**Exhibit 2.1**

** **

**EXECUTION COPY**

 

 

 

 

**AGREEMENTAND PLAN OF MERGERAMONGSMITHS MEDICAL HOLDCO LIMITED,FOREST ACQUISITION CORP.,MEDVEST HOLDINGS CORPORATION,CERTAIN PRINCIPAL STOCKHOLDERS OF THE COMPANYANDOEP MEDVEST LLC, AS REPRESENTATIVE OF THE COMPANY STOCKHOLDERSDECEMBER 5, 2004**

 

 

 

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**TABLE OF CONTENTS**

 
| ARTICLE I      | DEFINITIONS                                                               |   |
|----------------|---------------------------------------------------------------------------|--------|
| ARTICLE II     | THE  MERGER                                                               |   |
| SECTION  2.01. | The Merger                                                                |   |
| SECTION  2.02. | Effective Time                                                            |   |
| SECTION  2.03. | Effect of the Merger                                                      |   |
| SECTION  2.04. | Articles of Incorporation; Code of  Regulations                           |   |
| SECTION  2.05. | Directors and Officers                                                    |   |
| ARTICLE III    | MERGER CONSIDERATION; CONVERSION OF  SECURITIES; EXCHANGE OF CERTIFICATES |   |
| SECTION  3.01. | Calculation and Payment of the Merger  Consideration                      |   |
| SECTION  3.02. | Effect of Merger on the Capital Stock of  the Company                     |   |
| SECTION  3.03. | Options                                                                   |   |
| SECTION 3.04.  | Closing Net Working Capital Adjustment;  Closing Cash Adjustment          |   |
| SECTION 3.05.  | Return of Merger Consideration                                            |   |
| SECTION 3.06.  | No Liability                                                              |   |
| SECTION 3.07.  | Lost, Stolen and Destroyed Certificates                                   |   |
| SECTION 3.08.  | Effect of Merger on Capital Stock of  Surviving Corporation               |   |
| SECTION 3.09.  | Appraisal Rights                                                          |   |
| SECTION 3.10.  | Deliveries                                                                |   |
| ARTICLE  IV    | REPRESENTATIONS AND WARRANTIES OF THE  COMPANY                            |   |
| SECTION 4.01.  | Organization, Qualification, Corporate  Power and Authority               |   |
| SECTION 4.02.  | Authority Relative to this Agreement                                      |   |
| SECTION 4.03.  | Capitalization                                                            |   |
| SECTION 4.04.  | Noncontravention                                                          |   |
| SECTION 4.05.  | Brokers’ Fees                                                        |   |
| SECTION 4.06.  | Title to Assets; All Tangible Assets                                      |   |
| SECTION 4.07.  | Financial Statements; Books of Account                                    |   |
| SECTION 4.08.  | Events Subsequent to Balance Sheet Date                                   |   |
| SECTION 4.09.  | Legal Compliance. The Company and each of  its Subsidiaries:              |   |
| SECTION 4.10.  | Tax Matters                                                               |   |
|                |                                                                           |        |  |

 

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| SECTION 4.11. | Real Property                                                         |   |
|---------------|-----------------------------------------------------------------------|--------|
| SECTION 4.12. | Intellectual Property                                                 |   |
| SECTION 4.13. | Contracts                                                             |   |
| SECTION 4.14. | Litigation                                                            |   |
| SECTION 4.15. | Employee Benefits; Labor Matters                                      |   |
| SECTION 4.16. | Environmental Matters                                                 |   |
| SECTION 4.17. | Certain Business Relationships with the  Company and Its Subsidiaries |   |
| SECTION 4.18. | Vote Required                                                         |   |
| SECTION 4.19. | Indebtedness; Certain Obligations                                     |   |
| SECTION 4.20. | SEC Reports                                                           |   |
| SECTION 4.21. | Condition of Assets                                                   |   |
| SECTION 4.22. | Insurance                                                             |   |
| SECTION 4.23. | Relationship with Customers                                           |   |
| SECTION 4.24. | Regulatory Matters                                                    |   |
| SECTION 4.25. | Representations and Warranties of  Stockholders                       |   |
| SECTION 4.26. | Antitrust                                                             |   |
| ARTICLE  V    | REPRESENTATIONS AND WARRANTIES OF PARENT AND  MERGER SUB              |   |
| SECTION 5.01. | Organization of Parent and Merger Sub                                 |   |
| SECTION 5.02. | Ownership of Merger Sub; No Prior  Activities                         |   |
| SECTION 5.03. | Authority Relative to this Agreement                                  |   |
| SECTION 5.04. | Noncontravention                                                      |   |
| SECTION 5.05. | Brokers’ Fees                                                    |   |
| SECTION 5.06. | Litigation                                                            |   |
| SECTION 5.07. | Financing                                                             |   |
| ARTICLE  VI   | PRE-CLOSING COVENANTS                                                 |   |
| SECTION 6.01. | General                                                               |   |
| SECTION 6.02. | Notices and Consents                                                  |   |
| SECTION 6.03. | Operation of Business                                                 |   |
| SECTION 6.04. | Publicity                                                             |   |
|               |                                                                       |        |  |

 

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| SECTION 6.05.  | Access                                                         |   |
|----------------|----------------------------------------------------------------|--------|
| SECTION 6.06.  | Notice of Developments                                         |   |
| SECTION 6.07.  | Exclusivity                                                    |   |
| SECTION 6.08.  | Company Senior Subordinated Notes                              |   |
| SECTION 6.09.  | FDA Notification                                               |   |
| ARTICLE  VII   | POST-CLOSING COVENANTS                                         |   |
| SECTION 7.01.  | General                                                        |   |
| SECTION 7.02.  | Employee Matters                                               |   |
| SECTION 7.03.  | Directors’ and Officers’ Indemnification             |   |
| SECTION 7.04.  | Restrictive Covenants                                          |   |
| SECTION 7.05.  | Filing of Tax Returns                                          |   |
| SECTION 7.06.  | EES Accounts Receivable                                        |   |
| SECTION 7.07.  | Mexico Land Sale                                               |   |
| SECTION 7.08.  | Tax Payments                                                   |   |
| ARTICLE  VIII  | CONDITIONS TO OBLIGATION TO CLOSE                              |   |
| SECTION 8.01.  | Conditions to Obligations of Each Party  Under This Agreement  |   |
| SECTION 8.02.  | Additional Conditions to Obligations of  Parent and Merger Sub |   |
| SECTION 8.03.  | Additional Conditions to Obligation of the  Company            |   |
| ARTICLE  IX    | TERMINATION                                                    |   |
| SECTION 9.01.  | Termination of Agreement                                       |   |
| SECTION 9.02.  | Effect of Termination                                          |   |
| ARTICLE  X     | INDEMNIFICATION                                                |   |
| SECTION 10.01. | Indemnification by the Company  Stockholders                   |   |
| SECTION 10.02. | Indemnification by Parent                                      |   |
| SECTION 10.03. | Survival                                                       |   |
| SECTION 10.04. | Procedure for Indemnification                                  |   |
| SECTION 10.05. | Exclusive Remedy                                               |   |
| SECTION 10.06. | Effect of Insurance                                            |   |
| SECTION 10.07. | Measurement of Tax Claims                                      |   |
| SECTION 10.08. | Computation of Damages                                         |   |
|                |                                                                |        |  |

 

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| SECTION 10.09. | Effect of Other Recoveries                |   |
|----------------|-------------------------------------------|--------|
| SECTION 10.10. | Characterization of Indemnity Payments    |   |
| ARTICLE  XI    | MISCELLANEOUS                             |   |
| SECTION 11.01. | Expenses                                  |   |
| SECTION 11.02. | No Third-Party Beneficiaries              |   |
| SECTION 11.03. | Entire Agreement                          |   |
| SECTION 11.04. | Succession and Assignment                 |   |
| SECTION 11.05. | Counterparts                              |   |
| SECTION 11.06. | Headings                                  |   |
| SECTION 11.07. | Notices                                   |   |
| SECTION 11.08. | Governing Law                             |   |
| SECTION 11.09. | Amendments and Waivers                    |   |
| SECTION 11.10. | Severability                              |   |
| SECTION 11.11. | Construction                              |   |
| SECTION 11.12. | Incorporation of Exhibits and Schedules   |   |
| SECTION 11.13. | Consent to Merger                         |   |
| SECTION 11.14. | Company Stockholder Representative        |   |
| SECTION 11.15. | Acknowledgements by Parent and Merger Sub |   |
|                |                                           |        |  |

 

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**AGREEMENT AND PLAN OF MERGER**

** **

This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made andentered into as of December 5, 2004 by and among Smiths Medical Holdco Limited,a company formed under the laws of England and Wales (“Parent”), ForestAcquisition Corp., an Ohio corporation and a wholly-owned subsidiary of Parent(“Merger Sub”), MedVest Holdings Corporation, an Ohio corporation (the “Company”),each of the individual Company Stockholders (as hereafter defined) signatoriesto this Agreement (collectively, the “Principal Company Stockholders”)and OEP MedVest LLC, a Delaware limited liability company (the “Representative”),on behalf of the Company Stockholders.

 

**RECITALS**

** **

WHEREAS, the Board of Directors of each of Parent, Merger Sub and theCompany has approved and declared advisable the merger of Merger Sub with andinto the Company (the “Merger”), pursuant to which the Company shallcontinue as the surviving corporation and as a wholly-owned subsidiary ofParent, upon the terms and subject to the conditions of this Agreement and inaccordance with Title 17 of the Ohio Revised Code (the “ORC”);

 

WHEREAS, the Board of Directors of each of Parent and the Company hasdetermined that the Merger is in furtherance of and consistent with theirrespective business strategies and is in the best interest of their respectivestockholders, and Parent has approved this Agreement and the Merger as the solestockholder of Merger Sub;

 

WHEREAS, pursuant to the Merger, among other things, all of the issuedand outstanding shares of capital stock of the Company (assuming cancellationof all outstanding Options (as hereafter defined) to purchase Company Shares(as hereafter defined) in connection with the Merger) shall be converted intothe right to receive the Sellers’ Merger Consideration (as hereafter defined)as provided herein;

 

WHEREAS, as a condition to, and in connection with the execution ofthis Agreement, the Principal Company Stockholders have entered into a Consent,Release and Stockholder Representative Agreement (the “RepresentativeAgreement”) with the Representative in the form attached hereto as ExhibitA; and

 

WHEREAS, the parties to this Agreement desire to make certainrepresentations and warranties, covenants and other agreements in connectionwith the Merger.

 

NOW, THEREFORE, in consideration of the foregoing and the respectiverepresentations and warranties, covenants and agreements set forth in thisAgreement, and other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree asfollows:

 

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ARTICLE IDEFINITIONS

 

“Accounting Arbitrator” has the meaning set forth in Section3.04(b) below.

 

“Acquisition Proposal” means any proposal, offer or indicationof interest with respect to (i) a merger, consolidation, liquidation,dissolution, sale of substantial assets, tender offer, recapitalization, shareexchange or other business combination involving the Company or any of itsSubsidiaries the assets of which, individually or in the aggregate, constitutemore than 20% of the consolidated assets of the Company and its Subsidiaries,(ii) the issuance by the Company of over 20% of its equity securities or (iii)the acquisition in any manner, directly or indirectly, of over 20% of theconsolidated assets of the Company and its Subsidiaries or 20% of any class ofequity or voting securities of the Company or any of its Subsidiaries, theassets of which, individually or in the aggregate, constitute more than 20% ofthe consolidated assets of the Company and its Subsidiaries.

 

“Affiliate” has the meaning set forth in Rule 12b-2 promulgatedunder the Exchange Act.

 

“Agreement” has the meaning set forth in the introductoryparagraph above.

 

“AIP” has the meaning set forth in Section 4.24(e) below.

 

“Assets” means all of the Company’s or its Subsidiaries’ assets,properties, goodwill and rights of every kind and description, real andpersonal, tangible and intangible, wherever situated and whether or notreflected on the Most Recent Financial Statements.

 

“Audited Financial Statements” has the meaning set forth in Section4.07(a) below.

 

“Balance Sheet Date” has the meaning set forth in Section4.07(a) below.

 

“Buyer Indemnified Parties” has the meaning set forth in Section10.01 below.

 

“Cash” shall mean all cash (including cash on hand and cash inbank accounts) and cash equivalents (including marketable securities) of theCompany and its Subsidiaries as of the close of business on the Closing Datedetermined in accordance with GAAP consistent with the consolidatedpresentation of “cash” set forth in the Audited Financial Statements.

 

“CERCLA” has the meaning set forth in Section 4.16(g)below.

 

“Certificate of Merger” has the meaning set forth in Section2.02 below.

 

“Certificates” has the meaning set forth in Section 3.02(d)below.

 

“Charter Documents” has the meaning set forth in Section 4.04below.

 

“Claims” has the meaning set forth in Section 10.01(a)below.

 

“Closing” has the meaning set forth in Section 2.02below.

 

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“Closing Cash” has the meaning set forth in Section 3.01(c)below.

 

“Closing Cash Adjustment” has the meaning set forth in Section3.01(c) below.

 

“Closing Date” has the meaning set forth in Section 2.02below.

 

“Closing Net Working Capital” shall mean, as of the close ofbusiness on the Closing Date (but without giving effect to any purchaseaccounting adjustments that arise solely as a result of the Merger), the sum ofthose consolidated current assets of the Company and its Subsidiaries minus**the sum of those consolidated current liabilities of theCompany and its Subsidiaries, in each case as set forth in Section 3.04 (a) ofthe Disclosure Schedule, as determined in accordance with GAAP applied on abasis consistent with the methodologies and principles used in the preparationof the consolidated balance sheet of the Company and its Subsidiaries as ofDecember 31, 2003, which constitutes a part of the Audited FinancialStatements, and subject to the methodologies, principles and exceptions setforth in Section 3.04(a) of the Disclosure Schedule.

 

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

 

“Common Per Share Merger Consideration” shall be equal to thequotient of (x) the Sellers’ Merger Consideration, minus the PreferredPer Share Merger Consideration multiplied by the Fully-Diluted PreferredShares, divided by (y) the Fully-Diluted Common Shares.

 

“Common Share” has the meaning set forth in Section 3.02(a)below.

 

“Company” has the meaning set forth in the introductoryparagraph above.

 

“Company Articles” means the Articles of Incorporation of theCompany, as amended.

 

“Company Indemnified Officers and Directors” has the meaning setforth in Section 7.03(a) below.

 

“Company Indemnified Parties” has the meaning set forth in Section10.02 below.

 

“Company Shares” means, collectively, the Common Shares and thePreferred Shares.

 

“Company Senior Debt” shall mean all indebtedness owed by theCompany and its Subsidiaries pursuant to that certain Credit Agreement, datedas of May 21, 2003, among Medex, the Company, the domestic subsidiaries ofMedex, the lenders parties thereto, Wachovia Bank, National Association, LehmanCommercial Paper Inc., Banc One Mezzanine Corporation, The Huntington NationalBank, LaSalle Bank National Association, Wachovia Securities, Inc. and LehmanBrothers Inc., as amended or supplemented from time to time.

 

“Company Senior Subordinated Notes” means those certain 8-7/8%Senior Subordinated Notes issued by Medex and guaranteed by the Company havinga face value of $200.0 million and due May 15, 2013.

 

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“Company Stockholder Transaction Expenses” has the meaning setforth in Section 11.01 below.

 

“Company Stockholders” means the holders of all issued andoutstanding Company Shares and Options at or prior to the Effective Time.

 

“Confidentiality Agreement” has the meaning set forth in Section6.05 below.

 

“Contract” means, with respect to a Person, any written or oralcontract, agreement, lease, instrument, commitment or undertaking that isbinding on such Person or its property under applicable Law.

 

“Copyrights” mean all copyrights in both published andunpublished form and all registrations and applications for registration forcopyrights in any jurisdiction, and any renewals, modifications and extensionsthereof.

 

“Court Order” means, with respect to a Person, any judgment,decree, injunction, order or ruling of any federal, state, local or foreigncourt or Governmental Body that is binding on such Person or its property underapplicable Law.

 

“Customer Contracts” means all Contracts that provide for theshipment of Products to, the billing of and the collection of payment fromcustomers by the Company or any of its Subsidiaries.  To the extent that such Products are orderedby a customer through a distributor, group purchasing organization or otheragency/sponsoring organization set forth in Section 4.13(a) of theDisclosure Schedule, any Contract with such end-user customer shall not beseparately identified in Section 4.13(a) of the DisclosureSchedule.

 

“Default” means (i) a breach, default or violation, (ii) theoccurrence of an event that with or without the passage of time or the givingof notice, or both, would constitute a breach, default or violation or (iii)with respect to any Contract, the occurrence of an event that with or withoutthe passage of time or the giving of notice, or both, would give rise to aright of termination, renegotiation or acceleration.

 

“Disclosure Schedule” means the disclosure schedule delivered bythe Company to Parent on the date of this Agreement, as amended after the datehereof, if at all, in accordance with Section 6.06 below.

 

“Dissenting Shares” has the meaning set forth in Section 3.09below.

 

“Dissenting Stockholders” has the meaning set forth in Section3.09 below.

 

“Dombrowski Patent Agreement” has the meaning set forth in Section6.03(k).

 

“Dublin Land” means the Company’s former excess vacant OwnedReal Property consisting of approximately 5.89 acres located adjacent to theCompany’s facility in Dublin, Ohio.

 

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“EES Accounts Receivable” means the net amount receivable fromEthicon Endo-Surgery, Inc., a subsidiary of Johnson & Johnson, or any ofits Affiliates relating to matters as set forth in Section 1 of theDisclosure Schedule.

 

“Effective Time” has the meaning set forth in Section 2.02below.

 

“Employee Benefit Plan” means any “employee benefit plan” (assuch term is defined in ERISA §3(3)) and any other employee benefit plan,program, incentive arrangement or arrangement that provides benefits orcompensation to any employee or former employee of the Company or any of itsERISA Affiliates and that is maintained, sponsored or contributed to by theCompany or any of its ERISA Affiliates, or to which the Company or any ERISAAffiliate has or has had an obligation to contribute.

 

“Employee Pension Benefit Plan” has the meaning set forth inERISA §3(2), and also for the avoidance of doubt includes any employersponsored scheme for the provision of funding retirement benefits for any pastor present officer or employee, or for any dependant of any such person, withwhich the Company or its ERISA Affiliates has or may have any liability (actualor contingent, present or future) including any obligation or liability tocontribute to any personal pension scheme in respect of any of its officers oremployees.

 

“Employee Welfare Benefit Plan” has the meaning set forth inERISA §3(1).

 

“Environmental Claims” means any and all administrative orjudicial actions, suits, orders, claims, liens, notices, investigations,violations or proceedings related to any applicable Environmental Law or anyEnvironmental Permit brought, issued or asserted by a Governmental Body orthird party for compliance, damages, penalties, removal, response, remedial orother action pursuant to any applicable Environmental Law or for personalinjury or property damage resulting from the release of a Hazardous Materialat, to or from any facility or property owned or operated by the Company or anyof its Subsidiaries or at, to or from any facility or property at which theCompany or any of its Subsidiaries disposed or arranged for the disposal ortreatment (with a transporter or otherwise) of Hazardous Materials, includingclaims by the Company’s employees or any employees of any of its Subsidiariesseeking damages for exposure to Hazardous Materials.

 

“Environmental Laws” means any and all applicable: (a)international, European Union, national, state, federal, regional or local laws(including common law, statute law, civil, criminal and administrative law);(b) subordinate legislation and codes of practice, including, withoutlimitation, guidance notes, circulars, decisions, regulations and judgments;and (c) judicial or administrative interpretation of each of the foregoing, ineach case having the force and effect of law, which relate to the protection ofthe environment, natural resources, safety or health (as it relates to exposureto Hazardous Materials) or the handling, use, recycling, generation, treatment,storage, management, transportation or disposal of Hazardous Materials.

 

“Environmental Permit” means all permits, licenses, approvals,authorizations or consents required by any Governmental Body under anyapplicable Environmental Law and includes any and all orders, consent orders orbinding agreements issued or entered into by a Governmental Body under anyapplicable Environmental Law.

 

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“ERISA” means the Employee Retirement Income Security Act of1974, as amended.

 

“ERISA Affiliate” means each entity that is treated as a singleemployer with the Company for purposes of Code §414.

 

“Escrow Agent” has the meaning set forthin Section 3.01(d)(ii) below.

 

“Escrow Agreement” has the meaning setforth in Section 3.01(d)(ii) below.

 

“Escrow Amount” means $30 million.

 

“Escrow Funds” is defined in Section3.01(d)(ii) below.

 

“Estimated Closing Cash” has the meaning set forth in Section3.01(c) below.

 

“Estimated Closing Net Working Capital” has the meaning setforth in Section 3.01(b).

 

“Exchange Act” has the meaning set forth in Section 4.20below.

 

“FDA” has the meaning set forth in Section 4.24(a) below.

 

“Financial Statements” has the meaning set forth in Section4.07(a) below.

 

“Fully-Diluted Common Shares” is equal to, at the Effective Timeand without duplication with respect to clauses (i) and (ii) immediately below,the sum of:  (i) the total number ofCommon Shares outstanding and (ii) the total number of Common Shares that wouldbe issued assuming the exercise of all outstanding Options.

 

“French Subsidiary” means Medex Medical France, S.A.R.L.

 

“Fully-Diluted Preferred Shares” is equal to, at the EffectiveTime and without duplication with respect to clauses (i) and (ii) immediatelybelow, the sum of:  (i) the total numberof Preferred Shares outstanding and (ii) the total number of Preferred Sharesthat would be issued assuming the exercise of all outstanding Options.

 

“GAAP” means United States generally accepted accountingprinciples as in effect from time to time.

 

“General Threshold” has the meaning set forth in Section10.01(b) below.

 

“German Subsidiary” means Medex GmbH.

 

“Governmental Body” means, in relation to anywhere in the world,any supra-national, national, state, municipal or local government(including any subdivision, court, administrative agency, competent authority,notified body or commission or other authority thereof) or any quasi-governmentalbody exercising any regulatory, taxing, importing or other governmental orquasi-governmental authority, including the European Union.

 

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“Hazardous Material” means any hazardous, toxic or radioactivesubstance, material or waste with respect to which, as of the Closing Date, anystate or local Governmental Body requires environmental investigation,monitoring, reporting or remediation, including any material or substance thatis: (A) defined as a “hazardous substance,” “regulated substance”or “hazardous waste” under applicable state law, (B) petroleum,petroleum products or petroleum wastes, (C) asbestos, (D) designated as a “hazardoussubstance” pursuant to section 311 of the Federal Water Pollution ControlAct, as amended, 33 U.S.C. §1251 et seq. (33 U.S.C. § 1321), (E) defined as a “hazardouswaste” pursuant to section 1004 of the Resource Conservation and RecoveryAct, as amended, 42 U.S.C. §6901 et seq. (42 U.S.C. §6903), (F) defined as a “hazardoussubstance” pursuant to section 101 of the CERCLA or (G) otherwise regulatedas hazardous or toxic under the Toxic Substances Control Act, as amended, 15U.S.C. §2601 et seq., the Clean Air Act, as amended, 42 U.S.C. §7401 et seq.,the Hazardous Materials Transportation Act, as amended, 49 U.S.C. §1801 etseq., or the Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7U.S.C. §136 et seq., the Emergency Planning and Community Right-to-Know Act, asamended, 42 U.S.C. §11001 et seq., the Safe Drinking Water Act, as amended, 42U.S.C. §300(f) et seq., and the Occupational Safety and Health Act, as amended,29 U.S.C. §651 et seq.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Actof 1976, as amended, and the rules and regulations thereunder.

