Representatives....................... 20
Section 4.23 Insurance.............................................. 20
Section 4.24 Accounts Receivable.................................... 21
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TABLE OF CONTENTS--(continued)
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Section 4.25 Products.............................................. 21
Section 4.26 Brokers............................................... 21
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS................... 21
Section 5.1 Conduct of Business by the Company Pending the Merger. 21
Section 5.2 No Solicitation....................................... 23
Section 5.3 Third Party Standstill Agreements..................... 24
ARTICLE VI ADDITIONAL AGREEMENTS...................................... 24
Section 6.1 Stockholder Meeting................................... 24
Section 6.2 Access to Information................................. 24
Section 6.3 Directors............................................. 25
Section 6.4 Fees and Expenses..................................... 25
Section 6.5 Company Stock Options and Company Warrant............. 26
Section 6.6 Reasonable Best Efforts............................... 27
Section 6.7 Public Announcements.................................. 27
Section 6.8 State Takeover Laws................................... 27
Section 6.9 Indemnification; Directors and Officers Insurance..... 28
Section 6.10 Notification of Certain Matters....................... 28
Section 6.11 Real Estate Transfer and Gains Tax.................... 28
Section 6.12 Employee Matters...................................... 28
Section 6.13 Rights Agreement...................................... 29
Section 6.14 Obligations of Sub.................................... 29
ARTICLE VII CONDITIONS PRECEDENT TO THE MERGER........................ 29
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger.............................................. 29
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER........................ 30
Section 8.1 Termination........................................... 30
Section 8.2 Effect of Termination................................. 30
Section 8.3 Amendment............................................. 31
Section 8.4 Waiver................................................ 31
ARTICLE IX GENERAL PROVISIONS......................................... 32
Section 9.1 Non-Survival of Representations and Warranties........ 32
Section 9.2 Notices............................................... 32
Section 9.3 Interpretation; Certain Definitions................... 33
Section 9.4 Counterparts.......................................... 35
Section 9.5 Entire Agreement; No Third-Party Beneficiaries........ 35
Section 9.6 Governing Law......................................... 35
Section 9.7 Assignment............................................ 35
Section 9.8 Severability.......................................... 35
Section 9.9 Enforcement of this Agreement......................... 35
EXHIBITS
A Conditions of the Offer.......................................
B Stockholder Agreement.........................................
C Rights Agreement Amendment....................................
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 13, 2002 (this
"Agreement"), among Xxxxx & Nephew, Inc., a Delaware corporation ("Parent"),
Orchid Merger Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Sub"), and ORATEC Interventions, Inc., a Delaware corporation (the
"Company") (Sub and the Company being hereinafter collectively referred to as
the "Constituent Corporations").
WITNESSETH:
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 all of the outstanding shares of
Common Stock, par value $.001 per share, of the Company (the "Company Common
Stock"), together with the related Rights (as defined in Section 4.2) of the
Company (the shares of Company Common Stock subject to the Offer, together with
the related Rights, are hereinafter collectively referred to as the "Shares"),
at a purchase price of $12.50 per Share (such amount, or any greater amount per
Share paid pursuant to the Offer being referred to herein as 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 adopt this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub with and into 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 or the Company, except for Dissenting Shares (as defined
in Section 2.5), will be converted into the right to receive the Offer Price
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 attached hereto as Exhibit B.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
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 February 25, 2002, 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 and not withdrawn pursuant
to the Offer shall be subject only to the conditions set forth in the attached
Exhibit A (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 A) 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
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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) add to 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, (v) change the form of
consideration payable in the Offer, or (vi) otherwise amend the terms and
conditions of the Offer in a manner adverse to the stockholders of the Company.
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) if all Offer Conditions are satisfied or waived but the
number of Shares tendered pursuant to the Offer is less than 90% of the
outstanding Shares, extend the Offer on one or more occasions for an aggregate
period of not more than 10 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. If the Offer Conditions are satisfied
or waived (to the extent permitted herein) and Sub purchases Shares pursuant to
the Offer, Sub may, in Sub's sole discretion, provide a "subsequent offering
period" in accordance with Rule 14d-11 under the Exchange Act. Parent and Sub
agree that if at any scheduled expiration date of the Offer, the Minimum
Condition, the HSR Condition (as defined in Exhibit A) or either of the
conditions set forth in paragraphs (e) or (f) of Exhibit A shall not have been
satisfied, but at such scheduled expiration date all of the conditions set
forth in paragraphs (a), (b), (c), (d) and (g) of Exhibit A shall then be
satisfied, at the request of the Company (confirmed in writing), Sub shall
extend the Offer from time to time (provided that Sub shall not be required to
extend the Offer for more than 20 business days), subject to the right of
Parent, Sub or the Company to terminate this Agreement pursuant to the terms
hereof; provided, however, that Parent and Sub shall not be required to extend
the Offer if 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 (and not withdrawn)
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. The
initial expiration date of the Offer shall be 20 business days from and
including the date of commencement of the Offer. 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.
(b) On the date of commencement of the Offer, Parent and Sub shall file
with the SEC a Tender Offer Statement on Schedule TO (together with all
supplements or amendments thereto, the "Schedule TO") with respect to the
Offer, which shall contain as an exhibit or incorporate by reference an
offer to purchase and a related letter of transmittal and summary
advertisement (such Schedule TO 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 the Offer
Documents to be disseminated to holders of Shares as and to the extent
required by applicable federal securities laws. Parent, Sub and the Company
shall each promptly 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 TO 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.
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
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all directors were present (in person or by telephone), duly and unanimously
adopted resolutions declaring advisable, 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 in Section 2.1) 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 adopt this Agreement and approve the
Merger. The Company represents and warrants that its Board of Directors has
received the opinion of X. X. Xxxxxx Securities, 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 the Offer (such Schedule 14D-9, as amended from time
to time, the "Schedule 14D-9") containing the recommendation described in
Section 1.2(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. The Company, Parent and Sub shall each promptly
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, and any amendments thereto, prior to 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, shall use such information only in
connection with the Offer and the Merger and, if this Agreement shall be
terminated, shall, upon request, deliver, and will use their reasonable 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 defined in Section 2.2). 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 succeed to and assume all the rights and obligations of Sub in accordance
with the
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DGCL. Notwithstanding anything to the contrary herein, at the election of
Parent, any wholly-owned Subsidiary (as defined in Section 9.3) 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 and time of effectiveness of the Merger. When used in this Agreement, the
term "Effective Time" means the date and time at which the Certificate of
Merger is accepted for record or such later date and 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 By-Laws; Directors and Officers. (a) At the
Effective Time, the Amended and Restated Certificate of Incorporation 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
By-laws of the Company, as in effect immediately prior to the Effective Time,
shall be the By-Laws 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. 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.
(ii) All Shares that are held in the treasury of the Company and any
Shares owned by Parent or by any wholly-owned Subsidiary of Parent shall be
canceled and no capital stock of Parent or other consideration shall be
delivered in exchange therefor.
(iii) Each Share issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with Section
2.5(ii) and other than Dissenting Shares (as defined in Section 2.5(iv))
shall be converted into the right to receive from the Surviving Corporation
in cash, without interest, the Offer Price (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 converted into 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 Section 262 of the DGCL unless
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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 at the Effective Time into the right to receive the Merger
Consideration, without any interest thereon. The Company shall (i) give
Parent prompt notice of any demands received by the Company for appraisals
of Shares and (ii) give Parent the opportunity to direct all negotiations
and proceedings with respect to any such demands. 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.
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 interest earned on funds made available to
the Paying Agent pursuant to this Agreement shall be the property of Parent and
shall be paid over to Parent as and when requested by 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 to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly 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 defined in Section 9.3) 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
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.
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(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 defined in Section 9.3)),
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 holder thereof is
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 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 Merger (the "Closing") and all
actions specified in this Agreement to occur at the Closing shall take place at
the offices of Sidley Xxxxxx Xxxxx & Xxxx, Bank One Plaza, 00 Xxxxx Xxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, 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.
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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 (as defined in Section 9.3) 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
have 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. This Agreement has been duly executed and
delivered by Parent and Sub and (assuming the valid authorization, execution
and delivery of this Agreement by the Company and the validity and binding
effect hereof on the Company), this Agreement constitutes the valid and binding
obligation of each of Parent and Sub enforceable against them in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
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 or satisfied, 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 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 (i) in
connection, or in compliance, with the provisions of the HSR Act (as defined in
Section 9.3) 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
7
the Company 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 6.11, (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 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 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 3.6 Ownership of Shares. Neither Parent nor any of its
Subsidiaries, including Sub, owns, or has during the three year period prior to
the date hereof owned, any Company Common Stock.
