EX-10.1



 





Exhibit 10.1




      




AGREEMENT AND PLAN OF MERGER




among




INTEGRA LIFESCIENCES HOLDINGS CORPORATION,




ICE MERGERCORP, INC.




and




ISOTIS, INC.




Dated as of August 6, 2007




      




 









 





TABLE OF CONTENTS



 |



Page




	 	 	 	 	 
	ARTICLE I. THE MERGER
	 	 	1	 
	 
	 	 	 	 
	Section 1.1. The Merger
	 	 	1	 
	Section 1.2. Closing
	 	 	1	 
	Section 1.3. Effective Time
	 	 	2	 
	Section 1.4. Effects of the Merger
	 	 	2	 
	Section 1.5. Certificate of Incorporation
	 	 	2	 
	Section 1.6. Bylaws
	 	 	2	 
	Section 1.7. Directors; Officers
	 	 	2	 
	Section 1.8. Effect on Capital Stock
	 	 	2	 
	Section 1.9. Treatment of Options
	 	 	4	 
	 
	 	 	 	 
	ARTICLE II. EXCHANGE OF CERTIFICATES
	 	 	4	 
	 
	 	 	 	 
	Section 2.1. Exchange Fund
	 	 	4	 
	Section 2.2. Exchange Procedures
	 	 	4	 
	Section 2.3. No Further Ownership Rights in Company Common Stock
	 	 	5	 
	Section 2.4. Termination of Exchange Fund
	 	 	5	 
	Section 2.5. No Liability
	 	 	5	 
	Section 2.6. Lost Certificates
	 	 	5	 
	Section 2.7. Withholding Rights
	 	 	6	 
	Section 2.8. Further Assurances
	 	 	6	 
	Section 2.9. Stock Transfer Books
	 	 	6	 
	 
	 	 	 	 
	ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	6	 
	 
	 	 	 	 
	Section 3.1. Corporate Organization
	 	 	7	 
	Section 3.2. Qualification to Do Business
	 	 	7	 
	Section 3.3. No Conflict or Violation
	 	 	7	 
	Section 3.4. Consents and Approvals
	 	 	7	 
	Section 3.5. Authorization and Validity of Agreement
	 	 	8	 
	Section 3.6. Capitalization and Related Matters
	 	 	8	 
	Section 3.7. Subsidiaries and Equity Investments
	 	 	10	 
	Section 3.8. Company SEC Reports
	 	 	10	 
	Section 3.9. Absence of Certain Changes or Events
	 	 	10	 
	Section 3.10. Tax Matters
	 	 	12	 
	Section 3.11. Absence of Undisclosed Liabilities
	 	 	13	 
	Section 3.12. Company Property
	 	 	14	 
	Section 3.13. Assets of the Company and its Subsidiaries
	 	 	15	 
	Section 3.14. Intellectual Property
	 	 	15	 
	Section 3.15. Software
	 	 	16	 
	Section 3.16. Licenses and Permits
	 	 	17	 






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	Section 3.17. Regulatory Matters
	 	 	17	 
	Section 3.18. Certifications; Product Safety
	 	 	20	 
	Section 3.19. Compliance with Law
	 	 	21	 
	Section 3.20. Litigation
	 	 	21	 
	Section 3.21. Contracts
	 	 	22	 
	Section 3.22. Employee Plans
	 	 	24	 
	Section 3.23. Insurance
	 	 	26	 
	Section 3.24. Affiliate Transactions
	 	 	26	 
	Section 3.25. Vendors and Customers
	 	 	27	 
	Section 3.26. Labor Matters
	 	 	27	 
	Section 3.27. Environmental Matters
	 	 	28	 
	Section 3.28. No Brokers; Other Advisors
	 	 	29	 
	Section 3.29. State Takeover Statutes
	 	 	29	 
	Section 3.30. Opinion of Financial Advisor
	 	 	29	 
	Section 3.31. Information Supplied
	 	 	29	 
	Section 3.32. Board Approval
	 	 	30	 
	Section 3.33. Vote Required
	 	 	30	 
	Section 3.34. Illegal or Unauthorized Payments; Political Contributions
	 	 	30	 
	Section 3.35. Exchange Offer
	 	 	31	 
	Section 3.36. Product Warranty
	 	 	32	 
	Section 3.37. Export
	 	 	32	 
	Section 3.38. Inventory
	 	 	33	 
	Section 3.39. No Other Representations or Warranties
	 	 	33	 
	 
	 	 	 	 
	ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
	 	 	33	 
	 
	 	 	 	 
	Section 4.1. Organization
	 	 	33	 
	Section 4.2. No Conflict or Violation
	 	 	33	 
	Section 4.3. Consents and Approvals
	 	 	34	 
	Section 4.4. Authorization and Validity of Agreement
	 	 	34	 
	Section 4.5. No Brokers
	 	 	34	 
	Section 4.6. Information Supplied
	 	 	34	 
	Section 4.7. Merger Sub
	 	 	35	 
	Section 4.8. No Other Representations or Warranties
	 	 	35	 
	 
	 	 	 	 
	ARTICLE V. COVENANTS OF THE COMPANY
	 	 	35	 
	 
	 	 	 	 
	Section 5.1. Conduct of Business Before the Closing Date
	 	 	35	 
	Section 5.2. Notice of Breach
	 	 	38	 
	Section 5.3. Affiliate Letter
	 	 	38	 
	Section 5.4. FDA Correspondence
	 	 	38	 
	Section 5.5. Section 409A
	 	 	38	 






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	ARTICLE VI. COVENANTS OF PARENT AND MERGER SUB.
	 	 	38	 
	 
	 	 	 	 
	Section 6.1. Employee Benefits.
	 	 	38	 
	Section 6.2. Indemnification Continuation.
	 	 	39	 
	 
	 	 	 	 
	ARTICLE VII. ADDITIONAL COVENANTS OF THE PARTIES.
	 	 	40	 
	 
	 	 	 	 
	Section 7.1. Preparation of Proxy Statement, Company Stockholders Meeting.
	 	 	40	 
	Section 7.2. Access to Information
	 	 	41	 
	Section 7.3. Efforts.
	 	 	41	 
	Section 7.4. Acquisition Proposals.
	 	 	43	 
	Section 7.5. Stockholder Litigation
	 	 	46	 
	Section 7.6. Maintenance of Insurance
	 	 	46	 
	Section 7.7. Public Announcements
	 	 	46	 
	Section 7.8. No Shareholder Rights Plan
	 	 	46	 
	 
	 	 	 	 
	ARTICLE VIII. CONDITIONS PRECEDENT
	 	 	47	 
	 
	 	 	 	 
	Section 8.1. Conditions to Each Party’s Obligation to Effect the Merger
	 	 	47	 
	Section 8.2. Additional Conditions to Obligations of Parent and Merger Sub
	 	 	47	 
	Section 8.3. Additional Conditions to Obligations of the Company
	 	 	48	 
	 
	 	 	 	 
	ARTICLE IX. TERMINATION.
	 	 	49	 
	 
	 	 	 	 
	Section 9.1. Termination
	 	 	49	 
	Section 9.2. Effect of Termination.
	 	 	50	 
	Section 9.3. Amendment
	 	 	52	 
	Section 9.4. Extension; Waive
	 	 	52	 
	 
	 	 	 	 
	ARTICLE X. MISCELLANEOUS.
	 	 	52	 
	 
	 	 	 	 
	Section 10.1. Non-Survival of Representations, Warranties and Agreements
	 	 	52	 
	Section 10.2. Disclosure Schedules
	 	 	52	 
	Section 10.3. Successors and Assigns
	 	 	52	 
	Section 10.4. Governing Law; Jurisdiction.
	 	 	53	 
	Section 10.5. Expenses
	 	 	54	 
	Section 10.6. Severability; Construction.
	 	 	54	 
	Section 10.7. Notices
	 	 	54	 
	Section 10.8. Entire Agreement
	 	 	55	 
	Section 10.9. Parties in Interest
	 	 	55	 
	Section 10.10. Section and Paragraph Headings
	 	 	56	 
	Section 10.11. Counterparts
	 	 	56	 
	Section 10.12. Definitions
	 	 	56	 







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AGREEMENT AND PLAN OF MERGER




     AGREEMENT AND PLAN OF MERGER, dated as of August 6, 2007 (this “Agreement”), among
INTEGRA LIFESCIENCES HOLDINGS CORPORATION, a Delaware corporation (“Parent”), ICE
MERGERCORP, INC., a Delaware corporation and a direct wholly owned Subsidiary of Parent
(“Merger Sub”), and ISOTIS, INC., a Delaware corporation (the “Company”).



WITNESSETH:




     WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have each
approved and declared advisable the merger of Merger Sub with and into the Company (the
“Merger”), upon the terms and subject to the conditions set forth in this Agreement,
pursuant to which each outstanding share of common stock, par value $0.0001 per share, of the
Company (“Company Common Stock”) issued and outstanding immediately prior to the Effective
Time, other than shares owned or held directly or indirectly by Parent or the Company and Appraisal
Shares, will be converted into the right to receive $7.25 per share in cash;



     WHEREAS, Parent, Merger Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the transactions contemplated hereby and
also to prescribe various conditions to the transactions contemplated hereby; and



     NOW, THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, and intending to be legally bound hereby,
the parties hereto agree as follows:



ARTICLE I.




THE MERGER




     Section 1.1. The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time, Merger Sub shall be merged with and into the Company and the separate existence of
Merger Sub shall thereupon cease, and the Company, as the surviving corporation in the Merger (the
“Surviving Corporation”), shall by virtue of the Merger continue its existence under the
laws of the State of Delaware.



     Section 1.2. Closing. Unless this Agreement shall have been terminated pursuant to
the provisions of Section 9.1, the closing of the Merger (the “Closing”) will take place on
the third Business Day after the satisfaction or waiver (subject to applicable law) of the
conditions (excluding conditions that, by their terms, cannot be satisfied until the Closing Date,
but subject to the satisfaction or, where permitted, waiver of those conditions as of the Closing)
set forth in Article VIII, unless another time or date is agreed to in writing by the parties
hereto (the date of the Closing, the “Closing Date”). The Closing shall be held at the
offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, unless
another place is agreed to in writing by the parties hereto.



 









 





     Section 1.3. Effective Time. Upon the Closing, the parties shall file with the
Secretary of State of the State of Delaware a certificate of merger (the “Certificate of
Merger”). The Merger shall become effective at such time as the Certificate of Merger is duly
filed with and accepted by the Secretary of State of the State of Delaware or at such subsequent
time as Parent and the Company shall agree and as shall be specified in the Certificate of Merger
(the date and time the Merger becomes effective being the “Effective Time”).



     Section 1.4. Effects of the Merger. The Merger shall have the effects set forth in
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 Surviving Corporation, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.



     Section 1.5. Certificate of Incorporation. At the Effective Time, the certificate of
incorporation of the Company shall be amended to read in its entirety as the certificate of
incorporation of Merger Sub as in effect immediately prior to the Effective Time, except that the
name of the Company shall continue to be “IsoTis, Inc.” and the provisions of the certificate of
incorporation of the Company related to the incorporator of the Company shall not be amended, and
as so amended shall be the certificate of incorporation of the Surviving Corporation after the
Effective Time, and thereafter may be amended as provided therein or by law.



     Section 1.6. Bylaws. The bylaws of Merger Sub as in effect at the Effective Time
shall be the bylaws of the Surviving Corporation, and thereafter may be amended as provided therein
or by law.



     Section 1.7. Directors; Officers. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation and the officers of the
Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation,
in each case until their respective successors are duly elected and qualified or until their death,
resignation or removal in accordance with the DGCL and the certificate of incorporation and bylaws
of the Surviving Corporation.



     Section 1.8. Effect on Capital Stock. At the Effective Time by virtue of the Merger
and without any action on the part of the holder thereof:



     (a) Each share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than treasury shares and any shares held directly or indirectly by Parent
and, except as provided in Section 1.8(e), Appraisal Shares) shall be converted into the right to
receive $7.25 in cash, without interest (the “Merger Consideration”).



     (b) All shares of Company Common Stock shall cease to be outstanding and shall be canceled and
retired and shall cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of Company Common



- 2 -









 







Stock (a “Certificate”) shall thereafter cease to have any rights with respect to such
shares of Company Common Stock, except the right to receive the Merger Consideration. Each
Treasury Share at the Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be canceled and no Merger Consideration or other consideration shall be delivered in exchange
therefor.



     (c) 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 Surviving Corporation.



     (d) If prior to the Effective Time, the Company should split, combine or otherwise reclassify
the Company Common Stock, or pay a stock dividend or other stock distribution in Company Common
Stock, or otherwise change the Company Common Stock into any other securities, or make any other
such stock dividend or distribution in capital stock of the Company in respect of the Company
Common Stock, then the Merger Consideration will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or change. For avoidance of doubt, the issuance of
shares of Company Common Stock pursuant to the Exchange Offer shall not give rise to any adjustment
contemplated by this Section 1.8(d).



     (e) Notwithstanding anything in this Agreement to the contrary, shares (the “Appraisal
Shares”) of Company Common Stock issued and outstanding immediately prior to the Effective Time
that are held by any holder who is entitled to demand and properly demands appraisal of such shares
pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL
(“Section 262”), shall not be converted into the right to receive the Merger Consideration
as provided in Section 1.8(a), but instead such holder shall be entitled to payment of the fair
value of such Appraisal Shares in accordance with the provisions of Section 262. At the Effective
Time, the Appraisal Shares shall no longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time
represented Appraisal Shares shall cease to have any rights with respect thereto, except the right
to receive the fair value of such shares in accordance with the provisions of Section 262.
Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive,
withdraw or lose the right to appraisal under Section 262 or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided by Section 262, then the
right of such holder to be paid the fair value of such holder’s Appraisal Shares under Section 262
shall cease and such Appraisal Shares shall be deemed to have been converted at the Effective Time
into, and shall have become, the right to receive the Merger Consideration as provided in Section
1.8(a). The Company shall serve prompt notice to Parent of any demands for appraisal of any shares
of Company Common Stock, withdrawals of any such demands and any other related instruments served
pursuant to the DGCL received by the Company, and Parent shall have the right to participate in and
direct all negotiations and proceedings with respect to such demands. The Company shall not,
without the prior written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands, or agree to do or commit to do any of the foregoing.



- 3 -









 





     Section 1.9. Treatment of Options.



     (a) Each option to purchase shares of Company Common Stock (individually a “Company
Option” and collectively, the “Company Options”) outstanding immediately prior to the
Effective Time pursuant to any Company Stock Plan or otherwise will at the Effective Time be
cancelled and the holder of such Company Option will, in full settlement of such Company Option,
receive from the Company an amount (subject to any applicable withholding), if any, in cash equal
to the product of (x) the excess, if any, of the Merger Consideration over the exercise price per
share of Company Common Stock underlying such Company Option multiplied by (y) the number of shares
of Company Common Stock subject to such Company Option, whether or not vested or exercisable;
provided that the aggregate amount of such payment shall be rounded down to the nearest whole cent.
If the applicable exercise price of any Company Option equals or exceeds the Merger Consideration,
such Company Option shall be cancelled without payment of additional consideration, and all rights
with respect to such Company Option shall terminate as of the Effective Time. Parent shall pay, or
shall cause the Surviving Corporation to pay, the amount of cash payable in respect of each Company
Option as soon as practicable following the Effective Time, but in any event no later than ten (10)
Business Days following the Effective Time. The holders of Stock Options will have no further
rights in respect of any Company Options from and after the Effective Time.



     (b) Prior to the Effective Time, the Company will adopt such resolutions and take such other
actions as are necessary in order to (i) effectuate the actions contemplated by this Section 1.9 or
to otherwise cancel the Company Options prior to the Effective Time, and (ii) terminate each
Company Stock Plan, in each case without paying any consideration or incurring any debts or
obligations on behalf of the Company or the Surviving Corporation, provided that such resolutions
and actions shall expressly be conditioned upon the consummation of the Merger and the other
transactions contemplated hereby and shall be of no effect if this Agreement is terminated.



ARTICLE II.




EXCHANGE OF CERTIFICATES




     Section 2.1. Exchange Fund. At or prior to the Effective Time, Parent shall deposit
with American Stock Transfer and Trust Company or such other bank or trust company as Parent shall
determine and who shall be reasonably satisfactory to the Company (the “Exchange Agent”),
in trust for the benefit of holders of shares of Company Common Stock, for exchange in accordance
with Section 1.8, the cash to be paid pursuant to this Agreement in exchange for outstanding
Company Common Stock. Any cash deposited with the Exchange Agent shall hereinafter be referred to
as the “Exchange Fund.”



     Section 2.2. Exchange Procedures. As promptly as practicable after the Effective
Time, the Exchange Agent will send to each record holder of a Certificate, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in a form and have such other provisions as Parent may reasonably specify) and (ii)



- 4 -









 







instructions for use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. As soon as reasonably practicable after the Effective Time, each holder of a
Certificate, upon surrender of a Certificate to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may reasonably be required by the Exchange
Agent, shall be entitled to receive in exchange therefor a check in the amount equal to the per
share cash amount of the Merger Consideration (after giving effect to any required tax
withholdings), which such holder has the right to receive pursuant to Section 1.8. The Exchange
Agent shall accept such Certificates upon compliance with such reasonable terms and conditions as
the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal
exchange practices. No interest will be paid or will accrue on any cash payable upon due surrender
of the Certificates. In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, the Merger Consideration with respect to such
Company Common Stock shall be paid to such a transferee only if the Certificate 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.



     Section 2.3. No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid upon conversion of shares of Company Common Stock in accordance with the terms
of Article I and this Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock.



     Section 2.4. Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates for twelve months after the Effective Time
shall be delivered to the Surviving Corporation or otherwise on the instruction of the Surviving
Corporation, and any holders of Certificates who have not theretofore complied with this Article II
shall thereafter look only to the Surviving Corporation and Parent (subject to abandoned property,
escheat or other similar laws) for the Merger Consideration with respect to the shares of Company
Common Stock formerly represented thereby to which such holders are entitled pursuant to Section
1.8.



     Section 2.5. No Liability. None of Parent, Merger Sub, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of any Merger
Consideration from the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.



     Section 2.6. Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such
Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate or other
documentation (including an indemnity in customary form) reasonably requested by Parent, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the shares of Company Common Stock formerly
represented thereby.



- 5 -









 





     Section 2.7. Withholding Rights. Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock and any holder of Company Options such
amounts as it is required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the “Code”), and the rules and regulations
promulgated thereunder (“Treasury Regulations”), or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or Parent, as the case
may be.



     Section 2.8. Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and deliver, in the name and
on behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to
take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the Merger.



     Section 2.9. Stock Transfer Books. At the close of business, New York time, on the
day the Effective Time occurs, the stock transfer books of the Company shall be closed and there
shall be no further registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of Certificates shall cease
to have any rights with respect to such shares of Company Common Stock formerly represented
thereby, except as otherwise provided herein or by law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Parent for any reason shall be converted into the
Merger Consideration with respect to the shares of Company Common Stock formerly represented
thereby.



ARTICLE III.




