UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 19, 2012

 

 

WRIGHT MEDICAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   000-32883   13-4088127

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

  (IRS Employer Identification No.)
5677 Airline Road, Arlington, Tennessee   38002
(Address of principal executive offices)   (Zip Code)

(Registrant’s telephone number, including area code): (901) 867-9971

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

þ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

Merger Agreement

On November 19, 2012, Wright Medical Group, Inc., a Delaware corporation (“Wright”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BioMimetic Therapeutics, Inc., a Delaware corporation (“BioMimetic”) and Wright’s direct wholly-owned subsidiaries, Achilles Merger Subsidiary, Inc., a Delaware corporation (“Merger Sub”), and Achilles Acquisition Subsidiary, LLC, a Delaware limited liability company (“Sister Subsidiary” and together with Merger Sub, the “Merger Subsidiaries”). The Merger Agreement provides that, upon the terms and subject to the conditions thereof, Merger Sub will be merged with and into BioMimetic (the “Initial Merger”) followed by BioMimetic merging with and into Sister Subsidiary (together with the Initial Merger, the “Transaction”). As a result of the Transaction, BioMimetic will become a wholly-owned subsidiary of Wright and the stockholders of BioMimetic prior to the Initial Merger will own approximately 14.5% of Wright.

Pursuant to the terms of the Merger Agreement and subject to the conditions thereof, at the effective time of the Initial Merger (the “Effective Time”), each outstanding share of BioMimetic’s common stock (other than shares owned by Wright, BioMimetic or their respective subsidiaries, or shares as to which dissenters’ rights have been properly exercised) will be converted into the right to receive (i) $1.50 in cash, without interest, (ii) 0.2482 of a validly issued, fully paid and non-assessable share of Wright common stock, $0.01 par value per share (“Wright Common Stock”) and (iii) one contingent value right (a “CVR”) to be issued by Wright subject to and in accordance with the CVR Agreement described below.

The Merger Agreement includes customary representations, warranties and covenants of Wright, BioMimetic and the Merger Subsidiaries. BioMimetic has agreed to operate its business in the ordinary course consistent with past practice until the Effective Time, subject to certain agreed upon limitations, and has agreed to certain “non-solicitation” provisions that prohibit BioMimetic from soliciting proposals relating to alternative transactions and, subject to certain exceptions, entering into discussions or negotiations concerning proposals for alternative transactions prior to the Effective Time. Wright has also agreed to certain covenants and agreements, including that it will nominate an independent member of BioMimetic’s board of directors for election to Wright’s board of directors at Wright’s 2013 annual meeting.

The completion of the Transaction is subject to various closing conditions, including obtaining the approval of BioMimetic’s stockholders, registering the shares of Wright Common Stock and CVRs to be issued in connection with the Transaction, and receipt of regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The Merger Agreement contains certain termination rights for both Wright and BioMimetic, including, subject to certain conditions, for BioMimetic to enter into an agreement with respect to a superior proposal if a failure to do so would be inconsistent with the fiduciary duties of BioMimetic’s board of directors. Upon termination under certain circumstances, BioMimetic would be required to pay Wright a termination fee of $8,255,000. The Merger Agreement also provides that, upon termination under certain circumstances, Wright would be required to pay BioMimetic a termination fee of $30 million.

Concurrently with the execution of the Merger Agreement, the directors and certain officers of BioMimetic, as well as their stockholder affiliates, who together beneficially own approximately 30% of BioMimetic’s outstanding common stock, have entered into voting agreements whereby they agreed, among other things, to vote all shares of BioMimetic common stock held by them in favor of adopting the Merger Agreement. A copy of the form of voting agreement is attached to this report as Exhibit 10.2 and is incorporated herein by reference.

Contingent Value Rights Agreement

In connection with the Merger Agreement, Wright and a trustee mutually agreeable to Wright and BioMimetic will enter into a Contingent Value Rights Agreement (“CVR Agreement”) governing the terms of the CVRs. A holder of a CVR will be entitled to receive the following cash payments, conditioned upon the achievement of certain milestones as follows:


   

Approval Milestone : Wright would be obligated to pay $3.50 per CVR upon United States Food and Drug Administration (“FDA”) approval of Augment ® Bone Graft on or before the sixth anniversary of the closing of the Transaction.

 

   

Product Sales Milestone #1 : Wright would be obligated to pay $1.50 per CVR the first time sales of specified products exceed $40 million during a consecutive 12 month period. If such milestone is achieved prior to the second anniversary of the closing of the Transaction, the payment related to such milestone will be payable on the later of the second anniversary of the closing of the Transaction or 20 business days following notice of achievement of the milestone.

 

   

Product Sales Milestone #2 : Wright would be obligated to pay $1.50 per CVR the first time sales of specified products exceed $70 million during a consecutive 12 month period. If such milestone is achieved prior to the second anniversary of the closing of the Transaction, the payment related to such milestone will be payable on the later of the second anniversary of the closing of the Transaction or 20 business days following notice of achievement of the milestone.

Wright has agreed to use certain diligent efforts to achieve each of the milestones, which efforts generally require Wright to use those efforts normally used by persons in the medical device business similar in size and resources to Wright. In addition, Wright has agreed to use its commercially reasonable efforts to maintain a listing for trading on the Nasdaq Global Market or another national securities exchange for so long as any CVRs remain outstanding.

On or after the third anniversary of closing of the Transaction, on any date on which both: (i) FDA approval of Augment ® has not been achieved and (ii) the volume weighted average price paid per CVR for all CVRs traded over the 45 trading days prior to such date is less than $0.10, Wright may provide notice (a “Failure Purchase Notice”) to holders of CVRs that it will purchase all (but not less than all) of the outstanding CVRs (a “Failure Purchase”). The price at which the CVRs are to be purchased in a Failure Purchase is 115% of the volume weighted average price paid per CVR for all CVRs traded over the 45 trading days prior to the 5 th trading day before the date of the Failure Purchase Notice.

Forward-Looking Statements

This Current Report on Form 8-K may contain “forward-looking statements” as defined under U.S. federal securities laws. These statements reflect management’s current knowledge, assumptions, beliefs, estimates, and expectations and express management’s current view of future performance, results, and trends. Forward looking statements may be identified by their use of terms such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, and other similar terms. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements. In addition to those described below, forward looking statements contained in this Current Report include, without limitation, statements concerning the possibility of FDA approval of Augment Bone Graft, statements regarding market acceptance of, and expected annual market demand for Augment Bone Graft, statements regarding the expected impact of the transaction with BioMimetic on Wright’s adjusted EBITDA and other financial results, and statements about the timing and expected benefits of the transaction. The reader should not place undue reliance on forward-looking statements. Such statements are made as of the date of this Current Report, and Wright undertakes no obligation to update such statements after this date. In addition to those described above, risks and uncertainties that could cause Wright’s actual results to materially differ from those described in forward-looking statements are discussed in Wright’s filings with the Securities and Exchange Commission (including those described in Item 1A of Wright’s Annual Report on Form 10-K for the year ended December 31, 2011 and Wright’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, in each case under the heading “Risk Factors” and elsewhere in such filings). By way of example and without implied limitation, such risks and uncertainties include: the failure of BioMimetic stockholders to adopt the merger agreement or the failure of either Wright or BioMimetic to meet any of the other conditions to the closing of the transaction; the failure to realize the anticipated benefits from the transaction or delay in realization thereof; future actions of the United States Attorney’s office, the FDA, the Department of Health and Human Services or other U.S. or foreign government authorities that could delay, limit or suspend Wright’s development, manufacturing, commercialization and sale of


products, or result in seizures, injunctions, monetary sanctions or criminal or civil liabilities; any actual or alleged breach of the Corporate Integrity Agreement to which Wright is subject through September 2015 which could expose Wright to significant liability including exclusion from Medicare, Medicaid and other federal healthcare programs, potential criminal prosecution, and civil and criminal fines or penalties; adverse outcomes in existing product liability litigation; new product liability claims; inadequate insurance coverage; the possibility of private securities litigation or shareholder derivative suits; demand for and market acceptance of Wright’s new and existing products; potentially burdensome tax measures; lack of suitable business development opportunities; product quality or patient safety issues; challenges to Wright’s intellectual property rights; geographic and product mix impact on Wright’s sales; Wright’s inability to retain key sales representatives, independent distributors and other personnel or to attract new talent; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; inability to realize the anticipated benefits of restructuring initiatives; negative impact of the commercial and credit environment on Wright, Wright’s customers and Wright’s suppliers; and the potentially negative effect of Wright’s ongoing compliance enhancements on Wright’s relationships with customers, and on Wright’s ability to deliver timely and effective medical education, clinical studies, and new products.

Additional Information

The foregoing summary of the Merger Agreement, the CVR Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement and the form of CVR Agreement which are attached to this report as Exhibits 2.1 and 10.1, respectively, and are incorporated herein by reference.

The Merger Agreement has been attached as an exhibit to this report to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about Wright, BioMimetic or the Merger Subsidiaries or to modify or supplement any factual disclosures about Wright in its public reports filed with the U.S. Securities and Exchange Commission (“SEC”). In particular, the Merger Agreement and the related summary in this report are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to Wright. The Merger Agreement includes representations, warranties and covenants of Wright, BioMimetic and the Merger Subsidiaries made solely for the benefit of the parties to the Merger Agreement. The assertions embodied in those representations and warranties were made solely for purposes of the contract among Wright, BioMimetic and the Merger Subsidiaries and may be subject to important qualifications and limitations agreed to by Wright, BioMimetic and the Merger Subsidiaries in connection with the negotiated terms. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to Wright’s SEC filings or may have been used for purposes of allocating risk among Wright, BioMimetic and the Merger Subsidiaries rather than establishing matters as facts. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of Wright, BioMimetic and the Merger Subsidiaries or any of their respective subsidiaries or affiliates.

This communication is being made in respect of the proposed merger transaction involving Wright and BioMimetic. In connection with the proposed transaction, Wright intends to file with the SEC a registration statement on Form S-4, which will include a proxy statement/prospectus and other relevant materials in connection with the proposed transaction, and each of Wright and BioMimetic intend to file with the SEC other documents regarding the proposed transaction. The proxy statement/prospectus and this Current Report are not offers to sell Wright securities and are not soliciting an offer to buy Wright securities in any state where the offer and sale is not permitted. The final proxy statement/prospectus will be mailed to the stockholders of BioMimetic. INVESTORS AND SECURITY HOLDERS OF BIOMIMETIC ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND THE OTHER RELEVANT MATERIAL CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT WRIGHT AND BIOMIMETIC AND THE PROPOSED TRANSACTION.

The proxy statement/prospectus and other relevant materials (when they become available), and any and all documents filed with the SEC, may be obtained free of charge at the SEC’s web site at www.sec.gov . In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Wright by directing a written request to Wright Medical Group, Inc., 5677 Airline Road, Arlington, TN 38002, Attention: Investor Relations, and by BioMimetic by directing a written request to BioMimetic Therapeutics, Inc., 389 Nichol Mill Lane, Franklin, TN 37067, Attention: Investor Relations. In addition, investors and security


holders may obtain free copies of the documents filed with the SEC by Wright by going to Wright’s investor information web site at http://phx.corporate-ir.net/phoenix.zhtml?c=129751&p=irol-irhome and by BioMimetic by going to BioMimetic’s investor information web site at http://investor.biomimetics.com/phoenix.zhtml?c=196896&p=irol-sec.

BioMimetic and its respective executive officers and directors and other persons, including Wright and its respective executive officers and directors, may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed transaction. Information about the executive officers and directors of BioMimetic and their ownership of BioMimetic common stock is set forth in its annual report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 13, 2012 and the proxy statement for BioMimetic’s 2012 annual meeting of stockholders, filed with the SEC on April 27, 2012. Information about the executive officers and directors of Wright is set forth in its annual report on Form 10-K for the year ended December 31, 2011, filed with the SEC on February 24, 2012 and the proxy statement for Wright’s 2012 annual meeting of stockholders, filed with the SEC on March 27, 2012. Certain directors and executive officers of BioMimetic and other persons may have direct or indirect interests in the merger due to securities holdings, pre-existing or future indemnification arrangements and rights to severance payments if their employment is terminated prior to or following the transaction. If and to the extent that any of the BioMimetic participants will receive any additional benefits in connection with the transaction, the details of those benefits will be described in the proxy statement/prospectus relating to the transaction. Investors and security holders may obtain additional information regarding the direct and indirect interests of BioMimetic and its executive officers and directors in the transaction by reading the proxy statement/prospectus regarding the transaction when it becomes available.

 

Item 9.01 Financial Statements and Exhibits.

 

(d)   

Exhibits

2.1    Agreement and Plan of Merger, dated as of November 19, 2012, among Wright Medical Group, Inc., BioMimetic Therapeutics, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC.
10.1    Form of Contingent Value Rights Agreement, to be entered into among Wright Medical Group, Inc. and Trustee.
10.2    Form of Voting Agreement, by and among Wright Medical Group, Inc. and the directors and certain officers of BioMimetic Therapeutics, Inc. and their stockholder affiliates.

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  WRIGHT MEDICAL GROUP, INC.
By:   /s/ Robert J. Palmisano
 

Robert J. Palmisano

President and Chief Executive Officer

Date: November 19, 2012


EXHIBIT INDEX

 

Exhibit
Number

  

Description

2.1    Agreement and Plan of Merger, dated as of November 19, 2012, among Wright Medical Group, Inc., BioMimetic Therapeutics, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC.
10.1    Form of Contingent Value Rights Agreement, to be entered into among Wright Medical Group, Inc. and Trustee.
10.2    Form of Voting Agreement, by and among Wright Medical Group, Inc. and the directors and certain officers of BioMimetic Therapeutics, Inc. and their stockholder affiliates.

Exhibit 2.1

EXECUTION VERSION

 

 

 

AGREEMENT AND PLAN OF MERGER

by and among

BIOMIMETIC THERAPEUTICS, INC.,

WRIGHT MEDICAL GROUP, INC.,

ACHILLES MERGER SUBSIDIARY, INC.

AND

ACHILLES ACQUISITION SUBSIDIARY, LLC

Dated as of November 19, 2012

 

 

 

This copy of the Agreement and Plan of Merger is filed as an exhibit to this Current Report on Form 8-K to provide information regarding its terms and it is not intended to modify or supplement any factual disclosures about Wright Medical Group, Inc. in its public reports filed with the SEC. In particular, the Agreement and Plan of Merger is not intended to be, and should not be relied upon as, disclosure regarding any facts and circumstances relating to Wright Medical Group, Inc. The Agreement and Plan of Merger includes representations, warranties and covenants of BioMimetic Therapeutics, Inc., Wright Medical Group, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC made solely for the benefit of the parties to the Agreement and Plan of Merger. The assertions embodied in those representations and warranties were made solely for purposes of the contract among BioMimetic Therapeutics, Inc., Wright Medical Group, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC and may be subject to important qualifications and limitations agreed to by BioMimetic Therapeutics, Inc., Wright Medical Group, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC in connection with the negotiated terms. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to Wright Medical Group, Inc.’s SEC filings or may have been used for purposes of allocating risk among BioMimetic Therapeutics, Inc., Wright Medical Group, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC rather than establishing matters as facts. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of BioMimetic Therapeutics, Inc., Wright Medical Group, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC or any of their respective subsidiaries or affiliates.


TABLE OF CONTENTS

 

          Page  

ARTICLE I THE MERGERS

     2   

1.1

   The Merger      2   

1.2

   The Subsequent Merger      2   

1.3

   Effective Time of the Merger and the Subsequent Merger      2   

ARTICLE II THE INITIAL SURVIVING CORPORATION AND THE FINAL SURVIVING ENTITY

     3   

2.1

   Effect of the Merger and the Subsequent Merger      3   

2.2

   Organizational Documents      3   

2.3

   Directors      4   

2.4

   Officers      4   

ARTICLE III EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES

     5   

3.1

   Effect on Capital Stock      5   

3.2

   Exchange of Share Certificates      7   

3.3

   Appraisal Rights      10   

3.4

   Adjustments to Prevent Dilution      11   

ARTICLE IV THE CLOSING

     11   

4.1

   Closing      11   

ARTICLE V REPRESENTATIONS AND WARRANTIES

     11   

5.1

   Representations and Warranties of the Company      11   

5.2

   Representations and Warranties of Parent, Merger Sub and Sister Subsidiary      37   

ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER

     46   

6.1

   Covenants of the Company      46   

6.2

   Covenants of Parent      50   

6.3

   No Control of Other Party’s Business      51   

ARTICLE VII ADDITIONAL AGREEMENTS

     51   

7.1

   Access      51   

7.2

   Acquisition Proposals      52   

7.3

   Stockholders Meeting      55   

7.4

   Filings; Other Actions; Notifications; Third-Party Consents      56   

7.5

   Transaction Litigation      58   

7.6

   Proxy Statement/Prospectus; S-4 Registration Statement      58   

7.7

   CVR Agreement      60   

7.8

   Stock Exchange Listing      60   

 

-i-


7.9

   Stock Exchange Delisting; Deregistration of Stock      60   

7.10

  

Publicity

     60   

7.11

   Employee Benefits Matters      61   

7.12

   Indemnification; Directors’ and Officers’ Insurance      63   

7.13

  

Expenses

     64   

7.14

   Takeover Statute      64   

7.15

   Section 16 Matters      64   

7.16

   Board Matters      65   

7.17

   Tax-Free Reorganization      65   

ARTICLE VIII CONDITIONS

     66   

8.1

   Conditions to Each Party’s Obligation to Effect the Merger      66   

8.2

   Conditions to Obligations of Parent, Merger Sub and Sister Subsidiary      66   

8.3

   Conditions to Obligation of the Company      67   

ARTICLE IX TERMINATION

     68   

9.1

   Termination by Mutual Consent      68   

9.2

   Termination by Either Parent or the Company      68   

9.3

   Termination by Parent      69   

9.4

   Termination by the Company      70   

9.5

   Effect of Termination and Abandonment      70   

ARTICLE X MISCELLANEOUS AND GENERAL

     72   

10.1

   Survival      72   

10.2

   Modification or Amendment      72   

10.3

   Waiver of Conditions      72   

10.4

   Counterparts      73   

10.5

   Governing Law and Venue      73   

10.6

   Specific Enforcement      73   

10.7

   WAIVER OF JURY TRIAL      74   

10.8

   Notices      74   

10.9

   Entire Agreement; NO OTHER REPRESENTATIONS      75   

10.10

   No Third-Party Beneficiaries      76   

10.11

   Obligations of Parent and of the Company      76   

10.12

   Severability      76   

10.13

   Disclosure Letters      77   

10.14

   Interpretation      77   

10.15

   Assignment      78   

EXHIBITS

 

Exhibit A

   Form of Voting Agreement

Exhibit B

   Form of Contingent Value Rights Agreement

 

-ii-


INDEX OF DEFINED TERMS

 

Defined Term

  

Section

368 Reorganization

   5.1(p)(ix)

Acceptable Confidentiality Agreement

   7.2(c)

Acquisition Proposal

   7.2(b)

Adverse FDA Event

   5.1(a)

Affected Employees

   7.11(c)

Affiliate

   3.2(d)

Agreement

   Preamble

Alternative Acquisition Agreement

   9.3(a)(i)

Anticorruption Laws

   5.1(m)(x)

Assumed Option

   3.1(d)

Audit Date

   5.1(e)(iii)

Augment

   5.1(a)

Augment PMA

   5.1(a)

Bankruptcy and Equity Exception

   5.1(c)(i)

Book-Entry Shares

   3.1(c)

Business Day

   4.1

By-Laws

   2.2(a)(ii)

Cash Consideration

   3.1(c)(ii)

Certificate

   3.1(c)

Certificate of Incorporation

   2.2(a)(i)

Certificate of Merger

   1.3(a)

Closing

   4.1

Closing Date

   4.1

Code

   Recitals

Company

   Preamble

Company 401(k) Plan

   7.11(f)

Company Advisor

   5.1(z)

Company Board

   5.1(a)

Company Board Designee

   7.16

Company Board Recommendation

   5.1(c)(ii)

Company Common Stock

   3.1(b)

Company Compensation and Benefit Plan

   5.1(l)(i)

Company Disclosure Letter

   5.1

Company Employee Stock Purchase Plan

   3.1(e)

Company Facilities

   5.1(s)

Company Intellectual Property Agreements

   5.1(r)(vii)

Company Intellectual Property Rights

   5.1(r)( i)

Company Leases

   5.1(s)

Company Material Adverse Effect

   5.1(a)

Company Option

   3.1(d)

Company Partner

   5.1(m)(ii)

Company Product

   5.1(m)(vi)

Company Reports

   5.1(e)(i)

 

-iii-


Company Required Statutory Approvals

   5.1(d)(i)

Company Requisite Vote

   5.1(w)

Company Stock Incentive Plans

   3.1(d)

Company Stockholders Meeting

   7.3(a)

Company Termination Fee

   9.5(b)

Compensation and Benefit Plan

   5.1(l)(i)

Confidentiality Agreement

   10.9

Contracts

   5.1(d)(ii)

control

   3.2(d)

Core Products

   5.1(r)(i)

CVR

   3.1(c)(iii)

CVR Agreement

   Recitals

CVR Certificate

   3.1(c)(iii)

D&O Insurance

   7.12(b)

DGCL

   Recitals

Dissenting Shares

   3.3(a)

DLLCA

   1.3(b)

Effective Time

   1.3(a)

Environmental Law

   5.1(o)

Environmental Permit

   5.1(o)

ERISA

   5.1(l)(i)

ERISA Affiliate

   5.1(l)(v)

Exchange Act

   5.1(d)(i)

Exchange Agent

   3.2(a)

Exchange Fund

   3.2(a)

Exchange Ratio

   3.1(c)(i)

Exchange Ratio Per Share Reduction Amount

   3.1(c)

Exclusively Licensed Intellectual Property

   5.1(r)(i)

FCPA

   5.1(m)(x)

FDA

   5.1(a)

FDA Approval

   5.1(a)

FDA Development

   9.3(a)(i)

FDCA

   5.1(m)(vi)

Final Surviving Entity

   1.2

Governmental Entity

   5.1(d)(i)

Grant Date

   5.1(b)(ii)

Hazardous Substance

   5.1(o)

Hazardous Substance Activities

   5.1(o)

HSR Act

   5.1(d)(i)

Indemnified Parties

   7.12(a)

Initial Surviving Corporation

   1.1

Intellectual Property Rights

   5.1(r)(i)

IRS

   5.1(l)(ii)

knowledge

   5.1(a)

Laws

   5.1(m)

Liens

   5.1(s)

 

-iv-


Litigation Claims

   5.1(k)

Material Contract

   5.1(t)

Merger

   Recitals

Merger Consideration

   3.1(c)

Merger Sub

   Preamble

Option Exchange Ratio

   3.1(d)

Order

   8.1(c)

Organizational Documents

   5.1(a)

Outside Date

   9.2(a)

Parent

   Preamble

Parent Board

   5.2(a)

Parent Common Stock

   3.1(c)(i)

Parent Disclosure Letter

   5.1(a)

Parent Intellectual Property Agreements

   5.2(o)(vii)

Parent Intellectual Property Rights

   5.2(o)(i)

Parent Material Adverse Effect

   5.2(a)

Parent Options

   5.2(b)(ii)

Parent Reports

   5.2(f)(i)

Parent Required Statutory Approvals

   5.2(e)(i)

Parent Share Price

   3.1(d)

Parent Stock Plans

   5.2(b)(i)

Parent Termination Fee

   9.5(c)

Patents

   5.1(r)(i)

Permitted Liens

   5.1(j)

Permits

   5.1(m)

Person

   3.2(b)

Proceeding

   5.1(m)(ix)

Program

   5.1(m)(ix)

Proxy Statement/Prospectus

   7.6(a)

Registered Company Exclusively Licensed Intellectual Property

   5.1(r)(i)

Registered Company Licensed Intellectual Property

   5.1(r)(i)

Registered Company Owned Intellectual Property

   5.1(r)(i)

Registered Parent Exclusively Licensed Intellectual Property

   5.2(o)(i)

Registered Parent Licensed Intellectual Property

   5.2(o)(i)

Registered Parent Owned Intellectual Property

   5.2(o)(i)

Release

   5.1(o)

Representatives

   7.2(a)

S-4 Registration Statement

   5.1(h)

Sarbanes-Oxley Act

   5.1(e)(iii)

SEC

   5.1(e)(i)

Section 409A

   5.1(l)(x)

Securities Act

   5.1(d)(i)

Sister Subsidiary

   Preamble

Stock Consideration

   3.1(c)(i)

Subsequent Merger

   1.2

Subsidiary

   5.1(a)

 

-v-


Superior Proposal

   7.2(i)

Takeover Statute

   5.1(n)(i)

Tax

   5.1(p)(x)

Tax Counsel

   7.17(b)

Tax Return

   5.1(p)(x)

Taxes

   5.1(p)(x)

Trademarks

   5.1(r)(i)

Trust Indenture Act

   5.1(e)(i)

U.S. GAAP

   5.1(a)

Voting Agreements

   Recitals

 

-vi-


AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (hereinafter called this “ Agreement ”), dated as of November 19, 2012 by and among BioMimetic Therapeutics, Inc., a Delaware corporation (the “ Company ”), Wright Medical Group, Inc., a Delaware corporation (“ Parent ”), Achilles Merger Subsidiary, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (“ Merger Sub ”) and Achilles Acquisition Subsidiary, LLC, a Delaware limited liability company and a direct wholly owned Subsidiary of Parent (“ Sister Subsidiary ”).

W I T N E S S E T H :

WHEREAS, the Company, Parent and Merger Sub have agreed to enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”);

WHEREAS, the respective Boards of Directors of the Company, Parent and Merger Sub have each unanimously (i) determined that the Merger and other transactions contemplated hereby are advisable, fair to and in the best interests of the Company, Parent and Merger Sub and their respective stockholders and (ii) approved this Agreement and the transactions contemplated hereby, in each case, on the terms and subject to the conditions hereof;

WHEREAS, the respective Boards of Directors of each of the Company and Merger Sub have unanimously determined to recommend to their respective stockholders the adoption of this Agreement;

WHEREAS, for U.S. federal income tax purposes, it is intended that the Merger and the Subsequent Merger (as defined below) shall be treated as a single integrated transaction (collectively, the “ Mergers ”) and shall qualify as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the regulations promulgated thereunder and that this Agreement will be, and is, adopted as a plan of reorganization;

WHEREAS, as a condition and further inducement to Parent to enter into this Agreement and incur the obligations set forth herein, certain stockholders of the Company concurrently herewith are entering into a voting agreement with Parent and Merger Sub (the “ Voting Agreements ”), in the form attached hereto as Exhibit A , pursuant to which each such stockholder has irrevocably agreed to (i) vote in favor of adopting this Agreement and (ii) grant in favor of, and deliver to, Parent an irrevocable proxy relating to the foregoing;

WHEREAS, as of or prior to the Closing, Parent and a trustee mutually agreeable to Parent and the Company (the “ Trustee ”) will enter into a Contingent Value Rights Agreement in the form attached hereto as Exhibit B (the “ CVR Agreement ”);

WHEREAS, the Company, Parent, Merger Sub and Sister Subsidiary desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the other transactions contemplated herby and to prescribe certain conditions to the consummation of the Merger and such other transactions; and


NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, each intending to be legally bound, hereby agree as follows:

ARTICLE I

THE MERGERS

1.1 The Merger .

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease. The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “ Initial Surviving Corporation ”).

1.2 The Subsequent Merger .

Immediately following the Effective Time and in accordance with the DGCL, Parent will cause the Initial Surviving Corporation to merge with and into Sister Subsidiary and the separate corporate existence of the Initial Surviving Corporation shall thereupon cease (the “ Subsequent Merger ”), and Sister Subsidiary shall be the surviving entity in the Subsequent Merger, and shall succeed to and shall by virtue of the Subsequent Merger continue its existence under the laws of the State of Delaware as a direct wholly-owned subsidiary of Parent. Sister Subsidiary, as the surviving entity of the Subsequent Merger, is referred to herein as the “ Final Surviving Entity ”. At the effective time of the Subsequent Merger and without any further action on the part of the Initial Surviving Corporation, Parent, Sister Subsidiary or any holder of any capital stock of the Initial Surviving Corporation, Parent or Sister Subsidiary, each share of common stock, par value $0.01 per share, of the Initial Surviving Corporation issued and outstanding immediately prior to the effective time of the Subsequent Merger shall continue as one limited liability company interest of Sister Subsidiary, which shall constitute the only outstanding equity of Sister Subsidiary. Any other equity of the Sister Subsidiary shall automatically be cancelled and retired and shall cease to be outstanding, and no consideration shall be delivered or deliverable in exchange therefor.

1.3 Effective Time of the Merger and the Subsequent Merger .

(a) Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware, in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL, and the Merger shall become effective at the time set forth in the Certificate of Merger, which shall be between 4:30 p.m. and 11:59 p.m. Eastern time on the Closing Date (such time at which the Merger becomes effective, the “ Effective Time ”).

 

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(b) Immediately following the Effective Time, Parent shall cause the Subsequent Merger to be consummated by filing a certificate of merger with the Secretary of State of the State of Delaware, in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL and Delaware Limited Liability Company Act (the “ DLLCA ”), and the Subsequent Merger shall become effective upon such filing of such certificate of merger with the Secretary of State of the State of Delaware.

ARTICLE II

THE INITIAL SURVIVING CORPORATION

AND THE FINAL SURVIVING ENTITY

2.1 Effect of the Merger and the Subsequent Merger .

(a) At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Initial Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Initial Surviving Corporation.

(b) At the effective time of the Subsequent Merger, the effect of the Subsequent Merger shall be as provided in the applicable provisions of the DGCL and the DLLCA. Without limiting the generality of the foregoing, and subject thereto, at the effective time of the Subsequent Merger all the property, rights, privileges, powers and franchises of the Initial Surviving Corporation and the Sister Subsidiary shall vest in the Sister Subsidiary, and all debts, liabilities and duties of the Initial Surviving Corporation and the Sister Subsidiary shall become the debts, liabilities and duties of the Sister Subsidiary.

2.2 Organizational Documents .

(a) Initial Surviving Corporation

(i) At the Effective Time, the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Initial Surviving Corporation until thereafter amended as provided therein or by Law (the “ Certificate of Incorporation ”), except that Article I thereof shall be amended, by the filing of the Certificate of Merger or other appropriate documents, to read in its entirety as follows: “The name of the corporation is BioMimetic Therapeutics, Inc.”.

(ii) At the Effective Time, and without any further action on the part of the Company or Merger Sub, the by-laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the by-laws of the Initial Surviving Corporation (the “ By-Laws ”), until thereafter amended as provided therein, in the Certificate of Incorporation or in accordance with applicable Law.

 

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(b) Sister Subsidiary .

(i) Unless otherwise determined by Parent prior to the Effective Time, the certificate of formation of Sister Subsidiary as in effect immediately prior to the effective time of the Subsequent Merger shall be the certificate of formation of the Final Surviving Entity in the Subsequent Merger until thereafter amended in accordance with the applicable provisions of the DLLCA and such certificate of formation; provided , however , that at the effective time of the Subsequent Merger, the certificate of formation of the Final Surviving Entity shall be amended so that the name of the Final Surviving Entity shall be “BioMimetics Therapeutics, LLC”.

(ii) Unless otherwise determined by Parent prior to the Effective Time, the limited liability company agreement of Sister Subsidiary as in effect immediately prior to the effective time of the Subsequent Merger, and including the provisions required by Section 7.12(c) , shall be the limited liability company agreement of the Final Surviving Entity until thereafter amended in accordance with the applicable provisions of the DLLCA, the certificate of formation of the Final Surviving Entity and such limited liability company agreement.

2.3 Directors .

(a) Initial Surviving Corporation. Subject to requirements of applicable Law, the directors of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Initial Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and the By-Laws.

(b) Sister Subsidiary. Subject to requirements of applicable Law, the directors of the Initial Surviving Corporation immediately prior to the effective time of the Subsequent Merger shall, from and after the effective time of the Subsequent Merger, be the managers of the Final Surviving Entity until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of formation and limited liability company agreement of the Final Surviving Entity.

2.4 Officers .

(a) Initial Surviving Corporation . Effective as of the Effective Time, the officers of Merger Sub shall be the initial officers of the Initial Surviving Corporation, who shall serve until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and the By-Laws.

(b) Sister Subsidiary . Effective as of the effective time of the Subsequent Merger, the officers of Initial Surviving Corporation shall be the initial officers of the Final Surviving Entity,

 

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who shall serve until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of formation and limited liability company agreement of the Final Surviving Entity.

ARTICLE III

EFFECT OF THE MERGER ON CAPITAL

STOCK; EXCHANGE OF CERTIFICATES

3.1 Effect on Capital Stock . At the Effective Time, as a result of the Merger and without any further action on the part of the Company, Parent, Merger Sub or any holder of any capital stock of the Company, Parent or Merger Sub:

(a) Merger Sub . Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $0.01 per share, of the Initial Surviving Corporation, which shall constitute the only outstanding shares of capital stock of the Initial Surviving Corporation as of immediately after the Effective Time.

(b) Cancellation of Treasury Stock and Parent-Owned Stock . Each share of common stock, par value $0.001 per share, of the Company (the “ Company Common Stock ”), and each other share of capital stock of the Company, that is owned by the Company or any Subsidiary of the Company or by Parent, Merger Sub or any other Subsidiary of Parent shall automatically be cancelled and retired and shall cease to be outstanding, and no Merger Consideration shall be delivered or deliverable in exchange therefor.

(c) Conversion of Company Common Stock . Subject to Section 3.3 , each issued and outstanding share of Company Common Stock (other than Dissenting Shares and shares of Company Common Stock to be cancelled and retired pursuant to Section 3.1(b) ), shall be converted into the right to receive the following consideration, without interest (the “ Merger Consideration ”):

(i) 0.2482 (as may be adjusted pursuant to Section 3.4 , the “ Exchange Ratio ”) shares of common stock, par value $0.01 per share, of Parent, fully paid and nonassessable, (collectively, the “ Parent Common Stock ”) (such Parent Common Stock, together with any cash in lieu of fractional Parent Common Stock to be paid pursuant to Section 3.2(f) , the “ Stock Consideration ”);

(ii) $1.50 in cash (the “ Cash Consideration ”); and

(iii) one contingent value right (a “ CVR ”) issued by Parent subject to and in accordance with the CVR Agreement. Each CVR issued as Merger Consideration hereunder will be in the form attached as Annex A to the CVR Agreement (the “ CVR Certificate ”).

At the Effective Time, each share of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to be outstanding, and, in the

 

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case of book-entry shares (“ Book-Entry Shares ”), the names of the former registered holders shall be removed from the registry of holders of such shares, and (A) each holder of a certificate representing any such shares (other than Book-Entry Shares) of Company Common Stock (a “ Certificate ”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration upon the surrender of such Certificate (for each share of Company Common Stock previously represented thereby), and (B) each holder of Book-Entry Shares shall cease to have any rights with respect thereto except the right to receive the Merger Consideration following such removal of such holder’s name from the registry of holders of such shares (for each such Book-Entry Share).

Notwithstanding anything contained herein to the contrary, to the extent that the number of shares of Parent Common Stock issuable as Stock Consideration plus the number of shares of Parent Common Stock underlying Assumed Options would exceed 19.99% of the outstanding shares or voting power of Parent Common Stock as of the Effective Time, then the Exchange Ratio for each issued and outstanding share of Company Common Stock (other than Dissenting Shares and shares of Company Common Stock to be cancelled and retired pursuant to Section 3.1(b) ) shall be reduced so that the number of shares of Parent Common Stock issued as Stock Consideration plus the number of shares of Parent Common Stock underlying Assumed Options equals 19.99% of the outstanding shares or voting power of Parent Common Stock as of the Effective Time (the amount of the reduction of the Exchange Ratio for each issued and outstanding share of Company Common Stock (other than Dissenting Shares and shares of Company Common Stock to be cancelled and retired pursuant to Section 3.1(b) ), the “ Exchange Ratio Per Share Reduction Amount ”)) and each issued and outstanding share of Company Common Stock (other than Dissenting Shares and shares of Company Common Stock to be cancelled and retired pursuant to Section 3.1(b) ) shall have the right to receive additional cash consideration equal to the product of (a) the Exchange Ratio Per Share Reduction Amount multiplied by (b) the Parent Share Price. As used in this Agreement, the term “ Parent Share Price ” shall mean the volume weighted average price paid per share of Parent Common Stock for the ten (10) most recent days that the Parent Common Stock has traded on The NASDAQ Global Select Market ending on the last full trading day immediately prior to the Closing Date.

(d) Each holder of Company Options outstanding immediately prior to the Effective Time shall be permitted to elect for all or any portion of such Company Options to be exercised on a net basis by undertaking irrevocably to exchange the shares of Company Common Stock subject to such Company Options pursuant to Section 3.1(c) and, in connection with such exchange, by relinquishing a fraction of the aggregate Merger Consideration payable pursuant to Section 3.1(c) with respect to such shares of Company Common Stock corresponding to the quotient obtained by dividing (x) the sum of the per share exercise price of such Company Option and the per share amount of any required withholdings with respect to the exercise of such Company Option by (y) the estimated per share value of the Merger Consideration determined, solely for purposes of effectuating net exercises contemplated by this Section 3.1(d), by agreement of the Parties reasonably in advance of the Closing Date. At the Effective Time, each option to purchase Company Common Stock (each, a “ Company Option ”) (or portion thereof), whether vested or unvested, that is outstanding and unexercised as of immediately prior to the Effective Time (disregarding Company Options which the holder has elected to be exercised on a net basis pursuant to the first sentence of this Section 3.1(d)) shall be assumed by Parent and converted into an option (each, an “ Assumed Option ”) to acquire that number of

 

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shares of Parent Common Stock (rounded to the nearest whole share) equal to the product of (i) the number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time multiplied by (ii) the Option Exchange Ratio (as defined below), and each such Assumed Option shall be exercisable at a price per share of Parent Common Stock (which price per share shall be rounded to the nearest whole cent) equal to the aggregate exercise price of such Company Option immediately prior to the Effective Time divided by the Option Exchange Ratio. Each Assumed Option shall otherwise be subject to the same terms and conditions as were applicable under the respective Company Option immediately prior to the Effective Time. It is the intention of the parties that (i) each Assumed Option that qualified as an incentive stock option (as defined in Section 422 of the Code) shall continue to so qualify, to the maximum extent permissible, following the Effective Time, and (ii) the number of shares of Parent Common Stock and exercise price per share of Parent Common Stock under each Assumed Option shall be determined in a manner consistent with the requirements of Section 409A of the Code. The Company shall take all actions as are necessary under the Company’s 2001 Long-Term Stock Incentive Plan, as amended, and the Company’s 2012 Equity Incentive Plan (each, a “ Company Stock Incentive Plan ” and collectively, the “ Company Stock Incentive Plans ”), the agreements evidencing each such Company Option, and any applicable Law to effect the assumption of the Company Options upon the Effective Time, including, but not limited to, adopting all resolutions and giving all timely notices. The form and substance of any such resolutions and notices shall be subject to review and approval of Parent, which approval shall not be unreasonably withheld, conditioned or delayed. Parent shall take all actions as are necessary to approve and effectuate the assumption by Parent of such Company Options. The “Option Exchange Ratio” shall mean an amount equal to the lesser of (i) 0.5558, or (ii) the sum of (x) the Exchange Ratio plus (y) the quotient obtained by dividing (1) $6.20 by (2) the Parent Share Price. The Parent and the Company have agreed that the Option Exchange Ratio is intended to reflect a reasonable method for determining the fair market value of the stock subject to the Company Options (within the meaning of Treas. Reg. 1.424-1(a)(9)) as of the date hereof.

(e) Prior to the dates actions must be taken pursuant to this Section 3.1(e) , and subject to the reasonable review of Parent, the Company shall take all actions that are necessary to cause (A) the Company’s stock purchase plans, including, without limitation, the BioMimetic Therapeutics, Inc. 2005 Employee Stock Purchase Plan (the “ Company Employee Stock Purchase Plan ”), to be modified, terminated and/or suspended so that no new offering period to purchase Company Common Stock shall or may occur from and after the date hereof; (B) the rights of participants under the Company Employee Stock Purchase Plan with respect to any offering period then underway to be determined by shortening such offering period so that the last day of such offering period is the date hereof, together with such other appropriate adjustments as are necessary to reflect such shortened offering period and to otherwise treat such shortened offering period as a fully effective and completed offering period for all purposes under such plan; and (C) to cause the Company Employee Stock Purchase Plan to terminate effective as of the close of business on the day immediately prior to the Effective Time.

3.2 Exchange of Share Certificates .

(a) Exchange Agent . Prior to the Effective Time, Parent shall designate Wells Fargo Bank, National Association, or another bank, trust company or transfer agent as reasonably

 

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satisfactory to the Company to act as agent (the “ Exchange Agent ”) for the holders of shares of Company Common Stock to receive the Merger Consideration to which such holders shall become entitled with respect to such holder’s shares of Company Common Stock pursuant to Section 3.1(c) . At or prior to the Effective Time, Parent or Merger Sub shall deposit with the Exchange Agent (i) that number of shares of Parent Common Stock, as applicable, (ii) cash, and (iii) CVR Certificates representing the aggregate number of CVRs issuable pursuant to the CVR Agreement, in each case as are issuable or payable pursuant to this Article III in respect of shares of Company Common Stock for which Certificates or Book-Entry Shares are properly delivered to the Exchange Agent. The deposit made by Parent or Merger Sub, as the case may be, pursuant to this Section 3.2(a) is hereinafter referred to as the “ Exchange Fund ”. The Exchange Agent shall cause the Exchange Fund to be (i) held for the benefit of the holders of Company Common Stock and (ii) applied promptly to making the payments provided for in Section 3.1(c) . The Exchange Fund shall not be used for any purpose that is not expressly provided for in this Agreement; provided that Parent may direct the Exchange Agent to invest the Exchange Fund in obligations of or guaranteed by the United States of America and backed by the full faith and credit of the United States of America or in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Services, Inc. or Standard & Poor’s Corporation, respectively; provided further that no such investment or losses thereon shall affect the Merger Consideration payable to the holders of Company Common Stock, and following any losses Parent shall promptly provide additional funds to the Exchange Agent for the benefit of the holders of Company Common Stock in the amount of such losses. Any interest or other income resulting from such investments shall be (A) the property of Parent and (B) promptly paid to Parent. Parent shall, prior to the Effective Time, allot Parent Common Stock referred to in Section 3.1(c) on the terms and subject to the conditions set forth in this Agreement.