 

“Indemnified Party” has the meaning set forth in Section10.04 below.

 

“Indemnifying Party” has the meaning set forth in Section10.04 below.

 

“Insurance Costs” has the meaning set forth in Section 10.06below.

 

“Intellectual Property” means patents, trade marks, servicemarks, logos, trade names, internet domain names, rights in designs, Copyrights(including rights in computer software) and database rights, utility models,rights in know-how and other intellectual property rights, in each case whetherregistered or unregistered and including applications for registration, and allrights or forms of protection having equivalent or similar effect anywhere inthe world.

 

“IPI” means Inhalation Plastics, Inc.

 

“IPI Agreement” means the Asset Purchase Agreement by andbetween Medex Cardio-Pulmonary, Inc. and IPI, dated as of May 10, 2002, and allother agreements related thereto.

 

“IRB” has the meaning set forth in Section 4.24(d) below.

 

“Jelco Agreements” means the Purchase Agreement by and betweenEthicon Endo-Surgery, Inc. and Medex, dated as of April 2, 2003, the ForeignPurchase Agreements (as defined therein), and all other agreements relatedthereto.

 

“Knowledge” means, with respect to the Company, the actualknowledge without independent investigation of the following individuals:Dominick A. Arena, Michael I. Dobrovic, Ralph E. Dickman, Jr., Charles J.Jamison, Georg W. Landsberg, Catherine Chenetski, Vinc Ellerbrock and ScottSeidenverg.

 

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“Law” means any statute, law, ordinance, regulation, guidance,order or rule of any Governmental Body, including those covering employment,employee benefits, tax, medical devices and pharmaceuticals, energy, safety,health, information technology, transportation, bribery, recordkeeping, zoning,antidiscrimination, antitrust, wage and hour, and price and wage controlmatters, excluding Environmental Laws.

 

“Leased Real Property” means all leasehold or subleaseholdestates and other rights to use or occupy any land, buildings, structures,improvements, fixtures or other interests in real property that is used in thebusiness of the Company and its Subsidiaries.

 

“Leases” means all leases, subleases, licenses, concessions andother agreements (written or oral), including all amendments, extensions,renewals, guaranties and other agreements with respect thereto, pursuant towhich the Company or any of its Subsidiaries holds any Leased Real Property.

 

“Liability” means any direct or indirect liability,indebtedness, obligation, expense, claim, loss, damage, deficiency, guaranty orendorsement of or by any Person, absolute or contingent, accrued or unaccrued,due or to become due, liquidated or unliquidated.

 

“Licenses” means any permits, licenses, clearances, franchises,registrations, certificates, variances, exemptions, consents, approvals andother authorizations granted by any Governmental Body, excluding EnvironmentalPermits.

 

“Lien” means any mortgage, pledge, charge, lien, assignment,hypothecation, encumbrance, charge or other security interest (including anyright to acquire, option or right of preemption or conversion) or any agreementto create any of the above, other than (a) liens for Taxes not yet due andpayable or for Taxes that the taxpayer is contesting in good faith throughappropriate proceedings, (b) purchase money liens and liens securing rentalpayments under capital lease arrangements and (c) other liens arising in theOrdinary Course of Business and not incurred in connection with the borrowingof money.

 

“Management Buyout Agreement” means the Amended and RestatedStock Purchase Agreement, dated as of February 9, 2001, by and among theCompany, Medex and Saint-Gobain Performance Plastics Corporation and all otheragreements related thereto.

 

“Material Adverse Effect” or “Material Adverse Change”means any effect or change that would be materially adverse to the business,operations, assets, financial condition and results of operations of theCompany and its Subsidiaries, taken as a whole; provided that none ofthe following shall be deemed to constitute, and none of the following shall betaken into account in determining whether there has been, a Material AdverseEffect or Material Adverse Change:  anyadverse change, event, development or effect arising from or relating to (1)general business or economic conditions, including such conditions related tothe business of the Company and its Subsidiaries, (2) national or internationalpolitical or social conditions, including the engagement by the United Statesin hostilities, whether or not pursuant to the declaration of a nationalemergency or war, or the occurrence of any military or terrorist attack uponthe United States or any of its territories, possessions or diplomatic orconsular offices or upon any military installation, equipment or personnel ofthe United States, (3) financial, banking or securities

 

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markets (including any disruption thereof and anydecline in the price of any security or any market index), (4) changes in GAAP,(5) changes in Law or (6) the announcement or performance of this Agreement orthe transactions contemplated by this Agreement or the other TransactionDocuments, including any disclosure of Parent’s post-Closing plans orintentions with respect to the operations of the Company or any of itsSubsidiaries; and (b) any adverse change in or effect on the business ofthe Company and its Subsidiaries that is cured by the Company or itsSubsidiaries before the earlier of (1) the Closing Date and (2) the date onwhich this Agreement is terminated pursuant to Section 9.01 hereof.

 

“Material Customer Contracts” has the meaning set forth in Section4.13(a) below.

 

“Medex” means Medex, Inc., an Ohio corporation, a wholly-ownedsubsidiary of the Company.

 

“Merger” has the meaning set forth in the Recitals above.

 

“Merger Consideration” has the meaning set forth in Section3.01(a) below.

 

“Merger Sub” has the meaning set forth in the introductoryparagraph above.

 

“Mexico Land” means the Company’s excess vacant Owned RealProperty consisting of approximately 10.0 acres located adjacent to the Company’sfacility in Apodaca, Nuevo Leon, Mexico for which a sale contract has beenentered into for an aggregate purchase price of approximately US $1.56 million.

 

“Money Purchase Benefits” in relation to a member of a personalor occupational pension scheme or the widow or widower of a member of such ascheme, means benefits the rate or amount of which is calculated by referenceto a payment or payments made by the member or by any other person in respectof the member and which are not average salary benefits.

 

“Most Recent Financial Statements” has the meaning set forth in Section4.07(a) below.

 

“Multiemployer Plan” has the meaning set forth in ERISA §3(37).

 

“Option” has the meaning set forth in Section 3.03 below.

 

“Option Holder” has the meaning set forth in Section 3.03below.

 

“Option Payments” has the meaning set forth in Section 3.03below.

 

“Option Plans” has the meaning set forth in Section 3.03below.

 

“ORC” has the meaning set forth in the Recitals above.

 

“Ordinary Course of Business” means the ordinary course ofbusiness consistent with past custom and practice (including with respect toquantity and frequency).

 

“Owned Real Property” means all land, together with allbuildings, structures, improvements and fixtures located thereon, and alleasements and other rights and interests

 

9

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appurtenant thereto, owned by the Company or any ofits Subsidiaries and used in the business of the Company and its Subsidiaries.

 

“Parent” has the meaning set forth in the introductory paragraphabove.

 

“Payment Fund” has the meaning set forth in Section 3.01(d)below.

 

“Permitted Encumbrances” means with respect to each parcel ofOwned Real Property: (a) Taxes, assessments and other governmental levies, feesor charges imposed with respect to such Owned Real Property that are (i) notdue and payable as of the Closing Date or (ii) being contested by appropriateproceedings; (b) mechanics liens and similar liens for labor, materials orsupplies provided with respect to such Owned Real Property incurred in theOrdinary Course of Business for amounts that are (i) not delinquent and wouldnot, in the aggregate, have a Material Adverse Effect or (ii) being contestedby appropriate proceedings; (c) zoning, building codes and other land use lawsregulating the use or occupancy of such Owned Real Property or the activitiesconducted thereon that are imposed by any governmental authority havingjurisdiction over such Owned Real Property; and (d) easements, covenants,conditions, restrictions and other similar matters affecting title to suchOwned Real Property and other title defects, all of which do not materiallyimpair the use or occupancy of such Owned Real Property in the operation of thebusiness of the Company or its Subsidiaries.

 

“Person” means an individual, a partnership, a corporation, alimited liability company, an association, a joint stock company, a trust, ajoint venture, an unincorporated organization, any other business entity or agovernmental entity (or any department, agency or political subdivisionthereof).

 

“Preamendment Devices” has the meaning set forth in Section4.24(c) below.

 

“Preferred Per Share Merger Consideration” shall be equal to thequotient of (i) the sum of (a) the Preferred Share Face Amount, plus (b)the Preferred Share Preference Amount, plus (c) the Preferred ShareParticipation Amount, divided by (ii) the Fully-Diluted PreferredShares, which amount shall be allocated to the holders of Preferred Shares inaccordance with the provisions of Section 3.01(g).

 

“Preferred Share” has the meaning set forth in Section3.02(b) below.

 

“Preferred Share Face Amount” shall be an amount equal to $5.643times the number of Fully-Diluted Preferred Shares.

 

“Preferred Share Face Amount Threshold” has the meaning setforth in Section 3.01(g)(i).

 

“Preferred Share Participation Amount” shall be an amount equalto ten percent (10%) of the aggregate Sellers’ Merger Consideration remainingafter the Preferred Share Face Amount Threshold and Preferred Share PreferenceAmount Threshold have been met and the Preferred Share Face Amount andPreferred Share Preference Amount have been allocated to the holders ofPreferred Shares in accordance with the provisions of Section 3.01(g).

 

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“Preferred Share Preference Amount” shall be an amount equal to$2.8215 times the number of Fully-Diluted Preferred Shares.

 

“Preferred Share Preference Amount Threshold” has the meaningset forth in Section 3.01(g)(ii).

 

“Prime Rate” has the meaning set forth in Section 3.04(c)below.

 

“Principal Company Stockholders” has the meaning set forth inthe introductory paragraph above.

 

“Products” means all products manufactured, tested, packaged,labeled, marketed, sold or distributed by the Company or any of itsSubsidiaries.

 

“Relevant Group” means any affiliated, combined, consolidated,unitary or similar group of which any of the Company or its Subsidiaries is orwas a member during the period beginning on February 10, 2001 and ending on theClosing Date.

 

“Representative” has the meaning set forth in the introductoryparagraph above.

 

“Representative Agreement” has the meaning set forth in theRecitals above.

 

“Requisite Stockholder Approval” has the meaning set forth in Section4.18 below.

 

“Restricted Company Stockholders” means Dominick A. Arena,Michael I. Dobrovic, Ralph E. Dickman, Jr., Charles J. Jamison and Georg W.Landsberg.

 

“SEC” has the meaning set forth in Section 4.20 below.

 

“SEC Reports” has the meaning set forth in Section 4.20below.

 

“Sellers’ Merger Consideration” means an amount equal to theMerger Consideration plus the aggregate exercise price that would bepayable to the Company upon the exercise of all Options outstanding immediatelyprior to the cancellation and settlement thereof pursuant to Section 3.03.

 

“Senior Debt Payoff Amount” has the meaning set forth in Section3.01(e) below.

 

“Senior Subordinated Notes Amount” means an amount equal to theaggregate principal of, and accrued but unpaid interest on, the Company SeniorSubordinated Notes.

 

“Statement of Closing Cash” has the meaning set forth in Section 3.04(a)below.

 

“Statement of Closing Net Working Capital” has the meaning setforth in Section 3.04(a) below.

 

“Statement of Estimated Closing Cash” has the meaning set forthin Section 3.01(c) below.

 

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“Statement of Estimated Closing Net Working Capital” has themeaning set forth in Section 3.01(b) below.

 

“Subsidiary” means, with respect to any Person, any corporation,limited liability company, partnership, association or other business entity ofwhich (i) if a corporation, a majority of the total voting power of shares ofstock entitled (without regard to the occurrence of any contingency) to vote inthe election of directors, managers or trustees thereof is at the time owned orcontrolled, directly or indirectly, by that Person or one or more of the otherSubsidiaries of that Person or a combination thereof or (ii) if a limitedliability company, partnership, association or other business entity (otherthan a corporation), a majority of membership, partnership or other similarownership interest thereof is at the time owned or controlled, directly orindirectly, by that Person or one or more Subsidiaries of that Person or acombination thereof and for this purpose a Person or Persons owns a majorityownership interest in such a business entity (other than a corporation) if suchPerson or Persons shall be allocated a majority of such business entity’s gainsor losses or shall be or control any managing director or general partner ofsuch business entity (other than a corporation).  The term “Subsidiary” shall include allSubsidiaries of such Subsidiary.

 

“Surviving Corporation” has the meaning set forth in Section 2.01below.

 

“Target Closing Net Working Capital” has the meaning set forthin Section 3.01(b) below.

 

“Tax” or “Taxes” means any charge on income, profits orgains, and all other federal, state, local or foreign income, gross receipts,license, payroll, employment, excise, severance, stamp, occupation, premium,windfall profits, environmental (including taxes under Code §59A), customsduties, capital stock, franchise, profits, withholding, social security (orsimilar, including any national insurance contributions), unemployment,disability, real property, personal property, sales, use, transfer,registration, value added, alternative or add-on minimum, estimated or othertax, assessment, fee levy or other governmental charge of any kind whatsoever(other than fees or similar amounts paid with respect to the renewal of patentsor other Intellectual Property), including any interest, penalty, addition totax or addition thereto.

 

“Tax Benefits” means any Tax benefits that the Company or any ofits Subsidiaries derive from any items incurred by the Company or itsSubsidiaries in connection with the transactions contemplated by thisAgreement.

 

“Tax Return” means any return, declaration, report, claim forrefund or information return or statement relating to Taxes.

 

“Tax Threshold” has the meaning set forth in Section 10.01(b)below.

 

“Territory” has the meaning set forth in Section 7.04(a)below.

 

“Transaction Documents” means this Agreement and any othercertificate, instrument, agreement or document required to be deliveredpursuant to the terms hereof.

 

“WARN Act” has the meaning set forth in Section 4.15(j)below.

 

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“Withholdings” means all amounts to be withheld from the MergerConsideration as required by Law (arising from withholding obligations of theCompany as a result of the cancellation and settlement of Options pursuant to Section 3.03),which amount(s) shall be remitted to the appropriate Governmental Body by theSurviving Corporation at and upon the Closing.

 

ARTICLE II****THE MERGER

 

## SECTION 2.01.                                         TheMerger.  Upon the terms and subjectto the conditions set forth in this Agreement, and in accordance with the ORC,at the Effective Time, Merger Sub shall be merged with and into the Company.  As a result of the Merger, the separatecorporate existence of Merger Sub shall cease, and the Company shall continueas the surviving corporation and as a wholly-owned subsidiary of Parentfollowing the Merger (the “Surviving Corporation”).  Subject to the provisions of this Agreement,nothing contained in this Agreement shall give Parent, directly or indirectly,the right to control or direct the Company’s operations prior to the EffectiveTime.  Prior to the Effective Time, eachof the Company and the Parent shall exercise, consistent with the terms andconditions of this Agreement, complete control and supervision over itsrespective operations.

##  

## SECTION 2.02.                                         EffectiveTime.  Unless this Agreement isearlier terminated pursuant to Section 9.01, the closing of the Merger(the “Closing”) will take place no later than seven (7) business daysafter the satisfaction or, if permissible, waiver of the conditions set forthin Article VIII, at the offices of Winston & Strawn LLP, 35 WestWacker Drive, Chicago, Illinois 60601, at 10:00 a.m. (Chicago time), providedthat such place, date and time may be changed to another place, date and/ortime as agreed to in writing by Parent and the Company.  The date upon which the Closing actuallyoccurs is herein referred to as the “Closing Date.”  On the Closing Date, the parties hereto shallcause the Merger to be consummated by filing a certificate of merger (the “Certificateof Merger”) with the Secretary of State of the State of Ohio, in such formas required by, and executed in accordance with, the relevant provisions of theORC (the date and time of acceptance by the Secretary of State of Ohio of suchfiling, or, if another date and******time isspecified in such filing, such specified date and time, being the “EffectiveTime”).

##  

## SECTION 2.03.                                         Effectof the Merger.  At the EffectiveTime, the effect of the Merger shall be as provided in the applicableprovisions of the ORC.  Without limitingthe generality of the foregoing, and subject thereto, at the Effective Time,except as otherwise provided herein, all the property, assets, rights,privileges, powers and franchises of the Company and Merger Sub shall vest inthe Surviving Corporation, and all debts, liabilities, duties and obligationsof the Company and Merger Sub shall become the debts, liabilities, duties andobligations of the Surviving Corporation.

##  

## SECTION 2.04.                                         Articlesof Incorporation; Code of Regulations. At the Effective Time, the Articles of Incorporation and the Code ofRegulations of the Surviving Corporation shall be amended in their entirety tocontain the provisions set forth in the Articles of

 

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## Incorporation andCode of Regulations of Merger Sub, as in effect immediately prior to theEffective Time.

##  

## SECTION 2.05.                                         Directorsand Officers.  The directors ofMerger Sub immediately prior to the Effective Time shall be the initialdirectors of the Surviving Corporation, each to serve in accordance with theArticles of Incorporation and the Code of Regulations of the SurvivingCorporation.  The officers of Merger Subimmediately prior to the Effective Time shall be the initial officers of theSurviving Corporation, each to hold office in accordance with the Articles ofIncorporation and the Code of Regulations of the Surviving Corporation.

##  

ARTICLE III****MERGER CONSIDERATION; CONVERSION OF SECURITIES; EXCHANGE OFCERTIFICATES

 

## SECTION 3.01.                                         Calculationand Payment of the Merger Consideration.

##  

### (a)                                  Calculationof Merger Consideration.  Theaggregate amount to be paid by Parent with respect to the Company Shares (on afully-diluted basis) shall equal the sum of the following:

###  

#### (i)                                     NineHundred Twenty Five Million Dollars ($925,000,000),plus

####  

#### (ii)                                  theEstimated Closing Cash, plus or minus

####  

#### (iii)                               theexcess or deficiency of the Target Closing Net Working Capital determined bythe calculations set forth in the Statement of Estimated Closing Net WorkingCapital under Section 3.01(b), minus

####  

#### (iv)                              theSenior Debt Payoff Amount to be paid by Parent under Section 3.01(e), minus

####  

#### (v)                                 theSenior Subordinated Notes Amount, plus

####  

#### (vi)                              thecosts and expenses (including legal fees and expenses) paid prior to theClosing by the Company and its Subsidiaries in connection with the tender offerto redeem the Company Senior Subordinated Notes, minus

####  

#### (vii)                           theCompany Stockholder Transaction Expenses not paid prior to the Closing by theCompany and its Subsidiaries.

####  

The aggregate amount of items (i) through (vii) immediately above isreferred to herein as the “Merger Consideration.”  Remittance and delivery of the MergerConsideration shall be made by Parent or Merger Sub in accordance with theprovisions of Sections 3.01(d), 3.01(e) and 3.01(f)below.  After the Effective Time, theMerger Consideration, the Preferred Per Share Merger Consideration and theCommon Per Share Merger Consideration shall be subject to the adjustments setforth in Sections 3.01(b), 3.01(c) and 3.04.

 

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### (b)                                 EstimatedClosing Net Working Capital Adjustment. Not less than four (4) business days prior to the Closing Date, theCompany shall deliver to Parent and Merger Sub a statement of the EstimatedClosing Net Working Capital (the “Statement of Estimated Closing Net WorkingCapital”) determined on a basis consistent with the methodology to beemployed in the calculation of the Closing Net Working Capital pursuant to Section3.04 below (such estimate, the “Estimated Closing Net Working Capital”).  To the extent that the Estimated Closing NetWorking Capital is greater than Seventy-Six Million Dollars ($76,000,000) (the “TargetClosing Net Working Capital”), the Merger Consideration (and the paymentrequired to be made into the Payment Fund under this Section 3.01 at theClosing) will be increased by such excess. To the extent that the Estimated Closing Net Working Capital is lessthan the Target Closing Net Working Capital, the Merger Consideration (and thepayment required to be made into the Payment Fund under this Section 3.01at the Closing) will be decreased by such shortfall.  Subsequent to Closing, the provisions of Section3.04 will apply.

###  

### (c)                                  EstimatedClosing Cash Adjustment.  Not lessthan four (4) business days prior to the Closing Date, the Company shalldeliver to Parent and Merger Sub a statement of the Estimated Closing Cash (the“Statement of Estimated Closing Cash”), which shall reflect theestimated amount of Cash of the Company and each of its Subsidiaries as of theclose of business on the Closing Date (the “Estimated Closing Cash”).  Subsequent to the Closing, the EstimatedClosing Cash shall be reconciled to the actual amount of Cash of the Companyand each of its Subsidiaries as of the close of business on the Closing Date(the “Closing Cash”) in accordance with Section 3.04 below (the “ClosingCash Adjustment”).

###  

### (d)                                 Paymentof Merger Consideration.  At and uponthe Effective Time, Parent or Merger Sub shall remit the Merger Considerationby wire transfer of immediately available funds as follows:

###  

#### (i)                                     theWithholdings shall be remitted to the Company’s payroll withholding bankaccount for transmittal to the Internal Revenue Service or the applicablerecipient thereof;

####  

#### (ii)                                  a portion of the Merger Consideration in theamount of the Escrow Amount shall be deposited by Parent with the escrow agent(the “Escrow Agent”) designated in the escrow agreement (the “EscrowAgreement”), substantially in the form of Exhibit B hereto, to beentered into at the Closing by Parent, the Representative and the EscrowAgent.  Such cash delivered to the EscrowAgent, together with any investment proceeds thereon are referred tocollectively herein as the “Escrow Funds.”  The Escrow Agreement sets forth the termsupon which disbursements shall be made by the Escrow Agent; and

####  

#### (iii)                               theremaining amount of the Merger Consideration, after subtraction of the amountsremitted in accordance with Sections 3.01(d)(i) and 3.01(d)(ii)and subtraction of the portion thereof otherwise allocable in accordance with Section3.01(g) below to Dissenting Shares, shall be remitted to the Representativeor its designee by Parent.

####  

#### 15

#### 

####  

#### The aggregate of the paymentsset forth in this Section 3.01(d), together with any subsequentremittances to the Representative or its designee as a consequence of the ClosingNet Working Capital Adjustment and/or the Closing Cash Adjustment (asrespectively described in Section 3.04), is referred to herein as the “PaymentFund.”  The Representative shallallocate and distribute, or cause its designee to distribute, the Payment Fundin accordance with the provisions of Sections 3.01(g),3.02 and 3.03below.

####  

### (e)                                  Paymentof Company Senior Debt.  At and uponthe Effective Time, Parent shall pay, or cause to be paid, on behalf of theCompany by wire transfer of immediately available funds, to the lenders suchamounts as directed in writing by the lenders necessary to repay the CompanySenior Debt (including all interest accrued thereunder and all fees andexpenses required to satisfy such obligations) up to and including the ClosingDate (the “Senior Debt Payoff Amount”).

###  

### (f)                                    Paymentof Company Stockholder Transaction Expenses.  At and upon the Effective Time, Parent shallpay, or cause to be paid, by wire transfer of immediately available funds suchamounts necessary to pay the Company Stockholder Transaction Expenses, not paidprior to the Closing by the Company and its Subsidiaries, which shall be setforth on a schedule that the Representative shall deliver to Parent not lessthan three (3) business days prior to the Closing Date.

###  

### (g)                                 Allocationof Merger Consideration.  Upon andafter the Closing, the Representative, having been duly empowered to act onbehalf of the Company Stockholders pursuant to the terms of the RepresentativeAgreement, shall make determinations as to the allocation of the Sellers’Merger Consideration among the Preferred Shares, the Common Shares and theOptions.  In furtherance of theforegoing, the Representative shall follow the directives and procedures setforth in this Section 3.01(g) and in Sections 3.02 and 3.03to determine the payments and deliveries to be made from the Payment Fund withrespect to such ownership interests in the Company.