REPRESENTATIONS AND WARRANTIES OF THE COMPANY




     Except as set forth in the Company Disclosure Letter delivered by the Company to Parent prior
to the execution of this Agreement (the “Company Disclosure Letter”) (provided that the
disclosures in any section or subsection of the Company Disclosure Letter shall qualify other
sections and subsections of this Agreement as to which such information may be applicable only if
(a) it is readily apparent on the face of any such section of the Company Disclosure Letter that
the matters, facts or circumstances disclosed therein are applicable to another section of the
Company Disclosure Letter or (b) such disclosure is cross-referenced to in such other section of
the Company Disclosure Letter) and subject to Section 10.2 hereof, the Company hereby represents
and warrants to Parent and Merger Sub as follows:



- 6 -









 





     Section 3.1. Corporate Organization. Each of the Company and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, limited liability company or limited partnership
power (as the case may be) to own its properties and assets and to conduct its business as now
conducted. Copies of the Company Organizational Documents and the organizational documents of each
Subsidiary of the Company, with all amendments thereto to the date hereof, have been made available
to Parent or its representatives, and such copies are accurate and complete as of the date hereof.
A complete and correct chart showing the Company and all of its direct and indirect Subsidiaries is
set forth on Section 3.1 of the Company Disclosure Letter.



     Section 3.2. Qualification to Do Business. Each of the Company and its Subsidiaries
is duly qualified to do business as a foreign corporation, limited liability company or partnership
(as the case may be) and is in good standing in every jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Company Material Adverse Effect. Section 3.2 of the
Company Disclosure Letter sets forth for each of the Company and its Subsidiaries all jurisdictions
in which each of the Company and its Subsidiaries are qualified to do business.



     Section 3.3. No Conflict or Violation. The execution, delivery and performance by the
Company of this Agreement does not and will not (i) violate or conflict with any provision of any
Company Organizational Document or any of the organizational documents of the Subsidiaries of the
Company, (ii) violate any provision of law, or any order, judgment or decree of any Governmental
Entity, (iii) except as set forth on Section 3.3 of the Company Disclosure Letter, violate or
result in a breach of or constitute (with due notice or lapse of time or both) a default under any
Contract or result in the creation or imposition of any Lien (other than any Permitted Lien) upon
any of the assets, properties or rights of either of the Company or any of its Subsidiaries or
result in or give to others any rights of cancellation, modification, amendment, acceleration,
revocation or suspension of any of the Contracts or obligations thereunder, or Licenses and Permits
or (iv) violate or result in a breach of or constitute (with due notice or lapse of time or both) a
default under any contract, agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which it is bound or to which any of its properties or assets is subject, except
with respect to clauses (iii) and (iv), for any violations, breaches, conflicts or other
occurrences which would not, individually or in the aggregate, have a Company Material Adverse
Effect.



     Section 3.4. Consents and Approvals. No consent, waiver, authorization or approval of
any Governmental Entity, and no declaration or notice to or filing or registration with any
Governmental Entity, is required in connection with the execution and delivery of this Agreement by
the Company or the performance by the Company or its Subsidiaries of their obligations hereunder or
thereunder, except for: (i) any required competition or other regulatory approvals required of
foreign or domestic authorities; (ii) applicable requirements of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the “Securities Act”) and of
the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the “Exchange Act”) and the rules and



- 7 -









 







regulations of Nasdaq; (iii) the consents, waivers, authorizations or approvals of any
Governmental Entity set forth on Section 3.4 of the Company Disclosure Letter; (iv) the amendment
of Establishment Registrations and Device Listings under the United States Food and Drug
Administration’s (“FDA”) Establishment Registration and Device Listing regulations, as set
forth in 21 C.F.R. Part 807; and (v) such other consents, waivers, authorizations, approvals,
declarations, notices, filings or registrations, which if not obtained or made would not,
individually or in the aggregate, have a Company Material Adverse Effect..



     Section 3.5. Authorization and Validity of Agreement. The Company has the requisite
corporate power and authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and all other necessary corporate action on the part of the Company, other
than the adoption of this Agreement by the stockholders of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly executed and delivered
by the Company and, assuming due execution and delivery by Parent and Merger Sub, shall constitute
a legal, valid and binding obligation of the Company, enforceable against it in accordance with its
terms, subject to (i) the effect of bankruptcy, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting the enforcement of creditors’ rights generally,
(ii) general equitable principles (whether considered in a proceeding in equity or at law) and
(iii) an implied covenant of good faith and fair dealing.



     Section 3.6. Capitalization and Related Matters.




     (a) As of the date hereof, the authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock and 10,000,000 shares of Company Preferred Stock. As of the close
of business on August 3, 2007:




     (i) 7,099,229 shares of Company Common Stock are issued and outstanding, and
there are no shares of Company Preferred Stock issued or outstanding;




     (ii) 1,300,000 shares of Company Common Stock are reserved for issuance and
issuable upon or otherwise deliverable under the Company’s 2006 Incentive Award
Plan, the IsoTis, S.A. Stock Option Plan 2003/0, the IsoTis, S.A. Stock Option Plan
2003/1, the IsoTis, S.A. Stock Option Plan 2003/2 (collectively, the “Company
Stock Plans”) in connection with the exercise of outstanding Company Options.
Section 3.6(a)(ii) of the Company Disclosure Letter sets forth, for each outstanding
Company Option, whether or not vested, the (x) name of the holder of such Company
Option, (y) the exercise price per share for such Company Option and (z) the
expiration date of such Company Option; and



- 8 -









 






     (iii) 681,297 shares of Company Common Stock were reserved for issuance, and
were issued, pursuant to the consummation of the Swiss Merger.


The outstanding shares of Company Common Stock (i) have been duly authorized and validly issued and
are fully paid and nonassessable and (ii) were issued in compliance with all applicable federal,
state and foreign securities laws. All grants of Company Options were validly issued and properly
approved by the Company’s Board of Directors or a duly authorized committee thereof (and all
required approvals by the stockholders of the Company have been obtained) no later than the date on
which the grant of such Company Stock Option was by its terms to be effective in accordance with
all applicable law and all grants of options to purchase equity interests of IsoTis, S.A. which
were subsequently converted into Company Options were validly issued and properly approved by
IsoTis, S.A.’s Board of Directors or a duly authorized committee thereof (and all required
approvals by the stockholders of IsoTis, S.A. have been obtained) no later than the date on which
the grant of such option was by its terms to be effective in accordance with all applicable law
and, neither the Company nor IsoTis, S.A. has knowingly granted, and there is no and has been no
policy or intentional practice by the Company or IsoTis, S.A. to grant, Company Stock Options or
options to purchase equity interests of IsoTis, S.A., as applicable, prior to, or otherwise
intentionally coordinate the grant of such options with, the release of material information
regarding the Company or its Subsidiaries. Each Company Option was properly accounted for in all
material respects in accordance with GAAP in the financial statements (including the related notes)
of the Company and its Subsidiaries and disclosed in the filings of the Company and its
Subsidiaries with the SEC in accordance with the Exchange Act and other applicable securities laws.
Except as set forth above in Section 3.6(a), no shares of capital stock of the Company are
outstanding and the Company does not have outstanding any securities convertible into or
exchangeable for any shares of capital stock, including Company Options, any rights to subscribe
for or to purchase or any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or known claims of any other character
relating to the issuance of, any capital stock, or any stock or securities convertible into or
exchangeable for any capital stock; and the Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire, or to register under the Securities Act,
any shares of capital stock. Except as set forth above in Section 3.6(a), the Company does not
have outstanding any bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the right to vote) with the
stockholders of the Company on any matter.




     (b) All of the outstanding shares of capital stock, or membership interests or other ownership
interests of, each Subsidiary of the Company, as applicable, is validly issued, fully paid and
nonassessable and is owned of record and beneficially by the Company, directly or indirectly. The
Company has, as of the date hereof and shall have on the Closing Date, valid and marketable title
to all of the shares of capital stock of, or membership interests or other ownership interests in,
each Subsidiary of the Company, free and clear of any Liens other than Permitted Liens. Such
outstanding shares of capital stock of, or membership interests or other ownership interests in,
the Subsidiaries of the Company, as applicable, are the sole outstanding securities of such
Subsidiaries; the Subsidiaries of the Company do not have outstanding any securities convertible
into or exchangeable for any capital stock of, or membership interests or other ownership interests
in, such Subsidiaries, any rights to subscribe



- 9 -









 







for or to purchase or any options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or claims of any other character
relating to the issuance of, any capital stock of, or membership interests or other ownership
interests in, such Subsidiaries, or any stock or securities convertible into or exchangeable for
any capital stock of, or membership interests or other ownership interests in, such Subsidiaries;
and neither the Company or any of its Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire, or to register under the Securities Act,
any capital stock of, or membership interests or other ownership interests in, any Subsidiary of
the Company.



     Section 3.7. Subsidiaries and Equity Investments. The Company and its Subsidiaries do
not directly or indirectly own, or hold any rights to acquire, any capital stock or any other
securities, interests or investments in any other Person other than investments that constitute
cash or cash equivalents.



     Section 3.8. Company SEC Reports. (a) The Company and its Subsidiaries, including,
without limitation, IsoTis, S.A., have filed each registration statement, prospectus, definitive
proxy statement or information statement, form, report, schedule and other document (together with
all amendments thereof and supplements thereto) required to be filed by the Company or any of its
Subsidiaries pursuant to the Exchange Act or the Securities Act or comparable foreign law or
regulation with the SEC or any comparable foreign regulatory authority or exchange since January 1,
2004 (as such documents have since the time of their filing been amended or supplemented, the
“Company SEC Reports”). As of their respective dates, after giving effect to any
amendments or supplements thereto filed prior to the date hereof, the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the Exchange Act or the
Securities Act, as applicable, and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading.



     (b) The audited consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the Company SEC
Reports complied as to form in all material respects with the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements included therein, to normal
year-end adjustments and the absence of complete footnotes) in all material respects the
consolidated financial position of the Company or its predecessor and its consolidated Subsidiaries
as of the respective dates thereof and the consolidated results of their operations and cash flows
for the respective periods then ended.



     Section 3.9. Absence of Certain Changes or Events.



     (a) Except as set forth in Section 3.9(a) of the Company Disclosure Letter, since December 31,
2006, there has not been:



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     (i) any Company Material Adverse Effect;




     (ii) any loss, damage, destruction or other casualty to the material assets or
properties of either of the Company or any of its Subsidiaries (other than any for
which insurance awards have been received or guaranteed);




     (iii) any material change in any method of accounting or accounting practice of
either of the Company or any of its Subsidiaries except for any such change required
by reason of a concurrent change in GAAP; or




     (iv) any loss of the employment, services or benefits of the chief executive
officer of the Company and members of the Company’s senior management who report
directly to such chief executive officer.



     (b) Since December 31, 2006, each of the Company and each of its Subsidiaries has operated in
the ordinary course of its business and consistent with past practice and, except as set forth on
Section 3.9(b) of the Company Disclosure Letter, has not:




     (i) incurred any material obligation or liability (whether absolute, accrued,
contingent or otherwise) except in the ordinary course of business and consistent
with past practice;




     (ii) failed to discharge or satisfy any Lien or pay or satisfy any material
obligation or liability (whether absolute, accrued, contingent or otherwise), other
than Permitted Liens and liabilities being contested in good faith and for which
adequate reserves have been provided;




     (iii) mortgaged, pledged or subjected to any Lien (other than Permitted Liens)
any of its material assets, properties or rights;




     (iv) sold or transferred any of its material assets, or cancelled any material
debts or claims or waived any material rights;




     (v) disposed of any patents, trademarks or copyrights or any patent, trademark
or copyright applications;




     (vi) defaulted on any material obligation;




     (vii) granted any increase in the compensation or benefits of its key employees
other than increases in the ordinary course of business not exceeding 20% of the key
employee’s annual compensation then in effect or entered into any employment, change
of control, retention or severance agreement or arrangement with any of them;




     (viii) contractually committed to make any capital expenditure for any periods
after the date hereof or additions to property, plant and equipment used in its
operations other than ordinary repairs and maintenance in excess of $100,000 in the
aggregate;



- 11 -









 






     (ix) laid off any significant number of its employees;




     (x) received notice from any domestic distributor of its intention to terminate
its relationship or contract with the Company or any of its Subsidiaries or had any
such relationship or contract terminated by any distributor;




     (xi) received notice from any international distributor of its intention to
terminate its material relationship or material contract with the Company or any of
its Subsidiaries or had any such relationship or contract terminated by any
distributor;




     (xii) discontinued the offering of any material services or product;




     (xiii) incurred any obligation or liability for the payment of severance
benefits;




     (xiv) declared, paid, or set aside for payment any dividend or other
distribution in respect of shares of its capital stock, membership interests or
other securities, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of its capital stock, membership interests or other
securities, or agreed to do so; or




     (xv) entered into any agreement or made any commitment to do any of the
foregoing.



     Section 3.10. Tax Matters. Except as set forth on Section 3.10 of the Company
Disclosure Letter:



     (a) The Company and each of its Subsidiaries have filed when due all material Tax Returns
required by applicable law to be filed with respect to the Company and each of its Subsidiaries;
(ii) all such Tax Returns were true, correct and complete in all material respects as of the time
of such filing; (iii) all material Taxes owed by the Company and each of its Subsidiaries, if
required to have been paid, have been paid (except for Taxes which are being contested in good
faith); and (iv) any material liability of the Company or any of its Subsidiaries for Taxes not yet
due and payable, or which are being contested in good faith, has been provided for on the financial
statements of the Company in accordance with GAAP.



     (b) There is no material action, suit, proceeding, investigation, audit or claim now pending
with respect to the Company or any of its Subsidiaries in respect of any Tax, nor has any material
claim for additional Tax been asserted in writing by any taxing authority.



     (c) Since January 1, 2002, no claim has been made in writing by any taxing authority in a
jurisdiction where the Company or any of its Subsidiaries has not filed a Tax Return that it is or
may be subject to Tax by such jurisdiction.



     (d) (i) There is no outstanding request for any extension of time for the Company or any of
its Subsidiaries to pay any Taxes or file any Tax Returns; (ii) there has



- 12 -









 







been no waiver or extension of any applicable statute of limitations for the assessment or
collection of any Taxes of the Company or any of its Subsidiaries that is currently in force; and
(iii) neither the Company nor any of its Subsidiaries is a party to or bound by any agreement,
whether written or unwritten, providing for the payment of Taxes, payment for Tax losses,
entitlements to refunds or similar Tax matters, other than agreements among the Company and its
Subsidiaries and other than customary Tax indemnifications or allocations in commercial lending or
lease agreements.



     (e) The Company and each of its Subsidiaries have withheld and paid all material Taxes
required to be withheld in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.



     (f) The Company has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.



     (g) Neither the Company nor any of its Subsidiaries has 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.



     (h) There is no material Lien, other than a Permitted Lien, affecting any of the assets,
properties or rights of the Company and its Subsidiaries that arose in connection with any failure
or alleged failure to pay any Tax.



     (i) Neither the Company nor any of its Subsidiaries (i) has been a member of an affiliated
group (within the meaning of Code § 1504(a)) filing a consolidated federal income Tax Return (other
than a group the common parent of which is the Company) or (ii) has any liability for the Taxes of
any Person (other than any of the Company and its Subsidiaries) under Treasury Regulations §
1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.



     Section 3.11. Absence of Undisclosed Liabilities. Except as set forth on Section 3.11
of the Company Disclosure Letter, there are no material liabilities or obligations of the Company
or any Subsidiary thereof of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, 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 (A) liabilities or obligations disclosed and provided for in the consolidated balance sheet of
the Company as of March 31, 2007 included in the Company SEC Reports filed prior to the date hereof
or referred to in the notes thereto, (B) liabilities or obligations incurred in the ordinary course
of business consistent with past practice since March 31, 2007 or (C) liabilities or obligations
which would not, individually or in the aggregate, have a Company Material Adverse Effect. Neither
of the Company or any of its Subsidiaries is directly or indirectly liable upon or with respect to
(by discount, repurchase agreements or otherwise), or obliged in any other way to provide funds in
respect of, or to guarantee or assume, any material debt, obligation or dividend of any Person,
except



- 13 -









 







endorsements in the ordinary course of business in connection with the deposit, in banks or
other financial institutions, of items for collection.



     Section 3.12. Company Property.



     (a) Section 3.12(a) of the Company Disclosure Letter contains a true and complete description
of all real property owned by the Company and its Subsidiaries (the “Owned Real Property”)
as of the date hereof. The Company has made available to Parent copies of any title insurance
policies (together with copies of any documents of record listed as exceptions to title on such
policies) currently insuring each Owned Real Property and copies of the most recent surveys of the
same. The Company and its Subsidiaries have good, marketable and valid fee title to all of the
Owned Real Property free and clear of Liens other than Permitted Liens.



     (b) Section 3.12(b) of the Company Disclosure Letter sets forth a list of all leases, licenses
(for real property), subleases and occupancy agreements, together with all amendments thereto, in
which either of the Company or its Subsidiaries has a leasehold interest or similar occupancy
rights, whether as lessor or lessee, and (i) are material to the operation of the Company and its
Subsidiaries, taken as a whole, or (ii) involve payments by the Company or its Subsidiaries in
excess of $150,000 per year (each, a “Lease” and collectively, the “Leases”; the
property covered by Leases under which either of the Company or its Subsidiaries is a lessee is
referred to herein as the “Leased Real Property”; the Leased Real Property, together with
the Owned Real Property, collectively being the “Company Property”). Neither the Company
nor any of its Subsidiaries is a party to any Contract (other than a Lease) with the lessor of any
of the Leased Real Properties, which gives such lessor any right to terminate or adversely alter
the terms of the Lease to which such lessor is a party. The Company or its Subsidiaries enjoys
peaceful and undisturbed possession of, the Leased Real Property pursuant to the Leases. No option
has been exercised under any of such Leases, except options whose exercise has been evidenced by a
written document, a true, complete and accurate copy of which has made available to Parent with the
corresponding Lease. The transactions contemplated by this Agreement do not require the consent or
approval of the other party or parties to the Leases.



     (c) With respect to each Lease, (i) such Lease is in full force and effect, (ii) all rents,
required deposits and additional rents due to date pursuant to each Lease have been paid in full,
(iii) the Company has not prepaid rent or any other amounts due under a Lease more than thirty (30)
days in advance, and (iv) no party has any rights of offset against any rents, required security
deposits or additional rents payable under such Lease, including, but not limited to the security
deposits paid by the Company pursuant to the Leases for the Unit B Premises (as hereinafter
defined) and the Leased Real Property. As of the date hereof, no Lease has been materially
modified or amended. That certain Industrial Real Estate Lease between New Goodyear, LTD.
(“Goodyear Landlord”) and GenSci Regeneration Laboratories, Inc. dated as of December 28,
1998, as amended by that certain (i) Rider No. 1 between Goodyear Landlord and GenSci Regeneration
Laboratories, Inc. dated as of December 28, 1998, (ii) Option to Extend Lease Term Rider between
Goodyear Landlord and GenSci Regeneration Laboratories, Inc. dated as of December 28, 1998, and
(iii) Rider No. 2 between Goodyear Landlord, and the Company, as successor-in-interest to GenSci



- 14 -









 







Regeneration Laboratories, Inc. dated as of December 9, 2003, with respect to the premises
commonly known as Unit B in the building located at 2 Goodyear, Irvine, CA (the “Unit B
Premises”), has expired and the Company has no further obligations to Goodyear Landlord
thereunder.