Section 3.7 Financing. Prior to the consummation of the Offer, Parent and
Sub will have available to them all funds necessary to purchase the Shares
tendered pursuant to the Offer and to consummate the Merger.
Section 3.8 Brokers. No broker, investment banker, financial advisor or
other person, other than U.S. Bancorp Xxxxx Xxxxxxx Inc. and Cazenove Group
plc, 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.
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. The Company is duly qualified to do
business, and is
8
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 the
Company. The Company does not have any Subsidiaries (as defined in Section
9.3). Except as 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"), the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exercisable for any equity or
similar interest in, any corporation, partnership, limited liability company,
joint venture or other legal entity. Except as set forth in Section 4.1 of the
Company Letter, there are no outstanding contractual obligations of the Company
to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity.
Section 4.2 Capital Structure. (a) As of the date hereof, the authorized
capital stock of the Company consists of 75,000,000 shares of Company Common
Stock and 5,000,000 shares of preferred stock, par value $.001 per share
("Company Preferred Stock"). The Company has designated 100,000 shares of
Company Preferred Stock as "Series A Participating Preferred Stock" ("Series A
Preferred Stock") and has reserved such shares for issuance upon exercise of
rights to purchase shares of Series A Preferred Stock (the "Rights") under the
Preferred Shares Rights Agreement dated as of November 28, 2000 (the "Rights
Agreement") between the Company and American Stock Transfer and Trust Company,
as rights agent.
(b) At the close of business on February 8, 2002:
(i) 23,215,109 Shares were issued and outstanding;
(ii) no shares of Company Preferred Stock were issued and outstanding;
(iii) no Shares or shares of Company Preferred Stock were held in the
treasury of the Company;
(iv) 553,488 Shares were reserved for issuance and unissued pursuant
to the Company's 1999 Employee Stock Purchase Plan (the "Company Stock
Purchase Plan");
(v) (A) 937,735 Shares were reserved for issuance upon the exercise
of outstanding vested and exercisable stock options issued under the
Company's 1995 Stock Plan (the "Company 1995 Stock Plan") and (B)
214,759 Shares were reserved for issuance upon the exercise of
outstanding unvested stock options issued under the Company 1995 Stock
Plan;
(vi) (A) 799,280 Shares were reserved for issuance upon the exercise
of outstanding vested and exercisable stock options issued under the
Company's 1999 Stock Plan, as amended (the "Company 1999 Stock Plan"),
and (B) 1,167,322 Shares were reserved for issuance upon the exercise of
outstanding unvested stock options issued under the Company 1999 Stock
Plan;
(vii) (A) 18,472 Shares were reserved for issuance upon the exercise
of outstanding vested and exercisable stock options issued under the
Company's 1999 Directors' Stock Option Plan, as amended (the "Company
1999 Directors' Stock Option Plan" and together with the Company 1995
Stock Plan and the Company 1999 Stock Plan, the "Company Stock Option
Plans") and (B) 16,528 Shares were reserved for issuance upon the
exercise of outstanding unvested stock options issued under the Company
1999 Directors' Stock Option Plan; and
(viii) 28,000 Shares were reserved for issuance upon the exercise of
outstanding warrants to purchase shares of Company Common Stock pursuant
to the warrant (the "Company Warrant") described in Section 4.2 of the
Company Letter, which description shall set forth the holder thereof,
exercise price applicable thereto and the number of shares of Company
Common Stock issuable upon exercise of the Company Warrant.
(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 Plans (collectively, the
"Company Stock Options"), including the holder, date of grant, exercise
price and number of shares of Company Common Stock subject thereto and the
schedule pursuant to which the option has or
9
will become vested and/or exercisable. Section 4.2 of the Company Letter
also sets forth the aggregate amount of payroll deductions which as of the
date hereof have been withheld from the compensation of participants
pursuant to the Company Stock Purchase Plan for the current Offering Period
(as defined therein) and the maximum number of shares of Company Common
Stock to be issued under the Company Stock Purchase Plan at the conclusion
of the current Offering Period, taking into account the provisions of
Section 6.5(b) of this Agreement.
(d) Except for the Company Stock Options, the Company Stock Purchase
Plan, the Rights and the Company Warrant, there are no options, warrants,
calls, rights or agreements to which the Company is a party or by which it
is bound obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Company
or obligating the Company 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 is a party the value of which is based on the
value of shares of Company Common Stock. There are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock.
(e) Each outstanding share of Company Common Stock is, and each share of
Company Common Stock which may be issued pursuant to the Company Stock
Options or the Company Stock Purchase Plan will be, when issued and paid for
in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to the preemptive
rights of third parties in respect thereto.
(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, if applicable. The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to adoption by the
stockholders of the Company of this Agreement, if applicable, 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 adoption of
this Agreement by the stockholders of the Company, if applicable. 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, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws of general applicability relating to or
affecting the enforcement of creditors' rights and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
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, except as set forth in Section 4.4 of the Company
Letter, 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 under, any provision of (i) the
10
Company Charter or the By-Laws of the Company, (ii) 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 properties or assets or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its properties or assets, other than, in the case of clauses (ii) or (iii), 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 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 (i) in connection, or in compliance, with the provisions of the HSR Act
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 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 6.11, (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 timely filed
all required documents (including proxy statements) with the SEC since April 4,
2000 (the "Company SEC Documents"). Except as set forth in Section 4.5 of the
Company Letter, 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 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
("GAAP") (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 financial position of the Company as at
the respective dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein). Section 4.5 of the Company Letter contains a true, correct and
complete copy of the financial information to be included in the Company's
earnings press release disclosing results for the year ended December 31, 2001.
Except as disclosed in the Company SEC Documents filed with the SEC prior to
the date of this Agreement or Section 4.5 of the Company Letter, or as required
by GAAP, the Company has not, since April 4, 2000, made any change in the
accounting procedures or policies applied in the preparation of financial
statements. As of the date hereof, the Company has aggregate cash and cash
equivalents of no less than $51.0 million.
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
11
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 (but excluding items disclosed under the heading "Factors That May
Affect Future Results" in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 as filed with the SEC and similar disclosures elsewhere
in the Company SEC Documents filed prior to the date hereof (the "Risk Factor
Disclosures")) or as set forth in Section 4.7 of the Company Letter, since
December 31, 2000, (A) the Company has 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 has 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, no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its stock and no purchase or redemption by the Company of, nor any
agreement by the Company to purchase or redeem, any Shares or other capital
stock of the Company, (D) there has not been (v) any adoption of a new Company
Plan (as defined in Section 9.3), (w) any amendment to a Company Plan
materially increasing benefits thereunder, (x) any granting by the Company to
any executive officer or other key employee of the Company 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 with the SEC prior to the date hereof, (y) any granting by
the Company 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
with the SEC prior to the date hereof or any grant or other award of stock
options or stock appreciation rights under the Company Stock Option Plans
(except awards of stock options under the Company Stock Option Plans in the
ordinary course of business consistent with past practice) or (z) any entry by
the Company into any employment, severance or termination agreement with any
such executive officer or other key employee, (E) there has not been any
material change in the amount or terms of the indebtedness of the Company from
that described in the Company SEC Documents filed with the SEC prior to the
date hereof, (F) the Company has not prepared or filed any Tax Return (as
defined in Section 9.3) inconsistent with past practice or, on any such Tax
Return, taken any position, made any election, or adopted any method that is
inconsistent with positions taken, elections made or methods used in preparing
or filing similar Tax Returns in prior periods and (G) there has been no event
that has had a Material Adverse Effect on the Company, nor any development that
would, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on the Company.