(b) Payment Procedures . As soon as reasonably practicable after the Effective Time (and in any event within five (5) Business Days of the Effective Time), the Final Surviving Entity shall cause the Exchange Agent to mail to each holder of record of shares of Company Common Stock at the Effective Time (A) a letter of transmittal specifying that delivery of the Certificates shall be effected, and risk of loss and title to the Certificates and Book-Entry Shares shall pass, only upon delivery of the Certificates (or effective affidavits of loss in lieu thereof) or evidence of Book-Entry Shares, as the case may be, to the Exchange Agent, such letter of transmittal to be in customary form and have such other provisions as Parent and the Company shall reasonably agree and (B) instructions for use in effecting the surrender of the Certificates (or effective affidavits of loss in lieu thereof) and evidence of Book-Entry Shares in exchange for the Merger Consideration (such instructions shall include instructions for the payment of the Merger Consideration to a Person other than the Person in whose name the surrendered Certificate is registered on the transfer books of the Company, subject to the receipt of appropriate documentation for such transfer). Upon the proper surrender of a Certificate (or effective affidavit of loss in lieu thereof) or evidence of Book-Entry Shares to the Exchange Agent, together with a properly completed letter of transmittal, duly executed, and such other documents as may reasonably be requested by the Exchange Agent, the holder of such Certificate or Book-Entry Shares will be entitled to receive in exchange therefor the applicable Merger Consideration (after giving effect to any required tax withholdings) that such holder has the right to receive pursuant to this Article III , and the Certificate or Book-Entry Shares so surrendered will forthwith be cancelled and retired. No interest shall be paid, payable or accrued on any amount payable upon due surrender of the Certificates or Book-Entry Shares. In the

 

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event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, the Merger Consideration to be paid and issued upon due surrender of the Certificate or Book-Entry Shares may be paid to such a transferee if the Certificate or evidence of Book-Entry Shares formerly representing such shares of Company Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer Taxes have been paid or are not applicable.

For the purposes of this Agreement, the term “ Person ” shall mean any individual, corporation (including, without limitation, any not-for-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.

(c) Transfers . After the Effective Time, there shall be no registration of transfers on the stock transfer books of the Company of shares of Company Common Stock that were outstanding immediately prior to the Effective Time.

(d) Termination of Exchange Fund . Any portion of the Exchange Fund that remains unclaimed by the holders of Company Common Stock one (1) year after the Effective Time shall be returned to, and to the extent not prohibited by Law, become the property, free and clear of all claims or interest of, Parent, the Final Surviving Entity or another Affiliate of Parent, as may be designated by Parent or the Final Surviving Entity. Any holders of Company Common Stock who have not theretofore complied with this Article III shall thereafter look only to Parent or the Final Surviving Entity as a general unsecured creditor for payment of the Merger Consideration, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Final Surviving Entity, the Exchange Agent or any other Person shall be liable to any former holder of shares of Company Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws. For the purposes of this Agreement, the term “ Affiliate ” means, with respect to any Person, (i) each Person that, directly or indirectly, owns or controls such Person, and (ii) each Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person, provided , that, for the purpose of this definition, “ control ” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.

(e) Lost, Stolen or Destroyed Certificates . In the event that 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 (and upon such terms and subject to such conditions as Parent shall reasonably require), (i) the agreement by such Person to indemnify and hold harmless Parent, the Final Surviving Entity and any of their respective Affiliates from and against any and all claims with respect to such Certificate and/or (ii) if required by the Exchange Agent, the posting by such Person of a bond in a reasonable amount as indemnity against any and all such claims, the Exchange Agent or Parent (as the case may be) will issue, or cause to be issued, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration upon due surrender of the shares of Company Common Stock represented by such Certificate pursuant to this Agreement.

 

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(f) Fractional Shares . Notwithstanding any other provision of this Agreement to the contrary, no fractional shares of Parent Common Stock will be issued and any holder of shares of Company Common Stock entitled to receive a fractional share of Parent Common Stock but for this Section 3.2(f) shall be entitled to receive a cash payment, without interest, rounded to the nearest cent, determined by multiplying (i) the per share value calculated as the average of the closing sale prices of one share of Parent Common Stock for the ten (10) most recent days that the Parent Common Stock has traded on The NASDAQ Global Select Market ending on the last full trading day immediately prior to the Effective Time by (ii) the fractional interest of the share of Parent Common Stock which such holder would otherwise be entitled to receive under Section 3.1(b) .

(g) Withholding Rights . Each of Parent, the Final Surviving Entity and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article III such amounts as it is required to deduct and withhold with respect to the making of such payment under provision of any federal, state, local or foreign Tax Law. If Parent, the Final Surviving Entity or the Exchange Agent, as the case may be, so withholds amounts and pays such amounts to the appropriate Governmental Entity, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock or Company Options in respect of which Parent, the Final Surviving Entity or the Exchange Agent, as the case may be, made such deduction and withholding.

3.3 Appraisal Rights .

(a) Notwithstanding anything in this Agreement to the contrary, with respect to each share of Company Common Stock (including Book-Entry Shares) as to which the holder thereof (i) has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares in accordance with Section 262 of the DGCL, (ii) properly complied with Section 262 of the DGCL and (iii) has not effectively withdrawn or lost its rights to appraisal (each, a “ Dissenting Share ”), if any, such holder shall be entitled to payment (subject to, and net of, any applicable withholding Tax), solely from the Final Surviving Entity, of the appraisal value of such Dissenting Shares to the extent permitted by and in accordance with the provisions of Section 262 of the DGCL, except that (x) if any holder of Dissenting Shares, under the circumstances permitted by Section 262 of the DGCL, affirmatively withdraws or loses (through failure to perfect or otherwise) the right to dissent or its rights for appraisal of such Dissenting Shares, (y) if any holder of Dissenting Shares fails to establish his entitlement to appraisal rights as provided in the DGCL or (z) if any holder of Dissenting Shares takes or fails to take any action the consequence of which is that such holder is not entitled to payment for his shares under the DGCL, such holder or holders shall forfeit the right for appraisal of such shares of Company Common Stock and such shares of Company Common Stock shall cease to constitute Dissenting Shares, and each such share of Company Common Stock shall, to the fullest extent permitted by Law, thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 3.2 , of such formerly Dissenting Shares.

 

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(b) The Company shall give Parent prompt notice of, together with copies of, any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served on or otherwise received by the Company pursuant to the DGCL. Parent shall have the right to participate in all negotiations and proceedings with respect to any and all such demands for appraisal. Without limiting, and in furtherance of, the foregoing, the Company shall not, except with the prior written consent of Parent, (i) make any payment with respect to any such demands for appraisal, (ii) offer to settle or otherwise settle any such demands, (iii) waive any failure to properly make or effect any such demand for appraisal or other action required to perfect appraisal rights in accordance with the DGCL or (iv) agree to do any of the foregoing.

3.4 Adjustments to Prevent Dilution .

Notwithstanding anything to the contrary in this Agreement, if, after the date hereof, and prior to the Effective Time, the issued and outstanding Company Common Stock or Parent Common Stock shall have been changed into a different number of shares or a different class by reason of any stock split, reverse stock split, stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares or other similar transaction, or Parent changes the number of shares of Parent Common Stock represented by a share of Parent Common Stock, then the Merger Consideration and Exchange Ratio and any other similarly dependent items, as the case may be, shall be equitably adjusted to provide to the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such action, and as so adjusted shall, from and after the date of such event, be the Merger Consideration, the Exchange Ratio or other dependent item, as applicable, subject to further adjustment in accordance with this Section 3.4 .

ARTICLE IV

THE CLOSING

4.1 Closing .

The closing (the “ Closing ”) of the transactions contemplated by this Agreement shall take place (i) at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 12235 El Camino Real, San Diego, California 92103-3002, at 10:00 a.m. Eastern time on the third (3rd) Business Day after the last to be satisfied or waived of the conditions set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) shall be satisfied or waived (by the party entitled to the benefit of such condition) in accordance with this Agreement, or (ii) at such other place and time and/or on such other date as the Company and Parent may agree in writing (the date on which the Closing occurs, the “ Closing Date ”). For purposes of this Agreement, the term “ Business Day ” means any day on which banks are not required or authorized to close in the City of New York.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

5.1 Representations and Warranties of the Company .

Except as disclosed in (i) and reasonably apparent on the face of the disclosure contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 or any of the Company’s Current Reports on Form 8-K dated after December 31, 2011 filed by the Company with the SEC prior to the date hereof (excluding any disclosures set forth therein to the extent that they do not relate to historical or existing facts, events, changes, effects, developments, conditions or occurrences and excluding any disclosures set forth therein to the extent that they are predictive, cautionary or forward-looking in nature, including risk factor disclosure) and, for the avoidance of doubt, without giving effect to any event occurring subsequent to the date that any such public filing was filed, or (ii) the disclosure letter delivered to Parent by the Company simultaneously with the execution and delivery of this Agreement (the “ Company Disclosure Letter ”), the Company hereby represents and warrants to Parent and Merger Sub that:

(a) Organization, Good Standing and Qualification . The Company and each of its Subsidiaries is a corporation validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own and operate its material properties and assets and to carry on its business as currently conducted in all material respects and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties and assets or conduct of its business requires such qualification, except where the failure to be so qualified as a foreign corporation or be in good standing would not be reasonably likely to have, either individually or in the aggregate, a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. The Company has heretofore made available to Parent complete and correct copies of the Company’s and each of its Subsidiaries’ Organizational Documents, each as amended and currently in effect. The Organizational Documents of the Company and each of its Subsidiaries so made available are in full force and effect. Section 5.1(a) of the Company Disclosure Letter sets forth a list of all of the Subsidiaries of the Company, the jurisdictions under which such Subsidiaries are incorporated and qualified or licensed to transact business, and the percent of the equity interest therein owned by the Company and each Subsidiary of the Company, as applicable.

As used in this Agreement, the term “ Organizational Documents ” means, with respect to any Person, the articles of incorporation, certificate of incorporation, charter, articles of formation, certificate of formation, articles of association, memorandum of association, by-laws, operating agreement, limited liability company agreement or partnership agreement (or, in each case, any comparable governing instruments) of such Person.

 

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As used in this Agreement, the term “ Subsidiary ” means, with respect to any specified Person, any other Person of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors (or other Persons performing similar functions) of such other Person is directly or indirectly owned or controlled by such specified Person or by one or more of its Subsidiaries or by such specified Person and any one or more of its Subsidiaries.

As used in this Agreement, the term “ Company Material Adverse Effect ” means any event, change, circumstance, effect, development or state of facts that, individually or in the aggregate, has or would reasonably be expected to have a material adverse effect on the business condition (financial or otherwise), assets, liabilities or results of operations of the Company and its Subsidiaries taken as a whole, other than any such event, change, circumstance, effect, development or state of facts resulting from or arising out of (i) any change, after the date hereof, in applicable Law or U.S. generally accepted accounting principles (“ U.S. GAAP ”), (ii) general changes in the U.S. or foreign economies or capital markets, (iii) changes in general conditions arising after the date hereof affecting the industry in which the Company operates, (iv) natural disasters, acts of war, terrorism or other force majeure events in the United States, (v) the public announcement or pendency of this Agreement or the transactions contemplated hereby, (vi) any litigation brought by any current or former stockholders of the Company (on their own behalf or on behalf of the Company) against the Company and/or the board of directors of the Company (the “ Company Board ”) relating specifically to this Agreement or the Merger; (vii) any failure by the Company to meet analysts’ estimates, internal or external projections or forecasts of revenues, earnings or other financial or business metrics, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into account unless otherwise excluded by this definition), (viii) any decline in the market price or change in the trading volume of the Company Common Stock, in and of itself (it being understood that the underlying cause(s) of any such decline or change may be taken into account unless otherwise excluded by this definition), or (ix) an Adverse FDA Event (with the understanding that the occurrence of an Adverse FDA Event permits Parent to terminate this Agreement pursuant to the terms and conditions of Article IX ); except in the case of the preceding clauses (i), (ii), or (iii), to the extent that such effects have a materially disproportionate impact on the Company and its Subsidiaries taken as a whole as compared to other companies in the same industry as the Company.

As used in this Agreement, the term “ Adverse FDA Event ” shall mean any of the following: (i) receipt by the Company of an order from the FDA under 21 CFR 814.45 denying FDA Approval of Augment; (ii) if the FDA approves the Augment PMA submission but with a label that does not include at least the following indications: primary hindfoot and ankle fusions, with no black box warnings and with no limitations that would restrict the use of Augment only to patients who are not suitable autograft candidates or patients who have failed an autograft procedure (collectively, the “Minimum Indications”); (iii) if the FDA, in advance of approval and in a Formal Communication, proposes a label for Augment that does not include the Minimum Indications; or (iv) if the FDA requires one or more additional clinical efficacy trials or requests additional information that cannot be derived from the Company’s completed clinical studies. For the avoidance of doubt, a clinical efficacy trial excludes additional safety trials such as pharmacokinetic studies or other non-efficacy based endpoints that are reasonably capable of being performed in less than an eighteen (18)-month period and additional information does not include information derived from such studies. “Formal Communication” means any transmittal on FDA letterhead, dated, and signed by an FDA official.

 

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As used in this Agreement, the term “ Augment PMA ” means the Company’s amended pre-market approval application no. P100006 submitted to the FDA on June 28, 2012.

As used in this Agreement, the term “ FDA Approval ” shall mean the approval of the U.S. Food and Drug Administration (the “ FDA ”), as evidenced by publication of such approval by the FDA, of the pre-market approval application to market and sell Augment™ Bone Graft (“ Augment ”) in the United States.

As used in this Agreement, the term “ knowledge ” or any similar formulation of knowledge shall mean the actual knowledge of: (i) with respect to the Company, those individuals set forth in Section 5.1(a) of the Company Disclosure Letter; and (ii) with respect to Parent, those persons set forth in Section 5.1(a) of the disclosure letter delivered to the Company by Parent simultaneously with the execution and delivery of this Agreement (the “ Parent Disclosure Letter ”).

(b) Capital Structure .

(i) As of the close of business on November 14, 2012, the authorized capital stock of the Company consists of (A) 100,000,000 shares of Company Common Stock, of which 28,225,241 shares were issued and outstanding, and (B) 15,000,000 shares of preferred stock, par value $0.001 per share, of the Company, none of which were issued and outstanding. All of the issued and outstanding shares of Company Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. Each of the outstanding shares of capital stock or other securities of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and, to the extent reflected in Section 5.1(a) of the Company Disclosure Letter, is owned by the Company or a direct or indirect wholly owned Subsidiary of the Company free and clear of any Lien. As of the close of business on November 14, 2012, there were 3,434,262 shares of Company Common Stock subject to outstanding Company Options and 3,174,850 shares of Company Common Stock were reserved for future option grants. The Company has delivered to Parent (or made available in a data room for review by Parent) true and complete copies of the Company’s form(s) of stock option agreement evidencing Company Options, as well as any stock option agreement evidencing Company Options that deviates in any material respect from such form(s), and the Company Stock Incentive Plans. Other than the Company Options and options under the Company Employee Stock Purchase Plan, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or to sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Section 5.1(b)(i) of the Company Disclosure Letter sets forth a complete and correct list, as of the close of business on November 14, 2012 and for each holder, of

 

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the number of shares of Company Common Stock subject to each Company Option or other rights to purchase or receive Company Common Stock held by such holder, together with the date of grant, the per share exercise price, the vesting schedule (including the extent vested to date and whether such Company Option or right is subject to acceleration as a result of the transactions contemplated by this Agreement or any other events), and for any Company Option, whether such option is a nonstatutory stock option or an incentive stock option within the meaning of Section 422 of the Code.

(ii) With respect to the Company Options, (A) each Company Option was duly authorized no later than the date on which the grant of such Company Option was by its terms to be effective (the “ Grant Date ”) by all necessary corporate action, including approval by the Company Board, or a committee thereof, and any required approval by the stockholders of the Company by the necessary number of votes or written consents, and the award agreement governing such grant, if any, was duly executed and delivered by each party thereto within a reasonable time following the Grant Date, (B) each such grant was made in accordance with the material terms of the applicable Company Stock Incentive Plan and all other applicable Law, (C) the per share exercise price of each Company Option was not less than the fair market value of a share of Company Common Stock (based on a good faith determination of the Company Board and in a manner consistent with Section 409A of the Code) on the applicable Grant Date, and (D) each such grant was properly accounted for in all material respects in accordance with U.S. GAAP in the consolidated financial statements (including the related notes thereto) of the Company and its Subsidiaries contained in the Company Reports.

(c) Corporate Authority .

(i) The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate, on the terms and subject to the conditions of this Agreement, the transactions contemplated hereby, subject only to receipt of the Company Requisite Vote and the Company Required Statutory Approvals. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by each of Parent, Merger Sub and Sister Subsidiary, is a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the “ Bankruptcy and Equity Exception ”).

(ii) The Company Board has approved and adopted this Agreement and the Merger and other transactions contemplated hereby and has resolved to recommend that the stockholders of the Company adopt this Agreement (the “ Company Board Recommendation ”).

 

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(d) Governmental Filings; No Violations .

(i) Other than any reports, filings, registrations, approvals and/or notices (A) required to be made pursuant to Section 1.3(a) , (B) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), the Securities Act of 1933, as amended (the “ Securities Act ”), and the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and (C) required to be made with The NASDAQ Global Market (items (B) and (C), the “ Company Required Statutory Approvals ”), no notices, reports, registrations or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company from, any United States or foreign federal, state, or local governmental or regulatory authority, agency, commission, body or other governmental entity including, without limitation, the FDA and the U.S. Drug Enforcement Agency (each, a “ Governmental Entity ”), in connection with the execution and delivery of this Agreement and the consummation by the Company of the transactions contemplated hereby, except for those that the failure to make or obtain are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect.

(ii) The execution, delivery and performance of this Agreement and the consummation by the Company of the transactions contemplated hereby will not constitute or result in (A) a breach or violation of, or a default under, any Organizational Document of the Company or of any Subsidiary of the Company, (B) a breach or violation of, a default or event of default under, the acceleration of any obligations, the loss of any right or benefit, or the creation of a Lien on the assets, properties or rights of the Company or any Subsidiary of the Company (with or without notice, lapse of time or both) pursuant to, or require any notice or consent under, give rise to any right of termination, limitation, cancellation, modification, suspension, revocation or amendment under, any agreement, lease, contract, note, mortgage, indenture, arrangement or other obligation (“ Contracts ”) binding upon the Company or any Subsidiary of the Company or any Law or governmental permit or license to which the Company or any of its Subsidiaries is subject or (C) any change in the rights or obligations of any party under any of the Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration, creation or change that would not, individually or in the aggregate, be reasonably likely to have a Company Material Adverse Effect.

(e) Company Reports; Financial Statements .

(i) The filings required to be made by the Company since December 31, 2009 under the Securities Act and the Exchange Act have been filed with the Securities and Exchange Commission (the “ SEC ”), including all forms, registration, proxy and information statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto, and complied, as of their respective dates, in all material respects with all applicable requirements of the statutes and the rules and regulations thereunder (collectively, including any amendments of any such reports filed with or furnished to the SEC by the Company prior to the date hereof, the “ Company Reports ”). None of the Company Reports as of their respective dates, after giving effect to any amendments or supplements thereto filed prior to the date hereof, 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 made therein not misleading.

 

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(ii) The consolidated financial statements of the Company and its Subsidiaries included in such Company Reports complied as of the effective, file or release dates thereof, as applicable, as to form in all material respects with the applicable rules and regulations of the SEC with respect thereto. Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) presents fairly, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of its date, and each of the consolidated statements of income and consolidated statements of cash flows included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents, in all material respects, the consolidated results of operations, cash flows and financial position, as the case may be, of the Company and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments), in each case in accordance with U.S. GAAP consistently applied during the periods involved, except as may be noted therein. Any change by the Company in the accounting principles, practices or methods used in such financial statements of the Company and its Subsidiaries included in the Company Reports has been appropriately disclosed in such financial statements.

(iii) The management of the Company has (A) implemented (x) disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its Subsidiaries, is made known to the management of the Company by others within those entities and (y) a system of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and (B) disclosed to the Company’s outside auditors and the audit committee of the Company Board (x) all known significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to materially and adversely affect the Company’s ability to record, process, summarize and report financial data and (y) any known fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. Any such significant deficiency, material weakness or fraud is described in Section 5.1(e)(iii) of the Company Disclosure Letter. Since December 31, 2011 (the “ Audit Date ”), there has not been any material change in the Company’s internal control over financial reporting. The Company is in material compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”) and the rules and regulations promulgated thereunder.

(iv) Since the Audit Date, (x) neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding failure to comply with applicable Law or U.S.

 

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GAAP in respect of the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls relating to periods since the Audit Date, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices (except for any of the foregoing after the date hereof which have no reasonable basis), and (y) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation, relating to periods after the Audit Date, by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or, to the knowledge of the Company, to any director or officer of the Company.

(v) Each of the “principal executive officer” (as such term is used in the Sarbanes-Oxley Act) and the “principal financial officer” (as such term is used in the Sarbanes-Oxley Act) of the Company has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC, and the statements contained in any such certifications were true and accurate as of the date such certifications were made and have not been modified or withdrawn.

(f) Independent Auditors . Ernst & Young LLP, the Company’s current auditors, to the knowledge of the Company, is and has been at all times since January 1, 2010 (x) “independent” with respect to the Company within the meaning of Regulation S-X promulgated by the SEC and (y) to the knowledge of the Company, in compliance with subsections (g) through (l) of Section 10A of the Exchange Act (to the extent applicable) and the related rules of the SEC and the Public Company Accounting Oversight Board. All non-audit services performed by the Company’s auditors for the Company or its Subsidiaries that were required to be approved in accordance with Section 202 of the Sarbanes-Oxley Act were so approved.

(g) NASDAQ Rules and Regulations . The Company is in material compliance with the applicable listing and corporate governance rules and regulations of The NASDAQ Global Market.

(h) Information Supplied . None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in (i) the S-4 Registration Statement of Parent to be filed with the SEC with respect to the registration under the Securities Act of the shares of Parent Common Stock and CVRs to be issued in connection with the Merger (in which the Proxy Statement/Prospectus, as defined in Section 7.6(a) of this Agreement, shall be included) (the “ S-4 Registration Statement ”) or any amendment or supplement thereto will, at the time such S-4 Registration Statement or any amendment or supplement thereto is filed with the SEC or at the time such S-4 Registration Statement becomes effective, 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 made therein, in light of the circumstances under which they were made, not misleading or (ii) the Proxy Statement/Prospectus will, at the date of mailing to holders of Company Common Stock and at the time of the Company Stockholders Meeting to be held in connection with the Merger, contain any untrue statement of a material fact

 

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or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Proxy Statement/Prospectus relating to the Company Stockholders Meeting and any amendments or supplements thereto will, when filed, comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder. 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 for inclusion or incorporation by reference in the Proxy Statement/Prospectus or the S-4 Registration Statement.

(i) No Undisclosed Liabilities . There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, known or unknown, determined, determinable or otherwise, required by U.S. GAAP to be set forth in the Company’s consolidated financial statements included in the Company Reports, and there is no existing condition, situation or set of circumstances that could be reasonably expected to result in such a liability or obligation, other than: (i) liabilities or obligations disclosed and provided for in the Company’s balance sheet as of June 30, 2012 included in the Company Reports or in the notes thereto; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices since June 30, 2012; (iii) liabilities and obligations under this Agreement; (iv) liabilities or obligations under Contracts in effect as of the date hereof not arising from breach or as a result of the execution or announcement of this Agreement or the consummation of the transactions contemplated hereby, and (v) liabilities or obligations that are not reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect.

(j) Absence of Certain Changes . Since June 30, 2012, except as expressly contemplated by this Agreement, the Company and its Subsidiaries taken as a whole have conducted their business in all material respects only in, and have not engaged in any material transaction other than according to, the Company’s ordinary and usual course of business and: (i) there has not been a Company Material Adverse Effect; (ii) there has not been any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company or any repurchase, redemption or other acquisition by the Company or any Subsidiary of any securities of the Company; (iii) there has not been any change by the Company in accounting principles, practices or methods which was not required by U.S. GAAP; (iv) there has not been any material increase in the compensation payable or that could become payable by the Company or any of its Subsidiaries to officers or key employees or any material amendment of any of the Company Compensation and Benefit Plans other than increases or amendments in the ordinary course of business consistent with past practice; (v) neither the Company nor any of its Subsidiaries has issued or sold any equity interests, or any securities convertible into or exchangeable for any such interests, or issued, sold, granted or entered into any subscriptions, options, warrants, conversion or other rights, agreements, commitments, arrangements or understandings of any kind, contingently or otherwise, to purchase or otherwise acquire any such shares or interests or any securities convertible into or exchangeable for any such interests; (vi) neither the Company nor any of its Subsidiaries has incurred any indebtedness for borrowed money, issued or sold any debt securities or prepaid any debt except for borrowings and repayments in the ordinary course of business; (vii) neither the Company nor any of its Subsidiaries has mortgaged, pledged or otherwise subjected to any Lien any of its properties or

 

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assets, except for Permitted Liens; (viii) neither the Company nor any of its Subsidiaries has amended any of its Organizational Documents; (ix) neither the Company nor any of its Subsidiaries has sold any assets with a value in excess of $100,000 in the aggregate; (x) there has not been any damage, destruction or other casualty loss (whether or not covered by insurance) with respect to any assets of the Company that, individually or in the aggregate, are material to the Company and its Subsidiaries, taken as a whole; (xi) neither the Company nor any of its Subsidiaries has made any loans, advances or capital contributions to, or investments in, any other Person; (xii) neither the Company nor any of its Subsidiaries has agreed to any material changes, alterations or modifications to a premarket approval, clinical trial or other application or request pending with the FDA or other Governmental Entity; (xiii) neither the Company nor any of its Subsidiaries has settled, released or forgiven any material claim or litigation (or waived any right thereto); (xiv) neither the Company nor any of its Subsidiaries has incurred any capital expenditures or any obligations or liabilities in respect of capital expenditures in excess of $500,000 in the aggregate; (xv) there has not been, and, to the knowledge of the Company, no event, change, circumstance, effect, development or state of facts has occurred that would reasonably be likely to result in, an Adverse FDA Event; and (xvi) there has not been any action taken by the Company or any of its Subsidiaries that would result in any of the foregoing. As used in this Agreement, the term “ Permitted Liens ” shall mean (v) Liens for Taxes not yet due and payable or Taxes being contested in good faith and for which adequate reserves have been established in accordance with GAAP on the most recent financial statements of the Company, (w) mechanics’, carriers’, workmen’s, repairmen’s, landlord’s or other like liens or other similar encumbrances arising or incurred in the Company’s ordinary course of business consistent with past practice, (x) zoning restrictions, utility easements, rights of way and similar Liens that are imposed by any Governmental Entity or otherwise are typical for the applicable property type and locality and that, individually or in the aggregate, would not reasonably be expected to materially interfere with the Company’s ability to conduct its business as currently conducted, (y) matters that would be disclosed on current title reports or surveys that arise or have arisen in the ordinary course of business, and (z) Liens reflected in the Company Reports.

(k) Litigation . There are no civil, criminal or administrative actions, suits, claims, hearings, investigations, reviews or proceedings (collectively, the “ Litigation Claims ”) pending or, to the knowledge of the Company, threatened by or against the Company or any of its Subsidiaries that would reasonably be expected, individually or in the aggregate, to be material to the Company. There are no material SEC inquiries or investigations, other material governmental inquiries or investigations or material internal investigations pending, or to the knowledge of the Company, threatened, in each case regarding any accounting practices of the Company or any of its Subsidiaries or any malfeasance by any director (or any Person in a similar position) or executive officer of the Company or any of its Subsidiaries. There is no judgment, order or decree outstanding against the Company or any of its Subsidiaries.

(l) Employee Benefits .

(i) For the purposes of this Agreement: (i) “ Compensation and Benefit Plan ” shall mean each “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and all other employee compensation and benefits plans, policies, programs, arrangements or payroll practices, including multiemployer plans within the meaning of Section 3(37) of ERISA,

 

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and each other stock purchase, stock option, restricted stock, severance, retention, employment, consultant compensation, change-of-control, collective bargaining, bonus, incentive, deferred compensation, employee loan, fringe benefit and other benefit plan, agreement, program, policy, commitment or other arrangement, whether or not subject to ERISA (including any related funding mechanism now in effect or required in the future), whether formal or informal, oral or written, legally binding or not; and (ii) “ Company Compensation and Benefit Plan ” shall mean each Compensation and Benefit Plan under which any past or present director, officer, employee, consultant or independent contractor of the Company, any of its Subsidiaries or any of its ERISA Affiliates has any present or future right to benefits or to which contributions are made or otherwise required to be made, by the Company or any of its Subsidiaries, together with any trust agreement or insurance contract forming a part of such Compensation and Benefit Plan. Section 5.1(l)(i) of the Company Disclosure Letter sets forth a complete and accurate list of all material Company Compensation and Benefit Plans.

(ii) The Company has provided or made available to Parent, with respect to each material written Company Compensation and Benefit Plan, a true and complete copy of all plan documents, if any, including related trust agreements, funding arrangements, service contracts with any third-party, and insurance contracts and all amendments thereto; and, to the extent applicable, (i) the most recent determination letter, if any, received by the Company or Subsidiary from the Internal Revenue Service (the “ IRS ”) regarding the tax-qualified status of such Company Compensation and Benefit Plan; (ii) the most recent financial statements for such Company Compensation and Benefit Plan, if any; (iii) the most recent actuarial valuation report, if any; (iv) the current summary plan description and any summaries of material modifications; (v) the Form 5500 Annual Return/Report, including all schedules and attachments, including the certified audit opinions, for the most recent plan year for which a Form 5500 was required to be filed; and (vi) the most recent written results of all compliance testing performed pursuant to Sections 125, 401(a)(4), 401(k), 401(m), 410(b), 415, and 416 of the Code for the most recent plan year.

(iii) Each Company Compensation and Benefit Plan has been administered in accordance with its terms and has been established and administered in material compliance with the applicable provisions of ERISA, the Code and any other applicable Law. All contributions (including all employer contributions and employee salary reduction contributions) required to have been remitted under any of the Company Compensation and Benefit Plans to any funds or trusts established thereunder or in connection therewith have been remitted by the due date thereof.

(iv) Each Company Compensation and Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter (or may rely on a favorable opinion letter) from the IRS that it is so qualified and that its trust is exempt from taxation under Section 501(a) of the Code, and nothing has occurred, whether by action or failure to act, that would reasonably be expected, individually or in the aggregate, to cause the loss of such qualification or result in any material costs to the Company, Parent, Merger Sub, the Final Surviving Entity or any of their respective Subsidiaries. There is no pending or, to the knowledge of the Company, threatened litigation or other proceeding relating to the Company Compensation and Benefit Plans (other than routine claims for benefits).

 

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(v) No Company Compensation and Benefit Plan is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, and no events have occurred and no circumstances exist that would reasonably be expected to result in any material liability to the Company or any entity that is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an “ ERISA Affiliate ”) under Title IV of ERISA with respect to any single employer defined benefit plan. No Company Compensation and Benefit Plan is a “multiemployer plan” as defined in Section 3(37) of ERISA, and none of the Company or any ERISA Affiliate has withdrawn at any time within the preceding six years from any multiemployer plan, or incurred any withdrawal liability which remains unsatisfied, and no events have occurred and no circumstances exist that would reasonably be expected to result in any such liability to the Company or any of its ERISA Affiliates with respect to any multiemployer plan.

(vi) None of the Company Compensation and Benefit Plans provide retiree health or life insurance benefits except as may be required by Section 4980B of the Code and Section 601 of ERISA or any other applicable law or at the expense of the participant or the participant’s beneficiary. There has been no violation of the “continuation coverage requirement” of “group health plans” as set forth in Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA with respect to any Company Compensation and Benefit Plan to which such continuation coverage requirements apply.

(vii) Other than as expressly provided by this Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in combination with another event) (i) result in any payment becoming due, or increase the amount of any compensation or benefits due, to any current or former employee of the Company and its Subsidiaries or with respect to any Company Compensation and Benefit Plan; (ii) increase any benefits otherwise payable under any Company Compensation and Benefit Plan; (iii) result in the acceleration of the time of payment or vesting of any such compensation or benefits; or (iv) result in a non-exempt “ prohibited transaction” within the meaning of Section 406 of ERISA or section 4975 of the Code.

(viii) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in combination with another event) result in the payment of any amount that would, individually or in combination with any other such payment, not be deductible as a result of Section 280G or 162(m) of the Code.

(ix) Except as set forth on Section 5.1(l)(ix) of the Company Disclosure Letter, no stock or other securities issued by the Company or any Affiliate forms or has formed a material part of the assets of any Company Employee Compensation and Benefit Plan.

 

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(x) Except as would not be likely to have a Company Material Adverse Effect, each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) of the Company has been (i) during the period commencing on January 1, 2005, in good faith operational compliance with Section 409A of the Code and the guidance and regulations promulgated thereunder (“ Section 409A ”), and (ii) since January 1, 2009, in operational and documentary compliance with Section 409A.

(xi) No Company Compensation and Benefit Plan provides any present or future rights to any employee, director, officer, consultant, or independent contractor of the Company, any of its Subsidiaries, or any ERISA Affiliate who performs services outside the United States.

(m) Compliance with Laws . The Company and its Subsidiaries have been since January 1, 2010 and are in material compliance with applicable U.S. and foreign, federal, state or local laws, statutes, ordinances, rules, regulations, judgments, orders, injunctions, decrees, arbitration awards and agency requirements (collectively with Permits, as defined below, “ Laws ”) and permits, licenses, authorizations, consents, approvals and franchises from Governmental Entities required to conduct their businesses as currently conducted (“ Permits ”).

(i) Neither the Company nor any of its Subsidiaries has knowledge of any actual or threatened enforcement action or investigation by the FDA or any other Governmental Entity that has jurisdiction over the operations of the Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries has any knowledge that the FDA or any other Governmental Entity is considering such action.

(ii) All reports, documents, forms, claims, Permits, applications, records, submissions, supplements, amendments and notices required to be filed with, maintained for or furnished to the FDA or any other Governmental Entity by the Company, its Subsidiaries, and, to the knowledge of the Company, any Person that manufactures, develops, packages, processes, labels, markets, tests or distributes Company Products pursuant to a development, distribution, commercialization, manufacturing, supply, testing or other arrangement with the Company or any of its Subsidiaries (each, a “ Company Partner ”) have been so filed, maintained or furnished by the Company, its Subsidiaries and, to the knowledge of the Company, the Company Partners, as applicable, except where the failure to file, maintain or furnish such reports documents, forms, claims, Permits, applications, records, submissions, supplements, amendments and notices would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. All such reports, documents, claims and notices were complete, not misleading and accurate in all material respects on the date filed or furnished (or were corrected in or supplemented by a subsequent filing) and remain complete and accurate in all material respects. Neither the Company nor its Subsidiaries, nor any employee of the Company or its Subsidiaries, nor to the knowledge of the Company, any Person retained by the Company or its Subsidiaries, has made on behalf of the Company or its Subsidiaries any material false statements or material omissions in any application or other submission relating to the Company Products to the FDA or other Governmental Entity.

 

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(iii) None of the Company, its Subsidiaries or, to the knowledge of the Company, any Company Partner, has, since January 1, 2010, received any FDA Form 483, notice of adverse finding, warning letters, untitled letters or other correspondence or notice from the FDA or other Governmental Entity (i) alleging or asserting noncompliance with any applicable Laws or Permits, and the Company and its Subsidiaries have no knowledge that the FDA or any other Governmental Entity is considering such action or (ii) contesting the investigational device exemption, premarket clearance or approval of, the uses of or the labeling or promotion of any Company Products.

(iv) No Permit issued to the Company, its Subsidiaries, or, to the knowledge of the Company, any Company Partner, by the FDA or any other Governmental Entity has, since January 1, 2010, been limited, suspended, materially modified or revoked and the Company has no knowledge that the FDA or any other Governmental Entity is considering such action.

(v) All preclinical animal testing and clinical trials, tests and studies being funded or conducted by, at the request of or on behalf of the Company, its Subsidiaries, or a Company Partner are, to the knowledge of the Company, being conducted with reasonable care and in material compliance with experimental protocols, procedures and controls, accepted professional scientific standards and applicable Law, have been conducted using clinical practices sufficient to allow the resulting data to be included in the Company’s regulatory filings. The Company has no knowledge of any studies, tests or trials, the results of which the Company believes reasonably call into question the study, test or trial results described in the Company’s public filings or the efficacy or safety of the Company Products or the Company’s filings with any Governmental Entity. The Company and its Subsidiaries have not received any written notices, correspondence or other communication from the FDA or any other Governmental Entity since January 1, 2010 requiring the termination, suspension or modification of any clinical trials conducted by, or on behalf of, the Company or its Subsidiaries, or in which the Company or its Subsidiaries have participated, and the Company and its Subsidiaries have no knowledge that the FDA or any other Governmental Entity is considering such action.

(vi) Each product or product candidate subject to the Federal Food, Drug and Cosmetic Act (including the rules and regulations of the FDA promulgated thereunder, the “ FDCA ”) or comparable Laws in any non-U.S. jurisdiction that is being or has been since January 1, 2010 developed, manufactured, tested, distributed, promoted or marketed by or on behalf of the Company or any of its Subsidiaries (each such product or product candidate, a “ Company Product ”), is being or has been since January 1, 2010 developed, manufactured, tested, distributed, promoted and marketed in material compliance with all applicable requirements under the FDCA and comparable Laws in any non-U.S. jurisdiction, including those relating to investigational use, premarket clearance or approval, registration and listing, good manufacturing practices, good clinical practices, good laboratory practices, labeling, advertising, data protection and data transfer, record keeping and filing of required reports. The Company maintains materially accurate and complete documentation showing that components supplied to and accepted by the Company are manufactured in accordance with the Company’s

 

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specifications therefor. The processes used to produce the Company Products are described in documents maintained by the Company in a materially complete and accurate manner, and such documents have been made available to Parent. To the knowledge of the Company, such processes are adequate to ensure that commercial quantities of the Company Products currently conform to the specifications established therefor and will be: (i) of merchantable quality, (ii) salable in the ordinary course of business at prevailing market prices, (iii) materially free from defects in design, material and workmanship, (iv) suitable for their intended purposes and efficacy levels, and (v) not adulterated or misbranded under the FDCA.

(vii) The Company and its Subsidiaries have not either voluntarily or involuntarily initiated, conducted or issued, or caused to be initiated, conducted or issued, any recall, field notifications, field corrections, market withdrawal or replacement, safety alert, warning, “dear doctor” letter, investigator notice, safety alert or other notice or action relating to an alleged lack of safety, efficacy or regulatory compliance of any product. The Company and its Subsidiaries have no knowledge of any facts which are reasonably likely to cause (1) the recall, market withdrawal or replacement of any product sold or intended to be sold by the Company or its Subsidiaries; (2) a change in the marketing classification or a material change in the labeling of any such products, or (3) a termination or suspension of the marketing of such products.

(viii) Neither the Company nor any of its Subsidiaries has received any written notice that the FDA or any other Governmental Entity has commenced, or threatened to initiate, any action to (i) withdraw its investigational device exemption, premarket clearance or premarket approval or request the recall of any Company Product, (ii) enjoin manufacture or distribution of any Company Product, or restrict the promotion of any Company Product in the manner currently conducted by the Company and its Subsidiaries, (iii) enjoin the manufacture or distribution of any Company Product produced at any facility where any Company Product is manufactured, tested, processed, packaged or held for sale, or (iv) investigate the Company or its products or its practices related thereto.

(ix) The Company and its Subsidiaries are and at all times since January 1, 2010 have been in compliance with federal or state criminal or civil Laws (including the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b), Stark Law (42 U.S.C. §1395nn), Federal False Claims Act (31 U.S.C. §3729 et. seq.), Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §1320d et seq., 42 U.S.C. §300jj et seq.; §17901 et seq., and any comparable state or local laws), and the regulations promulgated pursuant to such Laws, or which are cause for civil or criminal penalties or mandatory or permissive exclusion from Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act) or any other state or federal health care program (each, a “ Program ”). There is no civil, criminal, administrative or other action, suit, demand, claim, hearing, investigation, proceeding, notice or demand (a “ Proceeding ”), pending or, to the knowledge of the Company, threatened, in each case against the Company or any of its Subsidiaries, that could reasonably be expected to result in its exclusion from participation in any Program or other third-party payment programs in which the Company or any of its Subsidiaries participates. With respect to interactions

 

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with healthcare professionals, the Company has a corporate compliance program, which it follows, both in the United States and, as applicable, in foreign countries, which complies with applicable Law and the Company believes is the substantial equivalent of the AdvaMed Code of Ethics on Interactions with Health Care Professionals and/or MEDEC’s Code on Interactions with Healthcare Professionals and international equivalents in the respective countries to which those codes apply.

(x) The Company and its Subsidiaries are in compliance with, and have been in compliance with since January 1, 2010, the Foreign Corrupt Practices Act of 1977, as amended (the “ FCPA ”), and other applicable antibribery, fraud, kickback, and other anticorruption laws, rules, and regulations of any other country (together with the FCPA, the “ Anticorruption Laws ”). To the knowledge of the Company, neither the Company nor any of its Subsidiaries, nor any director (or Person in a similar position), officer, agent or employee of the Company or any of its Subsidiaries has made, directly or indirectly, any payment or promise to pay, or gift or promise to give or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to: (A) any foreign official (as such term is defined in the FCPA) for the purpose of influencing any official act or decision of such official or inducing him or her to use his or her influence to affect any act or decision of a Governmental Entity; or (B) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use his, her or its influence to affect any act or decision of a foreign Governmental Entity, in the case of both (A) and (B) above in order to assist the Company or any of its Subsidiaries to obtain or retain business for, or direct business to the Company or any of its Subsidiaries, as applicable, and under circumstances which would subject the Company or any of its Subsidiaries to any liability under the FCPA or any of the Anticorruption Laws. The prohibition on indirect payments or commitments includes any situation where the Person making the payment knows, believes, or is aware of the possibility that the Person receiving the payment will pass the payment through, in whole or in part, to a foreign official in the circumstances set forth above.

(xi) The Company further represents and warrants, on behalf of itself and its Subsidiaries, that (A) they have not been found by a Governmental Entity or court to have violated the Anticorruption Laws and are not under investigation for any potential violation of the Anticorruption Laws; (B) they have not violated, and have no knowledge of any potential violations of, any of the Anticorruption Laws; (C) they have not committed any act that would constitute a violation of the Anticorruption Laws; (D) to its knowledge, no consultant, agent, intermediary, or other Person retained by the Company or its Subsidiaries has violated, or caused them to violate, the requirements of the Anticorruption Laws; (E) none of their officers, directors or, to its knowledge, their stockholders, beneficial owners, employees, or agents is a foreign official, and if the Company has knowledge that any such person becomes a foreign official, then the Company agrees to notify Parent promptly in writing; and (F) to its knowledge, neither the Company nor any officer, director, shareholder, beneficial owners, employee, agent, or Subsidiary has received any notice or other communication, in writing or otherwise, from a Governmental Entity regarding any actual, alleged, or potential violation of, or failure to comply with, the Anticorruption Laws.

 

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(n) Anti-Takeover Statutes and Agreements .