     (d) Except as set forth in Section 3.12(d) of the Company Disclosure Letter, none of the
Company Property is subject to any option, lease, sublease, license or other agreement granting to
any Person or entity any right to the use, occupancy or enjoyment of such property or any portion
thereof or to obtain title to all or any portion of such property.



     (e) Except as set forth in Section 3.12(e) of the Company Disclosure Letter, all material
improvements, systems, equipment, machinery and fixtures on the Company Property are in good
operating condition and repair and generally are adequate and suitable in all material respects for
the present and continued use, operation and maintenance thereof as now used, operated or
maintained. All improvements on the Company Property constructed by or on behalf of the Company or
any Subsidiary were constructed, to the Knowledge of the Company, in compliance in all material
respects with applicable laws, ordinances and regulations affecting such Company Property,
including but not limited to the American with Disabilities Act.



     Section 3.13. Assets of the Company and its Subsidiaries.




     (a) The assets, properties and rights of each of the Company and its Subsidiaries constitute
all of the assets, properties and rights which are used in the operation of their business as
currently conducted. There are no assets, properties, rights or interests of any kind or nature
that either of the Company or any of its Subsidiaries has been using, holding or operating in their
business prior to the Closing that will not be used, held or owned by each of the Company or its
Subsidiaries immediately following the Closing.



     (b) Each of the Company and its Subsidiaries has good and marketable fee simple title, free
and clear of any Liens other than Permitted Liens, to, or a valid leasehold interest under
enforceable leases in, all of its material assets, properties and rights.



     Section 3.14. Intellectual Property.




     (a) The Company and its Subsidiaries own all right, title and interest in and to, or have
valid and enforceable licenses to use, all the Intellectual Property, and such Intellectual
Property represents all intellectual property rights necessary for the conduct of their business as
and where conducted on the date hereof and on the Closing. The Company and its Subsidiaries are in
compliance in all material respects with all licenses relating to the protection of such of the
Intellectual Property as it uses pursuant to license or other agreement. To the Knowledge of the
Company, there are no conflicts with or infringements of any Intellectual Property by any third
party. To the Knowledge of the Company, the conduct of the business of the Company and its
Subsidiaries does not conflict with, violate, misappropriate, misuse or infringe any proprietary or
intellectual property right of any third party. Except as set forth on Section 3.14(a) of the
Company Disclosure Letter, there is no claim, suit, action or proceeding pending or, to the
Knowledge of the Company, threatened



- 15 -









 







against the Company or its Subsidiaries: (i) alleging any such conflict, violation,
misappropriation, misuse or infringement with any third party’s proprietary or intellectual
property rights; or (ii) challenging the Company’s or its Subsidiaries’ ownership or use of, or the
validity or enforceability of any Intellectual Property.



     (b) Section 3.14(b) of the Company Disclosure Letter sets forth a complete and current list of
all registrations, certificates, applications, filings or other material documents issued by, filed
with, or recorded by, any Governmental Entity pertaining to the Intellectual Property
(“Registered Intellectual Property”) as of the date hereof and the owner of record, date of
application or issuance, and relevant jurisdiction as to each. All Registered Intellectual
Property is owned by the Company and/or its Subsidiaries, free and clear of all Liens other than
Permitted Liens. All Registered Intellectual Property is valid, subsisting, unexpired, and all
renewal fees and other maintenance fees that have fallen due on or prior to the Closing have been
paid. Except as listed on Section 3.14(b)(iv) of the Company Disclosure Letter, no Registered
Intellectual Property is the subject of any proceeding before any governmental, registration or
other authority in any jurisdiction. The consummation of the transactions contemplated by this
Agreement will not alter or impair any Intellectual Property.



     (c) Section 3.14(c) of the Company Disclosure Letter sets forth a complete list of all license
agreements pertaining to Intellectual Property as of the date hereof, except for agreements
pertaining to commercially available, off-the-shelf software. The Company and its Subsidiaries are
in compliance in all material respects with all agreements pertaining to the Intellectual Property,
and, except as set forth in Section 3.14(c) of the Company Disclosure Letter are not under any
obligation to pay royalties or other payments in connection with any agreement, nor restricted from
assigning its rights respecting Intellectual Property, such rights including the right to sue and
obtain damages for past and future infringements thereof, nor will the Company or its Subsidiaries
otherwise be, as a result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any agreement relating to the Intellectual Property.
Neither the Company nor its Subsidiaries is in material default of any such agreement.



     (d) Except as set forth in Section 3.14(d) of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries has made any claim of a violation, infringement, misuse or
misappropriation by any third party (including any employee or former employee of the Company or
its Subsidiaries) of its rights to, or in connection with, any Intellectual Property, which claim
is pending. Neither the Company nor any of its Subsidiaries has entered into any agreement to
indemnify any other Person against any charge of infringement of any Intellectual Property.



     Section 3.15. Software.




     (a) To the Knowledge of the Company, none of the operating and applications computer software
programs and databases used by the Company and its Subsidiaries that are material to the conduct of
their business (collectively, the “Software”), nor any use thereof, conflicts with,
infringes upon or violates any intellectual property or other proprietary right of



- 16 -









 







any other Person and, no claim, suit, action or other proceeding with respect to any such
infringement or violation is pending, or to the Knowledge of the Company, threatened.



     (b) The Company and its Subsidiaries have not purchased any material amount of
telecommunications equipment without procuring a software license for the imbedded software in such
equipment nor is the Company or its Subsidiaries subject to any claim for failing to procure such a
license.



     Section 3.16. Licenses and Permits.




     (a) The Company and its Subsidiaries own or possess all right, title and interest in and to
each of their respective material licenses, permits, franchises, registrations, authorizations and
approvals issued or granted to any of the Company or its Subsidiaries by any Governmental Entity
(the “Licenses and Permits”) and has taken all necessary action to maintain such Licenses
and Permits. Each License and Permit has been duly obtained, is valid and in full force and
effect, and is not subject to any pending or, to the Knowledge of the Company, threatened
administrative or judicial proceeding to revoke, cancel, suspend or declare such License and Permit
invalid in any respect. The Licenses and Permits are sufficient and adequate in all material
respects to permit the continued lawful conduct of the business of the Company and its
Subsidiaries, and none of the operations of the Company or its Subsidiaries are being conducted in
a manner that violates in any material respects any of the terms or conditions under which any
License and Permit was granted.



     (b) No petition, action, investigation, notice of violation or apparent liability, notice of
forfeiture, order to show cause, complaint, or proceeding seeking to revoke, reconsider the grant
of, cancel, suspend, or modify any of the Licenses and Permits is pending or, to the Knowledge of
the Company, threatened before any Governmental Entity. No notices have been received by and, to
the Knowledge of the Company, no claims have been filed against the Company or its Subsidiaries
alleging a failure to hold any requisite permits, regulatory approvals, licenses or other
authorization.



     Section 3.17. Regulatory Matters.




     (a) The Company and its Subsidiaries manufacture, market, test and distribute and for the past
three years have manufactured, marketed, tested and distributed their products in material
compliance with the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and all applicable
rules and regulations of the FDA or similar laws in any state or foreign jurisdiction (including,
but not limited to, the “Good Manufacturing Practices” otherwise known as the “Quality System
Regulation,” the “Medical Device Reporting” regulations and those related to investigational use or
pre-market notification for medical devices and approval of abbreviated applications to market new
drugs, regulations regarding labeling, advertising and record-keeping, and regulations addressing
human cells, tissues, and cellular and tissue-based products) and in material compliance with the
Company’s and its Subsidiaries’ quality control procedures in effect at the time of manufacture.
Except as set forth on Section 3.17(a) of the Company Disclosure Letter, all of the products
currently sold by the Company and its Subsidiaries have been approved or cleared for marketing by
the FDA and all other applicable federal, state and foreign regulatory agencies and the Company and
its Subsidiaries have



- 17 -









 







obtained all necessary authorizations, consents and approvals from any applicable Governmental
Entity and neither the Company nor any of its Subsidiaries promotes or, to the Knowledge of the
Company, has promoted any “off-label” use for such products or received any notice from any other
Person alleging such promotion. Neither the Company nor any Subsidiary has received any notice or
other communication from the FDA, Person or any other federal, state or foreign regulatory agency
questioning its manufacturing practices or threatening to revoke or curtail any product clearance
or approval or otherwise alleging any violation applicable to any products of the Company or its
Subsidiaries, and the Company is not aware of any intent to deliver any such notice to it or the
Company’s Subsidiaries. Section 3.17(a) of the Company Disclosure Letter contains a complete list
of all products manufactured or marketed by the Company and its Subsidiaries, including those which
require the approval of, or premarket notification to, or listing with the FDA or any other United
States federal or state or foreign governmental agency or bureau under any existing law, regulation
or policy, specifying (i) with respect to each domestic product, the type of approval, premarket
notification or listing required and the reference number or identification of each currently
effective approval, notice and registration and (ii) with respect to each foreign product, the
regulatory status of such product. None of the products of the Company or its Subsidiaries have
been recalled, withdrawn, suspended or discontinued by the Company or its Subsidiaries in the
United States or outside the United States whether voluntary or involuntary and to the Company’s
Knowledge, there exists no basis for any action by the FDA or any other Governmental Entity to
revoke, suspend, cancel or withdraw any product approval, clearance, registration, license or other
authorization or permit with respect to any product of the Company or its Subsidiaries. All United
States and international regulatory approvals or premarket notifications therefor are owned by and
registered in the name of the Company or one of its Subsidiaries and are in full force and effect.



     (b) Neither the Company nor any of its Subsidiaries has failed to file with the applicable
regulatory authorities (including, without limitation, the FDA or any foreign, federal, state or
local governmental or regulatory authority performing functions similar to those performed by the
FDA) any material required filing, declaration, listing, registration, report or submission; all
such filings, declarations, listings, registrations, reports or submissions were in compliance with
applicable laws when filed and no deficiencies have been asserted by any applicable regulatory
authority with respect to any such filings, declarations, listing, registrations, reports or
submissions.



     (c) Any clinical, pre-clinical and other studies and tests conducted by or on behalf of or
sponsored by the Company or its Subsidiaries were and, if still pending, are being conducted in
accordance with all United States and foreign statutes, laws, rules, directives and regulations, as
applicable. The Company has no knowledge of other studies or tests the results of which are
inconsistent with the Company’s or its Subsidiaries’ studies or tests or otherwise call into
question the safety or efficacy of the Company’s or its Subsidiaries’ current or previous products.
Neither the Company nor any of its Subsidiaries has received any notices or other correspondence
from the FDA or any other foreign, federal, state or local governmental or regulatory authority
performing functions similar to those performed by the FDA with respect to any ongoing clinical or
pre-clinical studies or tests requiring the termination, suspension or material modification of
such studies or tests.



- 18 -









 





     (d) To the Knowledge of the Company, there are no facts, circumstances or conditions that
would reasonably be expected to form the basis for any investigation, suit, claim or action or
proceeding against or affecting the Company or its Subsidiaries relating to or arising under the
FDCA or the regulations of the FDA promulgated thereunder or similar foreign regulations, except
for any such investigation, suit, claim, action or proceeding that is not material.



     (e) Neither the Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any
employee of the Company or any of its Subsidiaries or any Person retained by the Company or any of
its Subsidiaries, has made on behalf of the Company or any of its Subsidiaries any false statement
or material omissions in any application or other Submission relating to products governed by the
FDA or other Governmental Entity.



     (f) Except as set forth in Section 3.17(f) of the Company Disclosure Letter, to the Knowledge
of the Company, all of the manufacturing facilities and operations of the suppliers of the Company
and its Subsidiaries of products sold in the United States are in material compliance with
applicable FDA regulations, including current Good Manufacturing Practices, and meet sanitation
standards set by the FDCA.



     (g) Except as set forth in Section 3.17(g) of the Company Disclosure Letter, to the Knowledge
of the Company, no legislative or regulatory proposal or other proposal for a change in any
applicable law or the interpretations thereof has been adopted or is pending which could materially
adversely affect the Company or its Subsidiaries or the business of the Company or its
Subsidiaries.



     (h) All of the products sold by the Company and its Subsidiaries are classified as Class I and
Class II Medical Devices (as defined in 21 U.S.C. § 360c(a)(1)(A) and (B) and applicable rules
thereunder. Except as set forth on Section 3.17(h) of the Company Disclosure Letter, the Company
and its Subsidiaries, and the products sold by the Company and its Subsidiaries, are in compliance
in all material respects with all current and otherwise applicable statutes, rules, regulations or
orders administered or issued by the FDA and all other Governmental Entities (except for
environmental agencies or bodies) having regulatory authority over the products of the Company and
its Subsidiaries (except with respect to environmental matters) and the Company and its
Subsidiaries.



     (i) Except as set forth on Section 3.17(i) of the Company Disclosure Letter, since their
founding neither the Company nor any of its Subsidiaries has received any of the following
communications and, to the Knowledge of the Company, no facts exist which furnish any reasonable
basis for, any Notice of Inspectional Observation (Form FDA 483), Notice of Adverse Findings, FDA
Warning Letter, Section 305 notice, subpoena, an Unacceptable Determination under the
Government-Wide Quality Assurance Program (GWQAP) or other similar communication by any
Governmental Entity.



     (j) Except as set forth on Section 3.17(j) of the Company Disclosure Letter, since their
founding, neither the Company nor any of its Subsidiaries has either filed any premarket approval
applications (“PMA”) or received any premarket notification (“510(k)”) clearance or
concurrence letters from the FDA. Section 3.17(j) of the Company Disclosure



- 19 -









 







Letter contains a complete list of all of the products of the Company and its Subsidiaries not
marketed under an approved PMA or 510(k).



     (k) Since their founding, neither the Company nor any of its Subsidiaries has filed any
investigational device exemptions (“IDE”) or conducted any clinical investigations under an
IDE.



     (l) Except as set forth on Section 3.17(l) of the Company Disclosure Letter, since January 1,
2002, neither the Company nor any of its Subsidiaries has received any FDA inspection reports and
the FDA has not inspected the Company’s or any of its Subsidiaries’ facilities. The Company has
furnished Parent with access to material internal audit reports (as required by 21 C.F.R. Part 820,
Section 820.22) conducted by the Company and its Subsidiaries since January 1, 2002. Section
3.17(l) of the Company Disclosure Letter contains an accurate and complete list of all such
internal audit reports.



     (m) The Company has made available to Parent all complaints maintained by the Company and its
Subsidiaries (as required by 21 C.F.R. Part 820) and all Product Experience Reports received or
compiled by the Company and its Subsidiaries since January 1, 2003. Section 3.17(m) of the Company
Disclosure Letter contains a complete list of all such complaints and Product Experience Reports
received or compiled by the Company and its Subsidiaries since January 1, 2003. Except as set
forth on Section 3.17(m) of the Company Disclosure Letter, since January 1, 2003, the Company has
not filed any Medical Device Reports (pursuant to 21 C.F.R. Part 803).



     Section 3.18. Certifications; Product Safety.




     (a) All operations of the Company and its Subsidiaries have achieved and maintained all
required ISO (International Organization for Standardization) and quality certifications and are
compliant, in all material respects, with the applicable FDA Quality System Regulations, and there
is no pending or threatened, action to audit, repeal, fail to renew or challenge any such
certification. Except as set forth in Section 3.18(a) of the Company Disclosure Letter, since
January 1, 2003, neither the Company nor any of its Subsidiaries has been required to file any
notification or other report with or provide information to any product safety agency, commission,
board or other governmental entity of any jurisdiction concerning actual or potential hazards with
respect to any product purchased, distributed, sold or leased, or with respect to services
rendered, by the Company or any of its Subsidiaries. Each product distributed, sold, or leased, or
service rendered, by the Company and its Subsidiaries complies in all material respects with all
product safety standards of each applicable product safety agency, commission, board or other
governmental entity having jurisdiction over the Company. The Company and its Subsidiaries, or an
agent of the Company or its Subsidiaries, manufactures each product of the Company and its
Subsidiaries in material compliance with each device master record (as such term is defined in the
FDA Quality System Regulations) maintained by the Company and its Subsidiaries, or an agent of the
Company or its Subsidiaries, for each product of the Company and its Subsidiaries.



     (b) Except as set forth on Section 3.18 of the Company Disclosure Letter, no product liability
claims related to the Company or its Subsidiaries or any of the Company’s or



- 20 -









 







its Subsidiaries’ products have been made against the Company or its Subsidiaries since
January 1, 2003.



     Section 3.19. Compliance with Law.




     (a) Except as set forth on Section 3.19(a) of the Company Disclosure Letter, the operations of
the business of the Company and its Subsidiaries have been conducted in accordance in all material
respects with all laws, regulations, orders and other requirements of all Governmental Entities
having jurisdiction over such entity and its assets, properties and operations. Since January 1,
2005, none of the Company or its Subsidiaries has received notice of any violation (or any
investigation with respect thereto) of any such law, regulation, order or other legal requirement,
and none of the Company or its Subsidiaries is in material default with respect to any order, writ,
judgment, award, injunction or decree of any foreign, national, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign, applicable to any of its
assets, properties or operations.



     (b) The Company and each of its officers are in compliance in all material respects with (i)
the applicable provisions of the Sarbanes-Oxley Act of 2002 and the related rules and regulations
promulgated under such act or the Exchange Act (the “Sarbanes-Oxley Act”) and (ii) the
applicable listing and corporate governance rules and regulations of Nasdaq. The Company has
previously disclosed to Parent the information required to be disclosed by the Company and certain
of its officers to the Company’s Board of Directors or any committee thereof pursuant to the
certification requirements contained in Form 10-K and Form 10-Q under the Exchange Act. Except as
permitted by the Exchange Act, including, without limitation, Sections 13(k)(2) and (3), since the
enactment of the Sarbanes-Oxley Act, neither the Company nor any of its Affiliates has made,
arranged or modified personal loans to any executive officer or director of the Company.



     (c) The management of the Company has (i) implemented (x) disclosure controls and procedures
to ensure that material information relating to the Company, including its consolidated
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 sufficient to provide reasonable
assurances regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP, and (ii) has disclosed, based on its most
recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of
the Company’s Board of Directors (A) any significant deficiencies in the design or operation of
internal controls which could adversely affect the Company’s ability to record, process, summarize
and report financial data and have identified for the Company’s auditors any material weaknesses in
internal controls and (B) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal controls. The Company has made
available to Parent a summary of any such disclosure made by management to the Company’s auditors
and audit committee.