Section 4.8 Permits and Compliance. (a) The Company 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 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. The permits and authorizations for the manufacture, sale or
distribution of, or reimbursement for, medical devices offered by the Company
(including, without limitation, those related to signal emission and signal
absorption in such medical devices) ("Company Regulatory Permits") are set
forth in Section 4.8 of the Company Letter. No suspension or cancellation of
any of the Company Permits is pending or, to the Knowledge of the Company (as
defined in Section 9.3), threatened, except where the suspension or
cancellation of any of the
12
Company Permits would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company has obtained certification to ISO
9001 quality system standards through British Standards Institute ("BSI"). The
Company's SpineCATH IDET system and its ElectroThermal Arthroscopy System are
designed and manufactured in compliance with ISO 9001 quality system standards
and United States Food and Drug Administration ("FDA") quality system
regulations. All products sold, marketed or distributed by the Company in
Europe have CE Marking authorization under European Medical Device Directive,
as audited and approved by BSI. The Company is not 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, 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, except as set forth in
Section 4.8 of the Company Letter: (A) the Company is in compliance in all
material respects with all current applicable statutes, rules, regulations or
orders administered or issued by the FDA or comparable foreign Governmental
Entity; and (B) since December 31, 1998, there have been no recalls, field
notifications, alerts or seizures requested or threatened relating to the
products of the Company. Except as set forth in Section 4.8 of the Company
Letter, the medical 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 no false information or
significant omission in any product application or product-related submission
made by the Company to the FDA or comparable foreign Governmental Entity. The
Company has obtained all necessary regulatory approvals from any foreign
regulatory agencies relating to the distribution and sale of medical devices by
the Company in the respective foreign jurisdictions in which medical devices
are distributed and sold by the Company. To the Knowledge of the Company,
neither the Company nor the officers, directors, managing employees or agents
(as those terms are defined in 42 C.F.R. (S)1001.1001) of the Company: (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 with the SEC
prior to the date of this Agreement (excluding the Risk Factor Disclosures)
or Section 4.8 of the Company Letter, the Company does not have (i) any
"material contracts" (as defined in Item 601(b)(10) of Regulation S-K under
the Securities Act) or (ii) any contracts or agreements having covenants not
to compete that materially impair the ability of the Company to conduct its
business as currently conducted or purporting to bind any stockholder or any
Affiliated Person (as defined in Section 4.21) of any stockholder of the
Company after the Effective Time. Except as set forth in the Company SEC
Documents filed with the SEC prior to the date of this Agreement (excluding
the Risk Factor Disclosures), 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 is a party or by which the Company is bound or to which any of the
properties, assets or operations of the Company is subject, other than any
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
13
Section 4.9 Tax Matters. Except as otherwise set forth in Section 4.9 of
the Company Letter, (i) the Company has filed all Tax Returns required to have
been filed, and such Tax Returns are correct and complete and disclose all
Taxes (as defined in Section 9.3) required to be paid by the Company 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; (iii) the Company has 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) the Company has not waived any statute of limitations in
respect of its Taxes; (v) no Tax Returns required to have been filed by or with
respect to the Company relating to federal and state income Taxes have ever
been examined by the Internal Revenue Service ("IRS") or any foreign or state
taxing authority; (vi) 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 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; (viii) there is no action, suit,
investigation, audit, claim or assessment pending or, to the Knowledge of the
Company, proposed or threatened with respect to Taxes of the Company; (ix)
there are no liens for Taxes upon the assets of the Company except liens
relating to current Taxes not yet due; (x) the Company has not 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 for each of the taxable years
ended on or prior to December 31, 2001 (collectively, the "NOLs") are set forth
(for each year) in Section 4.9 of the Company Letter and are each available to
the Company for the period set forth in Section 172(b)(1)(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" (as defined in
Section 1503 of the Code and the regulations thereunder) 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. Except as set forth in Section 4.10
of the Company Letter, there are no outstanding orders, judgments, injunctions,
awards or decrees of any Governmental Entity against or involving the Company,
or against or involving any of the present or former directors, officers,
employees, consultants, agents or stockholders of the Company with respect to
the Company, any of the properties, assets or business of the Company 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 Knowledge of the Company,
threatened against or involving the Company or any of its present or former
directors, officers, employees, consultants, agents or stockholders with
respect to the Company, or any of the properties, assets or business of the
Company 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 or their present or
former officers, directors, employees, consultants, agents or stockholders with
respect to the Company, or any of the properties, assets or business of the
Company relating to the transactions contemplated by this Agreement or the
Stockholder Agreements.
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Section 4.11 Compensation Agreements. Except as set forth in Section 4.11
of the Company Letter, no Company Plan and no Compensation Agreement (as
defined in Section 9.3) provides that any benefit will be increased, or the
vesting or payment of any benefit will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or that the value of any
benefit will be calculated on the basis of any of the transactions contemplated
by this Agreement. Section 4.11 of the Company Letter sets forth (i) for each
person who will receive benefits under any Company Plan or Compensation
Agreement as a result of the transactions contemplated by this Agreement, the
total amount that such person may receive, or is eligible to receive, assuming
that the transactions contemplated by this Agreement were consummated on the
date hereof, and (ii) the total amount of indebtedness owed to the Company from
each officer, director, or employee or consultant of the Company.
Section 4.12 Employee Benefits. (a) Each Company Plan is listed in Section
4.12(a) of the Company Letter. With respect to each Company Plan, the Company
has provided to Parent a true and correct copy of the following documents, to
the extent they apply to such plan: (i) the three most recent annual reports
(Form 5500) filed with the IRS, (ii) all documents including trust agreements,
insurance and annuity contracts and administration agreements, (iii) a written
summary of the Company Plan if the Company Plan is unwritten, (iv) the most
recent summary plan description and other written explanations of each Company
Plan provided to participants, beneficiaries and parties thereto, (v) the most
recent determination letter issued by the IRS and request therefor, (vi) any
request for a determination letter currently pending before the IRS and (vii)
all correspondence with the IRS, the Department of Labor, or the SEC relating
to any outstanding controversy. Each Company Plan complies in all material
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
has maintained, contributed to or had any liability under, any plan which is
subject to Section 412 of the Code, 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 has maintained, contributed to or
had any liability under, any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA).
(b) Each Compensation Agreement is listed in Section 4.12(b) of the
Company Letter. With respect to each Compensation Agreement, the Company has
provided to Parent a true and complete copy of (i) all documents, including
trust agreements and insurance and annuity contracts, (ii) a written summary
if the Compensation Agreement is unwritten, and (iii) the most recent
written explanations provided to participants, beneficiaries and parties
thereto.
(c) Except as set forth in Section 4.12(c) of the Company Letter, with
respect to each Company Plan and Compensation Agreement, no event has
occurred and there exists no condition or set of circumstances in connection
with which the Company or any ERISA Affiliate or Company Plan fiduciary
could be subject to any liability under the terms of such Company Plan,
Compensation Agreement, ERISA, the Code or any other applicable law except
for such liabilities which have not had and would not have, individually or
in the aggregate, a Material Adverse Effect on the Company. Except as set
forth in Section 4.12(c) of the Company Letter, each Company Plan and
Compensation Agreement has been administered in all material respects in
accordance with its terms. 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 may rely on an opinion letter issued with respect to a
standardized prototype plan adopted in accordance with the requirements for
such reliance, or a timely application for such determination is now pending
or there is time remaining for such application, and the Company is not
aware of any reason why any such Company Plan is not so qualified in form or
operation. Except as set forth in Section 4.12(c) of the Company Letter,
neither the Company nor any ERISA Affiliate has any liability or obligation
under any welfare plan to provide benefits after termination of employment
to any person other than as required by Part 6 of Title I of ERISA or any
similar state law (together, "COBRA"). Neither the Company nor any ERISA
Affiliate has failed to comply in all material respects with COBRA. The
Company and each ERISA Affiliate is in compliance in all material respects
with the requirements of the Workers Adjustment and Retraining Notification
Act and any similar state law.
15
(d) Section 4.12(d) of the Company Letter contains a list of all Company
Plans and Compensation Agreements containing change of control or similar
provisions.
(e) Except as set forth in Section 4.12(e) of the Company Letter, no
payment or other benefit, and no acceleration of the vesting of any options,
payments or other benefits, will be, as a direct or indirect result of the
transactions contemplated by this Agreement, an "excess parachute payment"
to a "disqualified individual" as those terms are defined in Section 280G of
the Code and the regulations thereunder. Except as set forth in Section
4.12(e) of the Company Letter, no payment or other benefit, and no
acceleration of the vesting of any options, payments or other benefits,
will, as a direct or indirect result of the transactions contemplated by
this Agreement, be (or under Section 280G of the Code and the regulations
thereunder be presumed to be) a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code and the
regulations thereunder, without regard to whether such payment or
acceleration is reasonable compensation for personal services performed or
to be performed in the future. The Company has no obligation under any
Company Plan, Compensation Agreement or otherwise to "gross up" or otherwise
compensate any person because of the imposition of any excise tax (including
interest and penalties) because of the applicability of Section 4999 of the
Code.
(f) Except as set forth in Section 4.12(f) of the Company Letter, no
Company Plan or Compensation Agreement is subject to laws outside of the
United States.