(i) No “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover Law (each, including, without limitation, Section 203 of the DGCL, a “ Takeover Statute ”) or any anti-takeover provision in any of the Organizational Documents of the Company is or will be applicable to this Agreement, the Voting Agreements or any of the transactions contemplated hereby (including, without limitation, the Merger). The adoption of this Agreement and the transactions contemplated hereby (including, without limitation, the Merger) by the Company Board represents all the actions necessary to render inapplicable to this Agreement and the transactions contemplated hereby (including, without limitation, the Merger) the restrictions on “business combinations” (as used in Section 203 of the DGCL) set forth in Section 203 of the DGCL to the extent, if any, such restrictions would otherwise be applicable to this Agreement or any of the transactions contemplated hereby (including, without limitation, the Merger) or to Parent or Merger Sub or any of their respective Affiliates. Without limiting, and in furtherance of, the foregoing, the Company and the Company Board have taken all actions necessary to cause this Agreement and the transactions contemplated hereby (including, without limitation, the Merger) and the Voting Agreements to be exempt from the provisions of Section 203 of the DGCL.

(ii) Neither the Company nor any of its Subsidiaries is a party to, or is otherwise bound under, any stockholder rights plan (or similar plan commonly referred to as a “poison pill”).

(o) Environmental Matters . Except for such matters that would not, either individually or in the aggregate, be reasonably likely to have a Company Material Adverse Effect (i) the operations of the Company and its Subsidiaries are and have been in compliance with all applicable Environmental Laws; (ii) each of the Company and its Subsidiaries possesses and maintains in effect all Environmental Permits required under applicable Environmental Laws with respect to the properties and business of the Company and its Subsidiaries; (iii) the Company and each of its Subsidiaries has complied with all terms and conditions of all Environmental Permits; (iv) neither the Company nor any of its Subsidiaries has received any written environmental claim, notice or request for information concerning any liability under or violation or alleged violation of any applicable Environmental Law or any Environmental Permit, nor, to the Company’s knowledge, is there any existing factual or legal basis for any such claim, notice or request for information; (v) neither the Company nor any of its Subsidiaries has any knowledge of a Release or threat of Release of any Hazardous Substances which could reasonably be expected to result in liability to the Company or any of its Subsidiaries; (vi) there are no writs, injunctions, decrees, orders or judgments outstanding, or any claims, complaints, actions, suits or proceedings pending relating to compliance by the Company or any of its Subsidiaries with any Environmental Permits, Environmental Laws, or the Hazardous Substance Activities of the Company or any of its Subsidiaries; (vii) to the knowledge of the Company, no Hazardous Substances are present on any real property owned, operated, controlled or leased by the Company or any of its Subsidiaries; (viii) neither the Company nor any Subsidiary has entered into any agreement that may require it to guarantee, reimburse, pledge, defend, hold harmless, or indemnify any other Person with respect to liabilities arising under Environmental Laws or the Hazardous Substance Activities of the Company or any Subsidiary; and (ix) the

 

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Company has made available to Parent all environmental assessments and audits in the Company’s and its Subsidiaries’ possession relating to any real property owned, operated, controlled or leased by the Company or any Subsidiary at any time.

As used herein: (i) “ Environmental Law ” means any Law (including common law) relating to (a) pollution; (b) the protection of the environment (including air, water, soil, subsurface strata and natural resources) or human health and safety; and (c) Hazardous Substance Activities; (ii) “ Hazardous Substance ” means any chemical, emission, material or substance that is potentially harmful to human health, reproduction, the environment, or natural resources or has been designated as radioactive, toxic, a medical waste, a biomedical waste, hazardous, a pollutant, or a contaminant under any Environmental Law, including without limitation, petroleum, petroleum products, polychlorinated biphenyls, radon, mold, urea formaldehyde insulation, silica, chlorofluorocarbons, all other ozone-depleting substances, asbestos and asbestos-containing materials; (iii) “ Hazardous Substance Activities ” is the generation, use, storage, handling, transportation, treatment, Release, manufacture, labeling, exposure of others to, sale, distribution remediation, or disposal of a Hazardous Substance, or a product or waste containing a Hazardous Substance, including, without limitation any product content or take-back or recycling laws; (iv) “ Environmental Permit ” is any approval, permit, license, registration, certification, clearance or consent required to be obtained from any Person with respect to Hazardous Substance Activities; (v) “ Release ” shall have the same meaning as under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.).

(p) Tax Matters .

(i) The Company and each of its Subsidiaries (A) have duly and timely filed (taking into account any extension of time within which to file) all income and other material Tax Returns required to be filed by any of them as of the date hereof and all such filed Tax Returns are complete and accurate in all material respects; (B) have timely paid all material Taxes that are shown as due on such filed Tax Returns and any other material Taxes that the Company or any of its Subsidiaries are otherwise obligated to pay, except with respect to Taxes that are being contested in good faith or that are not yet due and payable, and no material penalties or charges are due with respect to the late filing of any Tax Return required to be filed by or with respect to any of them on or before the Effective Time; (C) with respect to all income and other material Tax Returns filed by or with respect to any of them, have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency other than an extension attributable to an extension to file any such Tax Returns; (D) as of the date hereof, do not have any deficiency, audit, examination, investigation or other proceeding in respect of Taxes or Tax matters pending or proposed or threatened; and (E) have provided adequate reserves in accordance with U.S. GAAP in the most recent consolidated financial statements of the Company and its Subsidiaries, as disclosed in the Company Reports, for any material Taxes of the Company or any of its Subsidiaries that have not been paid, whether or not shown as being due on any Tax Returns, as of the date of the most recent consolidated financial statements of the Company and its Subsidiaries.

 

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(ii) Each of the Company and its Subsidiaries has withheld and paid to the appropriate taxing authority all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any current or former employee, independent contractor, creditor, stockholder or other third party and has complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes.

(iii) Neither the Company nor any of its Subsidiaries has been a member of an affiliated group filing a consolidated, combined or unitary federal, state, local or foreign income Tax Return (other than a group whose common parent was the Company).

(iv) Neither the Company nor any of its Subsidiaries has any material liability for the Taxes of any Person (other than the Company and its Subsidiaries) under Treasury regulation section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise (other than pursuant to an agreement, Contract, arrangement or commitment entered into in the ordinary course of business and one of the primary purposes of such agreement, Contract, arrangement or commitment does not relate to the sharing, indemnity or allocation of Taxes, such as leases, credit agreements or bills of sale).

(v) The Company has made available to Parent true and correct copies of the federal income Tax Returns filed by the Company and its Subsidiaries for tax years 2007 through 2011.

(vi) There is no contract or agreement, plan or arrangement by the Company or its Subsidiaries covering any Person that, individually or collectively, would constitute compensation in excess of any applicable deduction limitation set forth in Section 162(m) of the Code.

(vii) Neither the Company nor any of its Subsidiaries has since January 1, 2010 distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.

(viii) Neither the Company nor any of the Subsidiaries has at any time participated in a “listed transaction” as defined in Section 6011 of the Code and the regulations thereunder, or any transaction substantially similar to the foregoing.

(ix) Neither the Company nor any of its Affiliates has taken or agreed to take any action, or is aware of any fact or circumstance, that would prevent the Mergers from qualifying as a reorganization within the meaning of Section 368 of the Code (a “ 368 Reorganization ”).

(x) As used in this Agreement, (i) the term “ Tax ” (including, with correlative meaning, the term “ Taxes ,”) includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy, escheat, unclaimed property and other taxes, duties

 

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or assessments of any kind in the nature of (or similar to) taxes whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (ii) the term “Tax Return” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns, as well as attachments thereto and amendments thereof) required to be supplied to a Tax authority relating to Taxes.

(q) Labor Matters .

(i) The Company and its Subsidiaries are, and since January 1, 2010 have been, in compliance in all material respects with all applicable Laws relating to employment of labor, including all applicable Laws relating to wages, hours, collective bargaining, employment discrimination, civil rights, occupational safety and health, workers’ compensation, pay equity, classification of employees, and the collection and payment of withholding and/or social security Taxes. The Company and its Subsidiaries have since January 1, 2010 met in all material respects all requirements required by Law relating to the employment of foreign citizens, including all requirements of the Immigration and Naturalization Act, as amended, that relate to Forms I-9, and to the knowledge of the Company, neither the Company nor any of its Subsidiaries currently employs any Person who is not permitted to work in the jurisdiction in which such Person is employed.

(ii) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to its employees and, to the knowledge of the Company, there are not any activities and proceedings of any labor union to organize any such employees.

(iii) Neither the Company nor any of its Subsidiaries is the subject of any material Proceeding asserting that the Company or any of its Subsidiaries has committed an unfair labor practice or any other violation of law relating to employee matters, nor since January 1, 2010 has there been any labor strike, work stoppage, work slow-down or lockout involving employees of the Company or any of its Subsidiaries. No material notices, reports, registrations or other filings are required to be made by the Company or any of its Subsidiaries with, nor are any material consents, registrations, approvals, permits or authorizations required to be obtained by the Company or any of its Subsidiaries from, any works counsel, labor union or similar labor entity or governing body in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

(r) Intellectual Property .

(i) The Company and its Subsidiaries collectively own, or are licensed or otherwise possess sufficient legal rights to use all Intellectual Property Rights used in or necessary for the conduct of, and that are material to the operations of, their respective businesses, as currently conducted, including without limitation all Intellectual Property Rights owned, licensed to, or used by the Company or any of its Subsidiaries that are necessary for and material to the Company’s and its Subsidiaries’ research, development,

 

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testing, manufacturing, marketing or sale of Augment, Augment TM Injectable Bone Graft and Augmatrix TM Biocomposite Bone Graft (“ Core Products ”) (all such Intellectual Property Rights, collectively “ Company Intellectual Property Rights ”). As used herein, “ Intellectual Property Rights ” shall mean: all patents and filed patent applications (including, without limitation, divisions, continuations, requests for continued examination, continuations in part and renewal applications), patent rights, and any renewals, extensions, re-examinations, supplementary protection certificates or reissues thereof, in any jurisdiction (collectively, “ Patents ”); any rights available in registered and unregistered trademarks, trade names, service marks, brand names, certification marks, trade dress, logos, Internet domain names, and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application (collectively, “ Trademarks ”); trade secrets and rights in any jurisdiction to limit the use or disclosure thereof by any person; copyrights in published and unpublished writings and other works of authorship, copyrights in software, and available proprietary rights in data compilations in any jurisdiction, and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; and all similar proprietary rights. All Patents, registered Trademarks, filed Trademark applications, registered copyrights and filed copyright applications owned by the Company or its Subsidiaries (collectively, “ Registered Company Owned Intellectual Property ”) are valid and enforceable, and have been maintained in accordance with commercially reasonable industry practices. To the knowledge of the Company, all Patents, registered Trademarks, filed Trademark applications, registered copyrights and filed copyright applications that are (A) licensed to the Company or its Subsidiaries and (B) material to the operations of their respective businesses, as currently conducted (collectively, “ Registered Company Licensed Intellectual Property ”), are valid and enforceable, and have been maintained in accordance with commercially reasonable industry practices. The Registered Company Owned Intellectual Property has been duly registered with or applied for in the United States Patent and Trademark Office, United States Copyright Office or other appropriate domestic or foreign filing office, and such registrations and applications remain in full force and effect (other than with respect to natural expiration). To the knowledge of the Company, the Registered Company Licensed Intellectual Property that is exclusively licensed to the Company or its Subsidiaries (collectively, “ Registered Company Exclusively Licensed Intellectual Property ”) has been duly registered with or applied for in the United States Patent and Trademark Office, United States Copyright Office or other appropriate domestic or foreign filing office, and such registrations and applications remain in full force and effect (other than with respect to natural expiration). Section 5.1(r)(i) of the Company Disclosure Letter contains a complete and accurate list of the Registered Company Owned Intellectual Property and all agreements pursuant to which the Company or its Subsidiaries license the Registered Company Licensed Intellectual Property. The Company and its Subsidiaries maintain assigned personnel, designated outside counsel, and procedures sufficient to prosecute, maintain, preserve and renew (as applicable) all Registered Company Owned Intellectual Property during the one hundred eighty (180) day period immediately following the date of this Agreement.

 

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(ii) To the knowledge of the Company (A) the conduct of the respective businesses of the Company and its Subsidiaries, as currently conducted, does not infringe upon, constitute a misappropriation of, or otherwise violate any right, title, interest in or to any Intellectual Property Right of any third party, (B) neither the Company nor any of its Subsidiaries has received written notice of any claim, nor is any such claim pending or, to the knowledge of the Company, threatened, that any Registered Company Owned Intellectual Property or Registered Company Exclusively Licensed Intellectual Property is invalid or unenforceable, or conflicts with the asserted Intellectual Property Right of any third party, and (C) neither the Registered Company Owned Intellectual Property nor the Registered Company Exclusively Licensed Intellectual Property is being infringed upon, misappropriated or otherwise violated by any third party. To the Company’s knowledge, the manufacture, use, sale, offer for sale and import of the Core Products, the Augment TM Rotator Cuff product candidate and the Augment TM Chronic Tendinopathy product candidate does not infringe any claim of any issued Patent or published Patent application of any third party, except that of a licensor who has granted the Company or its applicable Subsidiaries a license under any such Patent. No court has ruled or otherwise held that any of the issued Patents owned by the Company or any of its Subsidiaries are invalid or unenforceable, and, to the knowledge of the Company, no court has ruled or otherwise held that any of the issued Patents included in the Registered Company Exclusively Licensed Intellectual Property are invalid or unenforceable. There are no pending or, to the knowledge of the Company, threatened, interference, re-examination, opposition or cancellation proceedings involving, or other proceedings challenging the validity, ownership or use of, the Registered Company Owned Intellectual Property. To the knowledge of the Company, there are no pending or threatened, interference, re-examination, opposition or cancellation proceedings involving, or other proceedings challenging the validity, ownership or use of, the Registered Company Exclusively Licensed Intellectual Property. The Company or its applicable Subsidiaries have the sole and exclusive right to bring actions for infringement or unauthorized use of the Registered Company Owned Intellectual Property.

(iii) No Registered Company Owned Intellectual Property will terminate or cease to be a valid right of the Company by reason of the execution and delivery of this Agreement by the Company, the performance of the Company of its obligations hereunder, or the consummation by the Company of the transactions contemplated by this Agreement. No Company Intellectual Property Agreement will terminate or cease to be a valid right of the Company by reason of the execution and delivery of this Agreement by the Company, the performance of the Company of its obligations hereunder, or the consummation by the Company of the transactions contemplated by this Agreement.

(iv) Neither the Company nor any of its Subsidiaries has entered into any consents, judgments, orders, indemnifications, forbearances to sue, settlement agreements, licenses or other arrangements in connection with the resolution of any disputes or Litigation Claims which (A) materially restrict the Company’s or any of its Subsidiaries’ right to use any Registered Company Owned Intellectual Property or Registered Company Licensed Intellectual Property, or (B) materially restrict the Company’s or any of its Subsidiaries’ businesses in any material manner in order to accommodate any third party’s Intellectual Property Right.

 

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(v) The Company and its Subsidiaries have caused each employee, contractor, consultant and officer of the Company or its Subsidiaries that has made any material contribution to the creation or development of Company Intellectual Property Rights to enter into Contracts to assign and transfer to the Company or its Subsidiaries all Intellectual Property Rights created or developed by such employees, contractors, consultants and officers in the course of their employment or engagement by the Company or its Subsidiaries.

(vi) The Company and its Subsidiaries have taken commercially reasonable steps to maintain the confidentiality of their material trade secrets, and, to the Company’s knowledge, none of such trade secrets have been disclosed to any other Person, except pursuant to written confidentiality obligations. To the knowledge of the Company, there are no unauthorized uses, disclosures or infringements of any such trade secrets by any Person, except where such use, disclosure or infringement would not have, individually or in the aggregate, a Company Material Adverse Effect. The Company and its Subsidiaries have a policy requiring employees and certain consultants and contractors to execute a confidentiality and assignment agreement substantially in the Company’s standard form previously provided to Parent.

(vii) Section 5.1(r)(vii) of the Company Disclosure Letter contains a complete and accurate list of all material Contracts as of the date hereof (A) under which the Company or any of its Subsidiaries licenses any material Intellectual Property Rights from a third party (other than commercially available software licensed on standard terms) or (B) under which the Company or any of its Subsidiaries has licensed to any third party the right to use any material Intellectual Property Rights (other than non-exclusive licenses to customers as customary in the industry), in each case specifying the parties to the agreement (such agreements, the “ Company Intellectual Property Agreements ”). To the knowledge of the Company: (A) all Company Intellectual Property Agreements are in full force and effect, as the same may have been amended prior to the date hereof, and (B) neither the Company, its Subsidiaries nor any third party that is party to any Company Intellectual Property Agreement is in material breach thereof. The Company has not received written notice of any pending disputes regarding the scope of any Company Intellectual Property Agreements, performance under the Company Intellectual Property Agreements, or with respect to payments made or received under any Company Intellectual Property Agreements.

(s) Title to Properties . The Company and each of its Subsidiaries has good and valid title to all of its material real properties and physical assets, free and clear of all mortgages, liens, pledges, charges, security interests, encumbrances or other adverse claims of any kind in respect of such property or asset (collectively, “ Liens ”), except Permitted Liens. Section 5.1(s) of the Company Disclosure Letter sets forth a list of all real property currently leased, subleased, licensed or occupied by or from the Company or any of its Subsidiaries (the “ Company Facilities ”) and identifies all leases, lease guaranties, subleases and similar agreements relating to the Company’s occupancy of the Company Facilities and all amendments, terminations and modifications thereof (the “ Company Leases ”). All Company Leases and all leases pursuant to which the Company and each of its Subsidiaries leases from others material personal property are valid and effective in accordance with their respective terms, and there is not, under any of

 

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such leases, any existing default or event of default of the Company or any of its Subsidiaries or, to the knowledge of the Company, any other party (or any event which with notice or lapse of time, or both, would constitute such a default) that, individually or in the aggregate, would be reasonably likely to be material to the Company and its Subsidiaries taken as a whole or the operations of their respective businesses as currently conducted or would be reasonably likely to result in a termination or acceleration of a Company Lease. The Company and each of its Subsidiaries owns or leases all such properties as are material to its operations as now conducted. Neither the Company nor any of its Subsidiaries owns any real property or has ever owned any real property, nor is the Company or any of its Subsidiaries party to any agreement to purchase or sell any real property. There are no parties occupying, or with a right to occupy any Company Facilities other than the Company and its Subsidiaries.

(t) Material Contracts . For purposes of this Agreement, a “ Material Contract ” means each of the following: (i) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act); (ii) any Contract with any employee, individual consultant or independent contractor that provides for annual compensation in excess of $150,000 and is not immediately terminable by the Company or any of its Subsidiaries without cost or liabilities, including any Contract requiring the Company to make a payment to any employee on account of the transactions contemplated by this Agreement (including the Merger) or any Contract that is entered into in connection with this Agreement; (iii) any collective bargaining agreement or other Contract with a labor organization; (iv) any material Contract providing for indemnification or any guaranty (in each case, under which the Company has continuing obligations as of the date hereof); (v) any material Contract containing any covenant, commitment or other obligation (A) limiting the right of the Company or any of its Subsidiaries to engage in any line of business, to make use of any Registered Company Owned Intellectual Property or to compete with any Person in any line of business, (B) granting any exclusive rights, (C) containing a “most favored nation” or similar provision, (D) prohibiting the Company or any of its Subsidiaries (or, after the Effective Time, Parent) from engaging in business with any Person or levying a fine, charge or other payment for doing so or (E) otherwise prohibiting or limiting the right of the Company or its Subsidiaries to develop, sell, distribute or manufacture any products or services, other than such Contracts that may be cancelled without continuing material obligations, restrictions or liabilities to the Company upon notice of thirty (30) days or less; (vi) any Contract (A) relating to the license, disposition or acquisition by the Company or any of its Subsidiaries of a material amount of assets other than in the ordinary course of business or (B) pursuant to which the Company or any of its Subsidiaries will acquire any material ownership interest in any other Person or other business enterprise other than the Company’s Subsidiaries; (vii) any Contract for the acquisition or disposition of any business; (viii) any material dealer, distributor, sales agency, joint marketing agreement, to jointly market any product, technology or service; (ix) any material Contract pursuant to which the Company or any of its Subsidiaries have continuing obligations to jointly develop any Intellectual Property Rights that will not be owned solely by the Company or one of its Subsidiaries; (x) any joint venture agreements, material development agreements, or material outsourcing arrangements (including material Contracts to assemble, manufacture and package any Company Product); (xi) any mortgages, indentures, guarantees, material loans or credit agreements, security agreements or other Contracts relating to the borrowing of money or material extension of credit, other than trade receivables and payables; (xii) any settlement Contract, other than (a) releases entered into with former employees or independent contractors of the Company in the ordinary course of

 

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business or (b) settlement Contracts only involving the payment of cash (which has been paid) in amounts that do not exceed $250,000 in any individual case; (xiii) any Contract with the federal government, any foreign government, any state or local government or any division, subdivision, department, agency or instrumentality thereof; (xiv) any Lease of, or purchase or sale Contract with respect to, any real property; (xv) any Contract with any healthcare provider (e.g., doctors and contract research organizations) of the Company or any of its Subsidiaries that may not be cancelled without material liability to the Company upon notice of thirty (30) days or less; (xvi) any Contract that provides for payment obligations by the Company or any of its Subsidiaries of $100,000 or more in any individual case and is not disclosed pursuant to clauses (i) through (xv) above; and (xvii) any Contract, the termination or breach of which would be reasonably expected to have a Company Material Adverse Effect and is not disclosed pursuant to clauses (i) through (xv) above. Other than Material Contracts filed as an exhibit to the Company Reports, Section 5.1(t) of the Company Disclosure Letter contains a complete and accurate list of all Material Contracts to which the Company or any of its Subsidiaries is a party or which bind or affect their respective properties or assets, and identifies each subsection of Section 5.1(t) that describes such Material Contract. The Company has delivered or made available to Parent complete and correct copies of each such Material Contract. To the knowledge of the Company, each Material Contract is valid and binding on the Company (and/or each such Subsidiary of the Company, as the case may be) and is in full force and effect, and neither the Company nor any of its Subsidiaries party thereto, nor, to the knowledge of the Company, any other party thereto, is in breach of, or default under, in any material respect, any such Material Contract, and to the knowledge of the Company no event has occurred that with notice or lapse of time or both would constitute such a breach or default thereunder in any material respect by the Company or any of its Subsidiaries, or, to the knowledge of the Company, any other party thereto. Neither the Company nor any of its Subsidiaries has received any written notice or other communication regarding any actual or alleged violation or breach of or default under, or intention to cancel or modify, any Material Contract. Neither the Company nor any of its Subsidiaries has entered into any standstill agreement with any third party (or other agreement containing a standstill provision) that does not automatically terminate upon the execution of this Agreement.

(u) Product Liability . No product liability claims have been asserted in writing against the Company or any of its Subsidiaries or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries relating to any of their products or product candidates developed, tested, manufactured, marketed, distributed or sold by the Company or any of its Subsidiaries, except for claims that, individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect. There is no judgment, order or decree outstanding against the Company or any of its Subsidiaries relating to product liability claims or assessments.

(v) Insurance . The Company maintains for itself and its Subsidiaries insurance policies covering the assets, business, equipment, properties, operations, employees, directors and officers, and product warranty and liability claims, and such other forms of insurance in such amounts, with such deductibles and against such risks and losses as, in its judgment, are reasonable for the business and assets of the Company and its Subsidiaries. All such insurance policies are in full force and effect, all premiums due and payable thereon have been paid, and the Company and its Subsidiaries are otherwise in compliance in all material respects with the terms and conditions of such policies and bonds.

 

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(w) Company Vote Required . The affirmative vote of the holders of a majority of the shares of Company Common Stock outstanding on the record date for such vote and entitled to vote thereon (the “ Company Requisite Vote ”) is the only vote of the holders of any class or series of capital stock of the Company that is or will be necessary for the adoption of this Agreement by the Company or for the Company to consummate the transactions contemplated hereby (including, without limitation, the Merger).

(x) Suppliers . To the knowledge of the Company, there are no facts concerning the Company’s suppliers of active ingredients, bulk chemical products and finished drug products that would reasonably be expected to result in any material interruption (whether due to a regulatory, including without limitation, customs, manufacturing, intellectual property or any other issue) of the timely supply by such suppliers to the Company and its Subsidiaries of any such materials. No such supplier has notified the Company or any of its Subsidiaries in writing that it intends to terminate or materially alter the terms of its relationship with the Company and its Subsidiaries. To the knowledge of the Company, the conduct of the businesses of such suppliers, at the locations from which products or ingredients are produced for the Company or any of its Subsidiaries, are in compliance in all material respects with all applicable Laws, including the regulations of the FDA.

(y) Transactions with Affiliates . No present or former Affiliate of the Company or any of its Subsidiaries has or, since December 31, 2009, has had, (i) any significant interest in any material property (whether real, personal or mixed and whether tangible or intangible) used in or pertaining to any of the businesses of the Company or any of its Subsidiaries, (ii) any material business dealings or a material financial interest in any transaction with the Company or any of its Subsidiaries (other than compensation and benefits received in the ordinary course of business as an employee or director of the Company or any of its Subsidiaries) or (iii) any material equity interest or any other material financial or profit interest in any Person that has had material business dealings or a material financial interest in any transaction with the Company or any of its Subsidiaries.

(z) Brokers and Finders . Except for Goldman, Sachs & Co. (the “ Company Advisor ”), neither the Company nor any of its Affiliates has incurred any liability for any brokerage fees, commissions or finders fees to any broker or finder employed or engaged thereby in connection with the Merger or the other transactions contemplated in this Agreement. The Company has made available to Parent a true and complete copy of its engagement letter (including all amendments thereto) with the Company Advisor, which engagement letter (as so amended) sets forth the fees of the Company Advisor payable by the Company and its Affiliates in connection with the transactions contemplated by this Agreement.

(aa) Opinion of Financial Advisor . The Company has received an opinion of the Company Advisor to the effect that, as of its date and based upon and subject to the limitations, qualifications and assumptions set forth therein, the Merger Consideration is fair from a financial point of view to the stockholders of the Company. As soon as practicable following the date hereof, an executed copy of the aforementioned opinion will be made available to Parent for informational purposes only.

 

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(bb) No Other Representations or Warranties . Except for the representations and warranties contained in this Section 5.1 , neither the Company nor any other Person makes any other express or implied representation or warranty on behalf of the Company or any of its Subsidiaries.

5.2 Representations and Warranties of Parent, Merger Sub and Sister Subsidiary .

Except as disclosed in (i) and reasonably apparent on the face of the disclosure contained in Parent’s Annual Report on Form 10-K for the year ended December 31, 2011, Parent’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, Parent’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, Parent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, or any of Parent’s Current Reports on Form 8-K dated after December 31, 2011 filed by Parent with the SEC prior to the date hereof (excluding any disclosures set forth therein to the extent that they do not relate to historical or existing facts, events, changes, effects, developments, conditions or occurrences and excluding any disclosures set forth therein to the extent that they are predictive, cautionary or forward-looking in nature, including risk factor disclosure) and, for the avoidance of doubt, without giving effect to any event occurring subsequent to the date that any such public filing was filed, or (ii) the Parent Disclosure Letter, Parent, Merger Sub and Sister Subsidiary each represents and warrants, jointly and severally, to the Company that:

(a) Organization, Good Standing and Qualification . Each of Parent, Merger Sub, Sister Subsidiary and each of Parent’s other Subsidiaries is validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own and operate its material properties and assets and to carry on its business as currently conducted in all material respects and is qualified to do business and is in good standing in each jurisdiction where the ownership or operation of its properties and assets or conduct of its business requires such qualification, except where the failure to be so qualified or be in good standing would not be reasonably likely to have, either individually or in the aggregate, a Parent Material Adverse Effect or to prevent, materially delay or materially impair the ability of Parent or Merger Sub to consummate the transactions contemplated hereby. Parent has made available to the Company a complete and correct copy of the Organizational Documents of Parent, Merger Sub and Sister Subsidiary, each as amended and in effect. The Organizational Documents of Parent, Merger Sub and Sister Subsidiary so made available to the Company are in full force and effect.

As used in this Agreement, the term “ Parent Material Adverse Effect ” means any event, change, circumstance, effect, development or state of facts that, individually or in the aggregate, (x) has or would reasonably be expected to have a material adverse effect on the business condition (financial or otherwise), assets, liabilities, properties or results of operations of Parent and its Subsidiaries taken as a whole, other than any such event, change, circumstance, effect, development or state of facts resulting from or arising out of (i) any change, after the date hereof, in applicable Law or U.S. GAAP, (ii) general changes in the U.S. or foreign economies or capital markets, (iii) changes in general conditions arising after the date hereof affecting the industry in which Parent operates, (iv) natural disasters, acts of war, terrorism or other force majeure events,

 

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(v) public announcement or pendency of this Agreement or the transactions contemplated hereby, (vi) any litigation brought by any current or former stockholders of Parent (on their own behalf or on behalf of Parent) against Parent and/or the board of directors of Parent (the “ Parent Board ”) relating specifically to this Agreement or the Merger; (vii) any failure by Parent to meet published analysts’ estimates, internal or external projections or forecasts of revenues, earnings or other financial or business metrics, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into account unless otherwise excluded by this definition), (viii) any decline in the market price or change in the trading volume of the Parent Common Stock, in and of itself (it being understood that the underlying cause(s) of any such decline or change may be taken into account unless otherwise excluded by this definition), except in the case of the preceding clauses (i), (ii), and (iii) to the extent that such effects have a disproportionate impact on Parent and its Subsidiaries taken as a whole as compared to other companies in the same industry as Parent, or (y) prevents, materially delays or materially impairs the ability of Parent or Merger Sub to consummate the transactions contemplated by this Agreement.

(b) Capital Structure .

(i) As of November 14, 2012, the authorized share capital of Parent consists of (A) 100,000,000 shares of Parent Common Stock, of which 39,680,384 shares were issued and outstanding and (B) 5,000,000 shares of preferred stock of Parent, none of which were issued and outstanding. All of the issued and outstanding shares of Parent Common Stock and all shares of Parent Common Stock which are to be issued pursuant to the Merger have been duly authorized and will be, when issued in accordance with the terms of this Agreement, validly issued, fully paid and nonassessable and are not subject to any preemptive or similar right. Each of the outstanding shares of capital stock, ownership interests or other securities of each of Parent’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and is owned by Parent or a direct or indirect wholly owned Subsidiary of Parent, free and clear of any Lien, pledge, security interest, claim or other encumbrance. Except pursuant to Parent’s stock plans (collectively, the “ Parent Stock Plans ”), there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or to sell any shares of capital stock, ownership interests or other securities of Parent or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of Parent or any of its Subsidiaries, and no securities or obligations evidencing such rights authorized, issued or outstanding.

(ii) As of November 14, 2012, there were 4,021,810 shares of Parent Common Stock subject to outstanding options to purchase shares of Parent Common Stock (“ Parent Options ”), and 1,576,759 shares of Parent Common Stock were reserved for future option grants. All shares of Parent Company Stock that may be issued pursuant to the Parent Stock Plans will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued and will be fully paid and non-assessable. With respect to the Parent Options, each such grant was properly accounted for in all material respects in accordance with U.S. GAAP in the consolidated financial statements (including the related notes thereto) of Parent and its Subsidiaries contained in the Parent Reports.

 

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(c) Operation of Merger Sub and Sister Subsidiary . All of the issued and outstanding capital stock of Merger Sub and Sister Subsidiary is, and at the Effective Time will be, owned by Parent or a direct or indirect wholly owned Subsidiary of Parent. Merger Sub and Sister Subsidiary were formed solely for purposes of effecting the Merger and Subsequent Merger, respectively. Merger Sub and Sister Subsidiary have not conducted any business prior to the date hereof and have no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to their formation and pursuant to this Agreement and the Merger, the Subsequent Merger and the other transactions contemplated by this Agreement.

(d) Corporate or Limited Liability Company Authority .

(i) Each of Parent, Merger Sub and Sister Subsidiary has all requisite corporate or limited liability company, as applicable, power and authority and has taken all corporate or limited liability company, as applicable, action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, subject only to receipt of the approval of Parent as the sole stockholder of Merger Sub and the Parent Required Statutory Approvals. This Agreement has been duly executed and delivered by Parent, Merger Sub and Sister Subsidiary and, assuming due authorization, execution and delivery by the Company, is a valid and legally binding agreement of Parent, Merger Sub and Sister Subsidiary, enforceable against each of Parent, Merger Sub and Sister Subsidiary in accordance with its terms, subject to the Bankruptcy and Equity Exception.

(ii) The Boards of Directors of Parent and Merger Sub and the board of directors (or other governing body) of Sister Subsidiary have approved and adopted this Agreement and the transactions contemplated hereby (including, without limitation, the Mergers). Immediately following the execution of this Agreement, Parent, as the sole stockholder of Merger Sub and as the sole member of Sister Subsidiary, will approve this Agreement and the transactions contemplated hereby (including, without limitation, the Mergers).

(e) Governmental Filings; No Violations .

(i) Other than any reports, filings, registrations, approvals and/or notices (A) required to be made pursuant to Section 1.3 , (B) required to be made under the HSR Act, the Securities Act and the Exchange Act and state securities and “blue sky” laws (including, without limitation, the filing of the S-4 Registration Statement), (C) required to be made with The NASDAQ Global Select Market, and (D) may required to be made for the qualification of the CVR Agreement under the Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”), if required by Law, (items (B), (C) and (D), the “ Parent Required Statutory Approvals ”), no notices, reports, registrations or other filings are required to be made by Parent, Merger Sub or Sister Subsidiary with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Parent, Merger Sub or Sister Subsidiary from, any Governmental Entity, in connection

 

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with the execution and delivery by Parent, Merger Sub or Sister Subsidiary of this Agreement and the consummation by Parent, Merger Sub or Sister Subsidiary of the Merger and the other transactions contemplated hereby, except for those that the failure to make or obtain would not be reasonably likely to have, either individually or in the aggregate, a Parent Material Adverse Effect.

(ii) The execution, delivery and performance of this Agreement by Parent, Merger Sub or Sister Subsidiary do not, and the consummation by Parent, Merger Sub or Sister Subsidiary of the Merger, the Subsequent Merger and the other transactions contemplated hereby will not, constitute or result in (A) breach or violation of, or a default under, the Organizational Documents of Parent or any of Parent’s Subsidiaries, (B) a breach or violation of, or a default under, the acceleration of any obligations, the loss of any right or benefit or the creation of a Lien on the assets of Parent or any of Parent’s Subsidiaries (with or without notice, lapse of time or both) pursuant to any Contracts binding upon Parent or any of Parent’s Subsidiaries or any Law or governmental or non-governmental permit or license to which Parent or any of Parent’s Subsidiaries is subject or (C) any change in the rights or obligations of any party under any of the Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration, creation or change that would not be reasonably likely to have, either individually or in the aggregate a Parent Material Adverse Effect.

(f) Parent Reports; Financial Statements .

(i) The filings required to be made by Parent since December 31, 2009 under the Securities Act and the Exchange Act have been filed with or furnished to the SEC, including all forms, statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto, and complied, as of their respective dates, in all material respects with all applicable requirements of the appropriate statutes and the rules and regulations thereunder (collectively, including any amendments of any such reports filed with or furnished to the SEC by Parent prior to the date hereof, the “ Parent Reports ”). None of the Parent Reports, as of their respective dates, after giving effect to any amendments or supplements thereto filed prior to the date hereof, 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 made therein not misleading.

(ii) The consolidated financial statements of Parent and its Subsidiaries included in the Parent Reports complied, as of the dates thereof, as to form in all material respects with the applicable rules and regulations of the SEC with respect thereto. The consolidated financial statements of Parent and its Subsidiaries included in or incorporated by reference into the Parent Reports (including the related notes and schedules) present fairly, in all material respects, the financial position of Parent and its Subsidiaries as of the date thereof, and the results of operations and cash flows for the periods set forth therein (subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments), in each case in conformity with U.S. GAAP, except as may be noted therein. Any change by Parent in the accounting principles, practices or methods used in such financial statements of Parent and its Subsidiaries included in the Parent Reports has been appropriately disclosed in such financial statements.

 

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(iii) Parent’s disclosure controls and procedures (as defined in sections 13a-15(e) and 15d-15(e) of the Exchange Act) effectively enable Parent to comply with, and the appropriate officers of Parent to make all certifications required under, the Sarbanes-Oxley Act; and Parent has implemented a system of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Since December 31, 2009, there has not been any material change in Parent’s internal control over financial reporting.

(g) Independent Auditors . KPMG LLP, Parent’s current auditors, to the knowledge of Parent, is and has been at all times since January 1, 2010 (x) “independent” with respect to Parent within the meaning of Regulation S-X promulgated by the SEC and (y) to the knowledge of Parent, in compliance with subsections (g) through (l) of Section 10A of the Exchange Act (to the extent applicable) and the related rules of the SEC and the Public Company Accounting Oversight Board. All non-audit services performed by Parent’s auditors for Parent or its Subsidiaries that were required to be approved in accordance with Section 202 of the Sarbanes-Oxley Act were so approved.

(h) NASDAQ Rules and Regulations . Parent is in material compliance with the applicable listing and corporate governance rules and regulations of The NASDAQ Global Select Market.

(i) Information Supplied . None of the information supplied or to be supplied by Parent for inclusion or incorporation by reference in (i) the S-4 Registration Statement or any amendment or supplement thereto will, at the time such S-4 Registration Statement or any amendment or supplement thereto is filed with the SEC or at the time such S-4 Registration Statement becomes effective, 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 made therein not misleading or (ii) the Proxy Statement/Prospectus will, at the date of mailing to holders of Company Common Stock and at the time of the Company Stockholders Meeting to be held in connection with the Merger, 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 made therein, in the light of the circumstances under which they were made, not misleading. When filed, the S-4 Registration Statement will comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations thereunder. No representation or warranty is made by Parent with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference in the Proxy Statement/Prospectus or the S-4 Registration Statement.

(j) No Undisclosed Liabilities . There are no liabilities or obligations of Parent or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, known or unknown, determined, determinable or otherwise, required by U.S. GAAP to be set forth in Parent’s consolidated financial statements included in the Parent Reports, and there is no existing

 

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condition, situation or set of circumstances that could be reasonably expected to result in such a liability or obligation, other than: (i) liabilities or obligations disclosed and provided for in Parent’s balance sheet as of June 30, 2012 included in the Parent Reports or in the notes thereto; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices since June 30, 2012; (iii) liabilities and obligations under this Agreement; (iv) liabilities and obligations under Contracts in effect as of the date hereof; and (v) liabilities or obligations that are not reasonably likely to have, individually or in the aggregate, a Parent Material Adverse Effect.

(k) Absence of Certain Changes . Since June 30, 2012, except as expressly contemplated by this Agreement, Parent and its Subsidiaries taken as a whole have conducted their business only in, and have not engaged in any material transaction other than according to, the ordinary and usual course of such business and there has not been a Parent Material Adverse Effect.

(l) Litigation . There are no Litigation Claims pending or, to the knowledge of Parent, threatened against Parent or any of its Subsidiaries, except for those that would not be reasonably likely to have, either individually or in the aggregate, a Parent Material Adverse Effect. There are no material SEC inquiries or investigations, other material governmental inquiries or investigations or material internal investigations pending, or to the knowledge of Parent, threatened, in each case regarding any accounting practices of Parent or any of its Subsidiaries or any malfeasance by any director (or any Person in a similar capacity) or executive officer of Parent or any of its Subsidiaries.

(m) Compliance with Laws . The Company and its Subsidiaries are in material compliance with applicable Laws and Permits required to conduct their businesses as currently conducted.

(n) Tax Matters . Parent and each of its Subsidiaries (i) have duly and timely filed (taking into account any extension of time within which to file) all income and other material Tax Returns required to be filed by any of them as of the date hereof and all such filed Tax Returns are complete and accurate in all material respects; (ii) (A) have timely paid all material Taxes that are shown as due on such filed Tax Returns and any other material Taxes that Parent or any of its Subsidiaries are otherwise obligated to pay, except with respect to matters contested in good faith or that are not yet due and payable and (B) no material penalties or charges are due with respect to the late filing of any Tax Return required to be filed by or with respect to any of them on or before the Effective Time; (iii) with respect to all income and other material Tax Returns filed by or with respect to any of them have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency; and (iv) as of the date hereof, do not have any deficiency, or any such audits, examinations, investigations or other proceedings in respect of Taxes or Tax matters pending or proposed or threatened in writing. Neither Parent nor any of its Affiliates has taken or agreed to take any action or is aware of any facts or circumstances that would prevent the Mergers from qualifying as a 368 Reorganization.

 

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(o) Intellectual Property .

(i) Parent and each of its Subsidiaries owns, or is licensed or otherwise possesses sufficient legally enforceable rights to use and enforce all Intellectual Property Rights used in or necessary for the conduct of, and that are material to the operations of, its business as currently conducted, including without limitation all Intellectual Property Rights owned, licensed to, or used by Parent or any of its Affiliates that are necessary for and material to Parents’ and its Subsidiaries research, development, testing, manufacturing, marketing or sale of all products currently commercialized by Parent or its Subsidiaries (all such Intellectual Property Rights, collectively “ Parent Intellectual Property Rights ”). All Patents, registered Trademarks, filed Trademark applications, registered copyrights and filed copyright applications owned by Parent or its Subsidiaries (collectively, “ Registered Parent Owned Intellectual Property ”) are valid and enforceable, and have been maintained in accordance with commercially reasonable industry practices. To the knowledge of Parent, all Patents, registered Trademarks, filed Trademark applications, registered copyrights and filed copyright applications that are (A) licensed to Parent or its Subsidiaries and (B) material to the operations of their respective businesses, as currently conducted (collectively, “ Registered Parent Licensed Intellectual Property ”), are valid and enforceable, and have been maintained in accordance with commercially reasonable industry practices. The Registered Parent Owned Intellectual Property has been duly registered with or applied for in the United States Patent and Trademark Office, United States Copyright Office or other appropriate domestic or foreign filing office, and such registrations and applications remain in full force and effect (other than with respect to natural expiration). To the knowledge of Parent, the Registered Parent Licensed Intellectual Property that is exclusively licensed to Parent or its Subsidiaries (collectively, “ Registered Parent Exclusively Licensed Intellectual Property” ) has been duly registered with or applied for in the United States Patent and Trademark Office, United States Copyright Office or other appropriate domestic or foreign filing office, and such registrations and applications remain in full force and effect (other than with respect to natural expiration).

(ii) To the knowledge of Parent, (A) the conduct of the respective businesses of Parent and its Subsidiaries, as currently conducted, does not infringe upon, constitute a misappropriation of, or otherwise violate any right, title, interest in or to any, Intellectual Property Right of any third party, (B) neither Parent nor any of its Subsidiaries has received written notice of any claim, nor is any such claim pending or, to the knowledge of Parent, threatened, that any Registered Parent Owned Intellectual Property or Registered Parent Exclusively Licensed Intellectual Property is invalid or unenforceable, or conflicts with the asserted Intellectual Property Right of any third party, and (C) neither the Registered Parent Owned Intellectual Property nor the Registered Parent Exclusively Licensed Intellectual Property is being infringed upon, misappropriated or otherwise violated by any third party. To Parent’s knowledge, the manufacture, use, sale, offer for sale and import of any product currently marketed by Parent or its Subsidiaries does not infringe any claim of any issued Patent or published patent application of any third party, except that of a licensor who has granted Parent or its applicable Subsidiaries a license under such patent. No court has ruled or otherwise held that any of the issued Patents owned by Parent or any of its Subsidiaries are invalid or unenforceable, and, to

 

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the knowledge of Parent, no court has ruled or otherwise held that any of the issued Patents included in the Registered Parent Exclusively Licensed Intellectual Property are invalid or unenforceable. There are no pending or, to the knowledge of Parent, threatened, interference, re-examination, opposition or cancellation proceedings involving, or other proceedings challenging the validity, ownership or use of, the Registered Parent Owned Intellectual Property. To the knowledge of Parent, there are no pending or threatened, interference, re-examination, opposition or cancellation proceedings involving, or other proceedings challenging the validity, ownership or use of, the Registered Parent Exclusively Licensed Intellectual Property. Parent or its applicable Subsidiaries have the sole and exclusive right to bring actions for infringement or unauthorized use of the Registered Parent Owned Intellectual Property.