     Section 3.20. Litigation. Except as set forth in Section 3.20 of the Company
Disclosure Letter, there are no claims, actions, suits, proceedings, subpoenas or, to the Knowledge
of the Company, investigations (each, an “Action”) pending or, to the Knowledge



- 21 -









 







of the Company, threatened, before any Governmental Entity, or before any arbitrator of any
nature, brought by or against any of the Company or its Subsidiaries or any of their officers or
directors involving or relating to the Company or its Subsidiaries, the material assets, properties
or rights of any of the Company and its Subsidiaries or the transactions contemplated by this
Agreement. There is no judgment, decree, injunction, rule or order of any Governmental Entity or
before any arbitrator of any nature outstanding, or to the Knowledge of the Company, threatened,
against either of the Company or its Subsidiaries.



     Section 3.21. Contracts.




     (a) Section 3.21 of the Company Disclosure Letter sets forth a complete and correct list of
all Contracts as of the date hereof.



     (b) Each Contract is in full force and effect, valid, binding and enforceable against the
Company or its Subsidiaries and, to the Knowledge of the Company, against the other parties thereto
in accordance with its terms, subject to (i) the effect of bankruptcy, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting the enforcement of
creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding
in equity or at law) and (iii) an implied covenant of good faith and fair dealing. Each of the
Company and its Subsidiaries has performed all obligations required to be performed by it to date
under, and is not in default or delinquent in performance, status or any other respect (claimed or
actual) in connection with, any Contract, and no event has occurred which, with due notice or lapse
of time or both, would constitute such a default, except as would not, individually or in the
aggregate, have a Company Material Adverse Effect. The Company has sent no notices of default
under any Contract, which default remains uncured, and to the Knowledge of the Company, no other
party to any Contract is in material default in respect thereof, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a default. The Company has made
available to Parent or its representatives true and complete originals or copies of all the
Contracts.



     (c) A “Contract” means any agreement, contract or commitment, oral or written, to
which either of the Company or any of its Subsidiaries is a party or by which it or any of its
assets are bound constituting:




     (i) a contract or agreement (A) with a customer of the Company or any of its
Subsidiaries pursuant to which the Company or any of its Subsidiaries has sold goods
and/or services and derived revenue (when taken together with any revenue derived
from any other contracts or agreements with that customer) of at least $150,000 for
the year ended December 31, 2006, or (B) with any customer that contains
“most-favored nation,” pursuant to which the Company or any of its Subsidiaries has
sold goods and/or services (the Contracts set forth in subsection (A) and (B)
collectively, the “Customer Contracts”);




     (ii) a contract or agreement with (A) a vendor of the Company or any of its
Subsidiaries pursuant to which the Company and its Subsidiaries



- 22 -









 







paid (when taken together with any amounts paid to that vendor pursuant to any
other contracts or agreements) at least $150,000 to such vendor for the year ended
December 31, 2006 or (B) with any tissue bank (the Contracts set forth in subsection
(A) and (B) collectively, the “Vendor Contracts”);




     (iii) a mortgage, indenture, security agreement, guaranty, pledge and other
agreement or instrument relating to the borrowing of money or extension of credit
(other than accounts receivable or accounts payable in the ordinary course of
business and consistent with past practice);




     (iv) an employment, change of control, retention, severance or material
consulting agreement or a collective bargaining agreement or other material
agreement with any association representing employees;




     (v) any agreement with a hospital under which payments in excess of $150,000 in
the aggregate have been or are expected to be made over the term of the agreement;
and




     (vi) any agreement with a GPO, surgeon or hospital organization;




     (vii) a joint venture, partnership or limited liability company agreement with
third parties;




     (viii) a non-competition agreement or any other agreement or obligation which
purports to limit in any material respect (i) the manner in which, or the localities
in which, the business of the Company or its Subsidiaries may be conducted or (ii)
the ability of either of the Company or its Subsidiaries to provide any type of
service presently conducted by the Company or its Subsidiaries;




     (ix) an agreement containing any exclusivity clause or most-favored-nations
clause;




     (x) a Lease;




     (xi) an agreement limiting or restricting the ability of either of the Company
or its Subsidiaries to make distributions or declare or pay dividends in respect of
its capital stock or membership interests, as the case may be;




     (xii) a distribution, dealership, representative, broker, sales agency,
consulting or material advertising contract;




     (xiii) an agreement requiring capital expenditures in excess of $100,000;




     (xiv) an agreement or offer to acquire all or a substantial portion of the
capital stock, business, property or assets of any other Person or sell,



- 23 -









 







transfer or otherwise dispose of any assets or capital stock of the Company or
any of its Subsidiaries;




     (xv) any agreement to indemnify any other Person against any charge of
infringement of any Intellectual Property;




     (xvi) any power of attorney; or




     (xvii) any other material agreement not in the ordinary course of the business
of the Company and its Subsidiaries.



     Section 3.22. Employee Plans.



     (a) Section 3.22(a) of the Company Disclosure Letter sets forth a list: (i) all “employee
benefit plans”, as defined in Section 3(3) of ERISA, and all other employee benefit agreements,
plans, programs, policies or arrangements, including, without limitation, any such agreements,
plans, programs, policies or arrangements providing severance pay, sick leave, employment,
severance, retention, change in control, consulting, vacation pay, salary continuation for
disability, retirement benefits, deferred compensation, bonus pay, incentive pay, stock options or
stock awards, hospitalization insurance, medical insurance, life insurance, cafeteria benefits,
dependent care reimbursements, prepaid legal benefits, scholarships or tuition reimbursements,
maintained or sponsored by the Company or any of its Subsidiaries or to which the Company or any of
its Subsidiaries is obligated to contribute thereunder for current or former employees, officers,
directors, agents, consultants and independent contractors of the Company and its Subsidiaries (the
“Employee Benefit Plans”), and (ii) all “employee pension plans”, as defined in Section
3(2) of ERISA, maintained or sponsored by the Company or any trade or business (whether or not
incorporated) which is under control or treated as a single employer with the Company under Section
414(b), (c), (m), or (o) of the Code (a “ERISA Affiliate”) or to which the Company or any
ERISA Affiliate has contributed or has been obligated to contribute thereunder (the “Pension
Plans”).



     (b) True, correct and complete copies of the following documents, with respect to each of the
Employee Benefit Plans and Pension Plans, have been made available to Parent, to the extent
applicable: (i) all plans and related trust documents, and amendments thereto; (ii) Forms 5500
filed for the three most recent plan years; (iii) the most recent IRS determination letter, if any,
regarding the tax-qualified status of such Employee Benefit Plan or Pension Plan; (iv) the most
recent summary plan descriptions, annual reports and material modifications; (v) the most recent
actuarial report, if any; (vi) written descriptions of the terms of all non-written agreements
relating to the Employee Benefit Plans or Pension Plans; and (vii) the most recent written results
of all compliance testing required pursuant to Sections 125, 401(a)(4), 401(k), 401(m), 410(b), 415
and 416 of the Code.



     (c) None of the Employee Benefit Plans or Pension Plans is a multiemployer plan, as defined in
Section 3(37) of ERISA (“Multiemployer Plan”) or subject to Title IV or Section 302 of
ERISA or Sections 412 or 4971 of the Code. 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



- 24 -









 







circumstances have occurred or exist which could reasonably be expected to result in any such
liability to the Company or any Subsidiary.



     (d) Each Pension Plan that is intended to qualify under Section 401(a) of the Code has
received a determination letter from the IRS or can rely on an opinion letter as to its
qualification and the trust maintained pursuant thereto is exempt from federal income taxation
under Section 501(a) of the Code, and nothing has occurred with respect to the operation of any
such Pension Plan that would reasonably be expected to cause the loss of such qualification or
exemption or the imposition of any material liability, penalty or tax under ERISA or the Code.



     (e) All contributions (including all employer contributions and employee salary reduction
contributions) and all premiums required to have been paid under any of the Employee Benefit Plans
or Pension Plans or by law (without regard to any waivers granted under Section 412 of the Code) to
any funds or trusts established thereunder or in connection therewith have been made by the due
date thereof (including any valid extension) and all contributions for any period ending on or
before the Closing Date which are not yet due will be paid or accrued prior to the Closing Date.



     (f) To the Knowledge of the Company, there has been no material violation of ERISA or the Code
with respect to the filing of applicable reports, documents and notices regarding the Employee
Benefit Plans with the Secretary of Labor or the Secretary of the Treasury or the furnishing of
required reports, documents or notices to the participants or beneficiaries of the Employee Benefit
Plans.



     (g) There are no pending actions, claims or lawsuits (other than claims for benefits in the
ordinary course) which have been instituted or, to the Knowledge of the Company, asserted against
the Employee Benefit Plans or Pension Plans, the assets of any of the trusts under such plans or
the plan sponsor or the plan administrator, or against any fiduciary of the Employee Benefit Plans
or Pension Plans with respect to the operation or administration of such plans or the investment of
the assets of such plans (other than routine benefit claims), nor does the Company have Knowledge
of facts which could reasonably form the basis for any such claim or lawsuit. No Employee Benefit
Plan or Pension Plan has been the subject of an audit, investigation or examination by any
Governmental Entity to the Knowledge of the Company.



     (h) The Employee Benefit Plans and Pension Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA and the Code (including
rules and regulations thereunder) and other applicable federal and state laws and regulations.
None of the Company, its Subsidiaries, or, to the Knowledge of the Company, any “party in interest”
or “disqualified person” with respect to the Employee Benefit Plans or Pension Plans, as
applicable, has engaged in a non-exempt “prohibited transaction” within the meaning of Section 406
of ERISA or 4975 of the Code pursuant to which the tax or penalty could be material. No stock or
other security issued by the Company or any Affiliate forms or has formed a part of the assets of
any Employee Benefit Plan or Pension Plan.



- 25 -









 





     (i) Except as set forth in Section 3.22(i) of the Company Disclosure Letter, none of the
Employee Benefit Plans or Pension Plans provide retiree life, health or death benefits except as
may be required under COBRA or any similar state or local law at the retirees own expense.



     (j) Except as set forth in Section 3.22(j) of the Company Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation of the transactions contemplated
hereby will, either alone or together with the occurrence of subsequent events (i) increase any
benefits otherwise payable under any Employee Benefit Plan or Pension Plan; (ii) result in the
acceleration of the time of payment or vesting of any benefits under any Employee Benefit Plan,
Pension Plan or Contract to any current or former employee; or (iii) result in the payment of any
amount that would, individually or in combination with any other such payment, fail to be
deductible by reason of Section 280G of the Code.



     (k) Except as set forth on Section 3.22(k) of the Company Disclosure Letter, no Contract,
Employee Benefit Plan, warrant or other compensatory or equity-based arrangement with any employee,
officer or director of the Company contains any provision requiring the Company to pay on behalf
of, or otherwise reimburse, any such individual for any income or excise taxes due by such
individual upon payment of any benefits by the Company, other than any such obligations as required
by applicable laws or regulations.



     (l) Each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the
Code) of the Company has been operated in good faith compliance with Section 409A of the Code, IRS
Notice 2005-1, or the proposed regulations or final regulations promulgated under Section 409A of
the Code.



     (m) All Company Employee Benefit Plans and all Company Pension Plans subject to the laws of
any jurisdiction outside of the United States (i) have been maintained in material compliance with
all applicable requirements, (ii) if they are intended to qualify for special tax treatment, meet
all requirements for such treatment, and (iii) if they are intended to be funded and/or
book-reserved, are fully funded and/or book reserved, as appropriate, based upon reasonable
actuarial assumptions.



     Section 3.23. Insurance. The Company has made available to Parent true, complete and
accurate copies of all material surety bonds, fidelity bonds and all material policies of title,
liability, fire, casualty, business interruption, workers’ compensation and other forms of
insurance insuring each of the Company and its Subsidiaries and their assets, properties and
operations. All such policies and bonds are in full force and effect. None of the Company or its
Subsidiaries is in material default under any provisions of any such policy of insurance nor has
any of the Company or its Subsidiaries received notice of cancellation of or cancelled any such
insurance. For all material claims made under such policies and bonds, the Company and its
Subsidiaries have timely complied with any applicable notice provisions.



     Section 3.24. Affiliate Transactions. Except as set forth in the Company SEC Reports
(including the exhibits thereto) filed prior to the date hereof, there are no transactions,
agreements, arrangements or understandings between the Company or any of its Subsidiaries, on the
one hand, and any director or executive officer of the Company, on the



- 26 -









 







other hand, that would be required to be disclosed under Item 404 of Regulation S-K under the
Securities Act other than ordinary course of business employment agreements and similar employee
arrangements otherwise set forth on Section 3.24 of the Company Disclosure Letter to the extent
required to be set forth therein (or any such ordinary course employment agreements and similar
arrangements not required to be set forth on Section 3.24 of the Company Disclosure Letter by the
limitations contained in the representation and warranty set forth in Section 3.21 of this
Agreement).



     Section 3.25. Vendors and Customers.




     (a) Section 3.25(a) of the Company Disclosure Letter sets forth a list of the vendors that are
parties to the Vendor Contracts. No such vendor has expressed in writing or, to the Knowledge of
the Company, verbally to the Company or any of its Subsidiaries its intention to cancel or
otherwise terminate or materially reduce or modify its relationship with the Company or any of its
Subsidiaries.



     (b) Section 3.25(b) of the Company Disclosure Letter sets forth a list of the customers that
are parties to the Customer Contracts. No customer under any such Customer Contract has expressed
in writing or, to the Knowledge of the Company, verbally to the Company or any of its Subsidiaries
its intention to cancel or otherwise terminate or materially reduce or modify its relationship with
the Company or any of its Subsidiaries.



     (c) No GPO or hospital contracting with the Company or any of its Subsidiaries nor any Person
who is a licensor to the Company, has expressed in writing or, to the Knowledge of the Company,
verbally to the Company or any of its Subsidiaries its intention to cancel or otherwise terminate
or materially reduce or modify its relationship with the Company or any of its Subsidiaries.



     Section 3.26. Labor Matters.




     (a) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or other labor union contract or similar scheme or arrangement applicable to its
employees nor does the Company have Knowledge of any activities or proceedings of any labor union
to organize any such employees.



     (b) Each of the Company and its Subsidiaries is in compliance in all material respects with
all applicable laws relating to employment and employment practices, the classification of
employees, wages, hours, collective bargaining, unlawful discrimination, civil rights, safety and
health, workers’ compensation and terms and conditions of employment. There are no charges with
respect to or relating to either of the Company or its Subsidiaries pending or, to the Knowledge of
the Company, threatened before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment practices. Neither the
Company nor any of its Subsidiaries has received any notice from any national, state, local or
foreign agency responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of either of the Company or its Subsidiaries and no such investigation is
in progress.



- 27 -









 





     (c) There has been no “mass layoff” or “plant closing” as defined by the Worker Adjustment and
Retraining Notification Act or any similar state or local “plant closing” law (“WARN”) with
respect to the current or former employees of the Company or its Subsidiaries.



     (d) Except as set forth on Section 3.26(d) of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries has any severance plan or severance obligation with respect to
its employees.



     Section 3.27. Environmental Matters.




     (a) Each of the Company and its Subsidiaries is, and has been, in compliance in all material
respects with all Environmental Laws. Each of the Company and its Subsidiaries has in effect all
material licenses, permits and other authorizations required under all Environmental Laws and all
such licenses, permits and other authorizations are in full force and effect and the Company is in
compliance in all material respects with all such licenses, permits and authorizations and such
licenses, permits and authorizations are transferable without cost.



     (b) There is no material litigation or other proceeding or investigation pending, or to the
Knowledge of the Company, threatened against the Company, any of its Subsidiaries or any of their
respective properties under any Environmental Law, and the Company and its Subsidiaries have not
received any notice of material violation or potential liability under any Environmental Laws from
any Person or any Governmental Entity inquiry, request for information, or demand letter under any
Environmental Law relating to operations or properties of the Company or its Subsidiaries. None of
the Company, its Subsidiaries or respective properties or operations is subject to any orders
arising under Environmental Laws nor are there any administrative, civil or criminal actions,
suits, proceedings or investigations pending or, to the Knowledge of the Company, threatened,
against the Company or its Subsidiaries under any Environmental Law. None of the Company or its
Subsidiaries has entered into any agreement pursuant to which the Company or its Subsidiaries has
assumed or will assume any material liability under Environmental Laws, including without
limitation, any obligation for costs of remediation, of any other Person.



     (c) To the Knowledge of the Company, there has been no release or threatened release of any
Hazardous Material, on, at or beneath any of the Company Property or other properties currently or
previously owned or operated by the Company or its Subsidiaries or any surface waters or
groundwater’s thereon or thereunder which requires any material disclosure, investigation, cleanup,
remediation, monitoring, abatement, deed or use restriction by the Company, or which would be
expected to give rise to any actual or alleged material liability for personal injury, property
damage, natural resources damage or other material liability or damages to the Company or its
Subsidiaries under any Environmental Laws.



     (d) None of the Company or its Subsidiaries has sent or arranged for the disposal of any
Hazardous Material, or transported any Hazardous Material, that reasonably would be expected to
give rise to any material liability for any damages or costs of



- 28 -









 







investigation, remediation or any other action to respond to the release or threatened release
of any Hazardous Material.



     (e) The Company has made available to Parent copies of all environmental studies,
investigations, reports or assessments concerning the Company, its Subsidiaries, the Company
Property and any owned real property currently or previously owned or operated by the Company or
its Subsidiaries.



     (f) None of the Company and its Subsidiaries is or will be required to incur material cost or
expense in order to cause their operations or properties to comply with applicable Environmental
Laws.



     Section 3.28. No Brokers; Other Advisors.




     (a) No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to
any broker’s, finder’s or similar fee or other commission from the Company or its Subsidiaries in
connection with this Agreement or the transactions contemplated hereby other than Thomas Weisel
Partners LLC. The Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and Thomas Weisel Partners LLC pursuant to which Thomas Weisel
Partners LLC would be entitled to any payment relating to the transactions contemplated hereby.



     (b) Other than the agreements with Thomas Weisel Partners LLC described in Section 3.28(a),
each engagement letter or other contract between the Company or any of its Subsidiaries and any of
its legal, accounting or other advisors in connection with the transactions contemplated by this
Agreement entitles the applicable advisor to receive compensation only at its usual hourly rates,
without any premium, bonus or similar payment in connection with the transactions contemplated by
this Agreement.



     Section 3.29. State Takeover Statutes. The Board of Directors of the Company has
taken all action necessary to ensure that any restrictions on business combinations contained in
the DGCL, including Section 203 of the DGCL, or in the Company Organizational Documents will not
apply to the Agreement, the Merger and the transactions contemplated by this Agreement. No other
“fair price”, “moratorium”, “control share acquisition” or other similar anti-takeover statute or
regulation or any anti-takeover provision in the Company’s Organizational Documents is, or at the
Effective Time will be, applicable to the Company, the Company Common Stock, the Agreement, the
Merger or the other transactions contemplated by this Agreement.



     Section 3.30. Opinion of Financial Advisor. The Board of Directors of the Company has
received the opinion of Thomas Weisel Partners LLC, dated as of the date hereof, to the effect
that, as of such date, the Merger Consideration to be received by the holders of the Company Common
Stock pursuant to the Merger is fair from a financial point of view to the holders of such Company
Common Stock. A written copy of such opinion has been delivered to Parent.