###  

#### (i)                                     Untilthe Preferred Share Face Amount Threshold has been met, one hundred percent(100%) of the Sellers’ Merger Consideration shall be paid to the holders ofPreferred Shares (other than with respect to Dissenting Shares) pro rata amongsuch holders on the basis of the number of Fully-Diluted Preferred Shares heldby such holders immediately prior to the Effective Time.  The “Preferred Share Face Amount Threshold”shall mean the point at which the (x) sum of the Sellers’ Merger Considerationpaid to the holders of Preferred Shares divided by (y) the number ofFully-Diluted Preferred Shares equals $5.643.

####  

#### (ii)                                  Fromand after the point the Preferred Share Face Amount Threshold has been metuntil the Preferred Share Preference Amount Threshold has been met, (1) ninetypercent (90%) of the Sellers’ Merger Consideration shall be paid to the holdersof Preferred Shares (other than with respect to Dissenting Shares) pro rataamong such holders on the basis of the number of Fully-Diluted Preferred Sharesheld by such holders immediately prior to the Effective Time and (2) tenpercent (10%) of the Sellers’ Merger Consideration shall be paid to the holdersof Common Shares (other than with respect to Dissenting Shares) pro rata amongsuch holders on the basis of the number of

####  

#### 16

#### 

####  

#### Fully-Diluted Common Shares held by such holders immediately prior tothe Effective Time. The “Preferred Share Preference Amount Threshold”shall mean the point at which the (x) sum of the Merger Consideration paid tothe holders of Preferred Shares divided by (y) the number of Fully-DilutedPreferred Shares equals $8.4645.

####  

#### (iii)                               Fromand after the point the Preferred Share Preference Amount Threshold has beenmet, (1) ten percent (10%) of the Sellers’ Merger Consideration shall be paidto the holders of Preferred Shares (other than with respect to DissentingShares) pro rata among such holders on the basis of the number of Fully-DilutedPreferred Shares held by such holders immediately prior to the Effective Timeand (2) ninety percent (90%) of the Sellers’ Merger Consideration shall be paidto the holders of Common Shares (other than with respect to Dissenting Shares)pro rata among such holders on the basis of the number of Fully-Diluted CommonShares held by such holders immediately prior to the Effective Time.

####  

#### (iv)                              Indetermining the allocation of the Sellers’ Merger Consideration, the CompanyStockholders shall be deemed to have received the Escrow Amount as a portion ofsuch Sellers’ Merger Consideration.

####  

## SECTION 3.02.                                         Effectof Merger on the Capital Stock of the Company.

##  

### (a)                                  Conversionof Common Stock.  At the EffectiveTime, each share of common stock, without****par value, ofthe Company (each, a “Common Share”) that is issued and outstandingimmediately prior to the Effective Time, including, without limitation, allshares of common stock issued upon exercise of any Options shall, by virtue ofthe Merger and without any action on the part of Parent, Merger Sub, theCompany or the Company Stockholders, be canceled and extinguished, and eachsuch Common Share shall be converted into the right to receive the Common PerShare Merger Consideration (subject to adjustment to reflect changes in theClosing Net Working Capital and/or the Closing Cash as provided in Sections 3.01(b),3.01(c) and 3.04 hereof) in cash, payable in accordance with andsubject to the conditions on payment as provided in this Article III,other than with respect to Dissenting Shares and without duplication withrespect to Options cancelled pursuant to Section 3.03.  Notwithstanding any contrary provision setforth in this Agreement, the Representative shall not pay to any CompanyStockholder holding Common Shares (i) that portion of the Merger Considerationrepresented by such Company Stockholder’s pro rata share of the Escrow Fundsuntil such time as such amount, if any, is distributable pursuant to the termsand conditions of the Escrow Agreement or (ii) such Company Stockholder’s prorata share of Holdback Amount or the Expense Amount (in each case as such termsare defined in the Representative Agreement), until such time as such amounts,if any, are distributable pursuant to the terms and conditions of theRepresentative Agreement.  The adoptionof this Agreement and the approval of the Merger by the Company Stockholdersshall constitute approval of the Escrow Agreement and of all of thearrangements relating thereto, including, without limitation, the placement ofthe Escrow Funds in escrow.

###  

### (b)                                 Conversionof Preferred Stock.  At the EffectiveTime, each share of Class A Preferred Stock, without****parvalue, of the Company (each, a “Preferred Share”) that is issued andoutstanding immediately prior to the Effective Time, including, withoutlimitation, all shares of Preferred Stock issued upon exercise of any Optionsshall, by virtue of the Merger and

###  

### 17

### 

###  

### without any actionon the part of Parent, Merger Sub, the Company or the Company Stockholders, becanceled and extinguished, and each such Preferred Share shall be convertedinto the right to receive the Preferred Per Share Merger Consideration (subjectto adjustment to reflect changes in the Closing Net Working Capital and/or theClosing Cash as provided in Sections 3.01(b), 3.01(c) and 3.04hereof) in cash, payable in accordance with and subject to the conditions onpayment as provided in this Article III, other than with respect toDissenting Shares and without duplication with respect to Options cancelledpursuant to Section 3.03. Notwithstanding any contrary provision set forth in this Agreement, theRepresentative shall not pay to any Company Stockholder holding PreferredShares (i) that portion of the Sellers’ Merger Consideration represented bysuch Company Stockholder’s pro rata share of the Escrow Funds until such timeas such amount, if any, is distributable pursuant to the terms and conditionsof the Escrow Agreement or (ii) such Company Stockholder’s pro rata share ofHoldback Amount or the Expense Amount (in each case as such terms are definedin the Representative Agreement), until such time as such amounts, if any, aredistributable pursuant to the terms and conditions of the RepresentativeAgreement.

###  

### (c)                                  TreasuryStock.  Each Company Share held inthe treasury of the Company immediately prior to the Effective Time shall becanceled and extinguished without any conversion thereof, and no payment shallbe made with respect thereto.

###  

### (d)                                 Surrenderof Certificates.  The Representativeor its designee shall deliver the Merger Consideration pursuant to this Section3.02 (adjusted as contemplated in Sections 3.01(b), 3.01(c)and 3.04) out of the Payment Fund for each Company Share that issurrendered in accordance with this Section 3.02(d).  As soon as practicable, but in no event laterthan five (5) business days after the Effective Time, the Representative or itsdesignee shall mail to each holder of record of a certificate representingoutstanding Company Shares (the “Certificates”) (1) a letter oftransmittal (which shall specify that delivery shall be effected, and risk ofloss and title to the Certificates shall pass, only upon proper delivery bysuch Company Stockholder of his, her or its Certificates to the Representativeor its designee, and shall be in customary form) and (2) instructions for usein effecting the surrender of the Certificates in exchange for the Sellers’Merger Consideration contemplated to be paid to the Company Stockholderspursuant to this Section 3.02. Upon surrender of a Certificate to the Representative or its designeefor cancellation, the holder of such Certificate shall be entitled to receivein exchange therefor the Sellers’ Merger Consideration (adjusted ascontemplated in Sections 3.01(b),3.01(c) and 3.04hereof) represented by such Certificate as set forth above, which Sellers’Merger Consideration shall be payable upon such proper surrender by theRepresentative or its designee by delivery of a certified or bank cashier’scheck or by wire transfer, and the Certificate so surrendered shall forthwithbe canceled upon delivery thereof to the Representative or its designee.  No interest will be paid or accrued on anycash payable to holders of Certificates. In the event of a transfer of ownership of Company Shares that is notregistered in the transfer records of the Company, payment may be made to atransferee if the Certificate representing such Company Shares is presented toParent, accompanied by all documents required to evidence and effect suchtransfer and by evidence that any applicable stock transfer taxes have beenpaid.

###  

### (e)                                  Cancellationof Company Shares.  From and afterthe Effective Time, all Company Shares shall no longer be outstanding and shallautomatically be canceled and retired

###  

### 18

### 

###  

### and shall cease toexist, and each holder of a Certificate representing any such Company Sharesshall cease to have any rights with respect thereto, except the right toreceive the Sellers’ Merger Consideration represented by such Certificate(other than with respect to Dissenting Shares).

###  

## SECTION 3.03.                                         Options.  In connection with the Merger, effective atthe Effective Time, all outstanding stock options or similar rights to purchaseCommon Shares or Preferred Shares (each, an “Option”) heretofore grantedunder the Company’s 2001 Stock Option Plan, 2002 Stock Option Plan or 2004Stock Option Plan (together, the “Option Plans”), without any paymenttherefor except as otherwise provided in this Section 3.03, shall beautomatically cancelled in accordance with their terms, and, prior to theEffective Time, the Board of Directors of the Company (or, if appropriate, anycommittee thereof) shall adopt appropriate resolutions and take all otheractions necessary to terminate the Option Plans and all individual optionagreements outside of the Option Plans as of the Effective Time.  Each Option, to the extent unexercised as ofthe Effective Time, shall thereafter no longer be exercisable but shall entitleeach holder thereof (each, an “Option Holder”), in cancellation andsettlement therefor, to a payment in cash, at the Effective Time, equal to (A)if an Option exercisable for Common Shares, the product of (i) the excess, ifany, of (x) the Common Per Share Merger Consideration (subject to adjustment toreflect changes in the Closing Net Working Capital and/or the Closing Cash asprovided in Sections 3.01(b), 3.01(c) and 3.04hereof) over (y) the exercise price per Common Share subject to such Option, multipliedby (ii) the total number of Common Shares subject to such Optionimmediately prior to its cancellation (such payment to be net of Withholding,if any, and without interest), at the same time, in the same manner and subjectto the same conditions under which other Company Stockholders receive CommonPer Share Merger Consideration, or (B) if an Option exercisable for PreferredShares, the product of (i) the excess, if any, of (x) the Preferred Per ShareMerger Consideration (subject to adjustment to reflect changes in the ClosingNet Working Capital and/or the Closing Cash as provided in Sections 3.01(b),3.01(c) and 3.04 hereof) over (y) the exercise price perPreferred Share subject to such Option, multiplied by (ii) the totalnumber of Preferred Shares subject to such Option immediately prior to itscancellation (such payment to be net of Withholding, if any, and withoutinterest), at the same time, in the same manner and subject to the sameconditions under which other Company Stockholders receive the Preferred PerShare Merger Consideration (collectively, such amounts payable hereunder beingreferred to as the “Option Payments”). As soon as practicable, but in no event later than five (5) businessdays after the Effective Time, the Representative or its designee shall mail toeach Option Holder (1) a letter of transmittal and (2) instructions for use ineffecting the cancellation and termination of the Option in exchange for theOption Payments contemplated to be paid to the Option Holders pursuant to this Section3.03.  Upon receipt of a dulycompleted letter of transmittal, the Representative or its designee shall payto such Option Holder, on behalf of the Company out of amounts paid to theRepresentative in accordance with this Agreement and subject to any applicableWithholdings, the Option Payments due under this Section 3.03 withrespect to such Option.  Notwithstandingany contrary provision set forth in this Agreement, the Representative shallnot pay to any Option Holder at the Effective Time (i) that portion of theOption Payments represented by such Option Holder’s pro rata share of theEscrow Funds until such time as such amount, if any, is distributable pursuantto the terms and conditions of the Escrow Agreement or (ii) such Option Holder’spro rata share of Holdback Amount or the Expense Amount (in each case as suchterms are defined in the Representative Agreement), until such time as suchamounts, if any, are distributable pursuant to the terms and conditions of theRepresentative Agreement.

##  

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## SECTION 3.04.              ClosingNet Working Capital Adjustment; Closing Cash Adjustment.

##  

### (a)           Within ninety (90) daysafter the Closing Date, Parent****shall prepareand deliver to the Representative (i) a statement of the Closing NetWorking Capital (the “Statement of Closing Net Working Capital”) and(ii) a statement of the Closing Cash (the “Statement of Closing Cash”).  The Statement of Closing Net Working Capitalshall be based upon the books and records of the Company and its Subsidiariesand shall be prepared in accordance with GAAP and the definition of Closing NetWorking Capital set forth in Article I above and in accordance withthe procedures set forth in Section 3.04(a) of the DisclosureSchedule.  The Statement of Closing Cashshall be based upon the books and records of the Company and its Subsidiariesand shall be prepared in accordance with GAAP and the definition of Cash setforth in Article I above.

###  

### (b)           The Statement ofClosing Net Working Capital and the Statement of Closing Cash shallrespectively be final and binding on the parties unless the Representativeshall, within thirty (30) days following the delivery of (i) the Statement ofClosing Net Working Capital or (ii) the Statement of Closing Cash, asapplicable, deliver to Parent written notice of disagreement with any of suchstatements, which notice(s) shall describe the nature of any such disagreementin reasonable detail, identify the specific items involved and the dollaramount of each such disagreement.  TheRepresentative shall provide reasonable supporting documentation for each suchdisagreement concurrently with the delivery of the respective notice(s).  After the end of such thirty (30) day period,the Representative may not introduce additional disagreements with respect toany item in the Statement of Closing Net Working Capital or the Statement ofClosing Cash.  If the Representativeshall raise any objections within the aforesaid thirty (30) day period, thenthe disputed matters shall be resolved by the Representative, on behalf of theCompany Stockholders, and Parent.  If theRepresentative and Parent are unable to resolve all disagreements within thirty(30) days of receipt by Parent of a written notice of disagreement, or suchlonger period as may be agreed by Parent and the Representative, then, withinthirty (30) days thereafter, the Representative and Parent jointly shall selectKPMG LLP or any other arbiter from a nationally recognized independent publicaccounting firm that is not the independent auditor of any of Parent, the Company,the Representative or the Surviving Corporation; if Parent and theRepresentative are unable to select an arbiter within such time period, theAmerican Arbitration Association shall make such selection (the Person soselected shall be referred to herein as the “Accounting Arbitrator”).  The Accounting Arbitrator so selected willconsider only those items and amounts set forth in the Statement of Closing NetWorking Capital and/or the Statement of Closing Cash as to which Parent and theRepresentative have disagreed within the time periods and on the termsspecified above and must resolve the matter in accordance with the terms andprovisions of this Agreement.  Insubmitting a dispute to the Accounting Arbitrator, each of the parties shallconcurrently furnish, at its own expense, to the Accounting Arbitrator and theother party such documents and information as the Accounting Arbitrator mayrequest.  Each party may also furnish tothe Accounting Arbitrator such other information and documents as it deemsrelevant, with copies of such submission and all such documents and informationbeing concurrently given to the other party. The Accounting Arbitrator shall issue a detailed written report thatsets forth the resolution of all items in dispute and that contains, asapplicable, (i) a final Statement of Closing Net Working Capital and/or(ii) a final Statement of Closing Cash, according to the dispute(s)noticed.  Each such report shall be

###  

### 20

### 

###  

### final and bindingupon Parent and the Representative (on behalf of the Stockholders).  The fees and expenses of the AccountingArbitrator incurred in connection with the determination of the disputed itemsby the Accounting Arbitrator shall be borne by (i) Parent if the AccountingArbitrator’s determination of the disputed items shall vary from Parent’sdetermination of the disputed items by more than the difference between theRepresentative’s determination of the disputed items and the AccountingArbitrator’s determination of the disputed items or (ii) the Representative ifthe Accounting Arbitrator’s determination of the disputed items shall vary fromthe Representative’s determination of the disputed items by more than thedifference between Parent’s determination of the disputed items and theAccounting Arbitrator’s determination of the disputed items. Parent and theRepresentative shall, and Parent shall cause the Surviving Corporation to,cooperate fully with the Accounting Arbitrator and respond on a timely basis toall requests for information or access to documents or personnel made by theAccounting Arbitrator or by other parties hereto, all with the intent to fairlyand in good faith resolve all disputes relating to the Statement of Closing NetWorking Capital and/or the Statement of Closing Cash as promptly as reasonablypracticable.

###  

### (c)           If theamount representing:

###  

#### (i)            theClosing Net Working Capital as reflected in the Statement of Closing NetWorking Capital as finally determined in accordance with this Section 3.04is less than the Estimated Closing Net Working Capital, the MergerConsideration shall be decreased on a dollar-for-dollar basis by the amount ofsuch shortfall.  If the amountrepresenting Closing Net Working Capital as reflected in the Statement ofClosing Net Working Capital as finally determined is greater than the EstimatedClosing Net Working Capital, the Merger Consideration shall be increased on adollar-for-dollar basis by the amount of such excess.

####  

#### (ii)           theClosing Cash as reflected in the Statement of Closing Cash as finallydetermined in accordance with this Section 3.04 is less than theEstimated Closing Cash, the Merger Consideration shall be decreased on adollar-for-dollar basis by the amount of such shortfall.  If the amount representing Closing Cash asreflected in the Statement of Closing Cash as finally determined is greaterthan the Estimated Closing Cash, the Merger Consideration shall be increased ona dollar-for-dollar basis by the amount of such excess.

####  

#### If any adjustment under this Section 3.04results in an aggregate reduction in the Merger Consideration, Parent shall beentitled to the amount of such reduction plus interest from and after theClosing Date to and through the date of payment at the prime rate charged onthe Closing Date by LaSalle Bank, National Association, Chicago, Illinois (the “PrimeRate”), which such amount shall be paid to Parent within five (5) businessdays after the final determination of the Closing Net Working Capital and/orthe Closing Cash, respectively.  Anyreduction in Merger Consideration to be paid pursuant to this Section 3.04shall be the joint and several obligation of all Company Stockholders and paidby the Representative to Parent. Conversely, if any adjustment results in an aggregate increase in theMerger Consideration, Parent shall deposit or shall cause to be deposited intothe Payment Fund the amount of such increase plus interest from and after theClosing Date to and through the date of payment at the Prime Rate within five(5)

####  

#### 21

#### 

####  

#### business days after the final determination of the Closing Net WorkingCapital and/or the Closing Cash, respectively.

####  

## SECTION 3.05.              Returnof Merger Consideration.  If, afternine (9) months after the Effective Time, there remain any holders of CompanyShares who have not surrendered their Certificates for payment of the MergerConsideration, the Representative shall mail notices to such holders at theaddress set forth in the stock records of the Company notifying them of theirright to receive the Merger Consideration. To the extent that any holders of Company Shares have not tendered theirCertificates within ninety (90) days after the mailing of such notice, theRepresentative or its designee shall return, to the extent permitted by Law, toParent any funds held by it or its designee for the benefit of holders ofCompany Shares and deliver to Parent any Certificates or other documentsreceived by it or its designee from any holder of Company Shares after suchtime.  Upon receipt, Parent shall holdthe remaining funds for the benefit of such holders and shall deliver to anyholder of Company Shares who has properly surrendered Certificates for CompanyShares the Merger Consideration to which such holder is entitled pursuant tothis Agreement with respect to the Company Shares surrendered by such holder.

##  

## SECTION 3.06.              NoLiability.  None of Parent, MergerSub or the Surviving Corporation shall be liable to any Company Stockholder inrespect of any Merger Consideration delivered to a public official as requiredby and pursuant to any applicable abandoned property, escheat or similarLaw.  Subject to Section 3.07, ifany Certificate shall not have been surrendered prior to the date on which anyMerger Consideration would otherwise escheat to or become the property of anypublic official, any such Merger Consideration shall, to the extent permittedby applicable Law, become the property of the Surviving Corporation, free andclear of all claims or interests of any Person previously entitled thereto.

##  

## SECTION 3.07.              Lost,Stolen and Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon themaking of an affidavit of that fact by the Person claiming such Certificate tobe lost, stolen or destroyed, and the agreement by the Person to indemnify theSurviving Corporation in respect of any losses it incurs with respect to suchlost, stolen or destroyed Certificate, the Surviving Corporation will issue inexchange for such lost, stolen or destroyed Certificate, the MergerConsideration deliverable in respect thereof pursuant to this Agreement.

##  

## SECTION 3.08.              Effectof Merger on Capital Stock of Surviving Corporation.  At the Effective Time, each share of MergerSub’s common stock, par value $0.01 per share, that is issued and outstandingimmediately prior to the Effective Time, shall, by virtue of the Merger andwithout any action on the part of Parent, Merger Sub, the Company or theCompany Stockholders, be converted automatically into and exchanged for oneshare of common stock of the Surviving Corporation.

##  

## SECTION 3.09.              AppraisalRights.  Notwithstanding anything inthis Agreement to the contrary, Company Shares (the “Dissenting Shares”)that are issued and outstanding immediately prior to the Effective Time and areheld by Company Stockholders who have not voted in favor of the Merger,consented thereto in writing or otherwise contractually waived their rights toappraisal and who have complied with all of the relevant provisions of the ORC(the “Dissenting Stockholders”) shall not be converted into or be exchangeablefor the right to receive

##  

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## the Sellers’Merger Consideration, unless and until such Company Stockholders shall havefailed to perfect or shall have effectively withdrawn or lost their rights toappraisal under the ORC.  The Companyshall give Parent (i) prompt notice of any written demands for appraisal of anyCompany Shares, attempted withdrawals of such demands and any other instrumentsserved pursuant to the ORC and received by the Company relating to stockholders’rights of appraisal, and (ii) the opportunity to direct all negotiations andproceedings with respect to demands for appraisal under the ORC.  Neither the Company nor the SurvivingCorporation shall, except with the prior written consent of Parent, voluntarilymake any payment with respect to, or settle or offer to settle, any such demandfor payment.  If any DissentingStockholder shall fail to perfect or shall have effectively withdrawn or lostthe right to dissent, then (i) as of the occurrence of such event, suchholder’s Dissenting Shares shall cease to be Dissenting Shares and shall beconverted into and represent the right to receive the Sellers’ MergerConsideration (adjusted as contemplated in Sections 3.01(b), 3.01(c)and 3.04 hereof) issuable pursuant to Section 3.02, and(ii) promptly following the occurrence of such event, Parent shall depositinto the Payment Fund the Merger Consideration (adjusted as contemplated in Sections 3.01(b),3.01(c) and 3.04 hereof) to which such holder is entitledpursuant to Section 3.02.

##  

## SECTION 3.10.              Deliveries.  At the Closing and as a condition to Closing:

##  

### (a)           The Company or theRepresentative on behalf of the Company Stockholders, as the case may be, shalldeliver to Parent:

###  

#### (i)            Allof the third party consents identified on Section 3.10(a)(i) of theDisclosure Schedule in form and substance reasonably satisfactory to Parent;

####  

#### (ii)           Thewritten resignations of each director and officer of the Company and itsSubsidiaries as Parent shall direct in writing to the Company prior to theClosing;

####  

#### (iii)          Acertificate to the effect that each of the conditions specified below in Sections8.02(a) and (b) is satisfied in all respects;

####  

#### (iv)          TheEscrow Agreement executed by the Representative;

####  

#### (v)           TheTermination Agreement substantially in the form of Exhibit C hereto dulyexecuted by the Company and One Equity Partners LLC;

####  

#### (vi)          TheTermination Agreement substantially in the form of Exhibit D hereto dulyexecuted by the Company and Garrett Capital Advisors;

####  

#### (vii)         Evidencein form and substance reasonably satisfactory to Parent that the consultingagreement between the Company and Prottiviti, Inc. has been terminated withoutliability to the Company beyond the Closing Date;

####  

#### (viii)        Anopinion of counsel to the Company in form and substance reasonably satisfactoryto Parent; and

 

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#### (ix)           Aduly completed and executed certification that an interest in the Company isnot a “United States real property interest” pursuant to Section 1.1445-2(c)(3)of the Treasury Regulations.