(iii) No Registered Parent Owned Intellectual Property will terminate or cease to be a valid right of Parent by reason of the execution and delivery of this Agreement by Parent, the performance by Parent of its obligations hereunder, or the consummation by Parent of the transactions contemplated by this Agreement. No Parent Intellectual Property Agreement will terminate or cease to be a valid right of Parent by reason of the execution and delivery of this Agreement by Parent, the performance of Parent of its obligations hereunder, or the consummation by Parent of the transactions contemplated by this Agreement.

(iv) Neither Parent nor any of its Subsidiaries has entered into any consents, judgments, orders, indemnifications, forbearances to sue, settlement agreements, licenses or other arrangements in connection with the resolution of any disputes or Litigation Claims which (A) materially restrict Parent’s or any of its Subsidiaries’ right to use any Registered Parent Owned Intellectual Property or Registered Parent Licensed Intellectual Property, or (B) materially restrict Parent’s or any of its Subsidiaries’ businesses in any manner in order to accommodate any third party’s Intellectual Property Right.

(v) Parent and its Subsidiaries have caused each employee, contractor, consultant and officer of Parent or its Subsidiaries that has made any material contribution to the creation or development of Parent Intellectual Property Rights to enter into Contracts to assign and transfer to Parent or its Subsidiaries all Intellectual Property Rights created or developed by such employees, contractors, consultants and officers in the course of their employment or engagement by Parent or its Subsidiaries.

(vi) Parent and its Subsidiaries have taken commercially reasonable steps to maintain the confidentiality of their material trade secrets, and, to Parent’s knowledge, none of such trade secrets have been disclosed to any other Person, except pursuant to written confidentiality obligations. To the knowledge of Parent, there are no unauthorized uses, disclosures or infringements of any such trade secrets by any Person, except where such use, disclosure or infringement would not have, individually or in the aggregate, a Parent Material Adverse Effect. Parent and its Subsidiaries have a policy requiring employees and certain consultants and contractors to execute a confidentiality and assignment agreement substantially in Parent’s standard form previously provided to the Company.

 

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(vii) To the knowledge of Parent: (A) all material Contracts as of the date hereof (x) under which Parent or any of its Subsidiaries licenses any material Intellectual Property Rights from a third party or (y) under which Parent or any of its Subsidiaries has licensed to any third party the right to use any material Intellectual Property Rights (such agreements, the “ Parent Intellectual Property Agreements ”) are in full force and effect, as the same may have been amended prior to the date hereof, and (B) neither Parent, its Subsidiaries nor any third party that is party to any Parent Intellectual Property Agreement is in material breach thereof. Parent has not received written notice of any pending disputes regarding the scope of any Parent Intellectual Property Agreements, performance under the Parent Intellectual Property Agreements, or with respect to payments made or received under any Parent Intellectual Property Agreements.

(p) Title to Properties . Parent and each of its Subsidiaries has good and valid title to all of its material properties and assets, free and clear of all Liens, except for Permitted Liens and such Liens or other imperfections of title, if any, that, individually or in the aggregate, are not reasonably likely to have a Parent Material Adverse Effect.

(q) Insurance . Parent maintains for itself and its Subsidiaries insurance policies covering the assets, business, equipment, properties, operations, employees, directors and officers, and product warranty and liability claims, and such other forms of insurance in such amounts, with such deductibles and against such risks and losses as, in its judgment, are reasonable for the business and assets of Parent and its Subsidiaries. All such insurance policies are in full force and effect, all premiums due and payable thereon have been paid, and Parent and its Subsidiaries are otherwise in compliance in all material respects with the terms and conditions of such policies and bonds.

(r) Brokers and Finders . Except for J.P. Morgan Securities, LLC, the fees, commissions and expenses of which will be paid by Parent, neither Parent, Merger Sub nor any of their respective Affiliates has incurred any liability for any brokerage fees, commissions or finders fees to any broker or finder employed or engaged thereby in connection with the Merger or the other transactions contemplated in this Agreement for which the Company (other than the Final Surviving Entity from and after the Effective Time) would be liable.

(s) Financial Capability; Parent Common Stock . Parent will have at the Effective Time, and taking into account the Company’s resources, sufficient funds available to pay the Cash Consideration and all amounts payable in lieu of fractional shares pursuant to Section 3.2(f) . Parent will have at the Effective Time sufficient authorized but unissued shares of Parent Common Stock to issue the Stock Consideration pursuant to Section 3.1(c)(i) .

(t) Ownership of Shares . None of Parent or any of Parent’s “Affiliates” or “Associates” directly or indirectly “owns,” and at all times during the three (3) year period prior to the date of this Agreement, none of Parent or any of Parent’s “Affiliates” or “Associates” has “owned,” beneficially or otherwise, any shares of Company Common Stock, and neither Parent, Merger Sub nor Sister Subsidiary is, nor at any time during the three (3) year period prior to the date hereof has been, an “interested stockholder,” as those terms (in quotation marks) are defined in Section 203 of the DGCL.

 

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(u) No Parent Vote Required . No vote of the holders of shares of Parent Common Stock is or will be necessary for the adoption of this Agreement by Parent or for Parent to consummate the transactions contemplated hereby (including, without limitation, the Merger).

(v) No Other Representations or Warranties . Except for the representations and warranties contained in this Section 5.2 , neither Parent nor any other Person makes any other express or implied representation or warranty on behalf of Parent or any of its Subsidiaries.

ARTICLE VI

CONDUCT OF BUSINESS PENDING THE MERGER

6.1 Covenants of the Company .

The Company covenants and agrees as to itself and its Subsidiaries that, from and after the date hereof and continuing until the Effective Time, except as set forth in Section 6.1 of the Company Disclosure Letter, expressly required by this Agreement, required by applicable Law, or with the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed:

(a) the Company and its Subsidiaries shall conduct their respective businesses only in the ordinary course of business consistent with past practice and, to the extent consistent therewith, it and its Subsidiaries shall use their respective reasonable best efforts to (i) preserve its business organization intact and maintain its existing relations and goodwill with customers, suppliers, partners, licensors, distributors, creditors, lessors, employees, collaborators, and business associates, (ii) maintain and keep material properties and assets in good repair and condition, (iii) maintain in effect all material Permits pursuant to which such party or any of its Subsidiaries currently operates, (iv) comply with applicable Law and (v) take such actions as are reasonable to prosecute, maintain and enforce all material Registered Company Owned Intellectual Property consistent with past practice in the ordinary course of business;

(b) neither the Company nor any of its Subsidiaries shall (i) propose, make or adopt any amendments to its Organizational Documents; (ii) split, combine or reclassify its outstanding shares of capital stock; (iii) declare, set aside or pay any dividend or make any distribution (whether payable in cash, stock or property) in respect of any capital stock (other than dividends from its direct or indirect wholly owned Subsidiaries to the Company or a wholly owned Subsidiary), (iv) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exchangeable or exercisable for any shares of its capital stock or permit any of its Subsidiaries to purchase or otherwise acquire, any shares of its capital stock or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, (v) enter into any Contract, understanding or arrangement with respect to the sale, voting, pledge, encumbrance, disposition, acquisition, transfer, registration or repurchase of its capital stock or such securities or other rights or (vi) register for sale, resale or other transfer any capital stock under the Securities Act on behalf of the Company or any other Person;

 

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(c) neither the Company nor any of its Subsidiaries shall issue, sell, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class or any other property or assets (which shares of capital stock, for purposes of this Agreement shall be deemed to include “phantom” stock or other commitments that provide any right to receive value or benefits similar to such capital stock, securities or other rights) (other than as contemplated in clause (i)(iii) below and shares of Company Common Stock issuable pursuant to options (whether or not vested) outstanding on the date hereof under the Company Option Plans as in effect on the date hereof);

(d) neither the Company nor any of its Subsidiaries shall transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any other property or assets (including capital stock of any of its Subsidiaries) other than transactions or one or more series of transactions, whether or not related, not in excess of $100,000 in the aggregate and except sales of inventory in the ordinary course of business;

(e) neither the Company nor any of its Subsidiaries shall, by any means, make any acquisition of, or investment in, assets or stock (whether by way of merger, consolidation, tender offer, share exchange or other activity) in any transaction or any series of transactions (whether or not related) for an aggregate purchase price or prices, including the assumption of any debt, in excess of $100,000 in the aggregate in any calendar year, except for investments in money markets, short-term treasury securities and other short-term investment for cash management purposes;

(f) neither the Company nor any of its Subsidiaries shall, other than in the ordinary course of business (i) enter into, modify, amend, renew, extend or terminate any Material Contract, (ii) waive, release, relinquish or assign any such Contract (or any of the material rights of the Company, or any of its Subsidiaries thereunder), right or claim, or (iii) cancel or forgive any material indebtedness owed to the Company or any of its Subsidiaries;

(g) neither the Company nor any of its Subsidiaries shall enter into, modify, amend, renew, extend or terminate any Contract with any healthcare provider to the Company or any of its Subsidiaries, other than any sales contracts with such healthcare providers entered into in the ordinary course of business;

(h) neither the Company nor any of its Subsidiaries shall (i) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, recapitalization or other similar reorganization, or (ii) accelerate or delay collection of notes or accounts receivable in advance of or beyond their regular due dates, other than in the usual and ordinary course of business;

(i) neither the Company nor any of its Subsidiaries shall terminate, establish, adopt, enter into, make any new grants or awards under, amend or otherwise modify any Company Compensation and Benefit Plans or increase the salary, wage, bonus or other compensation of any employees, except for (i) salary or wage increases for employees, occurring in the ordinary course of business consistent with past practice and associated with normal periodic compensation reviews, provided that such salary and wage increases shall not exceed in the aggregate four percent (4%) of the current salaries or wages of the employees who receive such

 

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increases; (ii) cash or equity incentive bonuses for 2012, granted and paid in the ordinary course of business consistent with past practice and not exceeding in the aggregate the amount set forth on Section 6.1(i)(ii) of the Company Disclosure Letter, (iii) actions necessary to satisfy applicable Law or existing contractual obligations under Company Compensation and Benefit Plans or agreements existing as of the date hereof or (iv) in connection with retention agreements entered into with an aggregate value of up to $3,100,000;

(j) neither the Company nor any of its Subsidiaries shall (i) grant, transfer, dispose of, amend, modify or permit to lapse any right, title or interest to any material Registered Company Owned Intellectual Property or material Registered Company Exclusively Licensed Intellectual Property (or enter into any Contract or commitment to do the foregoing), or encumber, impair, abandon, fail to diligently maintain, transfer or otherwise dispose of any right, title or interest in any material Registered Company Owned Intellectual Property or material Registered Company Exclusively Licensed Intellectual Property or (ii) divulge, furnish or make accessible any Company trade secrets to any third party;

(k) the Company shall, and shall cause its Subsidiaries to, maintain with financially responsible insurance companies (or through self insurance) insurance in such amounts and against such risks and losses as are consistent with the insurance maintained by such party and its Subsidiaries as of the date hereof;

(l) except as may be required by applicable Law and except to the extent required by U.S. GAAP, neither the Company nor any of its Subsidiaries shall change any accounting principle, practice or method in any manner;

(m) the Company and each of its Subsidiaries shall (i) file all material Tax Returns required to be filed with any taxing authority in accordance with all applicable Laws, (ii) timely pay all material Taxes due and payable as shown in the respective Tax Returns that are so filed and, as of the time of filing, the Tax Returns will be based on tax positions that have substantial support, and (iii) promptly notify Parent of any action, suit, proceeding, investigation, audit or claim initiated or pending against or with respect to the Company or any of its Subsidiaries in respect of any Tax where there is a reasonable possibility of a determination or decision that would reasonably be likely to have a Company Material Adverse Effect on the Company or its Subsidiaries;

(n) neither the Company nor any of its Subsidiaries shall make any material Tax election or settle or compromise any material Tax liability;

(o) neither the Company nor any of its Subsidiaries shall enter into any Contract that (i) purports to limit or prohibit the Company or any of its Affiliates, including, after the Effective Time, Parent or its Affiliates or Subsidiaries or the Surviving Company, (A) from competing with any other Person, (B) from acquiring any product or other asset or any services from any other Person, (C) from developing, selling, supplying, distributing, offering, supporting or servicing any product or any technology or other asset to or for any other Person or (D) from transacting business or dealing in any other manner with any other Person or (ii) (A) provides for the making of any payment as a result of the transactions contemplated by this Agreement, (B) would result in the occurrence of a change in the rights or obligations of the Company or its

 

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Subsidiaries as a result of the transactions contemplated by this Agreement, (C) would result in the occurrence of a change in the rights or obligations or the counterparty thereto as a result of the transactions contemplated by this Agreement or (D) would prevent or materially delay the transactions contemplated by this Agreement;

(p) neither the Company nor any of its Subsidiaries shall commence or consent to a settlement, release or forgiveness of, or the entry of any judgment arising from, any Litigation Claim, unless such settlement or judgment involves less than $250,000 as its sole remedy, except as otherwise provided in Section 7.5 ;

(q) neither the Company nor any of its Subsidiaries shall incur, assume or guarantee any indebtedness, excluding short-term and trade indebtedness;

(r) neither the Company nor any of its Subsidiaries shall make any loans, advances or capital contributions to, or investments in, any other Person (other than to the Company or any Subsidiary of the Company);

(s) neither the Company nor any of its Subsidiaries shall agree to any material changes, alterations or modifications to a premarket approval, clinical trial or other application or request pending with the FDA or other Governmental Entity;

(t) neither the Company nor any of its Subsidiaries shall incur any capital expenditures or any obligations or liabilities in respect of capital expenditures in excess of $100,000 in the aggregate above the capital expenditure budget provided to Parent;

(u) neither the Company nor any of its Subsidiaries shall enter into any Contract with any officer, director or Affiliate (or any of their spouses), other than Contracts permitted by Section 6.1(i) , or make any material payment thereto (except pursuant to the terms of an existing Contract or arrangement or for the reimbursement of expenses reasonably incurred by such Person);

(v) neither the Company nor any of its Subsidiaries shall adopt or enter into a stockholder rights agreement or “poison pill”;

(w) neither the Company nor any of its Subsidiaries shall enter into a new line of business; and

(x) neither the Company nor any of its Subsidiaries will authorize or enter into an agreement to do anything prohibited by the foregoing.

 

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6.2 Covenants of Parent .

Parent covenants and agrees as to itself and its Subsidiaries (as applicable) that, from and after the date hereof and continuing until the Effective Time, except as required by this Agreement, as described in Section 6.2 of the Parent Disclosure Letter, as required by applicable Law or with the prior written consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed):

(a) Parent and its Subsidiaries shall use their respective reasonable best efforts to (i) subject to prudent management of workforce needs and ongoing programs currently in force, preserve its business organization intact and maintain its existing relations and goodwill with customers, suppliers, distributors, creditors, lessors, employees and business associates, (ii) maintain and keep material properties and assets in good repair and condition and (iii) maintain in effect all material governmental permits pursuant to which such party or any of its Subsidiaries currently operates;

(b) neither Parent nor its Subsidiaries shall (i) amend its Organizational Documents or any of the Organizational Documents of any of its Subsidiaries except for such amendments that would not prevent or materially impair the consummation of the transactions contemplated by this Agreement, (ii) declare, set aside or pay any dividends or make any distributions (whether payable in cash, stock or property) in respect of any capital stock, (iii) split, combine or reclassify its outstanding shares of capital stock without adjusting the Merger Consideration pursuant to Section 3.4 , (iv) authorize or issue additional shares or new classes of stock, except for issuances of shares of Parent Common Stock in connection with the exercise of Parent Options in the ordinary course of business or in connection with grants of equity compensation to its employees, officers, directors and consultants in the ordinary course of its business, or (v) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exchangeable or exercisable for any shares of its capital stock or permit any of its Subsidiaries to purchase or otherwise acquire, any shares of its capital stock or any securities convertible into or exchangeable or exercisable for any shares of its capital stock;

(c) neither Parent nor any of its Subsidiaries shall adopt a plan of liquidation or dissolution;

(d) neither Parent nor any of its Subsidiaries shall incur, assume or guarantee any indebtedness in excess of $100,000,000;

(e) neither Parent nor any of its Subsidiaries shall, by any means, make any acquisition of, or investment in, assets or stock (whether by way of merger, consolidation, tender offer, share exchange or other activity) in any transaction or any series of transactions (whether or not related) for an aggregate purchase price or prices, including the assumption of any debt, in excess of $100,000,000 in the aggregate in any calendar year; provided that in no event may Parent enter into any such acquisition or investment that, alone or together with all other acquisitions or investments, would reasonably be likely to materially delay or prevent the consummation of the transactions contemplated hereby;

(f) Parent shall not enter into a new line of business that is, or is reasonably likely to be, material to Parent and materially different from Parent’s existing businesses;

(g) neither Parent nor its Subsidiaries shall, by any means, acquire any shares of Company Common Stock;

(h) Parent shall not take or cause to be taken any action that would reasonably be expected to materially delay, impair or prevent the consummation of the Merger or other transactions contemplated hereby; and

 

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(i) neither Parent nor any of its Subsidiaries will authorize or enter into an agreement to do anything prohibited by the foregoing.

6.3 No Control of Other Party’s Business .

Nothing contained in this Agreement shall give Parent, directly or indirectly, the right to control or direct the Company’s or its Subsidiaries’ operations prior to the Effective Time, and nothing contained in this Agreement shall give the Company, directly or indirectly, the right to control or direct Parent’s or its Subsidiaries’ operations prior to the Effective Time. Prior to the Effective Time, each of the Company and Parent shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.

ARTICLE VII

ADDITIONAL AGREEMENTS

7.1 Access .

The Company and Parent agree that upon reasonable notice, and except as may otherwise be required or restricted by applicable Law, each shall (and shall cause its Subsidiaries to) afford the other’s officers, employees, counsel, accountants and other authorized representatives reasonable access, during normal business hours throughout the period prior to the Effective Time, to its executive officers, to its properties, books, contracts and records and, during such period, each shall (and each shall cause its Subsidiaries to) furnish promptly to the other all information concerning its business, properties, personnel and Litigation Claims as may reasonably be requested but only to the extent such access does not unreasonably interfere with the business or operations of such party; provided that no investigation pursuant to this Section 7.1 shall affect or be deemed to modify any representation or warranty made by the Company, Parent, Merger Sub or Sister Subsidiary in this Agreement. Without limiting the immediately preceding sentence, the Company shall reasonably cooperate with Parent in connection with a third-party compliance audit of the Company at the expense of Parent. All requests for information made pursuant to this Section 7.1 shall be directed to an executive officer of Parent or the Company, as applicable, or its financial advisor or such other Person as may be designated by either of its executive officers. All such information shall be governed by the terms of the Confidentiality Agreement. Notwithstanding the foregoing, this Section 7.1 shall not require any of Parent, the Company or any of their respective Subsidiaries to permit any inspection, or to disclose any information, that would result in (i) the waiver of any applicable attorney-client or similar privilege, (ii) a violation of any applicable Law (including antitrust Laws), or (iii) the disclosure of trade secrets or other confidential information of third party to whom such party owes a duty of confidentiality, provided that each party shall use its reasonable best efforts to make appropriate substitute disclosure arrangements under circumstances such that the foregoing restrictions would not reasonably be expected to be applicable.

 

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7.2 Acquisition Proposals .

(a) The Company will (and will direct and use its reasonable best efforts to cause its Subsidiaries and its Affiliates and each officer, director, employee, agent, representative (including accountants, attorneys and investment bankers), or other intermediaries of the Company or any of its Affiliates or Subsidiaries (collectively, the “ Representatives ”), to) immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person conducted heretofore with respect to any Acquisition Proposal or any proposal, discussion, negotiation, inquiry or request for information received by the Company or any such Affiliate, Subsidiary or Representatives with respect to any Acquisition Proposal. In addition, the Company shall promptly request that each such Person promptly return or destroy all confidential information heretofore furnished to such Person by or on behalf of the Company. The Company and its Subsidiaries will promptly inform the parties referred to in the first sentence of this paragraph (including the Representatives) of the obligations undertaken by the Company in this Section 7.2 .

(b) The Company will not (and will use its reasonable best efforts to cause its Affiliates, Subsidiaries and Representatives, not to), directly or indirectly, initiate or knowingly solicit, encourage or otherwise facilitate (including by way of furnishing confidential information) the making of any inquiry, proposal or offer, with respect to (i) any merger, reorganization, share exchange, business combination, recapitalization, consolidation, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries, (ii) any sale, lease, exchange, mortgage, pledge, transfer or purchase of the assets or equity securities of the Company or any of its Subsidiaries, in each case comprising 20% or more in value of the Company and its Subsidiaries, taken as a whole, in a single transaction or series of related transactions, or (iii) any purchase or sale of, or tender offer or exchange offer for, 20% or more of the voting power or outstanding shares of Company Common Stock (any such proposal or offer (other than a proposal or offer by Parent) being hereinafter referred to as an “ Acquisition Proposal ”).

(c) The Company shall not (and shall use its reasonable best efforts to cause its Affiliates, Subsidiaries and Representatives not to) directly or indirectly, (i) participate in or engage in any negotiations concerning, or provide, furnish or make available, any nonpublic information or data to, any Person relating to an Acquisition Proposal or potential Acquisition Proposal, or solicit, knowingly encourage or facilitate any effort or attempt to make or implement an Acquisition Proposal, (ii) withdraw, amend or modify, or publicly propose to withdraw, amend or modify, the Company Board Recommendation, (iii) approve, recommend, endorse or resolve to approve, recommend or endorse an Acquisition Proposal, (iv) enter into any letter of intent or similar document contemplating, or enter into any agreement with respect to, an Acquisition Proposal or (v) publicly announce the intention to take, any of the actions prohibited by (i) through (iv) above; provided, however , that nothing contained in this Section 7.2 shall prevent the Company Board or its Representatives from, prior to obtaining the Company Requisite Vote, (x) furnishing information to a third party and its Representatives in response to an unsolicited written Acquisition Proposal by such third party pursuant to a customary confidentiality agreement with terms and conditions that are no less favorable to the Company than those set forth in the Confidentiality Agreement (provided that such

 

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confidentiality agreement may not include any provision granting any such Person or group an exclusive right to negotiate with the Company) (an “ Acceptable Confidentiality Agreement ”) or (y) after receiving an executed Acceptable Confidentiality Agreement, engaging in discussions or negotiations with such third party and its Representatives with respect to such Acquisition Proposal, in either case, if, and only if (A) the Company has not intentionally and materially breached this Section 7.2 , including, without limitation, Section 7.2(g) , (B) prior to taking such action, the Company Board concludes in good faith (after consultation with its financial advisor and outside counsel) that such unsolicited bona fide written Acquisition Proposal is a Superior Proposal or is likely to result in a Superior Proposal and (C) prior to taking such action, the Company Board concludes in good faith (after consultation with its financial advisor and outside counsel) that failing to take such action would be inconsistent with its fiduciary duties to the Company’s stockholders under Delaware Law.

(d) Following the receipt of an unsolicited written Acquisition Proposal, the Company may (i) withdraw, modify or amend in a manner adverse to Parent the Company Board Recommendation in connection with such Acquisition Proposal, and/or (ii) terminate this Agreement to enter into a definitive agreement with respect to such Acquisition Proposal, in either case, if, and only if, prior to taking such particular action, (A) the Company has not intentionally and materially breached this Section 7.2 , including, without limitation, Section 7.2(g) , (B) the Company Requisite Vote shall not have been obtained, (C) the Company Board concludes in good faith (after consultation with its financial advisor and outside counsel) that such Acquisition Proposal is a Superior Proposal, and (D) the Company Board concludes in good faith (after consultation with its financial advisor and outside counsel) that failing to take such action would be inconsistent with its fiduciary duties to the Company’s stockholders under Delaware Law; provided , however , that the Company may not terminate this Agreement pursuant to clause (ii) above, and any purported termination pursuant to clause (ii) above shall be void and of no force or effect, unless in advance of, or concurrently with, such termination, the Company pays the Company Termination Fee in the manner provided for in Section 9.5(b) ; provided , further , that neither the Company nor the Company Board may terminate this Agreement pursuant to Section 9.4(b) , until at least three (3) Business Days ( provided that there are at least three (3) Business Days before the date scheduled for the Company Stockholders Meeting) have passed following Parent’s receipt of written notice from the Company advising Parent that the Company Board has received such a Superior Proposal which it intends to accept (it being understood and agreed that any amendment to the amount or form of consideration of the Superior Proposal shall require a new notice and a new two (2)-Business Day period ( provided that there are at least two (2) Business Days before the date scheduled for the Company Stockholders Meeting)), specifying the terms and conditions of such Superior Proposal, and Parent does not irrevocably undertake to make such adjustments to the terms and conditions of this Agreement such that the Acquisition Proposal would no longer constitute a Superior Proposal. The Company shall, upon the request of Parent, negotiate in good faith with Parent to make any such adjustments, and the Company Board shall promptly consider in good faith (in consultation with its outside counsel and financial advisor) any such adjustments irrevocably proposed by Parent.

(e) Notwithstanding Section 7.2(d) above, the Company may withdraw, modify or amend in a manner adverse to Parent the Company Board Recommendation other than in connection with an Acquisition Proposal (it being understood and agreed that any change of

 

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Company Board Recommendation proposed in relation to an Acquisition Proposal may only be made pursuant to and in accordance with the terms of 7.2(d) above), if, and only if, prior to taking such action, (A) the Company Requisite Vote shall not have been obtained, (B) a material fact, event, change, development or set of circumstances occurs after the date of this Agreement that was not known to or was not reasonably foreseeable by the Company Board as of or prior to the date of this Agreement, (C) the Company Board concludes in good faith (after consultation with its financial advisor and outside counsel) that failing to take such action would be inconsistent with its fiduciary duties to the Company’s stockholders under Delaware Law; (D) the Company shall have given Parent at least three (3) Business Days’ prior written notice of its intention to take such action ( provided that there are at least three (3) Business Days before the date scheduled for the Company Stockholders Meeting) (which notice shall include a written explanation of the Company Board’s basis and rationale for proposing to effect such withdrawal, modification or amendment to the Company Board Recommendation) and (E) Parent has not irrevocably undertaken to make such adjustments to the terms and conditions of this Agreement that would obviate the need for the Company to effect such withdrawal, modification or amendment to the Company Board Recommendation. The Company shall, upon the request of Parent, negotiate in good faith with Parent to make any such adjustments, and the Company Board shall promptly consider in good faith (in consultation with its outside counsel and financial advisor) any such adjustments irrevocably proposed by Parent. For the purposes of this Agreement, the Company acknowledges and agrees that (x) the FDA Approval of Augment (and developments supporting or potentially leading to the FDA Approval of Augment) are reasonably foreseeable and (y) the consideration contemplated by this Agreement and the CVR Agreement is designed to compensate Company stockholders upon FDA Approval of Augment.

(f) Nothing in this Agreement shall prohibit the Company or the Company Board from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) or Rule 14d-9 under the Exchange Act; provided , however , that neither the Company nor the Company Board may make withdraw, modify or amend in a manner adverse to Parent the Company Board Recommendation other than in accordance with Section 7.2(d) or Section 7.2(e) ; provided, further , any public disclosure related to an Acquisition Proposal, other than a “stop, look and listen” communication of the type contemplated by Section 14d-9(f) of the Exchange Act, shall be deemed to be in a change of Company Board Recommendation unless the Company Board expressly publicly reaffirms the Company Board Recommendation in such communication.

(g) Neither the Company nor the Company Board shall exempt any Person from the restrictions on takeover offers, business combinations, control share acquisitions, fair price, moratorium or other similar provisions contained in the DGCL, including Section 203 thereof (or any similar provisions), or otherwise cause such restrictions not to apply (including without limitation by approving a Person becoming an “interested shareholder” within the meaning of Section 203 of the DGCL).

(h) The Company will promptly (and in any event within one (1) Business Day) notify Parent in writing, of any Acquisition Proposal or the existence of any proposal, discussion, negotiation, inquiry or request for information received by the Company with respect to any Acquisition Proposal, and any terms and conditions thereof (and shall promptly (and in any event within one (1) Business Day of receipt thereof) provide to Parent copies of any written materials (including electronic materials) received by the Company in connection therewith), including

 

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any financing commitments relating thereto (and where no copy is available, a description of such Acquisition Proposal, proposal, inquiry or request for information), and the identity of the Person making such Acquisition Proposal, proposal, inquiry or request for information or with whom such discussions or negotiations are taking place. The Company will provide to Parent any nonpublic information concerning the Company that it intends to deliver to any other Person that was not previously provided to Parent contemporaneously with providing such information to such other Person.

(i) “ Superior Proposal ” means a written Acquisition Proposal (on its most recently amended or modified terms) that the Company Board determines in good faith (after consultation with its outside counsel and financial advisor), taking into account all of the terms and conditions of such proposal, including, among other things, all legal and financial (including any break-up fees payable) aspects of the proposal and the third party making the proposal, (i) to be more favorable to the Company’s stockholders from a financial point of view than the Merger and any revised terms thereof irrevocably proposed by Parent and (ii) is as reasonably likely to be consummated without undue delay in accordance with its terms, taking into account all legal, financial, regulatory and other aspects to the proposal as compared to the Merger and any revised terms thereof irrevocably proposed by Parent; provided that for purposes of the definition of “Superior Proposal”, the references to “20% or more” in the definition of Acquisition Proposal shall be deemed to be references to “50% or more.”

(j) Any withdrawal, modification or amendment by a special committee of the Company Board Recommendation and any approval, endorsement or recommendation by a special committee of any Acquisition Proposal, and any public announcement of an intention of a special committee with respect to any of the foregoing, shall be deemed and treated for all purposes of this Agreement as if such action were taken by the Company Board with respect to the Company Board Recommendation or any such Acquisition Proposal, as applicable.

(k) Without limiting the foregoing, it is agreed that any action that would be breach or violation by the Company of the provisions of this Section 7.2 , if taken by any of its Subsidiaries or Affiliates or the Company Board, 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 7.2 by the Company.

7.3 Stockholders Meeting .

(a) The Company shall take, in accordance with applicable Law and its Organizational Documents, all action necessary to convene a meeting of holders of shares of Company Common Stock (the “ Company Stockholders Meeting ”) as promptly as practicable after the Proxy Statement/Prospectus is mailed to its stockholders to consider and vote upon the adoption of this Agreement. Except as otherwise permitted by Section 7.2 , the Company Board shall include the Company Board Recommendation in the Proxy Statement/Prospectus unless withdrawn as permitted by Section 7.2 and take all lawful action to solicit such approval and shall use reasonable best efforts to solicit from its stockholders proxies in favor of such approval, including engaging a proxy solicitation firm to assist in such solicitation.

 

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(b) Once the Company Stockholders Meeting has been called, the Company will not adjourn or postpone the Company Stockholders Meeting, without Parent’s prior written consent except to the extent necessary (A) to provide any necessary supplement or amendment to the Proxy Statement/Prospectus to its stockholders in advance of the vote to be held at such meeting, (B) if as of the time for which the Company Stockholders Meeting is originally scheduled (as set forth in the Proxy Statement/Prospectus) there are insufficient shares of capital stock represented (either in person or by proxy) to approve such matters thereat or to constitute a quorum necessary to conduct the business of such meeting or (C) if additional time is reasonably required to solicit proxies in favor of approval of the matters to be voted upon at such meeting.

7.4 Filings; Other Actions; Notifications; Third-Party Consents .

(a) Each of Parent, Merger Sub and the Company will as promptly as practicable make all filings, notices, petitions, statements, registrations, submissions of information, applications or submissions of other documents required by any Governmental Entity, including an appropriate filing of a Notification and Report Form with the Federal Trade Commission and the Antitrust Division of the Department of Justice as required by the HSR Act with respect to the transactions contemplated hereby (which HSR filing shall in any event be made within fifteen (15) days after the execution of this Agreement) and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act. Each of Parent and the Company will use its reasonable best efforts to cause all documents that it is responsible for filing with any Governmental Entity under this Section 7.4 to comply in all material respects with all applicable Law. Each party hereto will use its reasonable best efforts to make such filings in a timely manner and to respond as promptly as practicable to any requests for additional information made by any such agency. Each of Parent, Merger Sub and the Company will notify the other promptly upon the receipt of: (i) any comments from any officials of any Governmental Entity in connection with any filings made pursuant hereto and (ii) any request by any officials of any Governmental Entity for amendments or supplements to any filings made pursuant to, or information provided to comply in all material respects with, applicable Law. Whenever any event occurs that is required to be set forth in an amendment or supplement to any filing made pursuant to this Section 7.4(a) , Parent, Merger Sub or the Company, as the case may be, will promptly inform the other of such occurrence and cooperate in filing with the applicable Governmental Entity such amendment or supplement. Subject to applicable Laws relating to the exchange of information and the preservation of any applicable attorney-client privilege, work-product doctrine, self-audit privilege or other similar privilege, Parent and the Company shall use reasonable best efforts to collaborate in reviewing and commenting on in advance, and to consult the other on, information relating to Parent or the Company, as the case may be, and any of their respective Subsidiaries, that appears in any filing made with, or written materials submitted to, any third party and/or any Governmental Entity in connection with the Merger and the other transactions contemplated hereby. In connection with such collaboration, each of the Company and Parent shall act reasonably and as promptly as practicable.

(b) Notwithstanding anything in this Agreement to the contrary, nothing contained in this Agreement shall be deemed to require Parent or any its Subsidiaries or Affiliates to agree to

 

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any divestiture, by itself or any of its Affiliates or Subsidiaries, of shares of capital stock or of any business, assets or property of Parent or its Subsidiaries or Affiliates, or of the Company, or the imposition of any limitation on the ability of Parent or any of its Subsidiaries or Affiliates to conduct their respective businesses or to own or exercise control of such assets, properties and stock.

(c) Subject to Section 7.4(b) , each of the parties hereto 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 Merger and the other transactions contemplated by this Agreement, including using reasonable best efforts to accomplish the following: (i) the causing of the conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining of all Company Required Statutory Approvals and Parent Required Statutory Approvals, (iii) the defending of any suits, claims, actions, investigations or proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay, temporary restraining order or preliminary injunction entered by any court or other Governmental Entity vacated or reversed, and (iv) the execution or delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. In connection with and without limiting the foregoing, the Company and the Company Board shall, if any takeover statute or similar Law is or becomes applicable to the Merger, this Agreement, the Voting Agreements or any of the transactions contemplated by this Agreement, use its reasonable best efforts to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such Law on the Merger, this Agreement, the Voting Agreements and the transactions contemplated hereby.

(d) In furtherance of the foregoing, subject to Section 7.4(b) , as soon as practicable following the date hereof, Parent and the Company will each use its reasonable best efforts to obtain any material third-party consents, waivers and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby; provided , that neither this Section 7.4(d) nor any other provision of this Agreement shall obligate the Company to obtain any consents, waivers or approvals that are conditioned upon any material payments or incurrence of other material obligations by Parent, the Company or any of their respective Subsidiaries.

(e) Parent shall give prompt notice to the Company, and the Company shall give prompt notice to Parent, of (i) any representation or warranty made by it contained in this Agreement becoming untrue or inaccurate in any material respect or (ii) the material failure by it to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by it under this Agreement; provided , however , that no such notification shall affect the representations, warranties, covenants, or agreements of the parties or the conditions to the obligations of the parties under this Agreement; provided , further , that an unintentional failure to comply with this Section 7.4(e) will not constitute the failure of any condition set forth in Article VIII to be satisfied unless the underlying inaccuracy or breach would independently result in the failure of a condition set forth in Article VIII to be satisfied.

 

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7.5 Transaction Litigation .

The Company shall provide Parent or its counsel with prompt notice of, and copies of all pleadings and written correspondence relating to, any proceeding against the Company, any of its Subsidiaries, or any of their respective directors or officers by any stockholder of the Company specifically relating to this Agreement or the transactions contemplated by this Agreement. The Company shall give Parent the opportunity to participate in the defense, settlement, or compromise of any such proceeding, and no such settlement or compromise shall be agreed to without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned, or delayed. For purposes of this paragraph “participate” means that Parent will be kept apprised of proposed strategy and other significant decisions with respect to the proceeding by the Company (to the extent the attorney-client privilege between the Company and its counsel is not undermined or otherwise affected), and Parent may offer comments or suggestions with respect to the proceeding but will not be afforded any decision making power or other authority over the proceeding except for the settlement or compromise consent set forth above.

7.6 Proxy Statement/Prospectus; S-4 Registration Statement .

(a) As promptly as practicable after the execution and delivery of this Agreement (but in any event within twenty (20) Business Days), (i) Parent and the Company shall cooperate in preparing and shall cause to be filed with the SEC mutually acceptable proxy materials that shall constitute the proxy statement/prospectus relating to the Merger and the issuance of the shares of Parent Common Stock and CVRs to be issued in connection with the Merger (the “ Proxy Statement/Prospectus ”), (ii) Parent shall prepare and file with the SEC the S-4 Registration Statement (in which the Proxy Statement/Prospectus shall be included) in connection with the registration under the Securities Act of the shares of Parent Common Stock to be issued in connection with the Merger, and (iii) Parent shall use its reasonable best efforts to, if required by Law, have the CVR Agreement become qualified under the Trust Indenture Act. Each of Parent and the Company shall provide promptly to the other such information concerning its business affairs and financial statements as, in the reasonable judgment of the providing party or its counsel, may be required or appropriate for inclusion in the Proxy Statement/Prospectus and the S-4 Registration Statement, or in any amendments or supplements thereto, and shall cause its counsel and auditors to cooperate with the other’s counsel and auditors in the preparation and filing of the Proxy Statement/Prospectus and the S-4 Registration Statement. Parent shall use its reasonable best efforts to cause such S-4 Registration Statement to become effective under the Securities Act as soon as practicable after the date of such filing (and, in any event, within two (2) Business Days of being informed by the SEC or its staff that it or they have no comments or no further comments on such the S-4 Registration Statement) and to keep the S-4 Registration Statement effective as long as is necessary to consummate the Merger. The Proxy Statement/Prospectus shall include, among other things, (x) the Company Board Recommendation, except to the extent that the Company Board shall have withdrawn or modified its approval or recommendation as permitted by Section 7.2 , and (y) unless previously withdrawn or modified, the opinion of the Company Advisor referred to in Section 5.1(aa) . The

 

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Company shall use reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed to the holders of Company Common Stock as promptly as practicable after the S-4 Registration Statement becomes effective and, after the Proxy Statement/Prospectus shall have been so mailed, promptly circulate amended, supplemental or supplemented proxy materials and, if required in connection therewith, resolicit proxies. Parent and the Company shall promptly provide to each other (A) notice of any oral comments to the Proxy Statement/Prospectus or the S-4 Registration Statement received from the SEC and (B) copies of any written comments to the Proxy Statement/Prospectus and the S-4 Registration Statement received from the SEC, and in each case shall consult with each other in connection with the preparation of written responses to such comments.

(b) Parent shall make, and the Company shall cooperate in making, all necessary filings with respect to the Merger and the transactions contemplated hereby under the Securities Act and U.S. state securities and “blue sky” laws. Each party shall advise the other, promptly after receipt of notice thereof, of the time of the effectiveness of the S-4 Registration Statement, the filing of any supplement or amendment thereto, the issuance of any stop order relating thereto, the suspension of the qualification of Parent Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, of any SEC request for an amendment to the Proxy Statement/Prospectus or the S-4 Registration Statement, SEC comments thereon and each party’s responses thereto or SEC requests for additional information, or of the issuance of any stop order or the suspension of the qualification of the CVRs issuable in connection with the Merger. Each of Parent and the Company shall cooperate and provide the other (and its counsel) with a reasonable opportunity to review and comment on any amendment or supplement to the S-4 Registration Statement and Proxy Statement/Prospectus prior to filing such with the SEC, and will promptly provide each other with a copy of all such filings made with the SEC. No amendment or supplement to the Proxy Statement/Prospectus or the S-4 Registration Statement shall be filed without the approval of the Company and Parent, which approval shall not be unreasonably withheld, conditioned or delayed. If, at any time prior to the Effective Time, any event occurs with respect to Parent or the Company or its respective Subsidiaries, or any change occurs with respect to any other information in the Proxy Statement/Prospectus or the S-4 Registration Statement, or Parent or the Company should discover any information relating to either party, or any of their respective Affiliates, directors or officers, which should be set forth in an amendment or supplement to the S-4 Registration Statement or the Proxy Statement/Prospectus, so that the documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party that discovers such information shall promptly notify the other party hereto and the parties shall cause an appropriate amendment or supplement describing such information to be promptly filed with the SEC and, to the extent required by Law, disseminated to the stockholders of Parent and the Company. Each of the parties hereto shall cause the Proxy Statement/Prospectus and the S-4 Registration Statement to comply as to form and substance as to such party in all material respects with the applicable requirements of (i) the Exchange Act, (ii) the Securities Act, and (iii) the rules and regulations of The NASDAQ Global Select Market.

 

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7.7 CVR Agreement .

At or prior to the Closing, Parent will duly adopt, execute and deliver, and shall use reasonable best efforts to cause a duly qualified Trustee to execute and deliver the CVR Agreement, subject to any reasonable revisions to the CVR Agreement that are required by such Trustee.

7.8 Stock Exchange Listing .

Parent shall use reasonable best efforts to cause the Parent Common Stock and the CVRs to be issued in connection with the Merger to be approved for quotation on The NASDAQ Global Select Market or The NASDAQ Global Market, subject to official notice of issuance.

7.9 Stock Exchange Delisting; Deregistration of Stock .

Prior to the Closing Date, the Company shall cooperate with Parent and cause to be taken all actions, and do or cause to be done all things, reasonably necessary, proper or advisable under applicable Laws and rules and policies of The NASDAQ Global Select Market to enable the delisting by the Final Surviving Entity of the Company Common Stock from The NASDAQ Global Select Market and the deregistration of the Company Common Stock under the Exchange Act as promptly as practicable after the Effective Time.