Section 4.13 Liabilities. Except (i) as set forth in Section 4.13 of the
Company Letter, (ii) as and to the extent reflected or reserved against in the
Company SEC Documents filed prior to the date hereof, or disclosed in the
footnotes thereto, (iii) liabilities and obligations incurred in the ordinary
course of business consistent with past practices since September 30, 2001 and
(iv) liabilities and obligations that have not had and would not have,
individually or in the aggregate, a Material Adverse Effect on the Company, the
Company has no liabilities or obligations of any nature, absolute or contingent.
Section 4.14 Labor Matters; Worker Safety Laws. (a) The Company has
complied with all applicable laws, ordinances, rules and regulations respecting
employment and employment practices, terms and conditions of employment, wages
and hours, except for such failures to comply which would not, individually or
in the aggregate, have a Material Adverse Effect on the Company, and the
Company is not liable for any arrears of wages or any Taxes or penalties for
failure to comply with any such laws, ordinances, rules or regulations. Except
as set forth in Section 4.14 of the Company Letter, the Company is not a party
to any collective bargaining agreement or labor contract. The Company has not
engaged in any unfair labor practice with respect to any persons employed by or
otherwise performing services primarily for the Company (the "Company Business
Personnel"), and there is no unfair labor practice complaint or grievance
against the Company 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 which may interfere with the respective business activities of the
Company, except where such dispute, strike or work stoppage would not have a
Material Adverse Effect on the Company. There are no claims, causes of action,
charges, suits, complaints, administrative proceedings, governmental
proceedings, arbitrations or other proceedings pending or, to the Knowledge of
the Company, threatened against the Company, and, to the Knowledge of the
Company, there is no investigation of any Governmental Entity pending or
threatened, relating to employment or employment practices with respect to any
employee or former employee or director of the Company. To the Knowledge of the
Company, there is no basis for any claim or assertion of liability against the
Company under any federal, state or local law relating to employment or
employment practices relating to any employee or former employee or director of
the Company.
(b) The properties, assets and operations of the Company 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,
16
individually or in the aggregate, would not have a Material Adverse Effect
on the Company. With respect to such properties, assets and operations
currently owned, leased or operated by the Company, and with respect to any
properties, assets or operations previously owned, leased or operated by the
Company, to the Knowledge of the Company, during any time such properties,
assets and operations were owned, leased or operated by the Company, there
are no past or present events, conditions, circumstances, activities,
practices, incidents, actions or plans of the Company that may interfere
with or prevent compliance or continued compliance with applicable Worker
Safety Laws, other than 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 4.15 Intellectual Property (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 as currently conducted or as currently contemplated
by the Company, together with all applications currently pending or in process
for any of the foregoing. Section 4.15 of the Company Letter contains a list
and description (showing in each case any product, device, process, service,
business or publication covered thereby, the registered or other owner,
expiration date and number, if any) of all registered patents and trademarks
owned by, licensed to or used by the Company.
(b) The Company Intellectual Property is valid and enforceable. Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date
of this Agreement (excluding the Risk Factor Disclosures), the Company owns,
or possesses 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 businesses. Section 4.15 of the
Company Letter lists each license or other agreement pursuant to which the
Company has the right to use Company Intellectual Property utilized in
connection with any product of, or service provided by, the Company, the
cancellation or expiration of which would have a Material Adverse Effect on
the Company (the "Company Licenses"). Except as set forth in Section 4.15 of
the Company Letter, 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, 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 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, 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 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 xxxx, service xxxx right, copyright or trade
secret of any third party that, individually or in the aggregate, would have
a Material Adverse Effect on the Company. The Company has the sole and
exclusive right to bring actions for infringement or unauthorized use of the
Company Intellectual Property owned by the Company. Except as disclosed in
the Company SEC Documents filed with the SEC prior to the date of this
Agreement or Section 4.15 of the Company Letter, 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
17
Material Adverse Effect on the Company. Except as set forth in Section 4.15
of the Company Letter, the Company has not 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) To the Knowledge of the Company, each of the employees, agents,
consultants or contractors who have contributed to or participated in the
creation or development of any copyrightable, patentable or trade secret
material on behalf of the Company either: (i) is a party to a
"work-for-hire" agreement under which the Company is deemed to be the
original owner/author of all property rights therein; or (ii) has executed
an assignment or an agreement to assign in favor of the Company of all
right, title and interest in such material.
Section 4.16 Title to Assets. (a) As of the date hereof, the Company
possesses, and as of the Effective Time the Company will possess, good and
marketable title to all of its assets, 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 of this Agreement (excluding the Risk Factor
Disclosures), or Section 4.16 of the Company Letter.
(b) The Company does not own any Real Estate (as defined in Section 9.3).
Section 4.16 of the Company Letter sets forth a list of all Real Estate
leased by the Company. There are no pending, or to the Knowledge of the
Company, threatened condemnation proceedings against or affecting any Real
Estate leased by the Company. The leases to all Real Estate occupied by 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, 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 4.17 Inventories. Except as set forth in Section 4.17 of the
Company Letter, all inventories of the Company (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 and are salable at prevailing market
prices that are not less than the book value amounts thereof or the price
customarily charged by the Company therefor. Except as set forth in Section
4.17 of the Company Letter, the quantities of all inventories, materials, and
supplies of the Company (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) are not
obsolete, damaged, slow-moving, defective, or excessive, and are, in the
Company's judgment, reasonable and balanced.
Section 4.18 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 United States federal, state or local, or
foreign 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 4.18 of the Company Letter, the
Company is and has been in compliance in all material respects with all
applicable Environmental Laws, have obtained all
18
Environmental Permits and is in compliance with their requirements, and has
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 4.18 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 4.18 of the Company Letter, the
Company has not (i) placed, held, located, released, transported or disposed
of any Hazardous Substances on, under, from or at any of the Company's or
any other properties, nor caused any conditions that constitute a violation
of any Environmental Law, 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) to the Knowledge of the Company, released any
Hazardous Substances on, under, emanating from, or at any of the Company's
properties or any other property but arising from the Company's current or
former operations, other than in a manner that would not result in a
Material Adverse Effect on the Company, or (iii) to the Knowledge of the
Company, received any written notice since January 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 current or former properties or operations or any other
properties, (D) alleging noncompliance by the Company with the terms of any
Environmental 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 current or former properties or operations or any other
properties, except in each case for the notices set forth in Section 4.18 of
the Company Letter.
(d) Except as disclosed in Section 4.18 of the Company Letter, no
Environmental Law imposes any obligation upon the Company 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, acknowledgement or covenant in any land
records, or the modification or provision of notice under any agreement,
consent order or consent decree.
(e) The Company has provided or made available to Parent copies of any
environmental assessment or audit report or other similar studies or
analyses currently in the possession of or available to the Company relating
to any Real Estate currently or formerly owned, leased or occupied by the
Company.
Section 4.19 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) An 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 and American Stock Transfer & Trust Company, as
rights agent, and such amendment is sufficient to render the Rights and the
Rights Agreement inapplicable to the Offer, the Merger and the Stockholder
Agreements.
Section 4.20 Required Vote of Company Stockholders. The affirmative vote
of the holders of at least a majority of the shares of Company Common Stock
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
By-Laws of the Company or otherwise in order for the Company to consummate the
Merger and the transactions contemplated hereby.
19
Section 4.21 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, (iii) any person, firm or corporation that directly or indirectly
controls, is controlled by, or is under common control with, the Company or
(iv) any member of the immediate family or any of such persons, in each case
other than Parent or its Subsidiaries.
(b) Except as set forth in Section 4.21 of the Company Letter or in the
Company SEC Documents filed with the SEC prior to the date of this Agreement
(excluding the Risk Factor Disclosures), to the Knowledge of the Company,
since December 31, 2000, the Company has 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), (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.
(c) Except as set forth in Section 4.21 of the Company Letter or in the
Company SEC Documents filed with the SEC prior to the date of this Agreement
(excluding the Risk Factor Disclosures), to the Knowledge of the Company,
(i) the contracts of the Company do not include any material obligation or
commitment between the Company and any Affiliated Person, (ii) the assets of
the Company do not include any receivable or other obligation or commitment
from an Affiliated Person to the Company and (iii) the liabilities of the
Company do not include any payable or other obligation or commitment from
the Company to any Affiliated Person.
(d) To the Knowledge of the Company and except as set forth in Section
4.21 of the Company Letter or in the Company SEC Documents filed with the
SEC prior to the date of this Agreement (excluding the Risk Factor
Disclosures), no Affiliated Person of the Company is a party to any contract
with any supplier of the Company that affects in any material manner the
business, financial condition or results of operation of the Company.