     Section 3.31. Information Supplied. The information supplied or to be supplied by the
Company specifically for inclusion in the proxy statement or any amendment




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or supplement thereto (the “Proxy Statement”) and to be sent to the stockholders of
the Company in connection with the Company stockholders meeting to adopt this Agreement and the
Merger (the “Company Stockholders Meeting”) shall not, on the date the Proxy Statement is
first mailed to the stockholders of the Company or at the time of the Company Stockholders Meeting
or at the Effective Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The Proxy Statement
will, at the time of the Company Stockholders Meeting, comply as to form in all material respects
with the requirements of the Exchange Act.




     Section 3.32. Board Approval. The Board of Directors of the Company, at a meeting
duly called and held, by unanimous vote (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are advisable and fair to, and in the best interests of,
the Company and its stockholders, (ii) approved this Agreement and the transactions contemplated
hereby, including the Merger, and (iii) resolved, subject to Section 7.4, to recommend that the
holders of the shares of Company Common Stock approve and adopt this Agreement and the transactions
contemplated hereby, including the Merger. The Company hereby agrees to the inclusion in the Proxy
Statement of the recommendation of the Board of Directors of the Company described in this Section
3.32 (subject to the right of the Board of Directors of the Company to withdraw, amend or modify
such recommendation in accordance with Section 7.4).



     Section 3.33. Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon (the “Required Company
Vote”) is the only vote of the holders of any class or series of the Company’s capital stock
necessary to approve and adopt this Agreement and the transactions contemplated hereby, including
the Merger.



     Section 3.34. Illegal or Unauthorized Payments; Political Contributions.



     (a) Neither the Company or its Subsidiaries nor, to the Knowledge of the Company (after
reasonable inquiry of its officers and directors), any of the officers, directors, employees,
agents or other representatives of the Company or its Subsidiaries or any other business entity or
enterprise with which the Company or any of its Subsidiaries is or has been affiliated or
associated, has, directly or indirectly, made or authorized any payment, contribution or gift of
money, property, or services, whether or not in contravention of applicable law, (a) as a kickback
or bribe to any Person or (b) to any political organization, or the holder of or any aspirant to
any elective or appointive public office except for personal political contributions not involving
the direct or indirect use of funds of the Company or any of its Subsidiaries.



     (b) None of the Company, any Subsidiary or, to the Knowledge of the Company, any directors or
officers, agents or employees of the Company or any Subsidiary, has (i) provided remuneration or
received any remuneration in violation of 42 U.S.C. 1320a-7b(b), the “Federal anti-kickback
statute” or any similar Law, or (ii) participated in providing financial or reimbursement
information to customers that was reported to government



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reimbursement agencies and that was untrue or misleading in violation of 31 U.S.C. 3729, the
“Federal False Claims Act” or any similar Law.



     Section 3.35. Exchange Offer.



     (a) Through a public exchange offer (the “Exchange Offer”), the Company acquired,
through its wholly owned Swiss subsidiary, IsoTis International S.A. (the “Swiss SPV”),
64,180,460 of the common shares of IsoTis, S.A., pursuant to Offer Memoranda (the “Offer
Memoranda”) and other informational materials made available to IsoTis, S.A. shareholders in
Switzerland, the Netherlands, Canada and the United States and such Exchange Offer and the
transactions contemplated therein complied with the applicable securities laws and any other
applicable laws of the above referenced jurisdictions (such laws, the “Applicable Securities
Laws”) as well as the pertinent recommendations of the Swiss Takeover Board dated December 12,
2006.



     (b) The Offer Memoranda and other informational materials made available to IsoTis, S.A.
shareholders in connection with the Exchange Offer, conformed, in all material respects, to the
requirements of the Applicable Securities Laws, and, as of the date thereof, did not contain an
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading;



     (c) The Company and the Swiss SPV, as applicable, has taken all corporate action necessary to
merge IsoTis, S.A. into a wholly owned subsidiary of the Company and to hold and acquire all of the
shares of capital stock in the merged entity and thereby to exchange all of the remaining shares of
capital stock of IsoTis, S.A. into shares of Company Common Stock in compliance with the Applicable
Securities Laws, including without limitation, the Swiss Federal Act on Mergers, De-Mergers,
Transformations and Transfers of Assets of October 3, 2003, as amended from time to time, and the
Swiss Federal Act on Stock Exchanges and Securities Trading of March 24, 1995, as amended from time
to time (the “Swiss Merger”) and has terminated as of July 30, 2007 the listing of shares
of capital stock of IsoTis, S.A. on each of the SWX Swiss Exchange, Euronext Amsterdam N.V. and the
Toronto Stock Exchange (collectively, the “Listing Terminations”) in compliance with the
Applicable Securities Laws;



     (d) The Swiss SPV is a corporation duly organized and validly existing under the laws of
Switzerland with full corporate power and authority to conduct the Swiss Merger. As of the date
hereof, the Company owns 100% of the issued and outstanding capital stock of the Swiss SPV and all
of the assets and liabilities of IsoTis, S.A., and IsoTis, S.A. has been dissolved; and



     (e) The Exchange Offer, the Swiss Merger, the Listing Terminations and the consummation of all
transactions in connection therewith did not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or give rise to a right of
termination under any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or



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assets of the Company or any of its subsidiaries is subject, except for such breaches or
violations as would not, individually or in the aggregate, have a Company Material Adverse Effect,
nor did such action result in any violation of the provisions of the Certificate of Incorporation
or Bylaws of the Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any
of their properties.



     Section 3.36. Product Warranty. No product of the Company or any of its Subsidiaries
manufactured, sold, leased or delivered by the Company or any of its Subsidiaries is subject to any
oral or written guaranty, warranty or other indemnity to its customers with respect to the quality
or absence of defects of such product beyond the Company’s and its Subsidiaries’ applicable regular
or standard or usual terms and conditions of sale or lease or as otherwise provided by applicable
law. Except as set forth in Section 3.36 of the Company Disclosure Letter, there are no claims
pending, or to the Knowledge of the Company, anticipated or threatened against the Company or any
of its Subsidiaries with respect to the quality of, or existence of defects in, any of their
products. The Company has made available to Parent information which is accurate and complete in
all material respects, regarding all returns of defective or expired products given or promised to
customers since January 1, 2003, and such information in each case accurately describes as best
known to the Company the cause which resulted in the return, allowance or credit. Neither the
Company nor any of its Subsidiaries has since January 1, 2004 paid or been required to pay or
received a request or demand for payment of any damages, including any direct, incidental or
consequential damages, to any Person in connection with any product.



     Section 3.37. Export.



     (a) In the three-year period prior to the date hereof, the Company and its Subsidiaries and,
to the Knowledge of the Company, any and all distributors of the Company’s and its Subsidiaries’
products have (i) complied with all applicable laws or regulations related to the sale, marketing,
promotion or export of goods promulgated or enforced by the Office of Foreign Assets Control in the
United States Department of the Treasury, the United States Department of Commerce or any other
department or agency of the United States federal government, including, without limitation, the
Arms Export Control Act, the trading with the Enemy Act, the International Emergency Economic
Powers Act, the Export Administration Act, the 1930 Tariff Act, the Foreign Corrupt Practices Act,
the Export Administration Regulations, the International Traffic in Arms Regulations, the United
States Customers Regulations (the “Trade Laws”) and (ii) made reasonable efforts to ensure
that no products have been sold directly or indirectly to any entity where such sales are, or were
at any time during the previous two years, prohibited by these Trade Laws or other regulations,
including, without limitation, in the case of each of clause (i) and (ii) with respect to any sales
made in Iran or to any Person in Iran.



     (b) Neither the Company nor any of its Subsidiaries has received notice that it has been the
subject of any investigation, complaint or claim of any violation of any Trade Law by any
Governmental Entity.



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     Section 3.38. Inventory. Section 3.38 of the Company Disclosure Letter sets forth a
complete and accurate list of addresses at which amounts of the inventory of the Company and its
Subsidiaries is located and except as set forth therein, no amounts of inventory are held by any
Person (including any Affiliate of the Company or any of its Subsidiaries) on consignment. All
inventory reflected on the Company’s financial statements included in the Company SEC Reports and
all other inventory acquired by the Company or any of its Subsidiaries was acquired in the ordinary
course of business and in a manner consistent with each of the Company’s and each of its
Subsidiary’s regular inventory practices. Adequate reserves have been established on the Company’s
financial statements and on the books and records of the Company and each of its Subsidiaries with
respect to excessive and obsolete inventory (it being agreed that, for purposes of this Section
3.38 the term “excessive and obsolete inventory” shall refer to any inventory which (i) cannot be
sold at current prices in the ordinary course of business, (ii) are not usable in the production of
current products of the Company and its Subsidiaries or (iii) consists of on-hand quantities in
excess of one year’s historical sales or usage).



     Section 3.39. No Other Representations or Warranties. Except for the representations
and warranties contained in this Article III, neither the Company nor any other Person makes any
other express or implied representation or warranty on behalf of the Company with respect to the
Company and its Subsidiaries.



ARTICLE IV.




REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.




     Parent and Merger Sub hereby jointly and severally represent and warrant to the Company as
follows:



     Section 4.1. Organization. Each of Parent and Merger Sub is duly incorporated,
validly existing and in good standing under the laws of the State of Delaware, and has all
requisite corporate power to own its properties and assets and to conduct its businesses as now
conducted.



     Section 4.2. No Conflict or Violation. The execution, delivery and performance by
Parent and Merger Sub of this Agreement do not and will not (i) violate or conflict with any
provision of any Parent Organizational Document or the organizational documents of Merger Sub, (ii)
violate any provision of law, or any order, judgment or decree of any Governmental Entity, (iii)
result in the creation or imposition of any Lien (other than any Permitted Lien) upon any of the
assets, properties or rights of either Parent or Merger Sub or (iv) violate or result in a breach
of or constitute (with due notice or lapse of time or both) a default under any material contract,
agreement or instrument to which Parent or Merger Sub is a party or by which it is are bound or to
which any of its properties or assets is subject, except in each case as would not, individually or
in the aggregate, prevent or materially delay the ability of Parent and Merger Sub to perform their
respective obligations under this Agreement or to consummate the transactions contemplated hereby.



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     Section 4.3. Consents and Approvals. No consent, waiver, authorization or approval of
any Governmental Entity, and no declaration or notice to or filing or registration with any
Governmental Entity, is required in connection with the execution and delivery of this Agreement by
Parent or Merger Sub or the performance by Parent or its Subsidiaries or Merger Sub of their
obligations hereunder or thereunder, except for (i) any required competition or other regulatory
approvals required of foreign or domestic authorities, (ii) applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations of Nasdaq, (iii) the consents,
waivers, authorizations or approvals of any Governmental Entity set forth on Section 4.3 of the
Parent Disclosure Letter; (iv) the amendment of Establishment Registrations and Device Listings
under the FDA’s Establishment Registration and Device Listing regulations, as set forth in 21
C.F.R. Part 807; and (v) such other consents, waivers, authorizations, approvals, declarations,
notices, filings or registrations, which if not obtained or made, would prevent or materially delay
the ability of Parent and Merger Sub to perform their respective obligations under this Agreement
or to consummate the transactions contemplated hereby.



     Section 4.4. Authorization and Validity of Agreement. Parent and Merger Sub have all
requisite corporate power and authority to execute, deliver and perform their obligations under
this Agreement and to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and Merger Sub and the performance by Parent and Merger Sub of their
obligations hereunder and the transactions contemplated hereby have been duly authorized by the
Board of Directors of each of Parent and Merger Sub and all other necessary corporate action on the
part of Parent and Merger Sub, and no other corporate proceedings on the part of Parent and Merger
Sub are necessary to authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming
due execution and delivery by the Company, shall constitute their legal, valid and binding
obligation, enforceable against them in accordance with its terms, subject to (i) the effect of
bankruptcy, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors’ rights generally, (ii) general equitable principles
(whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good
faith and fair dealing.



     Section 4.5. No Brokers. No broker, finder or similar intermediary has acted for or
on behalf of, or is entitled to any broker’s, finder’s or similar fee or other commission from
Parent in connection with this Agreement or the transactions contemplated hereby.



     Section 4.6. Information Supplied. The information supplied or to be supplied by
Parent specifically for inclusion in the Proxy Statement shall not, on the date the Proxy Statement
is first mailed to the stockholders of the Company or at the time of the Company Stockholders
Meeting or at the Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.



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     Section 4.7. Merger Sub. Merger Sub was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. All of the outstanding capital stock of Merger
Sub is directly owned of record and beneficially by Parent. Except for obligations or liabilities
incurred in connection with its incorporation or organization and the transactions contemplated by
this Agreement, Merger Sub has not and will not have incurred, directly or indirectly, through any
Subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of
any type or kind whatsoever or entered into any agreements or arrangement with any other Person.
Merger Sub has no Subsidiaries.



     Section 4.8. Sufficiency of Funds. Subject to the satisfaction of the condition set
forth in Section 8.2(f), Parent will have sufficient funds at the Effective Time for the payment of
the Merger Consideration and to perform its obligations with respect to the transactions
contemplated by this Agreement.



     Section 4.9. No Other Representations or Warranties. Except for the representations
and warranties contained in this Article IV, none of Parent, Merger Sub or any other Person makes
any other express or implied representation or warranty on behalf of Parent or Merger Sub with
respect to Parent and its Subsidiaries.



ARTICLE V.




COVENANTS OF THE COMPANY.




     The Company hereby covenants as follows:



     Section 5.1. Conduct of Business Before the Closing Date. (a) The Company covenants
and agrees that, during the period from the date hereof to the earlier of the termination of this
Agreement in accordance with its terms and the Effective Time (except as otherwise specifically
contemplated by the terms of this Agreement), unless Parent shall otherwise consent in writing
(which consent shall not be unreasonably withheld): (i) the businesses of the Company and its
Subsidiaries shall be conducted, in all material respects, in the ordinary course of business and
in a manner consistent with past practice and, in all material respects, in compliance with
applicable laws; (ii) the Company shall and shall cause its Subsidiaries to continue to maintain,
in all material respects, its assets, properties, rights and operations in accordance with present
practice in a condition suitable for their current use; and (iii) the Company shall use its
commercially reasonable efforts consistent with the foregoing to preserve substantially intact the
business organization of the Company and its Subsidiaries, to keep available the services of the
present officers and key employees of the Company and its Subsidiaries and to preserve, in all
material respects, the present relationships of the Company and its Subsidiaries with persons with
which the Company or any of its Subsidiaries has significant business relations. Without limiting
the generality of the foregoing, neither the Company nor any of its Subsidiaries shall (except as
specifically contemplated by the terms of this Agreement), between the date of this Agreement and
the earlier of the termination of this Agreement in accordance with its terms and the Effective
Time, directly or indirectly do, any of the following without the prior written consent of Parent
(which consent, with respect to clauses (vi) (but only with respect to non-officers of the
Company), (viii), (xi) and (xii), shall not be unreasonably withheld):



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     (i) make any change in any of its organizational documents; issue any
additional shares of capital stock (other than (A) upon the exercise of options to
purchase shares of Company Common Stock outstanding on the date hereof and (B) the
issuance of Company Common Stock upon consummation of the Exchange Offer),
membership interests or partnership interests or other equity securities or grant
any option, warrant or right to acquire any capital stock, membership interests or
partnership interests or other equity securities or issue any security convertible
into or exchangeable for such securities or alter in any way any its outstanding
securities or make any change in outstanding shares of capital stock, membership
interests or partnership interests or other ownership interests or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, stock dividend or
otherwise;




     (ii) make any sale, assignment, transfer, abandonment, sublease, assignment or
other conveyance of its material assets, Company Property or rights or any part
thereof, other than dispositions of worn-out or obsolete equipment for fair or
reasonable value in the ordinary course of business and consistent with past
practice;




     (iii) subject any of its assets, properties or rights or any part thereof, to
any Lien or suffer such to exist other than Permitted Liens;




     (iv) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
shares of the capital stock, membership interests or partnership interests or other
ownership interests of the Company and its Subsidiaries or declare, set aside or pay
any dividends or other distribution in respect of such shares or interests, except
for the issuance of Company Common Stock upon consummation of the Exchange Offer;




     (v) acquire, lease or sublease any assets, raw materials or properties
(including any real property), or enter into any other transaction, other than in
the ordinary course of business and consistent with past practice;




     (vi) enter into any new (or amend any existing to increase benefits) employee
benefit plan, program or arrangement or any new (or amend any existing to increase
benefits) employment, severance, change of control or consulting agreement, grant
any general increase in the compensation of officers or employees (including any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to become payable
to any employee, except as otherwise provided pursuant to the terms of any plan or
agreement, as required by law, to the extent necessary to avoid imposition of any
taxes under Section 409A (but only to the extent such amendment does not materially
increase the cost of such plan, program or arrangement to the Company, without
regard to the time value of money) or for increases in compensation to employees in
accordance with pre-existing contractual provisions;



- 36 -









 






     (vii) pay (other than with respect to compensatory payments to current or
former employees, officers, consultants or directors, in each case (a) in the
ordinary course of business consistent with past practice, (b) pursuant to
agreements in effect as of the date hereof or (c) which have been accrued for on the
Company’s balance sheet), lend or advance any amount to, or sell, transfer or lease
any properties or assets to, or enter into any agreement or arrangement with, any of
its Affiliates (other than wholly owned Subsidiaries);




     (viii) fail to keep in full force and effect insurance comparable in amount and
scope to coverage maintained as of the date hereof;




     (ix) make any change in any method of accounting or accounting principle,
method, estimate or practice except for any such change required by reason of a
concurrent change in GAAP, or write off as uncollectible any accounts receivable
except in the ordinary course of business and consistent with past practice;




     (x) make or change any material Tax election, change an annual accounting
period, adopt or change any accounting method, file any amended Tax Return, enter
into any closing agreement, settle any material Tax claim or assessment relating to
the Company or any of its Subsidiaries, surrender any right to claim a refund of a
material amount of Taxes or consent to any extension or waiver of the limitation
period applicable to any material Tax claim or assessment relating to the Company or
any of its Subsidiaries;




     (xi) settle, release or forgive any material claim or litigation or waive any
right thereto which has not been properly reserved on the books of the Company or
its Subsidiaries;




     (xii) make, enter into, modify, amend in any manner that would be reasonably
expected to have an adverse effect on the Company and its Subsidiaries or terminate,
or waive any right or remedy under, any Contract, bid or expenditure, where such
Contract, bid or expenditure is for a Contract entailing payments in excess of
$100,000, other than in the ordinary course of business and consistent with past
practice;




     (xiii) lend money to any Person, or incur or guarantee any indebtedness for
borrowed money in excess of $100,000 in the aggregate, or enter into any capital
lease obligation; or




     (xiv) commit to do any of the foregoing.



     (b) Nothing contained in this Agreement shall give to Parent or Merger Sub, directly or
indirectly, rights to control or direct the operations of the Company or its Subsidiaries prior to
the Closing Date. Prior to the Closing Date, the Company and its Subsidiaries shall exercise,
consistent with the terms and conditions of this Agreement, complete control and supervision of its
and its Subsidiaries’ operations.