7.10 Publicity .

The initial press release relating to this Agreement or the transactions contemplated hereby (including, without limitation, the Mergers) shall be a joint press release of the Company and Parent. Thereafter the Company and Parent each shall consult with the other prior to issuing, and provide each other a reasonable opportunity to review, comment upon and concur with, and use its reasonable best efforts to agree on, any press releases or otherwise making public announcements with respect to this Agreement or the transactions contemplated hereby (including, without limitation, the Mergers) and will not issue such press release or public announcement prior to such consultation and (to the extent practicable) agreement, except as may be required by applicable Law or by obligations pursuant to any listing agreement with or rules of any securities exchange or securities market on which securities of the Company or Parent are listed or traded; provided , subject to Section 7.2 , that this Section 7.10 shall not apply to any press release or other public disclosure made or proposed to be made by the Company (a) related to an Acquisition Proposal or (b) in connection with or following the Company Board withdrawing, modifying or amending the Company Board Recommendation.

 

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7.11 Employee Benefits Matters .

(a) Parent agrees that during the period commencing at the Effective Time and ending on the first anniversary thereof, each employee of the Company and its Subsidiaries shall (A) be paid an annual base salary or base wages at a rate not lower than the rate in effect for such employee immediately prior to the Effective Time and (B) be provided with incentive pay opportunities that are no less favorable than those provided to such employee immediately prior to the Effective Time.

(b) Parent agrees that as promptly as practicable following the Effective Time it will pay each employee of the Company and its Subsidiaries any portion of such employee’s 2012 incentive bonus that remains unpaid at the Effective Time.

(c) Parent agrees that, during the period commencing at the Effective Time and ending on the first anniversary thereof, the current and former employees of the Company and its Subsidiaries who are receiving benefits under the Company Compensation and Benefit Plans immediately prior to the Effective Time (“ Affected Employees ”) will thereafter continue to be provided with benefits under employee benefit plans that are no less favorable in the aggregate than, in the sole discretion of Parent, either (i) those currently provided by the Company and its Subsidiaries to such employees as of the Closing Date, disregarding the cessation prior to the Closing Date of benefits provided under any Company 401(k) Plan terminated pursuant to Section 7.11(f) below (and with no obligation under this Section 7.11(c) to replace benefits under any stock option or other equity-based plan, including the Company Employee Stock Purchase Plan, or to replace any right under a Company 401(k) Plan to receive contributions in the form of Company Common Stock, with comparable equity-based or equity-related benefits) or (ii) those provided by Parent and its Subsidiaries to similarly situated employees from time to time during such period.

(d) Following the Effective Time, Parent shall cause service by Affected Employees with the Company and its Subsidiaries (or any of their predecessors) to be taken into account for purposes of eligibility to participate, eligibility to commence benefits, vesting and, solely for purposes of severance and vacation benefits, benefit entitlements (except to the extent such treatment would result in duplicative of benefits for the same period of service) under the Parent employee benefit plans (other than any defined benefit pension plan) in which such employees participate.

(e) From and after the Effective Time, Parent shall (i) use its reasonable best efforts to cause to be waived any pre-existing condition limitations and any waiting-period limitations under welfare benefit plans, policies or practices of Parent or its Subsidiaries in which employees of the Company or its Subsidiaries participate and (ii) use its reasonable best efforts to cause to be credited any deductibles, co-payment amounts and out-of-pocket expenses incurred by such employees and their beneficiaries and dependents during the portion of the calendar year prior to participation in the Parent employee benefit plans.

(f) Unless otherwise requested by Parent at least five (5) Business Days prior to the Closing Date, the Company, any of its Subsidiaries or any of its ERISA Affiliates shall take (or

 

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cause to be taken) all actions necessary or appropriate to terminate, effective no later than the day prior to the Closing Date, any Company Compensation and Benefit Plan that contains a cash or deferred arrangement intended to qualify under Section 401(k) of the Code (a “ Company 401(k) Plan ”). The Company shall provide to Parent prior to the Closing Date written evidence of the adoption by the Company Board of resolutions authorizing the termination of such Company 401(k) Plan(s) (the form and substance of which resolutions shall be subject to the prior review and approval of Parent, which approval shall not be unreasonably withheld or delayed).

The Company agrees to take all actions that are necessary to terminate each Company Stock Incentive Plan effective as of the Effective Time. The Company further agrees to use its reasonable best efforts by action taken no less than five (5) Business Days prior to the Closing Date, to facilitate the exercise in full of each Company Option prior to the Closing Date, subject to the condition that the holder of such Company Option irrevocably undertakes to exchange pursuant to Section 3.1(c) the shares of Company Common Stock deliverable pursuant to such exercise. For the avoidance of doubt, the shares of Company Common Stock deliverable pursuant to the exercise of any Company Option that could have been exercised at the same time, in the same manner and to the same extent without regard to the Company actions contemplated by the preceding sentence shall not be subject to the condition set forth therein. With respect to any portion of such Company Option that may be unvested as of the Closing Date and that the Company causes to become exercisable prior to the Closing Date, the Company shall cause the exercise of such unvested portion of the Company Option to be expressly conditioned upon the Closing. The Company shall take all necessary, advisable, or appropriate actions to effectuate this Section 7.11(f), including but not limited to, (i) accelerating the vesting of each Company Option, subject to the exercise thereof either prior to the Closing Date or pursuant to an election to exercise such Company Option on a net basis as described in Section 3.1(d); (ii) amending any Company Option to allow the holder thereof to direct the Company to withhold that number of shares of Company Common Stock (or a corresponding portion of the Merger Consideration, as described in Section 3.1(d)) having an aggregate value equal to the sum of the aggregate exercise price of such Company Option and, at the election of the holder, any withholdings required in connection with the exercise of such Company Option; and (iii) adopting all necessary resolutions, giving all timely notices, and obtaining all necessary approvals and consents. The form and substance of any such amendments, resolutions, notices, and consents shall be subject to review and approval of Parent, which approval shall not be unreasonably withheld, conditioned or delayed.

(g) Nothing contained in this Section 7.11 , express or implied: (i) shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement; (ii) shall alter or limit the ability of any of Parent, the Company, the Merger Sub, the Final Surviving Entity or any of their respective Subsidiaries or Affiliates to amend, modify or terminate any benefit plan, program, agreement or arrangement at any time assumed, established, sponsored or maintained by any of them; (iii) is intended to confer upon any current or former employee any right to employment or continued employment for any period of time by reason of this Agreement, or any right to a particular term or condition of employment; or (iv) is intended to confer upon any Person (including for the avoidance of doubt any employee) any right as a third-party beneficiary of this Agreement.

 

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7.12 Indemnification; Directors’ and Officers’ Insurance .

(a) From and after the Effective Time, Parent shall indemnify and hold harmless, as required pursuant to any applicable Organizational Documents of the Company and its Subsidiaries and indemnity agreements of the Company existing on the date hereof and disclosed to Parent (and Parent also shall advance reasonable and documented attorneys’ fees and expenses as incurred as required pursuant to such existing indemnity agreements of the Company, provided that the Person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Person is not entitled to indemnification), each present and former director and officer of the Company and its Subsidiaries (collectively, the “ Indemnified Parties ”) against any costs or expenses (including reasonable attorneys’ fees and expenses), judgments, fines, losses, claims, settlements, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including the transactions contemplated hereby.

(b) For six (6) years from the Effective Time, Parent shall cause the Final Surviving Entity to maintain in effect for the benefit of the Company’s directors and officers an insurance and indemnification policy that provides coverage for acts or omissions occurring on or prior to the Effective Time (the “ D&O Insurance ”) covering each such person currently covered by the officers’ and directors’ liability insurance policies of the Company on terms with respect to coverage and in amounts no less favorable than those of the Company’s directors’ and officers’ insurance policy in effect on the date of this Agreement; provided , however , that the Final Surviving Entity shall not be required to pay an annual premium for the D&O Insurance in excess of 300% of the annual premium currently paid by the Company for such coverage; and provided , further , that if any annual premium for such insurance coverage exceeds 200% of such annual premium, Parent shall obtain a policy the Surviving Corporation believes has the greatest coverage available for a cost not exceeding such amount. Parent may satisfy its obligations under this Section 7.12(b) by purchasing a “tail” policy for the Company’s existing directors’ and officers’ insurance policy, which (i) has an effective term of six (6) years from the Effective Time, (ii) covers each person currently covered by the Company’s directors’ and officers’ insurance policy in effect on the date of this Agreement for actions and omissions occurring on or prior to the Effective Time, and (iii) contains terms with respect to coverage that are no less favorable than those of the Company’s directors’ and officers’ insurance policy in effect on the date of this Agreement; provided , however , that Parent shall not be required to pay a premium for such “tail” policy in excess of 300% of the annual premium currently paid by the Company for such coverage; and provided , further , that if the premium for such insurance coverage exceeds 300% of such annual premium, Parent shall obtain a policy it believes has the greatest coverage available for a cost not exceeding such amount.

(c) The by-laws of the Initial Surviving Corporation and limited liability company agreement of the Final Surviving Entity shall include provisions for exculpation of director and officer liability and indemnification on the same basis as set forth in the Company’s by-laws in effect on the date hereof. For six (6) years after the Effective Time, Parent shall cause the Final Surviving Entity to maintain in effect the provisions in its limited liability company agreement

 

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providing for indemnification of Indemnified Parties, with respect to facts and circumstances occurring at or prior to the Effective Time, to the fullest extent permitted from time to time under the DGCL and DLLCA, which provisions shall not be amended except as required by applicable Law or except to make changes permitted by applicable Law that would increase the scope of the Indemnified Parties’ indemnification rights thereunder.

(d) The rights of each Indemnified Party under this Section 7.12 shall be in addition to any right such Person might have under the Organizational Documents of the Company or any of its Subsidiaries or under applicable Law (including the DGCL) or under any agreement of any Indemnified Party with the Company or any of its Subsidiaries. The provisions of this Section 7.12 are intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties and their respective heirs and representatives.

(e) In the event Parent or the Final Surviving Entity or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Parent or the Final Surviving Entity, as the case may be, shall expressly assume and succeed to the obligations set forth in this Section 7.12 .

7.13 Expenses .

Subject to Section 9.5(b) and 9.5(c) , whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger and the other transactions contemplated hereby shall be paid by the party incurring such expense, except that (a) Parent shall bear all of the HSR filing fees and the filing fees payable in connection with the S-4 Registration Statement and (b) the Company and Parent shall share equally all of the costs and expenses associated with the printing and mailing of the Proxy Statement/Prospectus.

7.14 Takeover Statute .

If any Takeover Statute is or may become applicable to the Merger or the other transactions contemplated hereby, each of Parent, the Company and Merger Sub and their respective boards of directors, shall grant such approvals and take such actions as are necessary so that such transactions may be consummated as promptly as practicable hereafter on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of such statute or regulation on such transactions.

7.15 Section 16 Matters .

Prior to the Effective Time, the Company and Parent shall take all such steps as may be required and permitted to cause the transactions contemplated by this Agreement, including any dispositions of shares of Company Common Stock or acquisitions of Parent Common Stock (including derivative securities with respect to such shares of Company Common Stock or Parent

 

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Common Stock) by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.

7.16 Board Matters .

Parent will take all actions reasonably necessary to (i) submit to its stockholders for approval at the next annual meeting of its stockholders an amendment to Parent’s current certificate of incorporation, as amended, to increase the size of the Parent Board to ten (10) directors and (ii) cause the Nominating, Compliance and Governance Committee of Parent to nominate as a director of the Parent Board for election (and recommend such election) by its stockholders at the 2013 annual meeting of its stockholders an individual named by the Company Board prior to the Effective Time, which individual shall be a current independent director on the Company Board and shall be subject to the consent of Parent, which consent shall not be unreasonably withheld (the “ Company Board Designee ”). After the Effective Time and until the 2013 annual meeting of Parent’s stockholders, the Company Board Designee shall be entitled to attend all meetings of the Parent Board in a nonvoting observer capacity and receive copies of all materials provided to the Parent Board, at the same time and in the same manner that Parent provides to the members of the Parent Board; provided that the Company Board Designee executes Parent’s standard form of observer rights letter which shall contain customary limitations on the Company Board Designee’s participation in certain highly confidential and attorney-client privileged Parent Board meetings (or portions thereof).

7.17 Tax-Free Reorganization .

(a) Prior to the Effective Time, each of Parent and the Company shall use its reasonable best efforts to cause the Mergers to qualify as a 368 Reorganization, and shall not take any action reasonably likely to cause the Mergers not so to qualify. Parent shall not take, or cause the Initial Surviving Company, the Sister Subsidiary or the Final Surviving Entity to take, any action after the Effective Time reasonably likely to cause the Mergers not to qualify as a 368 Reorganization.

(b) Parent and the Company shall cooperate with each other and use reasonable commercial efforts to obtain the opinion of Ropes & Gray LLP, counsel to the Company, and the opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel to Parent (each such counsel, “ Tax Counsel ”), to the effect that the Mergers will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and that the Company, Parent, Merger Sub, Initial Surviving Corporation, the Sister Subsidiary and the Final Surviving Entity will each be a party to that reorganization within the meaning of Section 368(b) of the Code. It is agreed that Parent, Merger Sub, the Initial Surviving Company, the Final Surviving Entity and the Company shall each provide reasonable cooperation to each Tax Counsel in rendering their opinions pursuant to this Section 7.17(b) , including the execution and the delivery of customary representations of officers of Parent, Merger Sub, the Initial Surviving Company, the Final Surviving Entity and the Company, reasonably satisfactory in form and substance to each Tax Counsel, and upon which such counsel shall be entitled to rely. For the

 

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avoidance of doubt, it shall not be a condition to any party’s obligation to consummate the transactions contemplated by this Agreement that any tax opinion referred to in this Section 7.17(b) has been obtained by either the Company or Parent .

ARTICLE VIII

CONDITIONS

8.1 Conditions to Each Party’s Obligation to Effect the Merger .

The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of each of the following conditions:

(a) Company Requisite Vote . The Company Requisite Vote shall have been obtained.

(b) HSR . The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been earlier terminated.

(c) Injunction . No court or Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, Law, ordinance, rule, regulation, judgment, decree, injunction or other order that is in effect and enjoins or otherwise prohibits consummation of the Merger and the transactions contemplated hereby (collectively, an “ Order ”).

(d) S-4 Registration Statement . The S-4 Registration Statement shall have been declared effective by the SEC and no stop order suspending the effectiveness of the S-4 Registration Statement shall be in effect and no proceedings for such purpose shall be pending before or threatened by the SEC.

8.2 Conditions to Obligations of Parent, Merger Sub and Sister Subsidiary .

The obligations of Parent, Merger Sub and Sister Subsidiary to effect the Merger are also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties . The representations and warranties of the Company set forth in this Agreement (other than the first and fourth sentences of Section 5.1(b) and Sections 5.1(c) , 5.1(n) , 5.1(w) and 5.1(aa) ) shall be true and correct on the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of an earlier date, which representations and warranties shall be true and correct as of such date in the same manner as specified above), except for failures to be true and correct that individually or in the aggregate would not reasonably be likely to have a Company Material Adverse Effect; provided that for

 

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purposes of determining whether the condition in this Section 8.2(a) is satisfied, references to “Company Material Adverse Effect” and any other materiality qualification contained in such representations and warranties shall be ignored. The representations and warranties of the Company in the first and fourth sentences of Section 5.1(b) shall be true and correct within 100,000 shares of Company Common Stock as of the Closing Date as though made on and as of the Closing Date. The representations and warranties of the Company in Sections 5.1(c) , 5.1(n) , 5.1(w) and 5.1(aa) shall be true and correct in all material respects on the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date. Parent shall have received a certificate to such effect signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company.

(b) Performance of Obligations of the Company . The Company shall have performed in all material respects at or prior to the Closing Date all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate to such effect signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company.

(c) No Company Material Adverse Effect . Since the date hereof, a Company Material Adverse Effect shall not have occurred and no fact, event, circumstance, change or other event shall have occurred that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.

(d) Legal Action . No proceeding shall have been instituted or threatened against the Company or Parent or any of their respective Affiliates by a Governmental Entity which challenges the Merger, or which, in the reasonable judgment of Parent, may (i) make the Merger illegal, (ii) require Parent or Merger Sub to divest any portion of the business of Parent, any Parent Subsidiary, the Company or any Company Subsidiary, (iii) impose any limitation on the ability of Parent or Merger Sub effectively to exercise full rights of ownership with respect to the assets and properties of the Company and Company Subsidiaries or (iv) otherwise delay, prohibit or restrict consummation of the Merger or impair the contemplated benefits to Parent or to Merger Sub of any transaction contemplated by this Agreement.

8.3 Conditions to Obligation of the Company .

The obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties . The representations and warranties of Parent and Merger Sub set forth in this Agreement (other than the first sentence of each of Sections 5.2(b)(i) and 5.2(b)(ii) ) shall be true and correct on the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of an earlier date, which representations and warranties shall be true and correct as of such date in the same manner as specified above), except for failures to be true and correct that individually or in the aggregate would not reasonably be likely to have a Parent Material Adverse Effect; provided that for purposes of determining whether the condition in this Section 8.3(a) is satisfied, references to “Parent

 

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Material Adverse Effect” and any other materiality qualification contained in such representations and warranties shall be ignored. The representations and warranties of Parent in the first sentence of each of Sections 5.2(b)(i) and 5.2(b)(ii) shall be true and correct within 100,000 shares of Parent Company Common Stock on the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date. The Company shall have received a certificate to such effect signed on behalf of Parent by an executive officer of Parent.

(b) Performance of Obligations of Parent and Merger Sub . Each of Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate to such effect signed on behalf of Parent by an executive officer of Parent.

(c) No Parent Material Adverse Effect . Since the date hereof, a Parent Material Adverse Effect shall have not occurred and no fact, event, circumstance, change or other event shall have occurred that, individually or in the aggregate, would reasonably be expected to have a Parent Material Adverse Effect.

(d) CVR Agreement . The CVR Agreement shall have been duly executed and delivered by Parent and the Trustee and be in full force and effect.

(e) Stock Exchange Listing . The Parent Common Stock to be issued in connection with the Merger shall have been approved for quotation on The NASDAQ Global Select Market, subject to official notice of issuance. The CVRs to be issued in connection with the Merger shall have been approved for quotation on The NASDAQ Global Select Market or The NASDAQ Global Market, subject to official notice of issuance.

ARTICLE IX

TERMINATION

9.1 Termination by Mutual Consent .

This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by mutual written consent of the Company and Parent by action of their respective boards of directors.

9.2 Termination by Either Parent or the Company .

This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the board of directors of either Parent or the Company if:

(a) the Merger shall not have been consummated by May 15, 2013 (the “ Outside Date ”); provided that the right to terminate this Agreement pursuant to this clause (a) shall not be available to any party that has breached in any material respect its obligations under this Agreement in any manner that shall have proximately caused the occurrence of the failure of the Merger to be consummated;

 

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(b) the Company Requisite Vote shall not have been obtained at the Company Stockholders Meeting duly convened therefor or at any adjournment or postponement thereof at which the applicable vote is taken; or

(c) any Order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and non-appealable; provided that the right to terminate this Agreement pursuant to this clause (c) shall not be available to any party that breached in any material respect its obligations under this Agreement in any manner that shall have proximately resulted in the issuance or imposition of such Order.

9.3 Termination by Parent .

This Agreement may be terminated and the Merger may be abandoned by action of Parent Board at any time prior to the Effective Time if:

(a) (i) the Company Board has failed to make, withdrawn, modified or amended, in a manner adverse to Parent, or publicly proposed to withdraw, modify or amend, in a manner adverse to Parent, the Company Board Recommendation; (ii) the Company Board has approved, endorsed or recommended any Acquisition Proposal; (iii) the Company Board has approved, endorsed, recommended, permitted or not prevented the Company or any of its Subsidiaries to enter into, a merger agreement, acquisition agreement, purchase agreement or other similar agreement relating to an Acquisition Proposal (an “ Alternative Acquisition Agreement ”) or a letter of intent, an agreement in principle or an option agreement relating to an Acquisition Proposal; (iv) the Company Board, upon request from Parent or Merger Sub, has failed to expressly publicly reaffirm within two (2) Business Days of such request (or in the event that the Company Stockholders Meeting is scheduled to occur within such two (2)-Business Day period, prior to such meeting), the Company Board Recommendation; provided , that (A) prior to the time of such request, (x) the Company shall have received an Acquisition Proposal or public disclosure of a potential Acquisition Proposal has occurred (or has become publicly known), or (y) facts, events, changes, developments or circumstances related to the potential FDA Approval of Augment (including any communications with the FDA related to the application for FDA Approval of Augment) have been publicly disclosed (or become publicly known) (an “ FDA Development ”), and (B) the Company Board shall not be required to make any such reaffirmation more than twice with respect to any Acquisition Proposal or any FDA Development; (v) a tender or exchange offer for the Company’s securities has commenced and the Company or the Company Board has failed to send to the Company’s stockholders, within ten (10) Business Days after the commencement of any such tender or exchange offer, a statement that the Company and the Company Board recommend that the Company’s stockholders reject, and do not tender their shares of Company Common Stock in, such tender or exchange offer; or (vi) the Company or any of its Subsidiaries or Affiliates or the Company Board has publicly announced the Company’s intention to do any of the foregoing; provided that Parent must terminate this Agreement within twenty (20) days of the first to occur of the foregoing events;

(b) the Company has materially and intentionally breached its obligations under Section 7.2 ;

 

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(c) there has been a breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement (except the covenants and agreements in Section 7.2 ), such that a condition in Section 8.2(a) or Section 8.2(b) , as the case may be, would not be satisfied and that is not curable or, if curable by the Company, is not cured by the Company by the earlier of (i) twenty (20) days after written notice of such breach is given by Parent to the Company or (ii) the Outside Date;

(d) if there has been a Company Material Adverse Effect and such Company Material Adverse Effect is not curable or, if curable, is not cured within twenty (20) days after written notice is given by Parent to the Company stating its intention to terminate pursuant to this Section 9.3(d) and the basis for such termination; or

(e) an Adverse FDA Event has occurred.

9.4 Termination by the Company .

This Agreement may be terminated and the Merger may be abandoned by action of the Company Board at any time prior to the Effective Time:

(a) if there has been a breach by Parent or Merger Sub of any representation, warranty, covenant or agreement contained in this Agreement such that the condition in Section 8.2(a) or 8.2(b) , as the case may be, would not be satisfied and that is not curable or, if curable, is not cured by the earlier of (A) twenty (20) days after written notice of such breach is given by the Company to Parent or (B) the Outside Date;

(b) pursuant to and in accordance with Section 7.2(d) if the Company simultaneously with such termination enters into an Alternative Acquisition Agreement; provided further that the Company shall not terminate this Agreement pursuant to this Section 9.4(b) , and any purported termination pursuant to this Section 9.4(b) shall be void and of no force or effect, unless, in advance of, or concurrently with, such termination, the Company pays the Company Termination Fee in the manner provided for in Section 9.5(b) ; or

(c) if there has been a Parent Material Adverse Effect and such Parent Material Adverse Effect is not curable or, if curable, is not cured within twenty (20) days after written notice is given by the Company to Parent stating its intention to terminate pursuant to this Section 9.4(c) and the basis for such termination.

9.5 Effect of Termination and Abandonment .

(a) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article IX , written notice thereof shall be given to the other party or parties, specifying the provision hereof pursuant to which such termination is made and this Agreement (other than as set forth in Section 10.1 ) shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, Affiliates, agents, legal and financial advisor or other representatives); provided , however , that no such termination shall relieve any party hereto of any liability or damages resulting from any breach of this Agreement by such party prior to such termination or any fraud, willful misconduct or intentional misrepresentation on the part of such party.

 

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(b) The Company shall pay to Parent a termination fee in an amount in cash equal to $8,255,000 (the “ Company Termination Fee ”):

(i) if this Agreement is terminated by Parent pursuant to Sections 9.3(a) or 9.3(b) , in which event payment of the Company Termination Fee will be made within two (2) Business Days after such termination;

(ii) if this Agreement is terminated by Parent or the Company pursuant to Section 9.2(b) and (A) prior to the time of such termination, an Acquisition Proposal had been made, and (B) within twelve (12) months after the date of such termination the Company enters into a definitive agreement with respect to, or consummates, a transaction contemplated by any Acquisition Proposal ( provided , that, for purposes of this clause (B) only, references in the definition of Acquisition Proposal to the figure “20%” shall be deemed to be replaced by “50%”), in which event payment of the Company Termination Fee will be made on or prior to the date on which the Company enters into such definitive agreement or such consummation, as applicable; and

(iii) if this Agreement is terminated by the Company pursuant to Section 9.4(b) , in which event payment of the Company Termination Fee will be made in advance of, or concurrently with, and as a condition to such termination.

(c) Parent shall pay to the Company a termination fee in an amount equal to $30,000,000 (the “ Parent Termination Fee ”) in the event that this Agreement is terminated by Parent for an Adverse FDA Event pursuant to Section 9.3(e) , in which event payment of the Parent Termination Fee will be made concurrently with and as a condition to such termination.

(d) Any payment of the Company Termination Fee shall be made by wire transfer of immediately available funds to an account designated in writing by Parent to the Company and any payment of the Parent Termination Fee shall be made by wire transfer of immediately available funds to an account designated in writing by the Company to Parent.

(e) The parties hereto agree that they have computed, estimated and agreed upon the Company Termination Fee and the Parent Termination Fee as attempts to make reasonable forecasts of probable actual loss because of the difficulty of estimating with exactness the damages which will result and that any amounts payable as a termination fee pursuant to this Section 9.5 are reasonable and do not constitute a penalty. The parties acknowledge that the agreements contained in this Section 9.5 are an integral part of the transactions contemplated by this Agreement, and that, without such agreements Parent and the Company would not have entered into this Agreement; accordingly, if either party fails to timely pay any amounts due by it pursuant to this Section 9.5 , such party shall pay to the other party its reasonable costs and expenses (including its reasonable attorneys’ fees and disbursements) incurred in connection with such party’s enforcement of its rights hereunder, together with interest from the date such payment was due on the amounts owed at the prime rate in effect from time to time and quoted in The Wall Street Journal during such period.

 

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(f) If Parent is paid the Company Termination Fee, such fee will be the sole and exclusive remedy of Parent in respect of any breach of, or inaccuracy contained in, the Company’s covenants, agreements, representations or warranties in this Agreement. If the Company is paid the Parent Termination Fee following a valid termination of the Agreement pursuant to Section 9.5(c) , then such fees will the sole and excusive remedy of the Company in respect of any breach of, or inaccuracy contained in, Parent’s covenants, agreements, representations or warranties in this Agreement.

ARTICLE X

MISCELLANEOUS AND GENERAL

10.1 Survival .

This Article X and the agreements of the Company, Parent and Merger Sub contained in Section 7.09 (Stock Exchange Delisting; Deregistration of Stock), Section 7.11 (Employee Benefits Matters), Section 7.12 (Indemnification; Directors’ and Officers’ Insurance) and Section 7.13 (Expenses) and those other covenants and agreements contained herein that by their terms apply, or that are to be performed in whole or in part, after the Effective Time shall survive the consummation of the Mergers. This Article X , the agreements of the Company, Parent and Merger Sub contained in Section 7.13 (Expenses), Section 9.5 (Effect of Termination and Abandonment) and the Confidentiality Agreement shall survive the termination of this Agreement. All other representations, warranties, covenants and agreements in this Agreement shall not survive the consummation of the Mergers or the termination of this Agreement.

10.2 Modification or Amendment .

At any time prior to the Effective Time, this Agreement may be amended or modified only by a written agreement duly executed and delivered by Parent and the Company; provided , however , that, after approval of this Agreement and the Merger by the stockholders of the Company pursuant to the DGCL, no amendment may be made hereto that by Law or in accordance with the rules of the relevant stock exchange requires further approval by such stockholders without such further approval.

10.3 Waiver of Conditions .

The conditions to each of the parties’ obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable Law. The failure or delay of any party to assert any of its rights hereunder shall not constitute a waiver of such rights.

 

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10.4 Counterparts .

This Agreement may be executed by the parties hereto in one or more counterparts or duplicate originals, each of which when so executed and delivered shall be deemed an original, but all of which together shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. Any facsimile copies hereof or signature hereon shall, for all purposes, be deemed originals. The exchange of a fully executed Agreement (in counterpart or otherwise) by electronic transmission in PDF format or by facsimile shall be sufficient to bind the parties.

10.5 Governing Law and Venue .

(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, applicable to contracts executed in and to be performed entirely within that State and without giving effect to principles of conflicts of laws that would require the application of the law of any jurisdiction other than the State of Delaware.

(b) All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in the Chancery Court of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware) and the parties hereto hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. The consents to jurisdiction and venue set forth in this Section 10.5(b) shall not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law; provided , however , that nothing in the foregoing shall restrict any party’s rights to seek any post-judgment relief regarding, or any appeal from, such final trial court judgment. Each party agrees that service of process on such party as provided in Section 10.8 shall be deemed effective service of process on such party (but shall not be the exclusive means by which process may be served).

10.6 Specific Enforcement .

The parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of them hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. Subject to the following sentence, the parties acknowledge and agree that the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions

 

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hereof, this being in addition to any other remedy to which they are entitled under this Agreement. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the other parties have an adequate remedy at law. Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 10.6 shall not be required to provide any bond or other security in connection with any such order or injunction.

10.7 WAIVER OF JURY TRIAL .

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

10.8 Notices .

Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by facsimile (upon receipt of electronic or telephonic confirmation of successful transmission):if to Parent, Merger Sub or Sister Subsidiary,

Wright Medical Group, Inc.

5677 Airline Road

Arlington, Tennessee 38002

Attention: Robert J. Palmisano, President and Chief Executive Officer

Facsimile: (901) 867-4398

with a copy to:

Wright Medical Group, Inc.

5677 Airline Road

Arlington, Tennessee 38002

Attention: James A. Lightman, Senior Vice President, General Counsel and Secretary

Facsimile: (901) 867-4398

with copies (which shall not constitute notice) to:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

12235 El Camino Real

San Diego, California 92103-3002

 

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Attention: Martin J. Waters, Esq.

Telecopy No.: (858) 350-2399

and:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

One Market Street

Spear Tower, Suite 3300

San Francisco, California 94105-1126

Attention: Robert T. Ishii, Esq.

Telecopy No.: (415) 947-2099

if to the Company,

BioMimetic Therapeutics, Inc.

389 Nichol Mill Lane

Franklin, TN 37067

Attention: Dr. Samuel E. Lynch, President and Chief Executive Officer

Facsimile: (615) 844-1281

with a copy (which shall not constitute notice) to

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199

Attention: Paul Kinsella

Telecopy No.: (617) 235-0822

or to such other Persons or addresses as may be designated in writing by the party to receive such notice as provided above. Notice so given shall be deemed to be given (w) in the case of notice so given by mail, when received, (x) in the case of notice so given by overnight carrier, on the next Business Day following deposit with a nationally recognized overnight courier, (y) in the case of notice so given by facsimile, on the date of actual transmission if transmitted by 5:00 p.m. Central time or, if transmitted after such time, on the next succeeding day, or (z) in the case of personal delivery, when delivered.

10.9 Entire Agreement; NO OTHER REPRESENTATIONS .

This Agreement (including any exhibits hereto), the Company Disclosure Letter, the Parent Disclosure Letter and the Confidentiality Agreement between Wright Technology, Inc. and the Company dated October 1, 2010, as amended as of September 26, 2012, and the

 

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Confidentiality Agreement between Wright Technology, Inc. and the Company dated November 2, 2010 (together, and as each may be amended from time to time, the “ Confidentiality Agreement ”), constitute the entire agreement by and among the parties hereto, and supersede all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARENT, MERGER SUB NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AFFILIATES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER’S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.

10.10 No Third-Party Beneficiaries .

Other than with respect to (i) the rights of the holders of Company Common Stock to receive the Merger Consideration and (ii) the matters set forth in Section 7.12 (Indemnification; Directors’ and Officers’ Insurance), this Agreement (and each document and instrument referred to in this Agreement) is not intended to confer, and do not confer, upon any Person other than the parties hereto any rights or remedies hereunder. The rights of third-party beneficiaries under Section 7.12 shall not arise unless and until the Effective Time.

10.11 Obligations of Parent and of the Company .

Except as otherwise specifically provided herein, whenever this Agreement requires a Subsidiary of Parent to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause such Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of the Company to take any action, such requirement shall be deemed to include an undertaking on the part of the Company to cause such Subsidiary to take such action and, after the Effective Time, on the part of the Final Surviving Entity to cause such Subsidiary to take such action.

10.12 Severability .

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, insofar as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and

 

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the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

10.13 Disclosure Letters .

Any information disclosed in any section of the Company Disclosure Letter or the Parent Disclosure Letter shall be deemed to be disclosed on any other section of the Company Disclosure Letter or the Parent Disclosure Letter, respectively, where it is reasonably apparent that the disclosure contained in such section of the Company Disclosure Letter or the Parent Disclosure Letter is relevant to such other sections. The Company Disclosure Letter and the Parent Disclosure Letter, respectively, and the information and disclosures contained therein are intended only to qualify and limit the representations, warranties and covenants of the Company or Parent and Merger Sub, as the case may be, contained in this Agreement and shall not be deemed to expand in any way the scope or effect of any of such representations, warranties or covenants. No reference to or disclosure of any item or other matter in the Company Disclosure Letter or the Parent Disclosure Letter shall be construed to establish a standard of materiality. No reference to or disclosure of any item or other matter in the Company Disclosure Letter or Parent Disclosure Letter shall be construed as an admission or indication that (i) such item is required to be referred to or disclosed in the Company Disclosure Letter or Parent Disclosure Letter or (ii) any breach of any applicable Law or any Contract exists or has actually occurred.

10.14 Interpretation .

(a) When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, 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”. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted assigns and successors.

(b) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this

 

77


Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

10.15 Assignment .

This Agreement shall not be assignable without the prior written consent of the other party; provided , however ; that each of Parent and Merger Sub may (in its sole discretion), without the consent of any other party hereto, assign (in whole or in part and whether by merger, operation of law or otherwise) this Agreement and its rights and obligations hereunder to one or more of its Affiliates; provided , further , that, in the event of any such assignment pursuant to the immediately preceding proviso, Parent or Merger Sub (as the case may be) shall remain fully liable for, and shall not be released from, any of its obligations under this Agreement. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 10.15 shall be null and void.

[Remainder of page intentionally left blank]

 

78


IN WITNESS WHEREOF , this Agreement has been duly executed, acknowledged and delivered by the duly authorized officers of the parties hereto as of the date first written above.

 

BioMimetic Therapeutics, Inc.
By:  

/s/ Samuel E. Lynch

Name:   Samuel E. Lynch
Title:   President and CEO
Wright Medical Group, Inc.
By:  

/s/ Robert. J. Palmisano

Name:   Robert J. Palmisano
Title:   President and Chief Executive Officer
Achilles Merger Subsidiary, Inc.
By:  

/s/ James A. Lightman

Name:   James A. Lightman
Title:   Secretary
Achilles Acquisition Subsidiary, LLC
By:  

/s/ James A. Lightman

Name:   James A. Lightman
Title:   Secretary

Exhibit 10.1

CONTINGENT VALUE RIGHTS AGREEMENT

by and between

WRIGHT MEDICAL GROUP, INC.

and

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

Dated as of [ ]


TABLE OF CONTENTS

 

          Page  

ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

     1   

SECTION 1.1

  

Definitions

     1   

SECTION 1.2

  

Compliance and Opinions

     13   

SECTION 1.3

  

Form of Documents Delivered to Trustee

     13   

SECTION 1.4

  

Acts of Holders

     14   

SECTION 1.5

  

Notices, etc., to Trustee and Company

     15   

SECTION 1.6

  

Notice to Holders; Waiver

     15   

SECTION 1.7

  

Conflict with Trust Indenture Act

     16   

SECTION 1.8

  

Effect of Headings and Table of Contents

     16   

SECTION 1.9

  

Benefits of Agreement

     16   

SECTION 1.10

  

Governing Law

     16   

SECTION 1.11

  

Legal Holidays

     17   

SECTION 1.12

  

Separability Clause

     17   

SECTION 1.13

  

No Recourse Against Others

     17   

SECTION 1.14

  

Counterparts

     17   

SECTION 1.15

  

Acceptance of Trust

     18   

SECTION 1.16

  

Termination

     18   

ARTICLE 2 SECURITY FORMS

     18   

SECTION 2.1

  

Forms Generally

     18   

ARTICLE 3 THE SECURITIES

     19   

SECTION 3.1

  

Title and Payment Terms

     19   

SECTION 3.2

  

Registrable Form

     20   

SECTION 3.3

  

Execution, Authentication, Delivery and Dating

     21   

SECTION 3.4

  

Registration, Registration of Transfer and Exchange

     21   

SECTION 3.5

  

Mutilated, Destroyed, Lost and Stolen Securities

     24   

SECTION 3.6

  

Payments with Respect to CVRs

     25   

SECTION 3.7

  

Persons Deemed Owners

     25   

SECTION 3.8

  

Cancellation

     25   

SECTION 3.9

  

CUSIP Numbers

     25   

ARTICLE 4 THE TRUSTEE

     26   

SECTION 4.1

  

Certain Duties and Responsibilities

     26   


SECTION 4.2

   Certain Rights of Trustee      27   

SECTION 4.3

   Not Responsible for Recitals or Issuance of Securities      28   

SECTION 4.4

   May Hold Securities      28   

SECTION 4.5

   Money Held in Trust      29   

SECTION 4.6

   Compensation and Reimbursement      29   

SECTION 4.7

   Disqualification; Conflicting Interests      29   

SECTION 4.8

   Corporate Trustee Required; Eligibility      30   

SECTION 4.9

   Resignation and Removal; Appointment of Successor      30   

SECTION 4.10

   Acceptance of Appointment of Successor      32   

SECTION 4.11

   Merger, Conversion, Consolidation or Succession to Business      32   

SECTION 4.12

   Preferential Collection of Claims Against Company      32   

ARTICLE 5 HOLDERS’ LISTS AND REPORTS BY THE TRUSTEE AND COMPANY

     33   

SECTION 5.1

   Company to Furnish Trustee with Names and Addresses of Holders      33   

SECTION 5.2

   Preservation of Information; Communications to Holders      33   

SECTION 5.3

   Reports by Trustee      33   

SECTION 5.4

   Reports by Company      34   

SECTION 5.5

   Compliance Certificate      34   

ARTICLE 6 AMENDMENTS

     35   

SECTION 6.1

   Amendments without Consent of Holders      35   

SECTION 6.2

   Amendments with Consent of Holders      35   

SECTION 6.3

   Execution of Amendments      36   

SECTION 6.4

   Effect of Amendments; Notice to Holders      36   

SECTION 6.5

   Conformity with Trust Indenture Act      36   

SECTION 6.6

   Reference in Securities to Amendments      37   

ARTICLE 7 COVENANTS

     37   

SECTION 7.1

   Payment of Amounts, if any, to Holders      37   

SECTION 7.2

   Maintenance of Office or Agency      37   

SECTION 7.3

   Money for Security Payments to Be Held in Trust      38   

SECTION 7.4

   Certain Purchases and Sales      39   

SECTION 7.5

   Books and Records      39   

SECTION 7.6

   Audits      39   

SECTION 7.7

   Listing of CVRs      40   

SECTION 7.8

   Product Transfer      40   


SECTION 7.9

   Milestones      41   

SECTION 7.10

   Notice of Breach      42   

SECTION 7.11

   Non-Use of Name      42   

ARTICLE 8 REMEDIES OF THE TRUSTEE AND HOLDERS IN THE EVENT OF BREACH

     42   

SECTION 8.1

   Breach Defined; Waiver of Breach      42   

SECTION 8.2

   Collection by the Trustee; the Trustee May Prove Payment Obligations      43   

SECTION 8.3

   Application of Proceeds      45   

SECTION 8.4

   Suits for Enforcement      46   

SECTION 8.5

   Restoration of Rights on Abandonment of Proceedings      46   

SECTION 8.6

   Limitations on Suits by Holders      46   

SECTION 8.7

   Unconditional Right of Holders to Institute Certain Suits      47   

SECTION 8.8

   Powers and Remedies Cumulative; Delay or Omission Not Waiver of Breach      47   

SECTION 8.9

   Control by Holders      47   

SECTION 8.10

   Waiver of Past Breaches      48   

SECTION 8.11

   The Trustee to Give Notice of Breach, But May Withhold in Certain Circumstances      48   

SECTION 8.12

   Right of Court to Require Filing of Undertaking to Pay Costs      48   

ARTICLE 9 CONSOLIDATION, MERGER, SALE OR CONVEYANCE

     49   

SECTION 9.1

   Successor Person Substituted      49   

SECTION 9.2

   Opinion of Counsel to the Trustee      49   

SECTION 9.3

   Successors      50   

ARTICLE 10 SUBORDINATION

     50   

SECTION 10.1

   Agreement to Subordinate      50   

SECTION 10.2

   Liquidation; Dissolution; Bankruptcy      50   

SECTION 10.3

   When Distribution Must be Paid Over      51   

SECTION 10.4

   Notice by Company      51   

SECTION 10.5

   Subrogation      51   

SECTION 10.6

   Relative Rights      51   

SECTION 10.7

   Subordination May Not be Impaired by the Company      52   

SECTION 10.8

   Distribution or Notice to the Representative      52   

SECTION 10.9

   Rights of the Trustee      52   

SECTION 10.10

   Authorization to Effect Subordination      53   


SECTION 10.11

   Amendments      53   

ARTICLE 11 PURCHASE OF SECURITIES UPON CVR FAILURE EVENT

     53   

SECTION 11.1

   Notice of Trustee      53   

SECTION 11.2

   Notice of Failure Purchase      53   

SECTION 11.3

   Effect of Failure Purchase Notice      54   

SECTION 11.4

   Deposit of Failure Purchase Price      54   

SECTION 11.5

   Failure Purchase by the Company      55   

Annex A — Form of CVR Certificate/Global Security

 

Note:   This table of contents shall not, for any purpose, be deemed to be a part of this CVR Agreement.


Reconciliation and tie between Trust Indenture Act of 1939 and Contingent Value Rights Agreement, dated as of [ ].

 

Trust Indenture Act Section    Agreement Section

Section 310(a)(1)

   4.8

(a)(2)

   4.8

(a)(3)

   Not Applicable

(a)(4)

   Not Applicable

(a)(5)

   4.8

(b)

   4.7, 4.9

Section 311(a)

   4.12

(b)

   4.12

Section 312(a)

   5.1, 5.2(a)

(b)

   5.2(b)

(c)

   5.2(c)

Section 313(a)

   5.3(a)

(b)

   5.3(a)

(c)

   5.3(a)

(d)

   5.3(b)

Section 314(a)

   5.4

(b)

   Not Applicable

(c)(1)

   1.2(a)

(c)(2)

   1.2(a)

(c)(3)

   Not Applicable

(d)

   Not Applicable

(e)

   1.2(b)

Section 315(a)

   4.1(a), 4.1(b)

(b)

   8.11

(c)

   4.1(a)

(d)

   4.1(c)

(d)(1)

   4.1(a), 4.1(b)

(d)(2)

   4.1(c)(ii)

(d)(3)

   4.1(c)(iii)

(e)

   8.12

Section 316(a)(last sentence)

   1.1 (Definition of “Outstanding”)

(a)(1)(A)

   8.9

(a)(1)(B)

   8.10

(a)(2)

   Not Applicable

(b)

   8.7

Section 317(a)(1)

   8.2

(a)(2)

   8.2

(b)

   7.3

Section 318(a)

   1.7

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of this CVR Agreement.


THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of [ ] (this “ CVR Agreement ”), by and between Wright Medical Group, Inc., a Delaware corporation (the “ Company ”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as trustee (the “ Trustee ”), in favor of each person who from time to time holds one or more Contingent Value Rights (the “ Securities ” or “ CVRs ” and, each individually, a “ Security ” or a “ CVR ”) to receive cash payments in the amounts and subject to the terms and conditions set forth herein.

W I T N E S S E T H :

WHEREAS, this CVR Agreement is entered into pursuant to the Agreement and Plan of Merger, dated as of November 19, 2012 (the “ Merger Agreement ”), by and among the Company, Achilles Merger Subsidiary, Inc., a Delaware corporation and wholly owned Subsidiary of the Company (“ Merger Sub ”), Achilles Acquisition Subsidiary, LLC, a Delaware limited liability company and a wholly owned Subsidiary of the Company, and BioMimetic Therapeutics, Inc., a Delaware corporation (“ BioMimetic ”);

WHEREAS, pursuant to the Merger Agreement, BioMimetic shall merge with Merger Sub (the “ Merger ”);

WHEREAS, the CVRs shall be issued in accordance with and pursuant to the terms of the Merger Agreement; and

WHEREAS, a registration statement on Form S-4 (No. 333-XXXXXX) (the “ Registration Statement ”) with respect to the CVRs has been prepared and filed by the Company with the Commission (as defined below) and has become effective in accordance with the Securities Act of 1933, as amended (the “ Securities Act ”).

NOW, THEREFORE, in consideration of the foregoing premises and the consummation of the transactions contemplated by the Merger Agreement, it is covenanted and agreed, for the equal and proportionate benefit of all Holders, as follows:

ARTICLE 1

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 1.1 Definitions . For all purposes of this CVR Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this ARTICLE 1 have the meanings assigned to them in this Article, and include the plural as well as the singular;

(b) all accounting terms used herein and not expressly defined herein shall, except as otherwise noted, have the meanings assigned to such terms in accordance with applicable Accounting Standards, where “ Accounting Standards ” means generally accepted accounting principals in the U.S., consistently applied, or, to the extent the Company adopts International Financial Reporting Standards (“ IFRS ”), IFRS consistently applied;


(c) all capitalized terms used in this CVR Agreement without definition shall have the respective meanings ascribed to them in the Merger Agreement;

(d) all other terms used herein which are defined in the Trust Indenture Act (as defined herein), either directly or by reference therein, have the respective meanings assigned to them therein; and

(e) the words “ herein ,” “ hereof ” and “ hereunder ” and other words of similar import refer to this CVR Agreement as a whole and not to any particular Article, Section or other subdivision.

BioMimetic ” shall have the meaning set forth in the Recitals of this CVR Agreement.

Act ” shall have the meaning set forth in SECTION 1.4(a) of this CVR Agreement.

Acting Holders ” means, at the time of determination, Holders of at least thirty percent (30%) of the Outstanding CVRs.

Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

Applicable Procedures ” means, with respect to any transfer or exchange of or for beneficial interests in any Global Security, the rules and procedures of the Depositary that apply to such transfer or exchange.

Approval Milestone ” means receipt by the Company or one of its Affiliates of the first FDA Approval of AUGMENT Bone Graft based on the AUGMENT PMA.

Approval Milestone Payment ” means three dollars and fifty cents ($3.50) per CVR.

Approval Milestone Payment Date ” means, with respect to the Approval Milestone, either (i) the Closing Date, if such Milestone is achieved prior to the Closing Date, or (ii) the date that is twenty (20) Business Days following the date of the achievement of such Milestone.

Approval Record Date ” shall have the meaning set forth in SECTION 3.1(d) of this CVR Agreement.

AUGMATRIX Bone Graft ” means that certain medical device that is described in the Company’s 510(k) No. 051775, including any medical device that is sold by the Company, its Affiliates and/or licensees prior to the Termination Date outside the United States.

AUGMENT Bone Graft ” means that certain medical device that is described in the AUGMENT PMA, including any such medical device that is sold by the Company, its Affiliates and/or licensees prior to the Termination Date outside the United States.

 

2


AUGMENT Chronic Tendinopathy ” means that certain medical device that is described in the Company’s Investigational New Drug application No. 109460, as it may be further amended or supplemented, including any such medical device that is sold by the Company, its Affiliates and/or licensees prior to the Termination Date outside the United States.

AUGMENT Injectable ” means that certain medical device that is described in the Company’s Investigational Device Exemption application No. G090133, as it may be further amended or supplemented, including any such medical device that is sold by the Company, its Affiliates and/or licensees prior to the Termination Date outside the United States.

AUGMENT PMA ” means the Company’s amended pre-market approval application no. P100006 submitted to the FDA on June 28, 2012, as it may be further amended or supplemented prior to the Termination Date.

Board of Directors ” means the board of directors of the Company or any other body performing similar functions, or any duly authorized committee of that board.

Board Resolution ” means a copy of a resolution certified by the Chairman of the Board of Directors, the Chief Executive Officer of the Company or the Secretary to the Board of Directors, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.

Breach ” shall have the meaning set forth in SECTION 8.1 of this CVR Agreement.

Breach Interest Rate ” means a per annum rate equal to the prime rate of interest quoted by Bloomberg, or similar reputable data source, plus three percent (3%), calculated daily on the basis of a three hundred sixty-five (365) day year or, if lower, the highest rate permitted under applicable Law.

Business Day ” means any day (other than a Saturday or a Sunday) on which banking institutions in the city of New York, New York are not authorized or obligated by Law or executive order to close and, if the CVRs are listed on a national securities exchange, electronic trading network or other suitable trading platform, such exchange, electronic network or other trading platform is open for trading.

Code ” means the Internal Revenue Code of 1986, as amended.

Combination Product ” means (1) any product comprised of a Product and any other drug, device, or biologic (as each such term is defined by FDA or other relevant Governmental Entity) that is physically, chemically, or otherwise combined or mixed and produced as a single entity; or (2) a Product packaged with any other drug, device, or biologic (as each such term is defined by FDA or other relevant Governmental Entity) and sold as a single unit for a single price.

Commission ” means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.

 

3


Company ” means the Person named as the “Company” in the preamble of this CVR Agreement, until a successor Person shall have become such pursuant to the applicable provisions of this CVR Agreement, and thereafter “Company” shall mean such successor Person.

Company Request ” or “ Company Order ” means a written request or order signed in the name of the Company by the chairman of the Board of Directors, the Chief Executive Officer, a president or any vice president, or any other person duly authorized to act on behalf of the Company for such purpose or for any general purpose, and delivered to the Trustee.

Corporate Trust Office ” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this CVR Agreement is located at 6201 15 th Avenue, Brooklyn, New York 11219.

CVRs ” shall have the meaning set forth in the Preamble of this CVR Agreement.

CVR Agreement ” shall have the meaning set forth in the Preamble of this CVR Agreement.

CVR Certificate ” means a certificate other than a Global Security representing any of the CVRs.

CVR Failure Date ” means any date on which both of the following conditions are met: (a) the Approval Milestone has not been achieved and (b) the volume weighted average price paid per Security for all Securities traded over the forty-five (45) trading days prior to such date is less than ten cents ($0.10).

CVR Payment ” means a Product Sales Milestone Payment or the Approval Milestone Payment.

CVR Shortfall ” shall have the meaning set forth in SECTION 7.6(b) of this CVR Agreement.

Depositary ” shall have the meaning set forth in SECTION 3.2 of this CVR Agreement.

Diligent Efforts ” means, with respect to any Product and subject to SECTION 7.9 below, efforts of a Person to carry out its obligations, using such efforts and employing such resources normally used by Persons in the medical device business similar in size and resources to Parent, in the exercise of their reasonable business discretion, relating to development, seeking regulatory approval of or commercializing, as applicable, a similar product, that is of similar market potential and at a similar development stage, regulatory stage or commercialization stage, taking into account issues of market exclusivity (including patent coverage), product profile, including efficacy, safety, and convenience, actual product labeling, the competitiveness of alternate products in the marketplace or under development, the regulatory environment and the profitability of the applicable product (including pricing and reimbursement status achieved) consistent with publicly reported financial statements and other relevant factors, including financial, technical, legal, scientific and/or medical factors.

 

4


Direct Registration Securities ” means Securities, the ownership of which is recorded on the Direct Registration System. The terms “deliver,” “execute,” “issue,” “register,” “surrender,” “transfer” or “cancel,” when used with respect to Direct Registration Securities, shall refer to an entry or entries or an electronic transfer or transfers in the Direct Registration System.

Direct Registration System ” means the system for the uncertificated registration of ownership of securities established by the Security Registrar and utilized by the Security Registrar pursuant to which the Security Registrar may record the ownership of the CVRs without the issuance of a certificate, which ownership shall be evidenced by periodic statements issued by the Security Registrar to the Holders entitled thereto.

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

Exchange Act Documents ” shall have the meaning set forth in SECTION 5.4 of this CVR Agreement.

Existing Licenses ” means those licenses and related agreements (for so long as they are in effect) with respect to any Product granted by or to BioMimetic or its Affiliates to or from third parties (other than the Company or its Affiliates) as in effect immediately prior to the consummation of the Merger.

Failure Purchase ” shall have the meaning set forth in SECTION 11.1 of this CVR Agreement.

Failure Purchase Eligibility Date ” means any CVR Failure Date that occurs on or after the third anniversary of Closing.

Failure Purchase Date ” shall have the meaning set forth in SECTION 11.1 of this CVR Agreement.

Failure Purchase Notice ” shall have the meaning set forth in SECTION 11.2 of this CVR Agreement.

Failure Purchase Offer ” shall have the meaning set forth in SECTION 11.1 of this CVR Agreement.

Failure Purchase Price ” shall have the meaning set forth in SECTION 11.5 of this CVR Agreement.

FDA ” means the United States Food and Drug Administration or any successor agency.

FDA Approval ” means the approval by the FDA of a premarket approval application to market and sell a Product, as evidenced by the publication of such approval by the FDA.

Global Securities ” means global securities in registered form, substantially in the form set forth in Annex A.

 

5


Governmental Entity ” means any domestic (federal or state), or foreign court, commission, governmental body, regulatory or administrative agency or other political subdivision thereof.

Holder ” means a Person in whose name a Security is registered in the Security Register.

IFRS ” shall have the meaning set forth in SECTION 1.1(b) of this CVR Agreement.

Indemnitee ” shall have the meaning set forth in SECTION 4.6(c) of this CVR Agreement.

Independent Accountant ” shall have the meaning set forth in SECTION 7.6(a) of this CVR Agreement.

Indirect Participant ” means a Person who holds a beneficial interest in a Global Security through a Participant.

Junior Obligations ” shall have the meaning set forth in SECTION 10.1.

Law ” means any foreign, federal, state, local or municipal laws, rules, judgments, orders, regulations, statutes, ordinances, codes, decisions, injunctions, decrees, international treaties and conventions or requirements of any Governmental Entity.

Marketed Product ” means a Product: (a) that has received marketing approval in the applicable jurisdiction from the relevant Governmental Entity; and (b) for which commercial sales have been initiated in such jurisdiction prior to the date of execution of this CVR Agreement or for which the Company and/or its Affiliates elect, in their sole discretion, to initiate commercial sales in such jurisdiction after the date of execution of this CVR Agreement and prior to the Termination Date.

Merger ” shall have the meaning set forth in the Recitals of this CVR Agreement.

Merger Agreement ” shall have the meaning set forth in the Recitals of this CVR Agreement.

Merger Sub ” shall have the meaning set forth in the Recitals of this CVR Agreement.

Milestone ” means any of the Approval Milestone or any Product Sales Milestone.

Officer’s Certificate ” when used with respect to the Company means a certificate signed by the Chief Executive Officer, a president or any vice president, the Chief Financial Officer or any other person duly authorized to act on behalf of the Company for such purpose or for any general purpose.

Opinion of Counsel ” means a written opinion of counsel, who may be counsel for the Company.

 

6


Outstanding ” when used with respect to Securities (“ Outstanding Securities ”) means, as of the date of determination, all Securities theretofore authenticated and delivered under this CVR Agreement, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation and (b) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this CVR Agreement, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; provided , however , that in determining whether the Holders of the requisite Outstanding Securities have given any request, demand, authorization, direction, consent, waiver or other action hereunder, Securities owned by the Company or any Affiliate of the Company, whether held as treasury securities or otherwise, shall be disregarded and deemed not to be Outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, direction, consent, waiver or other action, only Securities that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded (but the Trustee need not confirm or investigate the accuracy of mathematical calculations or other facts stated in such request, demand, authorization, direction, consent, waiver or other action).

Participant ” means, with respect to the Depositary, a Person who has an account with the Depositary.

Party ” shall mean the Trustee, the Company and/or Holder(s), as applicable.

Paying Agent ” means any Person authorized by the Company to pay the amount determined pursuant to SECTION 3.1 of this CVR Agreement, if any, on any Securities on behalf of the Company.

Payment Date ” means a Product Sales Milestone Payment Date or the Approval Milestone Payment Date or any date as shall be required for any CVR Shortfall payment pursuant to the review procedure set forth in SECTION 7.6 of this CVR Agreement.

Permitted Junior Securities ” shall have the meaning set forth in SECTION 10.2(a).

Person ” means any individual, corporation, partnership, joint venture, association, joint­stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

Product ” means any of the following medical products: (a) AUGMENT Bone Graft; (b) AUGMENT Injectable; (c) AUGMATRIX Bone Graft; (d) AUGMENT Chronic Tendinopathy; or (e) any other medical product that the Company, in its sole discretion, elects to offer for sale in any jurisdiction and that: (i) contains recombinant human platelet-derived growth factor BB; and (ii) is covered by patents or utilizes proprietary know-how that was owned or controlled by Achilles immediately prior to the execution of this CVR Agreement .

Product Disposition Transaction ” shall have the meaning set forth in SECTION 7.8 of this CVR Agreement.

 

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Product Sales ” means:

(a) the aggregate gross amounts invoiced for any Product sold by the Company, its Affiliates or licensees of the Company or its Affiliates to third parties (other than the Company, its Affiliates or licensees of the Company and its Affiliates), including to distributors and end-users, less the following items (i) through (v) below as applicable to such Product sales to the extent actually taken or incurred with respect to such sales ( “ Permitted Deductions ”) and all in accordance with standard allocation procedures, allowance methodologies and the Accounting Standards (except as otherwise provided below):

(i) credits or allowances for returns, rejections or recalls (due to spoilage, damage, expiration of useful life or otherwise), retroactive price reductions or billing corrections;

(ii) separately itemized invoiced freight, postage, shipping and insurance, handling and other transportation costs;

(iii) sales, use, value added and other similar taxes (excluding income taxes), tariffs, customs duties, surcharges and other governmental charges levied on the production, sale, transportation, delivery or use of any Product that are incurred at time of sale or are directly related to the sale;

(iv) any quantity, cash or other trade discounts, rebates, returns, refunds, charge backs, fees, credits or allowances (including amounts incurred in connection with government-mandated rebate and discount programs, third party rebates and charge backs, and hospital buying group/group purchasing organization administration fees and payor organizations), distribution fees, sales commissions paid to third parties, retroactive price reductions and billing corrections (collectively, “ Discounts ”), excluding any discounts on Products that are not in the ordinary course of business of the Company, its Affiliates or licensees, as applicable, that are offered solely to benefit the Company’s, or its applicable Affiliate’s or licensee’s, other products or services to the detriment of Product Sales or any discounts on Products that are implemented in bad faith for the purpose of reducing Product Sales; and

(v) deductions for bad debts (which adjustment shall be based on actual bad debts incurred, net of any recoveries of previously written off bad debts from current or prior reporting periods).

Sales or other commercial dispositions of any Product among the Company, its Affiliates and licensees of the Company or its Affiliates shall be excluded from the computation of Product Sales, except where such an Affiliate or licensee is an end-user of such Product. Notwithstanding any other provision of this CVR Agreement, the following shall not be included in Product Sales: the use, transfer or other disposition of a Product at or below cost in connection with research and/or development, clinical trials, compassionate use programs, for use as samples, or as donations to non-profit institutions or government agencies; provided that to the extent the Company is reimbursed by a third-party payor for any of the foregoing, such reimbursements will be included in Product Sales.

 

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Subject to the foregoing, if a Product is sold or otherwise commercially disposed of for consideration other than cash or in a transaction that is not at arm’s-length between the buyer and the seller, then the gross amount to be included in the calculation of Product Sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s­length and for cash. Such amount that would have been invoiced shall be determined, wherever possible, by reference to the average selling price of such Product in arm’s-length transactions during the relevant calendar month and in the relevant jurisdiction.

Notwithstanding the foregoing, in the event that a Product is sold as a Combination Product (a “ Combination Sale ”), the Product Sales amount for the Product sold in such a Combination Sale shall be determined as follows:

(i) By multiplying the gross amount invoiced for the Combination Sale (less all Permitted Deductions) by the fraction A/C where A is the average selling price charged by the Company, its Affiliates or licensees of the Company or its Affiliates for such Product sold separately in such jurisdiction during such period, and C is the average selling price charged by the Company, its Affiliates or licensees of the Company or its Affiliates in such jurisdiction for such Combination Product during such period.

(ii) In the event that the Company, its Affiliates or licensees of the Company and its Affiliates do not sell during such period the Product included in a Combination Sale as a separate product in the jurisdiction where such Combination Sale occurs, but there are separate sales during such period of all of the other products or active ingredients/components, as the case may be, included in the Combination Sale in such jurisdiction, the calculation of Product Sales resulting from such Combination Sale shall be determined by multiplying the gross amount invoiced for the Combination Product (less all Permitted Deductions) by the fraction (C-D)/C, where C is the average selling price charged by the Company, its Affiliates or licensees of the Company or its Affiliates in such jurisdiction for such Combination Product during such period, and D is the aggregate of the average selling price(s) charged by the Company, its Affiliates or licensees of the Company or its Affiliates, as applicable, in such jurisdiction, of such other product(s) or active ingredients/components, as the case may be, included in the Combination Product and sold separately in such jurisdiction during such period.

If the calculation of Product Sales resulting from a Combination Sale in a jurisdiction cannot be determined by either of the foregoing methods, the calculation of Product Sales for such Combination Sale shall be calculated in a manner determined by the Company in good faith based upon the relative value of the active components of such Combination Product.

Product Sales Milestone ” means each of (a) Product Sales Milestone #1 and (b) Product Sales Milestone #2.

Product Sales Milestone #1 ” means the first calendar month prior to the Termination Date in which the aggregate Product Sales during the consecutive twelve (12) month period ending on the last day of such calendar month equals or exceeds a total of forty million dollars ($40,000,000).

 

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Product Sales Milestone #2 ” means the first calendar month prior to the Termination Date in which the aggregate Product Sales during the consecutive twelve (12) month period ending on the last day of such calendar month equals or exceeds a total of seventy million dollars ($70,000,000), provided that Product Sales that occur in a period or any portion thereof in which Product Sales Milestone #1 is achieved may be included in the calculation of Product Sales for determining whether Product Sales Milestone #2 has been achieved.

Product Sales Milestone Payment ” means (a) one dollar and fifty cents ($1.50) per CVR with respect to achieving Product Sales Milestone #1 and (b) one dollar and fifty cents ($1.50) per CVR with respect to achieving Product Sales Milestone #2.

Product Sales Milestone Payment Date ” means, with respect to each Product Sales Milestone, the date that is twenty (20) Business Days following notice of the achievement of such Product Sales Milestone in the applicable Product Sales Statement; provided , however , (a) if Product Sales Milestone #1 is achieved during a consecutive twelve (12) month period that ends on the last day of a calendar month that is prior to [            ] [date that is 24 months post-closing to be inserted] , then the Product Sales Milestone Payment Date for Product Sales Milestone #1 shall be on the later of (i)                     or (ii) twenty (20) Business Days following notice of the achievement of Product Sales Milestone #1, and (b) if Product Sales Milestone #2 is achieved during a consecutive twelve (12) month period that ends on the last day of a calendar month that is prior to [                    ] [date that is 36 months post-closing to be inserted] , then the Product Sales Milestone Payment Date for Product Sales Milestone #2 shall be the later of (i)             or (ii) twenty (20) Business Days following notice of the achievement of Product Sales Milestone #2.

Product Sales Statement ” means, with respect to each calendar month (or part thereof) occurring prior to the Termination Date, the written statement of the Company, certified by the Chief Financial Officer of the Company and setting forth with reasonable detail:

(a) the aggregate Product Sales during such calendar month and the eleven (11) immediately preceding calendar months;

(b) to the extent that Product Sales during an applicable period are determined based on Product Sales of a Combination Product for such period, the method of determining the Product Sales of the Combination Product attributable to the Product in accordance with the definition of Product Sales;

(c) to the extent that sales for a Product for an applicable period are recorded in currencies other than United States dollars, the exchange rates used for conversion of such foreign currency into United States dollars; and

(d) notice of whether any Product Sales Milestone has been achieved during the applicable reporting period.

The amounts in the Product Sales Statement shall be calculated in accordance with Accounting Standards and shall be derived from and consistent with the audited financial statements contained in the reports filed with the Trustee pursuant to subsection (a)(i) or (a)(ii) of SECTION 5.4 of this CVR Agreement.

 

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PSM Record Date ” shall have the meaning set forth in SECTION 3.1(c) of this CVR Agreement.

Registration Statement ” shall have the meaning set forth in the Recitals of this CVR Agreement.

Responsible Officer ” when used with respect to the Trustee means any officer assigned to the Corporate Trust Office and also means, with respect to any particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.

Securities ” shall have the meaning set forth in the Preamble of this CVR Agreement.

Securities Act ” shall have the meaning set forth in the Recitals of this CVR Agreement.

Security Register ” shall have the meaning set forth in SECTION 3.4(a) of this CVR Agreement.

Security Registrar ” shall have the meaning set forth in SECTION 3.4(a) of this CVR Agreement.

Senior Obligations ” means the principal of, premium (if any), interest (including, without limitation, any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable Law) on the following existing or future obligations of the Company, and all other amounts owing thereon, (i) with respect to borrowed money, (ii) evidenced by notes, debentures, bonds or other similar debt instruments, (iii) with respect to the net obligations owed under interest rate swaps or similar agreements or currency exchange transactions, (iv) reimbursement obligations in respect of letters of credit and similar obligations, (v) in respect of capital leases, or (vi) guarantees in respect of obligations referred to in clauses (i) through (v) above; unless, in any case, the instrument creating or evidencing the same or pursuant to which the same is outstanding provides that such obligations are pari passu to or subordinate in right of payment to the Securities.

Notwithstanding the foregoing, “Senior Obligations” shall not include:

(a) Junior Obligations (as defined in SECTION 10.1);

(b) trade debt incurred in the ordinary course of business;

(c) any intercompany indebtedness between the Company and any of its Subsidiaries or Affiliates;

(d) indebtedness of the Company that is subordinated in right of payment to Senior Obligations;

 

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(e) indebtedness or other obligations of the Company that by its terms ranks equal or junior in right of payment to the Junior Obligations;

(f) indebtedness of the Company that, by operation of Law, is subordinate to any general unsecured obligations of the Company;

(f) indebtedness evidenced by any guarantee of indebtedness ranking equal or junior in right of payment to the Junior Obligations;

(g) indebtedness consisting of the deferred purchase price for property or services, including earn-out and milestone payments and contingent value rights; or

(h) indebtedness that is contractually non-recourse to the general credit of the Company.

Series A Contingent Value Rights ” shall have the meaning set forth in SECTION 3.1(b) of this CVR Agreement.

Shortfall Interest Rate ” means a per annum rate equal to the prime rate of interest quoted by Bloomberg, or similar reputable data source, plus two percent (2%), calculated daily on the basis of a three hundred sixty-five (365) day year or, if lower, the highest rate permitted under applicable Law.

Shortfall Report ” shall have the meaning set forth in SECTION 7.6(b) of this CVR Agreement.

Subsidiary ” means, with respect to any Person, any corporation, limited liability company, association, partnership or other business entity of which more than fifty percent (50%) of the total voting power of shares of Voting Securities is at the time owned or controlled, directly or indirectly, by: (a) such Person; (b) such Person and one or more Subsidiaries of such Person; or (c) one or more Subsidiaries of such Person.

Tax ” means any federal, state, local or foreign income, profits, gross receipts, license, payroll, employment, severance, stamp, occupation, premium, windfall profits, environmental, customs duty, capital stock, franchise, sales, social security, unemployment, disability, use, property, withholding, excise, transfer, registration, production, value added, alternative minimum, occupancy, estimated or any other tax of any kind whatsoever, together with any interest, penalty or addition thereto, imposed by any Governmental Entity responsible for the imposition of any such tax, whether disputed or not.

Termination Date ” means the earlier of (a)                      [6 th anniversary of closing date of Merger Agreement to be inserted] and (b) the Payment Date for Product Sales Milestone #2.

Trust Indenture Act ” means the Trust Indenture Act of 1939, as amended from time to time.

 

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Trustee ” means the Person named as the “Trustee” in the preamble of this CVR Agreement, until a successor Trustee shall have become such pursuant to the applicable provisions of this CVR Agreement, and thereafter “Trustee” shall mean such successor Trustee.

Voting Securities ” means securities or other interests having voting power, or the right, to elect or appoint a majority of the directors, or any Persons performing similar functions, irrespective of whether or not stock or other interests of any other class or classes shall have or might have voting power or any right by reason of the happening of any contingency.

SECTION 1.2 Compliance and Opinions .

(a) Upon any application or request by the Company to the Trustee to take any action under any provision of this CVR Agreement, the Company shall furnish to the Trustee an Officer’s Certificate stating that, in the opinion of the signor, all conditions precedent, if any, provided for in this CVR Agreement relating to the proposed action have been complied with and an Opinion of Counsel stating, subject to customary exceptions, that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this CVR Agreement relating to such particular application or request, no additional certificate or opinion need be furnished.

(b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this CVR Agreement shall include: (i) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

SECTION 1.3 Form of Documents Delivered to Trustee.

(a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

(b) Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company.

 

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(c) Any certificate, statement or opinion of an officer of the Company or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Company. Any certificate or opinion of any independent firm of public accountants filed with the Trustee shall contain a statement that such firm is independent.

(d) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this CVR Agreement, they may, but need not, be consolidated and form one instrument.

SECTION 1.4 Acts of Holders.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this CVR Agreement to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “ Act ” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this CVR Agreement and (subject to SECTION 4.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this SECTION 1.4. The Company may set a record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this CVR Agreement, which date shall be no greater than ninety (90) days and no less than ten (10) days prior to the date of such vote or consent to any action by vote or consent authorized or permitted under this CVR Agreement. If not previously set by the Company, (i) the record date for determining the Holders entitled to vote at a meeting of the Holders shall be the date preceding the date notice of such meeting is mailed to the Holders, or if notice is not given, on the day next preceding the day such meeting is held, and (ii) the record date for determining the Holders entitled to consent to any action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company. If a record date is fixed, those Persons who were Holders of Securities at such record date (or their duly designated proxies), and only those Persons, shall be entitled to take such action by vote or consent or, except with respect to clause (d) below, to revoke any vote or consent previously given, whether or not such Persons continue to be Holders after such record date. No such vote or consent shall be valid or effective for more than one hundred twenty (120) days after such record date.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient.

 

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(c) The ownership of Securities shall be proved by the Security Register. Neither the Company nor the Trustee nor any agent of the Company or the Trustee shall be affected by any notice to the contrary.

(d) At any time prior to (but not after) the evidencing to the Trustee, as provided in this SECTION 1.4, of the taking of any action by the Holders of the Securities specified in this CVR Agreement in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this SECTION 1.4, revoke such action so far as concerns such Security. Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

SECTION 1.5 Notices, etc., to Trustee and Company . Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this CVR Agreement to be made upon, given or furnished to, or filed with:

(a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed, in writing, to or with the Trustee at its Corporate Trust Office; or

(b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the Company addressed to it at Wright Medical Group, Inc., 5677 Airline Road, Arlington, Tennessee 38002, Attention: General Counsel, or at any other address previously furnished in writing to the Trustee by the Company.

SECTION 1.6 Notice to Holders; Waiver.

(a) Where this CVR Agreement provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the Holder’s address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this CVR Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

 

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(b) In case by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event as required by any provision of this CVR Agreement, then any method of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice.

SECTION 1.7 Conflict with Trust Indenture Act . If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this CVR Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. Nothing herein shall be deemed an admission of, or agreement by, the Company and the Trustee that the Trust Indenture Act applies to this CVR Agreement.

SECTION 1.8 Effect of Headings and Table of Contents . The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 1.9 Benefits of Agreement . Nothing in this CVR Agreement or in the Securities, express or implied, shall give to any Person (other than the Parties hereto and their successors hereunder, any Paying Agent and the Holders) any benefit or any legal or equitable right, remedy or claim under this CVR Agreement or under any covenant or provision herein contained, all such covenants and provisions being for sole benefit of the Parties hereto and their successors, any Paying Agent and of the Holders.

SECTION 1.10 Governing Law . THIS CVR AGREEMENT AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS CVR AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS CVR AGREEMENT (INCLUDING ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO ANY REPRESENTATION OR WARRANTY MADE IN OR IN CONNECTION WITH THIS CVR AGREEMENT OR AS AN INDUCEMENT TO ENTER INTO THIS CVR AGREEMENT) OR THE SECURITIES, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. EACH OF THE COMPANY, THE TRUSTEE AND EACH OF THE HOLDERS BY THEIR ACCEPTANCE OF THE SECURITIES, HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE COURT IN THE STATE OF DELAWARE OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE IN RESPECT OF ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS CVR AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS CVR AGREEMENT (INCLUDING ANY CLAIM OR CAUSE OF ACTION BASED UPON,

 

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ARISING OUT OF OR RELATED TO ANY REPRESENTATION OR WARRANTY MADE IN OR IN CONNECTION WITH THIS CVR AGREEMENT OR AS AN INDUCEMENT TO ENTER INTO THIS CVR AGREEMENT), OR THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY AND THE TRUSTEE AGREES THAT PROCESS MAY BE SERVED UPON THEM IN ANY MANNER AUTHORIZED BY THE LAWS OF THE STATE OF DELAWARE FOR SUCH PERSONS. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS CVR AGREEMENT (A) THE DEFENSE OF SOVEREIGN IMMUNITY, (B) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR ANY REASON OTHER THAN THE FAILURE TO SERVE PROCESS IN ACCORDANCE WITH THIS SECTION 1.10, (C) THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH COURTS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE), AND (D) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW THAT (I) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT IN AN INCONVENIENT FORUM, (II) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER AND (III) THIS CVR AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH COURTS.

SECTION 1.11 Legal Holidays . In the event that a Payment Date shall not be a Business Day, then (notwithstanding any provision of this CVR Agreement or the Securities to the contrary) payment on the Securities need not be made on such date, but may be made, without the accrual of any interest thereon, on the next succeeding Business Day with the same force and effect as if made on such Payment Date.

SECTION 1.12 Separability Clause . In the event any provision in this CVR Agreement or in the CVRs shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 1.13 No Recourse Against Others . A director, officer or employee, as such, of the Company or an Affiliate of the Company or the Trustee shall not have any liability for any obligations of the Company or the Trustee under the Securities or this CVR Agreement or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

SECTION 1.14 Counterparts . This CVR Agreement shall be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this CVR Agreement.

 

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SECTION 1.15 Acceptance of Trust . American Stock Transfer & Trust Company, LLC, the Trustee named herein, hereby accepts the trusts in this CVR Agreement declared and provided, upon the terms and conditions set forth herein.

SECTION 1.16 Termination . This CVR Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, at 5:00 p.m., New York City time, on the Termination Date, provided that if any Milestone has been achieved on or prior to the Termination Date, but the associated CVR Payment has not been paid on or prior to the Termination Date, this CVR Agreement shall not terminate until such CVR Payment has been paid in full in accordance with the terms of the CVR Agreement; provided further that the obligations of the Parties to this CVR Agreement set forth in SECTIONS 4.6 and 7.6 and the obligation of the Company to pay any CVR Payment that is due in accordance with the terms of this CVR Agreement shall survive termination of this CVR Agreement in accordance with its terms and provided further that no termination of this CVR Agreement shall be deemed to affect the rights of the parties set forth in ARTICLE 8 to bring suit in the case of a Breach occurring prior to such Termination Date.

ARTICLE 2

SECURITY FORMS

SECTION 2.1 Forms Generally.

(a) The Global Securities, CVR Certificates, if any, and the Trustee’s certificate of authentication shall be in substantially the forms set forth in Annex A , attached hereto and incorporated herein by this reference, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this CVR Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may be required by Law or any rule or regulation pursuant thereto, all as may be determined by the officers executing such Global Securities or CVR Certificates, as evidenced by their execution of the Global Securities or CVR Certificates. Any portion of the text of any Global Security or CVR Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Global Security or CVR Certificate.

(b) The Global Securities and CVR Certificates, if any, shall be typewritten, printed, lithographed or engraved on steel engraved borders or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.

 

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(c) The Direct Registration Securities shall be uncertificated and shall be evidenced by the Direct Registration System maintained by the Security Registrar.

ARTICLE 3

THE SECURITIES

SECTION 3.1 Title and Payment Terms.

(a) The aggregate number of CVRs which may be authenticated, as applicable, and delivered under this CVR Agreement is limited to a number equal to [ ], except for Securities authenticated, as applicable, and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to SECTION 3.4, 3.5 or 6.6. From and after the Effective Time, the Company shall not be permitted to issue any CVRs that have the right to receive any portion of the Approval Milestone Payment or the Product Sales Milestone Payments, except as provided and in accordance with the terms and conditions of the Merger Agreement.

(b) The Securities shall be known and designated as the “ Series A Contingent Value Rights ” of the Company.

(c) On each Product Sales Milestone Payment Date, the Company shall pay to the Trustee, by wire transfer to the account designated by the Trustee on the date hereof, an amount equal to the product of (i) the Product Sales Milestone Payment due on such Product Sales Milestone Payment Date multiplied by (ii) the number of Securities Outstanding, and the Trustee shall promptly (but in any event within two (2) Business Days) pay to each Holder of record of the Securities as of the close of business in New York City, three (3) Business Days prior to such Product Sales Milestone Payment Date (a “ PSM Record Date ”), an amount equal to the product of (i) such Product Sales Milestone Payment multiplied by (ii) the number of Securities held by such Holder as of such PSM Record Date. Notwithstanding the foregoing, in no event shall the Company be required to pay a Product Sales Milestone Payment more than once in relation to any particular Product Sales Milestone, and the Company shall not be required to pay any Product Sales Milestone Payment in relation to a Product Sales Milestone that is achieved after the Termination Date.

(d) On the Approval Milestone Payment Date, the Company shall pay to the Trustee, by wire transfer to the account designated by the Trustee on the date hereof, an amount equal to the product of (i) the Approval Milestone Payment multiplied by (ii) the number of Securities Outstanding, and the Trustee shall promptly (but in any event within two (2) Business Days) pay to each Holder of record of the Securities as of the close of business in New York City, three (3) Business Days prior to the Approval Milestone Payment Date (the “ Approval Record Date ”), an amount equal to the product of (i) the Approval Milestone Payment multiplied by (ii) the number of Securities held by such Holder as of the Approval Record Date. Notwithstanding the foregoing, in no event shall the Company be required to pay the Approval Milestone Payment more than once, and the Company shall not be required to pay the Approval Milestone Payment if: (i) the FDA issue an order under 21 CFR 814.45 denying FDA Approval of Augment; or (ii) the Approval Milestone occurs after the Termination Date. For the avoidance of doubt, FDA Approval of anything other than the AUGMENT PMA shall not trigger the Approval Milestone Payment.

 

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(e) The Holders of the CVRs, by acceptance thereof, agree that no joint venture, partnership or other fiduciary relationship is created hereby or by the Securities.

(f) Other than in the case of interest on amounts due and payable after the occurrence of a Breach or with respect to any CVR Shortfall, no interest or dividends shall accrue on any amounts payable in respect of the CVRs.

(g) Except to the extent otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code, the Parties hereto shall determine the portion of any CVR Payment required to be treated as interest for U.S. federal income tax purposes pursuant to Section 483 of the Code and the Treasury Regulations promulgated thereunder.

(h) The Holder of any CVR is not, and shall not, by virtue thereof, be entitled to any rights of a holder of any Voting Securities or other equity security or other ownership interest of the Company, in any constituent company to the Merger or in any of such companies’ Affiliates or other subsidiaries, either at Law or in equity, and the rights of the Holders are limited to those contractual rights expressed in this CVR Agreement.

(i) Except as provided in this CVR Agreement (including, without limitation, SECTION 7.6), none of the Company or any of its Affiliates shall have any right to set off any amounts owed or claimed to be owed by any Holder to any of them against such Holder’s Securities or any CVR Payment or other amount payable to such Holder in respect of such Securities.

(j) In the event that all of the CVRs not previously cancelled shall have become due and payable pursuant to the terms hereof, all disputes with respect to amounts payable to the Holders brought pursuant to the terms and conditions of this CVR Agreement have been resolved, and the Company has paid or caused to be paid or deposited with the Trustee all amounts payable to the Holders under this CVR Agreement (including any amounts determined in accordance with SECTION 7.6), then this CVR Agreement shall cease to be of further effect and shall be deemed satisfied and discharged. Notwithstanding the satisfaction and discharge of this CVR Agreement, the obligations of the Company under SECTION 4.6(c) shall survive.

SECTION 3.2 Registrable Form . The Securities shall be issuable only in registered form. The CVRs shall be issued initially in the form of (a) one or more permanent Global Securities, deposited with the Trustee, as the custodian for The Depository Trust Company, its nominees and successors (the “ Depositary ”), or (b) one or more Direct Registration Securities. Each Global Security will represent such of the Outstanding Securities as will be specified therein and each shall provide that it represents the aggregate number of Outstanding Securities from time to time endorsed thereon and that the aggregate number of Outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate to reflect exchanges.

 

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SECTION 3.3 Execution, Authentication, Delivery and Dating.

(a) The Global Securities and CVR Certificates, if any, shall be executed on behalf of the Company by its Chief Executive Officer or any other person duly authorized to act on behalf of the Company for such purpose or any general purpose, but need not be attested. The signature of any of these persons on the Global Securities or CVR Certificates, if any, may be manual or facsimile.

(b) Securities bearing the manual or facsimile signatures of individuals who were, at the time of execution, the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

(c) At any time and from time to time after the execution and delivery of this CVR Agreement, the Company may deliver a Company Order for the authentication, as applicable, and delivery of Securities; and the Trustee, in accordance with such Company Order, shall authenticate and deliver such Securities as provided in this CVR Agreement and not otherwise. In the case of Global Securities or CVR Certificates, such Company Order shall be accompanied by Global Securities or CVR Certificates executed by the Company and delivered to the Trustee for authentication in accordance with such Company Order.

(d) Each Global Security or CVR Certificate shall be dated the date of its authentication.

(e) No Global Security or CVR Certificate shall be entitled to any benefit under this CVR Agreement or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee, by manual or facsimile signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Global Security or CVR Certificate has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this CVR Agreement.

(f) Direct Registration Securities need not be authenticated, and shall be valid and obligatory for all purposes and shall entitle each Holder thereof to all benefits of this CVR Agreement.

SECTION 3.4 Registration, Registration of Transfer and Exchange.

(a) The Company shall cause to be kept at the office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to SECTION 7.2 being herein sometimes referred to as the “ Security Register ”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby initially appointed “ Security Registrar ” for the purpose of registering Securities and transfers of Securities as herein provided.

 

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(b) (i) Upon surrender for registration of transfer of any CVR Certificate at the office or agency of the Company designated pursuant to SECTION 7.2, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new CVR Certificates, or at the Company’s election, deliver evidence of b Direct Registration Securities, representing the same aggregate number of CVRs represented by the CVR Certificate so surrendered that are to be transferred and the Company shall execute and the Trustee shall authenticate and deliver, in the name of the transferor, one or more new CVR Certificates, or at the Company’s election, deliver evidence of direct registration of CVRs, representing the aggregate number of CVRs represented by such CVR Certificate that are not to be transferred;

(i) A Global Security may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Securities will be exchanged by the Company for Direct Registration Securities if (1) the Company delivers to the Security Registrar notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; (2) the Company in its sole discretion determines that the Global Securities (in whole but not in part) should be exchanged for Direct Registration Securities and delivers a written notice to such effect to the Security Registrar or (3) a Breach has occurred and is continuing and the Security Registrar has received a request from the Depositary to issue Direct Registration Securities. Upon the occurrence of either of the preceding events in (1) or (2) above, Direct Registration Securities shall be issued in such names as the Depositary shall instruct the Trustee. Global Securities also may be exchanged or replaced, in whole or in part, as provided in SECTION 3.5 hereof. Every Global Security authenticated and delivered in exchange for, or in lieu of, a Global Security or any portion thereof, pursuant to this SECTION 3.4 or SECTION 3.5 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Security. A Global Security may not be exchanged for another Global Security other than as provided in this SECTION 3.4(b)(i), however, beneficial interests in a Global Security may be transferred and exchanged as provided in SECTION 3.4(b)(iii) or (iv) hereof.

(ii) At the option of the Holder, CVR Certificates may be exchanged for other CVR Certificates that represent in the aggregate the same number of CVRs as the CVR Certificates surrendered at such office or agency. Whenever any CVR Certificates are so surrendered for exchange, the Company shall execute and the Trustee shall authenticate and deliver, the CVR Certificates which the Holder making the exchange is entitled to receive.

(iii) The transfer and exchange of beneficial interests in the Global Securities will be effected through the Depositary, in accordance with the provisions of this CVR

 

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Agreement and the Applicable Procedures. Beneficial interests in any Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in Global Security. No written orders or instructions shall be required to be delivered to the Security Registrar to effect the transfers described in this SECTION 3.4(b)(iii).

(iv) If any holder of a beneficial interest in a Global Security proposes to exchange such beneficial interest for a Direct Registration Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Direct Registration Security, then the Security Registrar will cause the aggregate number of CVRs represented by the applicable Global Security to be reduced accordingly pursuant to SECTION 3.4(b)(vii) hereof, and the Security Registrar will deliver to the Person designated in the instructions a Direct Registration Security in the appropriate number of CVRs. Any Direct Registration Security issued in exchange for a beneficial interest pursuant to this SECTION 3.4(b)(iv) will be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Security Registrar from or through the Depositary and the Participant or Indirect Participant.

(v) A Holder of a Direct Registration Security may exchange such Direct Registration Security for a beneficial interest in a Global Security or transfer such Direct Registration Security to a Person who takes delivery thereof in the form of a beneficial interest in a Global Security at any time. Upon receipt of a request for such an exchange or transfer, the Security Registrar will cancel the applicable Direct Registration Security and increase or cause to be increased the aggregate number of CVRs represented by one of the Global Securities.