Section 4.22 Suppliers; Sales Representatives. (a) The Company has not
received any written or oral notice and the Company does not otherwise have
Knowledge that any significant supplier will not sell raw materials, supplies,
merchandise or other goods to the Company at any time after the Effective Time
on terms and conditions substantially similar to those currently in effect with
respect to sales to the Company, subject only to general and customary price
increases.
(b) (i) Except as set forth in Section 4.22(b)(i) of the Company Letter,
each agreement between the Company and its sales representatives and
distributors may be terminated without penalty by the Company upon delivery
of 30 days or less notice to the other party thereto.
(ii) The Sales Representative Agreements listed in Section
4.22(b)(ii) of the Company Letter (the "Designated Distributor
Agreements") may be terminated by the Company without penalty upon
delivery of the required notice with respect to each such agreement set
forth in Section 4.22(b)(ii) of the Company Letter.
Section 4.23 Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by the Company are with reputable insurance
carriers, provide full and adequate coverage for all normal risks incident to
the business of the Company and its properties and assets, and are, in the
reasonable judgment of the Company, 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 has made any and all
payments required to maintain such policies in full force and effect. Except as
set forth in Section 4.23 of the Company Letter, the Company has not received
notice of default under any such policy, or has received written
20
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.
Section 4.24 Accounts Receivable. All of the accounts and notes receivable
of the Company 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.
Section 4.25 Products. (a) Except as set forth in Section 4.25 of the
Company Letter, since December 31, 2000, the Company has not 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 have a
Material Adverse Effect on the Company. No product sold or delivered or service
rendered by the Company is subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of sale for products
delivered and services rendered by the Company, copies of which have previously
been delivered to Parent.
(b) The Company has provided to Parent a schedule of products in
development and planned introductions, a copy of which is attached to
Section 4.25 of the Company Letter.
(c) To the Knowledge of the Company, as of the date hereof, the results
of the Company's Tyler, Texas double-blind study indicate that the ultimate
results of such study will not be negative.
Section 4.26 Brokers. No broker, investment banker or other person, other
than X.X. Xxxxxx Securities Inc., the fees and expenses of which will be paid
by the Company (as reflected in an agreement between X.X. Xxxxxx Securities
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.
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 (xviii) of this Section 5.1,
during the period from the date of this Agreement through the Effective Time,
the Company shall 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, the Company shall not without the prior
written consent of Parent:
(i) (A) 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) 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
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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, grant, 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 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 or the Company Warrant outstanding on the date of this Agreement
in accordance with their current terms and (B) the issuance of shares of
Company Common Stock pursuant to the Company Stock Purchase Plan in
accordance with Section 6.5 of this Agreement;
(iii) amend its charter or by-laws or equivalent organizational
documents;
(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;
(v) sell, lease, pledge or otherwise dispose of or encumber, or agree
to sell, lease, pledge or otherwise dispose of or encumber, any of its
assets with a fair market value in excess of $100,000, other than sales
of inventory that are in the ordinary course of business consistent with
past practice;
(vi) (A) 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 or entity, other than in
the ordinary course of business consistent with past practices and, in
the case of indebtedness and guarantees, in an amount not to exceed
$250,000, or (B) invest its cash or reinvest its maturing investments in
investments other than certificates of deposit, direct obligations of
the United States government, money market instruments and obligations
of any corporation which at the time of purchase are rated AA or better
by Standard & Poor's Corporation, Inc., in each case, having maturity of
no more than 30 days;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company or form any Subsidiary;
(viii) except as provided in 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 Compensation Agreement;
(ix) increase the compensation payable or to become payable to its
directors, officers, employees, consultants or other service providers
(except for increases in the ordinary course of business consistent with
past practice in salaries or wages of employees of the Company who are
not officers of the Company) or grant any severance or termination pay
to, or enter into any employment or other agreement with, any director,
officer, employee, consultant or other service provider of the Company,
or establish, adopt, enter into, or, except as may be required to comply
with applicable law, amend or take action to enhance 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, employee, consultant or other
service provider;
(x) knowingly violate or knowingly fail to perform any obligation or
duty imposed upon it by any applicable material federal, state, local or
foreign law, rule, regulation, guideline or ordinance;
(xi) make any change to accounting policies or procedures (other than
actions required to be taken by GAAP);
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(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;
(xiii) settle or compromise any Tax liability;
(xiv) settle or compromise any claims or litigation in excess of
$50,000 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
without penalty or premium by notice of 60 days or less or (ii) which
involves or is expected to involve payments of $25,000 or more during
the term thereof; enter into, amend or terminate any other agreement or
contract material to the Company, 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 $50,000;
(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;
(xvii) file any application for national coverage under Medicare of
the Company's spine products; or
(xviii) 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
authorize or permit any officer, director or employee of or any financial
advisor, attorney or other advisor or representative of, the Company to,
directly or indirectly (i) solicit, initiate or encourage the submission of,
any Takeover Proposal (as defined in Section 9.3), (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 in connection with, or
take any other action to cooperate in any way with respect to, or assist in or
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
(as defined in Section 9.3), 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 to any person
making such Takeover Proposal pursuant to a confidentiality agreement, in
customary form and in any event containing terms, taken as a whole, at least as
stringent as those contained in the Confidentiality Agreement (as defined in
Section 6.2), 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 financial advisor, attorney or other advisor or
representative of the Company, whether or not such person is purporting to act
on behalf of the Company 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 request for information with respect 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
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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 24 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 48 hours in advance of
providing such information. The Company will keep Parent fully informed of
any material changes to the status or 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 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) If required by applicable law in
order to consummate the Merger, the Company will duly call, give notice of,
convene and hold a meeting of stockholders (the "Stockholder Meeting") for the
purpose of considering the adoption of this Agreement and at such meeting call
for a vote and shall solicit 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, or, if
later, the expiration of any subsequent offering period under Section 1.1
hereof, 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.
(b) If required by applicable law in order to consummate the Merger, the
Company shall, at Parent's request, as soon as practicable following the
expiration of the Offer, or, if later, the expiration of any subsequent
offering period under Section 1.1 hereof, 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
any 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 in all cases to currently
existing contractual and legal restrictions applicable to the Company, the
Company shall afford to the accountants, counsel, financial advisors and other
representatives of Parent reasonable access during normal business hours to,
and permit them to make
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such inspections during normal business hours 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 (i)
promptly make available 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) direct requests for access to
personnel of the Company knowledgeable about matters relevant to such
inspections to the Company's Chief Financial Officer who will make such
personnel available to Parent. 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
November 27, 2001 between Parent and the Company (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 percentage
of the Company's directors designated by Sub equal to the percentage of the
aggregate voting power of the shares of Company Common Stock held by Parent or
any of its Subsidiaries; provided, however, that if that Sub's designees are
elected to the Board of Directors of the Company, until the Effective Time such
Board of Directors shall have at least two directors who are directors 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 two for any reason
whatsoever, the remaining Independent Director shall designate a person to fill
such vacancy, who shall be deemed to be an Independent Director for purposes of
this Agreement or, if no Independent Directors then remain, the other directors
shall designate two persons to fill such vacancies who shall not be officers or
affiliates of the Company, 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 Section 6.11,
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.
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(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 Termination Fee upon demand;
(ii) if the Company terminates this Agreement under Section 8.1(e),
the Company shall pay the Termination Fee prior to, or simultaneously
with, such termination; or
(iii) if Parent terminates this Agreement pursuant to Section
8.1(b)(i) or Section 8.1(c) and at the time of any such termination a
Designated Takeover Proposal shall have been made (other than a
Designated Takeover Proposal made prior to the date hereof), then if
concurrently therewith or within 12 months thereafter, (A) the Company
enters into a merger agreement, acquisition agreement or similar
agreement (including a letter of intent) with respect to a Company
Acquisition, or a Company Acquisition is consummated, involving any
party (1) with whom the Company had any discussions with respect to a
Designated Takeover Proposal, (2) to whom the Company furnished
information with respect to or with a view to a Designated Takeover
Proposal or (3) who had submitted a proposal or expressed any interest
publicly in a Designated Takeover Proposal, in the case of each of
clauses (1), (2) and (3), prior to such termination, or (B) the Company
enters into a merger agreement, acquisition agreement or similar
agreement (including a letter of intent) with respect to a Superior
Proposal, or a Superior Proposal is consummated, then, in the case of
either (A) or (B) above, the Company shall pay the Termination Fee upon
the earlier of the execution of such agreement or upon consummation of
such Company Acquisition or Superior Proposal, as the case may be.
Section 6.5 Company Stock Options and Company Warrant. (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
consummation of the Offer shall be cancelled 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 Company Stock
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 Company
Stock 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 of Shares by Sub pursuant to
the Offer. The surrender of a Company Stock 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) any
Offering Period (as defined in the Company Stock Purchase Plan) applicable
to 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 not later than 10
business days after the commencement of the Offer; (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 effective from and after the
date hereof; and (iii) no new Offering Period commences on or after the date
hereof.
(c) The Company shall take all actions necessary to provide that,
effective on or before acceptance for payment by Sub of Shares pursuant to
the Offer, (i) the Company Stock Option Plans, the Company Stock Purchase
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 shall be terminated, and (iii) no person will
have any right to
26
receive any shares of capital stock of the Company or, if applicable, the
Surviving Corporation, upon exercise of any Company Stock Option or Purchase
Plan 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 Plans to comply with this Section 6.5 without the consent of
any Option Holder or any other person.
(e) The Company Warrant shall, by virtue of the Merger, no longer be
exercisable into the right to receive Shares but shall after the Effective
Time represent the right to receive an amount equal to (A) the product of
(1) the number of Shares subject to the Company Warrant and (2) the excess,
if any, of the Merger Consideration over the exercise price per Share
applicable to the Company Warrant minus (B) all applicable federal and local
taxes required to be withheld in respect of such payment, without interest.
Section 6.6 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 or assets of Parent or any of its
Subsidiaries or that otherwise would have a Material Adverse Effect on the
Company or Parent.
Section 6.7 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 other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange or the Nasdaq National Market.
Section 6.8 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
27
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 6.9 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 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 indemnification
agreements between the Company and such officers or directors listed in Section
6.9 of the Company Letter, the DGCL, the Company Charter or the Company's
Amended and Restated By-Laws 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 equivalent 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 aggregate premiums over
the six-year period for the D&O Insurance in excess of $1,300,000.
Section 6.10 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 6.10 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 6.11 Real Estate Transfer and Gains Tax. Either the Company or the
Surviving Corporation shall pay all state or local Taxes, if any (collectively,
the "Gains Taxes"), attributable to the transfer of the beneficial ownership of
the Company's real properties, and any penalties or interest with respect
thereto, payable in connection with the consummation of the Offer and the
Merger. The Company shall cooperate with Parent in the filing of any returns
with respect to the Gains Taxes, including supplying in a timely manner a
complete list of all real property interests held by the Company and any
information with respect to such properties that is reasonably necessary to
complete such returns. The portion of the consideration allocable to the real
properties of the Company shall be determined by Parent in its reasonable
discretion. The stockholders of the Company shall be deemed to have agreed to
be bound by the allocation established pursuant to this Section 6.11 in the
preparation of any return with respect to the Gains Taxes.
Section 6.12 Employee Matters. (a) Following the Effective Time, Parent or
the Surviving Corporation shall honor, or cause to be honored, all obligations
of the Company and its subsidiaries under any Compensation Agreement or Company
Plan in accordance with the terms thereof. Nothing herein shall be construed to
prohibit Parent or the Surviving Corporation from amending or terminating such
Compensation Agreements or Company Plans in accordance with the terms thereof
and with applicable law or to prohibit the Parent or the Surviving Corporation
from terminating, or causing the termination of, the employment of any employee
of the Company or its subsidiaries at any time following the Effective Time.
Individuals who continue in employment with the Company from and after the
Effective Time shall be referred to herein as "Affected Employees."
(b) On or before January 1, 2003, Affected Employees who continue to be
employed by the Company will be eligible to participate in the benefit
programs, plans, arrangements, payroll practices (including
28
vacation or paid time off entitlement) offered to employees of Parent or
established or maintained by the Surviving Corporation (the "Parent Employee
Benefit Plans") pursuant to the terms of each such Plan, or in the absence
of plan terms or provisions, in accordance with the regularly established
policies or procedures of Parent or the Surviving Corporation.
(c) To the extent that service is relevant for eligibility and vesting
under any employee benefit plan, program or arrangement maintained by Parent
or any subsidiary of Parent, other than any defined benefit pension plan,
such plan, program or arrangement shall credit each Affected Employee who
participates therein for his or her service on or prior to the Effective
Time with the Company. In addition, Parent will, or will cause the Surviving
Corporation to (i) waive limitations on benefits relating to any
pre-existing conditions under any Parent Employee Benefit Plan in which
Affected Employees may participate and (ii) provide each Affected Employee
with credit under the applicable Parent Employee Benefit Plan for any
deductible, copayment and out-of-pocket limits for any such amounts paid by
or credited to the Affected Employee prior to the commencement of coverage
under the applicable Parent Employee Benefit Plan during the calendar year
in which such coverage commences.
Section 6.13 Rights Agreement. The Board of Directors of the Company shall
take all further action (in addition to the action referred to in Section
4.19(b)) requested in writing by Parent (including redeeming the Rights or
amending or terminating the Rights Agreement) in order to render the Rights and
the Rights Agreement inapplicable to the Offer, the Merger and the Stockholder
Agreements. Except as requested in writing by Parent, the Board of Directors of
the Company shall not (i) amend the Rights Agreement or (ii) take any action
with respect to, or make any determination under, the Rights Agreement
(including a redemption of the Rights).
Section 6.14 Obligations of Sub. Parent will take all actions to cause Sub
to perform its obligations under this Agreement.
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 Filings. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) Purchase of Shares. Sub shall have previously accepted for payment
and paid for Shares validly tendered pursuant to the Offer, except that this
condition shall not apply with respect to the obligation of Parent and Sub
to effect the Merger if Sub shall have failed to purchase Shares pursuant to
the Offer in breach of its obligations (or the obligations of Parent) under
this Agreement.
(d) No Order. No court or other Governmental Entity having jurisdiction
over the Company or Parent, or any of its 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.
29
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 June 30, 2002; provided, however, that the right to
terminate this Agreement pursuant to this 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 A 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 A;
(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
Termination Fee to the extent required by Section 6.4(b); 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, in the event of a material breach by Parent or Sub of
any representation or warranty, covenant or other agreement contained in
this Agreement which 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.
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
30
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 willful or intentional breach of a representation or warranty
contained in this Agreement, the willful or intentional breach of any covenant
contained in this Agreement or for fraud.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto, subject to Section 6.3, 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. Delay in exercising any right under this Agreement shall not constitute
a waiver of such right.
31
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 and only the
covenants that by their terms survive the Effective Time shall survive 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):
(a) if to Parent or Sub, to:
Xxxxx & Nephew, Inc.
000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx Xxxxxx, President
Endoscopy Division
Facsimile: 000-000-0000
with copies to:
Xxxxx & Nephew, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
and
Sidley Xxxxxx Xxxxx & Xxxx
Bank One Plaza
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxx
Facsimile: 312-853-7036
(b) if to the Company, to:
ORATEC Interventions, Inc.
0000 Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx,
President and Chief
Executive Officer
Facsimile: 000-000-0000
with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Facsimile: 000-000-0000
32
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."
(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.
"Company Acquisition" means (i) a merger, consolidation or other business
combination pursuant to which stockholders of the Company immediately preceding
such transaction hold less than a majority of the equity interest in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by the Company of all or substantially all of its assets or (iii)
the acquisition by any person or group (including by way of tender offer,
exchange offer or issuance of securities by the Company), directly or
indirectly, of beneficial ownership (as determined pursuant to Rule 13d-3
promulgated under the Exchange Act) or a right to acquire beneficial ownership
of shares representing a majority of the voting power of the then outstanding
shares of capital stock of the Company.
"Company Plan" means a "pension plan" (as defined in Section 3(2) of ERISA),
a "welfare plan" (as defined in Section 3(1) of ERISA), and 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, insurance or
other plan, trust, policy, arrangement or understanding established or
maintained by the Company or any ERISA Affiliate, or as to which the Company or
any ERISA Affiliate has contributed or may have any liability (including any
such arrangement sponsored or required by any government or any statute or
other law), for the benefit of any prior or present employee, officer,
director, consultant or other service provider of the Company or any ERISA
Affiliate (or spouse, dependent or other beneficiary of any such individual).
"Compensation Agreement" means a written or oral agreement, arrangement or
understanding of any kind (including any employment, consulting, compensation,
deferred compensation, termination or severance agreement, arrangement or
understanding) with or for the benefit of any prior or present employee,
officer, director, consultant or other service provider of the Company or any
ERISA Affiliate (or spouse, dependent or other beneficiary of any such
individual) as to which the Company or any ERISA Affiliate is a party or may
have any liability, except for any Company Plan.
"Designated Takeover Proposal" means (i) any proposal for a merger or other
business combination involving the Company pursuant to which the stockholders
of the Company immediately preceding such transaction will hold less than 85%
of the total voting power of the outstanding shares of capital stock of the
entity surviving or resulting from such transaction, (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, other than the transactions contemplated by this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which would be considered a single employer with the Company 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, or with any trade or business described in
this definition.
33
"Governmental Entity" means any domestic (federal and state), foreign or
supranational court, commission, governmental body, regulatory agency,
authority or tribunal.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as
amended.
"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, taken as a whole, or Parent and its
Subsidiaries, taken as a whole, as the case may be; provided, however, that, in
the case of the Company only, any adverse change or affect arising from or
relating to the loss of existing customers, suppliers or employees of the
Company that results directly and exclusively from the public announcement,
pendency or consummation of the transactions contemplated by this Agreement
shall not be deemed alone, or in combination, to constitute a Material Adverse
Effect.
"Real Estate" means, with respect to the Company, 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 written 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 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 (i) any proposal for a merger or other business
combination involving the Company, (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, other than the transactions contemplated by this Agreement.
"Taxes" (i) 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 and (ii) any liability
of the Company for the payment of amounts with respect to payments of a type
described in clause (i) as a result
34
of being a member of an affiliated, consolidated, combined or unitary group, or
as a result of any obligation of the Company under any Tax sharing arrangement
or Tax indemnity arrangement.
"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 $12,000,000.
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 6.9, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 9.6 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.
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.
35
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.
XXXXX & NEPHEW, INC.
By: /s/ XXX XXXXXX
__________________________________
Name: Xxx Xxxxxx
________________________________
Title: President
_________________________________
ORCHID MERGER CORP.
By: /s/ XXX XXXXXX
__________________________________
Name: Xxx Xxxxxx
________________________________
Title: President
_________________________________
ORATEC INTERVENTIONS, INC.
By: /s/ XXXXXXX X. XXXXXX
__________________________________
Name: Xxxxxxx X. Xxxxxx
________________________________
Title: President and Chief Executive
Officer
_________________________________
36
Exhibit A
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 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, 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
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:
(a) there shall be threatened in writing 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 taken as a whole, (ii) seeking to
prohibit or materially limit the ownership or operation by the Company,
Parent or any of its Subsidiaries of a material portion of the business or
assets of the Company, 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,
taken as a whole, or Parent and its Subsidiaries, taken as a whole, in each
case 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 from effectively controlling
in any material respect any material portion of the business or operations
of the Company 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, 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;
(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 the Board of Directors of
the Company or any committee thereof shall have resolved to take any of the
foregoing actions) or (ii) the Board of Directors of the Company or any
committee thereof shall have failed to reaffirm publicly and unconditionally
its recommendation to the Company's stockholders that they tender their
Shares in the Offer within 5 business days after Parent's written request to
do so (which request may be made at any time after a Takeover Proposal shall
have been publicly communicated to the Company's Board of Directors or to the
A-1
stockholders of the Company and for so long as such Takeover Proposal shall
be pending and not withdrawn) and must also include the unconditional
rejection of such Takeover Proposal;
(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 in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(g) 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) the commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving
the United States (or, in the case of any of the foregoing occurrences
existing at the time of commencement of the Offer, an acceleration or
escalation thereof) 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 any of the Dow Xxxxx Industrial
Average, the Standard & Poor's 500 Index or the Nasdaq Composite Index; or
(h) 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 A is a part.
A-2
Exhibit B
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of February 13, 2002,
among Xxxxx & Nephew, Inc., a Delaware corporation ("Parent"), Orchid Merger
Corp, a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"),
and the undersigned stockholder (the "Stockholder") of ORATEC Interventions,
Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Sub and the Company are contemporaneously with the
execution hereof entering 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 $.001 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"),
and any additional shares of Common Stock that become legally and/or
beneficially owned by the Stockholder as the result of the exercise of any
stock option, warrant or other security after the date hereof, 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, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the
effect of general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law). 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, result in any violation of or default (with or without
notice or lapse of time or both) under, any provision of any trust
agreement, loan or credit agreement, note, bond, security agreement,
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 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-1
(b) The Shares. The Stockholder has good and marketable title to the
Subject Shares, free and clear of any claims, liens, encumbrances, security
interests, proxies, voting trusts, agreements, options, rights or any other
encumbrances whatsoever on title, transfer, or exercise of any rights of a
stockholder in respect of such Subject Shares except for any encumbrances
arising hereunder. The Stockholder owns legally and/or beneficially no
shares of Common Stock other than the Subject Shares.
2. Representations and Warranties of Parent and Sub. 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, except to the extent
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws of general applicability
relating to or affecting the enforcement or creditors' rights and by the affect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
3. Covenants of the Stockholder. From and after the date hereof through
and including the Termination Date, 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 adoption 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 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 certificate of
incorporation or by-laws or other proposal, transaction or agreement
involving the Company or any of its subsidiaries, which amendment or other
proposal, transaction or agreement would in any manner impede, frustrate,
prevent, delay or nullify the Offer, the Merger, the Merger Agreement or any
of the other transactions contemplated by the Merger Agreement.
(c) The Stockholder agrees not to, directly or indirectly (i) sell,
transfer, pledge, assign or otherwise dispose of (including by gift), 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 ("Transfer") of, the Subject Shares to any person other
than Sub or Sub's designee; provided, that nothing contained herein will be
deemed to restrict (A) the exercise or conversion of any stock option, (B)
the entry by the Stockholder into "hedging" or similar economic transactions
with respect to the Subject Shares so long as such "hedging" or similar
economic transactions do not restrict or otherwise inhibit the Stockholder's
ability to vote the Subject Shares in accordance with the requirements of
this Agreement and to otherwise comply with the covenants and agreements of
the Stockholder contained herein, or (C) the Transfer of any Subject Shares
to any person who agrees to be bound by the terms and conditions of this
Agreement pursuant to a written agreement in a form reasonably satisfactory
to Parent, or (ii) enter into any voting arrangement, whether by proxy,
voting agreement or otherwise, in connection, directly or indirectly, with
any Takeover Proposal.
B-2
(d) Subject to Section 10, 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 proposal to
acquire the Subject Shares 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 or proposal to acquire the
Subject Shares.
(e) The Stockholder agrees to validly tender all of the Subject Shares
within 10 business days following commencement of the Offer pursuant to and
in accordance with the terms of the Offer and, provided that this Agreement
has not been terminated, the Stockholder agrees not to withdraw any Subject
Shares so tendered prior to the termination of the Offer.
4. Grant of Proxy. (a) The Stockholder hereby irrevocably grants to, and
appoints, Parent and each of its designees, and each of them individually, as
the Stockholder's proxy and attorney-in-fact (with full power of substitution
and resubstitution), for and in the name, place and stead of the Stockholder,
to vote the Subject Shares, or execute one or more written consents in respect
of the Subject Shares, (i) in favor of the Merger, the approval of the Merger
Agreement and the approval of the terms thereof and each of the transactions
contemplated by the Merger Agreement, (ii) against any merger agreement or
merger (other than the Merger Agreement and the Merger), consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any other
Takeover Proposal, and (iii) against any amendment of the Company's certificate
of incorporation or by-laws or other proposal, transaction or agreement
involving the Company or any of its subsidiaries, which amendment or other
proposal, transaction or agreement would in any manner impede, frustrate,
prevent, delay or nullify the Offer, the Merger, the Merger Agreement or any
other transactions contemplated by the Merger Agreement. Notwithstanding
anything contained herein to the contrary, such irrevocable proxy will not be
exercised by Parent or any of its designees unless the Stockholder breaches its
obligations under Section 4 of this Agreement. No proxy is given hereby with
respect to any matters other than those enumerated above.
(b) The Stockholder represents and warrants that any proxies heretofore
given in respect of the Subject Shares are revocable, and that any such
proxies have been or are hereby revoked.
(c) The Stockholder hereby affirms that the irrevocable proxy set forth
in this Section 4 is given in connection with the execution of the Merger
Agreement and that such irrevocable proxy is given to secure the performance
of the duties of the Stockholder under this Agreement. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 4 is
coupled with an interest and is intended to be irrevocable in accordance
with the provisions of Section 212 of the General Corporation Law of the
State of Delaware, as amended, prior to the termination of this Agreement.
Notwithstanding anything contained herein to the contrary, this irrevocable
proxy shall automatically terminate upon termination of this Agreement.
5. Further Assurances. The Stockholder will, from time to time, take such
actions and 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.
6. 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.
B-3
7. Termination. Except as otherwise provided herein, this Agreement shall
terminate upon the earlier of (i) the Effective Time and (ii) a valid
termination of the Merger Agreement in accordance with its terms (the
"Termination Date").
8. General Provisions.
(a) Expenses. Except as otherwise expressly provided in the Merger
Agreement, each party hereto shall pay its own expenses incurred in
connection with this 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 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):
(i) if to Parent or Sub, to:
Xxxxx & Nephew, Inc.
000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx Xxxxxx, President
Endoscopy Division
Facsimile No.: 000-000-0000
with a copy to:
Xxxxx & Nephew, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: 000-000-0000
and
Sidley Xxxxxx Xxxxx & Xxxx
Bank One Plaza
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxx
Facsimile No.: 312-853-7036
B-4
(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 manually or by
facsimile, 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.
(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.
9. No Limitations on Actions of the Stockholder as a
Director. Notwithstanding anything to the contrary in this Agreement, nothing
in this Agreement is intended or shall be construed to limit or affect, or give
rise to any liability to, any Stockholder who is or becomes (prior to the
Termination Date) a director or officer of the Company by virtue of any actions
taken by Stockholder in his or her capacity as an officer or director of the
Company in exercising his or her rights or obligations under the Merger
Agreement or applicable law.
[Signature page to follow]
B-5
IN WITNESS WHEREOF, each of Parent and Sub has caused this Agreement to be
signed by its officer thereunto duly authorized and the Stockholder has duly
signed this Agreement, all as of the date first written above.
XXXXX & NEPHEW, INC.
By: _______________________________
Name:
Title:
ORCHID MERGER CORP.
By: _______________________________
Name:
Title:
STOCKHOLDER:
[Name]
By: _______________________________
Number of shares of Common Stock
owned by the Stockholder on the
date hereof: [Number of Shares]
B-6
Exhibit C
FIRST AMENDMENT TO PREFERRED SHARES RIGHTS AGREEMENT
This First Amendment to Preferred Shares Rights Agreement, dated as of
February 13, 2002 (this "Amendment"), to the Preferred Shares Right Agreement,
dated as of November 28, 2000 (the "Rights Agreement"), is entered into by and
between ORATEC Interventions, Inc., a Delaware corporation (the "Company") and
American Stock Transfer and Trust Company (the "Rights Agent").
A. The Company and the Rights Agent have entered into the Rights Agreement.
Pursuant to Section 27 of the Rights Agreement, prior to the Distribution Date
(as defined in the Agreement), the Company may supplement or amend the Rights
Agreement in any respect without the approval of any holders of Rights and the
Company may cause the Rights Agent to execute such amendment.
B. As of the date of this Amendment, the Distribution Date has not occurred.
C. The Board of Directors of the Company has determined that it is in the
best interests of the Company and its stockholders to enter into an Agreement
and Plan of Merger, dated as of February 13, 2002, by and among Xxxxx & Nephew,
Inc., a Delaware corporation ("Parent"), ORATEC Interventions, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub") and the Company
(the "Merger Agreement").
D. As a condition to the willingness of Parent and Sub to enter into the
Merger Agreement, certain stockholders of the Company are entering into
Stockholder Agreements, each dated as of February 13, 2002, with Parent and Sub
(the "Stockholder Agreements").
E. As a further condition to the willingness of Parent and Sub to enter
into the Merger Agreement, the Company is required to amend the Rights
Agreement such that the Rights and the Rights Agreement are inapplicable to the
Offer (as defined in the Merger Agreement), the Merger (as defined in the
Merger Agreement) and the Stockholder Agreements.
In consideration of the foregoing, the parties agree as follows:
1. Amendments to the Rights Agreement. The Rights Agreement is hereby
amended as follows:
a. The definition of "Acquiring Person" set forth in Section 1(a) of
the Rights Agreement is hereby amended and restated in its entirety to read as
follows:
"(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding,
but shall not include (i) the Company, any Subsidiary of the Company or
any employee benefit plan of the Company or of any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the
terms of any such plan, nor (ii) Xxxxx & Nephew, Inc. ("Parent") or
Orchid Merger Corp. ("Sub") or any of their Affiliates or Associates
(the "S&N Group") in the event that the S&N Group shall become the
Beneficial Owners of Common Shares of the Company upon the execution of,
or in one or more transactions contemplated by, and not in contravention
of, the Agreement and Plan of Merger, dated as of February 13, 2002, by
and among Parent, Sub and the Company or the Stockholder Agreements,
dated as of February 13, 2002, by and between Parent and certain holders
of Common Shares of the Company. Notwithstanding the foregoing, no
Person shall be deemed to be an Acquiring Person either (i) as the
result of an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% or more of the
Common Shares of the Company then outstanding; provided, however, that
if a Person shall become the Beneficial Owner of 15% or more of the
Common Shares of the Company then outstanding by reason of share
purchases by the Company
C-1
and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, (other
than pursuant to a dividend or distribution paid or made by the Company
on the outstanding Common Shares in Common Shares or pursuant to a split
or subdivision of the outstanding Common Shares), then such Person shall
be deemed to be an Acquiring Person unless upon becoming the Beneficial
Owner of such additional Common Shares of the Company such Person does
not beneficially own 15% or more of the Common Shares of the Company
then outstanding. Notwithstanding the foregoing, (i) if the Board of
Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person" as defined pursuant to the
foregoing provisions of this Section 1(a) has become such inadvertently
(including, without limitation, because (A) such Person was unaware that
it beneficially owned a percentage of the Common Shares that would
otherwise cause such Person to be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this Section 1(a) or (B) such
Person was aware of the extent of the Common Shares it beneficially
owned but had no actual knowledge of the consequences of such beneficial
ownership under this Agreement) and without any intention of changing or
influencing control of the Company, and if such Person divested or
divests as promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this Section 1(a), then such
Person shall not be deemed to be or to have become an "Acquiring Person"
for any purposes of this Agreement; and (ii) if, as of the date hereof,
any Person is the Beneficial Owner of 15% or more of the Common Shares
outstanding, such Person shall not be or become an "Acquiring Person,"
as defined pursuant to the foregoing provisions of this Section 1(a),
unless and until such time as such Person shall become the Beneficial
Owner of additional Common Shares (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common
Shares in Common Shares or pursuant to a split or subdivision of the
outstanding Common Shares), unless, upon becoming the Beneficial Owner
of such additional Common Shares, such Person is not then the Beneficial
Owner of 15% or more of the Common Shares then outstanding."
b. The definition of "Distribution Date" set forth in Section 1(h) of
the Rights Agreement is hereby amended and restated in its entirety to read as
follows:
"(h) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by
action of a majority of the Board of Directors) after the Shares
Acquisition Date (or, if the tenth day after the Shares Acquisition Date
occurs before the Record Date, the Close of Business on the Record Date)
or (ii) the Close of Business on the tenth day (or such later date as
may be determined by action of a majority of the Board of Directors)
after the date that a tender or exchange offer by any Person (other than
(A) the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan or (B) the S&N Group, provided
that in each case involving a member of the S&N Group such action shall
be in accordance with, and not in contravention of, the terms of the
Merger Agreement and the Stockholder Agreements) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules
and Regulations under the Exchange Act, if, assuming the successful
consummation thereof, such Person would be the Beneficial Owner of 15%
or more of the shares of Common Stock then outstanding."
2. Governing Law. 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 laws of such State applicable to contracts
to be made and performed entirely within such State.
3. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all such counterparts
shall together constitute one and the same instrument.
Terms used herein but not defined herein shall have the meaning set forth in
the Rights Agreement.
C-2
The parties have caused this Agreement to be duly executed as of the date
first written above.
ORATEC INTERVENTIONS, INC.
/s/ XXXXXXX X. XXXXXX
By: _______________________________
Xxxxxxx X. Xxxxxx
Name: _______________________________
President and Chief Executive
Officer
Title: ____________________________
AMERICAN STOCK TRANSFER TRUST COMPANY
/s/ XXXXXXX X. XXXXXX
By: _______________________________
Xxxxxxx X. Xxxxxx
Name: _______________________________
Vice President
Title: ____________________________
[Signature page to First Amendment to Preferred Shares Rights Agreement]
C-3