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     Section 5.2. Notice of Breach. From and after the date hereof and until the earlier
to occur of the Closing Date or the termination of this Agreement pursuant to Article IX hereof,
the Company shall promptly give written notice with particularity upon having Knowledge of any
matter that constitutes a breach of any representation, warranty, agreement or covenant contained
in this Agreement.



     Section 5.3. Affiliate Letter. The Company shall deliver no later than ten (10) days
prior to the Company Stockholders Meeting, a letter to Parent identifying all persons who, to the
Knowledge of the Company, are “affiliates” of the Company for purposes of Rule 145 under the
Securities Act.



     Section 5.4. FDA Correspondence. The Company will (i) consult with Parent prior to
any communication or correspondence with, or delivery of notice, supplemental reports or materials
to, the FDA in connection with the Company’s efforts to obtain 510(k) clearance for the Accell
Products and (ii) promptly provide Parent with copies of any correspondence with the FDA and any
written comments, notices, supplemental reports or materials received from or provided to the FDA
and promptly advise Parent of any oral communications with the FDA.



     Section 5.5. Section 409A. To the extent requested by Parent, the Company will work
with Parent in good faith to amend each Company Employee Benefit Plan and Company Pension Plan to
comply with or be exempt from Section 409A of the Code (if applicable).



ARTICLE VI.




COVENANTS OF PARENT AND MERGER SUB.




     Section 6.1. Employee Benefits.



     (a) Employees of Company and its Subsidiaries who continue their employment with the Surviving
Corporation or who become employees of Parent or any subsidiary of Parent (“Continuing
Employees”) shall be given credit for all service with the Company and its Subsidiaries (and
their respective predecessors) (or service credited by the Company and its Subsidiaries for similar
plans, programs or policies) under all employee benefit and fringe benefit plans, programs and
policies of the Parent or its affiliates in which they become participants for purposes of
eligibility, vesting and level of benefits (except to the extent such service credit will result in
benefit accrual under any defined benefit pension plans or otherwise result in a duplication of
benefits).



     (b) If a Continuing Employee becomes eligible to participate in any medical, dental or health
plan of the Parent or any of its affiliates, Parent shall cause such plan to (A) waive any
preexisting condition limitations for conditions covered under the applicable medical, health or
dental plans of the Company (the “Company Welfare Plans”) and (B) honor any deductible and
out-of-pocket expenses incurred by such employee and his or her beneficiaries under the Company
Welfare Plans during the portion of the applicable plan year preceding the Closing.



- 38 -









 





     (c) Except as provided in this Section 6.1, nothing in this Agreement shall limit or restrict
the right of Parent or any of its Subsidiaries to modify, amend, terminate or establish employee
benefit plans or arrangements, in whole or in part, at any time after the Effective Time.



     (d) No provision of this Section 6.1 shall create any third party beneficiary rights in any
Continuing Employee or any current or former director or consultant of the Company or its
Subsidiaries located in the United States in respect of continued employment (or resumed
employment) or any other matter.



     Section 6.2. Indemnification Continuation.



     (a) For purposes of this 6.2, (i) “Indemnified Person” shall mean any person who is
now, or has been at any time prior to the Effective Time, an officer or director of the Company or
who was serving at the request of the Company as an officer or director of another corporation,
joint venture or other enterprise, and can provide evidence thereof to Parent acceptable to Parent
in its sole discretion and (ii) “Proceeding” shall mean any claim, action, suit, proceeding
or investigation.



     (b) From and after the Effective Time, Parent shall, or Parent shall cause the Surviving
Corporation, to provide indemnification to each Indemnified Person to the same extent and under
similar conditions and procedures as such Indemnified Person is entitled on the date hereof in
connection with any Proceeding based directly or indirectly (in whole or in part) on, or arising
directly or indirectly (in whole or in part) out of, the fact that such Indemnified Person is or
was an officer or director of the Company, or is or was serving at the request of the Company as an
officer or director of another corporation, joint venture or other enterprise or general partner of
any partnership or a trustee of any trust, whether pertaining to any matter arising before or after
the Effective Time. An Indemnified Person shall repay the Surviving Corporation for any expenses
incurred by Surviving Corporation in connection with the indemnification of such Indemnified Person
pursuant to this Section 6.2 if it is ultimately determined that such Indemnified Person did not
meet the standard of conduct necessary for indemnification by the Surviving Corporation.



     (c) Parent shall, or shall cause the Surviving Corporation to, provide or maintain in effect
for six years from the Effective Time (the “Tail Period”), through the purchase of run-off
coverage or otherwise, directors’ and officers’ liability insurance covering the Indemnified
Persons who are covered by the directors’ and officers’ liability insurance policy provided for
directors and officers of the Company and its Subsidiaries as of the date hereof (the “Existing
Policy”) on terms substantially comparable in the aggregate to the Existing Policy; provided,
however, that in no event shall the Surviving Corporation be required to expend in the aggregate in
excess of 200% of the current annual premium paid by the Company for such insurance with respect to
the Tail Period, and if the premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to maintain or obtain a policy with the greatest coverage available
for a cost not exceeding such amount. In lieu of the foregoing, the Company or the Surviving
Corporation may purchase, a six-year “tail” prepaid officers’ and directors’ liability insurance
policy in respect of acts or omissions occurring at or prior to the Effective Time covering each
such Indemnified Person.



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     (d) The provisions of this Section 6.2 shall survive the consummation of the Merger for a
period of six years and are expressly intended to benefit each of the Indemnified Persons;
provided, however, that in the event that any claim or claims for indemnification are asserted or
made within such six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims.



     (e) In the event that Parent or the Surviving Entity or any of their respective successors or
assigns (i) consolidates with or merges into any other Person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all its properties and assets to any Person, then, and in each such case, Parent
shall cause proper provisions to be made so that the successors and assigns of Parent or the
Surviving Entity, as the case may be, assume the obligations set forth in this Section 6.2.



ARTICLE VII.




ADDITIONAL COVENANTS OF THE PARTIES.




     Section 7.1. Preparation of Proxy Statement, Company Stockholders Meeting.



     (a) As promptly as practicable, the Company shall prepare and file the Proxy Statement with
the SEC provided, that the Company shall consult with Parent and provide Parent a reasonable
opportunity to review and comment on such preliminary Proxy Statement prior to filing. The parties
shall reasonably cooperate with each other in the preparation of the Proxy Statement and to have
such document cleared by the SEC as promptly as practicable after such filing. The Proxy Statement
shall include the recommendation of the Board of Directors of the Company in favor of approval and
adoption of this Agreement and the Merger, except to the extent the Board of Directors of the
Company shall have withdrawn or modified its approval or recommendation of this Agreement to the
extent such action is permitted by Section 7.4. The Company shall use its reasonable best efforts
to cause the Proxy Statement to be mailed to its stockholders as promptly as practicable upon the
earlier of (x) receiving notification that the SEC is not reviewing the Proxy Statement and (y) the
conclusion of any SEC review of the Proxy Statement. The Company shall promptly provide copies,
consult with Parent and prepare written responses with respect to any written comments received
from the SEC with respect to the Proxy Statement and advise Parent of any oral comments received
from the SEC. The Proxy Statement shall comply as to form in all material respects with the rules
and regulations promulgated by the SEC under the Exchange Act.



     (b) The Company shall make all necessary filings with respect to the Merger and the
transactions contemplated thereby under the Exchange Act and the rules and regulations thereunder.
The Company will advise Parent, promptly after it receives notice thereof, of any request by the
SEC for amendment of the Proxy Statement or comments thereon and responses thereto or requests by
the SEC for additional information. No amendment or supplement to the Proxy Statement shall be
filed without the prior approval of Parent, which approval shall not be unreasonably withheld or
delayed. If at any time prior to



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the Effective Time, any information relating to Parent or the Company, or any of their
respective Affiliates, officers or directors, should be discovered by Parent or the Company that
should be set forth in an amendment or supplement to the Proxy Statement, so that such 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 which discovers such information shall promptly notify the other parties
hereto and an appropriate amendment or supplement describing such information shall be promptly
filed with the SEC and, to the extent required by law, disseminated to the stockholders of the
Company.



     (c) The Company shall cause the Company Stockholders Meeting to be duly called and held as
soon as reasonably practicable for the purpose of obtaining the Required Company Vote. In
connection with such meeting, the Company will (i) subject to Section 7.4(b), use its reasonable
best efforts to obtain the Required Company Vote and (ii) otherwise comply with all legal
requirements applicable to such meeting.



     Section 7.2. Access to Information. Upon reasonable notice, the Company shall (and
shall cause its Subsidiaries to) afford to Parent and its representatives reasonable access during
normal business hours, during the period prior to the Effective Time, to all its officers,
employees, properties, offices, plants and other facilities and to all books and records and,
during such period, the Company shall (and shall cause its Subsidiaries to) furnish promptly to
Parent and its representatives, consistent with its legal obligations, all other information
concerning its business, properties and personnel as Parent may reasonably request; provided,
however, that the Company may restrict the foregoing access to the extent that, in the Company’s
reasonable judgment, (i) providing such access would result in the disclosure of any trade secrets
of third parties or violate any of its obligations with respect to confidentiality if the Company
shall have used all reasonable efforts to obtain the consent of such third party to such access, or
(ii) any law, treaty, rule or regulation of any Governmental Entity applicable to the Company
requires the Company or its Subsidiaries to preclude Parent and its representatives from gaining
access to any properties or information. Parent will hold any such information that is non-public
in confidence to the extent required by, and in accordance with, the provisions of that certain
Confidentiality Agreement, dated May 14, 2007 (the “Confidentiality Agreement”), between
the Company and Parent.



     Section 7.3. Efforts.



     (a) Subject to the terms and conditions of this Agreement, each party will use its
commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement as soon as
practicable after the date hereof. In furtherance and not in limitation of the foregoing, if
applicable, each party hereto agrees to make any filing required by any applicable Regulatory Law
(as defined below) with respect to the transactions contemplated hereby as promptly as practicable,
and to supply as promptly as practicable any additional information and documentary material that
may be requested pursuant to such applicable Regulatory Law and to take all other actions
necessary to cause the expiration or termination of the applicable waiting periods under such
applicable Regulatory Law as soon as practicable.



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     (b) Each of Parent and the Company shall, in connection with the efforts referenced in Section
7.3 to obtain all requisite approvals and authorizations for the transactions contemplated by this
Agreement under any Regulatory Law (as defined below), use its commercially reasonable best efforts
to (i) cooperate in all respects with each other in connection with any filing or submission and in
connection with any investigation or other inquiry, including any proceeding initiated by a private
party; (ii) promptly inform the other party of any communication received by such party from, or
given by such party to any governmental authority and of any material communication received or
given in connection with any proceeding by a private party, in each case regarding any of the
transactions contemplated hereby, and (iii) permit the other party to review any communication
given by it to, and consult with each other in advance of any meeting or conference with any
governmental authority or, in connection with any proceeding by a private party, with any other
Person, and to the extent permitted by the applicable governmental authority or other Person, give
the other party the opportunity to attend and participate in such meetings and conferences. For
purposes of this Agreement, “Regulatory Law” means the Sherman Act, as amended, the Clayton
Act, as amended, the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, the Federal
Trade Commission Act, as amended, and all other federal, state and foreign, if any, statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are
designed or intended to prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition through merger or acquisition. In
furtherance and not in limitation of the covenants of the parties contained in Section 7.3 and this
Section 7.4(b), each party hereto shall use its reasonable best efforts to resolve objections, if
any, as may be asserted with respect to the transactions contemplated by this Agreement under any
Regulatory Law. Notwithstanding anything to the contrary contained in this Agreement, in connection
with any filing or submission required or action to be taken by either Parent or the Company to
consummate the Merger, in no event shall Parent or any of its Subsidiaries or Affiliates be
obligated to propose or agree to accept any undertaking or condition, to enter into any consent
decree, to make any divestiture, or accept any operational restriction, or take or commit to take
any action that could reasonably be expected to limit (A) the freedom of action of Parent or its
Subsidiaries or Affiliates with respect to the operation of, or Parent’s or its Subsidiaries’ or
Affiliates’ ability to retain, the Company or any businesses, product lines or assets of the
Company, or (B) the ability to retain, own or operate any portion of the businesses, product lines,
or assets, of Parent or any of its Subsidiaries or Affiliates, or alter or restrict in any way the
business or commercial practices of the Company, Parent or its Subsidiaries or Affiliates.



     (c) The parties shall use their commercially reasonable efforts to obtain all consents,
waivers, authorizations and approvals of all third parties, including Governmental Entities,
necessary, proper or advisable for the consummation of the transactions contemplated by this
Agreement; provided that, without the prior written consent of Parent, the Company shall not incur
any significant expense or liability or agree to any significant modification to any contractual
arrangement to obtain such consents or certificates, and to provide any notices to third parties
required to be provided prior to the Effective Time.



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     Section 7.4. Acquisition Proposals.



     (a) None of the Company or any of its Subsidiaries shall (whether directly or indirectly
through Affiliates, directors, officers, employees, representatives or other intermediaries), nor
shall (directly or indirectly) the Company authorize or permit any of its or their officers,
directors, representatives or other intermediaries or Subsidiaries to, (i) solicit, initiate or
take any action to knowingly facilitate or encourage the submission of inquiries, proposals or
offers from any Person (other than Parent and Merger Sub) relating to any Acquisition Proposal, or
agree to or endorse any Acquisition Proposal; (ii) enter into any agreement to (x) knowingly
facilitate or consummate, any Acquisition Proposal or (y) approve or endorse any Acquisition
Proposal; (iii) enter into or participate in any discussions or negotiations in connection with any
Acquisition Proposal or inquiry with respect to any Acquisition Proposal, or furnish to any Person
any information with respect to its business, properties or assets in connection with any
Acquisition Proposal or inquiry with respect to any Acquisition Proposal; or (iv) agree to resolve
or take any of the actions prohibited by clause (i), (ii) or (iii) of this sentence. The Company
shall immediately cease, and cause its representatives and other intermediaries to immediately
cease, any and all existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and shall demand the return or destruction of any
information previously provided with respect to such activities, discussion, or negotiations. For
purposes of this Section 7.4, the term “Person” means any person, corporation, entity or
“group,” as defined in Section 13(d) of the Exchange Act, other than Parent or any Subsidiaries of
Parent.



     “Acquisition Proposal” means any offer or proposal for a merger, reorganization,
recapitalization, consolidation, share exchange, business combination or other similar transaction
involving the Company or any of the Subsidiaries (excluding the transactions contemplated by the
Exchange Offer) or any proposal or offer to acquire, directly or indirectly, securities
representing more than 20% of the voting power of the Company or more than 20% of the assets of the
Company and the Subsidiaries taken as a whole, other than the Merger contemplated by this
Agreement.



     (b) Notwithstanding the foregoing, the Board of Directors of the Company, directly or
indirectly through representatives or other intermediaries, may, in the event of an Acquisition
Proposal, (i) comply with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard
to any Acquisition Proposal, provided that the Board of Directors of the Company may not withdraw,
modify or amend its recommendation of the Merger except to the extent such action is permitted by
clause (iv) of this Section 7.4(b), (ii) engage in negotiations or discussions with any Person that
has made an unsolicited bona fide written Acquisition Proposal not resulting from or arising out of
a breach of Section 7.4(a), (iii) furnish to any Person that has made an unsolicited bona fide
written Acquisition Proposal not resulting from or arising out of a breach of Section 7.4(a)
nonpublic information relating to the Company or any of the Subsidiaries pursuant to a
confidentiality and standstill agreement (the “Competing Confidentiality Agreement”) with
terms that are no less favorable to the Company than those contained in the Confidentiality
Agreement (it being understood that the standstill provision contained in such Competing
Confidentiality Agreement may permit such Person to convey confidentially an Acquisition Proposal
to the Board of Directors of the Company under circumstances in which the Company is permitted
under this Section 7.4 to



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participate in discussions regarding an Acquisition Proposal), and/or (iv) if prior to the
Company Stockholders Meeting, withdraw or modify or change in a manner adverse to Parent its
approval or recommendation of this Agreement or the Merger; provided that, the Board of Directors
of the Company shall be permitted to take an action described in the foregoing clauses (i), (ii),
(iii) or (iv) if, and only if, prior to taking such particular action, the Board of Directors of
the Company has determined in good faith by a majority vote that (x) such Acquisition Proposal
would result in, or would reasonably be expected to result in, a Superior Proposal, in the case of
any of the foregoing clauses (i), (ii) or (iii), or constitutes a Superior Proposal, in the case of
the foregoing clause (iv), and (y) (after considering the advice of outside legal counsel) failing
to take such action in the case of any of the foregoing clauses (i), (ii) or (iii) would reasonably
be expected to result in a breach of its fiduciary duties under the DGCL or in the case of the
foregoing clause (iv) would result in a breach of its fiduciary duties under the DGCL.
Notwithstanding the foregoing, in response to an Intervening Event, the Board of Directors of the
Company may withdraw or modify or change in a manner adverse to Parent its approval or
recommendation of this Agreement or the Merger, if and only if, the Board of Directors of the
Company, after considering the advice of outside legal counsel, has determined that failing to take
such action would result in a breach of its fiduciary duties under the DGCL.




	 	i)	 	“Superior Proposal” means any proposal (on its most
recently amended or modified terms, if amended or modified) made by a third
party to enter into any transaction involving an Acquisition Proposal that the
Board of Directors of the Company determines in its good faith judgment
(following consultation with an independent financial advisor) to be more
favorable to the Company’s stockholders than this Agreement and the Merger,
taking into account all terms and conditions of such transaction (including any
break-up fees, expense reimbursement provision and financial terms, the
anticipated timing, conditions and prospects for completion of such
transaction, including the prospects for obtaining regulatory approvals and
financing, and any third party approvals) and that is reasonably likely to be
consummated, except that the reference to “more than 20%” in the definition of
“Acquisition Proposal” shall be deemed to be a reference to “more than 50%”.
Reference to “this Agreement” and “the Merger” in this paragraph shall be
deemed to include any proposed alteration of the terms of this Agreement or the
Merger that are agreed to by Parent after it receives written notice from the
Company pursuant to Section 7.4(d) of the existence of, the identity of the
Person making, and the terms and conditions of, any Acquisition Proposal.





     (c) Notwithstanding anything in this Section 7.4 to the contrary, if, at any time prior to the
Company Stockholders Meeting, the Company’s Board of Directors determines in good faith, after
consultation with its financial advisors and outside legal counsel, in response to an Acquisition
Proposal that was unsolicited and that did not otherwise result from a breach of Section 7.4(a),
that such proposal is a Superior Proposal, the Company or its Board of Directors may, pursuant to
and subject to complying with Section 9.1(f), accept such Superior Proposal; provided, however,
that prior to any such acceptance of such Superior



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Proposal, the Company shall have given Parent five (5) Business Days’ written notice (it being
understood and agreed that any amendment to the amount or form of consideration of the Superior
Proposal shall require a new notice pursuant to this Section 7.4(c) except that all references in
this Section 7.4(c) to five (5) Business Days shall be deemed to be references to three (3)
Business Days in such event) advising Parent that the Company’s Board of Directors intends to cause
the Company to accept such Superior Proposal, specifying the material terms and conditions of the
Superior Proposal and that the Company shall, during such five (5) Business Day period, negotiate
in good faith with Parent to make such adjustments to the terms and conditions of this Agreement
such that such Acquisition Proposal would no longer constitute a Superior Proposal and provided
further, however, that after the expiration of such five (5) Business Day period and prior to the
termination of this Agreement pursuant to Section 9.1(f), the Company’s Board of Directors shall
have confirmed (after taking into account any such adjustments to the terms and conditions of this
Agreement) that the Acquisition Proposal continues to be a Superior Proposal.