(vi) Upon request by a Holder of Direct Registration Securities and such Holder’s compliance with the provisions of this SECTION 3.4(b)(vi), the Security Registrar will register the transfer or exchange of Direct Registration Securities. Prior to such registration of transfer or exchange, the requesting Holder must present to the Security Registrar a written instruction of transfer in form satisfactory to the Security Registrar duly executed by such Holder or by its attorney, duly authorized in writing. A Holder of Direct Registration Securities may transfer such Direct Registration Securities to a Person who takes delivery thereof in the form of Direct Registration Securities. Upon receipt of a request to register such a transfer, the Security Registrar shall register the Direct Registration Securities pursuant to the instructions from the Holder thereof.

(vii) At such time as all beneficial interests in a particular Global Security have been exchanged for Direct Registration Securities or a particular Global Security has been repurchased or canceled in whole and not in part, each such Global Security will be returned to or retained and canceled by the Security Registrar in accordance with SECTION 3.8 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security or for Direct Registration Securities, the aggregate number of CVRs represented by such Global Security will be reduced accordingly and an endorsement will be made on such Global

 

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Security by the Security Registrar or by the Depositary at the direction of the Security Registrar to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security, such other Global Security will be increased accordingly and an endorsement will be made on such Global Security by the Security Registrar or by the Depositary at the direction of the Security Registrar to reflect such increase.

(viii) (A) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Securities upon receipt of a Company Order in accordance with SECTION 3.3 hereof or at the Security Registrar’s request.

(B) No service charge will be made to a Holder of a beneficial interest in a Global Security or to a Holder of a Direct Registration Security for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith.

(C) All Global Securities and Direct Registration Securities issued upon any registration of transfer or exchange of Global Securities or Direct Registration Securities will be the valid obligations of the Company, evidencing the same rights, and entitled to the same benefits under this CVR Agreement, as the Global Securities or Direct Registration Securities surrendered upon such registration of transfer or exchange.

(D) The Trustee will authenticate Global Securities and CVR Certificates in accordance with the provisions of SECTION 3.3 hereof.

SECTION 3.5 Mutilated, Destroyed, Lost and Stolen Securities .

(a) If (i) any mutilated Global Security or CVR Certificate is surrendered to the Trustee, or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Global Security or CVR Certificate, and there is delivered to the Company and the Trustee (A) such security or indemnity as may be reasonably required by them to save each of them and any agent of either harmless and (B) an affidavit of loss in respect of such Security, then, in the absence of notice to the Company or the Trustee that such Global Security or CVR Certificate has been acquired by a bona fide purchaser, the Company shall execute and, upon delivery of a Company Order, the Trustee shall authenticate, as applicable, and deliver, in exchange for any such mutilated Global Security or CVR Certificate or in lieu of any such destroyed, lost or stolen Security, a new CVR, in the form of either a Global Security, a CVR Certificate or a Direct Registration Security, of like tenor and amount of CVRs, bearing a number not contemporaneously outstanding.

(b) In case any such mutilated, destroyed, lost or stolen Global Security or CVR Certificate has become or is to become finally due and payable within fifteen (15) days, the Company in its discretion may, instead of issuing a new CVR, pay to the Holder of such Security on the applicable Payment Date, as the case may be, all amounts due and payable with respect thereto.

 

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(c) Every new Security issued pursuant to this SECTION 3.5 in lieu of any destroyed, lost or stolen Global Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this CVR Agreement equally and proportionately with any and all other Securities duly issued hereunder.

(d) The provisions of this SECTION 3.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

SECTION 3.6 Payments with Respect to CVRs . Payment of any amounts pursuant to the CVRs shall be made in such coin or currency of the United States of America as at the time is legal tender for the payment of public and private debts. The Company may, at its option, pay such amounts by wire transfer or check payable in such money.

SECTION 3.7 Persons Deemed Owners . Prior to the time of due presentment for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

SECTION 3.8 Cancellation . All Securities surrendered for payment, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company shall promptly deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company has acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this SECTION 3.8, except as expressly permitted by this CVR Agreement. All cancelled Securities held by the Trustee shall be destroyed and a certificate of destruction shall be issued by the Trustee to the Company, unless otherwise directed by a Company Order.

SECTION 3.9 CUSIP Numbers . The Company in issuing the Securities may use “CUSIP” numbers (if then generally in use). The Company shall promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

 

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ARTICLE 4

THE TRUSTEE

SECTION 4.1 Certain Duties and Responsibilities.

(a) With respect to the Holders, the Trustee, prior to the occurrence of a Breach (as defined in SECTION 8.1) with respect to the Securities and after the curing or waiving of all Breaches which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this CVR Agreement and no implied covenants shall be read into this CVR Agreement against the Trustee. In case a Breach with respect to the Securities has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this CVR Agreement, and use the same degree of care and skill in their exercise, as a reasonably prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(b) In the absence of bad faith on its part, prior to the occurrence of a Breach and after the curing or waiving of all such Breaches which may have occurred, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee which conform to the requirements of this CVR Agreement; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this CVR Agreement.

(c) No provision of this CVR Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection (c) shall not be construed to limit the effect of Subsections (a) and (b) of this SECTION 4.1; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders pursuant to SECTION 8.9 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this CVR Agreement.

(d) Whether or not therein expressly so provided, every provision of this CVR Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this SECTION 4.1.

 

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SECTION 4.2 Certain Rights of Trustee . Subject to the provisions of SECTION 4.1, including without limitation, the duty of care that the Trustee is required to exercise upon the occurrence of a Breach:

(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties and the Trustee need not investigate any fact or matter stated in the document;

(b) any request or direction or order of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution and the Trustee shall not be liable for any action it takes or omits to take in good faith reliance thereon;

(c) whenever in the administration of this CVR Agreement the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers’ Certificate and the Trustee shall not be liable for any action it takes or omits to take in good faith reliance thereon or an Opinion of Counsel;

(d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this CVR Agreement at the request or direction of any of the Holders pursuant to this CVR Agreement, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document, but the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney, as necessary for such inquiry or investigation at the sole cost of the Company and shall incur no liability of any kind by reason of such inquiry or investigation other than as a result of Trustee’s gross negligence or willful misconduct;

(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(h) the Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this CVR Agreement;

 

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(i) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Paying Agent, the Security Registrar, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder;

(j) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

(k) certain of the Trustee’s duties hereunder may be performed by the Paying Agent or Security Registrar;

(l) the Trustee shall not be deemed to have knowledge of any Breach except any Breach of which the Trustee shall have received written notification or otherwise obtained actual knowledge. In the absence of such notice, the Trustee may conclusively assume there is no Breach except as aforesaid;

(m) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder;

(n) the permissive rights of the Trustee enumerated in this CVR Agreement shall not be construed as duties hereunder;

(o) the Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this CVR Agreement; and

(p) in no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities or communications services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

SECTION 4.3 Not Responsible for Recitals or Issuance of Securities . The Trustee shall not be accountable for the Company’s use of the Securities by any Person other than the Trustee. The recitals contained herein and in the Securities, except the Trustee’s certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this CVR Agreement or of the Securities.

SECTION 4.4  May Hold Securities . The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other capacity, may become

 

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the owner or pledgee of Securities, and, subject to SECTIONS 4.7 and 4.12, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such other agent.

SECTION 4.5 Money Held in Trust . Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by Law. The Trustee shall be under no liability for interest on any money received by it hereunder, except as otherwise agreed by the Trustee in writing with the Company.

SECTION 4.6 Compensation and Reimbursement . The Company agrees:

(a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amount as the Company and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of Law in regard to the compensation of a trustee of an express trust);

(b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this CVR Agreement (including the reasonable compensation and the reasonable expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Trustee’s gross negligence, bad faith or willful misconduct; and

(c) to indemnify the Trustee and any predecessor Trustee and each of their respective agents, officers, directors and employees (each an “ indemnitee ”) for, and to hold them harmless against, any loss, liability or expense (including attorneys fees and expenses) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust and the performance of their duties hereunder, including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder. The Company’s payment obligations pursuant to this SECTION 4.6 shall survive the termination of this CVR Agreement. When the Trustee incurs expenses after the occurrence of a Breach specified in SECTION 8.1(c) or 8.1(d) with respect to the Company, the expenses are intended to constitute expenses of administration under bankruptcy Laws.

In order to secure the payment obligations of the Company in this SECTION 4.6, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee except such money or property held in trust to make CVR Payments.

SECTION 4.7 Disqualification; Conflicting Interests.

(a) If applicable, to the extent that the Trustee or the Company determines that the Trustee has a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall

 

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immediately notify the Company of such conflict and, within ninety (90) days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this CVR Agreement. The Company shall take prompt steps to have a successor appointed in the manner provided in this CVR Agreement.

(b) In the event the Trustee shall fail to comply with the foregoing subsection 4.7(a), the Trustee shall, within ten (10) days of the expiration of such ninety (90) day period, transmit a notice of such failure to the Holders in the manner and to the extent provided in the Trust Indenture Act and this CVR Agreement.

(c) In the event the Trustee shall fail to comply with the foregoing subsection 4.7(a) after written request therefor by the Company or any Holder, any Holder of any Security who has been a bona fide Holder for at least six (6) months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of such Trustee and the appointment of a successor Trustee.

SECTION 4.8 Corporate Trustee Required; Eligibility . There shall at all times be a Trustee hereunder which satisfies the applicable requirements of Sections 310(a)(1) and (5) of the Trust Indenture Act and has a combined capital and surplus of at least one hundred fifty million dollars ($150,000,000). If such corporation publishes reports of condition at least annually, pursuant to Law or to the requirements of a supervising or examining authority, then for the purposes of this SECTION 4.8, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this SECTION 4.8, it shall resign immediately in the manner and with the effect hereinafter specified in this ARTICLE 4.

SECTION 4.9 Resignation and Removal; Appointment of Successor.

(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this ARTICLE 4 shall become effective until the acceptance of appointment by the successor Trustee under SECTION 4.10.

(b) The Trustee, or any trustee or trustees hereafter appointed, may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c) The Trustee may be removed at any time by a demand in writing by the Holders of at least a majority of the Outstanding CVRs delivered to the Trustee and to the Company.

 

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(d) If at any time:

(i) the Trustee shall fail to comply with SECTION 4.7 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six (6) months; or

(ii) the Trustee shall cease to be eligible under SECTION 4.8 and shall fail to resign after written request therefor by the Company or by any such Holder; or

(iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any case, (A) the Company, by a Board Resolution or action of its Chief Executive Officer, may remove the Trustee, or (B) the Holder of any Security who has been a bona fide Holder of a Security for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution and/or action of its Chief Executive Officer, shall promptly appoint a successor Trustee. If, within one (1) year after any removal by the Holders of at least a majority of the Outstanding CVRs, a successor Trustee shall be appointed by act of the Holders of at least a majority of the Outstanding CVRs delivered to the Company and the retiring Trustee the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with SECTION 4.10, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders of the Securities and accepted appointment within sixty (60) days after the retiring Trustee tenders its resignation or is removed, the retiring Trustee may (at the expense of the obligor), or, the Holder of any Security who has been a bona fide Holder for at least six (6) months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. If any Trustee is removed with or without cause, all fees and expenses (including the reasonable fees and expenses of counsel) of such Trustee incurred in the administration of the trust or in performing its duties hereunder shall be paid to such Trustee.

(f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Company fails to send such notice within ten (10) days after acceptance of appointment by a successor Trustee, it shall not be a breach hereunder but the successor Trustee shall cause the notice to be mailed at the expense of the Company.

 

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SECTION 4.10 Acceptance of Appointment of Successor.

(a) Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, upon request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. Notwithstanding the replacement of the Trustee pursuant to this SECTION 4.10, the Company’s obligations under SECTION 4.6 shall continue and inure to the benefit of the retiring Trustee.

(b) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this ARTICLE 4.

SECTION 4.11 Merger, Conversion, Consolidation or Succession to Business . Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, by sale or otherwise shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this ARTICLE 4, without the execution or filing of any paper or any further act on the part of any of the Parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion, sale or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities; and such certificate shall have the full force which it is anywhere in the Securities or in this CVR Agreement provided that the certificate of the Trustee shall have; provided that the right to adopt the certificate of authentication of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

SECTION 4.12 Preferential Collection of Claims Against Company . If and when the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company (or any other obligor upon the Securities), excluding any creditor relationship set forth in Section 311(b) of the Trust Indenture Act, if applicable, the Trustee shall be subject to the applicable provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor).

 

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ARTICLE 5

HOLDERS’ LISTS AND REPORTS BY THE TRUSTEE AND COMPANY

SECTION 5.1 Company to Furnish Trustee with Names and Addresses of Holders . The Company shall furnish or cause to be furnished to the Trustee (a) promptly after the issuance of the Securities, and semi-annually thereafter, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a recent date, and (b) at such times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than fifteen (15) days prior to the time such list is furnished; provided , however , that if and so long as the Trustee shall be the Security Registrar, no such list need be furnished.

SECTION 5.2 Preservation of Information; Communications to Holders.

(a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders contained in the most recent list furnished to the Trustee as provided in SECTION 5.1 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in SECTION 5.1 upon receipt of a new list so furnished.

(b) The rights of the Holders to communicate with other Holders with respect to their rights under this CVR Agreement and the corresponding rights and privileges of the Trustee shall be as provided by Section 312(b)(2) of the Trust Indenture Act, if applicable.

(c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee shall be deemed to be in violation of Law or held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act (if applicable) regardless of the source from which such information was derived.

SECTION 5.3 Reports by Trustee.

(a) Within sixty (60) days after December 31 of each year commencing with the December 31 following the date of this CVR Agreement, the Trustee shall transmit to all Holders such reports concerning the Trustee and its actions under this CVR Agreement as may be required pursuant to Section 313(a) of the Trust Indenture Act to the extent and in the manner provided pursuant thereto. The Trustee shall also comply with Section 313(b)(2) of the Trust Indenture Act, if applicable. The Trustee shall also transmit by mail all reports as required by Section 313(c) of the Trust Indenture Act, if applicable.

(b) A copy of each such report shall, at the time of such transmission to the Holders, be filed by the Trustee with each stock exchange, if any, upon which the Securities are listed, with the Commission and also with the Company. The Company shall promptly notify the Trustee when the Securities are listed or delisted on any stock exchange.

 

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SECTION 5.4 Reports by Company . The Company shall: (a) file with the Trustee, (i) within fifteen (15) days after the Company files or furnishes the same with the Commission, copies of the annual reports filed on Form 10-K and the quarterly reports filed on Form 10-Q, and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company is required to file with or furnish to the Commission, pursuant to Section 13 or Section 15(d) of the Exchange Act (such annual and quarterly reports and required information, documents and other reports, together the “ Exchange Act Documents ”), (ii) if the Company does not file such annual and quarterly reports with the Commission, within forty-five (45) days after each fiscal quarter (other than the last quarter of each fiscal year), quarterly financial information and, within ninety (90) days after each calendar year, annual financial information, in each case calculated in accordance with Accounting Standards, (iii) copies of any quarterly financial information or earnings reports made public by the Company or made available on the Company’s website, within fifteen (15) days after such information or reports are furnished or otherwise made public or available, (iv) within fifteen (15) days after the end of each calendar month during a calendar year other than the last calendar month, and within thirty (30) days after the end of the last calendar month of a calendar year, a Product Sales Statement, and (v) within four (4) Business Days after the occurrence of the Approval Milestone, a notice setting forth the occurrence of the Milestone, the amount of the payment payable in connection with such Milestone and the applicable Payment Date of such Milestone; (b) file with the Trustee such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this CVR Agreement as may be required from time to time by the Trustee or the rules and regulations of the Commission; and (c) make available on the Company’s website as of an even date with the filing of such materials with the Trustee, the information, documents and reports required to be filed by the Company pursuant to subsections (a) or (b) of this SECTION 5.4.

SECTION 5.5 Compliance Certificate . The Company shall comply with Section 314(a)(4) of the Trust Indenture Act, to the extent applicable, by delivering to the Trustee an Officers’ Certificate within one hundred and twenty (120) days after the end of each fiscal year of the Company ending after the date hereof, to be executed by the principal executive officer, principal financial officer or principal accounting officer of the Company and stating whether or not, to the best knowledge of the signer(s) thereof, the Company is in breach in the performance and observance of any of the terms, provisions or conditions of this CVR Agreement (without regard to any period of grace or requirement of notice provided hereunder).

 

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ARTICLE 6

AMENDMENTS

SECTION 6.1 Amendments without Consent of Holders . Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may enter into one or more amendments hereto or to the Securities, for any of the following purposes:

(a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities any property or assets;

(b) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities;

(c) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as the Board of Directors and/or the Chief Executive Officer of the Company and the Trustee shall consider to be for the protection of the Holders of Securities, and to make the occurrence, or the occurrence and continuance, of a breach in any such additional covenants, restrictions, conditions or provisions a Breach permitting the enforcement of all or any of the several remedies provided in this CVR Agreement as herein set forth; provided, that in respect of any such additional covenant, restriction, condition or provision, such amendment may provide for a particular period of grace after breach (which period may be shorter or longer than that allowed in the case of other breaches) or may provide for an immediate enforcement upon such a Breach or may limit the remedies available to the Trustee upon such a Breach or may limit the right of the Acting Holders to waive such a Breach;

(d) to cure any ambiguity, or to correct or supplement any provision herein or in the Securities which may be defective or inconsistent with any other provision herein; provided that such amendment shall not adversely affect the interests of the Holders;

(e) to make any other provisions with respect to matters or questions arising under this CVR Agreement; provided that such provisions shall not adversely affect the interests of the Holders;

(f) to make any amendments or changes necessary to comply or maintain compliance with the Trust Indenture Act, if applicable; or

(g) make any change that does not adversely affect the interests of the Holders.

Promptly following any amendment of this CVR Agreement or the Securities in accordance with this SECTION 6.1, the Company shall notify the Holders of the Securities of such amendment; provided , that any failure so to notify the Holders shall not affect the validity of such amendment.

SECTION 6.2 Amendments with Consent of Holders . With the consent of the Holders of at least a majority of the Outstanding CVRs, by Act of said Holders delivered to the Company and the Trustee (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Securities), the Company (when authorized by a Board Resolution and/or its Chief Executive Officer) and the Trustee may enter into one or more amendments hereto or to the Securities for the purpose of adding any provisions to or changing in any manner

 

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or eliminating any of the provisions of this CVR Agreement or to the Securities or of modifying in any manner the rights of the Holders under this CVR Agreement or to the Securities; provided , however , that no such amendment shall, without the consent of the Holder of each Outstanding Security affected thereby:

(a) modify in a manner adverse to the Holders (i) any provision contained herein with respect to the termination of this CVR Agreement or the Securities, (ii) the time for payment and amount of any Product Sales Milestone Payment or the Approval Milestone Payment, or otherwise extend the time for payment of the Securities or reduce the amounts payable in respect of the Securities or modify any other payment term or Payment Date;

(b) reduce the number of CVRs; or

(c) modify any of the provisions of this SECTION 6.2, except to increase the percentage of Holders from whom consent is required or to provide that certain other provisions of this CVR Agreement cannot be modified or waived without the consent of the Holder of each Security affected thereby.

SECTION 6.3 Execution of Amendments . In executing any amendment permitted by this ARTICLE 6, the Trustee (subject to SECTION 4.1) shall be fully protected in relying upon (i) an Opinion of Counsel and Officer’s Certificate stating that the execution of such amendment is authorized or permitted by this CVR Agreement and (ii) if such amendment is executed pursuant to SECTION 6.2, evidence of the consent of the Holders required to consent thereto. The Trustee shall execute any amendment authorized pursuant to this ARTICLE 6 if the amendment does not adversely affect the Trustee’s own rights, duties or immunities under this CVR Agreement or otherwise. Otherwise, the Trustee may, but need not, execute such amendment.

SECTION 6.4 Effect of Amendments; Notice to Holders.

(a) Upon the execution of any amendment under this ARTICLE 6, this CVR Agreement and the Securities shall be modified in accordance therewith, and such amendment shall form a part of this CVR Agreement and the Securities for all purposes; and every Holder of Securities theretofore or thereafter authenticated, as applicable, and delivered hereunder shall be bound thereby.

(b) Promptly after the execution by the Company and the Trustee of any amendment pursuant to the provisions of this ARTICLE 6, the Company shall mail a notice thereof by first-class mail to the Holders of Securities at their addresses as they shall appear on the Security Register, setting forth in general terms the substance of such amendment. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment.

SECTION 6.5 Conformity with Trust Indenture Act . Every amendment executed pursuant to this ARTICLE 6 shall conform to the applicable requirements of the Trust Indenture Act, if any.

 

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SECTION 6.6 Reference in Securities to Amendments . If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. Securities authenticated and delivered after the execution of any amendment pursuant to this ARTICLE 6 may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such amendment. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee on the one hand and the Board of Directors and/or the Chief Executive Officer of the Company on the other hand, to any such amendment may be prepared and executed by the Company, as applicable, and authenticated, as applicable, and delivered by the Trustee in exchange for Outstanding Securities. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.

ARTICLE 7

COVENANTS

SECTION 7.1 Payment of Amounts, if any, to Holders . The Company shall duly and punctually pay the amounts, if any, on the Securities in accordance with the terms of the Securities and this CVR Agreement. Such amounts shall be considered paid on the applicable Payment Date if on such date the Trustee or the Paying Agent holds in accordance with this CVR Agreement money sufficient to pay all such amounts then due. Notwithstanding any other provision of this CVR Agreement, the Company or any of its Affiliates (including the Surviving Corporation, as applicable), the Trustee or the Paying Agent, shall be entitled to deduct and withhold, or cause to be deducted and withheld, from any amounts payable or otherwise deliverable pursuant to this CVR Agreement to any Holder such amounts as are required to be deducted and withheld therefrom under the Code or the Treasury Regulations thereunder or any other Tax Law. If Trustee or the Paying Agent intends to withhold any amounts from amounts payable under this CVR Agreement, then Trustee or the Paying Agent shall provide thirty (30) days advance notice of such intended withholding to the payee explaining the basis therefor in order to give the payee an opportunity to provide any information or documentation that may be necessary in order to prevent such withholding.

SECTION 7.2 Maintenance of Office or Agency.

(a) As long as any of the Securities remain Outstanding, the Company shall maintain in the city of New York an office or agency (i) where Securities may be presented or surrendered for payment, (ii) where Securities may be surrendered for registration of transfer or exchange and (iii) where notices and demands to or upon the Company in respect of the Securities and this CVR Agreement may be served. The Corporate Trust Office shall be such office or agency of

 

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the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company or any of its Subsidiaries may act as Paying Agent, registrar or transfer agent; provided that such Person shall take appropriate actions to avoid the commingling of funds. The Company shall give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

(b) The Company may from time to time designate one or more other offices or agencies (in or outside of the city of New York) where the Securities may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; provided , however , that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the city of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such office or agency.

SECTION 7.3 Money for Security Payments to Be Held in Trust.

(a) If the Company or any of its Subsidiaries shall at any time act as the Paying Agent, it shall, on or before the Payment Date, as the case may be, segregate and hold in trust for the benefit of the Holders all sums held by such Paying Agent for payment on the Securities until such sums shall be paid to the Holders as herein provided, and shall promptly notify the Trustee of any failure of the Company to make payment on the Securities.

(b) Whenever the Company shall have one or more Paying Agents for the Securities, it shall, on or before a Payment Date deposit with a Paying Agent a sum in same day funds sufficient to pay the amount, if any, so becoming due; such sum to be held in trust for the benefit of the Persons entitled to such amount, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of such action or any failure so to act.

(c) The Company shall cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this SECTION 7.3, that (i) such Paying Agent shall hold all sums held by it for the payment of any amount payable on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall notify the Trustee of the sums so held and (ii) that it shall give the Trustee notice of any failure by the Company (or by any other obligor on the Securities) to make any payment on the Securities when the same shall be due and payable.

(d) Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment on any Security and remaining unclaimed for one (1) year after the Payment Date shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease.

 

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SECTION 7.4 Certain Purchases and Sales . The Company or any of its Subsidiaries or Affiliates may acquire in open market transactions, private transactions or otherwise, the Securities, provided that prior to any acquisition of any Securities, the Company must publicly disclose the amount of Securities which it has been authorized to acquire and the Company must report in each of its annual and quarterly reports the amount of Securities it has been authorized to acquire as well as the amount of Securities it has acquired as of the end of the quarterly or annual period reported in such quarterly or annual report.

SECTION 7.5 Books and Records . The Company shall keep, and shall cause its Subsidiaries to keep, true, complete and accurate records in sufficient detail to enable the amounts payable under this CVR Agreement to be determined by the Holders and their consultants or professional advisors, for a period of three (3) years following the Termination Date.

SECTION 7.6 Audits.

(a) Upon the written request of the Acting Holders (but no more than once during any calendar year), and upon reasonable notice, the Company shall provide an independent certified public accounting firm of nationally recognized standing jointly agreed upon by the Acting Holders and the Company (failing agreement on which each shall designate an independent public accounting firm of its own selection, which firms shall in turn appoint an independent public accounting firm for such purpose) (the “ Independent Accountant ”) with access during normal business hours to such of the records of the Company as may be reasonably necessary to verify the accuracy of the statements set forth in the Product Sales Statements and the figures underlying the calculations set forth therein for any period within the preceding three (3) years that has not previously been audited in accordance with this SECTION 7.6. The fees charged by such accounting firm shall be paid by the Company. The Independent Accountant shall disclose to the Acting Holders any matters directly related to their findings and shall disclose whether it has determined that any statements set forth in the Product Sales Statements are incorrect. The Independent Accountant shall provide the Company with a copy of all disclosures made to the Acting Holders. This covenant shall survive the termination of this CVR Agreement for a period of one (1) year. The initiation of a review by the Acting Holders as contemplated by this SECTION 7.6 shall not relieve the Company of its obligation to pay any Product Sales Milestone Payment relating to any Product Sales Milestone for which notice of achievement has been given in a Product Sales Statement, it being understood that the Company shall also be obligated to pay the full amount of the CVR Shortfall, if any, determined in accordance with SECTION 7.6(b).

(b) If the Independent Accountant concludes that any Product Sales Milestone Payment should have been paid but was not paid when due, the Company shall pay each Holder of a CVR the amount of such Product Sales Milestone Payment (to the extent not paid on a

 

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subsequent date), as applicable, plus interest on such Product Sales Milestone Payment, as applicable, at the Shortfall Interest Rate from the date the Product Sales Milestone Payment Date should have occurred (if the Company had given notice of achievement of such Product Sales Milestone pursuant to the terms of this CVR Agreement), as applicable, to the date of actual payment (such amount including interest being the “ CVR Shortfall ”). The Company shall pay the CVR Shortfall to the CVR Holders of record as of a date that is three (3) Business Days prior to a Payment Date selected by the Company, which Payment Date must be within sixty (60) days of the date the Acting Holders deliver to the Company the Independent Accountant’s written report (the “ Shortfall Report ”). The decision of such Independent Accountant shall be final, conclusive and binding on the Company and the Holders, shall be non­appealable and shall not be subject to further review.

(c) Each Person seeking to receive information from the Company in connection with a review or audit shall enter into, and shall cause its accounting firm to enter into, a reasonable and mutually satisfactory confidentiality agreement with the Company obligating such party to retain all such financial information disclosed to such party in confidence pursuant to such confidentiality agreement and not use such information for any purpose other than the completion of such review or audit.

(d) The Company shall not, and shall cause its Affiliates not to, enter into any license or distribution agreement with any third party (other than the Company or its Affiliates) with respect to a Product unless such agreement contains provisions that would allow any Independent Accountant appointed pursuant to this SECTION 7.6 such access to the records of the other party to such license or distribution agreement as may be reasonably necessary to perform its duties pursuant to this SECTION 7.6; provided that the Company and its Affiliates shall not be required to amend any Existing Licenses. The Parties agree that, if the Company or its Affiliates have exercised audit rights under any license or distribution agreement prior to the Acting Holders’ request for an audit under this SECTION 7.6 and under such license or distribution agreement the Company and its Affiliates cannot request another audit, the results of the Company’s prior audit of such licensee or distributor shall be used for purposes of the audit requested by the Acting Holders under this SECTION 7.6 and that the Company shall not have any further obligation to provide access to an Independent Accountant with respect to such licensee until such time as the Company may again exercise its rights of audit under the license agreement with such licensee.

SECTION 7.7 Listing of CVRs . The Company hereby covenants and agrees it shall use its commercially reasonable efforts to maintain a listing for trading on the Nasdaq Global Select Market, Nasdaq Global Market, or other national securities exchange for so long as any CVRs remain Outstanding.

SECTION 7.8 Product Transfer. Subject to ARTICLE 9, so long as the Securities remain Outstanding, the Company and its Affiliates may not, directly or indirectly, by a sale or swap of assets, merger, reorganization, joint venture, lease, license, or any other transaction or arrangement, sell, transfer, convey or otherwise dispose of their respective rights in and to a Product to a third party (other than the Company or its Affiliates) (such transaction, a “ Product

 

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Disposition Transaction ”), unless (a) the Company (or its successor including, if applicable, a Person to whom all of the Company’s and its Subsidiaries’ interests in the relevant Product are transferred) shall agree to remain subject to the obligations hereunder to make any Product Sales Milestone Payments and the Approval Milestone Payment if and when such a payment is due in accordance with the terms of this CVR Agreement and (b) at all times after the closing of such Product Disposition Transaction and prior to the Termination Date the gross amounts invoiced for Products by the applicable transferee will be reflected in the Product Sales in accordance with the terms hereunder (with the transferee substituted for the Company for the purposes of the definition of “Product Sales”) as if such transferee was the Company and the agreement for such Product Disposition Transaction requires the transferee to comply with the covenants in this SECTION 7.8 and in SECTION 7.6 hereof to the same extent as the Company. For purposes of clarification, this SECTION 7.8 shall not apply to sales of a Product made by the Company or its Affiliates or ordinary course licensing arrangements between the Company and its Affiliates, on the one hand, and third party licensees, distributors and contract manufacturers, on the other hand, entered into in the ordinary course of business for purposes of developing, manufacturing, distributing and/or selling such Product and for which the gross amounts invoiced for sales of such Product by the applicable third party licensee, distributor or contract manufacturer shall be reflected in Product Sales in accordance with the terms of this CVR Agreement.

SECTION 7.9 Milestones .

(a) Subject to SECTIONS 7.9(b), (c) and (d) below, the Company, directly or through its Affiliates, licensees and/or other contractors, shall use Diligent Efforts to achieve (i) the Approval Milestone and (ii) the Product Sales Milestones through sales of Marketed Products.

(b) The Company shall have no obligation to pursue the Approval Milestone if the FDA issues an order under 21 CFR 814.45 denying FDA Approval of the AUGMENT PMA . Further, and for the avoidance of doubt, in the event the FDA requires any additional clinical efficacy trial(s), post-marketing study(ies) (other than customary post-approval patient registries) or otherwise requests additional information that cannot be derived from BioMimetic’s completed clinical studies, the Company, its Affiliates and/or licensees will not be required to undertake any of the foregoing, and any election by the Company, its Affiliates and/or licensees not to do so will not be deemed a failure to exercise Diligent Efforts under this Agreement. For purposes of the foregoing sentence, additional safety trials such as pharmacokinetic studies and similar studies with non-efficacy based endpoints that are reasonably capable of being performed in less than eighteen (18) months will not be considered clinical efficacy trials.

(c) The Company’s obligation to use Diligent Efforts to achieve the Product Sales Milestones with respect to AUGMENT Bone Graft do not require the Company, its Affiliates and/or licensees to seek or obtain approval to market and sell AUGMENT Bone Graft (i) in any jurisdiction other than the United States, nor (ii) for any indication other than the indications approved by the FDA in the first FDA Approval of AUGMENT Bone Graft (assuming any such approval is obtained).

(d) Except as expressly set forth in SECTION 7.9(a) above with respect to AUGMENT Bone Graft, the Company shall have no obligation (i) to seek new or expanded

 

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regulatory approvals for any Product, (ii) to develop or introduce new Products or (iii) to commercialize any Product in any jurisdiction where such Product was not legally commercialized as of the date of this CVR Agreement. No failure of the Company, its Affiliates and/or licensees to do any of the foregoing will be deemed a failure to use Diligent Efforts hereunder. Further, and without in any way inferring that the application of Diligent Efforts would otherwise bar the Company, its Affiliates and/or licensees from electing in good faith to discontinue the marketing and sale of a Product, it is understood and agreed that if the Company, or any of its Affiliates or licensees, elects for any reason to suspend or discontinue the marketing and sale of AUGMATRIX Bone Graft in any jurisdiction (or in all jurisdictions), such decision shall not be deemed a failure by the Company to use Diligent Efforts hereunder.

SECTION 7.10 Notice of Breach . The Company shall file with the Trustee written notice of the occurrence of any Breach or other breach under this CVR Agreement within five (5) Business Days of its becoming aware of any such Breach or other breach.

SECTION 7.11 Non-Use of Name . Neither the Trustee nor the Holders shall use the name, trademark, trade name or logo of the Company, its Affiliates, or their respective employees in any publicity or news release relating to this CVR Agreement or its subject matter, without the prior express written permission of the Company, other than (in the case of the name of the Company, its Affiliates, or their respective employees) with respect to a dispute pursuant to this CVR Agreement between any of the Holders, the Trustee, the Company or its Affiliates.

ARTICLE 8

REMEDIES OF THE TRUSTEE AND HOLDERS IN THE EVENT OF BREACH

SECTION 8.1 Breach Defined; Waiver of Breach . “ Breach ” with respect to the Securities, means each one of the following events which shall have occurred and be continuing (whatever the reason for such Breach and whether it shall be voluntary or involuntary or be effected by operation of Law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) failure to pay all or any part of any CVR Payment after a period of ten (10) Business Days after such CVR Payment shall become due and payable on a Payment Date or otherwise; or

(b) material breach in the performance, or breach in any material respect, of any covenant or warranty of the Company in respect of the Securities (other than a covenant or warranty in respect of the Securities, a breach in whose performance or other breach is elsewhere in this SECTION 8.1 specifically dealt with), and continuance of such breach for a period of ninety (90) days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Acting Holders, a written notice specifying such breach and requiring it to be remedied and stating that such notice is a “Notice of Breach” hereunder; or

 

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(c) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of ninety (90) consecutive days; or

(d) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar Law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property, or make any general assignment for the benefit of creditors.

Except where authorization and/or appearance of each of the Holders is required by applicable Law, if a Breach described above occurs and is continuing, then either the Trustee by notice in writing to the Company, or the Trustee upon the written request of the Acting Holders by notice in writing to the Company and to the Trustee, may, as provided in SECTION 8.2, bring suit to protect the rights of the Holders, including to obtain payment for any amounts then due and payable, which amounts shall bear interest at the Breach Interest Rate from the date such amounts were due and payable until payment is made to the Trustee.

The foregoing provisions, however, are subject to the condition that if, at any time after the Trustee shall have begun such suit, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all amounts which shall have become due and payable (with interest upon such overdue amount at the Breach Interest Rate to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents, attorneys and counsel, and all other expenses and liabilities incurred and all advances made, by the Trustee, and if any and all Breaches under this CVR Agreement shall have been cured, waived or otherwise remedied as provided herein, then and in every such case Holders of at least a majority of the Outstanding CVRs, by Act of said Holders delivered to the Company and the Trustee, may waive all breaches with respect to the Securities, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent breach or shall impair any right consequent thereof.

SECTION 8.2 Collection by the Trustee; the Trustee May Prove Payment Obligations . The Company covenants that in the case of any failure to pay all or any part of the Securities when the same shall have become due and payable, whether at a Payment Date or otherwise, then upon demand of the Trustee, the Company shall pay to the Trustee for the benefit of the Holders of the Securities the whole amount that then shall have become due and payable on all Securities (with interest from the date due and payable to the date of such payment upon the overdue amount at the Breach Interest Rate); and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and any expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of the Trustee’s gross negligence or bad faith.

 

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The Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this CVR Agreement or in aid of the exercise of any power granted herein, or to enforce any other remedy.

In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at Law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon such Securities and collect in the manner provided by Law out of the property of the Company or other obligor upon such Securities, wherever situated, the moneys adjudged or decreed to be payable.

In any judicial proceedings relative to the Company or other obligor upon the Securities, irrespective of whether any amount is then due and payable with respect to the Securities, the Trustee is authorized:

(a) to file and prove a claim or claims for the whole amount owing and unpaid in respect of the Securities, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of the Trustee’s gross negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Company or other obligor upon the Securities, or to their respective property;

(b) unless prohibited by and only to the extent required by applicable Law, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings; and

(c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Holders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of the Trustee’s gross negligence or bad faith, and all other amounts due to the Trustee or any predecessor Trustee pursuant to SECTION 4.6. To the extent that such payment of reasonable compensation, expenses, disbursements, advances and other amounts out

 

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of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, moneys, securities and other property which the Holders may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or safeguard arrangement or otherwise.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, safeguard arrangement, adjustment or composition affecting the Securities, or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person.

All rights of action and of asserting claims under this CVR Agreement, or under any of the Securities, may be enforced by the Trustee without the possession of any of the Securities or the production thereof and any trial or other proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders.

In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this CVR Agreement to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders, and it shall not be necessary to make any Holders of such Securities parties to any such proceedings (unless required by applicable Law).

SECTION 8.3 Application of Proceeds . Any monies collected by the Trustee pursuant to this ARTICLE 8 in respect of any Securities shall be applied in the following order at the date or dates fixed by the Trustee upon presentation of the several Securities in respect of which monies have been collected and stamping (or otherwise noting) thereon the payment in exchange for the presented Securities if only partially paid or upon surrender thereof if fully paid:

FIRST : To the payment of costs and expenses in respect of which monies have been collected, including reasonable compensation to the Trustee and each predecessor Trustee and their respective agents and attorneys and of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of the Trustee’s gross negligence or willful misconduct, and all other amounts due to the Trustee or any predecessor Trustee pursuant to SECTION 4.6;

SECOND : To the payment of the whole amount then owing and unpaid upon all the Securities, with interest at the Breach Interest Rate on all such amounts, and in case such monies shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities, then to the payment of such amounts without preference or priority of any security over any other Security, ratably to the aggregate of such amounts due and payable; and

 

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THIRD : To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto.

SECTION 8.4 Suits for Enforcement . In case a Breach has occurred, has not been waived and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this CVR Agreement by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights (unless authorization and/or appearance of each of the Holders is required by applicable Law), either at Law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this CVR Agreement or in aid of the exercise of any power granted in this CVR Agreement or to enforce any other legal or equitable right vested in the Trustee by this CVR Agreement or by Law.

SECTION 8.5 Restoration of Rights on Abandonment of Proceedings . In case the Trustee or any Holder shall have proceeded to enforce any right under this CVR Agreement and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Holder, then and in every such case the Company and the Trustee and the Holders shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders shall continue as though no such proceedings had been taken.

SECTION 8.6 Limitations on Suits by Holders . Subject to the right of the Acting Holders under SECTION 7.6 and the rights of the Holders under SECTION 8.7, no Holder of any Security shall have any right by virtue or by availing of any provision of this CVR Agreement to institute any action or proceeding at Law or in equity or in bankruptcy or otherwise upon or under or with respect to this CVR Agreement, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless: (i) such Holder previously shall have given to the Trustee written notice of breach and of the continuance thereof, as hereinbefore provided; (ii) the Acting Holders shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder; and (iii) such Holder shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee for fifteen (15) days after its receipt of such notice and request shall have failed to institute any such action or proceeding and no direction inconsistent with such written request shall have been given to the Trustee pursuant to SECTION 8.9; it being understood and intended, and being expressly covenanted by the taker and Holder of every Security with every other taker and Holder and the Trustee, that no one or more Holders of Securities shall have any right in any manner whatever by virtue or by availing of any provision of this CVR Agreement to effect, disturb or prejudice the rights of any other such Holder of Securities, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this CVR Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities. For the protection and enforcement of the provisions of this SECTION 8.6, each and every Holder and the Trustee shall be entitled to such relief as can be given either at Law or in equity.

 

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SECTION 8.7 Unconditional Right of Holders to Institute Certain Suits . Notwithstanding any other provision in this CVR Agreement and any provision of any Security, the right of any Holder of any Security to receive payment of the amounts payable in respect of such Security on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 8.8 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Breach.

(a) Except as provided in SECTION 8.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by Law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at Law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

(b) No delay or omission of the Trustee or of any Holder to exercise any right or power accruing upon any Breach occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Breach or an acquiescence therein; and, subject to SECTION 8.6, every power and remedy given by this CVR Agreement or by Law to the Trustee or to the Holders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders.

SECTION 8.9 Control by Holders.

(a) The Holders of at least a majority of the Outstanding CVRs shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any power conferred on the Trustee with respect to the Securities by this CVR Agreement; provided that such direction shall not be otherwise than in accordance with Law and the provisions of this CVR Agreement; and provided further that (subject to the provisions of SECTION 4.1) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, the executive committee, or a committee of directors or Responsible Officers of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of Holders of the Securities not joining in the giving of said direction.

 

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(b) Nothing in this CVR Agreement shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction or directions by Holders.

SECTION 8.10 Waiver of Past Breaches.

(a) In the case of a breach or a Breach specified in clause (b), (c) or (d) of SECTION 8.1, the Holders of at least a majority of the Outstanding CVRs may waive any such Breach, and its consequences except a breach in respect of a covenant or provisions hereof which cannot be modified or amended without the consent of the Holder of each Security affected. In the case of any such waiver, the Company, the Trustee and the Holders of the Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other breach or impair any right consequent thereon.

(b) Upon any such waiver, such breach shall cease to exist and be deemed to have been cured and not to have occurred, and any Breach arising therefrom shall be deemed to have been cured, and not to have occurred for every purpose of this CVR Agreement; but no such waiver shall extend to any subsequent or other Breach or other breach of any kind or impair any right consequent thereon.

SECTION 8.11 The Trustee to Give Notice of Breach, But May Withhold in Certain Circumstances . The Trustee shall transmit to the Holders, as the names and addresses of such Holders appear on the Security Register (as provided under Section 313(c) of the Trust Indenture Act, if applicable), notice by mail of all breaches which have occurred and are known to the Trustee, such notice to be transmitted within ninety (90) days after the occurrence thereof, unless such breaches shall have been cured before the giving of such notice (the term “breach” for the purposes of this SECTION 8.11 being hereby defined to mean any event or condition which is, or with notice or lapse of time or both would become, a Breach); provided that, except in the case of a failure to pay the amounts payable in respect of any of the Securities, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders; and provided , however , that in the case of any breach of the character specified in SECTION 8.1(b) with respect to the Securities, no notice to Holders shall be given until at least thirty (30) days after the occurrence thereof.

SECTION 8.12 Right of Court to Require Filing of Undertaking to Pay Costs . All Parties to this CVR Agreement agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this CVR Agreement or in any suit against the Trustee for any action taken, suffered or omitted by it as the Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including attorneys’

 

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fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this SECTION 8.12 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder or group of Holders holding in the aggregate more than ten percent (10%) of the Securities Outstanding or to any suit instituted by any Holder for the enforcement of the payment of any Security on or after the due date expressed in such Security.

ARTICLE 9

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

SECTION 9.1 Successor Person Substituted .