####  

### (b)           Parent shall deliver tothe Company or the Representative, as the case may be:

###  

#### (i)            Thecash comprising the Merger Consideration (to be paid in the manner set forth inSection 3.01);

####  

#### (ii)           Acertificate to the effect that each of the conditions specified below in Sections8.03(a) and (b) is satisfied in all respects; and

####  

#### (iii)          TheEscrow Agreement executed by Parent.

####  

### (c)           Parent, the PrincipalCompany Stockholders and the Escrow Agent shall enter into the Escrow Agreementand Parent will deposit with the Escrow Agent the Escrow Amount by wiretransfer of immediately available funds to the account designated by the EscrowAgent.

###  

### (d)           The Company and theMerger Sub shall file with the Ohio Secretary of State a duly executed andverified Certificate of Merger, as required by the ORC, and the parties shalltake all such other and further actions as may be required by Law to make theMerger effective upon the terms and subject to the conditions hereof.

###  

ARTICLE IVREPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company, and with respect to Section 4.25 only, each of thePrincipal Company Stockholders, represent and warrant to Parent and Merger Subthat the statements contained in this Article IV are correct andcomplete as of the date of this Agreement and will be correct and complete asof the Closing Date (as though made then and as though the Closing Date weresubstituted for the date of this Agreement throughout this Article IV),except for representations and warranties that speak as of a specific dateother than the date of this Agreement or the Closing Date, which are correctand complete as of such other date.

 

## SECTION 4.01.              Organization,Qualification, Corporate Power and Authority.  The Company and each of its Subsidiaries is acorporation (or other business entity) duly organized or formed, validly existing and in good standing underthe laws of the jurisdiction of its incorporation or formation.  The Company and each of its Subsidiaries isduly authorized to conduct business and is in good standing under the laws ofeach jurisdiction where such qualification is required, except where the lackof such qualification would not have a Material Adverse Effect, all of whichjurisdictions are set forth in Section 4.01 of the DisclosureSchedule.  The Company and each of itsSubsidiaries has full corporate (or other entity) power and authority to carryon the businesses in which it currently is engaged and to own and use theproperties owned and used by it.  Section4.01 of the Disclosure Schedule lists the Company’s Subsidiaries and thedirectors and officers of the Company’s and each of its Subsidiaries.

##  

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## SECTION 4.02.              AuthorityRelative to this Agreement.  TheCompany has full corporate power and authority to execute and deliver thisAgreement and to perform its obligations hereunder.  The execution and delivery of this Agreementby the Company and the consummation by the Company of the Merger and the othertransactions contemplated hereby have been duly authorized by all necessarycorporate action, and no other corporate proceedings on the part of the Companyand no stockholder votes are necessary to authorize this Agreement or toconsummate the Merger and the other transactions contemplated hereby, otherthan the Requisite Stockholder Approval and the filing and recordation of theCertificate of Merger.  This Agreementconstitutes the valid and legally binding obligation of the Company,enforceable in accordance with its terms and conditions, subject to laws ofgeneral application relating to public policy, bankruptcy, insolvency and therelief of debtors and rules of law governing specific performance, injunctiverelief and other equitable remedies.

##  

## SECTION 4.03.              Capitalization.

##  

### (a)           The entire authorizedcapital stock of the Company consists of (i) 25,000,000 Common Shares, of which1,974,870 Common Shares are issued and outstanding as of the date hereof and(ii) 25,000,000 Preferred Shares, of which 17,773,826 Preferred Shares areissued and outstanding as of the date hereof. Pursuant to the Option Plans, the Company has reserved for issuance2,475,000****Preferred Shares and 525,000****Common Shares.  As ofthe date hereof, the Company has granted, pursuant to the Option Plans, optionsto purchase an aggregate of 1,719,203****PreferredShares and 211,183 Common Shares.  All ofthe issued and outstanding Company Shares have been duly authorized and arevalidly issued, fully paid and non-assessable, were not issued in violation ofany Contract binding upon the Company and were issued in compliance with allapplicable Charter Documents of the Company and all applicable federal andstate securities or “blue sky” laws and regulations.  The Company Shares are owned of record, andto the Knowledge of the Company, beneficially, by the Company Stockholders setforth in Section 4.03(a) to the Disclosure Schedule in the respectiveamounts set forth therein.  Except forthe Options, there are no outstanding or authorized options, warrants, purchaserights, subscription rights, conversion rights, exchange rights or othercontracts or commitments that could require the Company to issue, sell orotherwise cause to become outstanding any of its capital stock.  There are no outstanding or authorized stockappreciation, phantom stock, profit participation or similar rights withrespect to the Company.  There are noother securities of the Company that are convertible into or exchangeable forcapital stock or other securities of the Company.

###  

### (b)           Except as set forth in Section 4.03(b) of the Disclosure Schedule,the Company holds, directly or indirectly, the legal and beneficial title inall of the shares of capital stock (or equivalent equity interests) of each ofits Subsidiaries free from all Liens and any other rights exercisable by thirdparties (except for Liens securing Company Senior Debt, which Liens will bereleased, effective as of the Closing Date, and restrictions imposed byapplicable federal or state securities Law). All of the shares of capital stock(or equivalent equity interests) of the Subsidiaries of the Company are fullypaid or properly credited under the applicable Law of the jurisdiction ofincorporation or formation of the relevant Subsidiary of the Company. There isno liability to pay any additional contributions on any of the shares ofcapital stock (or equivalent equity interests) of the Subsidairies of theCompany. Other than the Company, no Person has the

 

25

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### right(exercisable now or in the future and whether contingent or not) to call forthe issue of any share or loan capital in any Subsidiary of the Company.

###  

## SECTION 4.04.              Noncontravention.  Assuming that all consents, approvals,authorizations and permits described in Section 4.04 of the DisclosureSchedule have been obtained and all filings and notifications described in thisSection 4.04 have been made, neither the execution and delivery of thisAgreement, nor the consummation of the transactions contemplated hereby, will(i) violate any Law or Court Order to which the Company or any of itsSubsidiaries is subject, (ii) assuming the Requisite Stockholder Approval isobtained, violate any provision of the charter, bylaws or other governingdocuments of the Company or any of its Subsidiaries (the “Charter Documents”),or (iii) conflict with, result in or constitute a Default under, orrequire any notice under any Contract to which the Company or any of itsSubsidiaries is a party or by which it is bound or to which any of its Assetsis subject (or result in the imposition of any Lien upon any of its Assets),except in the case of (i) and (iii) where the violation, conflict, Default,failure to give notice or Lien would not have a Material Adverse Effect.  Except as set forth in Section 4.04 ofthe Disclosure Schedule and except for the filing of the Certificate of Mergerunder the ORC, the pre-merger notification requirements of the HSR Act andforeign antitrust and competition law filings, neither the Company nor any ofits Subsidiaries needs to give any notice to, make any filing with or obtainany authorization, consent or approval of any Governmental Body in order forthe parties to consummate the transactions contemplated by this Agreement,except where the failure to give any notice, make any filing with or obtain anyauthorization, consent or approval would not have a Material Adverse Effect.

##  

## SECTION 4.05.              Brokers’Fees.  Other than to Banc of AmericaSecurities LLC, Credit Suisse First Boston LLC and Lehman Brothers Inc., whosefees are included in the Company Stockholder Transaction Expenses, neither theCompany nor any of its Subsidiaries has any liability or obligation to pay anyfees or commissions to any broker, finder, or agent with respect to thetransactions contemplated by this Agreement.

##  

## SECTION 4.06.              Titleto Assets; All Tangible Assets.  Eachof the Company and its Subsidiaries has good title to, or a valid leaseholdinterest in, the material Assets, including the assets and properties set forthon the Most Recent Financial Statements (except for such as may have beendisposed of in the Ordinary Course of Business since the Balance Sheet Date),free and clear of all Liens (other than Permitted Encumbrances and Lienssecuring Company Senior Debt, which Liens will be released, effective as of theClosing Date), except as set forth in Section 4.06 of the DisclosureSchedule****and except for Assets that it leasespursuant to Leases disclosed in any Section to the Disclosure Schedule heretoor Assets that constitute Intellectual Property that it licenses as disclosedin Section 4.12 of the Disclosure Schedule.  No Person other than the Company owns anyvehicles, equipment or other tangible assets or properties which are necessaryto the operation of the Company’s business, except for leased or licensed itemsdisclosed in the Disclosure Schedule hereto and items of immaterial value.

##  

## SECTION 4.07.              FinancialStatements; Books of Account.

##  

### (a)           The Company has madeavailable to Parent the following financial statements (collectively, the “FinancialStatements”):  (i) auditedconsolidated balance sheets as

###  

### 26

### 

###  

### of December 31,2003 and December 31, 2002 and audited consolidated statements of operations,stockholders’ equity (deficiency) and cash flows for the years ended December31, 2003 and December 31, 2002 and for the period from February 9, 2001 (dateoperations commenced) through December 31, 2001 of the Company and itsSubsidiaries (the “Audited Financial Statements”); and (ii) an unauditedconsolidated balance sheet and statements of operations and cash flows of theCompany and its Subsidiaries (the “Most Recent Financial Statements”) asof and for the nine months ended September 25, 2004 (such date, the “BalanceSheet Date”).  The FinancialStatements (including the footnotes thereto) have been prepared in accordancewith GAAP applied on a consistent basis throughout the periods covered therebyand present fairly in all material respects the financial position of theCompany and its Subsidiaries as of such dates and the results of operations andcash flows of the Company and its Subsidiaries for such periods; provided,however, that the Most Recent Financial Statements are subject to normalyear-end adjustments and lack footnotes and other presentation items.

###  

### (b)           The books of account ofthe Company fairly reflect in all material respects, in accordance with GAAP,consistently applied with the Audited Financial Statements, (a) alltransactions relating to the Company and (b) all items of income and expense,assets and liabilities and accruals relating to the Company.  The Company has not engaged in any materialtransaction, maintained any bank account or used any corporate funds except fortransactions, bank accounts and funds which have been and are reflected in thenormally maintained books and records of the Company.

###  

## SECTION 4.08.              EventsSubsequent to Balance Sheet Date. Except as contemplated by this Agreement or as set forth in Section4.08 of the Disclosure Schedule, since the date of the Balance Sheet Date,Company has conducted its business in the Ordinary Course of Business and therehas not been with respect to the Company’s business:

##  

### (a)           any change that has hada Material Adverse Effect;

###  

### (b)           any increase in thecompensation payable or to become payable to, or any payment to, any director,employee or independent contractor, except for payments and increases made inthe Ordinary Course of Business;

###  

### (c)           any sale, assignment ortransfer of Assets, or any additions to or transactions involving any Assets,other than those made in the Ordinary Course of Business;

###  

### (d)           other than in theOrdinary Course of Business, any waiver or release of any claim or right orcancellation of any debt held;

###  

### (e)           any distributions orpayments to any Affiliate of the Company, other than between Subsidiaries ofthe Company in the Ordinary Course of Business;

###  

### (f)            any capitalexpenditures incurred or capital leases entered into that in the aggregateexceed $500,000;

###  

### (g)           any change inaccounting or Tax accounting methods, revocation of any Tax election or theentering into any settlement with respect to any material Taxes;

 

27

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### (h)           material damage,destruction or loss (whether or not covered by insurance) adversely affectingthe Company or any of its Subsidiaries;

###  

### (i)            any declaration orpayment of any dividend or other distribution on its capital stock; or

###  

### (j)            any grant of any Lien(other than a Permitted Encumbrance) on any of the Assets of the Company andits Subsidiaries.

###  

## SECTION 4.09.              LegalCompliance. The Company and each of its Subsidiaries:

##  

### (a)           except as set forth in Section4.09(a) of the Disclosure Schedule, have complied in all material respectswith all applicable Laws of federal, state, local and foreign governments (andall agencies thereof), including, without limitation, those of the UnitedStates and of the European Union (and each of its member states) and any otherforeign jurisdiction.  No notice,correspondence, inquiry or other communication has been received by the Companyor any of its Subsidiaries alleging any failure to so comply; and

###  

### (b)           except as set forth in Section4.09(b) of the Disclosure Schedule, have, directly or indirectly throughdistributors, all material Licenses necessary for the operation of thebusinesses of the Company and each of its Subsidiaries as currentlyconducted.  To the Company’s Knowledge,the Company and each of its Subsidiaries are in compliance with the terms ofall such Licenses.  All such Licenses arecurrent and in full force and effect, and no suspension or cancellation of anyof such License is pending or, to the Knowledge of the Company, threatened.

###  

## SECTION 4.10.              TaxMatters.

##  

### (a)           Except as set forth in Section4.10(a) of the Disclosure Schedule, all Tax Returns required to have beenfiled by the Company or its Subsidiaries or a Relevant Group on or prior to theClosing Date have been timely filed, will be timely filed prior to the ClosingDate, or the time to file such return has been appropriately extended.  All Taxes owed by the Company, any of itsSubsidiaries, or any members of any Relevant Group for periods (or portionsthereof) ending on or before the Closing Date (whether or not shown on any TaxReturn) have been paid, will be paid on or prior to the Closing Date, or areadequately and specifically provided for on the Statement of Closing NetWorking Capital (including supporting work papers).  All current Taxes of the Company, any of itsSubsidiaries, and any Relevant Group not yet due and payable will be adequatelyand specifically provided for on the Statement of Closing Net Working Capital(including supporting work papers).

###  

### (b)           Except as disclosed in Section4.10(b) of the Disclosure Schedule, since February 9, 2001, no claim hasever been made by an authority in a jurisdiction where any of the Company orany of its Subsidiaries do not file Tax Returns that any of them is or may besubject to taxation by that jurisdiction or that any of them must file TaxReturns.  There are no Liens on theassets of any of the Company or its Subsidiaries (including stock owned in Subsidiaries)with respect to Taxes.

 

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### (c)           Except as set forth on Section4.10(c) of the Disclosure Schedule, the Company and its Subsidiaries havewithheld and paid all Taxes required to have been withheld and paid and havecomplied with all information reporting and backup withholding requirements,including maintenance of required records with respect thereto.

###  

### (d)           Except as set forth in Section4.10(d) of the Disclosure Schedule, there is no examination or claimconcerning any liability for Taxes with respect to the Company or any of itsSubsidiaries that is currently pending or outstanding and, to the Knowledge ofthe Company, no notice of an examination or claim has been received by theCompany or any Subsidiary concerning any liability for Taxes with respect tothe Company or any of its Subsidiaries.

###  

### (e)           Except as set forth in Section4.10(e) of the Disclosure Schedule, neither the Company nor any Subsidiarynor any Relevant Group has waived the statute of limitations in respect of anyTaxes or agreed to any extensions of time with respect to any Tax assessment ordeficiency that has not expired (or will not expire) on or prior to the ClosingDate.  The Company has made available toParent complete copies of all federal income Tax Returns filed by the Companysince February 9, 2001 with respect to any Relevant Group, examination reportsreceived by the Company or any Subsidiary since February 9, 2001 with respectto the income Tax Returns of the Company, any Subsidiary, or any RelevantGroup, and statements of deficiencies received the Company or any Subsidiarysince February 9, 2001 with respect to the income Tax liability of the Company,any Subsidiary, or any Relevant Group.

###  

### (f)            The Company is not(nor has been in the five year period ending on the Closing Date) a “UnitedStates real property holding corporation” within the meaning of Section897(c)(2) of the Code.  Neither theCompany nor any of its Subsidiaries is obligated to make any payments as aresult of the transactions resulting from this Agreement (including, thevesting of benefits, severance payments, or termination payments) that wouldresult in a nondeductible expense under Section 280G of the Code.

###  

### (g)           Except as disclosed in Section4.10(g) of the Disclosure Schedule, neither the Company nor any of itsSubsidiaries has agreed to or is required to make by reason of a change inaccounting method or otherwise, any adjustment under Section 481(a) of the Codethat could affect any year ending after the Closing Date or that could resultin the Company or any Subsidiary paying a Tax for any year in the form of apenalty.  Neither the Company nor any ofits Subsidiaries has been the “distributing corporation” (within the meaning ofSection 355(c)(2) of the Code) with respect to a transaction described inSection 355 of the Code within the two-year period ending on the ClosingDate.  Each of the Company and itsSubsidiaries has disclosed on the federal income Tax Returns of the RelevantGroup filed since February 9, 2001 all positions taken therein that could giverise to a substantial understatement of federal income Tax within the meaningof Section 6662 of the Code.  SinceFebruary 9, 2001 (or, to the Knowledge of the Company, at any time) neither theCompany nor its Subsidiaries has received (or is subject to) any privaterulings or special arrangements from any taxing authority or has entered into(or is subject to) any closing agreement with any taxing authority.

###  

### (h)           Neither the Company norany of its Subsidiaries is a party to any Tax allocation or sharingagreement.  None of the Company orits  Subsidiaries has any liability for

 

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### the Taxes of anyPerson arising during any period (or portion thereof) ending on or before theClosing Date (other than members of the Relevant Group), (i) as a transferee orsuccessor, (ii) by Contract or other agreement, or (iii) under Section 1.1502-6of the Treasury regulations (or any similar provision of state, local orforeign law).

###  

### (i)            Neither the Companynor any of its Subsidiaries will be required to include any item of income in,or exclude any item of deduction from, taxable income for any taxable period(or portion thereof) ending after the Closing Date as a result of anyintercompany transactions (except for intercompany transactions that in theaggregate the Company or any of its Subsidiaries have recognized less than$500,000 of gain) or excess loss accounts described in Treasury regulationsunder Section 1502 of the Code (or any similar provision of state, local, orforeign Tax law).

###  

## SECTION 4.11.              RealProperty.

##  

### (a)           Section 4.11(a)of the Disclosure Schedule sets forth a correct and complete list of all OwnedReal Property.  With respect to eachparcel of Owned Real Property, except as set forth in Section 4.11(a) ofthe Disclosure Schedule:

###  

#### (i)            theCompany or one of its Subsidiaries has good and marketable fee simple title andis the legal and beneficial owner, free and clear of all Liens, exceptPermitted Encumbrances and Liens securing the Company Senior Debt, which Lienswill be released, effective as of the Closing Date;

####  

#### (ii)           neitherthe Company nor any of its Subsidiaries has leased or otherwise granted to anyPerson the right to use or occupy such Owned Real Property or any portion thereof;and

####  

#### (iii)          thereare no outstanding contracts for sale or other disposition, options, rights offirst offer or rights of first refusal to purchase such Owned Real Property orany portion thereof or interest therein.

####  

### (b)           Section 4.11(b)of the Disclosure Schedule sets forth a correct and complete list of all LeasedReal Property.  The Company has madeavailable to Parent a correct and complete copy of all Leases pursuant to whichthe Company or any of its Subsidiaries holds an interest in such Leased RealProperty.  Each of the Leases is in full force and effect in accordance withits respective terms, and, except as set forth in Section 4.11(b) of theDisclosure Schedule, the Company is the legal and beneficial holder of thelessee’s or tenant’s interest thereunder. Except as set forth in Section 4.11(b) of the DisclosureSchedule, there exists no Default on the part of the Company or any of itsSubsidiaries and, to the Knowledge of the Company, any other party thereto,under any Lease, and no circumstance exists which, with the giving of notice,the passage of time or both, is reasonably likely to result in such a Defaultdue to any action or failure to act by the Company or any of its Subsidiariesor, to the Knowledge of the Company, any other party to such Lease.  The Company has complied with and timelyperformed all conditions, covenants, undertakings and obligations on its partto be complied with or performed under each of the Leases.  Except as set forth in Section 4.11(b)of the Disclosure Schedule, the Company has paid all rents and other charges tothe extent due and payable under

###  

### 30

### 

###  

### the Leases.  Except as set forth inSection 4.11(b) of the Disclosure Schedule, neither the Company nor anyof its Subsidiaries has granted to any Person the right to possess, use, occupyor enjoy any Leased Real Property, and, to the Knowledge of the Company, thereare no leases, subleases, licenses, concessions or any other contracts oragreements granting to any Person other than the Company any right to thepossession, use, occupancy or enjoyment of any Leased Real Property to whichthe Company or any of its Subsidiaries is granted an exclusive right of use andpossession under any of the Leases.

###  

### (c)           Neither the Company nor any of its Subsidiarieshas any ownership or leasehold interest in or actual or contingent liability inrespect of any real property other than the Owned Real Property and the LeasedReal Property listed in Sections 4.11(a) and 4.11(b) of the DisclosureSchedule.

###  

### (d)           Except as set forth in Section 4.11(d) of the Disclosure Schedule,to the Knowledge of the Company, there is no existing actual or contingentliability to pay any sums in relation to any Owned Real Property or any LeasedReal Property other than taxes, assessments and levies imposed by Law or by aGovernmental Body, payment of insurance premiums and service charges, sumspayable pursuant to Liens against the Owned Real Property and Leased RealProperty and, in the case of the Leased Real Property, only, rent, operatingand common area expenses, and any other charges payable pursuant to the Leases.

###  

### (e)           The Leased Real Property and the Owned Real Property constitute all ofthe real property necessary to operate the business of the Company as currentlyoperated.

###  

## SECTION 4.12.              IntellectualProperty.

##  

### (a)           Except as set forth in Section4.12(a) of the Disclosure Schedule, the Company and each of itsSubsidiaries owns, or possesses enforceable licenses or other rights to use(including, without limitation, foreign rights), all Intellectual Propertynecessary to or used by the Company or any of its Subsidiaries in the operationof the Company’s business, and such rights will not cease to be valid rights ofthe Company or any of its Subsidiaries by reason of the execution, delivery andperformance of this Agreement or the consummation of the transactionscontemplated hereby.

###  

### (b)           Section 4.12(b)of the Disclosure Schedule sets forth a correct and complete description of (i)all material issued patents, registered trademarks and registered copyrights(whether owned or licensed) and (ii) all material pending applications forpatents, trademarks and copyrights by the Company or any of its Subsidiariesand identifies all material agreements pursuant to which the Company or any ofits Subsidiaries has licensed or sub-licensed or received a license orsub-license with respect to any of its Intellectual Property (other thanlicenses for commercial “off-the-shelf” or “shrink-wrap” software that has not beenmodified or customized for the Company or any of its Subsidiaries by theapplicable software licensor).  Thepatents currently asserted by B. Braun Melsungen A.G., et al in filings made inconnection with the litigation described in items 9, 10 and 11 of Section4.14 of the Disclosure Schedule do not cover any Products currentlymanufactured or marketed by the Company or any of its Subsidiaries other thanthe PROTECTIV JELCO products or, to the Company’s

###  

### 31

### 

###  

### Knowledge, newProducts in development known as SGK, Python and the passive model ofPROTECTIV.

###  

### (c)           Except as set forth in Section4.12(c) of the Disclosure Schedule, neither the Company nor any of itsSubsidiaries has any obligation to compensate any Person for the use of anyIntellectual Property, and neither the Company nor any of its Subsidiaries hasgranted to any Person any license, option or other rights to use in any mannerany of its Intellectual Property, whether requiring the payment of royalties ornot, other than licenses to the Company and any of its Subsidiaries offranchises or licenses in the Ordinary Course of Business.  Except as set forth in Section 4.12(c)of the Disclosure Schedule, no Person has notified the Company or any of itsSubsidiaries that it is presently claiming any ownership of or right to use theCompany’s Intellectual Property or that it is presently claiming that any ofthe Company’s or any of its Subsidiaries’ Intellectual Property is invalid orunenforceable.  Except as set forth in Section4.12(c) of the Disclosure Schedule, no Person, to the Knowledge of theCompany, is infringing upon any such Intellectual Property in any way.  Except as set forth in Section 4.12(c)of the Disclosure Schedule, to the Knowledge of the Company, the use of theIntellectual Property by the Company or any of its Subsidiaries does notconflict with, infringe upon or otherwise violate the valid rights of any thirdparty in or to such Intellectual Property, and no action has been institutedagainst or notices received by the Company or any of its Subsidiaries that arepresently outstanding alleging that the use of the Intellectual Propertyinfringes upon or otherwise violates any rights of a third party in or to suchIntellectual Property.

###  

## SECTION 4.13.              Contracts.

##  

### (a)           Section 4.13(a)of the Disclosure Schedule sets forth a complete and accurate list of allCustomer Contracts that accounted for more than $660,000 of revenue in theeight-month period ended August 28, 2004 (the “Material Customer Contracts”).

###  

### (b)           Except pursuant toLeases which are reflected in the Financial Statements or as set forth on Section4.13(b) of the Disclosure Schedule, none of the material tangible Assets isleased by the Company from any third party, whether affiliated or unaffiliatedwith the Company.

###  

### (c)           Except as listed in Section4.13(c) of the Disclosure Schedule, the Company is not a party to any:

###  

#### (i)            Contractwith any present employee, consultant or independent contractor with an annualsalary in excess of $100,000 (or an equivalent amount in foreign currency) orthat contains any ongoing obligation with respect to any former employee,consultant or independent contractor;

####  

#### (ii)           Contractobligating the Company or any of its Subsidiaries to the future purchase of, orpayment for, supplies, products, Intellectual Property or services or the usethereof, with a value of more than $500,000;

####  

#### (iii)          Representative,distributorship or sales agency Contract under which at least $1,000,000 ofrevenue to the Company or any of its Subsidiaries has been generated during thepast two fiscal years;

####  

#### 32

#### 

####  

#### (iv)          Contractlimiting or restraining the Company or any of its Subsidiaries from engaging orcompeting in any lines of business with any Person;

####  

#### (v)           Contractevidencing the settlement of any investigation, inquiry or proceeding againstthe Company or any of its Subsidiaries by a Government Body pursuant to whichthe Company or any of its Subsidiaries has any ongoing obligation;

####  

#### (vi)          License,franchise or other similar agreement not otherwise disclosed in Section4.12(c) of the Disclosure Schedule; or

####  

#### (vii)         Contractrelating to the IPI Agreement, Jelco Agreements or Management Buyout Agreement.

####  

### (d)           All of the Contractsidentified in Sections 4.13(a), 4.13(b) and 4.13(c) of theDisclosure Schedule are valid, binding and enforceable against the Company orits Subsidiary in accordance with their terms, except as such enforcement maybe limited by applicable bankruptcy, insolvency, reorganization, moratorium orsimilar laws affecting the rights of creditors generally and general equityprinciples (regardless of whether enforceability is considered a proceeding atlaw or in equity) and are in compliance in all material respects with allapplicable Laws, and the execution and delivery of this Agreement, nor theconsummation of the transactions contemplated hereby, will not conflict with,or result in or constitute a Default under or require any notice under any ofsuch Contracts.  The Company and each ofits Subsidiaries have, and, to the Knowledge of the Company, all other partiesto such Contracts have, complied with the provisions of such Contracts.  Neither the Company nor any of its Subsidiariesnor, to the Knowledge of the Company, any other party to such Contracts, is inDefault thereunder, and no notice of any claim of Default has been given to theCompany or any of its Subsidiaries.  Withrespect to any of such Contracts that are Leases, neither the Company nor anyof its Subsidiaries has received any written notice of cancellation ortermination under any option or right reserved to the lessor, or any notice ofDefault, thereunder.

###  

## SECTION 4.14.              Litigation.  Section 4.14 of the DisclosureSchedule sets forth each instance in which the Company or any of itsSubsidiaries (i) is subject to any material outstanding sanction, exclusion,injunction, judgment, order or decree or (ii) is a party to any pending or, tothe Knowledge of the Company, threatened, material action, suit, proceeding,hearing or investigation of, in or before any court or quasi-judicial oradministrative agency of any federal, state, local or foreign jurisdiction,including, with respect to any pending litigation, whether the Company’sinsurers have been notified of such claim and each instance where an insurerhas denied or disavowed coverage thereof. The Company has no Knowledge of any event that has occurred, and noclaim has been asserted, that is likely to result in any investigation, inquiryor proceeding against the Company or any of its Subsidiaries, the business orthe Assets.

##  

## SECTION 4.15.              EmployeeBenefits; Labor Matters.

##  

### (a)           Section 4.15(a)of the Disclosure Schedule lists every Employee Benefit Plan and EmployeePension Benefit Plan that the Company or any of its ERISA Affiliates maintainsor to which the Company or any of its ERISA Affiliates contributes.  With respect to

###  

### 33

### 

###  

### each EmployeeBenefit Plan and Employee Pension Benefit Plan, the Company has made availableto Parent true and complete copies, if applicable, of (i) all plan documentsand amendments thereto, (ii) all trust agreements, (iii) all summary plandescriptions and other material communications with participants, (iv) allInternal Revenue Service determination letters, (v) written descriptions of anyunwritten Employee Benefit Plans and Employee Pension Benefit Plans, (vi) thethree most recently filed Forms 5500 or 5500C/R and any financial statements oractuarial reports related thereto, (vii) all reports received from serviceproviders within the preceding three years and (viii) all notices received fromany governmental entity within the preceding three years.

###  

#### (i)            Tothe Knowledge of the Company, each Employee Benefit Plan and Employee PensionBenefit Plan (and each related trust, insurance contract or fund) has beenmaintained, funded and administered in accordance with the terms of suchEmployee Benefit Plan or Employee Pension Benefit Plan and complies in form andin operation in all material respects with the applicable requirements of ERISAand the Code or any other relevant regulations or applicable Law.

####  

#### (ii)           Allcontributions (including all employer contributions and employee salaryreduction contributions) that are due have been made to each Employee BenefitPlan that is an Employee Pension Benefit Plan within the time and other limitsrequired by applicable Law.  All premiumsor other payments that are due have been paid with respect to each EmployeeBenefit Plan that is an Employee Welfare Benefit Plan.

####  

#### (iii)          Theonly Liability of the Company or any of its ERISA Affiliates to any person inrespect of any Employee Pension Benefit Plan is to contribute to those plansset forth in Section 4.15(a) of the Disclosure Schedule.

####  

#### (iv)          NoEmployee Pension Benefit Plan provides any benefits other than Money PurchaseBenefits, and neither the Company nor any of its ERISA Affiliates has anyobligation to pay, to or in respect of any member of an Employee PensionBenefit Plan, any benefits of which the value is greater than the value of theassets attributable to that member.

####  

#### (v)           EachEmployee Benefit Plan that is intended to meet the requirements of a “qualifiedplan” under Code Section 401(a) or other requirements of any applicable Law hastimely received a favorable determination letter or other necessary approvalfrom the Internal Revenue Service or other relevant Governmental Body to theeffect that such Employee Benefit Plan meets all requirements of Code Section401(a) or other applicable Law relevant to the Employee Benefit Plan for whicha determination letter or other approval is currently available, and, to theKnowledge of the Company, no fact or event has occurred since the date of suchdetermination letter or approval to adversely affect the qualification approvalof such Employee Benefit Plan.

####  

### (b)           Parent has been givendetails of all employees earning in excess of $100,000 (or an equivalent amountin foreign currency) per year, including details of any remuneration and otherbenefits payable to such employees, and copies of all current Contracts

###  

### 34

### 

###  

### of employment forany employee earning in excess of $100,000 (or an equivalent amount in foreigncurrency) and details of any consultancy agreements have been made available toParent.

###  

#### (i)            Neitherthe basis nor rate of remuneration payable or other benefits in kind provided(including under any Employee Benefit Plan) to any employee of the Company orany of its Subsidiaries has changed since the Balance Sheet Date so as toincrease aggregate annual payroll costs of the Company or any of itsSubsidiaries by more than 5%.

####  

#### (ii)           Neitherthe Company nor any of its Subsidiaries has entered into any arrangement (oralor otherwise) regarding any future variation to any contract of employment orcollective agreement, nor have there been any agreements, undertakings orassurances given to any past, present or future officers or employees of theCompany or any of its Subsidiaries or any other person as to the introductionof any Employee Pension Benefit Plan.

####  

#### (iii)          Exceptas set forth in Section 4.15(b) of the Disclosure Schedule, allcontracts of employment (written or otherwise) can be terminated without noticewithout giving rise to any claim for damages or other compensation (other thancompensation payable due to any applicable overriding Law).

####  

### (c)           Neither the Company norany of its ERISA Affiliates maintains, sponsors or contributes to any EmployeePension Benefit Plan that is subject to Title IV of ERISA or Code Section 412or that is an employee stock ownership plan within the meaning of Code Section4975(e)(7).

###  

### (d)           No Employee BenefitPlan is a Multiemployer Plan.  Neitherthe Company nor any of its ERISA Affiliates has (i) at any time during the lastsix (6) years contributed to or been obligated to contribute to anyMultiemployer Plan or (ii) incurred any withdrawal liability to a MultiemployerPlan that has not been satisfied in full.

###  

### (e)           Except as set forth in Section 4.15(e)of the Disclosure Schedule, neither the Company nor any of its Subsidiaries isa party to any collective bargaining agreement or other similar contract with,nor does it recognize any, labor organization, union, works council or otherbody representing its employees.  Therehas not been since May 21, 2003, and there is not presently pending or existingand, to the Knowledge of the Company, there is not threatened (i) anystrike, slowdown, walkout, picketing, work stoppage, labor arbitration or otherproceeding in respect of the grievance of any employee of the Company or any ofits Subsidiaries, (ii) any application or complaint filed by any employeeof the Company or any of its Subsidiaries or union with the National LaborRelations Board or any comparable governmental body or (iii) anyorganizational activity, including application for recognition or labor disputeagainst or affecting the Company or any of its Subsidiaries, and no applicationfor certification of a collective bargaining agreement or other similarcontract, labor organization or union is pending or, to the Knowledge of theCompany, threatened.  There is no lockoutof any employees by the Company or any of its Subsidiaries and no such actionis contemplated by the Company or any of its Subsidiaries.

###  

### 35

### 

###  

### (f)            Except as set forth inSection 4.15(f) of the Disclosure Schedule, no Employee Benefit Plan,contract of employment or collective bargaining agreement contains anyprovision that would prohibit the transactions contemplated by this Agreementor that would give rise to any vesting of benefits, severance, termination orother payments or liabilities as a result of the transactions contemplated bythis Agreement.

###  

### (g)           Except as set forth in Section4.15(g) of the Disclosure Schedule, no suit, action, litigation or otherclaim (excluding claims for benefits in the ordinary course) has been broughtor, to the Knowledge of the Company, threatened against or with respect to anyEmployee Benefit Plan, nor are there any other claims, of whatsoever naturepending or, to the Knowledge of the Company, threatened by any employee orworker against the Company or any of its Subsidiaries whether in connectionwith their employment, variation in terms of employment, termination ofemployment or otherwise, and, to the Knowledge of the Company, there are nofacts or circumstances that could reasonably be expected to give rise to anysuch suit, action, litigation or claim.

###  

### (h)           No Employee BenefitPlan provides health care or death benefit coverage beyond the termination ofan employee’s employment, except as required by Part 6 of Subtitle B of Title Iof ERISA or Code Section 4980B or any state Laws requiring continuation ofbenefits coverage beyond termination of employment.

###  

### (i)            Except as otherwiseprovided in this Agreement, neither the Company nor any of its ERISA Affiliateshas made any plan or commitment, whether or not legally binding, to create anyadditional Employee Benefit Plan or to modify any existing Employee BenefitPlan.  All Employee Benefit Plans may beamended or terminated without penalty before, at or after the Closing, subjectto the requirements of applicable Law or any collective bargaining agreement orother similar Contract.

###  

### (j)            In the past threeyears, neither the Company nor any of its Subsidiaries has effectuated (1) a “plantclosing” (as defined in the Worker Adjustment and Retraining Notification Act(the “WARN Act”), 29 U.S.C. §§ 2101 et seq.) affecting any site ofemployment or one or more facilities or operating units within any site ofemployment or facility of the Company or any of its Subsidiaries or (2) a “masslayoff” (as defined in the WARN Act) affecting any site of employment orfacility of the Company or any of its Subsidiaries, nor has the Company or anyof its Subsidiaries been affected by any transaction or engaged in layoffs oremployment terminations relating to their businesses sufficient in number totrigger application of any similar state or local law.  Neither the Company nor any of itsSubsidiaries has suffered an “employment loss” (as defined in the WARN Act) inthe past three years.

###  

### (k)           The Company and itsSubsidiaries have complied in all material respects with all Law, codes ofconduct, collective agreements, terms and conditions of employment andagreements with third parties (including trade unions, work councils or otheremployee representative bodies), and there are no investigations existing orpending in relation to any employment matter by any Governmental Body.

###  

### (l)            In the twelve monthspreceding the date of this Agreement, neither the Company nor any of itsSubsidiaries has given notice of any dismissals or redundancies to the

###  

### 36

### 

###  

### relevant publicauthority or started consultation with any trade union, works council or otheremployee representative body in relation to any dismissals or other mattersaffecting employment or been party to any transfer of a business or undertakingand failed to comply with any associated duty to inform and consult any tradeunion, works council or other employee representative body.

###  

## SECTION 4.16.              EnvironmentalMatters.  Except as noted in Section4.16 of the Disclosure Schedule:

##  

### (a)           The Company and each ofits Subsidiaries are in material compliance with Environmental Laws and have,and are in material compliance with, all necessary Environmental Permits.

###  

### (b)           No material releases ofHazardous Materials have occurred at or from any property during the period itwas owned or operated by the Company or any of its Subsidiaries or, to theKnowledge of the Company, at any other time.

###  

### (c)           There are no past,pending or, to the Knowledge of the Company, threatened Environmental Claimsagainst the Company or any of its Subsidiaries, which have not been fullyresolved.

###  

### (d)           There are nounderground storage tanks owned by the Company or any of its Subsidiaries orlocated at any facility owned or operated by the Company or any of itsSubsidiaries.

###  

### (e)           There are no facts,circumstances or conditions that could reasonably be expected to give rise toany material legal liability under the Environmental Laws pertaining to anyproperty now or, to the Knowledge of the Company, at any other time owned,operated, leased or otherwise used by the Company or any of its Subsidiaries.

###  

### (f)            None of the Company orany of its Subsidiaries has received a request under any of the EnvironmentalLaws for information relating to any of the property now or at any time owned,operated, leased or otherwise used by the Company or any of its Subsidiaries.

###  

### (g)           None of the propertiesowned, operated or leased by the Company or any of its Subsidiaries are now orhave in the past been listed on the National Priorities List of sites under theComprehensive Environmental Response, Compensation and Liability Act, asamended (42 U.S.C. §9601 et seq.) (“CERCLA”), the CERCLA InformationSystem or any comparable state or local environmental database.

###  

### (h)           There is noasbestos-containing material, lead-based paint or equipment containingpolychlorinated biphenyls located at any of the facilities or properties nowused by the Company or any of its Subsidiaries, which is not in compliance withEnvironmental Law.

###  

### (i)            Neither the Companynor any of its Subsidiaries has provided information to any Governmental Bodyof any releases of Hazardous Materials or any violation of an EnvironmentalPermit or Environmental Law, which has not been fully resolved.

###  

### 37

### 

###  

### (j)            Sections 4.14and 4.16 contain the sole and exclusive representations and warrantiesof the Company with respect to any environmental matters, including, withoutlimitation, any arising under any Environmental Laws.

###  

## SECTION 4.17.              CertainBusiness Relationships with the Company and Its Subsidiaries.  To the Knowledge of the Company, except asset forth in Section 4.17 of the Disclosure Schedule, no CompanyStockholder nor his, her or its Affiliates have been involved in any businessarrangement or relationship with the Company or any of its Subsidiaries withinthe past twelve months, and no Company Stockholder nor his, her or itsAffiliates own any material Asset, which is used in the business of the Companyor any of its Subsidiaries.

##  

## SECTION 4.18.              VoteRequired.  Except for the affirmativevote of the holders of a majority of the outstanding Common Shares, voting as asingle class in which each Common Share is entitled to one vote (the “RequisiteStockholder Approval”), no other vote or approval of the holders of anyclass or series of capital stock or other equity interests of the Company isnecessary to approve this Agreement, the Merger and the other transactionscontemplated hereunder.  The RequisiteStockholder Approval has been obtained.

##  

## SECTION 4.19.              Indebtedness;Certain Obligations.  As of theClosing Date, neither the Company nor any of its Subsidiaries will have anyindebtedness for borrowed money or any liability or obligation (fixed orcontingent) under any notes, guarantees, letters of credit, performance bondsor similar instruments or any foreign currency hedging or purchase arrangement,other than the Company Senior Debt and Company Senior Subordinated Notes andany intercompany indebtedness.  Except asset forth on Section  4.19 of theDisclosure Schedule, the Company or its Subsidiaries have satisfied in full allobligations, contingent or otherwise, with respect to any purchase price,earn-out or working capital adjustment payable in respect of the business oroperations acquired under any of the Jelco Agreements, IPI Agreement orManagement Buyout Agreement.  As of thedate of this Agreement, the Company Senior Subordinated Notes are held ofrecord for purposes of Rule 12g5-1 under the Exchange Act by fewer than threehundred Persons.

##  

## SECTION 4.20.              SECReports.  Since January 1, 2004,none of the reports filed by the Company or any of its Subsidiaries with theSecurities and Exchange Commission (the “SEC”) pursuant to theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), as oftheir respective dates (collectively, the “SEC Reports”), contained anyuntrue statement of a material fact or omitted to state a material factrequired to be stated therein or necessary to make the statements therein, inlight of the circumstances under which they were made, not misleading.  The SEC Reports complied as to form in allmaterial respects with the applicable requirements of the Exchange Act.  Since January 1, 2004, neither theCompany nor any of its Subsidiaries was required to file any reports with theSEC pursuant to the Exchange Act, other than the SEC Reports.

##  

## SECTION 4.21.              Conditionof Assets.  The equipment and allother tangible assets and properties which are part of the Assets are in goodoperating condition and repair, reasonable wear and tear excepted, and areusable in the Ordinary Course of Business and conform in all material respectsto all applicable Laws relating to their use and operation as such Assets arecurrently used in the conduct of the business of the Company and itsSubsidiaries and constitute

 

38

----

 

## all of theequipment and all other tangible assets and properties which are necessary tothe operation of the business of the Company and its Subsidiaries as presentlyconducted.

##  

## SECTION 4.22.              Insurance.** **Section 4.22of the Disclosure Schedule lists all policies of fire, liability, workmen’scompensation, life, property and casualty and other insurance owned or held bythe Company and its United States and United Kingdom Subsidiaries.  Copies of all policies of fire, liability,workmen’s compensation, life, property and casualty and other insurance ownedor held by the Company and its Subsidiaries have been made available to Parent,and (a) all such policies are in full force and effect, (b) theCompany is not in Default thereunder, and (c) no written notice ofcancellation or non-renewal has been received by the Company or any of itsSubsidiaries with respect to such policies.

##  

## SECTION 4.23.              Relationshipwith Customers.  Except as set forthin Section 4.23 to the Disclosure Schedule, no customer of the Companyor any of its Subsidiaries has terminated or has given written notice to theCompany or any of its Subsidiaries prior to the date hereof of an intention orplan to terminate any Material Customer Contract.

##  

## SECTION 4.24.              RegulatoryMatters.

##  

### (a)           All Products are incompliance in all material respects with all applicable investigational deviceexemption, premarket notification and/or premarket approval requirements andother requirements of the Food and Drug Administration (“FDA”) or anyother relevant regulatory authority and all Licenses, permissions,authorizations, notified body certificates of compliance or consents requiredfor placing the products on the market in the European Union or elsewhere.  Any modifications by the Company or any ofits Subsidiaries to any Product marketed by the Company or any of itsSubsidiaries have been made in accordance with applicable Law.  All manufacturing facilities are operated incompliance in all material respects with the FDA’s Quality System Regulationrequirements at 21 C.F.R. Part 820, as applicable, and all manufacturingenvironments for sterile products are specified, controlled and monitored incompliance with the European Council Directive 93/42/EEC concerning medicaldevices and relevant standards published by the International StandardsOrganization.

###  

### (b)           The Company is inmaterial compliance with the terms of the 1995 consent decree between FDA andIPI (the “Consent Decree”). Copies of all documentation and written correspondence between theCompany, IPI and/or FDA relating to this Consent Decree in the Company’spossession, have been made available or will be made available by Closing. TheCompany has made available or will make available at Closing copies of allreports of all expert inspections of the Company’s Chicago facility todetermine conformance with relevant Law, as set forth in the Consent Decree. Atthe time of Closing, the Company will have made all notifications required byapplicable Law, written or otherwise, to all necessary FDA officials and/oroffices, notifying the FDA of a change in ownership, in accordance with theprovisions of Section 17 of the Consent Decree.

###  

### (c)           For those Productsmarketed in the U.S. by the Company and each of its Subsidiaries based on theirstatus as medical devices marketed prior to May 28, 1976 (“PreamendmentDevices”), which Products are listed in Section 4.24(c) to theDisclosure Schedule, the Company and each of its Subsidiaries possess, or willpossess at Closing,

###  

### 39

### 

###  

### documentation thatmeets all of the criteria set forth for affidavits in FDA’s guidance, “PreamendmentStatus”, to (1) verify that these Products were marketed prior to May 28, 1976,and (2) have not changed significantly since that time such that they wouldrequire filing of a 510(k) premarket notification or premarket approvalapplication with the FDA.

###  

### (d)           All preclinical andclinical trials conducted or supervised by the Company or any of itsSubsidiaries have been conducted in material compliance with all applicableLaws, including, but not limited to, FDA good clinical practice and goodlaboratory practice requirements and European competent authority notificationrequirements.  The Company and each ofits Subsidiaries have consistently obtained and maintained any necessaryInstitutional Review Board (“IRB”) approvals of clinical trials ormodifications thereto, conducted or supervised by the Company or any of itsSubsidiaries.  In no clinical trialsponsored, conducted or supervised by the Company or any of its Subsidiarieshas IRB, ethics committee or European competent authority approval ever beensuspended, terminated, put on clinical hold or voluntarily withdrawn because ofdeficiencies attributed to the Company or any of its Subsidiaries.

###  

### (e)           In the last threeyears, no Governmental Body has served any notice, Warning Letter, regulatoryletter, Application Integrity Policy (“AIP”) communication, Section 305notice or any other similar communication on the Company or any of itsSubsidiaries or, to the Knowledge of the Company, any of their officers,directors or employees stating that the business was or is in violation of anyLaw or Court Order (including, without limitation, those of the European Union)or were or are the subject of any pending, threatened or anticipatedGovernmental Body investigation, proceeding, review or inquiry, which mightreasonably be expected to lead to any sanction, exclusion or loss of or refusalto renew any of the Licenses held by the Company or any of its Subsidiaries orrefusal to review any pending or future Product License submissions filed withany Governmental Body, and, to the Knowledge of the Company, no facts orcircumstances have occurred that are reasonably likely to give rise to any suchinvestigation, proceeding, review or inquiry.

###  

### (f)            Except as disclosed inSection 4.24(f) to the Disclosure Schedule, in the last three years,none of the Products have been recalled or subject to FDA correction or removalrequirements, and the Company and each of its Subsidiaries have not receivednotice, either completed or pending, of any proceeding seeking a correctiveaction, recall, suspension or seizure of any Products.  Neither the Company nor any of its Subsidiarieshave received any order, demand or other formal proceedings from any competentauthority or notified body for medical devices to undertake any form ofwithdrawal from the market of any of the Products or any Product recall andhave notified any competent authority or notified body of the intent to conducta market withdrawal, Product recall or field correction, and, to the Knowledgeof the Company, no facts or circumstances have occurred that are reasonablylikely to give rise to any such corrective action, recall, suspension orseizure.

###  

### (g)           Neither the Company norany of its Subsidiaries are included on FDA’s AIP list.

###  

### (h)           As of the date hereof,neither the Company nor any of its Subsidiaries, nor, to the Company’sKnowledge, any of its employees, agents or consultants retained to assist

###  

### 40

### 

###  

### with ProductLicense submissions, have been disqualified or debarred by the FDA, pursuant to21 U.S.C. §§ 335(a) or (b), or for any purpose, been charged with or convictedunder United States law for conduct relating to the development, approval,marketing or sale of drugs or devices or otherwise relating to the regulationof any drug product under the Generic Drug Enforcement Act of 1992 or any otherrelevant law or been disbarred, disqualified or convicted under or for anyequivalent or similar applicable foreign laws, including, without limitation,those of the European Union and each of its member states.

###  

### (i)            Neither the Companynor any of its Subsidiaries, or, to the Company’s Knowledge, any of theiragents, officers, directors or employees, have violated or caused a violationof any federal or state health care fraud and abuse or false claims statute orregulation, including, but not limited to, the Medicare/Medicaid Anti-kickbackprovisions of the Social Security Act, 42 U.S.C. § 1320a-7b(b), and therelevant regulations in 42 C.F.R. Part 1001 or have violated or caused aviolation of any equivalent or similar applicable foreign laws, including,without limitation, those of the European Union and each of its member states.

###  

## SECTION 4.25.              Representationsand Warranties of Stockholders.  Eachof the Principal Company Stockholders represents and warrants, on a several andnot joint basis, that:  (i) he, she or itis a resident of or domiciled in the State set forth next to his, her or itsname on Section 4.03 to the Disclosure Schedule; (ii) he, she or it hasgood and marketable title to his, her or its Company Shares, free and clear ofany Liens other than those that may be created by this Agreement andrestrictions imposed by federal or state securities laws and those contained inthe Company’s Stockholders Agreement dated as of May 21, 2003, as amended;(iii) he, she or it has full power and authority to sell his, her or itsCompany Shares and make, enter into and carry out the terms of this Agreement,has not granted the right to sell such Company Shares to any other person orentity, will not, and will not permit any entity under his, her or its controlto, sell any Company Shares prior to the Closing Date or deposit any of his,her or its Company Shares in a voting trust or irrevocable proxy or subject anyof such Company Shares to any arrangement or agreement with respect to thevoting or control of such Shares, other than as provided in this Agreement;(iv) this Agreement constitutes, and the other Transaction Documents thatare applicable to such Principal Company Stockholder will constitute, thelegal, valid and binding obligation of such Principal Company Stockholderenforceable against it in accordance with their respective terms, except as theenforcement thereof may be limited by applicable bankruptcy, insolvency,fraudulent conveyances, moratorium, reorganization or similar laws relating toor affecting the enforcement of creditors’ rights generally and by principlesof equity regarding the availability of remedies; and (v) neither theexecution and delivery of this Agreement by the Principal Company Stockholdernor the consummation of the transactions contemplated by this Agreement(a) will contravene or violate any Law or Court Order, which is applicableto the Principal Company Stockholder, or (b) will result in a Defaultunder, or require the consent or approval of any party to, any Contract to or bywhich the Principal Company Stockholder is a party or otherwise bound.

##  

## SECTION 4.26.      Antitrust.  The Company has not given an undertaking to,and is not bound by or party to any order or decision made by or given to, andhas not received any request for information from, and is not the subject ofany investigation by, without limitation, the United States Federal TradeCommission, Antitrust Division of the United States Department of Justice,European Commission, European Court of Justice, European Court of

##  

41

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## First Instance orany other competition authority, court or tribunal of competent jurisdiction orany other regulatory authority in any jurisdiction, under or in any law,regulation or administrative process relating to fair competition, antitrust,monopolies, mergers or other similar matters.

##  

ARTICLE VREPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

Parent and Merger Sub represent and warrant to the Company that thestatements contained in this Article V are correct and complete as ofthe date of this Agreement and will be correct and complete as of the ClosingDate (as though made then and as though the Closing Date were substituted forthe date of this Agreement throughout this Article V), except forrepresentations and warranties that speak as of a specific date other than thedate hereof or the Closing Date.

 

## SECTION 5.01.              Organizationof Parent and Merger Sub.  Each ofParent and Merger Sub is a corporation (or other entity) duly organized,validly existing and in good standing under the laws of the jurisdiction of itsincorporation (or other formation).

##  

## SECTION 5.02.              Ownershipof Merger Sub; No Prior Activities. Merger Sub is a direct, wholly-owned subsidiary of Parent, was formed solelyfor the purpose of engaging in the transactions contemplated by this Agreementand has engaged in no business activity other than as contemplated by thisAgreement.  Except for obligations orliabilities incurred in connection with its incorporation and the transactionscontemplated by this Agreement, Merger Sub has not and will not have incurred,directly or indirectly, through any Subsidiary or Affiliate, any obligations orliabilities or engaged in any business activities of any type or kind whatsoeveror entered into any agreements or arrangements with any Person.

##  

## SECTION 5.03.              AuthorityRelative to this Agreement.  Each ofParent and Merger Sub has full corporate power and authority to execute anddeliver this Agreement and to perform its obligations hereunder.  The execution and delivery of this Agreementby Parent and Merger Sub and the consummation by Parent and Merger Sub of theMerger and the other transactions contemplated hereby have been duly authorizedby all necessary corporate action, and no other corporate proceedings on thepart of Parent and Merger Sub and no stockholder votes are necessary toauthorize this Agreement or to consummate the Merger and the other transactionscontemplated hereby, other than the filing and recordation of the Certificateof Merger.  This Agreement constitutesthe valid and legally binding obligation of Parent and Merger Sub, enforceablein accordance with its terms and conditions, subject to laws of generalapplication relating to public policy, bankruptcy, insolvency and the relief ofdebtors and rules of law governing specific performance, injunctive relief andother equitable remedies.

##  

## SECTION 5.04.              Noncontravention.  Neither the execution and delivery of thisAgreement, nor the consummation of the transactions contemplated hereby, will(i) violate any Law or Court Order to which Parent or Merger Sub is subject,(ii) any provision of Parent or Merger Sub’s charter, bylaws or other governingdocuments or (iii) conflict with, result in a breach of, constitute a Defaultunder, result in the acceleration of, create in any party the right to

##  

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## accelerate,terminate, modify or cancel or require any notice under any agreement,contract, lease, License, instrument or other arrangement to which Parent orMerger Sub is a party or by which it is bound or to which any of its assets issubject (or result in the imposition of any Lien upon any of Parent or MergerSub’s Assets), except in the case of (i) and (iii) where the violation,conflict, breach, Default, acceleration, termination, modification,cancellation, failure to give notice or Lien would not (a) have a materialadverse effect on the business, operations, assets, financial condition,results of operations and customers of Parent and Merger Sub or (b) impede,interfere with, prevent or materially delay the transactions contemplated bythis Agreement.  Except for the filing ofthe Certificate of Merger under the ORC, the pre-merger notificationrequirements of the HSR Act and foreign antitrust and competition law filings,neither Parent nor Merger Sub needs to give any notice to, make any filing withor obtain any authorization, consent or approval of any government orgovernmental agency in order for the parties to consummate the transactionscontemplated by this Agreement.

##  

## SECTION 5.05.              Brokers’Fees.  Other than to Morgan Stanley& Co. Incorporated, whose fees are the responsibility of Parent, neitherParent nor Merger Sub has any liability or obligation to pay any fees orcommissions to any broker, finder or agent with respect to the transactionscontemplated by this Agreement.

##  

## SECTION 5.06.              Litigation.  There are no actions, suits, claims or legal,administrative or arbitratorial proceedings pending against, or threatenedagainst, Parent or Merger Sub that would adversely affect Parent’s or MergerSub’s performance under this Agreement or the consummation of the transactionscontemplated by this Agreement.

##  

## SECTION 5.07.              Financing.  Parent has sufficient funds or financing inplace or available to fund the Merger Consideration, the Senior Debt PayoffAmount, the costs and expenses relating to the tender offer to redeem theCompany Senior Subordinated Notes and the Company Stockholder TransactionExpenses to be paid at the Closing.

##  

ARTICLE VIPRE-CLOSING COVENANTS

 

The parties agree as follows with respect to the period between theexecution of this Agreement and the Closing.

 

## SECTION 6.01.              General.  Each of the parties will use commerciallyreasonable efforts to take all action and to do all things necessary, proper oradvisable in order to consummate and make effective the transactionscontemplated by this Agreement (including satisfaction, but not waiver, of theClosing conditions set forth in Article VIII below).

##  

## SECTION 6.02.              Noticesand Consents.  Each of the partieswill (and the Company will cause each of its Subsidiaries to) give any noticesto, make any filings with and use its best efforts to obtain anyauthorizations, consents and approvals of governments, governmental agenciesand third parties in connection with the matters referred to in Sections4.04 and 5.04 above.  Withoutlimiting the generality of the foregoing, each of the parties will, within five(5) business days of the date hereof, file any Notification and Report Formsand related material that

 

43

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## it may be requiredto file with the Federal Trade Commission and the Antitrust Division of theUnited States Department of Justice under the HSR Act, and any required filingsunder any other antitrust or competition laws of any applicable jurisdiction,will use its best efforts to obtain an early termination of any applicablewaiting period thereunder and will promptly make any further filings pursuantthereto that may be necessary, proper or advisable in connectiontherewith.  Parent shall be responsiblefor all filing fees for any required filings under the HSR Act or any otherantitrust or competition laws of any applicable jurisdiction.  The parties further agree to comply at theearliest practicable date with any formal or informal request for additionalinformation or documentary material received from the United States FederalTrade Commission, the Antitrust Division of the United States Department ofJustice or any foreign competition authority in connection with thistransaction.  The parties further agreeto cooperate with the other party in order to resolve any investigation orother inquiry concerning the transactions contemplated hereby initiated by theUnited States Federal Trade Commission, the Antitrust Division of the UnitedStates Department of Justice or any foreign competition authority.  The parties agree to promptly inform theother party of any material communication made to or received from the UnitedStates Federal Trade Commission, the Antitrust Division of the United StatesDepartment of Justice or any foreign competition authority.  For purposes of this Article VI, “bestefforts” does not include a requirement that the parties sell, hold separate ordivest any business or assets or license any assets as a condition of obtainingmerger control clearance.

##  

## SECTION 6.03.              Operationof Business.

##  

### (a)           Except as otherwisecontemplated by this Agreement or consented to in writing by Parent, theCompany will not, and will cause its Subsidiaries not to, engage in anypractice, take any action or enter into any transaction outside the OrdinaryCourse of Business and, to the extent consistent with the operation of thebusiness in the Ordinary Course, the Company will use commercially reasonableefforts to (i) preserve the current business organization of its businessintact, (ii) keep available the services of the employees of its business,(iii) continue normal purchasing, rental, leasing, financing, marketing,advertising, promotional and maintenance expenditures and (iv) preserve anybeneficial business relationships with all persons having business dealingswith it with respect to its business;

###  

### (b)           The Company shall, andshall cause each Subsidiary to, maintain (i) its tangible Assets in goodoperating condition and repair, subject to normal wear and maintenance, and(ii) all insurance covering its business and its employees and Assets in fullforce and effect until the Closing Date with responsible companies, comparablein amount, scope and coverage to that in effect on the date of this Agreement.

###  

### (c)           The Company shall, andshall cause each Subsidiary to, (i) use its best efforts to duly comply withall applicable Law and (ii) maintain all of the books and records in the usual,regular and ordinary manner on a basis consistent with past practices.

###  

### (d)           The Company shall, andshall cause each Subsidiary to, use commercially reasonable efforts to complywith all its obligations under any Contract to which it is a party.

###  

### 44

### 

###  

### (e)           The Company shall not,and shall not permit any of its Subsidiaries to, create or suffer to exist anynew Lien of any nature whatsoever (other than Permitted Encumbrances) on any ofits Assets.

###  

### (f)            The Company shall not,and shall not permit any of its Subsidiaries to, take any other action orsuffer or permit any other action to occur which would have a Material AdverseEffect.

###  

### (g)           The Company shall not,and shall not permit any of its Subsidiaries to, merge with or into orconsolidate with any other entity.

###  

### (h)           The Company shall not,and shall not permit any of its Subsidiaries to, hire any employee with anannual salary in excess of $100,000 (or an equivalent amount in foreigncurrency).

###  

### (i)            The Company shall not,and shall not permit any of its Subsidiaries to, issue and sell any of itsequity securities (except as contemplated by this Agreement), and the Companyshall not make, declare or pay any dividend relating thereto.

###  

### (j)            The Company shall not,and shall cause its Subsidiaries not to, make any change in accounting or Taxaccounting methods or revoke any material Tax elections or make any change intransfer pricing methods.

###  

### (k)           On or prior to theClosing, the Company will satisfy the payment obligation of $300,000 dueJanuary 15, 2005 under that certain Agreement between Mitchell P. Dombrowski,Robert A. Welch and Johnson & Johnson Medical Division of EthiconEndo-Surgery, Inc. (the “Dombrowski Patent Agreement”).

###  

### (l)            Prior to the Closing,the Company shall use commercially reasonable efforts to cause PNC Bank toexecute and file such documentation as shall be necessary to process therelease and removal of PNC Bank’s leasehold mortgage interest on the Company’sLeased Real Property located in Cumbernauld, Scotland.

###  

### (m)          At the direction ofParent, the Company will enter, or cause its Subsidiaries to enter, intoagreements, in form and substance reasonably acceptable to Parent (the “ForeignStock Purchase Agreements”), to sell all of the outstanding capital stockof the French Subsidiary and the German Subsidiary to one or more Affiliates ofParent for consideration equal to fair market value.  The consummation of any such agreement shalloccur immediately prior to the Effective Time. Notwithstanding anything set forth in this Agreement to the contrary,Parent covenants and agrees to indemnify, defend, protect and hold harmless theCompany Indemnified Parties from and the Company shall have no obligation toParent or any of its Affiliates for any Claims arising in connection with thenegotiation, execution or performance of the Foreign Stock Purchase Agreements,including, without limitation, any Taxes.

###  

## SECTION 6.04.              Publicity.  Except to the extent required by Law orapplicable stock exchange, no party shall issue any press release or make anypublic announcement relating to the subject matter of this Agreement withoutthe prior written approval of Parent and the Company.

##  

45

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## Prior to theissuance of any press release or announcement hereunder, the releasing partyshall provide notice of such release or announcement to the other party.

##  

## SECTION 6.05.              Access.  The Company will permit, and will cause eachof its Subsidiaries to permit, representatives of Parent (including legalcounsel and accountants) to have, upon prior written notice, reasonable accessduring normal business hours and under reasonable circumstances, and in amanner so as not to interfere with the normal business operations of theCompany and its Subsidiaries, to the premises, personnel, books, records(including tax records), contracts and documents of or pertaining to theCompany and each of its Subsidiaries. Neither Parent nor any of its representatives shall contact anyemployee, customer, supplier or landlord of the Company or any of itsSubsidiaries without the prior written consent of an officer of theCompany.  Parent and Merger Sub shallcomply with, and shall cause their respective representatives to comply with,all of their obligations under the Confidentiality Agreement dated July 2, 2004(the “Confidentiality Agreement”) by and between the Company and Parentwith respect to the information disclosed pursuant to this Section 6.05,which agreement will remain in full force and effect.

##  

## SECTION 6.06.              Noticeof Developments.  The Company shallpromptly notify Parent in writing of any development, misstatement or omissioncausing a breach of any of the representations and warranties in Article IVabove.  The written notice pursuant tothis Section 6.06 shall be deemed to have (a) amended the DisclosureSchedule, (b) qualified the representations and warranties contained in ArticleIV above and (c) cured any misrepresentation or breach of warranty thatotherwise might have existed hereunder by reason of the development,misstatement or omission only to the extent the written notice (i) relates toany development occurring after the date hereof in the Ordinary Course ofBusiness and not arising from any violation of Law or Environmental Law or (ii)arises from any development occurring after the date hereof that (x) relates toSection 4.13(a), (b) or (c) provided that the Company isnot in breach of Section 6.03 hereof, (y) relates to Section 4.23or (z) results from the announcement or performance of this Agreement or thetransactions contemplated by this Agreement or the other Transaction Documents,including any disclosure of Parent’s post-Closing plans or intentions withrespect to the operations of the Company or any of its Subsidiaries, and doesnot otherwise relate to Section 4.04 or Section 4.13(d).  Notwithstanding the foregoing, no noticedelivered pursuant to this Section 6.06 shall limit or affect any ofParent’s rights to terminate this Agreement pursuant to Section 9.01(b)below.

##  

## SECTION 6.07.              Exclusivity.  The Company will not, and will cause itsSubsidiaries and the officers, directors, employees, investment bankers,consultants, attorneys and other agents of the Company and its Subsidiaries notto, directly or indirectly, (i) enter into, continue or otherwise participatein any discussions or negotiations regarding, furnish to any person anyinformation, or afford access to the business, properties, assets, books orrecords of the Company or any of its Subsidiaries for the purpose ofencouraging or facilitating, any Acquisition Proposal or (ii) take any actionto solicit, initiate, encourage or facilitate the making or submission of anyproposal or offer from any Person relating to any Acquisition Proposal.  None of the Principal Company Stockholderswill vote their Company Shares in favor of any Acquisition Proposal other thanthe transactions contemplated by this Agreement.  Each Principal Company Stockholder agrees notto (i) sell, transfer, pledge, encumber, assign or otherwise dispose of, orenter into any contract, option or other arrangement or understanding withrespect to the transfer

##  

46

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## by such PrincipalCompany Stockholder of, any of the Company Shares or offer any interest in anythereof to any Person other than pursuant to the terms of the Merger, (ii)enter into any voting arrangement or understanding, whether by proxy, power ofattorney, voting agreement, voting trust or otherwise, with respect to theCompany Shares or (iii) commit or agree to take any of the foregoingactions.  The Company will notify Parentimmediately if any Person makes any Acquisition Proposal and will disclose to Parentthe terms of any such proposal, offer, inquiry or contact and the identity ofthe party making such proposal, offer, inquiry or contact.

##  

## SECTION 6.08.              CompanySenior Subordinated Notes.  TheCompany shall cooperate with Parent to initiate a tender offer to redeem theCompany Senior Subordinated Notes as promptly as possible following the date ofthis Agreement, which tender shall close as soon as possible following theMerger.  The Company shall file a Form 15with the SEC promptly following the end of the Company’s 2004 fiscal year.

##  

## SECTION 6.09.              FDANotification.  To the extent requiredby applicable Law, on or prior to Closing, the Company will have notified theFDA of a change in Company ownership relating to and affecting the pending510(k) submission for the PharmGuard Toolbox (K042432) and provide writtenevidence of such notification to and confirmation from the FDA.

##  

ARTICLE VIIPOST-CLOSING COVENANTS

 

The parties agree as follows with respect to the period following theClosing.

 

## SECTION 7.01.              General.  In case at any time after the Closing anyfurther action is necessary to carry out the purposes of this Agreement, eachof the parties will take such further action (including the execution anddelivery of such further instruments and documents) as any other partyreasonably may request, all at the sole cost and expense of the requestingparty.

##  

## SECTION 7.02.              EmployeeMatters.

##  

### (a)           Parentagrees for a period of twelve months after the Closing Date to honor, or causethe Surviving Corporation to honor, the obligations of the Company and itsSubsidiaries to the employees of the Company and its Subsidiaries under theprovisions of any employment, retention, severance (whether pursuant toindividual agreement, company policy or mandated by Law), indemnification andcollective bargaining and any other similar agreement between the Company orany of its Subsidiaries and any employee of the Company or any of itsSubsidiaries, including, without limitation, (i) those certain agreements andarrangements listed or described in Section 7.02(a) of the DisclosureSchedule and (ii) that certain Purchase Agreement, dated as of April 2, 2003,by and between Ethicon Endo-Surgery, Inc. and Medex.  Nothing in this Section7.02(a) will prevent the Surviving Corporation from exercising any rightsto amend such obligations under the terms thereof.

###  

### (b)           Parent agrees toprovide, or cause the Surviving Corporation to provide, each employee of theCompany or any of its Subsidiaries, for a period of one year following theClosing Date, with employee benefits plans, programs and arrangements that aresubstantially comparable to the employee benefits plans, programs andarrangements under the Employee

###  

### 47

### 

###  

### Benefit Plansmaintained by the Company and its Subsidiaries in effect immediately prior tothe Closing Date; provided that, in the event Parent or the SurvivingCorporation elects to have any employee of the Company or any of itsSubsidiaries receive coverage under any employee benefits plan, program orarrangement of Parent or the Surviving Corporation, each such employee will becredited with service with the Company and/or any of its Subsidiaries forpurposes of eligibility and vesting.

###  

### (c)           The Company shall,immediately prior to the Closing Date, terminate any Employee Benefit Plan thatis intended to satisfy the requirements of Code Section 401(k).

###  

### (d)           No provisions of this Section7.02 shall create any rights or interest, except as among the parties tothis Agreement, and no former, present or future employees of any such party orits Affiliates (or any dependents of such individuals) will be treated asthird-party beneficiaries in or under the provisions of this Agreement, exceptas set forth in Section 7.03.

###  

## SECTION 7.03.              Directors’and Officers’ Indemnification.

##  

### (a)           From and after theEffective Time, Parent, the Surviving Corporation and the Company shall,jointly and severally, to the fullest extent permitted under applicable Law,indemnify and hold harmless each present and former director and officer of theCompany and each of its Subsidiaries and each such Person who served at therequest of the Company or any of its Subsidiaries as a director, officer,trustee, partner, fiduciary, employee or agent of another corporation,partnership, joint venture, trust, pension or other Employee Benefit Plan orenterprise (collectively, the “Company Indemnified Officers and Directors”)against all costs and expenses (including, without limitation, reasonableattorneys’ fees), judgments, fines, losses, claims, damages, liabilities andsettlement amounts paid in connection with any claim, action, suit, proceedingor investigation (whether arising before or after the Effective Time), whethercivil, administrative, criminal or investigative, arising out of or pertainingto any action or omission in their capacities as directors, officers, trustees,partners, fiduciaries, employees or agents, in each case occurring at or beforethe Effective Time (including, without limitation, the transactionscontemplated by this Agreement), in each case, to the fullest extent permittedby applicable Law or to the fullest extent permitted under the Company Articlesand the Code of Regulations of the Company, the Charter Documents of anyapplicable Subsidiary or any applicable contract or agreement as in effect onthe date hereof.  Without limiting theforegoing, in the event of any such claim, action, suit, proceeding orinvestigation, (i) Parent, the Surviving Corporation or the Company, as thecase may be, shall pay the reasonable fees and expenses of counsel selected byany Company Indemnified Officer and Director, which counsel shall be reasonablysatisfactory to Parent, the Surviving Corporation or the Company, as the casemay be, promptly after statements therefor are received (unless the SurvivingCorporation shall elect to defend such action) and (ii) Parent, the SurvivingCorporation and the Company shall cooperate in the defense of any such matter; provided,however, that neither Parent nor the Surviving Corporation nor theCompany shall be liable for any settlement effected without its written consent(which consent shall not be unreasonably withheld or delayed).

###  

### (b)           For a period of atleast six (6) years after the Effective Time, Parent shall cause the code ofregulations of the Surviving Corporation to continue to include a provision

###  

### 48

### 

###  

 

### substantiallysimilar to Article Five of the Code of Regulations of the Company as of thedate hereof for the benefit of all directors, officers, employees, fiduciariesand agents of the Company prior to the Effective Time and shall cause each ofits Subsidiaries to continue to include in its Charter Documentsindemnification provisions substantially similar to those currently set forthin its Charter Documents for the benefit of all directors, officers, employees,fiduciaries and agents of such Subsidiary prior to the Effective Time.  In the event that any claim or claims forindemnification are asserted or made within such six (6) year period, allrights to indemnification in respect of any such claim or claims shall continueuntil the disposition of any and all such claims.

###  

### (c)           For aperiod of six (6) years after the Effective Time, Parent shall cause to bemaintained in effect directors’ and officers’ liability insurance policies thatare comparable to the directors’ and officers’ liability insurance policiescurrently maintained by the Company (provided that Parent may substitutetherefor policies reasonably satisfactory to the Company Indemnified Officersand Directors of at least the same coverage containing terms and conditionsthat, in the aggregate, are no less advantageous) with respect to claimsarising from facts or events that occurred at or prior to the Effective Time solong as the annual premium therefor would not be in excess of 150% of the lastannual premium paid prior to the Effective Time, which amount has beendisclosed to Parent prior to the date hereof.

###  

### (d)           In theevent the Company or the Surviving Corporation or any of their respectivesuccessors or assigns (i) consolidates with or merges into any other Person andshall not be the continuing or surviving corporation or entity in suchconsolidation or merger or (ii) transfers all or substantially all of itsproperties and assets to any Person, then, and in each case, proper provisionshall be made so that the successors and assigns of the Company or theSurviving Corporation, as the case may be, honor the indemnification and otherobligations set forth in this Section 7.03.

###  

## SECTION 7.04.                      RestrictiveCovenants.  Each party hereto herebyagrees that the covenants set forth in this Section 7.04 are a materialand substantial part of the transactions contemplated by this Agreement.

##  

### (a)           Until twoyears after the Closing Date, each Restricted Company Stockholder agrees thathe, she or it will not, anywhere in the world (the “Territory”), unlessacting for the Surviving Corporation, Parent or their Affiliates or inaccordance with the Surviving Corporation’s or Parent’s prior written consent:

###  

#### (i)            (directlyor indirectly) own, manage, operate, join, control, finance or participate inthe ownership, management, operation, control or financing of, or be connectedas an officer, director, employee, principal, agent, representative,consultant, investor, owner, partner, manager, joint venturer or otherwisewith, or permit its, his or her name to be used by or in connection with, anybusiness or enterprise engaged anywhere in the Territory in the businessconducted by Parent, the Company, or any of their Affiliates on the ClosingDate and, with respect to Restricted Company Stockholders who become employeesof Parent, the Surviving Corporation or any of their Affiliates any of thebusinesses engaged in by Parent, the Surviving Corporation or any of theirAffiliates either during his employment or at the time of its termination;

 

49

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#### (ii)           callon or solicit any person who or which is, at that time, or has been withinthree years prior thereto, a customer of the Company or the SurvivingCorporation with respect to any business of Parent, the Company or any of theirAffiliates covered by clause (i) above;

####  

#### (iii)          solicitthe employment of or hire any person who at the time of such solicitation orhiring or who within 90 days prior thereto, is or was employed by Parent, theCompany or any of their Affiliates on a full or part-time basis; or

####  

#### (iv)          onhis, her or its behalf, or on behalf of any competitor, call upon any person asa prospective acquisition candidate who was called upon by the Company as aprospective acquisition candidate or was the subject of an acquisition analysisby the Company on or prior to the Closing Date. Such Restricted Company Stockholder shall immediately cease all contactwith any prospective acquisition candidate upon being informed, in writing,that the Company had so called upon such candidate or made an acquisitionanalysis thereof.

####  

### (b)           Notwithstandingthe above, the foregoing covenant shall not be deemed to prohibit theRestricted Company Stockholders subject to this Section 7.04 from (i)acquiring as a passive investment not more than five percent of the outstandingvoting capital stock of a competing business, whose stock is traded on anational securities exchange or through the automated quotation system of aregistered securities association or (ii) conducting generalized solicitationsfor employees through the use of media advertisements or as hiring employeesthrough the use of such solicitations.

###  

### (c)           EachRestricted Company Stockholder acknowledges that (a) the provisions of this Section7.04 are reasonable and necessary to protect the legitimate interests ofParent and its Affiliates, (b) any violation of this Section 7.04 willresult in irreparable injury to Parent and its Affiliates and that damages atlaw would not be reasonable or adequate compensation to Parent and itsAffiliates for a violation of this Section 7.04 and (c), Parent and itsAffiliates shall be entitled to have the provisions of this Section 7.04specifically enforced by preliminary and permanent injunctive relief withoutthe necessity of proving actual damages and without posting bond or othersecurity as well as to an equitable accounting of all earnings, profits andother benefits arising out of any violation of this Section 7.04,including, without limitation, estimated future earnings.  In the event that the provisions of this Section7.04 should ever be deemed to exceed the time, geographic, product or anyother limitations permitted by applicable Law, then such provisions shall bedeemed reformed to the maximum permitted by applicable Law.

###  

### (d)           Parent andeach Restricted Company Stockholder intends to and do hereby conferjurisdiction to enforce the covenants set forth in this Section 7.04upon the courts of any jurisdiction within the geographical scope of suchcovenants.  If the courts of any one ormore of such jurisdictions hold such covenants unenforceable in whole or inpart, it is the intention of Parent and each Restricted Company Stockholderthat such determination not bar or in any way adversely affect the right ofParent and its Affiliates to equitable relief and remedies hereunder in courtsof any other jurisdiction as to breaches or violations of this Section 7.04,such covenants being, for this purpose, severable into diverse and independentcovenants.

 

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### (e)           Allinformation provided to third parties for evaluation of a potential transactionor transactions with the Company similar to the transactions contemplatedby this Agreement is subject to a confidentiality agreement with third partiesfor a term of not less than two years and contain confidentiality,non-disclosure and non-solicitation obligations and give the Company the rightto require any such third party to return or destroy any information disclosedto it pursuant to the terms of any such agreement.

###  

### (f)            Until twoyears after the Closing Date, One Equity Partners LLC will not solicit theemployment of or hire any person set forth on Section 7.04 of theDisclosure Schedule.

###  

## SECTION 7.05.                      Filingof Tax Returns.  Parent shall prepareor cause to be prepared and file or cause to be filed all Tax Returns of theCompany and its Subsidiaries and any Relevant Group due after the ClosingDate.  For avoidance of doubt, Parentacknowledges that the fact Parent elects to prepare and file the Company’s, itsSubsidiaries’ or any Relevant Group’s Tax Returns in a manner that is differentthan the manner in which the Company and its Subsidiaries have prepared andfiled their Tax Returns (including Tax Returns of any Relevant Group) on orbefore the Closing Date or the fact Parent elects to file an amended Tax Returnfor the Company, its Subsidiaries or a Relevant Group shall not be a basis, byitself, for a Claim with respect to Taxes.

##  

## SECTION 7.06.                      EESAccounts Receivable.  The Companyshall promptly pay to the Representative (for distribution to the CompanyStockholders) the amount of the EES Accounts Receivable (net of any Taxes paidby the Company or any of its Subsidiaries and determined assuming the Companyand its Subsidiaries have not realized any Tax Benefits) upon receipt ofpayment by Ethicon Endo-Surgery, Inc. or any of its Affiliates after theClosing.  Parent agrees to cause theCompany to cooperate with and use commercially reasonable efforts to assist theRepresentative in connection with the collection of the EES Accounts Receivableand, in connection therewith, agrees to cause the Company to make its personneland its books and records pertaining to the EES Accounts Receivable reasonablyavailable to the Representative to the extent reasonably requested by theRepresentative.

##  

## SECTION 7.07.                      MexicoLand Sale.  An agreement to sell theMexico Land has been reached.  Any netproceeds (which shall be the selling price less all Taxes paid or payable bythe Company or any of its Subsidiaries, including, without limitation, Taxesrequired to be paid on the distribution of the net sale proceeds to the Company(such amounts shall be determined assuming the Company and its Subsidiarieshave not realized any of the Tax Benefits) and costs of selling the Mexico Land(including professional, legal, financial, accounting, broker, appraisal,title, survey and similar services fees and associated costs, and all costsreflected in Section 4.11(d) of the Disclosure Schedule)) received bythe Company after the Closing shall be promptly paid by the Company to theRepresentative (for distribution to the Company Stockholders).

##  

## SECTION 7.08.                      TaxPayments.  To the extent permitted byapplicable Law, the Company and its Subsidiaries shall compute the amount ofTaxes that are due and payable between the date of this Agreement and theClosing Date (including, without limitation, estimated Taxes for federal andstate income Taxes) making the same assumptions used for

 

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## purposes of preparing the Statement of Closing Net Working Capital andStatement of Estimated Closing Net Working Capital.

##  

ARTICLE VIII

 

CONDITIONS TOOBLIGATION TO CLOSE

 

## SECTION 8.01.                      Conditionsto Obligations of Each Party Under This Agreement.  The respective obligations of each party toeffect the Merger and the other transactions contemplated herein shall besubject to the satisfaction at or prior to the Effective Time of the followingconditions, any or all of which may be waived, in whole or in part, to theextent permitted by applicable Law:

##  

### (a)           NoOrder.  There shall not be anyinjunction, judgment, order, decree, ruling or charge in effect preventingconsummation of any of the transactions contemplated by this Agreement.

###  

### (b)           MergerControl Filings.  The applicablewaiting period, together with any extensions thereof, under the HSR Act andunder the other applicable non-US merger control Laws set forth in Section8.01(b) of the Disclosure Schedule, having expired or been terminated, or clearancein writing on terms reasonably satisfactory to Parent and the Company havingbeen received.

###  

### (c)           Certificateof Merger.  Prior to the EffectiveTime, the Certificate of Merger shall be accepted for filing with the Secretaryof State of the State of Ohio.

###  

## SECTION 8.02.                      AdditionalConditions to Obligations of Parent and Merger Sub.  The obligations of Parent and Merger Sub toeffect the Merger and the other transactions contemplated herein are subject tosatisfaction of the following additional conditions:

##  

### (a)           Representationsand Warranties.  The representationsand warranties set forth in Article IV above shall be true and correctin all material respects at and as of the Closing Date (except that thoserepresentations and warranties that address matters only as of a particulardate shall have been true and correct in all material respects only as of suchdate), except to the extent that such representations and warranties arequalified by terms such as “material,” “Material Adverse Effect” or “MaterialAdverse Change,” in which case such representations and warranties shall betrue and correct in all respects at and as of the Closing Date (except thatthose representations and warranties that address matters only as of aparticular date shall have been true and correct in all respects only as ofsuch date), in each case, or in the aggregate, as has not had a MaterialAdverse Effect.

###  

### (b)           Covenants.  The Company shall have performed and compliedwith all of its covenants hereunder in all material respects through theClosing, except to the extent that such covenants are qualified by terms suchas “material,” “Material Adverse Effect” or “Material Adverse Change,” in whichcase the Company shall have performed and complied with all of such covenantsin all respects through the Closing, in each case, or in the aggregate, as hasnot had a Material Adverse Effect.

 

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### (c)           PayoffAmount.  Parent shall have receivedevidence reasonably satisfactory to it (i) of the amount required to pay infull the Company Senior Debt outstanding as of the Closing Date and (ii) thatupon receipt of the Senior Debt Payoff Amount the lenders of the Company SeniorDebt will release all Liens securing the Company Senior Debt, effective as ofthe Closing Date.

###  

### (d)           MaterialAdverse Effect. Since the date of this Agreement, there shall not haveoccurred any Material Adverse Effect that is continuing on the Closing Date.

###  

### (e)           AppraisalRights.  No more than five percent ofholders of the total outstanding shares of the Company on a fully-diluted basisshall have demanded, validly perfected and not withdrawn their appraisal rightsunder the ORC.

###  

### (f)            Paymentof Fees.  The Company Stockholdersshall have paid all fees, costs, commissions, payments and expenses (includingwithout limitation brokers’, accountants’ and attorneys’ fees) payable inconnection with the preparation and filing of all documents relating to theproposed initial public offering of the Company.

###  

### (g)           ClosingDeliveries.  The Company or theRepresentative on behalf of the Company Stockholders, as the case may be, shallhave delivered to Parent the documents set forth in Section 3.10(a)above.

###  

Parent may waive any condition specified in this Section8.02 if it executes a writing so stating at or prior to the Closing.

 

## SECTION 8.03.                      AdditionalConditions to Obligation of the Company. The obligation of the Company to effect the Merger and the othertransactions contemplated herein is subject to satisfaction of the followingadditional conditions:

##  

### (a)           Representationsand Warranties.  The representationsand warranties set forth in Article V above shall be true and correct inall material respects at and as of the Closing Date (except that thoserepresentations and warranties that address matters only as of a particulardate shall have been true and correct in all material respects only as of suchdate).

###  

### (b)           Covenants.  Parent and Merger Sub shall have performedand complied with all of their covenants hereunder in all material respectsthrough the Closing, except to the extent that such covenants are qualified byterms such as “material,” in which case Parent and Merger Sub shall haveperformed and complied with all of such covenants in all respects through theClosing.

###  

### (c)           ClosingDeliveries.  The Company or theRepresentative on behalf of the Company Stockholders, as the case may be, shallhave delivered to Parent the documents set forth in Section 3.10(b)above.

###  

The Company may waive anycondition specified in this Section 8.03 if it executes a writing sostating at or prior to the Closing.

 

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ARTICLE IX

 

TERMINATION

 

## SECTION 9.01.                      Terminationof Agreement.  Certain of the partiesmay terminate this Agreement as provided below:

##  

### (a)           Parent andthe Company may terminate this Agreement by mutual written consent at any timeprior to the Closing;

###  

### (b)           Parent mayterminate this Agreement by giving written notice to the Company at any timeprior to the Closing in the event (A) the Company has within the then previousfive (5) business days given Parent any notice pursuant to Section 6.06above and (B) the development that is the subject of the notice has had aMaterial Adverse Effect;

###  

### (c)           Parent mayterminate this Agreement by giving written notice to the Company at any timeprior to the Closing (A) in the event the Company has breached any materialrepresentation and warranty, covenant or agreement contained in this Agreementin any respect, Parent has notified the Company of the breach and the breachhas continued without cure for a period of thirty (30) days after the notice ofsuch breach and results in a Material Adverse Effect, (B) if the Closing shallnot have occurred on or before March 31, 2005 by reason of the failure tosatisfy any condition precedent under Section 8.02 (unless the failureresults primarily from Parent breaching any representation and warranty,covenant or agreement contained in this Agreement) or (C) if the Closing shallnot have occurred on or before June 30, 2005 by reason of the failure tosatisfy any condition precedent under Section 8.01 (unless the failureresults primarily from Parent breaching any representation and warranty,covenant or agreement contained in this Agreement); and

###  

### (d)           The Companymay terminate this Agreement by giving written notice to Parent at any timeprior to the Closing (A) in the event Parent or Merger Sub has breached anymaterial representation and warranty, covenant or agreement contained in thisAgreement in any material respect, the Company has notified Parent of thebreach and the breach has continued without cure for a period of thirty (30)days after the notice of such breach, (B) if the Closing shall not haveoccurred on or before March 31, 2005 by reason of the failure to satisfy anycondition precedent under Section 8.03 (unless the failure resultsprimarily from the Company breaching any representation and warranty, covenantor agreement contained in this Agreement) or (C) if the Closing shall not haveoccurred on or before June 30, 2005 by reason of the failure to satisfy anycondition precedent under Section 8.01 (unless the failure resultsprimarily from the Company breaching any representation and warranty, covenantor agreement contained in this Agreement).

###  

## SECTION 9.02.                      Effectof Termination.  If any partyterminates this Agreement pursuant to Section 9.01 above, all rights andobligations of the parties hereunder shall terminate without any liability ofany party to any other party (except for any liability of any party then inwillful breach); provided, however, that the confidentialityprovisions contained in Section 6.05 above shall survivetermination.  Notwithstanding theforegoing, upon any termination of this Agreement pursuant to Section 9.01above, Parent shall, upon demand, reimburse or pay the

 

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## costs and expenses (including legal fees and expenses) paid or incurredprior to such termination by the Company and its Subsidiaries in connectionwith the tender offer to redeem the Company Senior Subordinated Notes.

 

ARTICLE X

 

INDEMNIFICATION

 

## SECTION 10.01.                    Indemnificationby the Company Stockholders.  Fromand after the Effective Time, the Company Stockholders, severally and notjointly and in accordance with their respective interests in the Escrow Fundspursuant to the terms of the Escrow Agreement, covenant and agree to indemnify,defend, protect and hold harmless Parent, Merger Sub and each of theirofficers, directors, employees and affiliates (collectively, the “BuyerIndemnified Parties”)) from, against and in respect of:

##  

### (a)           allliabilities, losses, claims, damages (including direct damages and lost revenueand income, but excluding punitive, indirect and consequential damages (otherthan punitive, indirect and consequential damages payable by any BuyerIndemnified Party to third parties)), actions, suits, proceedings, demands,fines, penalties, assessments, adjustments, settlement payments, deficiencies,diminution in value, costs and expenses (including, without limitation,reasonable attorneys’ fees and expenses) (collectively, “Claims”)suffered, sustained, incurred or paid by the Buyer Indemnified Parties inconnection with, resulting from or arising out of, directly or indirectly:

###  

#### (i)            subjectto Section 6.06, any breach of any representation or warranty of theCompany set forth in this Agreement;

####  

#### (ii)           anynonfulfillment of any covenant or agreement on the part of the Company setforth in this Agreement;

####  

#### (iii)          anyliability or obligation relating to the sale of the Mexico Land (other than allTaxes actually paid or payable by the Company or any of its Subsidiaries,including, without limitation, Taxes required to be paid on the distribution ofthe net sale proceeds to the Company (such amounts shall be determined assumingthe Company and its Subsidiaries have not realized any Tax Benefits) and costsof selling the Mexico Land (including professional, legal, financial,accounting, broker, appraisal, title, survey and similar services fees and associatedcosts, and all costs reflected in Section 4.11(d) of the DisclosureSchedule));

####  

#### (iv)          anyliability or obligation relating to the sale of the Dublin Land (other than allTaxes actually paid or payable by the Company or any of its Subsidiaries (suchamounts shall be determined assuming the Company and its Subsidiaries have notrealized any Tax Benefits) and costs of selling the Dublin Land (includingprofessional, legal, financial, accounting, broker, appraisal, title, surveyand similar servicer fees and associated costs)); and

 

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#### (v)           anyliability or obligation relating to the payment obligation of $300,000 dueJanuary 15, 2004 under the Dombrowski Patent Agreement, including any claim byEthicon Endo-Surgery, Inc. for reimbursement thereof; and

####  

### (b)           provided,that (A) the Company Stockholders shall not have any liability under Section10.01(a)(i) (except for breaches of the representations and warranties setforth in Sections 4.01, 4.02 and 4.03) unless and untilthe amount of the aggregate indemnification obligations exceeds (i) $3 million(the “General Threshold”) or (ii) $1.5 million (the “Tax Threshold”)in the case of indemnification obligations solely in respect of breaches of therepresentations and warranties set forth in Section 4.10, whereupon theCompany Stockholders shall indemnify, defend, protect and hold harmless theBuyer Indemnified Parties for the amount of all Claims under Section10.01(a)(i) in excess of the General Threshold or the Tax Threshold, asapplicable, and (B) the aggregate amount of the Company Stockholders’ liabilityunder Section 10.01(a)(i) (except for breaches of the representationsand warranties set forth in Sections 4.01, 4.02 and 4.03for which there shall be no limit), Section 10.01(a)(iii), Section 10.01(a)(iv)and Section 10.01(a)(v) shall not exceed the Escrow Funds.

###  

## SECTION 10.02.                    Indemnificationby Parent.  Parent covenants andagrees to indemnify, defend, protect and hold harmless the Company Stockholdersand each of their officers, directors, employees and affiliates (collectively,the “Company Indemnified Parties”) from, against and in respect of allClaims suffered, sustained, incurred or paid by the Company Indemnified Partiesin connection with, resulting from or arising out of, directly or indirectly:

##  

#### (i)            anybreach of any representation or warranty of Parent or Merger Sub set forth inthis Agreement; and

####  

#### (ii)           anynonfulfillment of any covenant or agreement on the part of Parent or Merger Subset forth in this Agreement.

####  

## SECTION 10.03.                    Survival.  The representations and warranties set forthin Articles IV and V, the covenants set forth in Article VIand the indemnification obligations set forth in Section 10.01(a)(iii),(iv) and (v) shall survive the Closing for a period of twelvemonths after the Closing Date and shall thereafter terminate and be of nofurther force or effect, and the covenants set forth in Article VIIshall survive the Closing in accordance with their terms, except that any suchrepresentation, warranty, covenant or obligation as to which a Claim(including, without limitation, a contingent Claim) shall have been assertedduring the survival period shall continue in effect with respect to such Claimuntil such Claim shall have been finally resolved or settled.  Each party shall be entitled to rely upon therepresentations and warranties of the other party or parties set forth hereinregardless of any investigation or audit conducted before or after the ClosingDate or the decision of any party to complete the Closing.

##  

## SECTION 10.04.                    Procedurefor Indemnification.  In the eventany of the Buyer Indemnified Parties or the Company Indemnified Parties intendsto seek indemnification pursuant to the provisions of Section 10.01or 10.02 hereof (the “Indemnified Party”), the Indemnified Partyshall promptly give notice hereunder to the other party (the “IndemnifyingParty”) of any Claim or legal proceeding for which recovery or other actionmay be sought by the Indemnified Party because of the indemnification providedfor in Section 10.01 or 10.02

 

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## hereof, and, if such indemnity shall arise from the Claim of a thirdparty, the Indemnified Party shall permit the Indemnifying Party, at its solecost and expense and upon written notice to the Indemnified Party within 30days after the Indemnifying Party’s receipt of written notice of the Claim, toassume the defense of any such Claim or legal proceeding if the IndemnifyingParty acknowledges in writing its indemnification obligations with respect tosuch Claim.  If the Indemnifying Partyassumes the defense of any such Claim or legal proceeding, the IndemnifyingParty shall select counsel reasonably acceptable to the Indemnified Party toconduct the defense of such Claim or legal proceeding and shall take all stepsreasonably necessary in the defense or settlement thereof.  The Indemnifying Party shall not consent to asettlement of, or the entry of any judgment arising from, any such Claim or legalproceeding, without the prior written consent of the Indemnified Party (whichconsent shall not be unreasonably withheld or delayed).  The Indemnified Party shall be entitled toparticipate in (but not control) the defense of any such action, with its owncounsel and at its sole cost and expense. Notwithstanding the foregoing, theright to indemnification hereunder shall not be affected by any failure of theIndemnified Party to give such notice (or by delay by the Indemnified Party ingiving such notice) unless, and then only to the extent that, the rights andremedies of the Indemnifying Party shall have been prejudiced as a result ofthe failure to give, or delay in giving, such notice.

##  

If theIndemnifying Party does not assume the defense of any such Claim of a thirdparty or legal proceeding resulting therefrom in accordance with the terms ofthis Section 10.04, the Indemnified Party may defend against such Claimor legal proceeding in such manner as it reasonably deems appropriate.  The Indemnified Party may not settle suchclaim or litigation without the written consent of the Indemnifying Party,which consent shall not be unreasonably withheld or delayed.

 

Each partyshall cooperate in good faith and in all respects with each Indemnifying Partyand its representatives (including, without limitation, its counsel) in theinvestigation, negotiation, settlement, trial and/or defense of any Claim orlegal proceeding (and any appeal arising therefrom).  The parties shall cooperate with each otherin any notifications to and information requests of any insurers.  No individual representative of any Person,or its respective Affiliates, shall be personally liable for any Claim orClaims under this Agreement, except as specifically agreed to by said individualrepresentative or as set forth in this Agreement.

 

## SECTION 10.05.                    ExclusiveRemedy.  Notwithstanding anything inthis Agreement to the contrary, the parties acknowledge and agree that the solerecourse of the Buyer Indemnified Parties for any indemnification claim underthis Article X (except for claims arising under Section 10.01(a)(ii)solely in respect of the covenants set forth in Article VII or claimsalleging fraud) that is validly established shall be to make claims against andto collect amounts solely from the Escrow Funds, and the Buyer IndemnifiedParties shall have no other recourse against the Company Stockholders or any oftheir respective assets and properties for any such claim.  No claim for indemnification against any ofthe Company Stockholders in respect of the transactions contemplated by thisAgreement shall be available or asserted, and, except for claims arising under Section 10.01(a)(ii)solely in respect of the covenants set forth in Article VII or claimsalleging fraud, no Company Stockholder shall have any liability of any nature

 

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## whatsoever to any of the Buyer Indemnified Parties, other than fortheir respective interests in the Escrow Funds.

##  

## SECTION 10.06.                    Effectof Insurance.  An Indemnified Partywho has a right to make a claim under any policy of insurance with respect toan indemnified claim made by the Indemnified Party shall use commerciallyreasonable efforts to make such claim on a prompt and competent basis in themanner required by the insurance carrier. The Indemnified Party shall cooperate fully with the insurance carrierand the Indemnifying Party in the prosecution of the claim or claims.  In the event an Indemnified Party receivesinsurance proceeds with respect to Claims for which the Indemnified Party hasmade an indemnification claim prior to the date on which the Indemnifying Partyis required pursuant to this Article X to pay such indemnification claim, theindemnification claim shall be reduced by an amount equal to such insuranceproceeds received by the Indemnified Party less all reasonable out-of-pocketcosts, expenses (including attorneys’ fees) and premium adjustments (whetherretroactive or prospective) (the “Insurance Costs”) incurred by theIndemnified Party in its pursuit of such insurance proceeds.  If such insurance proceeds are received bythe Indemnified Party after the date on which the Indemnifying Party pays suchindemnification claim to the Indemnified Party, the Indemnified Party shall, nolater than five (5) business days after the receipt of such insurance proceeds,(A) if the payment with respect to such indemnification claim was paid outof the Escrow Funds and the Escrow Agreement remains in effect, reimburse theEscrow Funds for the amount received less the Insurance Costs, or (B) ifthe Escrow Agreement has been terminated, reimburse the Indemnifying Party inan amount equal to such insurance proceeds (but in no event in an amountgreater than the related Claim theretofore paid to the Indemnified Party by theIndemnifying Party) less the Insurance Costs. In either case, the Indemnifying Party shall compensate the IndemnifiedParty for all costs incurred by the Indemnified Party subsequent to either thereduction of any indemnification claim as provided above, or the delivery ofany such insurance proceeds to the Indemnifying Party as provided above, as thecase may be, as a result of any such insurance, including, but not limited to,retrospective premium adjustments, experience-based premium adjustments(whether retroactive or prospective) and indemnification or surety obligationsof the Indemnified Party to any insurer. Notwithstanding anything contained in this Article X to thecontrary, the Indemnified Party shall have no obligation under this Section 10.06to the extent the indemnification claims to be made by the Indemnified Partyexceed the Escrow Funds.

##  

## SECTION 10.07.                    Measurementof Tax Claims.  Notwithstanding anyother provision of this Agreement to the contrary, (i) the Buyer IndemnifiedParties shall have no right to indemnification for any Claim relating to theloss of any Tax Benefits; (ii) the Buyer Indemnified Party shall have no rightto any indemnification for any Claim relating to Taxes as a result of any loss,reduction, disallowance, or other limitation on the use of any net operatinglosses or other Tax attributes of the Company or any of its Subsidiaries; (iii)the Indemnifying Party’s obligations to pay any Claim relating to Taxes shallbe determined assuming that the Company and its Subsidiaries did not realizethe Tax Benefits; and (iv) the Buyer Indemnified Parties shall have no right toindemnification for any Claim relating to Taxes that would not have beenrealized except for the sale of the capital stock of the French Subsidiary orGerman Subsidiary or the other transactions contemplated by the Foreign StockPurchase Agreements.

 

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## SECTION 10.08.                    Computationof Damages.  All requiredindemnification payments under this Agreement shall be reduced to the extentthe Indemnified Party (or any of its Affiliates) actually realized for the yearin which the Claim arose any Tax benefits resulting from the facts giving riseto the Claim (determined assuming the Company and its Subsidiaries did notrealize the Tax Benefits).

##  

## SECTION 10.09.                    Effectof Other Recoveries.  With respect toany Claim hereunder, the Indemnified Party shall remit to the IndemnifyingParty the amount, if any, actually received by the Indemnified Party fromEthicon Endo-Surgery, Inc. with respect to such Claim less all costs andexpenses (including attorneys’ fees) incurred by the Indemnified Party inconnection therewith when the Indemnified Party actually receives such amount(but in no event in an amount greater than such Claim theretofore paid to theIndemnified Party by the Indemnifying Party). The Indemnified Party shall, and shall cause its Affiliates to, usecommercially reasonable efforts to pursue all available remedies and causes ofaction to recover the amount of such claim as may be available from EthiconEndo-Surgery, Inc.; provided that the Indemnified Party shall not beobligated to institute any lawsuit or offer or grant any accommodation(financial or otherwise) to any Person or incur any other obligation orliability to recover any such amount.  Inthe event an Indemnifying Party indemnifies an Indemnified Party on any claimreferred to in the previous sentence and the Indemnified Party is not pursuingsuch claim, the Indemnified Party shall assign to the Indemnifying Party, tothe fullest extent allowable, its rights and causes of action with respect tosuch claim, provided that the Indemnifying Party shall not be allowed to pursuesuch claim in the name of the Indemnified Party or its Affiliate, and all costsand expenses (including attorneys’ fees) incurred in connection with any suchclaim shall be paid by the Indemnifying Party. The Indemnified Party shall provide the Indemnifying Party reasonableassistance in prosecuting such claim, at the expense of the IndemnifyingParty.  If the Indemnified Party or anyof its Affiliates actually receives from Ethicon Endo-Surgery, Inc. any part ofa claim that had been paid by the Indemnifying Party pursuant to itsindemnification obligations hereunder, and (A) if the payment with respectto such indemnification claim was paid out of the Escrow Funds and the EscrowAgreement remains in effect, the Indemnified Party will reimburse the EscrowFunds for the amount received less all costs and expenses (including attorneys’fees) incurred in connection with such claim, or (B) if the EscrowAgreement has been terminated, the Indemnified Party shall promptly remit tothe Indemnifying Party the amount received (but in no event in an amountgreater than such Claim theretofore paid to the Indemnified Party by theIndemnifying Party) less all costs and expenses (including attorneys’ fees)incurred in connection with such claim. Notwithstanding anything contained in this Article X to thecontrary, the Indemnified Party shall have no obligation under this Section 10.09to the extent the indemnification claims to be made by the Indemnified Partyexceed the Escrow Funds.

##  

## SECTION 10.10.                    Characterizationof Indemnity Payments.  Except asotherwise required by applicable law, the parties shall treat anyindemnification payment made hereunder as an adjustment to purchase price.

 

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ARTICLE XI

 

MISCELLANEOUS

 

## SECTION 11.01.                    Expenses.  Subject to the provisions of Section 6.02,each of Parent, Merger Sub, the Company, the Company’s Subsidiaries and theCompany Stockholders will bear his, her or its own costs and expenses(including legal fees and expenses) incurred in connection with this Agreementand the transactions contemplated hereby; provided, however, inthe event the Merger is consummated, the Company Stockholders will bear thecosts and expenses (including legal fees and expenses) of the Company and itsSubsidiaries incurred in connection with this Agreement and the transactionscontemplated hereby (collectively, the “Company Stockholder TransactionExpenses”).  All transfer,documentary, sales, use, stamp, registration and other such Taxes, and allconveyance fees, recording charges and other fees and charges (including anypenalties and interest) incurred in connection with the consummation of thetransactions contemplated by this Agreement shall be shared equally by Parentand the Company Stockholders when due (except that such Taxes incurred inconnection with the sale of the capital stock of the German Subsidiary or theFrench Subsidiary or any other transaction contemplated by the Foreign StockPurchase Agreements shall be borne entirely by Parent), and the CompanyStockholders shall, at their own expense, file all necessary Tax Returns andother documentation with respect to all such Taxes, fees and charges, and, ifrequired by applicable Law, the parties will, and will cause their Affiliatesto, join in the execution of any such Tax Returns and other documentation.

##  

## SECTION 11.02.                    NoThird-Party Beneficiaries.  Except asset forth in Section 7.03, this Agreement shall not confer any rights orremedies upon any Person other than the parties and their respective successorsand permitted assigns.

##  

## SECTION 11.03.                    EntireAgreement.  This Agreement, includingthe schedules and exhibits attached hereto, the Disclosure Schedule and theRepresentative Agreement and the other documents referred to herein,constitutes the entire agreement among the parties and supersedes any priorunderstandings, agreements or representations by or among the parties, writtenor oral, to the extent they relate in any way to the subject matter hereof.

##  

## SECTION 11.04.                    Successionand Assignment.  This Agreement shallbe binding upon and inure to the benefit of the parties named herein and theirrespective successors and permitted assigns. No party may assign either this Agreement or any of its rights,interests or obligations hereunder without the prior written approval of Parentand the Company.

##  

## SECTION 11.05.                    Counterparts.  This Agreement may be executed in one or morecounterparts (including by means of facsimile), each of which shall be deemedan original but all of which together will constitute one and the sameinstrument.

##  

## SECTION 11.06.                    Headings.  The section headings contained in thisAgreement are inserted for convenience only and shall not affect in any way themeaning or interpretation of this Agreement.

 

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## SECTION 11.07.                    Notices.  All notices, requests, demands, claims andother communications hereunder will be in writing.  Any notice, request, demand, claim or othercommunication hereunder shall be deemed duly given (i) when delivered personallyto the recipient, (ii) one (1) business day after being sent to the recipientby reputable overnight courier service (charges prepaid), (iii) one (1)business day after being sent to the recipient by facsimile transmission orelectronic mail or (iv) four (4) business days after being mailed to therecipient by certified or registered mail, return receipt requested and postageprepaid, and addressed to the intended recipient as set forth below:

##  

### (a)           If toParent or Merger Sub, addressed to it at:

###  

Smiths Group plc

765 Finchley Road

London NW11 8DS

Fax:  44-20-8201-8041

Attention:  Company Secretary

 

with a copy to:

 

Morgan, Lewis &Bockius LLP

1701 Market Street

Philadelphia, PA 19103

Fax:  (215) 963-5001

Attention:  Michael J. Pedrick, Esq.

 

### (b)           If tothe Company, addressed to it at:

###  

MedVest HoldingsCorporation

2231 Rutherford Road

Carlsbad, CA  92008

Telephone:  (760) 602-4414

Fax:  (760) 929-0306

Attention:  Dominick A. Arena

 

With a copy to:

 

One Equity Partners LLC

1 Bank One Plaza

21 South Clark St., 14thFloor

Chicago, IL  60670-0610

Telephone:  (312) 732-6281

Fax:  (312) 336-3541

Attention:  Timothy A. Dugan

 

61

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and

 

Winston & Strawn LLP

35 West Wacker Drive

Chicago, IL  60601

Telephone:  (312) 558-5600

Fax:  (312) 558-5700

Attention:  Steven J. Gavin, Esq.

 

### (c)           If tothe Representative:

###  

OEP MedVest LLC

One Equity Partners LLC

1 Bank One Plaza

21 South Clark St., 14thFloor

Chicago, IL  60670-0610

Telephone:  (312) 732-6281

Fax:  (312) 336-3541

Attention:  Timothy A. Dugan

 

With a copy to:

 

Winston & Strawn LLP

35 West Wacker Drive

Chicago, IL  60601

Telephone:  (312) 558-5600

Fax:  (312) 558-5700

Attention:  Steven J. Gavin, Esq.

 

Any party may change the address to which notices,requests, demands, claims and other communications hereunder are to bedelivered by giving the other parties notice in the manner herein set forth.

 

## SECTION 11.08.                    GoverningLaw.

##  

### (a)           ThisAgreement shall be governed by and construed in accordance with the domesticlaws of the State of Illinois without giving effect to any choice or conflictof law provision or rule (whether of the State of Illinois or any otherjurisdiction) that would cause the application of the laws of any jurisdictionother than the State of Illinois.

###  

### (b)           Theparties hereto agree that any action, suit or proceeding (a “Proceeding”)arising out of the transactions contemplated by this Agreement shall becommenced and litigated exclusively in the United States District Court for theNorthern District of Illinois or in a state court of the State of Illinoislocated in the City of Chicago.

###  

### (c)           Each ofthe parties hereto hereby irrevocably and unconditionally (i) consents tosubmit to the exclusive jurisdiction of the federal and state courts located inthe City 

 

62

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### of Chicago in theState of Illinois for any Proceeding (and each such party agrees not tocommence any Proceeding, except in such courts), (ii) waives any objection tothe laying of venue of any Proceeding in such courts and (iii) waives, andagrees not to plead or to make, any claim that any Proceeding brought in anycourt located in the City of Chicago has been brought in an improper orotherwise inconvenient forum.

###  

### (d)           Each partyhereto hereby irrevocably designates and appoints CT Corporation (hereinaftercalled the “Agent”), as its attorney in fact to receive service ofprocess in such Proceeding, it being agreed that service upon such attorney infact shall constitute valid service upon each such party or its successors orassigns, and each party agrees that (i) the sole responsibilities of the Agentshall be (x) to receive such process, (y) to send a copy of any such process soreceived to such party, by overnight courier, return receipt requested, at theaddress set out in Section 11.07 above, or at the last address filed inwriting by such party with the Agent, and (z) to give prompt notice of receiptthereof to such party at such address, and (ii) the Agent shall have noresponsibility for the receipt or non-receipt by such party of such process,nor for any performance or non-performance by such party, or any other party tothis Agreement or their successors or assigns. The Company hereby agrees to pay to the Agent such compensation as shallbe agreed upon from time to time for services of the Agent hereunder.  Each party hereby agrees that its submissionto jurisdiction and its designation of the Agent set out above is made for theexpress benefit of each of the parties hereto. Each party further covenants and agrees that so long as this Agreementshall be in effect, such party shall maintain a duly appointed agent for theservice of summonses and other legal processes in Chicago, Illinois and willnotify the other parties hereto of the name and address of such agent if it isno longer the Agent.

###  

## SECTION 11.09.                    Amendmentsand Waivers.  No amendment of anyprovision of this Agreement shall be valid unless the same shall be in writingand signed by all of the parties hereto. No waiver by any party of anyprovision of this Agreement or any Default, misrepresentation or breach ofwarranty or covenant hereunder, whether intentional or not, shall be validunless the same shall be in writing and signed by the party making such waiver,nor shall such waiver be deemed to extend to any prior or subsequent Default,misrepresentation or breach of warranty or covenant hereunder or affect in anyway any rights arising by virtue of any prior or subsequent such occurrence.

##  

## SECTION 11.10.                    Severability.  Any term or provision of this Agreement thatis invalid or unenforceable in any situation in any jurisdiction shall notaffect the validity or enforceability of the remaining terms and provisionshereof or the validity or enforceability of the offending term or provision inany other situation or in any other jurisdiction.

##  

## SECTION 11.11.                    Construction.  The parties have participated jointly in thenegotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretationarises, this Agreement shall be construed as if drafted jointly by the parties,and no presumption or burden of proof shall arise favoring or disfavoring anyparty by virtue of the authorship of any of the provisions of thisAgreement.  Any reference to any federal,state, local or foreign statute or Law shall be deemed also to refer to allrules and regulations promulgated thereunder, unless the context requiresotherwise.  The word “including” shallmean including

 

63

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## without limitation.  Provisions inthis Agreement shall be deemed to bear the nearest equivalent meaning in anyjurisdiction which does not recognize the specific provision.

##  

## SECTION 11.12.                    Incorporationof Exhibits and Schedules.  Theexhibits and schedules identified in this Agreement are incorporated herein byreference and made a part hereof.

##  

## SECTION 11.13.                    Consentto Merger.  Each of the undersignedPrincipal Company Stockholders, in his, her or its capacity as a holder ofCommon Shares and Preferred Shares, as evidenced by his, her or its signaturehereto, does hereby waive all notice of the time, place and purposes of aspecial meeting of the Company Stockholders for the purpose of adopting thisAgreement and approving the Merger, and pursuant to the ORC, does herebyconsent in writing to the adoption of this Agreement and the approval of theMerger pursuant to the terms of this Agreement.

##  

## SECTION 11.14.                    CompanyStockholder Representative.

##  

### (a)           TheRepresentative shall not incur any liability with respect to any action takenor suffered by the Representative or omitted hereunder as Representative whileacting in good faith and in the exercise of reasonable judgment.  The Representative may, in all questionsarising hereunder, rely on the advice of counsel and other professionals, andfor anything done, omitted or suffered in good faith by the Representativebased on such advice, the Representative shall not be liable to anyone.  The Representative undertakes to perform suchduties and only such duties as are contemplated by this Agreement and theRepresentative Agreement, and no covenants or obligations shall be impliedunder this Agreement or the Representative Agreement against theRepresentative; provided, however, that the foregoing shall notact as a limitation on the powers of the Representative determined by theRepresentative to be reasonably necessary to carry out the Representative’sduties.

###  

### (b)           Adecision, act, consent or instruction of the Representative shall constitute adecision, act, consent or instruction from all of the Company Stockholders andshall be final, binding and conclusive upon each of the CompanyStockholders.  Parent may rely upon anysuch decision, act, consent or instruction of the Representative as being thedecision, act, consent or instruction of every such Company Stockholder.  Parent is hereby relieved from any liabilityto any Persons for any acts done by them in accordance with such decision, act,consent or instruction of the Representative. In furtherance of the foregoing, any reference to a power of the CompanyStockholders under this Agreement, to be exercised or otherwise taken, shall bea power vested in the Representative.

###  

### (c)           In thecase of any conflict between the provisions of this Section 11.14,except for Section 11.14(b) above, and the RepresentativeAgreement, the provisions of the Representative Agreement shall govern.

###  

## SECTION 11.15.                    Acknowledgementsby Parent and Merger Sub.  Parent andMerger Sub acknowledge that they have relied on the representations andwarranties of the Company expressly and specifically set forth in Article IVof this Agreement, including the Disclosure Schedule (and any updatesthereto).  SUCH REPRESENTATIONS ANDWARRANTIES BY

 

64

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## THE COMPANY CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS ANDWARRANTIES OF THE COMPANY TO PARENT AND MERGER SUB IN CONNECTION WITH THETRANSACTIONS CONTEMPLATED HEREBY, AND PARENT AND MERGER SUB UNDERSTAND,ACKNOWLEDGE AND AGREE THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KINDOR NATURE EXPRESSED OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TOTHE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS ORLIABILITIES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES AND ANY SET FORTH IN THECONFIDENTIAL INFORMATION MEMORANDUM PREVIOUSLY DELIVERED TO PARENT) ARESPECIFICALLY DISCLAIMED BY THE COMPANY AND THE COMPANY STOCKHOLDERS.

##  

* * * * *

 

65

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IN WITNESS WHEREOF, the parties hereto have executedthis Agreement and Plan of Merger as of the date first above written.

 
|   | **PARENT:**                                                                             |                              |   |
|--------|-----------------------------------------------------------------------------------------|-----------------------------------|--------|
|   |                                                                                    |                              |   |
|   | SMITHS MEDICAL HOLDCO LIMITED,  a company formed under the laws of  England and Wales   |                              |
|   |                                                                                    |                              |   |
|   | By:                                                                                     |   /s/ Robin J. Taunt    |   |
|   | Name: Robin J. Taunt                                                                    |                              |
|   | Title: Authorized Signatory                                                             |                              |
|   |                                                                                    |                              |   |
|   |                                                                                    |                              |   |
|   | **MERGER SUB:**                                                                         |                              |
|   |                                                                                    |                              |   |
|   | FOREST ACQUISITION CORP., an Ohio  corporation and a wholly-owned subsidiary  of Parent |                              |
|   |                                                                                    |                              |   |
|   |                                                                                    |                              |   |
|   | By:                                                                                     |   /s/ Robin J. Taunt    |   |
|   | Name: Robin J. Taunt                                                                    |                              |
|   | Title: Authorized Signatory                                                             |                              |
|   |                                                                                    |                              |   |
|   |                                                                                    |                              |   |
|   | **COMPANY:**                                                                            |                              |
|   |                                                                                    |                              |   |
|   | MEDVEST HOLDINGS CORPORATION,  an Ohio corporation                                      |                              |
|   |                                                                                    |                              |   |
|   | By:                                                                                     |   /s/ Dominick A. Arena |   |
|   | Name: Dominick A. Arena                                                                 |                              |
|   | Title: President and Chief Executive Officer                                            |                              |
|   |                                                                                    |                              |   |
|   |                                                                                    |                              |   |
|   | **REPRESENTATIVE:**                                                                     |                              |
|   | ** **                                                                              |                              |
|   |                                                                                    |                              |   |
|   | OEP MEDVEST LLC, a Delaware limited  liability company, as Representative               |                              |
|   |                                                                                    |                              |   |
|   | By: One Equity Partners LLC                                                             |                              |
|   | Its: Majority Member                                                                    |                              |
|   |                                                                                    |                              |   |
|   | By:                                                                                     |   /s/ Timothy A. Dugan  |   |
|   | Name:                                                                                   | Timothy A. Dugan                  |   |
|   | Title:                                                                                  | Partner                           |   |
|        |                                                                                         |                                   |        |  |  |

 

----

 
|   | **PRINCIPAL COMPANY STOCKHOLDERS:**                    |                             |
|--------|--------------------------------------------------------|----------------------------------|
|   |                                                   |                             |   |
|   |                                                   |                             |   |
|   | OEP MEDVEST LLC, a Delaware limited  liability company |                             |
|   |                                                   |                             |
|   | By:                                                    | One Equity Partners LLC          |   |
|   | Its:                                                   | Majority Member                  |   |
|   |                                                   |                             |
|   | By:                                                    |   /s/ Timothy A. Dugan |   |
|   | Name:                                                  | Timothy A. Dugan                 |   |
|   | Title:                                                 | Partner                          |   |
|   |                                                   |                             |   |
|   |                                                   |                             |   |
|   |   /s/ Dominick A. Arena                      |                             |
|   | Dominick A. Arena                                      |                             |
|   |                                                   |                             |   |
|   |                                                   |                             |   |
|   |   /s/ Michael I. Dobrovic                    |                             |
|   | Michael I. Dobrovic                                    |                             |
|   |                                                   |                             |   |
|   |                                                   |                             |
|   |   /s/ Charles J. Jamison                     |                             |
|   | Charles J. Jamison                                     |                             |
|   |                                                   |                             |   |
|   |                                                   |                             |   |
|   |   /s/ Ralph E. Dickman, Jr.                  |                             |
|   | Ralph E. Dickman, Jr.                                  |                             |
|   |                                                   |                             |   |
|   |                                                   |                             |   |
|   |   /s/ Georg W. Landsberg                     |                             |
|   | Georg W. Landsberg                                     |                             |
|        |                                                        |                                  |  |  |  |  |

 

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