     (d) The Company shall notify Parent promptly (but in any event within one Business Day) after
receipt or occurrence of (i) any Acquisition Proposal, (ii) any request for information with
respect to any Acquisition Proposal, (iii) any inquiry, proposal, discussions or negotiation with
respect to any Acquisition Proposal, and (iv) the material terms and conditions of any such
Acquisition Proposal, request for information, inquiry, proposal, discussion or negotiation and the
identity of the Person making any such Acquisition Proposal, request for information, inquiry or
proposal or with whom discussions or negotiations are taking place. In addition, the Company shall
promptly (but in any event within one Business Day) after the receipt thereof, provide to Parent
copies of any written documentation material to understanding such Acquisition Proposal, request
for information, inquiry, proposal, discussion or negotiation (“Other Acquisition
Documentation”) which is received by the Company from the Person (or from any representatives
or agents of such Person) making such Acquisition Proposal, request for information, inquiry or
proposal or with whom such discussions or negotiations are taking place. The Company shall not,
and shall cause each of its Subsidiaries not to, terminate, waive, amend or modify any provision of
any existing standstill or confidentiality agreement to which it or any of its Subsidiaries is a
party, and the Company shall, and shall cause its Subsidiaries to, enforce the provisions of any
such agreement (it being understood that the Company may waive any standstill provision to the
extent necessary to permit any Person subject to such standstill provision to convey confidentially
an Acquisition Proposal to the Board of Directors of the Company under circumstances in which the
Company is permitted under this Section 7.4 to participate in discussions regarding an Acquisition
Proposal). The Company shall keep Parent reasonably informed of the status and details (including
any material amendments or proposed material amendments) of any such Acquisition Proposal or
request for information and keep Parent reasonably informed as to the material details of any
information requested of or provided by the Company and as to the material details of all
substantive discussions or negotiations with respect to any such Acquisition Proposal, request for
information, inquiry or proposal and shall provide to Parent within one Business Day after receipt
thereof all copies of any additional Other Acquisition Documentation received by the Company from
the Person (or from any representatives or agents of such Person) making such Acquisition Proposal,
request for information, inquiry or proposal or with whom such discussions or negotiations are
taking place. The Company shall promptly provide to Parent any non-public information concerning



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the Company provided to any other Person in connection with any Acquisition Proposal that was
not previously provided to Parent. The Board of Directors of the Company shall promptly consider
in good faith (in consultation with its outside legal counsel and financial advisors) any proposed
alteration of the terms of this Agreement or the Merger proposed by Parent in response to any
Acquisition Proposal.



     Section 7.5. Stockholder Litigation. The Company shall keep Parent informed of, and
cooperate with Parent in connection with, any stockholder litigation or claim against the Company
and/or its directors or officers relating to the Merger or the other transactions contemplated by
this Agreement; provided, however, that no settlement in connection with such stockholder
litigation shall be agreed to without Parent’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.



     Section 7.6. Maintenance of Insurance. The Company will use reasonable best efforts
to maintain in full force and effect through the Closing Date all material insurance policies
applicable to the Company and its Subsidiaries and their respective properties and assets in effect
on the date hereof. If and as requested by Parent, the Company will use reasonable best efforts to
cause the Company’s insurers to waive any provisions in such insurance policies that would allow
the insurer to terminate or adversely modify coverage upon consummation of the Merger.



     Section 7.7. Public Announcements. Each of the Company, Parent and Merger Sub agrees
that no public release or announcement concerning the transactions contemplated hereby shall be
issued by any party without the prior written consent of the Company and Parent (which consent
shall not be unreasonably withheld or delayed), except as such release or announcement may be
required by law or the rules or regulations of any applicable United States securities exchange, in
which case the party required to make the release or announcement shall use its reasonable best
efforts to allow each other party reasonable time to comment on such release or announcement in
advance of such issuance, it being understood that the final form and content of any such release
or announcement, to the extent so required, shall be at the final discretion of the disclosing
party; provided, however, that upon prior consultation with the other party, each of the parties
may make statements that are not inconsistent with previous press releases, public disclosures or
public statements made by any of the parties in compliance with this Section 7.7.



     Section 7.8. No Shareholder Rights Plan. From the date hereof through the earlier of
termination of this Agreement and the Effective Time, the Company will not adopt, approve, or agree
to adopt, a shareholder rights plan.



     Section 7.9. European Restructuring. The Company shall use commercially reasonable
efforts to complete the restructuring of its European operations, including using commercially
reasonable efforts to accomplish the each of the actions set forth on Section 7.9 of the Company
Disclosure Letter.



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ARTICLE VIII.




CONDITIONS PRECEDENT




     Section 8.1. Conditions to Each Party’s Obligation to Effect the Merger. The
obligations of the Company, Parent and Merger Sub to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following conditions:



     (a) Stockholder Approval. The Company shall have obtained the Required Company Vote
in connection with the approval and adoption of this Agreement by the stockholders of the Company.



     (b) No Injunctions or Restraints, Illegality. No statute, rule, regulation, executive
order, decree, ruling, shall have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or other U.S. governmental
authority of competent jurisdiction shall be in effect, having the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger; provided, however, that the provisions
of this Section 8.1(b) shall not be available to any party whose failure to fulfill its obligations
pursuant to Section 7.3 shall have been the cause of, or shall have resulted in, such order or
injunction.



     (c) Governmental Entity Approvals. All material consents, orders or approvals of,
declarations or filings with, and expirations of waiting periods imposed by, any Governmental
Entity that are required for the consummation of the transactions contemplated hereby, if any,
shall have been obtained and in effect, except for such consents, orders, approvals, declarations
and filings the failure of which to be obtained or made would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect business, assets, condition
(financial or otherwise) or results of operations of Parent and its Subsidiaries, taken as a whole.



     Section 8.2. Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the satisfaction of, or
waiver by Parent, on or prior to the Closing Date of the following additional conditions:



     (a) Representations and Warranties. (i) The representations and warranties of the
Company contained in Section 3.6 (Capitalization and Related Matters) and Section 3.33 (Vote
Required) shall be true and correct in all respects (except, in the case of Section 3.6 for such
inaccuracies as are de minimis in the aggregate), in each case both when made and at and as of the
Closing Date, as if made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date) and (ii) each of the other representations and
warranties of the Company set forth in this Agreement shall be true and correct in all material
respects both when made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of such date). Parent
shall have received a certificate of the chief executive officer and the chief financial officer of
the Company to such effect.



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     (b) Performance of Obligations of the Company. The Company shall have performed in
all material respects and complied in all material respects with all agreements and covenants
required to be performed or complied with by it under this Agreement at or prior to the Closing
Date. Parent shall have received a certificate of the chief executive officer and the chief
financial officer of the Company to such effect.



     (c) Company Material Adverse Effect. During the period from the date hereof to the
Closing Date, there shall not have been a Company Material Adverse Effect.



     (d) Accell Products. The Company shall have obtained clearance for the 510(k),
K061880, submitted to the FDA on June 28, 2006 and currently under review by the FDA for the Accell
Products for the indication set forth on Section 8.2(d) of the Company Disclosure Letter.



     (e) European Structuring. The Company shall have completed the each of the actions
relating to the restructuring of its European operations set forth on Section 8.2(e) of the Company
Disclosure Letter, in a manner satisfactory to Parent.



     (f) Credit Agreement. The Credit Agreement, dated as of December 22, 2005, as
amended, among Parent and the lenders party thereto, shall have been amended, or the lenders party
thereto shall have granted Parent a waiver, in either case, to permit the consummation of the
transactions contemplated by this Agreement, including the Merger, and to provide for such other
revisions as Parent shall deem necessary or advisable in its sole and absolute discretion (the
“Credit Agreement Amendment”).



     (g) Appraisal Rights. Holders of no more than 10% of the number of shares of Company
Common Stock outstanding immediately prior to the Effective Time shall have exercised their
appraisal rights in the Merger in accordance with Section 262.



     Section 8.3. Additional Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger are subject to the satisfaction of, or waiver by the Company, on
or prior to the Closing Date of the following additional conditions:



     (a) Representations and Warranties. (i) Each of the representations and warranties of
Parent and Merger Sub set forth in this Agreement that is qualified as to materiality or Material
Adverse Effect shall be true and correct both when made and at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly made as of an earlier date, in which
case as of such date) and (ii) each of the other representations and warranties of Parent and
Merger Sub set forth in this Agreement shall be true and correct in all material respects both when
made and at and as of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date). The Company shall have
received a certificate of an executive officer of Parent to such effect.



     (b) Performance of Obligations of Parent. Parent shall have performed in all material
respects and complied in all material respects with all agreements and covenants required to be
performed or complied with by it under this Agreement at or prior to the



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Closing Date. The Company shall have received a certificate of an executive officer of Parent
to such effect.



ARTICLE IX.




TERMINATION.




     Section 9.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the terminating party or
parties, and except as provided below, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company:



     (a) By mutual written consent of Parent and the Company, by action of their respective Boards
of Directors;



     (b) By either the Company or Parent if the Effective Time shall not have occurred on or before
February 6, 2008 (the “Termination Date”); provided, however, that the right to terminate
this Agreement under this Section 9.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the primary cause of the failure of the
Effective Time to occur on or before the Termination Date and such action or failure to perform
constitutes a breach of this Agreement;



     (c) By either the Company or Parent if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting or making illegal the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable;



     (d) By either the Company or Parent if the approval by the stockholders of the Company
required for the consummation of the Merger shall not have been obtained by reason of the failure
to obtain the Required Company Vote at the Company Stockholders Meeting (or any adjournment or
postponement thereof) at which the vote to adopt this Agreement and the Merger is taken;



     (e) By Parent if (i) prior to the Company Stockholders Meeting, the Board of Directors of the
Company shall have failed to recommend or shall have withdrawn or modified or changed in a manner
adverse to Parent its approval or recommendation of this Agreement or the Merger or shall have
approved or recommended a Superior Proposal (or the Board of Directors of the Company resolves to
do any of the foregoing), whether or not permitted by Section 7.4, (ii) the Company shall fail to
call or hold the Company Stockholders Meeting in accordance with Section 7.1(c) and such breach
shall not have been cured prior to fifteen (15) days following receipt of notice of such breach
from Parent or (iii) the Company shall have materially and knowingly breached any of its material
obligations under Section 7.4; provided that with respect to clause (i), it being understood that
neither the disclosure of any Acquisition Proposal that is not being recommended by the Company’s
Board of Directors nor disclosure of any facts or circumstances, together with a statement that the
Company’s Board of Directors continues to recommend this Agreement and the Merger, shall be
considered to be a withdrawal, modification or change to the Company’s Board of



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Directors’ approval or recommendation of this Agreement or the Merger or approval or
recommendation of a Superior Proposal;



     (f) By the Company, prior to the Company Stockholders Meeting, to accept a Superior Proposal
in accordance with, and subject to the terms and conditions of, Section 7.4(c); provided, however,
that any such purported termination pursuant to this Section 9.1(f) shall be void and of no force
or effect unless the Company has concurrently complied with Section 9.2(e);



     (g) By the Company if there shall have been a breach of any representation, warranty, covenant
or agreement on the part of Parent or Merger Sub contained in this Agreement such that the
conditions set forth in Sections 8.3(a) or 8.3(b) would not be satisfied and (A) such breach is not
reasonably capable of being cured or (B) in the case of a breach of a covenant or agreement, if
such breach is reasonably capable of being cured, such breach shall not have been cured prior to
the earlier of (I) 20 days following notice of such breach and (II) the Termination Date; provided
that the Company shall not have the right to terminate this Agreement pursuant to this Section
9.1(g) if the Company is then in material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement; or



     (h) By Parent if there shall have been a breach of any representation, warranty, covenant or
agreement on the part of the Company contained in this Agreement such that the conditions set forth
in Sections 8.2(a) or 8.2(b) would not be satisfied and (A) such breach is not reasonably capable
of being cured or (B) in the case of a breach of a covenant or agreement, if such breach is
reasonably capable of being cured, such breach shall not have been cured prior to the earlier of
(I) 20 days following notice of such breach and (II) the Termination Date; provided that Parent
shall not have the right to terminate this Agreement pursuant to this Section 9.1(h) if Parent or
Merger Sub is then in material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement.



     (i) By the Company if the Credit Agreement Amendment has not been executed on or prior to
September 7, 2007 or such later date as is mutually agreed to by Parent and the Company; provided
that the Company shall not have the right to terminate this Agreement pursuant to this Section
9.1(i) if Parent agrees to waive satisfaction of the condition in Section 8.2(f).



     Section 9.2. Effect of Termination.



     (a) In the event of termination of this Agreement by either the Company or Parent as provided
in Section 9.1, this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent or the Company or their respective officers or directors except
with respect to this Section 9.2, Article X and the last sentence of Section 7.2, provided that the
termination of this Agreement shall not relieve any party from any liability for any willful breach
of any covenant, agreement, representation or warranty in this Agreement occurring prior to
termination.



     (b) If the Company or Parent shall terminate this Agreement pursuant to Section 9.1(d), the
Company shall reimburse Parent for all the Parent Expenses up to a



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maximum of $1,500,000, within two Business Days after delivery to the Company of written
notice of the amount of such Parent Expenses and a documented itemization setting forth such
expenses in reasonable detail.



     (c) If (i) the Company or Parent shall terminate this Agreement pursuant to Section 9.1(b) and
(ii) at the time of termination there shall have been made known to or proposed to the Company or
otherwise publicly disclosed or announced an Acquisition Proposal, the Company shall reimburse
Parent for all the Parent Expenses up to a maximum of $1,500,000, within two Business Days after
delivery to the Company of written notice of the amount of such Parent Expenses and a documented
itemization setting forth such expenses in reasonable detail.



     (d) If Parent shall terminate this Agreement pursuant to Section 9.1(e), then the Company
shall pay to Parent, not later than two Business Days following such termination, an amount equal
to $2,250,000 (the “Termination Fee”).



     (e) If the Company shall terminate this Agreement pursuant to Section 9.1(f), then the Company
shall pay to Parent, prior to or concurrently with such termination, the Termination Fee.



     (f) If (i) the Company or Parent shall terminate this Agreement pursuant to Section 9.1(b) or
9.1(d), (ii) at or prior to the time of the event giving rise to such termination, an Acquisition
Proposal shall have been made known or proposed to the Company or otherwise publicly disclosed or
announced and (iii) within 12 months of the termination of this Agreement, the Company enters into
a definitive agreement with respect to, or consummates, an Acquisition Proposal, then the Company
shall pay to Parent, not later than two Business Days after the execution of the definitive
agreement or consummation of the transaction, as applicable, the Termination Fee (less any amounts
previously reimbursed to Parent as Parent Expenses).



     (g) For purposes of this Section 9.2, the term “Acquisition Proposal” shall have the meaning
assigned to such term in Section 7.4(a), except that the reference to “more than 20%” in the
definition of “Acquisition Proposal” shall be deemed to be a reference to “more than 50%”.



     (h) All payments under this Section 9.2 shall be made by wire transfer of immediately
available funds to an account designated by Parent.



     (i) The Company acknowledges that the agreements contained in this Section 9.2 are an integral
part of the transactions contemplated by this Agreement and are not a penalty, and that, without
these agreements, Parent would not enter into this Agreement. If the Company fails to pay promptly
the fee due pursuant to this Section 9.2, the Company will also pay to Parent Parent’s reasonable
costs and expenses (including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together with interest on
the amount of the unpaid fee under this Section 9.2, accruing from its due date, at an interest
rate per annum equal to two percentage points in excess of the prime commercial lending rate quoted
by Bank of America. Any change in the



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interest rate hereunder resulting from a change in such prime rate will be effective at the
beginning of the date of such change in such prime rate. If applicable, the Termination Fee shall
not be payable by the Company more than once pursuant to this Section 9.2.



     Section 9.3. Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the stockholders of the Company,
but, after any such approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.



     Section 9.4. Extension; Waive. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any
of the agreements or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written instrument signed on
behalf of such party. The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.



ARTICLE X.




MISCELLANEOUS.




     Section 10.1. Non-Survival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and other agreements in this Agreement or in any instrument
delivered pursuant to this Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the Effective Time,
except for those covenants and agreements contained herein and therein that by their terms apply or
are to be performed in whole or in part after the Effective Time and this Article X.



     Section 10.2. Disclosure Schedules. The inclusion of any information in the
disclosure schedules accompanying this Agreement will not be deemed an admission or acknowledgment,
in and of itself, solely by virtue of the inclusion of such information in such schedules, that
such information is required to be listed in such schedules or that such information is material to
any Party or the conduct of the business of any Party.



     Section 10.3. Successors and Assigns. No party hereto shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of the other parties hereto
and any such attempted assignment without such prior written consent shall be void and of no force
and effect; provided, that, without the prior consent of the Company, Merger Sub may assign
any of its rights hereunder to its Affiliates. This Agreement shall



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inure to the benefit of and shall be binding upon the successors and permitted assigns of the
parties hereto.



     Section 10.4. Governing Law; Jurisdiction.



     (a) This Agreement shall be construed, performed and enforced in accordance with, and governed
by, the laws of the State of Delaware. The parties hereto irrevocably elect as the sole judicial
forum for the adjudication of any matters arising under or in connection with this Agreement, and
consent to the jurisdiction of, the courts of the State of Delaware.



     (b) Each party hereto irrevocably submits to the jurisdiction of (i) the Chancery Court of the
State of Delaware (or other appropriate state court in the State of Delaware), and (ii) the United
States District Court for the District of Delaware, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby. Each party hereto
agrees to commence any action, suit or proceeding relating hereto in the Chancery Court of the
State of Delaware or, if such suit, action or other proceeding may not be brought in such court for
reasons of subject matter jurisdiction in the United States District Court for the District of
Delaware. Each party hereto irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (A) the Chancery Court of the State of Delaware, or (B) the United States
District Court for the District of Delaware, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each party hereto further
irrevocably consents to the service of process out of any of the aforementioned courts in any such
suit, action or other proceeding by the mailing of copies thereof by mail to such party at its
address set forth in this Agreement, such service of process to be effective upon acknowledgment of
receipt of such registered mail; provided that nothing in this Section 10.4 shall affect the right
of any party to serve legal process in any other manner permitted by law. The consent to
jurisdiction set forth in this Section 10.4 shall not constitute a general consent to service of
process in the State of Delaware and shall have no effect for any purpose except as provided in
this Section 10.4. The parties hereto agree that a final judgment in any such suit, 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 law.



     (c) The parties hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms on a timely
basis or were otherwise breached. It is accordingly agreed that the parties shall be entitled to
seek an injunction or other equitable relief to prevent breaches of this Agreement and to seek to
enforce specifically the terms and provisions of this Agreement in any court identified in Section
10.4(b), this being in addition to any other remedy to which they are entitled at law or in equity.



     (d) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR



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OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH, THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.



     Section 10.5. Expenses. All fees and expenses incurred in connection with the Merger
including, without limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions contemplated
hereby, shall be the obligation of the respective party incurring such fees and expenses, except
(a) Parent and the Company shall each bear and pay one-half of the expenses incurred in connection
with the filing, printing and mailing of the Registration Statement and Proxy Statement and (b) as
provided in Section 9.2.



     Section 10.6. Severability; Construction.



     (a) In the event that any part of this Agreement is declared by any court or other judicial or
administrative body to be null, void or unenforceable, said provision shall survive to the extent
it is not so declared, and all of the other provisions of this Agreement shall remain in full force
and effect.



     (b) The Parties have participated jointly in the negotiation and drafting of this Agreement.
If any ambiguity or question of intent arises, this Agreement will be construed as if drafted
jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any
Party because of the authorship of any provision of this Agreement.



     Section 10.7. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is to be given; (ii) on the day after
delivery to Federal Express or similar overnight courier or the Express Mail service maintained by
the United States Postal Service; or (iii) on the fifth day after mailing, if mailed to the party
to whom notice is to be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:



     If to the Company:


IsoTis, Inc.

2 Goodyear

Irvine, California 92618

Attn: Pieter Wolters, Chief Executive Officer

Tel: (949) 855-7195

Fax: (949) 595-8717




     Copy to (such copy not to constitute notice):


Latham & Watkins LLP

650 Town Center Drive

20th Floor

Costa Mesa, CA 92626

Tel: (714) 540-1235




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Fax: (714) 755-8290

Attn: Kevin B. Espinola

          B. Shayne Kennedy




     If to Parent or Merger Sub:


Integra LifeSciences Holdings Corporation

311 Enterprise Drive

Plainsboro, New Jersey 08536

Attn: General Counsel

Tel: (609) 936-2238

Fax: (609) 275-9006




     Copy to (such copy not to constitute notice):


Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

Attn: David K. Boston

Tel: (212) 728-8000

Fax: (212) 728-8111




     Any party may change its address for the purpose of this Section by giving the other party
written notice of its new address in the manner set forth above.



     Section 10.8. Entire Agreement. This Agreement and the Confidentiality Agreement
contain the entire understanding among the parties hereto with respect to the transactions
contemplated hereby and supersede and replace all prior and contemporaneous agreements and
understandings, oral or written, with regard to such transactions. All Exhibits and Schedules
hereto and any documents and instruments delivered pursuant to any provision hereof are expressly
made a part of this Agreement as fully as though completely set forth herein.



     Section 10.9. Parties in Interest. Except for (i) the rights of the Company
stockholders to receive the Merger Consideration following the Effective Time in accordance with
the terms of this Agreement (of which the stockholders are the intended beneficiaries following the
Effective Time) and (ii) the rights to continued indemnification and insurance pursuant to Section
6.2 hereof (of which the Persons entitled to indemnification or insurance, as the case may be, are
the intended beneficiaries following the Effective Time), nothing in this Agreement is intended to
confer any rights or remedies under or by reason of this Agreement on any Persons other than the
parties hereto and their respective successors and permitted assigns. Nothing in this Agreement is
intended to relieve or discharge the obligations or liability of any third Persons to the Company
or Parent. No provision of this Agreement shall give any third parties any right of subrogation or
action over or against the Company or Parent.



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     Section 10.10. Section and Paragraph Headings. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.



     Section 10.11. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute the same instrument.



     Section 10.12. Definitions. As used in this Agreement:



     “510(k)” shall have the meaning set forth in Section 3.17(j).



     “Accell Products” shall mean the Company’s line of demineralized bone matrix products
included in the 510(k), K061880, submitted to the FDA on June 28, 2006 and currently under review
by the FDA, including, Accell Putty (A2i), Accell DBM 100, Accell TBM, and Accell Connexus.



     “Acquisition Proposal” shall have the meaning set forth in Section 7.4(a).



     “Action” shall have the meaning set forth in Section 3.20.



     “Affiliate” shall mean, with respect to any Person, any other Person that directly, or
through one or more intermediaries, controls or is controlled by or is under common control with
such Person.



     “Agreement” shall have the meaning set forth in the Preamble hereto.



     “Applicable Securities Laws” shall have the meaning set forth in Section 3.35(a).



     “Appraisal Shares” shall have the meaning set forth in Section 1.8(e).



     “Board of Directors” shall mean the Board of Directors of any specified Person and any
committees thereof.



     “Business Day” shall mean any day on which banks are not required or authorized to
close in the City of New York.



     “Certificate” shall have the meaning set forth in Section 1.8(b).



     “Certificate of Merger” shall have the meaning set forth in Section 1.3.



     “Closing” shall have the meaning set forth in Section 1.2.



     “Closing Date” shall have the meaning set forth in Section 1.2.



     “Code” shall have the meaning set forth in Section 2.7.



     “Company” shall have the meaning set forth in the Preamble hereto.



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     “Company Common Stock” shall have the meaning set forth in the Recitals hereto.



     “Company Disclosure Letter” shall have the meaning set forth in Article III.



     “Company Material Adverse Effect” shall mean any event, change, circumstance, effect,
development or state of facts that, individually or in the aggregate, (a) is or is reasonably
likely to become, materially adverse to the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole; provided, however,
that Company Material Adverse Effect shall not include the effect of any event, change,
circumstance, effect, development or state of facts arising out of or attributable to (i) general
economic conditions in the U.S., any U.S. state or any foreign country in which the Company and any
of its Subsidiaries operate, (ii) the industry in which the Company and its Subsidiaries operate,
and (iii) the execution and public announcement of this Agreement and the pendency of the
transactions contemplated hereby, except, in the case of the foregoing clauses (i) and (ii), to the
extent that such event, change, circumstance, effect, development or state of facts affects the
Company and its Subsidiaries in a materially disproportionate manner when compared to the effect of
such event, change, circumstance, effect, development or state of facts on other Persons in the
industry in which the Company and its Subsidiaries operate, or (b) would prevent or materially
delay the ability of the Company to perform its obligations under this Agreement or to consummate
the transactions contemplated hereby.



     “Company Options” shall have the meaning set forth in Section 1.9(a).



     “Company Organizational Documents” shall mean the Certificate of Incorporation and the
Bylaws of the Company, together with all amendments thereto.



     “Company Preferred Stock” shall mean the preferred stock, par value $.01 per share, of
the Company.



     “Company Property” shall have the meaning set forth in Section 3.12(b).



     “Company SEC Reports” shall have the meaning set forth in Section 3.8(a).



     “Company Stock Plans” shall have the meaning set forth in Section 3.6(a).



     “Company Stockholders Meeting” shall have the meaning set forth in Section 3.31.



     “Company Welfare Plans” shall have the meaning set forth in Section 6.1(b).



     “Competing Confidentiality Agreement” shall have the meaning set forth in Section
7.4(b).



     “Confidentiality Agreement” shall have the meaning set forth in Section 7.2.



     “Continuing Employees” shall have the meaning set forth in Section 6.1(a).



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     “Contract” shall have the meaning set forth in Section 3.21(c).



     “Credit Agreement Amendment” shall have the meaning set forth in Section 8.2(f).



     “Customer Contracts” shall have the meaning set forth in Section 3.21(c).



     “DGCL” shall mean the Delaware General Corporation Law.



     “Effective Time” shall have the meaning set forth in Section 1.3.



     “Employee Benefit Plans” shall have the meaning set forth in Section 3.22(a).



     “Encumbrances” shall mean any claim, lien, pledge, option, right of first refusal or
offer, preemptive right, charge, easement, security interest, deed of trust, mortgage,
right-of-way, covenant, condition, restriction, encumbrance or other rights of third parties.



     “Environmental Laws” shall mean any federal, state, local or foreign, statute,
regulation, ordinance, order, decree, directive or other requirement of law (including, without
limitation, common law) relating to human health, safety or welfare, wildlife, natural resources,
flora, fauna or the environment (including, without limitation, indoor or outdoor air, water, water
vapor, groundwater, drinking water, surface or subsurface land, noise and odor), or to the
identification, generation, use, labeling, processing, control, transportation, handling,
discharge, emission, treatment, storage, disposal, investigation, removal, remediation,
import/export, or monitoring of, or exposure to, any pollutant, contaminant, hazardous or solid
waste, or any hazardous or toxic substance, or material.



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974.



     “ERISA Affiliate” shall have the meaning set forth in Section 3.22(a).



     “Exchange Act” shall have the meaning set forth in Section 3.4.



     “Exchange Agent” shall have the meaning set forth in Section 2.1.



     “Exchange Fund” shall have the meaning set forth in Section 2.1.



     “Exchange Offer” shall have the meaning set forth in Section 3.35.



     “Existing Policy” shall have the meaning set forth in Section 6.2(c).



     “FDA” shall have the meaning set forth in Section 3.4.



     “FDCA” shall have the meaning set forth in Section 3.17(a).



     “GAAP” shall mean United States generally accepted accounting principles as in effect
from time to time, consistently applied.



     “Goodyear Landlord” shall have the meaning set forth in Section 3.12(c).



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     “Governmental Entity” shall mean any federal, state, local or foreign governmental,
regulatory or administrative authority, branch, agency or commission or any court, tribunal or
judicial body.



     “Hazardous Material” shall mean any product, substance, gas, chemical, microbial
matter, material or waste, whose presence, nature, quantity or concentration, either by itself or
in combination with other materials is (a) potentially injurious to human health or safety, the
environment or natural resources; or (b) regulated, monitored or subject to reporting by any
Governmental Entity relating to Environmental Laws.



     “IDE” shall have the meaning set forth in Section 3.17(k).



     “Indemnified Person” shall have the meaning set forth in Section 6.2(a).



     “Intellectual Property” shall mean all of the following, owned or used by the Company
and its Subsidiaries: material (i) trademarks and service marks, trade dress, product
configurations, trade names and other indications of origin, applications or registrations in any
jurisdiction pertaining to the foregoing and all goodwill associated therewith; (ii) inventions
(whether or not patentable), discoveries, improvements, ideas, know-how, formula methodology,
processes, technology, software (including password unprotected interpretive code or source code,
object code, development documentation, programming tools, drawings, specifications and data) and
applications and patents in any jurisdiction pertaining to the foregoing, including re-issues,
continuations, divisions, continuations-in-part, renewals or extensions; (iii) trade secrets,
including confidential information and the right in any jurisdiction to limit the use or disclosure
thereof; (iv) copyrighted and copyrightable writings, designs, software, mask works or other works,
applications or registrations in any jurisdiction for the foregoing and all moral rights related
thereto; (v) database rights; (vi) Internet Web sites, domain names and applications and
registrations pertaining thereto and all intellectual property used in connection with or contained
in all versions of the Web sites of the Company and its Subsidiaries; (vii) rights under all
agreements relating to the foregoing; (viii) books and records pertaining to the foregoing; and
(ix) claims or causes of action arising out of or related to past, present or future infringement
or misappropriation of the foregoing.



     “Intervening Event” shall mean a material event with respect to the Company’s
business, neither known by the Board of Directors of the Company nor reasonably foreseeable as of
the date hereof, which event (or any material consequence of which) becomes known to or by (or
understood by) the Board of Directors of the Company prior to the Company Stockholders Meeting;
provided, however, that in no event shall (i) any event resulting from a breach of this Agreement
by the Company or any of its Subsidiaries or (ii) the receipt, existence or terms of a Acquisition
Proposal or any matter relating thereto or consequence thereof, constitute an Intervening Event.



     “IRS” shall mean the United States Internal Revenue Service.



     “Knowledge” shall mean, with respect to the Company, the actual knowledge of the
executives of the Company listed on Section 10.12(a) of the Company Disclosure Letter



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after due inquiry of the senior employees of the Company and its Subsidiaries who have
administrative or operational responsibility for the particular subject matter in question.



     “Leases” shall have the meaning set forth in Section 3.12(b).



     “Leased Real Property” shall have the meaning set forth in Section 3.12(b).



     “Licenses and Permits” shall have the meaning set forth in Section 3.16(a).



     “Lien” shall mean any mortgage, pledge, security interest, encumbrance or title
defect, lease, lien (statutory or other), conditional sale agreement, claim, charge, limitation or
restriction.



     “Listing Terminations” shall have the meaning set forth in Section 3.35(c).



     “Merger” shall have the meaning set forth in the Recitals hereto.



     “Merger Consideration” shall have the meaning set forth in Section 1.8(a).



     “Merger Sub” shall have the meaning set forth in the Preamble hereto.



     “Multiemployer Plan” shall have the meaning set forth in Section 3.22(c).



     “Nasdaq” shall mean The Nasdaq Stock Market, Inc.



     “Other Acquisition Documentation” shall have the meaning set forth in Section 7.4(d).



     “Offer Memoranda” shall have the meaning set forth in Section 3.35(a).



     “Owned Real Property” shall have the meaning set forth in Section 3.12(a).



     “Parent” shall have the meaning set forth in the Preamble hereto.



     “Parent Expenses” shall mean all of Parent’s actual and reasonably documented
out-of-pocket fees and expenses (including fees and expenses of counsel, accountants, financial
advisors or consultants and commitment and funding fees) actually incurred by Parent and its
respective affiliates on or prior to the termination of this Agreement in connection with the
transactions contemplated by this Agreement, including the financing thereof.



     “Parent Organizational Documents” shall mean the Amended and Restated Certificate of
Incorporation and the Amended and Restated Bylaws of Parent, together with all amendments thereto.



     “Pension Plans” shall have the meaning set forth in Section 3.22(a).



     “Permitted Liens” shall mean (a) liens for utilities and current Taxes and assessments
not yet due and payable, (b) mechanics’, carriers’, workers’, repairers’,



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materialmen’s, warehousemen’s, lessor’s, landlord’s and other similar liens arising or
incurred in the ordinary course of business not yet due and payable, if the same shall not at the
time be delinquent or thereafter can be paid without penalty or are being contested in good faith
by appropriate proceedings and for which appropriate reserves have been included on the balance
sheet of the applicable Person, (c) easements, restrictive covenants and similar Encumbrances
(which Parent has determined are acceptable and shall be deemed Permitted Liens), (d) minor
encroachments or any state of facts an accurate survey of the Company would disclose which
individually or in the aggregate do not materially interfere with an entity’s business or the
operation of the property as currently conducted to which they apply, (e) Liens disclosed to Parent
(which Parent has determined are acceptable and shall be deemed Permitted Liens), (f) Liens granted
in respect of any Debt or securing any obligations with respect thereto and other Liens as set
forth on Section 10.12(b) of the Company Disclosure Letter, (g) customary Liens arising out of
pledges or deposits under worker’s compensation laws, unemployment insurance, old age pensions or
other social security or retirement benefits or similar legislation, (h) customary deposits
securing liability to insurance carriers under insurance or self-insurance arrangements, (i)
customary deposits to secure the performance of bids, tenders, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business, (j) Liens arising from protective filings, and (k)
Liens in favor of a banking institution arising as a matter of applicable law encumbering deposits
(including the right of set-off) held by such banking institution incurred in the ordinary course
of business and which are within the general parameters customary in the banking industry.



     “Person” shall mean an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or group (as defined in
the Exchange Act).



     “Proceeding” shall have the meaning set forth in Section 6.2(a).



     “Proxy Statement” shall have the meaning set forth in Section 3.31.



     “PMA” shall have the meaning set forth in Section 3.17(j).



     “Registered Intellectual Property” shall have the meaning set forth in Section
3.14(b).



     “Regulatory Law” shall have the meaning set forth in Section 7.3(b).



     “Required Company Vote” shall have the meaning set forth in Section 3.33.



     “Sarbanes-Oxley Act” shall have the meaning set forth in Section 3.19(b).



     “SEC” shall mean the United States Securities and Exchange Commission.



     “Securities Act” shall have the meaning set forth in Section 3.4.



     “Section 262” shall have the meaning set forth in Section 1.8(e).



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     “Software” shall have the meaning set forth in Section 3.15(a).



     “Subsidiary” when used with respect to any party shall mean any corporation,
partnership or other organization, whether incorporated or unincorporated, (i) of which such party
or any other Subsidiary of such party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of such party do not have a
majority of the voting interests in such partnership) or (ii) at least a majority of the securities
or other interests of which having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by any one or more of
its Subsidiaries, or by such party and one or more of its Subsidiaries.



     “Superior Proposal” shall have the meaning set forth in Section 7.4(b).



     “Surviving Corporation” shall have the meaning set forth in Section 1.1.



     “Swiss Merger” shall have the meaning set forth in Section 3.35(c).



     “Swiss SPV” shall have the meaning set forth in Section 3.35(a).



     “Tail Period” shall have the meaning set forth in Section 6.2(c).



     “Tax Return” shall mean any report, return, information return, filing, claim for
refund or other information, including any schedules or attachments thereto, and any amendments to
any of the foregoing required to be supplied to a taxing authority in connection with Taxes.



     “Taxes” shall mean all federal, state, local or foreign taxes, including, without
limitation, income, gross income, gross receipts, production, excise, employment, sales, use,
transfer, ad valorem, value added, profits, license, capital stock, franchise, severance, stamp,
withholding, Social Security, employment, unemployment, disability, worker’s compensation, payroll,
utility, windfall profit, custom duties, personal property, real property, taxes required to be
collected from customers on the sale of services, registration, alternative or add-on minimum,
estimated and other taxes, governmental fees or like charges of any kind whatsoever, whether
disputed or not, including any interest, penalties or additions thereto; and “Tax” shall mean any
one of them.



     “Termination Date” shall have the meaning set forth in Section 9.1(b).



     “Termination Fee” shall have the meaning set forth in Section 9.2(d).



     “the other party” shall mean, with respect to the Company, Parent and shall mean, with
respect to Parent, the Company.



     “Trade Laws” shall have the meaning set forth in Section 3.37(a).



     “Treasury Regulations” shall have the meaning set forth in Section 2.7.



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     “Unit B Premises” shall have the meaning set forth in Section 3.12(c).



     “Vendor Contracts” shall have the meaning set forth in Section 3.21(c).



     “WARN” shall have the meaning set forth in Section 3.26(c).



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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first above written.



	 	 	 	 	 
	 	INTEGRA LIFESCIENCES HOLDINGS CORPORATION

 	 
	 	By:  	/s/ John B. Henneman, III
 	 
	 	 	Name:  	John B. Henneman, III 	 
	 	 	Title:  	Executive Vice President and Chief

Administrative Officer 	 
	 
	 	ICE MERGERCORP, INC.

 	 
	 	By:  	/s/ John B. Henneman, III
 	 
	 	 	Name:  	John B. Henneman, III 	 
	 	 	Title:  	Vice President and Assistant
Secretary 	 
	 
	 	ISOTIS, INC.

 	 
	 	By:  	/s/ Pieter Wolters
 	 
	 	 	Name:  	Pieter Wolters 	 
	 	 	Title:  	Chief Executive Officer 	 
	 




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