(a) In case of a consolidation or merger with a wholly-owned Subsidiary or any other Person, or a transfer or sale to a Person of all or substantially all of the assets or business of Company related to the Products, and following the assumption of this CVR Agreement by such successor Person, such successor Person shall succeed to and be substituted for the Company with the same effect as if it had been named herein. Such successor Person may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Securities issuable hereunder, in the case of Global Securities, which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this CVR Agreement prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this CVR Agreement as the Securities theretofore or thereafter issued in accordance with the terms of this CVR Agreement as though all of such Securities had been issued at the date of the execution hereof.

(b) In case of any such consolidation or merger or sale described in SECTION 9.1(a), such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. The successor Person to such consolidation or merger may satisfy the obligations of SECTION 5.4(a)(i) and (ii) by providing copies of such successor entity’s Exchange Act Documents in the case of SECTION 5.4(a)(i) or such successor entity’s financial information in the case of SECTION 5.4(a)(ii).

SECTION 9.2 Opinion of Counsel to the Trustee . The Trustee, subject to the provisions of SECTIONS 4.1 and 4.2, shall receive an Officer’s Certificate and Opinion of Counsel, prepared in accordance with SECTIONS 1.2 and 1.3, as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, and any such liquidation or dissolution, complies with the applicable provisions of this CVR Agreement, and if a supplemental agreement is required in connection with such transaction, such supplemental agreement complies with this ARTICLE 9 and that there has been compliance with all conditions precedent herein provided for or relating to such transaction.

 

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SECTION 9.3 Successors . All covenants, provisions and agreements in this CVR Agreement by or for the benefit of the Company, the Trustee or the Holders shall bind and inure to the benefit of their respective successors, assigns, heirs and personal representatives, whether so expressed or not. The Company may assign this CVR Agreement without the prior written consent of the other Parties to this CVR Agreement (i) to one or more of its direct or indirect Subsidiaries or (ii) in connection with the transfer or sale of all or substantially all of the assets or business of the Company related to the Products, or in the event of the Company’s merger or consolidation , provided , however , that in the event of any such assignment the Company (or its successor) agrees in writing to remain subject to the obligations and covenants hereunder to make any Product Sales Milestone Payments and the Approval Milestone Payment when such a payment is due in accordance with the terms of this CVR Agreement.

ARTICLE 10

SUBORDINATION

SECTION 10.1 Agreement to Subordinate . The Company agrees, and each Holder by accepting a Security hereunder agrees, that the CVR Payments, all other obligations under this CVR Agreement and the Securities and any rights or claims relating thereto (collectively, the “ Junior Obligations ”) are subordinated in right of payment, to the extent and in the manner provided in this ARTICLE 10 to the prior payment in full in money or money’s worth of all Senior Obligations of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of such Senior Obligations.

SECTION 10.2 Liquidation; Dissolution; Bankruptcy . Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company’s assets and liabilities:

(a) holders of Senior Obligations will be entitled to receive payment in full in money or money’s worth of all Senior Obligations of the Company (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Obligation, whether or not permitted under such bankruptcy proceedings) before the Holders will be entitled to receive any payment of any kind with respect to the Junior Obligations (other than securities of the Company or debt of the Company that is subordinated to the Senior Obligations on terms at least as favorable to holders of Senior Obligations as this ARTICLE 10 (“ Permitted Junior Securities ”)); and

(b) until all Senior Obligations of the Company (as provided in clause (a) above) are paid in full in money or money’s worth, any distribution to which Holders would be entitled but for this ARTICLE 10 (other than Permitted Junior Securities) will be made to holders of Senior Obligations of the Company, as their interests may appear.

 

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SECTION 10.3 When Distribution Must be Paid Over .

(a) In the event that the Trustee or any Holder receives any payment of any Junior Obligations (other than Permitted Junior Securities) at a time when the Trustee or such Holder has actual knowledge that such payment is prohibited by this ARTICLE 10 , such payment will be held by the Trustee or such Holder, in trust for the benefit of, and will be paid forthwith over and delivered, upon written request, to, the holders of Senior Obligations of the Company as their interests may appear or their representative under the agreement, indenture or other document (if any) pursuant to which such Senior Obligations may have been issued, as their respective interests may appear, for application to the payment of all such Senior Obligations remaining unpaid to the extent necessary to pay such Senior Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Obligations.

(b) With respect to the holders of Senior Obligations, the Trustee undertakes to perform only those obligations on the part of the Trustee as are specifically set forth in this ARTICLE 10, and no implied covenants or obligations with respect to the holders of Senior Obligations will be read into this CVR Agreement against the Trustee. The Trustee will not be deemed to owe any fiduciary duty to the holders of Senior Obligations, and will not be liable to any such holders if the Trustee pays over or distributes to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Obligations are then entitled by virtue of this ARTICLE 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee.

SECTION 10.4 Notice by Company . The Company will promptly notify the Trustee of any facts known to the Company that would cause a payment of any Junior Obligations to violate this ARTICLE 10, but failure to give such notice will not affect the subordination of the Junior Obligations to the Senior Obligations as provided in this ARTICLE 10.

SECTION 10.5 Subrogation . After all Senior Obligations are paid in full in money or money’s worth and until the Junior Obligations are paid in full, Holders will be subrogated to the rights of holders of Senior Obligations to receive distributions applicable to Senior Obligations to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Obligations. The Holders by accepting the Securities acknowledge that to the extent that the Senior Obligations are determined to be unenforceable, or the Senior Obligations are subordinated to other obligations of the Company, such subrogation rights may be impaired.

SECTION 10.6 Relative Rights . This ARTICLE 10 defines the relative rights of Holders and holders of Senior Obligations. Nothing in this CVR Agreement will:

 

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(a) impair, as between the Company and Holders, the obligations of the Company under this CVR Agreement and the Securities;

(b) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Obligations; or

(c) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Obligations to receive distributions and payments otherwise payable to Holders under this ARTICLE 10.

If the Company fails because of this ARTICLE 10 to pay any amounts due in respect of the Securities on a due date in violation of SECTION 3.1(c) or SECTION 3.1(d), the failure is still an Event of Default.

SECTION 10.7 Subordination May Not be Impaired by the Company . No right of any holder of Senior Obligations to enforce the subordination of the Junior Obligations may be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this CVR Agreement.

SECTION 10.8 Distribution or Notice to the Representative . Whenever a distribution is to be made or a notice given to holders of Senior Obligations, the distribution may be made and the notice given to their representative in accordance with the terms of the instrument or other agreement governing such Senior Obligations. Upon any payment or distribution of assets of the Company referred to in this ARTICLE 10, the Trustee and the Holders will be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Obligations and other obligations of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this ARTICLE 10.

SECTION 10.9 Rights of the Trustee . Notwithstanding the provisions of this ARTICLE 10 or any other provision of this CVR Agreement, the Trustee will not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee may continue to make payments on the Securities, unless the Trustee has received at its address for notice specified in SECTION 1.5 at least five (5) Business Days prior to the date of such payment written notice of facts that would cause the payment of any Junior Obligations to violate this ARTICLE 10. Only the Company or a representative of Senior Obligations may give the notice. Nothing in this ARTICLE 10 will impair the claims of, or payments to, the Trustee under or pursuant to SECTION 4.6 hereof. The Trustee in its individual or any other capacity may hold Senior Obligations with the same rights it would have if it were not the Trustee.

 

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SECTION 10.10 Authorization to Effect Subordination . Each Holder, by the Holder’s acceptance of the Securities, authorizes and directs the Trustee on such Holder’s behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this ARTICLE 10, and appoints the Trustee to act as such Holder’s attorney-in-fact for any and all such purposes. If the Trustee (or any other Person acting on behalf of and at the direction of the Majority Holders) does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in SECTION 8.2 hereof at least thirty (30) days before the expiration of the time to file such claim, the representatives of the Senior Obligations are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Securities.

SECTION 10.11 Amendments . The provisions of this ARTICLE 10 are expressly made for the benefit of the holders from time to time of the Senior Obligations, and may not be amended or modified without the written consent of the representatives of the holders of all Senior Obligations.

ARTICLE 11

PURCHASE OF SECURITIES UPON CVR FAILURE EVENT

SECTION 11.1 Notice of Trustee . In the event that a Failure Purchase Eligibility Date has occurred and the Company elects to purchase the Securities pursuant to the provisions of SECTION 11.5 hereof (a “ Failure Purchase ”), it shall furnish to the Trustee, at least thirty (30) days (unless a shorter period shall be agreed to by the Trustee) but not more than sixty (60) days before the date on which the Company proposes to consummate the Failure Purchase (any such date, a “ Failure Purchase Date ”) (but in any event prior to the notice provided pursuant to SECTION 11.2 hereof), an Officer’s Certificate (a “ Failure Purchase Offer ”) setting forth (i) the clause of this CVR Agreement pursuant to which the Failure Purchase shall occur, (ii) the Failure Purchase Date, and (iii) the Failure Purchase Price, determined in accordance with SECTION 11.5 hereof.

SECTION 11.2 Notice of Failure Purchase . At least thirty (30) days but not more than sixty (60) days before a Failure Purchase Date, the Company shall mail or cause to be mailed, a notice of Failure Purchase to each Holder at its registered address (the “ Failure Purchase Notice ”) and shall publicly disclose the election of the Failure Purchase and the information required to be contained in the Failure Purchase Notice pursuant to this SECTION 11.2. The Failure Purchase Notice shall identify the number of Securities Outstanding and shall state:

(a) the Failure Purchase Date;

 

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(b) the Failure Purchase Price;

(c) the name and address of the paying agent;

(d) that Securities must be surrendered to the Paying Agent to collect the Failure Purchase Price;

(e) that, unless the Company fails to make payment of the Failure Purchase Price, all right, title and interest in and to the Securities and any CVR Payment or any other amounts due under this CVR Agreement, if any, on Securities called for Failure Purchase ceases to accrue on and after the Failure Purchase Date;

(f) the clause of this CVR Agreement pursuant to which the Failure Purchase shall occur; and

(g) that no representation is made as to the correctness or accuracy of the CUSIP and ISIN number, if any, listed in such notice or printed on the Securities.

At the Company’s request, the Trustee shall give the Failure Purchase Notice in the Company’s name and at its expense; provided, however, that the Company shall have delivered to the Trustee at least forty five (45) days (unless a shorter period shall be agreed to by the Trustee) but not more than sixty (60) days prior to the Failure Purchase Date, an Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

SECTION 11.3 Effect of Failure Purchase Notice . Once the Failure Purchase Notice is mailed in accordance with SECTION 11.2 hereof, the Securities shall become irrevocably due and payable on the Failure Purchase Date at the Failure Purchase Price. A Failure Purchase Notice shall be deemed to be given when mailed, whether or not the Holder receives the notice. In any event, failure to give a particular Holder his or her Failure Purchase Notice, or any defect in such notice, shall not affect the validity of the proceedings for the Failure Purchase.

SECTION 11.4 Deposit of Failure Purchase Price . On or one (1) Business Day prior to the Failure Purchase Date, the Company shall deposit with the Trustee or with the paying agent (if different from the Trustee) money sufficient to pay the Failure Purchase Price of all Securities Outstanding on that date. The Trustee or the paying agent shall promptly return to the Company any money deposited with the Trustee or the paying agent by the Company in excess of the amounts necessary to pay the Failure Purchase Price of all Securities Outstanding.

If the Company complies with the provisions of the preceding paragraph, on and after the Failure Purchase Date, all right, title and interest of a Holder to any CVR Payment, if any, shall cease to accrue on the Securities. If any Security called for Failure Purchase shall not be so paid upon surrender for Failure Purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid Failure Purchase Price from the Failure Purchase Date, until such Failure Purchase Price is paid at the Shortfall Interest Rate.

 

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SECTION 11.5 Failure Purchase by the Company . The Company may, for a period of sixty (60) days after any Failure Purchase Eligibility Date, issue the Failure Purchase Notice in accordance with SECTION 11.2. Upon issuance of the Failure Purchase Notice and in compliance with the other provisions of this ARTICLE 10, the Company shall, on the Failure Purchase Date specified in such Failure Purchase Notice, purchase and cancel all (but not less than all) of the outstanding Securities at a cash price equal to 115% of the volume weighted average price paid per Security for all Securities traded over the forty-five (45) trading days prior to the fifth (5th) trading day prior to the date of the Failure Purchase Notice (the “ Failure Purchase Price ”). If the Company has not issued the Failure Purchase Notice within such sixty (60) day period after the occurrence of a Failure Purchase Eligibility Date, it shall not be entitled to issue a Failure Purchase Notice and purchase and cancel the Securities until the next instance in which a Failure Purchase Eligibility Date occurs.

 

55


IN WITNESS WHEREOF, the Parties hereto have caused this CVR Agreement to be duly executed, all as of the day and year first above written.

 

Wright Medical Group, Inc.

By:

 

 

Name:

 

Title:

 

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,

as the Trustee

By:

 

 

Name:

 

Title:

 

 

56


ANNEX A

[For Global Securities only: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE CONTINGENT VALUE RIGHTS AGREEMENT (THE “ CVR AGREEMENT ”) HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE CVR AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE CVR AGREEMENT. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DIRECT REGISTRATION FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“ DTC ”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

WRIGHT MEDICAL GROUP, INC.

No.                              Certificate for                              Contingent Value Rights                             

This certifies that                     , or registered assigns (the “ Holder ”), is the registered holder of the number of Contingent Value Rights (“ CVRs ” or “ Securities ”) set forth above. Each CVR entitles the Holder, subject to the provisions contained herein and in the CVR Agreement referred to on the reverse hereof, to payments from Wright Medical Group, Inc., a Delaware corporation (the “ Company ”), in the amounts and in the forms determined pursuant to the provisions set forth on the reverse hereof and as more fully described in the CVR Agreement referred to on the reverse hereof. Such payments shall be made on a Payment Date, as defined in the CVR Agreement referred to on the reverse hereof.

 

A-1


Payment of any amounts pursuant to this CVR Certificate shall be made only to the registered Holder (as defined in the CVR Agreement) of this CVR Certificate. Such payment shall be made in the Borough of Manhattan, The City of New York, or at any other office or agency maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time is legal tender for the payment of public and private debts; provided , however , the Company may pay such amounts by wire transfer or check payable in such money. American Stock Transfer & Trust Company, LLC has been initially appointed as Paying Agent at its office or agency in The City of New York.

Reference is hereby made to the further provisions of this [Global Security] [CVR Certificate] set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this [Global Security] [CVR Certificate] shall not be entitled to any benefit under the CVR Agreement, or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

 

[ ]

 

By:

 

 

Name:

 

Title:

 


[Form of Reverse of Global Security or CVR Certificate]

1. This [Global Security] [CVR Certificate] is issued under and in accordance with the Contingent Value Rights Agreement, dated as of                  (the “ CVR Agreement ”), between the Company and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as trustee (the “ Trustee ,” which term includes any successor Trustee under the CVR Agreement), and is subject to the terms and provisions contained in the CVR Agreement, to all of which terms and provisions the Holder of this [Global Security] [CVR Certificate] consents by acceptance hereof. The CVR Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the CVR Agreement for a full statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Trustee and the Holders of the CVRs. All capitalized terms used in this [Global Security] [CVR Certificate] without definition shall have the respective meanings ascribed to them in the CVR Agreement. Copies of the CVR Agreement can be obtained by contacting the Trustee.

2. In the event of any conflict between this [Global Security] [CVR Certificate] and the CVR Agreement, the CVR Agreement shall govern and prevail.

3. Subject to the terms and conditions of the CVR Agreement, on any Product Sales Milestone Payment Date, the Company shall pay to the Trustee, for the benefit of the Holder hereof as of the applicable record date, for each CVR represented hereby, the Product Sales Milestone Payment with respect to such Product Sales Milestone Payment Date.

4. Subject to the terms and conditions of the CVR Agreement, on the Approval Milestone Payment Date, the Company shall pay to the Trustee, for the benefit of the Holder hereof as of the applicable record date, for each CVR represented hereby, the Approval Milestone Payment.

5. Each CVR Payment, if any, and interest thereon, if any, shall be payable by the Company in such coin or currency of the United States of America as at the time is legal tender for the payment of public and private debts; provided , however , the Company may pay such amounts by its check or wire transfer payable in such money. American Stock Transfer & Trust Company, LLC has been initially appointed as Paying Agent at its office or agency in The City of New York.

6. If a Breach occurs and is continuing, either the Trustee may or the Acting Holders, by notice to the Company and to the Trustee shall bring suit in accordance with the terms and conditions of the CVR Agreement to protect the rights of the Holders, including to obtain payment of all amounts then due and payable, with interest at the Breach Interest Rate from the date of the Breach through the date payment is made or duly provided for.

7. No reference herein to the CVR Agreement and no provision of this [Global Security] [CVR Certificate] or of the CVR Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay any amounts determined pursuant to the terms hereof and of the CVR Agreement at the times, place and amount, and in the manner, herein prescribed.


8. As provided in the CVR Agreement and subject to certain limitations therein set forth, the transfer of the CVRs represented by this [Global Security] [CVR Certificate] is registrable on the Security Register, upon surrender of this [Global Security] [CVR Certificate] for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new [Global Securities] [CVR Certificates], for the same amount of CVRs, shall be issued to the designated transferee or transferees. The Company hereby initially designates the office of Trustee at 6201 15 th Avenue, Brooklyn, New York 11219 as the office for registration of transfer of this [Global Security] [CVR certificate].

9. As provided in the CVR Agreement and subject to certain limitations therein set forth, this [Global Security] [CVR Certificate] is exchangeable for one or more CVR certificates or Direct Registration Securities representing the same number of CVRs as represented by this [Global Security] [CVR Certificate] as requested by the Holder surrendering the same.

10. No service charge shall be made for any registration of transfer or exchange of CVRs, but the Company may require payment of a sum sufficient to cover any documentary, stamp or similar tax or other similar governmental charge payable in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to SECTIONS 3.5 or 6.6 of the CVR Agreement not involving any transfer.

11. Prior to the time of due presentment of this [Global Security] [CVR Certificate] for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this [Global Security] [CVR Certificate] is registered as the owner hereof for all purposes, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary.

12. Neither the Company nor the Trustee has any duty or obligation to the Holder of this [Global Security] [CVR Certificate], except as expressly set forth herein or in the CVR Agreement.

13. As provided in the CVR Agreement and subject to certain limitations therein set forth, the rights of the Holder of this [Global Security] [CVR Certificate] shall terminate on the Termination Date.

14. Governing Law; Jurisdiction; Venue . THIS [GLOBAL SECURITY] [CVR CERTIFICATE] AND THE CVR AGREEMENT AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS [GLOBAL SECURITY] [CVR CERTIFICATE] AND THE CVR AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS [GLOBAL SECURITY] [CVR CERTIFICATE] AND THE CVR AGREEMENT (INCLUDING ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO ANY REPRESENTATION OR WARRANTY MADE IN OR IN CONNECTION WITH THIS [GLOBAL SECURITY] [CVR CERTIFICATE] AND THE CVR AGREEMENT OR AS AN INDUCEMENT TO ACCEPT THIS [GLOBAL SECURITY] [CVR CERTIFICATE]) OR THE SECURITIES, SHALL BE GOVERNED BY AND CONSTRUED


IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. EACH OF THE COMPANY, THE TRUSTEE AND EACH OF THE HOLDERS BY THEIR ACCEPTANCE OF THE SECURITIES, HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE COURT IN THE STATE OF DELAWARE OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE IN RESPECT OF ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS [GLOBAL SECURITY] [CVR CERTIFICATE] AND THE CVR AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS [GLOBAL SECURITY] [CVR CERTIFICATE] AND THE CVR AGREEMENT (INCLUDING ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO ANY REPRESENTATION OR WARRANTY MADE IN OR IN CONNECTION WITH THIS [GLOBAL SECURITY] [CVR CERTIFICATE] AND THE CVR AGREEMENT OR AS AN INDUCEMENT TO ACCEPT THIS [GLOBAL SECURITY] [CVR CERTIFICATE]), OR THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the [Global Securities] [CVR Certificates] referred to in the within-mentioned CVR Agreement.

 

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,
as the Trustee
By:  

 

  Authorized Signatory

Dated:

Exhibit 10.2

FORM OF VOTING AGREEMENT

THIS VOTING AGREEMENT (this “ Agreement ”) is made and entered into as of November 19, 2012 by and between Wright Medical Group, Inc., a Delaware corporation (“ Parent ”), and the undersigned Stockholder (the “ Stockholder ”) of BioMimetic Therapeutics, Inc., a Delaware corporation (the “ Company ”).

WITNESSETH:

WHEREAS, Parent, Achilles Merger Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”), Achilles Acquisition Subsidiary, LLC, a Delaware limited liability company and a direct wholly owned Subsidiary of Parent, and the Company have entered into an Agreement and Plan of Merger of even date herewith (as it may be amended from time to time, the “ Merger Agreement ”), which provides for, among other things, the merger of Merger Sub with and into the Company (the “ Merger ”) with the Company continuing as the surviving corporation of the Merger and pursuant to which all outstanding shares of capital stock of the Company will be converted into the right to receive the consideration set forth in the Merger Agreement (the “ Merger Consideration ”).

WHEREAS, the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) of that number of shares of Company Common Stock (as defined in the Merger Agreement), and, if applicable, the holder of one or more Company Options (as defined in the Merger Agreement) to purchase that number of shares of Company Common Stock, in each case, as set forth on the signature page of this Agreement.

WHEREAS, as a condition and inducement to the willingness of Parent and Merger Sub to enter into the Merger Agreement, the Stockholder (in the Stockholder’s capacity as such) has agreed to enter into this Agreement.

NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows:

1. Certain Definitions . All capitalized terms that are used but not defined herein shall have the respective meanings ascribed to them in the Merger Agreement. For all purposes of and under this Agreement, the following terms shall have the following respective meanings:

(a) “ Expiration Date ” shall mean the earliest to occur of (i) such date and time as the Merger Agreement shall have been validly terminated pursuant to Article IX thereof, (ii) such date and time as the Merger shall become effective in accordance with the terms and provisions of the Merger Agreement, (iii) such date and time as the Merger Agreement shall have been amended, without the Stockholder’s consent, to adversely affect the Merger Consideration payable to the Stockholder, or (iv) September 30, 2013.

(b) “ Person ” shall mean any individual, corporation, limited liability company, general or limited partnership, trust, unincorporated association or other entity of any kind or nature, or any governmental authority.

(c) “ Shares ” shall mean (i) all equity securities of the Company (including all shares of Company Common Stock and all Company Options and other rights to acquire shares of Company Common Stock) owned by the Stockholder as of the date hereof, and (ii) all additional equity securities of the Company (including all additional shares of Company Common Stock and all additional Company Options and other rights to acquire shares of Company Common Stock) of which the Stockholder acquires ownership during the period from the date of this Agreement through the Expiration Date (including by way of stock dividend or distribution, split-up, recapitalization, combination, exchange of shares and the like).


(d) “ Transfer ” A Person shall be deemed to have effected a “ Transfer ” of a Share if such Person directly or indirectly (i) sells, pledges, encumbers, assigns, grants an option with respect to, transfers, tenders or disposes of such Share or any interest in such Share, or (ii) enters into an agreement or commitment providing for the sale of, pledge of, encumbrance of, assignment of, grant of an option with respect to, transfer, tender of or disposition of such Share or any interest therein.

2. Transfer of Shares .

(a) Transfer Restrictions . During the term of this Agreement, the Stockholder shall not Transfer (or cause or permit the Transfer of) any of the Shares, or enter into any agreement relating thereto, except (i) by selling already-owned Shares either to pay the exercise price upon the exercise of a Company Option or to satisfy the Stockholder’s tax withholding obligation upon the exercise of a Company Option, in each case as permitted by any Company Compensation and Benefit Plan, (ii) transferring Shares to Affiliates, limited partners, members, immediate family members, a trust established for the benefit of the Stockholder and/or for the benefit of one or more members of the Stockholder’s immediate family or charitable organizations or upon the death of the Stockholder, provided that , as a condition to such Transfer, the recipient agrees to be bound by this Agreement and delivers a Proxy (as defined below) in the form attached hereto as Exhibit A , or (iii) with Parent’s prior written consent and in Parent’s sole discretion. Any Transfer, or purported Transfer, of Shares in breach or violation of this Agreement shall be void and of no force or effect.

(b) Transfer of Voting Rights . During the term of this Agreement, the Stockholder shall not deposit (or cause or permit the deposit of) any Shares in a voting trust or grant any proxy or enter into any voting agreement or similar agreement in contravention of the obligations of the Stockholder under this Agreement with respect to any of the Shares.

3. Agreement to Vote Shares .

(a) During the term of this Agreement, at every meeting of the stockholders of the Company, and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders of Company, the Stockholder (in the Stockholder’s capacity as such), to the extent not voted by the Person(s) appointed under the Proxy, shall, or shall cause the holder of record on any applicable record date to, vote all Shares that are then-owned by such Stockholder and entitled to vote or act by written consent:

(i) in favor of the adoption of the Merger Agreement and in favor of the Merger and any other transactions contemplated by the Merger Agreement;

(ii) against approval of any proposal made in opposition to, in competition with, or would result in a breach of, the Merger Agreement or the Merger or any other transactions contemplated by the Merger Agreement; and

(iii) against any of the following actions (other than those actions that relate to the Merger and any other transactions contemplated by the Merger Agreement): (A) any merger, consolidation, business combination, reorganization or recapitalization of or involving the Company or any of its Subsidiaries, (B) any sale, lease or transfer of all or substantially all of the assets of the Company or any of its Subsidiaries, (C) any reorganization, recapitalization, dissolution, liquidation or winding up of the Company or any of its Subsidiaries, (D) any material change in the capitalization of the

 

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Company or any of its Subsidiaries, or the corporate structure of the Company or any of its Subsidiaries, (E) any Acquisition Proposal with respect to the Company or any of its Subsidiaries, or (F) any other action that would reasonably be expected to materially impede, interfere with, delay, postpone, adversely affect the Merger or any other transactions contemplated by the Merger Agreement.

The Stockholder shall retain at all times the right to vote its Shares in its sole discretion and without any other limitation on any matters other than those set forth in clauses (i), (ii) and (iii) that are at any time or from time to time presented for consideration to the Company’s stockholders generally.

(b) In the event that a meeting of the stockholders of the Company is held, the Stockholder shall, or shall cause the holder of record of the Shares on any applicable record date to, appear at such meeting or otherwise cause the Shares to be counted as present thereat for purposes of establishing a quorum.

(c) The Stockholder shall not enter into any agreement or understanding with any Person to vote or give instructions in any manner inconsistent with the terms of this Section 3 .

4. Agreement Not to Exercise Appraisal Rights . The Stockholder shall not exercise, and hereby irrevocably and unconditionally waives, any statutory rights (including under Section 262 of the DGCL) to demand appraisal of any Shares that may arise in connection with the Merger. Notwithstanding the foregoing, nothing in this Section 4 shall constitute, or be deemed to constitute, a waiver or release by the Stockholder of any claim or cause of action against Parent or Merger Sub to the extent arising out of a breach of this Agreement or the Merger Agreement by Parent.

5. Directors and Officers . Notwithstanding any provision of this Agreement to the contrary, nothing in this Agreement shall limit or restrict the Stockholder (or a designee of the Stockholder) who is a director or officer of the Company from acting in such capacity or fulfilling the obligations of such office, including by voting, in his capacity as a director or officer of the Company, in the Stockholder’s (or its designee’s) sole discretion on any matter (it being understood that this Agreement shall apply to the Stockholder solely in the Stockholder’s capacity as a Stockholder of the Company), including with respect to Section 7.2 of the Merger Agreement. In this regard, the Stockholder shall not be deemed to make any agreement or understanding in this Agreement in the Stockholder’s capacity as a director or officer of the Company, including with respect to Section 7.2 of the Merger Agreement.

6. Irrevocable Proxy . Concurrently with the execution of this Agreement, the Stockholder shall deliver to Parent a proxy in the form attached hereto as Exhibit A (the “ Proxy ”), which shall be irrevocable to the fullest extent permissible by law, with respect to the Shares.

7. Representations and Warranties of the Stockholder . The Stockholder hereby represents and warrants to Parent as follows:

(a) Power; Binding Agreement . The Stockholder has full power and authority to execute and deliver this Agreement and the Proxy, to perform the Stockholder’s obligations hereunder and under the Proxy and to consummate the transactions contemplated hereby. This Agreement and the Proxy has been duly executed and delivered by the Stockholder, and, assuming this Agreement constitutes a valid and binding obligation of Parent, constitutes a valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or relating to creditors’ rights generally and is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

 

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(b) No Conflicts . None of the execution and delivery by the Stockholder of this Agreement or the Proxy, the performance by the Stockholder of its obligations hereunder or under the Proxy or the consummation by the Stockholder of the transactions contemplated hereby will (i) result in a violation or breach of any agreement to which the Stockholder is a party or by which the Stockholder may be bound, including any voting agreement or voting trust, except for violations, breaches or defaults that would not in any material respect impair or adversely effect the ability of the Stockholder to perform its obligations under this Agreement, or (ii) violate any order, writ, injunction, decree, judgment, order, statute, rule, or regulation applicable to the Stockholder.

(c) Ownership of Shares . The Stockholder (i) is the sole beneficial owner of the shares of Company Common Stock set forth on the signature page of this Agreement, all of which are free and clear of any liens, adverse claims, charges, security interests, pledges or options, proxies, voting trusts or agreements, understandings or agreements, or any other rights or encumbrances whatsoever (“ Encumbrances ”), (ii) is the sole holder of the Company Options that are exercisable for the number of shares of Company Common Stock set forth on the signature page of this Agreement, all of which Company Options and shares of Company Common Stock issuable upon the exercise or vesting of such Company Options are, or in the case of Company Common Stock received upon exercise or vesting of such Company Options after the date hereof will be, free and clear of any Encumbrances, and (iii) except as set forth on the signature page to this Agreement, does not own, beneficially or otherwise, any securities of the Company other than the shares of Company Common Stock or Company Options, and shares of Company Common Stock issuable upon the exercise or vesting of such Company Options, set forth on the signature page of this Agreement.

(d) Voting Power . The Stockholder has or will have sole voting power, sole power of disposition, sole power to issue instructions with respect to the matters set forth herein and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shares, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement.

(e) No Finder’s Fees . No broker, investment banker, financial advisor, finder, agent or other Person is entitled to any broker’s, finder’s, financial adviser’s or other similar fee or commission in connection with this Agreement based upon arrangements made by or on behalf of the Stockholder in his, her or its capacity as such.

(f) No Legal Actions . The Stockholder agrees that the Stockholder will not in the Stockholder’s capacity as a stockholder of the Company bring, commence, institute, maintain, prosecute or voluntarily aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (i) challenges the validity of or seeks to enjoin the operation of any provision of this Agreement or (ii) alleges that the execution and delivery of this Agreement by the Stockholder, either alone or together with the other Company voting agreements and proxies to be delivered in connection with the execution of the Merger Agreement, or the approval of the Merger Agreement by the board of directors of the Company, breaches any fiduciary duty of the board of directors of the Company or any member thereof.

8. Certain Restrictions . The Stockholder shall not, directly or indirectly, take any voluntary action that would make any representation or warranty of the Stockholder contained herein untrue or incorrect in any material respect.

9. Disclosure . The Stockholder shall permit Parent to publish and disclose in all documents and schedules filed with the SEC, and, after providing the Stockholder with a reasonable opportunity to review and comment upon, any press release or other disclosure document that Parent reasonably

 

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determines to be necessary or desirable in connection with the Merger and any transactions related to the Merger, the Stockholder’s identity and ownership of Shares and the nature of the Stockholder’s commitments, arrangements and understandings under this Agreement.

10. No Ownership Interest . Nothing contained in this Agreement shall be deemed to vest in Parent any direct or indirect ownership or incidence of ownership of or with respect to any Shares. Except as provided in this Agreement, all rights, ownership and economic benefits relating to the Shares shall remain vested in and belong to the Stockholder.

11. Further Assurances . Subject to the terms and conditions of this Agreement, upon request of Parent, the Stockholder shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary to fulfill such Stockholder’s obligations under this Agreement.

12. Stop Transfer Instructions . At all times commencing with the execution and delivery of this Agreement and continuing until the Expiration Date, in furtherance of this Agreement, the Stockholder hereby authorizes the Company or its counsel to notify the Company’s transfer agent that there is a stop transfer order with respect to all of the Shares of the Stockholder (and that this Agreement places limits on the voting and transfer of such Shares),subject to the provisions hereof and provided that any such stop transfer order and notice will immediately be withdrawn and terminated by Company following the Expiration Date.

13. Termination . This Agreement and the Proxy, and all rights and obligations of the parties hereunder and thereunder, shall terminate and shall have no further force or effect as of the Expiration Date. Notwithstanding the foregoing, nothing set forth in this Section 13 or elsewhere in this Agreement shall relieve either party hereto from liability, or otherwise limit the liability of either party hereto, for any intentional breach of this Agreement prior to such termination; provided that in no event shall the Stockholder’s monetary damages exceed the aggregate Merger Consideration to which they would be entitled pursuant to the Merger Agreement; provided , further , that, the foregoing proviso shall in no event impair or otherwise impact Parent’s right to seek specific performance or injunctive relief pursuant to Section 14(d) below. This Section 13 and Sections 1 , 5 , and 14 (as applicable) shall survive any termination of this Agreement.

14. Miscellaneous .

(a) Validity . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which will remain in full force and effect. In the event any Governmental Entity of competent jurisdiction holds any provision of this Agreement to be null, void or unenforceable, the parties hereto shall negotiate in good faith and execute and deliver an amendment to this Agreement in order, as nearly as possible, to effectuate, to the extent permitted by law, the original intent of the parties hereto with respect to such provision.

(b) Binding Effect and Assignment . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations of the parties hereto may be assigned by either of the parties (whether by operation of law or otherwise) without prior written consent of the other.

(c) Amendments; Waiver . This Agreement may be amended by the parties hereto, and the terms and conditions hereof may be waived, only by an instrument in writing signed on behalf of

 

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each of the parties hereto, or, in the case of a waiver, by an instrument signed on behalf of the party waiving compliance. Notwithstanding the foregoing, no failure or delay by any party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or future exercise of any other right hereunder.

(d) Specific Performance; Injunctive Relief . The parties hereto acknowledge that Parent shall be irreparably harmed and that there shall be no adequate remedy at law for a violation of any of the covenants or agreements of the Stockholder set forth herein. Therefore, it is agreed that, in addition to any other remedies that may be available to Parent upon any such violation, Parent shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means available to Parent at law or in equity.

(e) Notices . Any notice, request, instruction or other communication under this Agreement shall be in writing and delivered by hand or international courier service, by facsimile (with written confirmation of transmission) or by electronic mail, with a copy thereof delivered or sent as provided below:

If to Parent:

Wright Medical Group, Inc.

5677 Airline Road

Arlington, Tennessee 38002

Attention: Chief Executive Officer

Facsimile: (901) 867-4320

Wright Medical Group, Inc.

5677 Airline Road

Arlington, Tennessee 38002

Attention: General Counsel

Facsimile: (901) 867-4398

with copies (which shall not constitute notice) to:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

12235 El Camino Real

San Diego, California 92103-3002

Attention: Martin J. Waters, Esq.

Telecopy No.: (858) 350-2399

and:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

One Market Street

Spear Tower, Suite 3300

San Francisco, California 94105-1126

Attention: Robert T. Ishii, Esq.

Telecopy No.: (415) 947-2099

 

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If to the Stockholder:

[Name]

[Address]

[Address]

Telecopy No.:

with a copy (which shall not constitute notice) to:

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199

Attention: Paul Kinsella

Telecopy No.: (617) 235-0822

(f) No Waiver . The failure of either party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect of this Agreement at law or in equity, or to insist upon compliance by any other party with its obligation under this Agreement, and any custom or practice of the parties at variance with the terms of this Agreement, shall not constitute a waiver by such party of such party’s right to exercise any such or other right, power or remedy or to demand such compliance.

(g) No Third Party Beneficiaries . This Agreement is not intended to confer and does not confer upon any Person other than the parties hereto any rights or remedies hereunder.

(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 law thereof.

(i) Consent to Jurisdiction . Each of the parties hereto (a) irrevocably consents to the service of the summons and complaint and any other process in any action or proceeding relating to the this Agreement, the Proxy, or the agreements delivered by the Stockholder in connection herewith or the transactions contemplated hereby or thereby, for and on behalf of itself or any of its properties or assets, in accordance with Section 14(e) or in such other manner as may be permitted by applicable Law, and nothing in this Section 14(i) shall affect the right of any party to serve legal process in any other manner permitted by applicable Law; (b) irrevocably and unconditionally consents and submits itself and its properties and assets in any action or proceeding to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, only if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware) in the event any dispute or controversy arises out of this Agreement, the Proxy, or the agreements delivered by the Stockholder in connection herewith or the transactions contemplated hereby or thereby, or for recognition and enforcement of any judgment in respect thereof; (c) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court; (d) agrees that any actions or proceedings arising in connection with this Agreement, the Proxy or the agreements delivered by the Stockholder in connection herewith or the transactions contemplated hereby or thereby shall be brought, tried and determined only in the Court of Chancery of the State of Delaware (or, only if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware); (e) waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; and (f) agrees that it will not

 

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bring any action relating to this Agreement, the Proxy or the agreements delivered by the Stockholder in connection herewith or the transactions contemplated hereby or thereby in any court other than the aforesaid courts. Each of Parent and Stockholder agrees that a final judgment in any action or proceeding in such courts as provided above shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law.

(j) Rules of Construction . The parties hereto hereby waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

(k) Entire Agreement . This Agreement and the Proxy contain the entire understanding of the parties hereto in respect of the subject matter hereof, and supersede all prior negotiations, agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

(l) Interpretation .

(i) Whenever the words “include,” “includes” or “including” are used in this Agreement they shall be deemed to be followed by the words “without limitation.”

(ii) The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties hereto and shall not in any way affect or be deemed to affect the meaning or interpretation of this Agreement.

(m) Expenses . All fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs and expenses.

(n) Counterparts . This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement.

(o) No Obligation to Exercise Company Options . Notwithstanding any provision of this Agreement to the contrary, nothing in this Agreement shall obligate the Stockholder to exercise any Company Options or other right to acquire any shares of Company Common Stock.

[ Remainder of Page Intentionally Left Blank ]

 

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IN WITNESS WHEREOF, the undersigned have executed and caused to be effective this Agreement as of the date first above written.

 

PARENT       STOCKHOLDER
By:  

 

    By:  

 

Name:  

 

    Name:  

 

Title:  

 

   
      Shares beneficially owned as of the date hereof:
                       shares of Company Common Stock
                       shares of Company Common Stock issuable upon exercise or vesting of Company Options

[Signature Page to Voting Agreement]


EXHIBIT A

IRREVOCABLE PROXY

The undersigned Stockholder (the “ Stockholder ”) of BioMimetic Therapeutics, Inc., a Delaware corporation (the “ Company ”), hereby irrevocably (to the fullest extent permitted by law) appoints Wright Medical Group, Inc., a Delaware corporation (“ Parent ”), acting through any of its Chief Executive Officer, Chief Financial Officer or General Counsel, as the sole and exclusive attorneys and proxies of the undersigned to vote and exercise all voting and related rights (to the full extent that the undersigned is entitled to do so) with respect to all of the shares of capital stock of the Company that now are or hereafter may be beneficially owned by the undersigned, and any and all other shares or equity securities of the Company issued or issuable in respect thereof on or after the date hereof (collectively, the “ Shares ”) in accordance with the terms of this Irrevocable Proxy until the Expiration Date (as defined below); provided , however , that such proxy and voting and related rights are expressly limited to the matters discussed in clauses (i) through (iii) in the fourth paragraph of this Irrevocable Proxy. Upon the undersigned’s execution of this Irrevocable Proxy, any and all prior proxies given by the undersigned with respect to any Shares are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Shares until after the Expiration Date.

This Irrevocable Proxy is irrevocable to the fullest extent permitted by law, is coupled with an interest and is granted pursuant to that certain Voting Agreement of even date herewith by and between Parent and the undersigned Stockholder (the “ Voting Agreement ”), and is granted as a condition and inducement to the willingness of Parent and Achilles Merger Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”) to enter into that certain Agreement and Plan of Merger of even date herewith (as it may be amended from time to time, the “ Merger Agreement ”), among Parent, Merger Sub, Achilles Acquisition Subsidiary, LLC, a Delaware limited liability company and a direct wholly owned Subsidiary of Parent, and the Company. The Merger Agreement provides for, among other things, the merger of Merger Sub with and into the Company (the “ Merger ”) with the Company continuing as the surviving corporation of the Merger and pursuant to which all outstanding shares of capital stock of the Company will be converted into the right to receive the consideration set forth in the Merger Agreement (the “ Merger Consideration ”).

As used herein, the term “ Expiration Date ” shall mean the earliest to occur of (i) such date and time as the Merger Agreement shall have been validly terminated pursuant to Article IX thereof, (ii) such date and time as the Merger shall become effective in accordance with the terms and provisions of the Merger Agreement, (iii) such date and time as the Merger Agreement shall have been amended, without the Stockholder’s consent, to reduce the Merger Consideration payable to the Stockholder or (iv) December 31, 2013.

The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Date, to act as the undersigned’s attorney and proxy to vote the Shares, and to exercise all voting, consent and similar rights of the undersigned with respect to the Shares (including, without limitation, the power to execute and deliver written consents) at every annual, special, adjourned or postponed meeting of stockholders of the Company and in every written consent in lieu of such meeting:

(i) in favor of the adoption of the Merger Agreement and in favor of the Merger and any other transactions contemplated by the Merger Agreement;


(ii) against approval of any proposal made in opposition to, in competition with, or would result in a breach of, the Merger Agreement or the Merger or any other transactions contemplated by the Merger Agreement; and

(iii) against any of the following actions (other than those actions that relate to the Merger and any other transactions contemplated by the Merger Agreement): (A) any merger, consolidation, business combination, reorganization or recapitalization of or involving the Company or any of its Subsidiaries, (B) any sale, lease or transfer of all or substantially all of the assets of the Company or any of its Subsidiaries, (C) any reorganization, recapitalization, dissolution, liquidation or winding up of the Company or any of its Subsidiaries, (D) any material change in the capitalization of the Company or any of its Subsidiaries, or the corporate structure of the Company or any of its Subsidiaries, (E) any Acquisition Proposal with respect to the Company or any of its Subsidiaries, or (F) any other action that would reasonably be expected to materially impede, interfere with, delay, postpone or discourage the Merger or any other transactions contemplated by the Merger Agreement.

The attorneys and proxies named above may not exercise this Irrevocable Proxy on any other matter. The undersigned Stockholder may vote the Shares in its sole discretion on all other matters.

Any obligation of the undersigned hereunder shall be binding upon the successors and permitted assigns of the undersigned.

This Irrevocable Proxy shall terminate, and be of no further force and effect, automatically upon the Expiration Date.

[Remainder of Page Intentionally Left Blank]


IN WITNESS WHEREOF, the undersigned has executed and caused to be effective this Irrevocable Proxy as of             , 2012.

 

STOCKHOLDER

By:  

 

Name: